Insanity Gone Wild

You have heard of Girls gone wild, but the next story should be labeled Insanity gone wild. What does that mean, you say? Well after you read this article you will say "that's insane". Who was the PhD that thought of this deal? And better yet, is he still employed? Let me break down a few points of the article for you.

The government agreed to keep Fannie and Freddie afloat four years ago through a complex arrangement where the Treasury injects capital into the firms as needed every quarter to keep them afloat, and it receives preferred shares in exchange. Those shares pay a 10% dividend.

Well there you have it. It starts out pretty good, except for the 10% dividend. Why 10% when the common folk only gets maybe 2% interest. Okay, I know, because it was a risky loan. I mean, it is a government agency, US Treasury Department, bailing out Freddie and Fannie who are other government directed agencies. 

But the arrangement wasn’t expected to last this long. Congress and the Obama administration have taken few steps towards advancing any overhaul. That has led to perverse outcomes like the one currently facing the companies: Even if they’re profitable, there’s no mechanism for them to pay off the government–and they may continue to borrow money simply to pay those dividends.

Look at that section highlighted in red. Read it again and let it sink in until the light bulb comes on over your head. Yep, I see the lights on...you have figured it out. They may have to continue to borrow money just to pay the dividends. Now you might have thought, "well the economy has tanked further than anyone expected, so they may have to wait for the housing industry rebounds before profits return enough to pay those dividends". That is until you read this:

Fannie currently has to pay $12 billion in dividends every year. That’s more than the company has ever earned in one year.

Wow, more than they have ever earned in one year! Again, where were the PhD's and Accountants that are paid to figure these things out BEFORE they sign the contract. Anyone involved with approving this contract  should be fired.

In 2009, the Treasury Department said it would provide unlimited help for three years. But beginning in January, the companies once again will have a fixed amount of money available from the Treasury: $125 billion for Fannie and $150 billion for Freddie. 

Really, did they not learn the first time? Insanity Gone Wild I tell you. We peasants should be outraged as this is our money they play with. These actions cannot be sustained. The house of cards will collapse. 

Well 

The Big TARP Lie

WHAT Did He Say?

At about 0:13 into the video, you can here him say, "Things were being done which were certainly illegal and clearly criminal in certain cases..."




Alan Greenspan, the former Federal Reserve Chairman tells us there was criminal activity happening, so tell me why there are no bankers wearing the shiney nickel plated handcuffs.

Now go back and watch Ben Bernake, the current Federal Reserve Chairman, when Mr. Greenspan mentioned the "illegal and criminal" words.

October....Halloween May Be Coming Soon

The Real Horror Story: The U.S. Economic Meltdown

Let me point out a few of the key points this author is making. Reading the entire article is prudent.

The mainstream media has been treating "Foreclosuregate" as if it is a minor nuisance, but the truth is that the lid is about to be publicly lifted on years and years of massive fraud in the U.S. mortgage industry, and this thing has the potential to cause economic chaos that is absolutely unprecedented.  Over the past several days, expert after expert has been coming forward and warning that this crisis could completely and totally paralyze the mortgage industry in the United States.  If that happens, it will be essentially like pulling the plug on the U.S. economic recovery. 

According to the U.S. Census Bureau, the U.S. trade deficit was $46.3 billion during August, which was up significantly from $42.6 billion in July.
So how much coverage did this get in the mainstream media? 
Well, just about none.

How long do you think that the U.S. economy can keep shelling out 40 or 50 billion more dollars than we take in every single month?

According to the Department of Labor, for the week ending October 9th the advance figure for seasonally adjusted initial jobless claims was 462,000, which represented an increase of 13,000 from the previous week.
We have an unemployment epidemic going on in this country, but what did the mainstream media do in response to this news?
They yawned.  Instead, many of the "financial experts" were busy talking about how wonderful it is that the Stock Market is going up, up, up.

Well, as one reader recently reminded me, if you want to evaluate an economy by how much the stock market is going up, then the economy of Zimbabwe has had an absolutely wonderful decade!

Yet another piece of really bad economic news that just came out is that the number of home repossessions by banks set a new all-time record during the month of September.  The record total of 102,134 bank repossessions was the first time ever that bank repossessions climbed over the 100,000 mark for a single month.
The good news is that bank repossessions are about to come to a screeching halt.
The bad news is that it is because the U.S. mortgage industry is about to become completely and totally paralyzed by this foreclosure fraud crisis.

The legal rights to millions of U.S. mortgages has been scrambled so badly that it might actually be impossible to fully sort this mess out.  In particular, MERS (Mortgage Electronic Registration Systems) has created a paperwork nightmare that may never be able to be completely remediated.

Meanwhile, virtually nobody will want to buy any house that has been foreclosed on in the past ten years or so until this mess is sorted out (which could take years and years). 

Meanwhile, title insurance companies are going to avoid foreclosures like the plague.

Meanwhile, all of the investors that have been propping up the housing market by buying foreclosures are going to be fleeing the market in droves.

Meanwhile, the financial world is going to be trying to figure out which U.S. lending institutions are still solvent.  The value of most mortgage-based assets is now totally up in the air.

Meanwhile, millions more homeowners across the United States will be emboldened to quit making payments on their mortgages as they realize that those holding their mortgages may not have the legal right to foreclose on them.

And that is where the true horror of this entire situation may lie.  What is going to happen if millions upon millions of Americans holding underwater mortgages look at this situation and decide that they really don't have to be afraid of the threat of foreclosure any longer?

If a massive wave of homeowners suddenly decides to simply quit paying their mortgages, it would basically wipe out nearly the entire mortgage industry.

Keep your eyes open....

Double Dip In Housing Market Predicted

Merideth Whitney predicts a double dip in housing market.

Maybe she has been reading or hearing things like this and that has got her concerned.



According to the WSJ video clip, major banks masked their risk levels during the most recent five quarters by lowering debt levels just before announcing quarterly earnings, according to data from the New York Federal Reserve Bank.

Great Time To Buy A New Home

We hear that all the time by realtors and the MSM.  It seems like there is never a bad time to buy.  Weren't they saying that in 2001, 2005 and still saying it today? What they are really saying is "it's a great time to buy as long as there is a commission." If you are in the market for buying a home then you may want to do some extensive research before you buy and don't rely on info from the National Association of Reators. In 2005 when prices were climbing the chief economist for the NAR, David Lereah published a book entitled “Are You Missing the Real Estate Boom?” Mr. Lereah later reportedly acknowledged he had gotten it wrong. Well he wasn't the only one as many people got it wrong.
Here are a couple articles on the subject;
Most Troubled Real Estate Markets

Great Time To Buy

There are many more articles if you look.

As always, keep your eyes open....

U.S. Home Prices Forecast to Decrease

Fiserv, Inc has announced their analysis of the housing market.  They looked at 350+ cities across the nation and concluded that prices continue to decline in 2010.

www.marketwatch.com/story/fiserv-case-shiller-home-price-insights-us-housing-prices-see-first-back-to-back-quarterly-price-gains-since-2005-2010-01-28

Have you heard about this on the MSM? For those that live in Florida, Arizona, California and Nevada have you heard this on the MSM?

The Fiserv Case Shiller Indexes forecast that average single-family home prices will fall another 11.5 percent over the next twelve months. Steep home price declines are expected to continue in markets that have been hurt most by the housing crisis, including metro areas in California, Nevada, Arizona and Florida.

The report states Orlando could see 20.8% reduction, Jacksonville 14%, San Jose close to 10% and the list goes on.  Overall across the nation they anticipate a 11.5% further reduction on average.  I think we will continue to see people walking away from their homes as they don't see how they can make up the loss in their lifetime.
It's not over folks.  Keeps your eyes open....