Helping Homeowners In Michigan
Archive for September 6th, 2010
Alternate Unemployment Charts: U-6 Hits 16.5%; Broadest Measure 22%
September 6th, 2010 | 
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The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.
Unemployment Data Series (Subscription required.) View Download Excel CSV File Last Updated: September 3rd, 2010
'Control Fraud' Crushes Kabul: New York Times Needs to Correct Its Correction
The New York Times, in a story entitled “Afghanistan Tries to Help Nation’s Biggest Bank” issued the following correction:
Correction: September 4, 2010
An earlier version of this article, citing American and Afghan officials, erroneously stated that the United States would contribute money to help the Kabul Bank. American officials say the United States is providing technical assistance but no funds for the bank.
The problem is that the “earlier version” was correct – the correction is incorrect. Kabul Bank has been revealed to be a “control fraud.” Control frauds occur when those that control a seemingly legitimate entity use it as a “weapon” to defraud. Control frauds cause greater financial losses than all other forms of property crime – combined. Control frauds can also cause immense damage to a nation because they are run by financial elites that curry favor from political elites. The result is that they are often able to loot “their” banks for years with impunity. They also degrade the integrity of the entire system.
Kabul Bank is a typical example of a crude variant of control fraud at a major bank. Systems of crony capitalism, such as Afghanistan, inherently create an intensely “criminogenic” environment that produces epidemics of control fraud in the public, private, and non-profit sectors. Kabul Bank, like the (originally Pakistani) Bank of Credit and Commerce International (BCCI) – better known to regulators as the “Bank of Crooks and Criminals International” is reported to have helped everyone – corrupt Afghani government officials, corrupt business leaders, and the Taliban laundering its drug profits to, in part, buy weapons. Like BCCI, Kabul Bank’s managers’ reported frauds and self-dealing blew up the bank by causing massive losses. (If you believe that Kabul Bank is the only bank like this in Afghanistan you are consuming too much of Afghanistan’s leading export.)
The CIA tells us that Afghanistan raised roughly $1 billion in revenues last year and expended $3.3 billion. The shortfall, of course, was funded by us (the West, principally the U.S.). Indeed, that understates the case because Afghanistan raised the $1 billion in revenues primarily through customs duties and the U.S. and other Western nations indirectly or directly funded most of those customs duties. We know certain facts. Afghanistan has no deposit insurance system. Its government has no financial responsibility for bailing out Kabul Bank’s depositors. Nevertheless, Afghanistan’s government has announced it will bail out the depositors. The funds to bail out the depositors will come – indirectly, but surely – largely from the United States Treasury. The New York Times’ initial article correctly stated that the U.S. will bail out Kabul Bank’s depositors. Someone obviously demanded a “correction.” Whoever that person was lied to the New York Times with the goal of getting the newspaper to lie to its readers. That lie succeeded. It is time for the New York Times to correct its correction and defeat this effort to mislead the public. The U.S. taxpayers are about to bail out the depositors of a fraudulent Afghan bank.
**Bill Black is also a white-collar criminologist and former financial regulator. He is the author of The Best Way to Rob a Bank is to Own One.
Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Fraud, Government | 
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What Took You So Long? (Housing)
Three years late, but better late than never, I guess….
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
There was never a way to do that. I’ve been documenting this for the last three years.
The so-called “price appreciation” of the 2000s was false. That is, it was not predicated on actual value, it was not predicated on a reasonable amount of leverage, and it was not predicated on rapidly rising wages.
It was a scam predicated on ever-increasing leverage – a Ponzi scheme that was impossible to continue forward with in perpetuity.
In the early part of 2008 I wrote a white paper on this and distributed it to all 535 members of Congress and all major political campaigns for President, including John McCain, Hilliary Clinton and Senator (at the time) Obama. I said at the time:
The unfortunate reality is that home prices cannot appreciate, over long periods of time, at a rate that exceeds the growth in income among the population. That this is axiomatic should be obvious to everyone; attempting to “ramp” home prices by any mechanism is always a short term phenomena, and leads to a highly-destructive housing crash when the limit of debt carrying is exceeded among the population.
….
This housing bubble was created through intentional manipulation of appraisal values, dangerous and even fraudulent mortgage practices and willful blindness and tolerance among regulators that enabled the creation of “off balance sheet” vehicles (SIVs). Dishonest accounting and outright manipulation of credit markets also played a role.
Now the bubble has burst and we are faced with the aftermath.
It is critical that the government address these issues in a prudent and thoughtful fashion. There is a tremendous desire to “bail people out”, especially taxpayers who are howling in protest to the government in one form or another.
But doing so, whether those howling are banks, investors (bond or stock), homeowners, builders or anyone else would be a serious – perhaps critical – mistake.
Yep.
More than two years ago.
The Administration was stupid, as was the Bush Administration:
“The administration made a bet that a rising economy would solve the housing problem and now they are out of chips,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”
It was literally impossible for this to have worked on a mathematical basis.
The problem is that even with a rising economy at four or five times incomes, or more, houses are not affordable. Nothing can be done to fix this, other than to dramatically increase wages. That can’t happen with the global wage arbitrage that is in place, and even if the government was to decide to fix this (and they should) they can’t fix it quickly – it will take many years, perhaps a decade or more.
Michael L. Moskowitz, president of Equity Now, a direct mortgage lender that operates in New York and seven other states, also advocates letting the market fall. “Prices are still artificially high,” he said. “The government is discriminating against the renters who are able to buy at $200,000 but can’t at $250,000.”
Note that this is a lender.
Note what he’s not saying.
At historical lows interest rates only have one direction to go for mortgages: UPWARD.
Yet it was those historical, ridiculous lows that led to the bubble in the first place. It was 1 and 2% “teaser rates” and Option ARMs that caused the price explosion. Since the rate environment has been artificially suppressed, the price correction necessary to fix the problem has not been able to occur.
We are going to see a huge further decline folks. It is inevitable.
Take the current 4.5% rate available on 30 year money for “well-qualified” buyers. Now move that to a more-normal 7% long rate – not an unreasonable rate at all.
That gives you a payment on a $200,000 loan of $1009.58. If the home has a down payment applied of 20%, the selling price is $250,000.
Now let’s assume the payment is what the buyer can afford, but rates go to 7%. What happens?
The borrowed amount decreases to $152,633. Again, with a 20% down payment the house sells for about $190,000.
That’s about a 25% drop simply from rates normalizing.
Now add to that the excessive valuation predicated on income levels, and in those places where the bubble was it’s most extreme the problem is, quite clearly, nowhere near fixed.
“Let it crash” was the right decision in 2007, it was the right decision in 2008, it was the right decision in 2009, and it is the right, and inevitable, decision today.
If you want the housing market to “recover”, it must first adjust out the distortions from the previous decade. It cannot be otherwise. In addition, rates must normalize so that a durable bottom can be found and formed.
When will President Obama and his administration come to grips with reality?
Posted in Economic Crisis, Economy, Financial System, Government, Homeowners, Housing |
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proudly supports:
Bill Still For President
for Congress
Michigan 11th District
By Bill Still
There is only one answer for the world economic situation; monetary reform.
1. No More National Debt
2. No More Fractional Lending
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