Archive for April, 2011
Are the American people losing faith in the U.S. economy? The statistics that you are about to read might surprise you. Not everyone believes that the U.S. economy is dying (there are still millions out there that will swallow anything that the mainstream media tells them), but the reality is that there is a growing chunk of the population that has completely lost faith in our leaders and in our economic system. A brand new Gallup poll has found that the number of Americans that believe that we are in a “depression” is actually larger than the number of Americans that believe that the economy is “growing”. That is absolutely shocking because according to official government figures, the U.S. economy is growing right now and virtually nobody in the mainstream media or the government has used the term “depression” to describe the economic downturn that we went through recently. In fact, according to Gallup a total of 55% of the American people believe that we are either in a recession or a depression right now. This is clear evidence that the American people are losing faith in U.S. government economic statistics and instead they are basing their opinions on what they see in their own communities. Despite the pablum about an “economic recovery” constantly being spewed by Ben Bernanke and Barack Obama, faith in our economic system continues to decline. The truth is that the American people are not stupid. They can see what is happening to the economy.
Back when I was a teenager, one day I walked over to the local McDonald’s and filled out an application and was immediately hired.
But that is not how it works today.
Recently, McDonald’s made headlines when they held a National Hiring Day. Some commentators pointed to that event as evidence that the economy was recovering.
Well, you know what? McDonald’s ended up receiving approximately one million applications.
So how many of those people did McDonald’s hire?
They hired about 62,000 people.
That means that somewhere around 938,000 eager job applicants were turned away.
Just think about that.
Only about 6.2 percent of those that applied for a job at McDonald’s were accepted.
As Joe Weisenthal of Business Insider recently pointed out, that means that Harvard now has a higher acceptance rate than McDonald’s does.
Harvard accepts about 7% of those that apply to go to school there.
Who ever thought we would see the day when a higher percentage of applicants get accepted into Harvard than get hired at McDonald’s?
Sadly, the number of jobs continues to shrink. The competition for good jobs has become absolutely crazy.
Only 66.8% of American men had a job last year. That was the lowest level that has ever been recorded in all of U.S. history.
So why is this happening? Well, there are a lot of reasons, but as I have written about previously, the fact that millions of our jobs are being shipped overseas is a huge factor.
Without good jobs, an increasing number of Americans are being forced to turn to government assistance in order to survive.
Today, more than 44 million Americans are on food stamps. In addition, government transfer payments now make up 18 percent of all personal income in the United States.
That is frightening.
Things have gotten so bad that now even Wal-Mart is warning that their customers are running out of money.
A large percentage of Wal-Mart customers are just surviving month to month and Wal-Mart has been noticing a huge drop off in sales towards the end of the month when their customers run out of cash. The following is what the CEO of Wal-Mart had to say about this phenomenon recently….
“Purchases are really dropping off by the end of the month even more than last year.”
People are starting to get desperate. When economic times get tough, crime tends to increase. Sadly, as a report in USA Today recently noted, thefts of gasoline are increasing all over the nation.
We never had this kind of a problem back when a gallon of gas only was about a dollar a gallon.
Do you remember those days?
They weren’t that long ago.
Now it takes some people over a hundred dollars to fill up their gas tanks.
Our leaders keep promising that they know what is happening and that they are going to fix things, but most Americans are not buying it. Many Americans are completely losing faith in the system altogether.
Our economic decline has been one of the things that has fueled the growth of the prepper movement. Millions of Americans have decided that they want to start becoming independent of the system. One recent article described what some residents of Colorado are doing to prepare, but the truth is that this phenomenon is happening all over the nation….
A Black Forest resident has erected a geodesic dome on her 5-acre spread to grow vegetables, keeps horses for emergency transportation, in case she can’t get gasoline for her car, and plans to acquire chickens and goats as food sources.
A husband and wife who have a cabin on 100 acres of secluded land in Park County have weaned their property from the electric grid, acquired a three-year food supply and taken other measures to become self-sufficient.
Of course the mainstream media loves to portray preppers as “crazies”, but as the U.S. economy continues to die it would be a bit crazy not to prepare.
No job is completely safe today. Millions of Americans that assumed that their “good jobs” would always be there have had their lives shattered over the past couple of years.
There is nothing wrong with trying to become more self-sufficient.
Everyone should be thinking about either starting up a business or developing alternative sources of income. Yes, it can be exhausting to work on a side business during evening and weekends, but the time for loafing is over. Those that are going to make it through the times ahead are those that are going to be willing to work really hard.
People need to start thinking about becoming less dependent on “the system” however they can. One way to insulate yourself against rising food prices is to learn how to grow your own food.
Even if you only have a very small amount of room you can still grow your own food. For example, there is one family that is actually producing 6000 pounds of produce on just 1/10th of an acre right in the middle of Pasadena, California.
Just because we have lost some of the basic skills that previous generations possessed doesn’t mean that we can’t get them back. Back during World War II, “victory gardens” enabled Americans to grow 40 percent of all the vegetables that they needed. Those gardens greatly contributed to the war effort and helped Americans get through some very difficult times.
There are a lot of preppers out there that are totally out of debt, that own their own land, that are entirely off the electrical grid and that grow most of their own food. Many Americans would look at such people as “crazies” but those preppers will be in a much better position than most people when the economy totally collapses.
Don’t wait until it is too late to prepare. Millions of Americans are completely losing faith in our economic system. People are smart. They can see that we are living in the biggest debt bubble in the history of the world. They can see that the guts of our economic infrastructure are being ripped out and shredded. They can see that the number of people living in poverty continues to increase year after year. They can see the the number of good jobs continues to decrease year after year.
When you see a horrible storm coming the rational thing to do is to prepare. Just think about all of those tornadoes that ravaged the southeast U.S. the other day. Most of the people directly in the path of those tornadoes did whatever they could to survive when they realized the twisters were about to hit.
Well, a horrific economic storm is coming. Every American will be affected by this economic storm at least to some extent. We all need to prepare while we still can.
As established readers know, we’ve been writing since mid 2010 about the widespread, possibly pervasive, failure of mortgage securitization originators to convey the notes (the borrower IOU) to securitization trusts as stipulated in the deal documents, well before the robo signing scandal broke. This abuse matters because the transaction procedures were designed carefully to satisfy certain legal requirements, among them rules contained in the 1986 Tax Reform Act regarding REMICs, or real estate mortgage investment conduits, which required that the securitization trust receive all its assets by 90 days after closing and that all assets conveyed to the trust have to be “performing”, as in not in default. Failure to comply with the rules is a prohibited act and subject to taxation at a rate of 100%, and additional penalties may apply.
Now, with the Federal government under enormous budget pressure, shouldn’t the authorities be keen to go after tax cheats? The headline of a Reuters article, “IRS weighs tax penalties on mortgage securities,” would suggest so. But don’t get your hopes up. The lesson is don’t jump to conclusions when big finance is involved.
An overview from the article:
Should the IRS find reason to take tough action, the financial impact could be enormous. REMIC investments are held by pension funds, in individual retirement plans such as 401(k)s and by state and local government entities.
As of the end of 2010, investments in REMICs totaled more than $3 trillion, according to data supplied by the Securities Industry and Financial Markets Association.
In a brief statement in response to questions from Reuters, the agency said: “The IRS is aware of questions in the market regarding REMICs and proper ownership of the underlying mortgages as set out in federal tax law, and is actively reviewing certain aspects of this issue.”
This matter was raised early last year by an attorney I know with IRS, to a senior officer, not in enforcement but familiar with REMIC rules. She immediately understood the importance and nature of the violations being alleged and was keen to proceed. Having had no follow up, the attorney rang again, and the IRS officer took the call, this time reluctantly. She indicated she was not supposed to be taking to him. She said the issue had gone to the White House, where word came back that the IRS was not going to be used as a tool of policy.
So demanding that tax law violators pay what they owe is somehow seen as an misuse of government authority? That appears to be the message.
Knowing of this background, in the blogger meeting with Treasury last August, when someone we will euphemistically call as senior official argued that the Treasury had little power over servicers, I objected, and said it depended on whether they construed of their power narrowly or broadly. I pointed out that a Pacer scrape on foreclosure filings would find thousands of violations of REMIC rules that were subject to punitive charges, and that that was an important leverage point to bring the industry to heel. (Yes, this is an example of using tax as a tool of policy, as opposed to merely enforcing the rules……that was by design). He sidestepped the reference to REMIC both in my initial question and follow up.
Steve Waldman, who was also at the session, was as skeptical of the exchange as I was. From a message last August:
Re REMICs: The reaction to your probing was very suspicious.
It’d have been one thing if he’d said they hadn’t looked into the issue. But that wasn’t how he responded. He started talking about how he’d had his staff “look for leverage”, against servicers I think, but found there was nothing there. In other words, he didn’t want to leave the issue open. He wanted to neutralize it.
One possibility is that the truth is face value, but I doubt it. After all, we’d just had staffers describe using the government’s leverage in creative ways to protect taxpayers or serve other public purposes as “extra legal”. Yet here was [the senior official] apparently on a fishing expedition for leverage, no doubt desperate to persuade servicers to facililitate mods to help homeowners. Yeah. Right.
If I’m not misunderstanding you, your core point is that the paperwork on many boomtown mortgages is invalid, and therefore various sorts of transactions, from foreclosures to bundling into REMICs, cannot be legally done, at least not without a lot of expensive research and recertification. In other words, your line of thinking would put a question mark beneath the value of a whole lot of bank assets. That would obviously not be in the national interest according to Treasury. So of course they’ve already looked onto the story and there’s nothing to it.
As Waldman indicates, there is a blindingly obvious reason why the IRS inquiry is a coverup. If the IRS were to find any of the questionable practices to be violations, they’d lead to widespread and large assessments against mortgage investors. That in turn would spawn the mother of all litigations by investors against the originators and trustees. That would blow up the mortgage industrial complex and put us back in a financial crisis. That is the last thing the officialdom wants to happen.
Now in fact there are ways the IRS can make this problem go away. The article quotes Jim Peaslee, who is one of the top experts on REMICS and was i one of the major influences on the original REMIC regulation. Note how he avoids discussing whether there might be violations; his point is the IRS will take a “see no evil” stance:
James Peaslee, a partner at law firm Cleary Gottlieb who is an expert on taxation of securitized investments, said that even if the IRS finds wrongdoing, it might be loath to act because of the wide financial damage the penalties would cause. He notes that the REMIC investors, who he called “innocent parties,” would have to pay rather than the banks that were responsible for any wrongdoing in transferring mortgage ownership.
I had a few above-my-pay grade e-mail discussions with one of Peaslee’s colleagues, another REMIC expert, last year, and the issues are vastly more complex than mere mortals would appreciate. For instance (and this is one of the simple examples), arguably, if the securitization vehicle wasn’t really created with the assets it claimed, so arguably, at least technically speaking, it was disqualified from the outset. However, legal structures and issues don’t map cleanly on to tax issues. We’ve argued that if the notes were not properly conveyed to the trusts (assuming they are New York trusts, which is the governing law in the vast majority of cases) then the trusts will have a big problem with foreclosing, since New York trusts don’t have any discretion and there is no mechanism for getting the notes into the trust other than shortly after it was formed.
But that particular concern isn’t germane from a tax perspective. State law doesn’t determine characterization of an entity for federal tax purposes. So, for example, even if a taxpayer said he a partnership and planned to set up a state law LLC as the partnership vehicle but failed to take all the legal steps, but did have a contract with a partner, and both has acted according to the partnership tax rules and reported income them on their tax returns accordingly, it would most likely still be treated as a partnership in spite of the lack of a state law legal vehicle.
The net result, as the expert indicated, is “that the rules about REMIC (or other securitization) qualification become very bendable” which in turn gives the IRS a great deal of latitude in what it can deem to be acceptable. He felt that was a bad posture to take, since that would give the servicers considerable leeway to manipulate tax liabilities directly.
The Reuters article points out the more obvious concern: foregone revenues by letting tax violations go unpunished:
Adam Levitin, a Georgetown University Law School professor and expert on taxation, said that if the IRS fails to act, “it would be a backdoor bailout of the financial system.”
If the IRS did impose penalties, the REMICs could turn around and sue the banks for causing the problems and not living up to the terms of the agreements establishing each REMIC, thus transferring the costs to the banks. If the IRS finds wrongdoing but fails to act, the IRS would forego “potentially enormous tax revenue that would be passed on to the federal government,” Levitin said. “Given the federal budget deficit that’s not something to sniff at,” he added.
So why is the IRS looking into this issue at all? Wouldn’t one expect them to let sleeping dogs lie? I can think of reasons. First, the issue has gotten enough profile that the IRS (really Treasury) may feel it’s better to go into “put the matter behind us” mode. Second is that it isn’t just the Federal government who would be able to charge taxes against RMBS if they found they had violated the rules, but also states. It’s not hard to imagine that some states have realized that going after the RMBS could be a significant source of badly-needed income. The IRS may thus feel it needs to get in front of this potential source of that investor bugaboo “uncertainty” as well as discourage state action. Mind you, state rules necessarily track the Federal REMIC rules precisely, nor are they required to interpret them the same way, but an IRS “nothing to see here” finding would deter action by all but the most bloodyminded state treasuries).
So we have yet again another example of two tier justice in America. Do you think the IRS would cut you any slack if you had engaged in as many violations of the tax rules as mortgage originators and trusts have? But the point of having a kleptocracy is to avoid inconveniencing the people with money at all costs.
pair of recent Gallup Polls shows distinct loss of confidence in the US economy. The first poll shows Americans’ Economic Confidence at the 2011 Low. A second poll shows 55% still think the economy is in a recession, or worse.
Please consider Americans’ Economic Confidence Declines Further
Gallup’s Economic Confidence Index dropped to -39 in the week ending April 24 — a new weekly low for 2011. This continues a downward trend that began in mid-February. The current deterioration of confidence contrasts sharply with the improving trend found at this time a year ago.
Optimism About Economic Outlook Drops to 2011 Low
Slightly more than one in four Americans said the economy is “getting better” last week. This measure has been declining since mid-February, and is now at its 2011 low. Far fewer Americans currently feel the economy is improving than held that expectation a year ago, when 41% said things were getting better.
click on chart for sharper image
Just 12 months ago, economic confidence was improving and there was talk of “frugality fatigue.” The U.S. saw a sharp spike in spending — particularly among those with higher incomes — during May 2010. Things were looking up for the nation’s retailers and the economy as a whole until the debt crisis in Europe surfaced.
This year, economic confidence is going in the opposite direction. There is an increasing danger of stagflation as prices surge and the economy slows. As a result, retailers and the economy could find it difficult to match last May’s sales performance in 2011.
Survey Respondents Think US Still In Recession
For example, please consider More Than Half Still Say U.S. Is in Recession or Depression
More than half of Americans (55%) describe the U.S. economy as being in a recession or depression, even as the Federal Open Market Committee (FOMC) reports that “the economic recovery is proceeding at a moderate pace.”
Right now, do you think the economy is growing, slowing down, in a recession, or in an economic depression?
click on chart for sharper image
Although economists announced that the recession ended in mid-2009, more than half of Americans still don’t agree. These ratings are consistent with Gallup’s mid-April findings that 47% of Americans rate the economy “poor” and 19.2% report being underemployed.
In another possible disconnect with monetary policymakers, many Americans may not see the trade-off Bernanke suggests between promoting a stronger economy and experiencing higher inflation. Right now, prices are soaring, yet the latest Gallup Daily tracking data show that 67% of Americans say the economy is “getting worse.”
Majority Do Not See A Recovery
Is there a recovery? The answer is in the eyes of the beholder. Turn on mainstream media and the answer would likely be a resounding yes. Take a poll of average citizens and the answer is clearly different.
The one bright spot in the Gallup survey is 27% of respondents now think the economy is growing. This is up from 3% in September of 2008. However, there are more who think the US is in a depression than a recession, and more who think the US is a depression than think the economy is growing.
With rising gas prices, rising food prices, falling real wages, and falling nominal wages for many households, it should not be difficult to figure out reasons for declining sentiment.
Recovery is a Mirage
There is no real recovery, at least in any meaningful sense. Unemployment is down, but employment is not up. The economy is finally adding jobs, but at snail’s pace compared to any normal recovery.
Mean Unemployment Duration Weeks
click on chart for sharper image
If you lose your job, good luck finding another one quickly. You will need it.
click on chart for sharper image
Does that depict a recovery? Before you answer, bear in mind that Bernanke estimates that it takes 125,000 jobs a month just to hold the unemployment rate flat.
The only reason the unemployment rate has fallen is 2.3 million workers dropped out of the labor force in the last year alone, smack in the midst of an alleged recovery.
Take away government spending, unemployment insurance, and food stamps and you have a widespread economic depression. Gallup respondents realize that; The average commentator on mainstream media doesn’t.
Mike “Mish” Shedlock
Global Economic Analysis
It might be.
This afternoon Ben Bernanke basically told us that the dollar was a zero. And what happened after that? Well, you judge:
We are about two points this evening from loss of confidence in the dollar. We lost the last two points in the last two days. This means we are two days – at this rate – from loss of final support below which the dollar has never traded. How far will it fall below there and how fast will gas go up in price? I have no idea but from the time Bernanke’s Fed announced their decision this morning until now gasoline has gone up by 5.6 cents/gallon, gold is up about $20 and silver is up about $3.50. Ben is responsible for the entirety of those moves, as is Congress and our President, since Congress could remove The Fed’s authority – but won’t.
Both love a rising stock market, you see, even though the bottom 50% of America owns basically no stocks – but they do buy a lot of food and gasoline.
Then there’s Obama. He allegedly provided his “birth certificate” this morning. Except that there’s no reason to believe it actually is an image of the birth certificate.
In fact, there’s hard evidence it is not.
Watch this video. The file on the White House’s web server is manufactured. It is notably missing any sign of chromatic aberration. All color imaging sensors produce chromatic aberration, and if you blow up an image sufficiently you will see it. It is simply not present on Obama’s “Birth Certificate.” Anywhere. That “document” is a not an image. It is manufactured.
We have had banksters put together bogus securities and sell them, claiming they were “money good.” When they weren’t, we paid – not them. Then they foreclosed on a million homes, many with bogus documentation. You lost your house, they skated. We had a bank that admitted to laundering nearly a half-trillion dollars for Mexican drug gangs, and got a slap on the wrist. The residents of Jefferson County Alabama got screwed to the tune of a few billion, and none of the banksters involved were even charged, say much less jailed. Arizona’s Senate tried to protect homeowners and one lady in The House bent over and blew the bankster lobby, killing the bill.
And now, today, our President claimed he had a photocopy made of his birth certificate to settle a question many people have had since before he was elected, and he published that for the world to see.
But after close examination of the alleged document – an examination you can repeat for yourself to satisfy yourself that this is not some sort of sick joke – it is clear that this “certificate” is not a photograph, a photocopy or a scan.
It was assembled.
Is there anything left in this nation that is not a scam?
Michigan: Oakland County Clerk Says There's Evidence of Mortgage Fraud That Could Effect Foreclosures
It’s about time. The Daily Tribune has just reported that someone has caught on to the massive foreclosure fraud in Michigan.
Oakland County Clerk Bill Bullard said Monday there’s evidence to warrant an investigation into document fraud surrounding county properties that have been or are about to be foreclosed.
The alleged fraud may be the basis to set aside foreclosures for civil or criminal proceedings, Bullard said.
In a letter to Michigan Attorney General Bill Schuette dated April 25, Bullard alleges that assignments of mortgages filed in the county bear the signature of a “Linda Green” — the same name that was part of the subject of a recent “60 Minutes” investigation into mortgage document fraud.
“Our role is limited, we don’t prosecute,” Bullard said Monday. “We’re just turning over documents to the proper authorities and asking them to take action.”
I’d like to commend the new Oakland County Clerk, Bill Bullard, for doing what his predecessor never did – actually LOOK at the database Oakland County maintains. I did this about 2 and a half years ago, and had a number of conversations with the clerks in Oakland County that work the desk at the Register of Deeds. I pointed out that the majority of assignments were either to or from MERS and many properties were being foreclosed by MERS.
At the time, there were only a couple of precedents set in upper courts around the country, which held that MERS never had any interest in the properties and therefore could not foreclose. As I posted here yesterday, now the Michigan Appellate Court has ruled the same thing. So now Michigan has it’s own MERS precedent.
To add to the fraud, it now appears that Mr. Bullard has discovered that numerous assignments filed at Oakland County bear the signature of the now infamous ‘Linda Green’ – who at any given time may have been acting as CEO or President of just about any bank a person could imagine.
The fact is, while the judicial foreclosure states were discovering all the fraud in the mortgage industry, the non-judicial states, like Michigan, were being targeted by the banks and lenders (often through MERS) for a massive increase in the rate of foreclosures. This was because the lenders knew that foreclosures in non-judicial states never had to go into court – and therefore, the documents never had to be examined.
Well, here’s another little thing you might want to look into Mr. Bullard and Mr. Schuette: taxing authorities have had millions upon millions of dollars stolen through fraudulent conveyance of property. MERS was first and foremost a mechanism by which the banks and lenders could dodge recording fees, but not only that, for each property that was fraudulently conveyed there is a statutory penalty. What would recouping millions of dollars in lost revenue do for many of our cash-strapped municipalities?
While I doubt there’s any money to be recouped from MERS itself, since it has now been exposed for the shell of a company that it is, I believe it would be possible to recoup money from the lenders behind MERS, since they knew full well the fraud that was being committed. The problem is, once everyone figures this out, only the first few municipalities are going to get much before all of the banks collapse in a big, smoking crater.
This, my friends, is the big steaming pile of crap that our federal government doesn’t want you to know about, lest the precious big banks be exposed for the criminal enterprises that they are. Well, it’s either the municipalities and the states allow this fraud to continue and keep allowing the fraudulent foreclosures, the destruction of property law and the loss of tax revenues to continue, or they stand up and say, ‘It’s us or them.’ So, the ball appears to be in Attorney General Bill Schuette’s hands. I certainly hope that now that at least part of the scope of the fraud perpetrated on the citizens of Michigan has been revealed, Mr. Schuette will be far less inclined to enter into any multi-state ‘settlement’ with the banks.
Meanwhile, the taxpayers will continue to prop up these very same banks and lenders that devised and executed this massive fraud. Could we actually see some of these?