FedUpUSA

Archive for August, 2011

This video needs no further comment.  He hits the nail on the head.

Bernanke is out of tools that make any sense even to him.

Seriously, what can he do he has not already done? Given that $1.6 trillion in excess reserves did not do a damn thing to spur lending or job creation, what possible good can another $1 trillion do?

The answer is none.

Yet Monetarist fools want more QE. Monetarist fools are also hoping for “Operation Twist”, technically  not QE but an attempt to drive down long-term rates by buying the long end of the curve and selling the short end.

Yield Curve Table

Seriously, what possible good can come from say, driving down 10-year yields to say 1.75% or even 1.5% from here. Mortgage rates are at record low yields, yet new home sales are at the 1963 levels.

Clearly something other than the yield curve is holding down sales.

So what else can Bernanke do? Monetize more debt? How about …..

The Invisible Bazooka Ploy

Bloomberg reports Bernanke Says Fed Still Has Stimulus Tools, Doesn’t Signal He’ll Use Them

Federal Reserve Chairman Ben S. Bernanke said the central bank still has tools to stimulate the economy without providing details or signaling when or whether policy makers might deploy them.

“In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” Bernanke said in a speech today to central bankers and economists gathered at an annual forum in Jackson Hole, Wyoming. He said a second day has been added to the next policy meeting in September to “allow a fuller discussion” of the economy and the Fed’s possible response.

Translation: “I’ve got an invisible bazooka in my pocket and I will use it when I have to.”

Bernanke is out of tools and he knows it. So does Kansas City Fed member Thomas Hoenig who says “Fed Can’t Do It All, No Reason for Operation Twist to Work”, Focus Should Shift to Fixing U.S. Fiscal Woes

Of course Bernanke cannot come out and say “I am out of tools”.

When it gets serious you have to lie. This is serious, and his statement is a lie.

What else can he do but bluff?

He sounds like a 6-year old bragging about the size of his dog that will protect him against all evils, when the kid does not have a dog at all.

That does not mean Bernankle will not try something. Rest assured he will. I am not sure what, but it will likely be given a creative name hoping to dazzle us with the same misguided Fed policies that got us into this mess in the first place.

Bluff Working?

As of 10:00 Central the market is modestly higher. The S&P is up .8% and the Nasdaq double that. Is the bluff working?

Not really. I do not know a single person who thought today would be anything other than a sell the news event. Perhaps there is a sigh of relief that Bernanke is not doing anything, perhaps too many were looking for “down” and were already positioned that way.

Regardless, down will resume, just give it time.

Mike  “Mish”  Shedlock

Global Economic Analysis

A power play is underway in the foreclosure arena, according to the New York Times.

On the one side is Eric Schneiderman, the New York Attorney General, who is conducting his own investigation into the era of securitizations – the practice of chopping up assets like mortgages and converting them into saleable securities – that led up to the financial crisis of 2007-2008.

On the other side is the Obama administration, the banks, and all the other state attorneys general.

This second camp has cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes.

The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.

This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline.

This deal will also submarine efforts by both defrauded investors in MBS and unfairly foreclosed-upon homeowners and borrowers to obtain any kind of relief in the civil court system. The AGs initially talked about $20 billion as a settlement number, money that would “toward loan modifications and possibly counseling for homeowners,” as Gretchen Morgenson reported the other day.

The banks, however, apparently “balked” at paying that sum, and no doubt it will end up being a lesser amount when the deal is finally done.

To give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.

So this deal being cooked up is the ultimate Papal indulgence. By the time that $20 billion (if it even ends up being that high) gets divvied up between all the major players, the broadest and most destructive fraud scheme in American history, one that makes the S&L crisis look like a cheap liquor store holdup, will be safely reduced to a single painful but eminently survivable one-time line item for all the major perpetrators.

But Schneiderman, who earlier this year launched an investigation into the securitization practices of Goldman, Morgan Stanley, Bank of America and other companies, is screwing up this whole arrangement. Until he lies down, the banks don’t have a deal. They need the certainty of having all 50 states and the federal government on board, or else it’s not worth paying anybody off. To quote the immortal Tony Montana, “How do I know you’re the last cop I’m gonna have to grease?” They need all the dirty cops on board, or else the whole enterprise is FUBAR.

In addition to the global settlement, Schneiderman is also blocking an individual $8.5 billion settlement for Countrywide investors. He has sued to stop that deal, claiming it could “compromise investors’ claims in exchange for a payment representing a fraction of the losses.”

If Schneiderman thinks $8.5 billion is an insufficient, fractional payoff just for defrauded Countrywide investors, then you can imagine how bad a $20 billion settlement for the entire industry would be for the victims.

In that particular Countrywide settlement deal, it looks like Bank of New York Mellon, the New York Fed, Pimco and other players negotiated on behalf of defrauded investors. They told the Times they were happy with the deal, but investors outside the talks told Gretchen they weren’t happy with the settlement.

Schneiderman apparently listened to those voices instead of the Mellon-Fed-BofA crowd, which infuriated the insiders who struck the actual deal. In a remarkable quote given to the Times, Kathryn Wylde, the Fed board member who ostensibly represents the public, said the following about Schneiderman:

It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.

This, again, is coming not from a Bank of America attorney, but from the person on the Fed board who is supposedly representing the public!

This quote leads one to wonder just what Wylde would consider “indefensible,” given that stealing is pretty much the worst thing that a bank can do — and these banks just finished the longest and most orgiastic campaign of stealing in the history of money. Is Wylde waiting for Goldman and Citi to blow up a skyscraper? Dump dioxin into an orphanage? It’s really an incredible quote.

The banks are going to claim that all they’re guilty of is bad paperwork. But while the banks are indeed being investigated for “paperwork” offenses like mass tax evasion (by failing to pay fees associated with mortgage registrations and deed transfers) and mass perjury (a la the “robo-signing” practices), their real crime, the one Schneiderman is interested in, is even more serious.

The issue goes beyond fraudulent paperwork to an intentional, far-reaching theft scheme designed to take junk subprime loans and disguise them as AAA-rated investments. The banks lent money to corrupt companies like Countrywide, who made masses of bad loans and immediately sold them back to the banks.

The banks in turn hid the crappiness of these loans via certain poorly-understood nuances in the securitization process – this is almost certainly where Scheniderman’s investigators are doing their digging – before hawking the resultant securities as AAA-rated gold to fools in places like the Florida state pension fund.

They did this for years, systematically, working hand in hand in a wink-nudge arrangement with clearly criminal enterprises like Countrywide and New Century. The victims were millions of investors worldwide (like the pensioners who saw their funds drop in value) and hundreds of thousands of individual homeowners, who were often sold trick loans and hustled into foreclosure when unexpected rate hikes kicked in.

In a larger sense, even the (often irresponsible) people who simply bought more house than they could afford were victims of this scam. That’s because in many of these cases, credit simply would not have been available to those people had the banks not first discovered a way to raise vast sums of money dumping crap loans on an unsuspecting market.

In other words: if Bank of America hadn’t found a way to sell worthless subprime loans as AAA paper to the Chinese and the Scandavians in May, you can be sure that it wouldn’t be going back to Countrywide in June to lend out more money for more subprime loans.

And Countrywide, in turn, wouldn’t then have been sending masses of reps out into the ghettoes to offer juicy home loans to undocumented immigrants and refis to confused old ladies on social security.

This is as bad as white-collar crime gets. But to Wylde, it doesn’t rise to the level of being “indefensible.” Until they do something worse than this, we apparently should support the banks, and make sure they don’t have to pay more than a fraction of what they made off of this kind of crime.

What is most amazing about Wylde’s quote is the clear implication that even a law enforcement official like Schneiderman should view it as his job to “do everything we can to support” Wall Street. That would be astonishing interpretation of what a prosecutor’s duties are, were it not for the fact that 49 other Attorneys General apparently agree with her.

In Schneiderman we have at least one honest investigator who doesn’t agree, which is to his great credit. But everyone else is on Wylde’s side now. The Times story claims that HUD Secretary Shaun Donovan and various Justice Department officials have been leaning on the New York AG to cave, which tells you that reining in this last rogue cop is now an urgent priority for Barack Obama.

Why? My theory is that the Obama administration is trying to secure its 2012 campaign war chest with this settlement deal. If Barry can make this foreclosure thing go away for the banks, you can bet he’ll win the contributions battle against the Republicans next summer.

Which is good for him, I guess. But it seems to me that it might be time to wonder if is this the most disappointing president we’ve ever had.

Matt Taibbi for Rolling Stone Magazine

I am somewhat in awe (in a negative sense) of the silliness of analysts and executives who think banks in the US and Europe are being hit with liquidity issues, not solvency issues.

Here is a case in point, from a Telegraph article: Market crash ‘could hit within weeks’, warn bankers.

Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group’s implosion nearly three years ago.

Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender’s bonds against default is now £343,540.

The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.

“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.

Not a Liquidity Issue

Did you catch the silly quote? If not here it is: “The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.

This is not a liquidity issue. Banks are undercapitalized. I am not sure who that bank executive is, but he sounds like Rochdale Securities’ analyst, Dick Bove.

I recently commented on Dick Bove, Bank of America, and undercapitalization in  Hello Richard Bove, Repeating Nonsense Does Not Make It True; Bank of America Will Not Survive in One Piece.

On the chance you need a second opinion about Dick Bove, please consider Dick Bove – Open Mouth Insert Footon the Big Picture blog, from April 17, 2010.

At 9:43  AM ET on CNBC, Dick Bove (Rochdale Securities) said Goldman  would pay a  fine and this will pass (3:00).  He also called the stock  an aggressive  buy  at $171 (4:45).  At 6:00 minutes Mark Haines begged  him to reconsider  his position arguing that fraud is a big deal.  Bove  was undeterred and  reiterated his buy recommendation  stating a second  time this was a short-term issue (7:00).

http://www.cnbc.com/id/15840232?video=1470603264&play=1

Then  at 6:35 PM ET with the stock at $160.70 ($11 below his aggressive buy  recommendation this morning) …

Bloomberg.com  – Goldman Sachs Executives Should Resign, Bove Says

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein and   finance chief David Viniar should resign over fraud allegations,  according to Dick  Bove, an analyst at Rochdale Securities. “Will Lloyd  Blankfein, CEO, and David Viniar, CFO, maintain their  positions in the  company? I do not think so,” Bove wrote in a note to  clients today.  “Someone must ‘fall on their swords’ for the devastating  decline in  this company’s persona and they  may be forced to do so for public  relations reasons.”

Just six months ago  Bove stuck his foot in his mouth by offering instant  analysis on Wells  Fargo by exciting giving a positive instant reaction  to their earnings  only to change his opinion to a sell for clients six  hours later.As a result of this  embarrassment, Bove told Dow Jones newswires:

“I’m not  going to do it anymore. I’m going to  have to  see the  numbers before I go on air,” Bove told Dow Jones  Newswires Thursday.  “It creates an untenable situation.”

Dick, maybe you should  expand your self-imposed gag order beyond  numbers and not offer an  opinion on a SEC complaint until you actually  read it, or at least the  three paragraph  summary.

Goldman Sachs Weekly

The very best someone could have done on that recommendation  is get out break even, after a substantial initial loss. Those who held on are in  far worse shape.  Perhaps in a couple years they too can get back to even.

Dick Bove: Bank Of America Shares Could Rocket To $32

Flashback December 16, 2010: Dick Bove: Bank Of America Shares Could Rocket To $32

Bank of America(BAC) will likely hit $32 per share, according to the latest bullish forecast by Rochdale Securities analyst Richard Bove.

Bove has been touting bank stocks for several months now, and in May he argued Citigroup(C) and Bank of America would sextuple by 2015.

Bove said in a voice message left with TheStreet that he estimates it will take roughly three years for Bank of America to reach $32.

Can Bank of America Buy Credibility?

Bloomberg reports Bank of America ‘Buying Credibility’ With Buffett’s $5 Billion Investment

The Bank of America cash injection may have little impact on capital and doesn’t resolve mounting legal claims linked to mortgages, many of which stem from the 2008 acquisition of Countrywide Financial Corp. Shares of the Charlotte, North Carolina-based bank pared their initial gains today, rising 9.4 percent to $7.65 in regular New York trading.

“He’s buying credibility,” Richard Bove, an analyst at Rochdale Securities LLC in Lutz, Florida, said of Moynihan.

Still, Moynihan cut a “bad deal for Bank of America shareholders,” Bove said.

“It’s an excessive price to pay if, in fact, he didn’t need capital,” he said. “There’s no way in hell that he can make 6 percent after tax on any investment he can make.”

I do not believe one can buy credibility. However, let’s assume you can. Can you still buy credibility if you

1. “Pay an excessive price”
2. “Cut a bad deal”
3. “Raise capital when you do not need to”

Bove makes all those statements. I want to know how a company can make three major mistake and still “buy credibility”.

Bank of America Needed to Raise Capital

Actions speak louder than words.

Regardless, of what anyone says, Bank of America needed to raise capital or they would not have done this deal on extremely onerous terms. Bank of America has problems somewhere, perhaps multiple problems.

Statements to the contrary by Moynihan are meaningless. They remind me of statements by Bear Stearns,  Lehman, and Morgan Stanley, lies, lies, and more lies by all three companies.

Dick Bove An Embarrassment to Rochdale Securities

In general, do not care about bad calls. Everyone who makes predictions is going to have a number of them. I certainly have made a number of them over the years. It is extremely difficult to get both timing and direction correct every time you say something. Indeed, it’s impossible.

What’s important are thought processes, sheer recklessness, and a repeated history of  horrendously inept calls with few good ones.

In this case, it’s crystal clear Dick Bove is an embarrassment to Rochdale Securities, and if Rochdale had any common sense they would fire Bove immediately, if not sooner. That they have not done so, just may say something about Rochdale Securities.

Mike  “Mish”  Shedlock

Global Economic Analysis

ANOTHER 20 Point Overnight Range

You cannot be an “investor” in this market.

Today marks yet another 20 point S&P (and near 200 point DOW) overnight range.

This has been going on now for a couple of weeks, and it makes actual investing impossible.  You wake up and are up or down 2% or more, and there’s absolutely nothing that a prudent investor, acting in the cash markets, can do about it.

Oh sure, the days when your account is up make for smiles with your morning coffee.  The others feel like you were violated in your sleep – because you were.

Trading is ok in a market like this, even if I should change my schedule and become nocturnal.  Safety demands that I not hold positions overnight and trade only futures.  That kinda sucks.  Since I have other obligations than trading, I get to play only during normal hours and thus miss a huge part of these moves.

So be it, but my liquidity is mostly sitting on the sidelines too, because this sort of crap makes it impossible to determine even a reliable a short-term direction and thus on days like this you either chase (and take a big risk of loss) or sit it out.  Fine by me; just as the government can’t force me to start a business with my capital, it also can’t force me to expose myself to a 2% buttrape overnight due to it’s refusal to rein in the thieves guild.

All of this is coming from Europe, and our politicians and so-called “regulators” are explicitly to blame for all of this impact on our markets, because they have utterly refused to force those financial institutions that wish to operate here – and that would be virtually all of them – to comply with reasonable safety and soundness laws in order to hold a US banking license.

To put this in perspective the DAX, the German stock index, is down something like 25% this month.  It “flash crashed” yesterday with a roughly 4% swing in minutes and is down another 3% as I write this, yet their big banks operate here in the United States with impunity and one of them, Deutsche Bank, is even a primary dealer and privileged to bid on Treasury auctions!

Has our government made clear that this crap is not going to be allowed to stand?  Nope.  Not a damn peep out of them.  Not one word out of Ovomit and the Democraps or the Rethuglicans and the so-called “Tea Party”, all of whom seem to think that it’s no big deal because the markets are only down “a few percent” and thus “there is no crisis.”

Oh really?  Have you looked at some individuals stocks?  You know, things like Caterpillar, Cummins, Alcoa and other similar institutions?  Many are down 30 or 40% – and some more – from their peaks just a few months ago.  That’s approaching half of their value lost, and if you hold those stocks, your 401k has been similarly trashed.  Have you taken a look at your account lately?

Or how about Greece’s 2 year bond?  It is trading at nearly fifty percent (interest) at present.  That’s not a coupon payment (nobody borrows at 50% interest) it’s an implied recovery on a default the market has now said is not only inevitable but imminent.  Yet we continue to pretend this is all “no big deal” and we can “put off our own fiscal consolidation”?

That’s utter and complete crap.

Let’s not even talk about financials like BAC.  While I’m sure that people think that Buffett buying preferred might “instill confidence” it did no such thing, as Bank of America had just got done telling us that it didn’t need capital, then it took capital at thirty times the price it would pay for overnight money from The Fed plus a giveaway of warrants!  Buffett, for his part, claimed he dreamed all this up in his bathtub and did his diligence on the bank and it’s financial condition within less than 48 hours?

Who believes that crap – and why is it that after the debacle with Bear Stearns and Lehman, not to mention Paulson and Bernanke’s long-nosed lies in 07 and 08, isn’t this outrageous load of rotting dead fish spewed upon the airwaves viewed as a public fraud and worthy of indictment?

This is the same pattern we followed in 2008.  We had individual names down 20, 30, 40% while the market itself was down 10 to 15 percent.  Bank CEOs came on CNBC (along with Tangelo – remember him?) and said they were “well-capitalized” and “taking advantage of the situation.”

Then the holdouts cracked, the frauds played upon the public exposed and the entire market collapsed; in point of fact the only thing “taken advantage of” was you!

It’s going to happen again, and when it does, I’m willing to bet that you will NOT eject both the pachyderms and jackasses from Congress and the White House, as both are responsible, and both demand and elect a third party.  I would not be surprised to see a loss that reaches sixty to eighty percent in the markets and the collapse of every public and private pension fund.

This time, there will be no bailouts because there can’t be.  There’s no money.  Good luck with your belief in the candy-crapping Unicorn America.  He’s not going to appear.

You won’t act to stop it, will you?

You won’t rise and demand real change, not the promise of Unicorns, will you?

You know, something that would make a difference like STOP THE LOOTING AND START PROSECUTING?

Not even as your jobs disappear, the economy collapses, and your pension funds that you counted on – you know, you teachers, firefighters, cops and the rest – claim you’re entitled to be paid – disappear?

Yeah, that too.  It’s coming ladies and gentlemen.

Seniors?  You won’t throw the bums out either.  Not even when Medicare and Social Security stop on the back of having your savings income utterly destroyed over the last two years via zero interest rates.

Young people?  Enjoy your college debt.  There are and will be no jobs.  But you won’t rise up now and demand the thieves be tossed and jailed.  Oh no, that would require actually doing something constructive, instead of sticking your hand out and whining.

Me?

I’m headed for the bunker when it happens.

Because if we don’t cut this crap out right now – it will – and I’ve seen zero evidence that our nation is full of anything other than sheep.

You’ve been shorn three times in ten years – 2000, 2007 and now again, and this time you’re being skinned as well – and yet you stand still and let it happen.

Baaaaaaaaaaahhhhhh!

Discussion (registration required to post)

Real People Say “Screw You” To The Markets

Liquidity?  None.  This is the bid/offer stack in the S&P futures a few minutes into the trading day.

Nobody is talking about this.  That’s 27 – twenty-seven contracts – on the bid at 1146.75.  During the trading day.  There’s less than a thousand up and down the stack through the entire visible portion.

This is a tiny fraction of normal liquidity and those sub-100 numbers are more-akin to what you expect in the middle of the night when everyone’s sleeping!

All that’s left is the computers.  The humans have gone home.  True liquidity and participation has ended.  The people have given up.  This is not an isolated incident – as I write this I’m seeing it literally minute-by-minute, and it’s been very common all month.  A few minutes ago I saw seven contracts on the bid at the money.  Seven – at 9:57 (ET) in the morning.

The fraud, the phony bids and offers and the high-frequency ripoffs have driven everyone away.

Go ahead politicians, tell us how important “Wall Street” is to the economy and to you.  Let the thieves and liars continue to pollute the markets and screw everyone.  Volatility is as high as it is precisely because people are tired of getting buttraped and after a few instances of it they simply say “screw this”, take their money and go home.

They don’t need the markets, the markets need them, and they’re gone.

With no depth in the market huge moves become commonplace and are essentially impossible to trade.

I’ve never seen the market this illiquid during the day as it has been the last few weeks.  It’s ridiculously bad and getting worse.  When you see two-digit bids and offers during the trading day in the stack you may as well be playing with a loaded six-shooter pointed at your own head – you can’t possibly trade ahead of these jackasses and they can and will steal your money, rape your stops and then reverse the market right out from under you before you can react.  All you do is churn your account and waste your capital.

Don’t even try to “invest” in this market folks, and if you decide to trade, realize that you’re playing in a rigged casino and the entire force of the government is not only behind rigging the casino but explicitly endorses and permits the rigging to go on and continue, despite being fully-aware of it.

Remember, “Wall Street is Main Street” to them – and if that means your retirement and investments get destroyed that’s just fine provided that big buildings in downtown Manhatten continue to be infested by the thieves guild that pumps tithes into campaign coffers.

Oh, if you think that liquidity was bad, you should have seen it on the release of the speech.  There were double-digit bid and offers up and down the stack, and the collapse of about 1% you saw was a direct consequence of an illiquid market.  So was the subsequent ramp job, roughly 2% in minutes.  This chainsaw is more than happy to cut your arms and legs off with both sides of the bar.

Make sure you thank Congress and our wonderful “President”, all of whom are far more interested in making sure that the banksters simply rob you blind than anything else when it comes to the economy.

In fact, by their actions it’s clear that’s all they care about.

The UK Guardian, October 4, 2010

FedUpUSA – Bear Stearns Protest, April 25, 2008

FedUpUSA On Glenn Beck August 21, 2008

It is disappointing to me that the Tea Party has gone so far astray from what it was intended to be.  It was always supposed to be about stopping the looting and starting the prosecuting.  Today, as so eloquently put by the film, Inside Job, not a single person responsible for this catastrophe has gone to jail.  To the contrary, the same people are still in charge of the same enormous financial institutions, and those same institutions continue to rob us blind by contributing large sums of money to the campaigns of those in our government who allow these institutions and their officers to remain un-prosecuted by writing laws that exempt them from the criminal penalties that would apply to the rest of us. 

There’s a word for this:  Kleptocracy

klep·toc·ra·cy

[klep-tok-ruh-see] noun, plural ‐cies.

a government or state in which those in power exploit national resources and steal; rule by a thief or thieves.