Archive for December 8th, 2010
For about 2 years, FedUpUSA has doggedly sent Senator Carl Levin e-mails with many of our daily posts. Rarely, if ever do we get a response…..even though he happens to be my Senator, since I reside in Michigan. Actually, I was pretty sure he’d blocked my e-mails along time ago. Apparently not.
From The Market-Ticker today:
Senator Levin Quotes Tickerguy! (Flash Crash Hearings)
One well known trader, Karl Denninger, recently made this public comment about U.S. trading activity:
“Folks, this crap is totally out of hand. And it’s now a daily game that’s being played by the machines, which are the only things that can react with this sort of speed, and they’re guaranteed to screw you, the average investor or trader. Go ahead, keep thinking you can invest.” (Emphasis omitted.)
Yes, I sure did.
May I ask why Nanex was not included in these hearings? They seem to have it documented quite well.
There was also my little July 4th missive and follow-up as well.
This much we now seem to know – at least some folks on The Hill read The Ticker.
At least we know someone at Senator Levin’s office read that daily post.
It really doesn’t get more damning than this…..
“Fraud As a Business Model”, the slides from her presentation delivered today to the Federal Housing Finance Agency’s Supervision Summit.
Unfortunately I don’t have audio… but the Powerpoint slides speak for themselves…
From one of the slides:
• Investment banks – securities fraud
• Mortgage lenders – widespread fraud
• Rating agencies – junk science
• CDO “managers” – crash test dummies & accomplices
• Certain hedge funds – shorted CDOs they “managed”
• Bond insurers – money for nothing
• Regulators – poseurs and enablers
You gotta love it… and you darn well should read it.
The presentation is brutal, it is spot-on, it encompasses it all.
And now, with it out there under the white-hot light of the public and presented to the government’s forum on housing finance supervision from one of the preeminent experts in the world of Structured Finance, there no longer is any excuse for the lack of action on these scams – from top to bottom.
Again, where are….
Now comes this lawsuit out of Texas alleging that Bank of America not only tried to collect on a PAID IN FULL mortgage but refused to listen to the fact that it had been paid in full and in fact threatened that the owners were “going to lose their home.”
These banks all claim there is no “real problem” with securitization, there are no pernicious issues with paperwork not being in order, it’s all on the up and up, yet we continue to see filings like this, and these filings – extreme measures, lawsuits even – come only after reasonable attempts to communicate with these institutions and resolve problems are met with STONEWALLING and games – even when, as is alleged here, there is evidence that the loan in question was paid in full and discharged!
Had enough yet?
This is all “minor paperwork errors” and “nobody has lost their home” (or been unjustly harassed, dunned and threatened for money they do not owe, right?)
WHY ARE ANY OF YOU PAYING ANY OF THESE BANKS ANYTHING?
WHY ARE STATE REGULATORS AND ATTORNEYS GENERAL NOT FORCING ALL OF THESE LOANS THROUGH THE COURT SYSTEM AND MAKING THESE SO-CALLED ALLEGED “CREDITORS” COME TO COURT AND PROVE THE PROVENANCE OF THEIR CLAIMED “DEBTS” WITH A FULL AND UNBROKEN CHAIN OF ASSIGNMENTS?
HOW MANY MORE TIMES DO WE NEED TO SEE THIS BEFORE IT IS STOPPED?
THE ONLY WAY WE ARE GOING TO GET THESE INSTITUTIONS’ ATTENTION, AND THAT OF THE LAWMAKERS AND LAW ENFORCEMENT BODIES IN THIS NATION, IS WHEN THE PEOPLE OF THIS COUNTRY REFUSE TO PAY ANY OF THESE BANKS ONE SINGLE DIME – OWED OR NOT – UNTIL ALL OF THIS CRAP STOPS AND EVERY ONE OF THESE “DEBTS” HAS ITS PROVENANCE PROVED UP IN A COURT OF LAW.
Hoh, hoh…. they say he’s got to go go go BondZilla!
But Ben, you said this wouldn’t happen! You said you had it all under control. That rates on the long end would go down, not up….
Never mind that there was never a bit of evidence you were doing anything other than either lying or “wishcasting” – pick one.
Why? Because the last time Bernanke did “QE”, the so-called “QE1″ (now), bond rates actually went up, not down, and now it’s happening again.
Why not? Because there is no exit plan, Bernanke knows it, he’s lying, and the market has figured it out.
Here’s the problem in the main. Bernanke’s only tool to “tighten” monetary policy means selling bonds into the market and taking in cash from the system.
But what happens if he holds bonds that have all gone down in value? He gets screwed, that’s what. In an extreme case The Fed could go “bankrupt.” Bernanke will avoid this, of course, and he can – but only by not soaking up that liquidity – that is, allowing the cash he printed to remain in the system while the rotting bonds he bought are “absorbed” by The Fed.
The market knows this. It also knows that the duration of his holdings has gone up a lot and that he cannot pull enough liquidity via short-term roll-off to matter – that is, despite his claim of being “100% confident” he cannot tighten policy – not now and not for many years.
The market thus sees risk – that if the economy improves you get inflation, and lots of it, as Bernanke can’t do anything about it. If the economy doesn’t improve then the only way for the government to continue spending like crazy, which it clearly is going to do, is to continue to devalue the currency, which means interest rates go up too as commodities will continue to skyrocket (priced in dollars) and this will destroy the tax base upon which government funding rests from the bottom up.
I talk a lot about the tax base, which is best-represented as the labor participation rate. It sucks, it is not improving, and it cannot improve so long as commodity prices continue to ramp and the currency devaluation continues:
This was the prime error made during The Depression. Contrary to Bernanke’s claims of being “a student” of The Depression he’s really the Fool-in-Chief of that time. FDR’s devaluation of the currency trashed the tax base and guaranteed sky-high unemployment for the same reason it’s happening now – devaluation of the currency destroys the finances of the middle class and below as their spending on essential commodities (food, fuel, clothing) is not only more-or-less fixed in volume (which means their cost to those people ramps as price rises) but as a percentage of income this expenditure is much higher than it is for upper-income earners.
That in turn suppresses entry-level and lower-wage jobs, which holds down the labor participation rate. And it is that labor participation rate that drives the ability of government to collect taxes – you can only tax someone who has income, and only people pay taxes – all attempts to tax any other entity, such as corporations, are simply passed through to people.
It is not a coincidence that after stabilizing this chart took a major second leg down when Bernanke initiated QE1 – April of 2009. It is also not a coincidence that it began to recover when QE1 ended around the beginning of 2010 nor that when Bernanke started to threaten QE2, in the summer of 2010, that it weakened again and continues to weaken.
This is the precise dynamic that played out in the 1930s and Bernanke is causing it, not reacting to it.
Yesterday afternoon Obama made reference to Mitch McConnell and he “not being willing to threaten the sovereign credit of the United States.”
Mr. President, you, in re-nominating Bernanke and not putting a stop to both the outrageous deficit spending and allowing Bernanke to back himself into this corner without removing him, have destroyed the sovereign credit of the United States.
You may not recognize it yet, and neither has the market in the main, but I assure you that recognition will come, and precisely where the “tipping point” happens to be where you no longer have any meaningful degree of control over the situation is not determinable in advance.
And before you start spouting off about how smart you and Bernanke are, remember that neither Iceland, Greece or Ireland knew where that tipping point was in advance either.
Did you see Federal Reserve Chairman Ben Bernanke on 60 Minutes the other night? Bernanke portrayed the Federal Reserve as the great protector of the U.S. economy, he claimed that unemployment would be 15 percent higher if the Federal Reserve had sat back and done nothing during the financial crisis and he even started laying the groundwork for a third round of quantitative easing. Unfortunately, 60 Minutes did not ask Bernanke any hard questions and did not challenge him on his past record. It was almost as if they considered Bernanke to be above criticism. But someone in the mainstream media should be taking a closer look at this guy and his record. The truth is that the incompetence that Bernanke has displayed over the past few years makes the Cincinnati Bengals look like a model of excellence. Bernanke kept insisting that the housing market was stable even while it was falling apart, he had absolutely no idea the financial crisis was coming, he declared that Fannie Mae and Freddie Mac were in no danger of failing just before they failed, his policies have created asset bubble after asset bubble and the world financial system is now inherently unstable. But even with such horrific job performance, Barack Obama and leaders of both political parties continue to publicly praise Bernanke at every opportunity. What in the world is going on here?
Not that Bernanke is solely responsible. His predecessor, Alan Greenspan, was responsible for many of the policies that have brought us to this point. In addition, most of the other presidents of the individual Federal Reserve banks across the United States seem just as clueless as Bernanke.
But you would think at some point someone in authority would be calling for Bernanke to resign. Accountability has to begin somewhere.
The Bernanke quotes that you will read below reveal a pattern of incompetence and mismanagement that is absolutely mind blowing. Looking back now, we can see that Bernanke was wrong about almost everything.
But the mainstream media and our top politicians keep insisting that Bernanke is the man to lead our economy into a bright future.
It is almost as if we have been transported into some bizarre episode of “The Twilight Zone” where the more incompetence someone exhibits the more they are to be praised.
The following are 30 Ben Bernanke quotes that are so stupid that you won’t know whether to laugh or cry….
#1 (October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”
#2 (On 60 Minutes in response to a question about what would have happened if the Federal Reserve had not “bailed out” the U.S. economy) “Unemployment would be much, much higher. It might be something like it was in the Depression. Twenty-five percent.”
#3 (February 15, 2006) “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
#4 (January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”
#5 (When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) “The Federal Reserve will not monetize the debt.”
#6 “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”
#7 “The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities.”
#8 (November 21, 2002) “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”
#9 (March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”
#10 (July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”
#11 “Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.”
#12 (February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”
#13 (October 31, 2007) “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”
#14 (On the possibility that the Fed might launch QE3) “Oh, it’s certainly possible. And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks.”
#15 (November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”
#16 (January 18, 2008) “[The U.S. economy] has a strong labor force, excellent productivity and technology, and a deep and liquid financial market that is in the process of repairing itself.”
#17 “I wish I’d been omniscient and seen the crisis coming.”
#18 (May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”
#19 “The GSEs are adequately capitalized. They are in no danger of failing.”
#20 (Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) “They will make it through the storm.”
#21 (September 23rd, 2008) “My interest is solely for the strength and recovery of the U.S. economy.”
#22 “Economics has many substantive areas of knowledge where there is agreement but also contains areas of controversy. That’s inescapable.”
#23 “I don’t think that Chinese ownership of U.S. assets is so large as to put our country at risk economically.”
#24 “We’ve been very, very clear that we will not allow inflation to rise above 2 percent.”
#25 “…inflation is running at rates that are too low relative to the levels that the Committee judges to be most consistent with the Federal Reserve’s dual mandate in the longer run.”
#26 (June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”
#27 “Not all information is beneficial.”
#28 “The financial crisis appears to be mostly behind us, and the economy seems to have stabilized and is expanding again.”
#29 “Similarly, the mandate-consistent inflation rate–the inflation rate that best promotes our dual objectives in the long run–is not necessarily zero; indeed, Committee participants have generally judged that a modestly positive inflation rate over the longer run is most consistent with the dual mandate.”
#30 (October 4, 2006) “If current trends continue, the typical U.S. worker will be considerably more productive several decades from now. Thus, one might argue that letting future generations bear the burden of population aging is appropriate, as they will likely be richer than we are even taking that burden into account.”