ProPublica is reporting that Freddie Mac has been placing “multi-billion dollar bets designed to only pay off when homeowners remain “trapped” in high interest rate loans, and that the government-owned mortgage monster began increasing such bets late in 2010, which they say is, “the same time Freddie was making harder for homeowners to get out of high-interest mortgages.”

Now, the ProPublica story goes on to say…

“No evidence has emerged that these decisions were coordinated. The company is a key gatekeeper for home loans but says its traders are “walled off” from the officials who have restricted homeowners from taking advantage of historically low interest rates by imposing higher fees and new rules.”

And I suppose ProPublica had to say that for whatever reason, probably because that’s what the Freddie Mac SpokesLiar said when they asked about this egregious, fraudulent, criminal behavior that is also AT BEST yet another FAILURE OF GOVERNMENT to protect the American people.

Now, let me be very clear here, so as not to leave any doubt in what we should all understand about this situation that has been uncovered by an investigation conducted by NPR and ProPublica…

1. Freddie Mac has essentially been nationalized. It is 100 percent funded by U.S. taxpayers because if it weren’t for U.S. taxpayers Freddie Mac would be bankrupt. 

2. As ProPublica also points out in its story, Freddie Mac’s charter “calls for the company to make home loans more accessible. Its chief executive, Charles Haldeman Jr., recently told Congress that his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”  Really, Haldeman?  Or maybe, not so much.

3. The statement above about how Freddie’s traders are “WALLED OFF” from the people at Freddie who have restricted homeowners from getting lower rates so they could keep their homes is OFFENSIVE in so many ways I hardly know where to begin.

First of all, Freddie Mac… IT’S A BOLDFACED LIE.  Do you think you are dealing with a nation of 4 year-olds?  How dare you even try to make such a case to the American people?  Secondly, what right do you have to be “restricting homeowners” from doing ANYTHING?  You are a bankrupt mortgage company that failed so spectacularly that you have cost the American taxpayers incalculable and untold billions of dollars.  The way I see it, you have no right to “restrict” anyone from doing anything.

4. Mr. Charles Haldeman Jr. if you do not end up in prison for the rest of your life, it will be an abominable miscarriage of justice.  When you consider the state of the U.S. and even the world’s economy, and the fragile nature of our banking system, in which almost all trust has been destroyed… Freddie’s acts here constitute TREASON, and Mr. Haldeman should be considered nothing less than a TRAITOR to this country.

No, he didn’t declare war on the United States, or give aid and comfort to our enemies, but congress has, at times throughout our history, passed statutes creating offenses related to treason for acts that undermine the government or the national security, and in my mind, Mr. Haldeman as Freddie Mac’s Chief Executive, most certainly allowed such acts to occur in this case.

5. But Haldeman didn’t commit these acts alone… the others involved must be arrested and tried for these crimes so they may be brought to justice as well.  And where is Mr. Edward DeMarco, the head of the FHFA, the conservator of both Freddie Mac and Fannie Mae?

At an absolute minimum, and to avoid his own prosecution, if that’s even possible, we should all be calling for his IMMEDIATE RESIGNATION, and he should be delivering on national television his most profound apologies to the people of this country, for what he has overseen is a national disgrace at a level I’ve never even contemplated as being possible in this country.

6. Because you should make no mistake about this… the acts committed here have cost more than trillions of dollars in lost wealth, but beyond the incomprehensible monetary cost, they have cost American lives. 

There are children who will grow up without their loving parent or parents because of our foreclosure crisis, senior citizens who have lost all faith in our nation in the last years of their lives… families that have suffered in muted agony for months turned years… and to have used American taxpayer dollars to intentionally exacerbate the effects of the crisis, is so appalling… so contemptible… so utterly vile…  that it truly is unspeakable. 

Eric Holder & Lanny Breuer

Further, U.S. Attorney General Eric Holder should also immediately RESIGN in DISGRACE…

That these unconscionable trades of securities and derivatives, whatever they are, had to be uncovered by an investigation ProPublica and NPR illustrates the, at best laughable, and at worst  corrupt nature of Attorney General Eric Holder and his Department of In-Justice.

Not only has Eric Holder failed to prosecute any of the banking industry executives responsible for our catastrophic economic collapse, but he hasn’t even lifted a finger to do so, or even taken the time to tell the people of this country anything substantive about anything related to the crisis.

It should go with saying that he needs to be replaced, and perhaps this time we should not hire as our “top cop,” a lawyer from Covington & Burling, one of Washington’s biggest white shoe law firms, widely known to represent… WHILE HOLDER and BREUER WERE PARTNERS AT THE FIRM… some of the largest banks in the country, including Bank of America, JPMorgan Chase, CITIGROUP, WELLS FARGO BANK, MERS, one of the largest servicers, and yes… FREDDIE MAC too.

As reported by Huffington Post on January 19th…

“U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

Covington represented Freddie Mac, one of the nation’s biggest issuers of mortgage-backed securities, in enforcement investigations by federal financial regulators.

A particular concern by those pressing for an investigation is Covington’s involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.

Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. — roughly 60 million loans.

But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS “vice presidents” or “assistant secretaries.”

And get this…

“Covington declined to respond to questions from Reuters. A Covington spokeswoman said the firm had no comment.”

Roger that.  I understand perfectly.  Let me see if I’ve got this straight…

• President Obama announces Making Home Affordable Program.
• Obama puts Treasury Secretary Geithner in charge of HAMP loan modification and HARP refinancing programs.
• Geithner appoints Fannie Mae administrator and Freddie Mac regulator of MHA programs.
• Obama puts Edward DeMarco in charge of FHFA.
• FHFA is responsible for oversight of Fannie and Freddie.
• Obama and Geithner say they want Fannie & Freddie to offer principal reductions to stem tide of defaults.
• But DeMarco says no to principal reductions, claims it’s because of “short-term accounting reasons.”
• In 2010, Obama nominates permanent replacement for DeMarco, but Republicans in Congress block nomination.
• Charles Haldeman Jr. is in charge of Freddie Mac.
• Late in 2010.Freddie starts making it much harder for homeowners to get out of high interest loans. 
• For example, during Thanksgiving week 2010, Freddie increases post-settlement delivery fees charged to borrowers refinancing.
• Also late in 2010, Freddie starts placing multi-billion dollar bets that pay off by keeping homeowners trapped in high interest loans.
• These investments are called “inverse floaters.” Instead of backed mainly by principal, these are banked by interest payments.
• Because inverse floaters are riskier, they pay much higher rate of return, if people remain in higher interest rate loans.
• Meanwhile, Sec. Geithner and President Obama continue to state publicly that they want loans refinanced and/or modified.
• It’s impossible  to believe that Obama, Geithner, DeMarco, and Haldeman haven’t interacted over the last two years.
• FHFA knew about Freddie’s purchase of $3.4 billion in inverse floaters in 2010.
• The Federal Reserve recently said Fannie and Freddie fees charged make it harder to refinance “difficult to justify.”
• And the U.S. Attorney General Eric Holder was a partner in the law firm representing Freddie Mac, along MERS and major banks.
• Freddie and Fannie need another multi-billion bailout in 2011… and will need more in future.

Does that about cover it?  Awesome.

And President Obama…

If you haven’t figured it out yet, and I think you have, you’ve hired the WRONG PEOPLE, or been given bad advice, because the way your administration has handled the financial and foreclosure crises is fast getting entirely out of anyone’s control.  Today’s crisis is very much like a tsunami in the middle of the ocean when it looks like a small bump on the water.  But it’s approaching the shore and when it arrives it is likely to be 1,000 feet tall and moving at 600 miles per hour.

You are where the buck stops, and ultimately it is your administration that has allowed Freddie Mac to commit these horrific acts against America’s distressed and vulnerable homeowners.  You are the one responsible for putting Covington and Burling lawyers in charge of the DOJ… you are the individual in which we placed our trust and you have let us down.

I wish I thought you were capable of redeeming yourself, but you can’t… can you?  You’re in too deep and can’t see a way out.  You allowed Washington’s powerbrokers and structure to take over your presidency and now you don’t know how to change the path you’re on… I can feel it.  I am truly sorry, as I’ve felt that way before in my life.

All I can say is that you are still the President of the United States and you can break what needs to be broken.  It’s all about inches, like the journey of 1,000 miles beginning with one small step.

ONE LAST THING… A NOTE TO PROPUBLICA and NPR…

Thank you for your work on this.  Now, if you haven’t already done so, would you mind sauntering on over to Fannie Mae to check out what’s trading places over there.  I’m pretty sure I already know, but I don’t want to say because frankly… I don’t want to be right.

And after that… maybe check out what’s trading at all the major banks… you know… just round up the usual suspects and that oughta’ do it, don’t you think?  Yeppers… I think you’ve just uncovered one of the reasons why it’s been so damn hard to get a loan modification.

Because it seems to me that the odds are outstanding that… just like “robo-signing” wasn’t… this ain’t no “isolated incident.”

Mandelman out.

ARE YOU A DOER, OR JUST A READER?

TO FIND OUT MORE CLICK HERE.

Please don’t delay.  It’s FREE, so DO it today  It’s easy to DO.  And to win, we need you.

Becoming a DOER and committing to our code of action is easy. Just send an email to either one of us:

Martin Andelman at: mandelman@mac.com

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All you have to write in the message is: Count on me to be a DOER.  Or,  just say: I’m in.  Tell me what to DO.

About once a week we’ll call on you to DO something important… something that matters a lot.  

It feels really good to be a DOER, ask anyone who is.

Mandelman & Field… OUT!

Someone recently wrote to me saying that instead of continually telling everyone what’s wrong, I should tell them how to solve the problems we’re facing and I thought to myself… okay, fair enough.  This just isn’t that hard.  We’re not solving things because we don’t want to, not because no one can think of how to solve anything.

So, you ready… I’m going to show you solutions in ONE MINUTE and one solution at a time.. so please try to keep up okay?

1. Problem: Forging documents and filing fraudulent documents in public records… or “Robo-signing,” if you’d prefer.

1. Either pass a law that says these documents don’t need to be signed at all… or stop the filing of forged and fraudulent documents in public records… and Nevada has shown us how to do that… it’s easy and doesn’t cost a nickel.  And foreclosure filings in Nevada dropped by more than 80% as a result of what they did in that state, which was simply to make the penalties criminal and the fines higher for filing a fraudulent document in the public record.  Because, I don’t care if they need to be signed or they don’t need to be signed… but they don’t need to be forged under any circumstances.

2. In simpler terms: If Mickey Mouse is going to sign it, and Donald Duck is going to notarize it… THEN DON’T SIGN IT… because we don’t need it signed.  BUT… if we DO need it signed, then don’t forge it and file a fraudulent document into the public record.  If you do that, it’ll cost you thousands and you could end up in jail.

3. We already have millions of forged and fraudulent docs in our public records thank you very much, and 30 years from now some lawyer will have occasion to pull title docs for whatever reason, he’ll find a forged or otherwise fraudulent document(s) and we’ll be litigating the whole damn thing all over again.  We certainly don’t need that situation exacerbated.  The documents may need to be signed… but they don’t NEED to be forged.

4. We also don’t need to wait until the situation shakes out or the scope of the problem is known… or whatever.  There’s no reason to wait for any of that because it doesn’t matter how we answer any of the unanswered questions… the solution to however you want to define the problem is NOT under any circumstances going to be: “Oh, just forge the signature and file a fraudulent document in the public record.”  NO… that’s not allowed to be the answer no matter how you want to define the problem.

5. I’ve never lost the pink slip to my car… but I’m sure there’s a process to follow if that ever happens.  I call the DMV and fill out some forms and then I… blah, blah, blah… it’s never happened to me so I don’t know what the process is.  But I know what it isn’t.  It isn’t: “Fake one on your Mac, sign Donald Duck’s name, and use it for whatever…”  That is definitely not how it’s done.

6. There shouldn’t be ANY push back to what I’m suggesting here… NONE.  To those who say that the banks will oppose what I’m saying because I’m trying to stop foreclosures I reply: No, I’m not.  I haven’t said a word about stopping foreclosures, I’m talking about stopping the forging of documents and the filing of fraudulent documents into the public record.  I have all the confidence in the world that BofA, Chase and our state/federal  governments are more than capable of coming up with some other process… either that or pass a law that says all you need to do is place a red X on the dotted line… or leave the damn things blank… I don’t care.  But, forgery and fraud are not going to be our chosen methodology for anything ever.

7. The reason for my efforts, as I’ve explained to several state AGs and state legislators, is that what is going on now, with forged and fraudulent docs being used every day all over the country to foreclose on homes, is already changing the nature of the foreclosure crisis.  What was a terribly unfair, incompetent, cronyism, banker friendly, messed up situation is being transformed into organized crime.  Homeowners look at their title documents, and very easily see that the assignments and other affidavits have been robo-signed.  They have tangible proof of a crime having been committed.  They show the judge, he doesn’t care… and they lose their house.

8. That is the definition of organized crime… 5 huge crime families we call banks… committing crimes in the public view… and state law enforcement and the court system refusing to enforce the law because of connections with the banks.  That’s organized crime, period.  And human nature dictates that when people see that their government is failing to uphold the rule of law or enforce the laws against certain individuals or groups… well, they take the law into their own hands.  That’s always been true… it is in fact a fundamental human instinct.

9. If your son or daughter is harmed or your store or home is robbed… and the law refuses to do anything about it because of who you are relative to who the perpetrators are… want to know what happens?  Ask the KKK.  Someone takes the law into their own hands and someone gets shot in the head, or ends up hanging from a tall oak.  Every single time… and any of us are capable of doing just that… taking the law into our own hands.

10. Allowing forgery and fraud to go on unchecked is a BAD idea, and everyone should understand and agree with that.  And aren’t we lucky that we know exactly how to stop it… the State of Nevada has shown us the way.  So, change the law, increase the penalties and problem solved.  Now isn’t that a relief?

And… DING!  

The foreclosure crisis has already been allowed to grow out of control and destroy the American middle class.  Standing by idly while we watch it get even worse, when it’s easy and free to prevent that from happening, is beyond unconscionable.  And if we do it, then we deserve whatever we get as a result.

See, that wasn’t that hard, was it?   ONE MINUTE SOLUTIONS by Mandelman Matters.  Why didn’t I think of that?  Next solution tomorrow, so stay tuned.

Mandelman out.

Dear Bank of America, and by Bank of America I mean CEO Brian Moynihan…

Brian, I’m running out the door at the moment.  I have to make a flight to Arizona so I can attend a meeting in the morning at the state capitol.  A state senator called me last week asking for my help promoting a bill related to the foreclosure situation there.  Were it not for my schedule, I’d be ripping you and your bank to pieces in this column, and then asking all of my DOERS to inundate you with emails and letters in support of yet another homeowner who’s life you have irrevocably, unconscionably and inconceivably harmed.

I’ll be back at my desk tomorrow, and I was just going to wait until then to deal with you, but you see… this story brought tears to my eyes asa I sat here checking in for my flight… I guess I’m just emotional (although I think “human” is the more appropriate word) about such things, while you perhaps are not.  Anyway, I decided that even though I didn’t have time to write the story in detail… I’d let you know what’s coming soon to a theater near you.

My thinking is, if you want to avoid me having to spend the eight or so hours it takes me to write all of the details into a piece that will be read and remembered by tens of thousands of people all over the country, you’ll address this situation before I get home tomorrow afternoon.  I hope you don’t view this as some sort of threat… I don’t mean it that way… I hate people that threaten, you know what I mean?  Either do it or shut up, has always been my motto.

I’m just giving you a heads up, if you will, of what tomorrow afternoon is absolutely certain to bring if you don’t do something about… hey, do you remember the Perry Mason television show from days gone by…

The Case of the Grieving Grandpa and the Lying Lender

Starring…

Mr. Dale Wright of Cloverdale, California

Loan Number 149664284

Brian, this one’s going to make a great story too, so if you can’t make time to handle it before I’m home tomorrow afternoon, you’re going to wish you had.  Here are a few highlights… think of it as the show’s preview or a movie trailer…

Mr. Dale Wright of Cloverdale, California turned to Bank of America for help in 2009 after being told by the President of the United States that Bank of America would help him, if at all possible.  Mr. Wright is an 82 year-old veteran who’s been a pillar of his community since before you were born, Brian.

He was approved for his trial modification under the Making Home Affordable program on March 23, 2010.  I’m told by several people involved in his case that he made all of his payments on time and as agreed and I have reason to believe they are correct.  He was denied for a permanent loan modification because of Bank of America claimed not to have received a new 4506T… even though you had received said 4506T, 30 days earlier and I’m told those things are good for 90 or 120 days.

No matter… he was told he was being reconsidered as of December 6, 2011.  In fact, he was told he was under consideration as of December 23rd.  You SOLD his house on January 3rd, Brian. He’s 82 years old, Brian.  December 25th is Christmas, Brian.  January 3rd is two days after New Years, Brian.  God damnit… Bank of America doesn’t need to do sh#t that week, Brian. (I’m sorry, for my language, but I can’t take much more of this without swearing, Brian.)

Of course, your bank didn’t tell him it was sold on January 3rd.  He found out when the investor knocked on his door on January 3rd and told him that it would be understood if he needed more than three days to move out!  The investor told Dale he was buying the property to “flip it.”

(SIDEBAR: You might want to mention to whoever that was that said that to him, that he’s damn lucky that it wasn’t me that answered the door that day because I don’t have any prior criminal record and I’d be willing to pick up a first offense charge for beating the crap out of someone for doing that to my grandfather. But, I don’t suppose he would have said it to me, now would he?  No, he only says things like that to 82 year olds, I’m fairly sure.)

So, Mr. Wright called and Bank of America was like…

“Wo, wo, wo… we don’t know how this happened… we were trying to postpone the sale, but Wells Fargo wouldn’t do it and they’re the investor that owns the loan. It wasn’t our fault… blah, blah, blah.”

Your bank sold the home of an 82 year-old veteran right after New Years so some investor could flip it, and couldn’t even be bothered to make a call to let him know?  No… instead you blamed it on Wells Fargo, saying they were the investor and they wouldn’t agree to delay the sale or modify the loan.  Hmmm… think that’s true, Brian?  I wonder…

But luckily, I didn’t have to wonder for very long… here’s the email from Wells Fargo from just a few days ago:

From: catherine.h.martin@wellsfargo.com

To: kristiesheets@hotmail.com

Date: Tue, 17 Jan 2012 14:01:19 -0600

Subject: Dale Wright

 Dear Ms. Sheets,

Wells Fargo Bank, N.A. received and reviewed your recent correspondence regarding your concerns as it relates to your Grandfather’s mortgage.

After researching this matter, we have verified that Wells Fargo Bank is not the Investor/Owner and does not have a direct role in servicing the loan.  That being said, I am forwarding your letter to the servicer, Bank of America, instructing that they subsequently respond in a timely manner to your concerns giving Mr. Wright every consideration allowed. 

I urge that you continue addressing Bank of America with concerns pertaining to this matter.  You may contact Ms. Nora Jones at 817-864-2293 at Bank of America to request that she escalate this matter within Bank of America. 

Wells Fargo Bank makes every effort to facilitate and inform servicers of such issues so they may properly respond. 

Respectfully,

Cathy Martin 

Client Service Consultant 

Wells Fargo Bank 

9062 Old Annapolis Road 

Columbia, MD  21045 

410-884-2161 FAX 866-493-7814 

Ooopsie!  I guess your system was wrong… or your bank’s wires got crossed.  Or maybe they were just feeding Mr. Wright “Lie Number 32,863,” from the Bank of America Handbook?

The man’s wife passed away in 2006.  They were married for 53 years.  Your bank explained that a request for postponement went in on the 23rd of December 2011 on a loan which Bank of America agreed to review for HAMP on December 1, 2011 and then you sold  the home on January 3, 2012… Brian, are you trying to punish this man?

Fix this, Brian.  Fix it so that it doesn’t happen to even one more elderly person.  Because if you’ve heard of karma, your later years are likely going to be a real bear if you don’t.

COME ON DOERS… DO SOMETHING ABOUT THIS…

I CAN’T SAY ANYTHING ELSE WITHOUT BREAKING MY KEYBOARD AND MISSING MY FLIGHT, AND BESIDES I CAN’T SEE AGAIN, THIS IS JUST TOO UPSETTING… I FEEL LIKE IT’S GROUNDHOG DAY…

BRIAN… Kristie Sheets is his granddaughter… HER NUMBER IS: 707-632-6101.  You can call her and ask how to make this right, if you have a mind to do so.  I’ll be home tomorrow afternoon, and I’ll check with her before I do anything else.  This, as I mentioned, was just a preview of coming attractions.  (Insert Perry Mason Music here.)

Mandelman out.

DOERS YOU KNOW WHAT TO DO!

Brian Moynihan, President, CEO & Chairman

Bank of America

Email: brian.t.moynihan@bankofamerica.com

Matthew Task, Executive Relations, 
Office of the CEO (At BofA)

Phone: 813-805-4873

I was born and raised in the Northeast… born in Manhattan… father’s family from Boston with too many Harvard grads to count… and I grew up in Pittsburgh.  As a result… well, it’d be more than safe to say that I’ve never been at risk of being confused with a Southerner.  To my knowledge, after meeting me, nary a soul has later posited: “I forgot to ask, is Martin originally from Alabama or Mississippi?”

Truth be told, people from the Northeast are not bothered in the least by the fact that they’re never mistaken for Southerners.  Truth be told, as soon as many Northeasterners hear an opinion uttered in a Southern accent, we get tempted to respond by saying things like, “Thanks Ebb.  Now go on… don’t you have a lunch counter to segregate, or something like that?”

All right, calm down… it’s a joke… sort of… but my point here is that I’m familiar with the pompous air of intellectual superiority invariably inbred in the stereotypical cartoon Northeasterner, but let’s face it… you held onto the whole segregation thing far too long, and whenever there’s controversy over whether evolution should be taught alongside “creation science,” in public schools, it’s never coming out of Philadelphia.

Alright, I’ll stop fooling around… you know what I’m saying, and besides my point is that while I perhaps used to be capable of leaning that way when it came to southern accents, once I turned 18 years of age, enlisted in the United States Air Force, and found myself sans hair wearing fatigues and combat boots and saluting second lieutenants like they were four-star generals, all that Northeastern intellectual superiority crap flew straight out the window… of the pick-up truck for which I was now inexplicably longing.

You meet and come to respect all kind of folk when you serve in the U.S. military, and before you know it you’re craving SOS on toast, and saying, “Thank you, Ma’am,” with Gomer Pyle-like enthusiasm for the extra scoop of sausage gravy ladled onto your plate.

The fact is, joining the service, as we used to call it, does wonders to wipe any sort of superior smirk of your face, no matter how it got there in the first place.  You act like an idiot at the NCO Club bar, as I did once just after my 21^st birthday, and a Master Sargent cured me of that little behavioral shortcoming with just one punch to my not-so-superior nose.  Say what you will about his methods, but that man knew how to get a point across.

So, why was I telling you about all this?  Heck if I know.… no, wait… I remember… it’s because although I grew up in the Northeast, over the years I’ve learned to love the English language as spoken by those that hail from our nation’s southernmost states.  It’s not that I still didn’t cringe just a little every time Jesse Helms stepped to the podium, but I sure do love the way Southerners communicate with each other.

I remember sitting at the counter of a Waffle House in the Florida panhandle one time, watching these two women waitresses interact as they went about their work serving us all breakfast one morning.  One woman was clearly the more experienced of the two, and you could tell that she was in charge, even though they were both taking orders and refilling coffee cups as they communicated back and forth with each other as needed.

The less experienced waitress was having a problem with the coffee maker and figured she’d solicit help from her more experienced co-worker by calling out to explain the specific nature of the problem she had brewing.  Without missing a single beat in the tempo of the dialog, her more experienced co-worker replied in a tone and cadence straight off of the Steel Magnolia’s set: “Why Sugaah, I’m sure I don’t caahar.”

And that was that… the problem got solved and I can’t remember how… it didn’t matter… and I returned to my biscuits and gravy.

See, the New York City version of that same sentiment would have been something like, “Hey, what do I look like, Mrs. Coffee over here?  Figure it out yourself, bafangool.”  And then, silently… the patrons would have immediately divided into two camps, with half agreeing that the less experienced waitress was in fact, bafangool… and the other half thinking the more experienced waitress was a jerk… picking back up a dollar or two that they were about to leave her as a tip before she had revealed her true self through her chosen reply.

“Why Sugaah, I’m sure I don’t caahar,” was a much better way of saying things.  It was Southern speak for… “F#@k you,” but in a way that didn’t make anyone feel like taking sides.

So, why am I going the long way around the barn telling you this story?  Well, because of Federal Reserve Chairman Ben Bernanke, silly.  Aren’t you following me yet?  Okay, let me spell it out for you.

Yesterday, the Federal Open Market Committee or FOMC, which is a group of Federal Reserve Bank presidents and members of the Fed’s Board of Governors, that since being established by the Banking Act of 1933, meets eight times a year to set “monetary policy” by establishing the Fed’s short-term “open market operations,” which is what they call it when the Fed buys and sells U.S. Treasury securities.

The FOMC sets the target for the “federal funds rate,” the interest rate that banks charge each other for overnight loans, and that target rate impacts the interest rates charged on various loans to both businesses and consumers, which in turn impacts the U.S. money supply.

(If that’s all Geek to you and you’re interested in learning more about how it all works, here’s a link to a Wikipedia page about the FOMC, or send me an email and I’ll be happy to help you translate it from finance geek to regular English.)

Anyway, the FOMC releases transcripts of it’s meeting minutes and slide presentations five years after they’ve taken place, and yesterday the 2006 meeting transcripts were made public.  (You can find the entire year of 2006 FOMC transcripts, etc. HERE.  However, please consult your physician before reading too much of them, as certain combinations of medications and FOMC transcripts can lead to depression and suicidal thoughts… I’m pretty sure.)

That’s why you’ve seen a flurry of articles over the last 48 hours talking about how Bernanke, who assumed the throne in 2006, following the Reign of Greenspan that had lasted as long as anyone could remember, had totally blown it as far as seeing what the housing bust would bring.

Now, first let me just point out that none of this should be considered “news,” unless of course you’ve been incarcerated in Kazakhstan until quite recently, and even then, I have it on good authority that many Eastern Block prison guards were involved in flipping condos in Tampa, so you should have even been able to keep up with U.S housing market news from there.

That Bernanke blew it as related to the housing bust is legendary, although at this point, he’s blown it on so many other pivotal events that criticizing him for this is about like going after Joseph Stalin for overlooking the idea of a Bolshevik dental plan for Siberia’s Gulag-imprisoned dissidents.

Quite a few of my readers obviously felt as if this newly released evidence that Bernanke had in fact blown it would exert a vindicating influence on my psyche, as I’ve been known to rail on about how Bernanke couldn’t keep a hot dog stand on Atlantic City’s boardwalk open for the summer, let alone handle the responsibilities of guiding our country through what will someday be understood to have been, the Great Depression Part Deux… so, many sent me links to the plethora of “Ben blew it” type stories.

I, however, had already visited my personal physician and had him write me a note excusing me from having to expose myself to the 2006 FOMC transcripts… hey, I turned 50 this year and you just have to start limiting the risks you take at a certain point.  I mean, no one lives forever, and although I once went out on Lake Erie in a metal canoe during a lightning storm after drinking, as I recall, about half a gallon of Thunderbird wine, I was like 18 at the time and thus invincible.

Today if I tried something like that, I’d need to stop for Dramamine and TUMS at the very least, and then I’d realize that I didn’t really have the right shoes on, talking myself out of the whole thing and ending up back at the room in time for “The Daily Show,” with Jon Stewart, and perhaps some skim milk and Nilla Wafers if I felt like I needed a treat.

After maybe a dozen calls alerting me to the FOMC’s release of 2006 meeting transcripts, and another 25 people sending me links to this new evidence of Bernanke’s boobery, I somehow weakened and clicked on one that took me to AP ‘s coverage of the apparently earth shattering news.

Here’s how the story began…

WASHINGTON (AP) — Ben Bernanke presided over his first meeting as Federal Reserve chairman in March 2006 believing the nation’s economy could pull off a “soft landing” from falling home prices. Three months later, Bernanke had begun to grasp that he and others had underestimated the risk housing posed to the economy.

Okay, so… no.  That’s not even true.  Three months later than March of 2006 Bernanke realized he had underestimated something related to risk to the U.S. economy?  No, sir… not a chance in the world that’s even close to correct.  In fact, there’s so much wrong with that sentence, that I don’t even know where to begin, so all I’m going to say is…

“Why Sugaah, I’m sure I don’t caahar.”  And let’s move further into AP’s article…

Newly released transcripts of Fed meetings during Bernanke’s first year as chairman show that, among Fed officials, he often expressed the most concern about housing. But no official, according to the transcripts, recognized the extent of the damage a housing bubble would cause. A year later, the housing market’s collapse helped send the nation into its worst recession since the Great Depression.

Nope… again that is not a correct statement.  Do you see the inconsistencies here?  A minute ago the article said that Bernanke had realized something three months after March of ’06, which would have been June of ’06.  Now the article is saying that it was a year later that the housing market collapsed, sending us hurdling towards rampant overuse of Depression era metaphors.

Let’s keep going…

In fact, Treasury Secretary Timothy Geithner, then a Fed official, expressed confidence in September 2006 that “collateral damage” from housing could be avoided.

Well, big beans for Timmy.  In September of 2006, the housing bubble had barely even started to deflate… credit was still flowing like boxed wine at a Sunday afternoon Open House in Phoenix.  Heck, Bear Stearns wasn’t even institutionally lying to clients yet, and someone was able to convince BofA CEO Kenny Lewis that Countrywide was worth $4 billion.

(Besides, when Tim said that he thought we could avoid “collateral damage,” he was probably referring to FDIC Chair Sheila Bair.  I’m told that was his pet name fore Sheila… “Collateral Damage.”  Don’t look at me like that, that’s what I was told… prove I wasn’t.)

Back to the AP article…

… Geithner, who was then president of the Fed’s New York regional bank, expressed more confidence that the economy could weather the troubles in housing, saying the issue would be the impact on consumer and business spending.

 

The discussion by the members of the FOMC, the Fed board members in Washington and 12 regional bank presidents, gave no indication that any of them foresaw the devastating impact that the collapse of the housing bubble would have. The country fell into a deep recession and severe financial crisis that led to the loss of more than 8 million jobs.

Stay with me here… are you starting to see where this is going?

So, first of all we see that Tim Geithner is a babbling brook.  He’s talking about the economy “weathering” a cooling off of the housing market and how the issue would be some resulting impact on “consumer and business spending.”  Why is he saying that?

“Why Sugaah, I’m sure I don’t caahar.”  Let’s keep going…

Bernanke and other Fed officials have said that they failed to see the severity of the shock waves from the housing bust. But the transcripts of their closed-door discussions in 2006 provide new details about how the central bank was responding to the unfolding crisis.

No they don’t.  The transcripts don’t provide any “new details about how the central bank was responding to the unfolding crisis,” unless maybe this reporter is 11 years old and everything he reads is to him, a “new detail.”  The transcripts could provide any such new detail, because the crisis hadn’t happened yet.

The “crisis,” we’re all referring to today didn’t begin until August of 2007.  The official “recession,” didn’t officially begin until December of 2007, and it wasn’t announced as having begun in December of 2007… UNTIL NOVEMBER of 2008.

And the article wraps up with…

The transcripts of the final meeting of the year, in December, showed that Bernanke was still expecting that the economy would experience a “soft landing” in which growth would slow enough to cool inflation but not drop into a recession.

You see, as I’ve written many times in the past, our “CRISIS” has never been the deflating of a housing bubble.  It would have been… but it wasn’t.  It would have been… but in July of 2007… a year after the housing bubble started deflating in earnest, the sudden downgrading of debt securities tied to mortgages caused investors to turn cold essentially overnight, the credit markets froze solid making loans far less available overnight… and soon very near entirely unavailable.

Home prices went into a free fall, and various fleeting stimulus programs and tax incentives notwithstanding, they continue in that free fall today.

As more and more homeowners found themselves underwater, owing more than their home’s value… life events such as job loss, divorce and illness/injury started fueling foreclosures, which added to the other forces that were also creating record numbers of foreclosures… and the deflationary spiral slowly but steadily gained speed incinerating to-date more than $10 trillion in consumer wealth and eroding state revenues at an increasingly alarming pace.

The reporter who wrote the story for AP News referenced above, simply lacked the knowledge base to interpret the FOMC meeting transcripts.

The transcripts, in a way, do show that Bernanke and the Fed missed the housing bust, but only because the housing bust was entirely eclipsed by the global credit crisis, and that’s what we’ve been dealing with ever since the summer of 2007.

Want to have some fun?  Come with me… follow the bouncing boobs, Ben Bernanke and Hank Paulson… and don’t forget to watch the dates… with compiled quotes courtesy of austrianfilter.blogspot.com.

March 28th, 2007 – Ben Bernanke: “At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”

 

April 20th, 2007 – Paulson: “I don’t see subprime mortgage market troubles imposing a serious problem. I think it’s going to be largely contained.  All the signs I look at show the housing market is at or near the bottom.”

 

June 20th, 2007 – Bernanke: (the subprime fallout) “will not affect the economy overall.”

 

July 12th, 2007 – Paulson: “This is far and away the strongest global economy I’ve seen in my business lifetime.”

 

October 15th, 2007 – Bernanke: “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.”  (That was the last time we heard from Bernanke on this subject until February of 2008.)

 

February 29th, 2008 – Bernanke: “I expect there will be some failures. I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”

 

February 28th, 2008 – Paulson: “I’m seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street.”

 

March 16th, 2008 – Paulson: “We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”

 

March 18th, 2008 – Bear Stearns Bailout Announced

 

May 7, 2008 – Paulson: ‘The worst is likely to be behind us,”

 

May 16th, 2008 – Paulson: “In my judgment, we are closer to the end of the market turmoil than the beginning.”

 

June 9th, 2008 – Bernanke: Despite a recent spike in the nation’s unemployment rate, the danger that the economy has fallen into a “substantial downturn” appears to have waned,

 

July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm,” “… in no danger of failing.  … they are adequately capitalized.”

 

July 20th, 2008 – Paulson: “It’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

 

August 10th, 2008 – Paulson: “We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)

 

September 8th, 2008 – Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated $1-1.5 trillion dollars. Over $5 trillion is added to the nation’s balance sheet.

 

September 19th, 2008 – Bernanke: “… most severe financial crisis” in the post-World War II era. Investment banks are seeing “tremendous runs on their cash. Without action, they will fail soon.”

 

September 21st, 2008 – Paulson: “The credit markets are still very fragile right now and frozen. We need to deal with this and deal with it quickly.  The financial security of all Americans … depends on our ability to restore our financial institutions to a sound footing.”

 

September 23rd, 2008 – Paulson: “We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy.”

Look… are you feeling me here?  Do you see what I’m saying?  What’s the deal?  Are they lying or are they stupid, because there’s no way in the world we should be talking about whether the FOMC meeting transcripts show Bennie and the Feds missed the housing bust.

So, to everyone who sent me the news of the FOMC’s transcripts being released… thank you.  I always appreciate it when my readers send me links to news events they think I should know of, so don’t let my sarcasm about the whole thing prevent that from happening in the future.  But on this subject, I don’t need to be vindicated… what I need is for people to realize how distorted the coverage of the subject has been from the beginning.

Think about it… the banks and the mainstream media have us looking for love in all the wrong places.  We’ve been told to blame borrowers, brokers, servicers… everyone but the bankers who caused the global credit crisis and have continued to defraud… well, everyone involved as they’ve driven our nation’s economy to new lows.

And in the event that you’ve read all of this and still don’t agree, then at this point all I can think of to say to you is…

“Why Sugaah, I’m sure I don’t caahar.”

Mandelman out.

 YOU DID GOOD! 

Okay, DOERS… you’ve DONE IT again… but it’s not over yet, so if you’re one of the DOERS that hasn’t DONE anything yet, WE NEED YOU NOW!

I don’t usually do this, but with Holly’s permission, I’ve posted the three emails I received from her today.  I get a lot of very flattering emails from homeowners across the country, and I appreciate them all very much… but I don’t post them because it just seems weird and icky to do so… like, “look at how great I am.”  (Yuck.)

But, I’m posting Holly’s emails today for three reasons:

1. Because it’s not just about me… it’s about my DOERS too, and you DOERS deserve to feel like I do when I get an email like the ones you’ll read below.  I couldn’t DO it, without YOU.
2. Because not enough people have sent me an email to say they are a DOER… we NEED MORE… many more. So, I’m hoping by reading what Holly said and seeing the results DOERS get, more of my readers will become DOERS by sending an email to: mandelman@mac.com.  And DOERS… I need you to help recruit DOERS too!)
3. Because not enough DOERS have sent an email to John Stumpf at Wells Fargo as a result of the article I posted on Friday morning, and it’s a little disappointing.  I’m going to try to send everyone an email later to ask them to be the DOER they promised to be, but I assume the reason they haven’t sent their email is because they haven’t read my article yet.

So, if you’re already a DOER, but haven’t subscribed to Mandelman Matters please DO it now: SUBSCRIBE.  That way, you’ll get an email with each new article and if it’s a DOER ALERT, you’ll receive it that day.

I need DOERS to DO BOTH… SUBSCRIBE and send me your email.  The reason is that the SUBSCRIBE tab is through Feedburner, it sends an automatic email with each new article.  The emails you send me I’m putting in a private database of DOERS, so that when I need to tell DOERS about something but I don’t want everyone who reads Mandelman Matters to know… I’ll email everyone from that database.  Get it?  Cool.

So THANK YOU to all of my DOERS that did it… I just LOVE  the way you DO what you DO!  You DO it so well… BUT IT’S NOT OVER YET… It’s close though… you’ll see.

HERE’S THE 1ST EMAIL HOLLY SENT ME,

I READ IT EARLY THIS MORNING…

Mr. Andelman,

Thank you again for the great article. I cried through the entire thing. That someone would be so kind and do something for myself and my children to this magnitude is just heartwarming to me.

You know I didn’t mention this to you but it was the first time in 20 years that I did not go home to Erie with my family for Christmas. My children were really upset about it but with the eviction and house being in foreclosure I couldn’t take them there. My entire family was so disappointed because for my mom and dad their daughter and grandchildren weren’t there and for my brother and sister their sister and nieces and nephews were not there either.

Instead, I spent Christmas trying to pack everything up and do as much research as I could to stop the foreclosure from going through. I feel like I let my entire family down. Now though it was worth it because I got to you. I found someone who cared enough to stay up all night writing and trying to help me. It was a Christmas present I never expected. An early birthday gift (tomorrow is my birthday). I found hope.

Tonight an executive from Wells Fargo called me with her boss and Paula in her office. I wrote John Stumpf and the others today after reading your article. I let them have it. I told them I was going to fight til the end.

She said John Stumpf read my e mail and she wanted to talk to me about it. So, by the end of the conversation, she is calling the attorneys office and telling them that they are no longer doing an eviction or an inspection of the property.

They are going to let us live there until they can look into modifying our loan or something else to help make it affordable. She is putting this in writing and over nighting it to me. 

She also said that if they can not find a program that she would be the one contacting me and letting me know that we will be evicted. She said they want to work to see if they can work something out but she of course could not guarantee anything. She kept telling me how sorry she was that we had an eviction hanging over our head at Christmas time.

I also went down to the court house and got some documents and had them notarized. One is confusing to me as it was dated March 10, 2011 that the assignment transferred from Flick mortgage to Wells Fargo on that day. That isn’t true at all. Wells Fargo said it transferred title in 2007.

I am reading your blog and reading comments from your readers. The girl Beth something that called me to night said she is now the only point of contact for me and that she has escalated everything.

I will keep you posted on what happens,

Holly Niemic

AND HERE’S THE 2ND EMAIL FROM HOLLY TODAY…

Dear Mr. Andelman,

So, because of your article and your DOER’S my children may be able to stay in the only home they have known.

Another thing I didn’t tell  you is my daughter came home from PA where she was in college because she could not concentrate on school when all this was going on. She called me every day crying where are we going to live. Where are Kipper, miller and Sasha going to live (our dogs)?

I told her I don’t know. I’m going to fight to keep our home but other then that I don’t know. I will work ten jobs if I have to to put a roof over your head but she just wanted her home, her room and her life back. she wanted something stable as her parents are separated. She is now on cloud nine and filled with the same hope that I have thanks to you.

I honestly believe that we have won. I know it is all because of you! Thank you so much from the bottom of my heart. I will continue to do everything I need to do and then when my home is our home again without any banks coming after me I will help someone else that needs help. I now know where to go at the court house, I am learning so much that I will pass the knowledge on and I will point them to your blog and try to help them as much as I can.

I will also continue to be one of your DOERS. I will follow you forever.

Thank you so much for helping my children. You can not imagine how in awe I am at you and how much I appreciate everything.

I will keep you posted on what happens,

Holly Niemic

AND HERE’S HER 3RD EMAIL TODAY…

Mr. Andelman,

Yes, You can print anything I ever send you. If it helps just one person then it is so worth it to me.

I just recieved a letter by UPS from Beth Dorsett, Vice President, Office of Executive Complaints. It says that the subject property does not currently have a scheduled eviction date and that she will work with me in order to determine which workout options are available for the loan. 

She will also contact the attorney’s office to advise them of our intent to review the loan for retention options. ( I have been asking them to do this since before the Sheriff sale, but each department said they couldn’t do it and of course never did it).

She also gave me her personal cell phone number last night and her phone number at work which is (800) 853-8516  extension 40586.

I got that letter because of you! You are winning this not just for my children, myself but for everyone facing foreclosure. I have even had more people contact me who are offering advise and telling me not to give up hope.

Now I will never give up hope. You made me believe that there are truly good people out there who think of others and really not only thinks of them but does for them without even knowing them. That is so amazing to me.

All your DOERS, they have been so supportive. Like I said I am one of your DOERS for life now. I will have always lived my life helping others and now others are helping me. it is so touching I’m crying again.

Thank you once again and I will keep you posted on what Wells Fargo is doing.

I don’t know you but God knows I love you! 

Holly Niemic

###

SO, WHAT ARE YOU WAITING FOR?  IF YOU HAVEN’T DONE IT, DO IT NOW! AND BECOME A REGISTERED DOER TODAY BY SENDING AN EMAIL TO MANDELMAN@MAC.COM.

AND SUBSCRIBE TO MANDELMAN MATTERS HERE

Mandelman out.

Originally posted in December of 2009… how tragic is that?  Read it and you’ll see why.

HO, HO, HOmeless!

The Real Story Behind the Crisis

We Still Don’t Want to Understand.

A 46 year-old single mother lies awake as night threatens to turn to morning.  She wonders how she’ll make it through even one more day.  She can’t cry… anymore.  Can’t look into the eyes of her two young children, age 7 & 9.  For a fleeting moment she wonders if her sister, 3,000 miles away, should take the kids, for a while anyway.  She pushes that thought from her mind, reaches for her prescription on the nightstand, swallows two without water, and rolls onto her side.  She’s a Registered Nurse; she knows sleep will soon come.

~~~~~

A father of three stands in the shadows made by the tree in the front yard of his home of 14 years.  It’s 2:30 AM.  He’s wearing a tee shirt and boxer shorts. The wind is audible and cold.  His eyes fixate on the flower box he built his first year as a homeowner.  His stare moves to the driveway… his driveway… and remembers pitching underhand to his youngest son.  He had thought they would live in this house forever.  He absent-mindedly scratches his chest with the barrel of the .38 Smith & Wesson Super he’s holding in his hand.  He wonders if insurance policies pay off after suicide.

~~~~~

An older couple, returning from a trip to the grocery store, pulls into their driveway.  They’ve been married for 38 years; bought the house in ‘72.  He opens the back door of the sedan and reaches in for the bags.  She admonishes him not to do so.  The doctor said not to lift anything heavy… might tear his stitches.  They walk inside together, close the door; neither speaks.  There is paperwork taped to the front door.  It says they’ll have to be moving soon.

~~~~~

A young child listens to her father talking on the phone as he makes her breakfast.  His voice doesn’t sound normal to her ear.  He sounds nervous… he’s being very polite. Like when he’s talking to the men at church.  He hangs up and even though she didn’t ask, he tells her everything is fine.  But the child doesn’t think so.  She looks at him.  Thinks he’s crying.  She wants to help.  He wipes his eyes.  He says cutting an onion made them water.

~~~~~

A mother is on the phone first thing one morning.  She reads my column on-line.  She calls to tell me that her son, 41 years old, hung himself in the basement of his home last night.  She found him yesterday morning.  He had been laid off and out of work for nine months. He tried to convince his bank to modify his mortgage since then.  Went through his savings.  Started spending hers. Her voice shakes.  “Now,” she says, “the bank will finally get what they’ve wanted all along… his house.”

~~~~~

Happy Holidays everybody…

This has been a very hard article for me to write.  It’s been hard for me this year during the holidays.  I want to be happy.  I want to make this holiday season even more wonderful than the last, for my daughter, my wife and my family.  But it’s just harder this year.  Harder to forget everything else that’s going on around me.

The foreclosure crisis that began in mid-2006 continues to destroy the wealth of American consumers and the financial strength of our nation’s banking institutions.  And, although it pains me to say it, the end is still nowhere in sight.

It now seems likely that, before the crisis is over, not just millions, but tens of millions of Americans will have lost their homes to foreclosure, and thousands of banks will have shuttered their doors for good.  The scars will be deep and we will be a nation forever changed.

In 2007, the number of foreclosures filed hit 1.3 million, a 79% increase over 2006.  In 2008, that number had risen to 2.3 million, an 81% increase over 2007.  It appears that this year we’ll have something in the neighborhood of 3.9 million foreclosure notices sent out homeowners, if not more.  And next year, absent some unexpectedly competent response from government, is all but certain to be even worse.

As of August 2008, 9.2% of all U.S. mortgages were either seriously delinquent or already in foreclosure.  Today, that number is 14.7%.  Forecasts predict a staggering 14-17 million foreclosures over the next five years, depending on their source.  And, according to Bloomberg, mortgages of $1 million plus are now defaulting at twice the national rate, so there’s no question that the water level is rising.

Meanwhile, unemployment… the real unemployment, known as U6… has reached 17.5%.  In October of this year alone, our country lost another 558,000 jobs, and most of those in manufacturing and other areas that may never return.  In Detroit, according to the city’s Mayor, the actual unemployment rate is fast approaching 50%.

By now it should be abundantly clear that foreclosures breed foreclosures and that the problems are spreading state by state.  And it should be equally clear that our nation’s economy cannot begin to recover until the free fall in the housing market, and the resulting foreclosures, have been brought to an end.

Perhaps you’re among those only interested in blindly optimistic thoughts, and if so, there’s certainly no shortage of those.  Now that our government has run out of things to actually do, and since they’ve run out of money with which to paper over problems, as this year draws to a close it seems they simply would like us to believe the worst is over.  That recovery is right around the proverbial corner.  Few do, though, at least not in earnest.  It’s like Ben Bernanke keeps saying in so many words, the recession is over, damn it… probably… I think… sort of… it’s a jobless recovery… yeah, that’s the ticket… a jobless and homeless recovery.

I’ve come to understand many things about this housing led, increasingly complex economic crisis as I’ve written more than 200 articles on related subject matter over the last year.  I now believe in every fiber of my being that we will remain incapable of finding meaningful solutions until we as a nation come to understand the problems we’re facing and why we’re facing them.  And in this regard we have a very long way to go.

We still don’t know… and maybe some of us don’t want to know.

I have never in my life seen anything like what’s happening in this country today.  I’m not just talking about the severity of the crisis; I’m talking about the amount of misinformation and utter confusion about its proximate cause.  It is truly stunning to behold.  I can barely get through a week without bumping into another armchair economist who’s got lots of opinions on AIG, but has no idea what a Credit Default Swap is, let alone how one works, or why they were sold or purchased in the first place.

It’s uncomfortable to be around, frankly.  When did we become a nation filled with people who feel the need to hold a view on everything?  A few weeks ago I wrote a piece in favor of judicial loan modifications… you know, bankruptcy reform… the “cram down,” if you must.  Quite a few people wrote in to say they disagreed with my position, every one of them based their argument on the identical position: “It will raise borrowing costs in the future for everyone.”

It’s a ridiculous presumption, you should realize.  The “cram down” bill that recently was once again killed by the banking industry has no significant measurable potential to raise borrowing costs in the future.  For one thing, it would only apply to loans on the books at the time of its passage, so no future loans would be affected.  And for another, it only applies to those filing bankruptcy, a statistical probability that investors already price into their models.  And for a third, when a judge writes down a mortgage to the market value, that judge isn’t costing the investor a nickel… which is why it’s called the “market value”.

The funny thing about judicial loan modifications is that we clearly need them badly at the moment, as we watch another 14-17 million homes fall into foreclosure, so some miniscule, incalculable, potential threat hardly seems a good enough reason to kill the amendment within hours.  And many of the people who hold onto views in opposition to changing the bankruptcy code, would all unquestionably benefit from such a common sense approach.  But, regardless… no one changes his or her view on much of anything these days.  I suppose only two factors result in real learning: age and pain.  We don’t have the time to wait for age to do it, but stand by, because the pain will be increasing each month that passes, so maybe there’s still hope as that pain increases.

As it stands, all we’re left with in terms of a plan to stop the free fall in the housing market, is… well… we don’t really have a plan to stop the free fall in the housing market, now do we?  Even if Obama’s loan modification program was working, which it is not, it’s not designed to stop the foreclosure crisis.  Remember, it’s only designed to help “responsible” homeowners, if there’s still such a thing.

My intention is that this article doesn’t beat around the bush, so I want to go directly at the question of why we don’t have a plan to stop the foreclosure crisis.  What is it that prevents our adoption of policies that would lead to our economic recovery?

We don’t have a plan for two reasons, and both are political as opposed to economic.  What I mean by that is that we could fix the problems we’re facing, but a lot of people won’t like what we need to do.  In other words, if we could just get over ourselves, we’d all be much better off.

Okay, so here goes:

1. Stopping the Foreclosure Crisis

In terms of fixing the housing market and stopping the foreclosure crisis, we’re going to have to write down the seriously underwater mortgages to their market value, and we can’t do that because politically it’s potential suicide.

There are still many people that view the homeowners losing their homes to foreclosure today as being “irresponsible,” and who could possibly want to bail irresponsible homeowners out of their underwater mortgages?

What people fail to realize is that the mortgages that are seriously underwater need to be… and will be… written down to their market value.  The only question is the mechanism we use to write them down.  If we continue to use foreclosure as the mechanism, then we’re going to be in for a lot of pain, as we take down everyone else’s home value at the same time.

As a country, however, we don’t want to write down mortgages, in fact we barely want to modify them, because we’ve still got a sizable percentage of our population that blames homeowners for the economic collapse and therefore believes they must be punished.  And by punishing them through foreclosure, we will punish everyone else as well.

The problem with this kind of thinking, besides it being untrue, is that it prevents our elected officials from looking at real solutions to the problem.  Eventually, people will change their views on this issue, but it may take several years for the pain to become intense enough and sufficiently widespread, before people are willing to look at the situation differently.

Until then, we’ll keep foreclosing, and those foreclosures will continue to drive housing prices down… which will in turn create more foreclosures.

2. Fix the Banks and the Credit Markets

In terms of fixing our insolvent financial institutions, the only plan with the potential to succeed, short of nationalization, of course, is to buy the toxic assets off of the bank balance sheets at 100% of their face value… something that’s simply not politically palatable.  We could pay some amount less than full face value but that would only leave giant holes in the balance sheets of banks and we’d have to pony up the difference anyway.

It looks to me like Geithner’s plan is to keep the banks propped up with federal slush money, provided under one wonky acronym or another, and the suspension of all accounting rules that would give away their insolvency… until the banks can earn enough by lending to Treasury and charging us exorbitant fees.  There’s a bit more to it than that, but those are the important points.

I’m not the only one who sees this plan not working.  Geithner isn’t just forecasting economic recovery in 2010… he’s depending on it.  When it doesn’t happen, he’s going to act surprised, I’m sure, but he’ll be acting because he knows now that he’s taking a huge risk.

The “toxic assets” that are still clogging up bank balance sheets aren’t getting any less toxic on their own.  In fact, the more homes that are lost to foreclosure, the more toxic they’ll become.  So far, we’ve papered over the problems, but that only fixes the problems in the short run.  Remember, if the banks believed their balance sheets today… they’d be lending.

Let’s look at today’s conventional wisdom pertaining to the economic meltdown:

1. It’s the fault of sub-prime borrowers…

No, it’s not.  Today’s crisis isn’t a sub-prime crisis, and never was a sub-prime crisis.  From the beginning, sub-prime and prime loans defaulted at the same proportional rate.  That’s not to say that there weren’t more sub-prime foreclosures than there were sub-prime foreclosures… there were.  But proportionate to prime loans, the problem was never a “sub-prime” problem.

2. It’s unemployment that’s causing foreclosures…

No, it’s not.  Unemployment and other life events don’t cause foreclosures.  Look at the spikes in unemployment that followed the dot-com crash that began in April of 2000.  Unemployment in places like Northern California and Massachusetts skyrocketed, as did mortgage delinquencies, but foreclosures remained low.  Why?  Because in flat or slightly appreciating real estate markets, when people get in financial trouble or lose their jobs, they sell their homes, they don’t start losing them to foreclosure en masse.

3. Borrowing too much and not properly qualifying for loans caused the crisis…

I’m sorry, but no.  Roughly 54% of the foreclosures are prime loans for which people did qualify, and as far as borrowing too much, well… it’s just beside the point.   In light of where things are today, it would seem that any borrowing was over-borrowing.  And when you look at the leverage employed by Wall Street firms, which was in some cases up to 100:1, the whole idea that homeowners could have caused the economic meltdown of this country becomes preposterous.

Think about the 40:1 leverage at Lehman Bros.  On one hand, you’ve got a homeowner taking out a 100,000 mortgage, and on the other you’ve got Lehman Bros. borrowing $4 million based on that mortgage.  In terms of de-leveraging, which is the problem… the $100,000 mortgage or the $4,000,000 in leverage.  And, by the way, while we’re talking about it… who was it that thought that housing prices would go up forever?

None of this is to say that lending standards weren’t far too lax, that more sub-prime borrowers didn’t initially lose their homes than others, or that today’s unemployment rate isn’t contributing to the number of loans in default.  All are true, but none are the proximate cause of the crisis we face today.

The Birth of a Crisis… and the Crises that Followed

First of all, we’re not having a crisis; we’re having multiple crises.  The foreclosure crisis is one.  The credit crisis is another.

We could go back many years to begin such a discussion, but I don’t see the point.  Many say that the Glass Steagall Act should not have been repealed.  At the moment, however, I don’t care one way or the other whether it should or shouldn’t.  I’m sure some combination of experts and political types will figure that out soon enough, and resolving the issue today won’t change anything tomorrow morning.

For the moment, I’m only interested in what happened in July of 2006, on a day when housing prices dropped by 30% or more… although we didn’t all realize it at the time.

Declining real estate values are what cause foreclosures, and on a day in July of 2006, a number of pension funds realized that the AAA bonds they were holding were not in fact AAA… and they dumped them in a hurry.  They might have been AA… they might have been junk… no one could be sure.  All investors needed to know is that they were not AAA, as they had been rated by the ratings agencies, Standard & Poors, Moody’s or Fitch, and that was enough for them to know that they didn’t want to hold them in their portfolios any longer than they had to… and the bond market froze solid.  Money stopped moving.  And wherever the mortgages were at that moment, that’s where they would stay.

Banks, like IndyMac, who had $40 billion in mortgages on their books that they had planned to sell to Wall Street, now had real problems.  Banks don’t have any money they can loan out for 30 years.  They originate mortgages, but then they sell them to recoup their cash… or at least that’s what they did prior to the day the bond market froze solid.  Now, unable to sell their mortgages, banks immediately began hoarding cash.  Lending dried up within days.  And all of a sudden, what had been a market plush with mortgage cash, was now dry as a bone.

At the same time, there was another force in play… interest rates had been rising.  In fact, by the summer of 2006, the Fed had increased interest rates 17 times in a row.  Those with adjustable rate mortgages had already started to default, and sales had already started to slow appreciably.

Now, however, since essentially no one could get a mortgage, no one could buy a house… and prices had nowhere to go but down.  As they dropped, refinancing became impossible, and foreclosures were the only option.  The crises had begun.

Treasury Secretary Hank Paulson saw the problem as being limited to the sub-prime market and believed it would be contained there, but he failed to take into account what had really happened.  The credit markets had been broken.  Banks didn’t trust each other.  And as housing prices fell, and more loans defaulted as a result, the bonds were downgraded, and Bear Stearns was the first to go.  Paulson wanted to act at that point, but the now Democrat controlled Congress told him not to come to Congress unless he could assure the legislators that “a crisis was at the door”.

There are always a certain number of homeowners that need to sell their homes each year for a variety of reasons, both personal and career related, and when housing prices are declining rapidly, many of those sales inevitably become foreclosures.  The bubble was deflating fast and the loans that were the worst of the bunch went first.  But as prices fell, people who had over-extended themselves, and everyone else for that matter, stopped spending, and it was only a matter of time before unemployment would start to rise.  It was the beginnings of the downward spiral that continues today, albeit at a slightly slower pace than was experienced at its beginning.

The response by our government has been to pump trillions of dollars into our financial institutions in order to prevent their insolvency and make investors whole, but as long as the flood of foreclosures continues unabated, economic recovery cannot occur and we will all increasingly suffer as a result.  Hank Paulson tried to buy some of the toxic assets off of the bank balance sheets using the now infamous TARP funds, but the banks needed him to pay face value, not some discounted amount, and that would not have been politically palatable.

Even with the evidence of our deepening problems all around us, there is still a significant percentage of our population that is preventing our politicians from taking the steps necessary to stop preventable foreclosures and start the economy back on the road to prosperity.  Those that make up this group, in large part, gained their inadequate understanding of what’s transpired since 2006 from government and banking lobby inspired sound bites.  And even more importantly, their views haven’t changed over the last couple of years, even though almost everything else has.

The bottom-line is that this group continues to blame the borrower… the homeowner… as opposed to the commercial and investment banks, and if you’d like, the government regulatory agencies that stood idly by as Rome burned.

It’s a bleak picture, and sadly it is also one whose duration could be easily be reduced significantly if we as a nation shared a common understanding of how our crisis began and what must be done to stop its continuing spread.  That’s right… I have seen the enemy and it is us.

President Obama, however, now places the blame for the recession on “the irresponsibility of large financial institutions on Wall Street that gambled on risky loans and complex financial products, seeking short-term profits and big bonuses with little regard for long-term consequences.”  He and others are trying to get us to change our view of what happened so he can do something about it, but we continue to resist… we continue to hold onto our desire to punish our neighbors for buying too much.  It appears that we’d rather go down with the ship then reduce the principal on our neighbor’s mortgage.

In Conclusion…

Look… I realize that there’s more to the crisis than I’ve described here.  I realize that the bonds I’m referring to were insured by AIG’s credit default swaps, which were unregulated and resulted in a systemic risk to our financial system.  I know that AIG went under because of collateral calls that came along with the downgrading of the bonds it was insuring.

I realize that the process of securitization played a major role in how banks viewed mortgages, and why they were underwritten so poorly.  I realize that Wall Street’s CDOs, collateralized debt obligations, and other derivatives were, if not instruments of destruction, then something in that neighborhood.  And most recently, I’ve come to realize that the investment banks like Goldman Sachs, that packaged these deceptively risky investments and sold them to investors all over the world, bet against their success without disclosing their positions to investors or anyone else.

Yes, I realize that what I’ve described here is a dramatic oversimplification of a very complex situation, and I plan to write more about each aspect of the crisis in simple terms in the hopes that more people will become comfortable with what is now part of our history, and as a result tell their elected representatives that they are not to do whatever the banking lobby wants them to do.

But for the purpose of this article, none of that matters.  For the purpose of this article, I only wanted to say in no uncertain terms:

A. It wasn’t the borrowers that caused this crisis.  Did some people buy too much house?  Sure, some did.  Did some act irresponsibly?  Sure, to varying degree some did.  But today’s foreclosure crisis won’t abate as long as many cling to the belief that they should somehow sit in judgment as to who was irresponsible and who was just caught up in the worst economic downturn since the Great Depression, a task that will be increasingly difficult as each day passes.

B. Water is wet, the sky is blue, children want candy, and people want houses and money.  Some knew what they were doing and some didn’t.  So what?  No one entrusted individual people to make sure our banking system was safe and well managed.  We trusted the banks and they, of one variety or another, let us down.

C. We would be experiencing a similar meltdown regardless of whether we had a real estate bubble.  As long as some group’s actions were going to destroy the secondary mortgage or credit markets, then house prices were going to fall and fall fast.  And that’s what causes foreclosures: declining home values.

D. Our government mischaracterized its cause in the beginning.  Or, in other words… it was never a “sub-prime” borrower crisis.  We know that now.  If you still think it was a sub-prime crisis, caused by those high-risk loans… well, it’s time to take another look at the data.  Your views are wrong.

And to the homeowners who feel ashamed… who have suffered the indignity of losing a home in silence… this wasn’t your fault.  You didn’t break the bond market and send housing prices into a free fall.  You didn’t fail to address the problem, or fall asleep at the switch as a regulator.  You didn’t securitize every payment stream in the country, or leverage untold billions of investments or create untold trillions in synthetic derivatives.  It wasn’t your belief that real estate would continue to go up that caused the problem, it was Wall Street’s belief that it would continue to do so that brought the financial markets to the brink of destruction.

All you did was buy a house you thought you could afford.  Now it’s worth half of what you paid for it… or it will be worth half soon.  No one saw THAT coming.  No one.

So, don’t be ashamed and afraid to speak about what happened here.  Your neighbor may seem to know what he’s talking about, but he more than likely doesn’t know any more than he heard on television or read in some Newsweek article.  Besides, he’s going to be drowning soon enough anyway.  The economic situation we’re in as this New Year begins doesn’t discriminate… everyone will feel its powerful bite as this year continues to see our economy spiral downward.

Unless you’re a banker, of course.  In which case… stop judging others, you jackass.  You want to have a debate someone about how it was borrowers who caused the meltdown, or pick on someone for being an irresponsible… have the debate with me… pick on me.  Go ahead… it’s easy… I’m at mandelman@mac.com.  And I respond to even the most idiotic of opinions.  Bring it.

In fact, next week I’ll be in Park City, Utah, debating this very issue with a bunch of lawyers that represent bankers at a conference of the American Bar Association.  I’ll let you know how it goes, but I think you have some idea already.

For everyone else reading this… let’s stop the madness and tell our politicians we want solutions for the homeowners in trouble, not punishment.  Because at this point, we’re only punishing ourselves… because it’s the right thing to do… because we smarter now and see the situation more clearly… because there, but for the grace of God, go us all.

~~~

(P.S. If anyone wants sources for any of the data presented, just email me and I’ll send you the links.  It’s the holidays and I didn’t feel like writing a term paper, but I’ve got plenty of sources for everything I’ve written.)

And, as always, the illustration of Santa coming down the chimney into a foreclosed home was brilliantly interpreted and then drawn by Richard Taylor.

Well, it’s officially the “holiday season,” and that means it’s time once again to look back at the year that’s ending, so we can see exactly what we never want to have to think about again.

A lot happened in 2011… the shooting of Rep. Giffords… Wisconsin’s unions and teachers take over the capitol… gay marriage gets the nod… Arab Spring… Japan get walloped by tsunami and earthquake, then fallout from nuclear plant threatens to export killer cloud… Osama gets taken out… terror in Norway… Obama still born in Hawaii… Qaddafi finally gone… Casey Anthony… MJ’s doctor convicted of manslaughter… the GOP’s position of Just Saying NO, except to bankers… Summers gone, Geithner inexplicably still there… US economy in shambles… 10th anniversary of 9-11… Penn State does Catholic Church impersonation… Mitt in first place… Obama clearly not in control…

All in all, I’d say this past year was… awful.  But, I’m sorry to say, this next year will be significantly worse, so buckle your seatbelt.

But enough about that… it’s the holidays, and that means no worrying about next year… yet.

And, since it is the holidays, it’s also time for my annual year-in-review-in-rhyme, read to the famous holiday poem, ‘Twas the Night Before Christmas. I started writing my ‘Twas the Night year-in-review in 2007, or at least that’s the year I started keeping them, and they’ve been increasingly popular each year.  In fact, ‘Twas the Night was my very first blog post on MSNBC’s Newsvine, which was my very first blog.

Read it… or, I’ll read it to you…

This year, the written version is the December issue of The Niche Report magazine, center spread by the way.  But click play below, and you be able to listen to it as part of a very Special Holiday Podcast.  So, come on… get into that holiday spirit starting right now… join me for ‘Twas the Night Before Christmas – 2011.

Mandelman out.

###

‘Twas the Night Before Christmas… 2011

~~~

‘Twas the night before Christmas, 2011.

And I realized this poem began life in ’07.

This past year was bad, all the growth curves did flatten,

So I mixed up a pitcher and poured my Manhattan.

~~~

First the shooting, of AZ’s representative,

As beginnings go, this one felt rather tentative.

Wisconsin’s unions and teachers, they’re more than just talkers,

Senators fled, said the idea was Scott Walker’s.

~~~

Obama had upheld the ban on gay marriage,

Causing many supporters to malign and disparage.

Did the lawsuits cause Barack to reverse and agree?

Or did he just watch this past season of Glee?

~~~

Three billion saw Prince Willy, wed Mary Kate,

And it looked like $3 billion, would be billed to the state.

She seemed like a girl who’d soon have her prince trained,

Her dress wasn’t the only thing, that looked so restrained.

~~~

Then Egypt exploded over wealth distribution,

Tens of thousands in streets, ready for revolution.

“Arab Spring,” it was called, among them not one quitter,

It was the first time a regime was overthrown using Twitter.

~~~

But, Egypt was just, one link in a chain,

Because Tunisia and Libya, and which other? Bahrain?

Yes, thousands of people had now seen the light,

The beacon of freedom, which now shone so bright.

~~~

And right out of nowhere, came the death of Osama,

We smiled when the credit was heaped on Obama.

Did G. Bush get mad ‘cause the credit got switched,

Dubya said, “Heck no, the win goes to who pitched.”

~~~

And over in Norway, terror attacks came as twins,

I understand how it ended, but not how it begins.

And all the world mourning for religion’s guns,

Had brought darkness to, the land of midnight suns.

~~~

Then while I sat eating some rye with pastrami,

I saw Japan hit by a giant tsunami.

The footage, it made any movie look phony

And I resigned to buy Kodak, if I couldn’t get Sony.

~~~

And just when it looked like they should build an ark,

The concern changed to would people glow in the dark.

Fukushima made leaving one’s home not allowed,

We feared wind would bring us a radioactive cloud.

~~~

And throughout the year, although it was annoying,

It was Obama’s birth cert, with which we were toying.

But born in Hawaii, is what we discovered,

And Trump is a nutcase, that we also uncovered.

~~~

Casey Anthony got off, and few thought it was groovy,

But I’ll bet she’ll be back in her own Lifetime movie.

We found MJ’s doctor was really a killer

And Michael’s now gone and so heaven got Thriller.

~~~

Then over in Libya, Qaddafi’s done too,

I’m not sure what happened, perhaps a CIA coup?

They say making war was one of old Muammar’s vices,

But what we hated most, was that he raised gas prices.

~~~

And throughout the year, the GOP just said NO,

They would only agree to keep things status quo.

Which was bad for Obama, for hope and for change,

The political landscape went from odd to damn strange.

~~~

With health care behind him and financial reform,

The economy, he realized, was far from the norm.

So he turned to his team, Larry Summers and Geithner,

And asked how come credit was now even tightner.

~~~

Not one idea raised, that would fix unemployment

Obama knew then there would be no enjoyment

And banks denied loan mods, seems they’d rather foreclose

When Tim at Treasury talks, his nose grows and grows.

~~~

Watching homeowners who were all underwater,

Apply for loan mods, was like watching manslaughter.

They cried and they screamed, but their cries were ignored,

Bankers blamed borrowers, which left me totally floored.

~~~

And homeowners in court were treated like louses,

The judges all thought that they wanted free houses.

The stereotype whose idea was Wall Street’s,

Turned struggling homeowners into reckless deadbeats.

~~~

S&P with the meltdown, I can’t help equating,

So why allow them to cut our credit rating?

Then Republicans said the U.S. should default,

Which even made Lieberman exclaim, “Oy gevalt.”

~~~

Barack tried a Hail Mary, and threw up a jobs bill,

But Republicans made sure that it was a clean kill.

But what about spending some billions on school,

The GOP yelled out NO, which was not at all cool.

~~~

We remembered 9-11, on its 10^th anniversary

Shows reviewed every detail, it was far more than cursory.

Then Michigan’s straw poll, would the rightwing admit?

That a process of elimination, had left them with Mitt.

~~~

It was time once again, for political season,

With a Republican field, that defied rhyme or reason.

To understand Cain, you need a sentence contextual,

And I assure you I don’t mean to imply something sexual.

~~~

We can’t chance another Texas Gov sympathizer,

‘Cause that’s how we got a community organizer.

I think Perry and Dubya, they’re just too much the same,

Either one in the moment, might forget his own name.

~~~

Penn State was so shocking, so I did some research,

To see if Sandusky was trained by the Catholic Church.

And I know it’s not funny, and I know there’s no reason,

But did some say Paterno should finish the season?

~~~

The GOP’s line up should be like running unopposed,

Bachman plays Palin, her mind completely closed.

With Paul and Gingrich back, it’s hard to keep a straight face.

John Huntsman is “the other Mormon,” and Mitt’s in first place.

~~~

Santorum, Perry, Herman Cain, others past the comma,

There’s no better way to drive voters towards Obama.

The wild card is Europe, what if they default,

It’s our financial system, that they’re going to assault.

~~~

So, with my wife and children in bed and at peace,

I sat by the fire, stressing out over Greece.

I refilled my glass, pulling out all the stops,

Closed my eyes and was dreaming of defaulting swaps.

~~~

Then out on the lawn there arose such clatter,

I sprang to my feet to see what was the matter.

I stared out the window, the glass touching my nose,

It was Santa’s real sleigh, pulled by bank CEOs!

~~~

I yelled Blankfein! now Stumpf, John Mack, and now Dimon!

I didn’t know how long I could keep the names rhymin’.

On Lewis!  on Davis!  on Logue! And on Pandit!

Kelly, Davis, Rohr, Gorman… all my favorite bandits!

~~~

And then there he was, dressed in red suit so fine,

I asked him to stay, but he didn’t have time.

I was hoping his sleigh, that he’d teach me to fly it,

But to the North Pole, he had to get to Occupy it!

~~~

So, I said Merry Christmas, and with a crack of two whips,

Those bankers took off running in their Italian wing tips.

I yelled thank you Santa! It was my final remark,

He called back, “Cherish the spirit born in Zuccotti Park!”

~~~

So, I went straight to bed, and fell asleep quite content,

Knowing Santa was part of the 99 percent.

And I heard him exclaim, as he flew out of sight,

Merry Christmas, Happy Chanukah… God bless and good night.

~~~

HO! HO! HO!  Happy Holidays Everybody!

Martin Andelman

Mandelman Matters

~~~

Here are the preceding years, in case you feel like taking a walk down memory lane.

‘Twas the Night Before Christmas – 2007

‘Twas the Night Before Christmas – 2008

‘Twas the Night Before Christmas – 2009

‘Twas the Night Before Christmas – 2010

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]]> http://mandelman.ml-implode.com/2011/12/twas-the-night-before-christmas-2011/feed/ 0 http://mandelman.ml-implode.com/2011/12/mandelman-on-the-news-dissector-radio-show-with-danny-schechter/ http://mandelman.ml-implode.com/2011/12/mandelman-on-the-news-dissector-radio-show-with-danny-schechter/#comments Wed, 21 Dec 2011 01:11:03 +0000 Mandelman http://mandelman.ml-implode.com/?p=8225

Listen to the Podcast of last week’s News Dissector Radio Hour on PRN.fm

Subjects:

Occupy Wall Street and the Foreclosure Crisis.

Captain (Ret.) Ray Lewis of the Philadelphia Police Department

Martin Andelman of the blog, Mandelman Matters

and Laura from Occupy Wall Street

Danny Schechter is an Emmy award winning journalist, television producer and independent filmmaker who also writes, blogs and speaks about media issues.  His latest film is PLUNDER The Crime Of Our Time. He’s also become a friend and I’ve appeared on his weekly radio show a couple of times in the past.  This time, however, I was on with a couple of people that have been in the media spotlight lately as a result of their involvement with Occupy Wall Street, or if you’re hip and in-the-know, OWS.

So… if you’re interested in what I had to say, click the play button below and you’ll be listening to The News Dissector… Danny Schechter… on PRN… the Progressive Radio Network.

Mandelman out.

You can’t fully understand the economic meltdown and foreclosure crisis

without reading this book…

“The Monster,” by Michael Hudson

I’m not kidding about that.  I don’t think it’s possible to fully understand what’s going on today economically… politically… socially… legally… it’s just not possible.  I don’t care what else you’ve read either.  There’s simply not another book related to the meltdown that replaces this one.

Why?  Well, for one thing… it’s the historical perspective Mike Hudson provides.  Wall Street’s sub-prime lending binge of 2003-2006 had it’s roots in the Savings & Loans of the 1970s.  If you don’t understand the linkage there, you need to read this book… and listen to this podcast.

If you’ve wondered how the banking and financial services industry amassed so much political power over the last 30 years… how all the different pieces of litigation came together to create today’s situation, you need to read this book… and listen to this podcast.

Is sub-prime lending a good thing or a bad thing?  How did securitization change the world forever in ways we couldn’t see?  Who were the “sub-prime” lenders, like Ameriquest and First Alliance?  What was it really like to work inside the sub-prime industry?  And how did the sub-prime industry seduce Wall Street, and impact everyone, no matter the credit score?  The history is fascinating and once you understand all of the pieces, you find that not only does everything today makes more sense, but you’ll also see clearly what we’re up against… and what we have to do to push back against the banking lobby.

Did Wall Street’s executives know what they were doing?  Did they see all of this coming?  Whose really was responsible for this economic catastrophe?  Was it the borrowers… was it the loan officers and brokers… or was it the bankers of Wall Street?

Someone online said that only in the last 100 pages does Hudson talk about the years 2003-2007… and that’s true.  But Hudson responds by saying: “If I were writing about WWII, I’d have to start by writing about WWI.  Well, same thing here.”  And I couldn’t agree more.

Even if you were part of the real estate or mortgage industries over the last decade, and you think you already know everything there is to know about what went on and why… you don’t… and you’ll be glued too.

Now, before you go off reading “The Monster,” here’s something you can’t do anywhere else… listen to Michael Hudson not only talk with me about his book, but listen to how he applies his vast knowledge of the subject matter to what’s going on today in our society, our government… and even in our banking industry.

Michael and I became friends over the past year or so… we’ve never met face to face, but we’ve spent hours talking on the phone about various issues of the day… he’s a great writer and a really smart guy, simple as that.  But, because we’ve gotten to know each other, I think you’ll agree that the interview is one that couldn’t be duplicated anywhere.

By the way, Michael’s a staff writer at the Center for Public Integrity, a former reporter for the Wall Street Journal, and he was also an investigator for the Center for Responsible Lending.  He’s also written for the New York Times, the Los Angeles Times and Mother Jones.  If there’s one thing he knows about it’s fraud on Wall Street.

I’m telling you… this is a Mandelman Matters Podcast you’re really going to enjoy… in a weird sort of way… I mean, it is disturbing… especially if you’re a homeowner… in fact, I’d say it’s safe to assume that you’ll be outraged more than once.  But, you can’t hide from the facts, and you need to know about how we all ended up in this seemingly unsolvable nightmare.

So, click the big PLAY NOW button below, turn up your speakers,

and get ready for the author of

“The Monster,” Michael Hudson,

because this is a Mandelman Matters Podcast…

To order your copy of the book, “The Monster,” simply CLICK HERE!

Mandelman out.

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What you are about to read has not been smoothed out or otherwise homogenized, it’s just the news as it’s coming at me… and you.  Go ahead… read it and then tell me everything’s just fine.

Retail sales alchemy…

Thanksgiving airfares were up 20% this year over last, according to AAA the average price of a gallon of gas has risen almost 20 percent, and a 16-pound turkey and all the trimmings cost an average of $49.20, which is 13 percent more than last year, according to the American Farm Bureau Federation.

Adding to the problem of rising prices, the study released in October by Sentier Research showed that since December of 2007, real median household income dropped by just under 10 percent in this country.  And the number of open credit card accounts fell by another six million in Q3 of this year, bringing the total down by 23 percent since the peak in 2008.

And yet, according to the National Retail Federation (“NRF”), this past weekend broke records for consumer spending… $52.4 billion, which is up by 16 percent over last year’s $45 billion.  Not only that, but the NRF is also reporting that more consumers went shopping this year… 226 million versus 212 million last year.  Between Thursday and Sunday, holiday shoppers spent $398.62 each, the most spent since 2008 when shoppers spent $372.57, the NRF says.

It’s all very confusing because 2008 was one of the worst holiday shopping seasons on record.  That year, the NRF was forecasting that holiday sales would increase by 2.2 percent, but when the dust settled, holiday sales actually fell by 2.8 percent.

The NRF is predicting that holiday sales will increase by 2.8 percent this year, but a survey released just yesterday, conducted by Bankrate.com, showed that 42 percent of Americans said they planned to spend less this year as compared with last… only 10 percent said they planned to spend more than last year.

In addition, the Consumer Confidence Index^®, declined in October. The Index now stands at 39.8, down from 46.4 in September.  The Present Situation Index decreased to 26.3 from 33.3, and the Expectations Index declined to 48.7 from 55.1 last month.  The proportion of consumers that are anticipating an increase in income declined to 10.3 percent from 13.5 percent.

The views held by corporate CEOs turned even more pessimistic in Q3, as well.  Only 11 percent now say conditions are better compared to six months ago, which is down from 33 percent last quarter.  And CEOs’ optimism about the short-term outlook also deteriorated sharply. Currently, about 19 percent of business leaders anticipate an improvement in economic conditions over the next six months, down from 43 percent in the second quarter.

Housing markets continue their decline…

During the third quarter of this year, the number of people signing up for new mortgages fell 17 percent, the lowest level since mid-2000, which translated into a $114 billion decline in mortgage borrowing.

On November 7, 2011, Fitch released data showing that foreclosures this year have essentially doubled as compared with last year at this time.  The rate of new foreclosures has ascended to over 10 percent a month, according to Fitch’s latest performance metric, which is almost twice the rate one year ago.  Of course, one year ago the “robo-signing” scandal wasn’t yet being ignored in its entirety, so the largest banks were pretending to investigate and correct the minor dalliance some people refer to as fraud and forgery.

Fitch also said that the higher foreclosure rates mean that U.S. housing prices will probably fall another 10 percent before stabilizing.  Then a few paragraphs later, Fitch said the higher foreclosure rate will lower housing prices lower by increasing the inventory of houses on the market, and that the full number of new houses on the market won’t be evident for another year.

Nonetheless, Fitch is apparently comfortable with its forecast that “U.S. housing prices will probably fall another 10 percent before stabilizing.”  And, just in case anyone was wondering why investors around the world no longer trust our ratings agencies, of which Fitch is one… I really have no clue.

And isn’t it interesting that the State of California’s latest property assessment data shows that the state’s properties are worth $4.3 trillion, which is only a FOUR PERCENT DROP from their peak… BUT according to the FHFA, home prices in California are down by 37 PERCENT.

Gosh, it kind of makes one wonder what valuations the banks are using for those untold millions of REO properties we lovingly call the “shadow” inventory.  You don’t suppose the bankster balance sheets are artificially inflated, do you?  Nah… they wouldn’t do that… again… would they?

Fitch Ratings announced last week, while we were all wrapped up in our holiday eating fest, that U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis deepens and spreads beyond the five most-troubled nations.

According to Fitch: “Unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen.  Further contagion poses a serious risk.”

As of September 30th, according to Fitch, the six largest U.S. banks – JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. and Morgan Stanley (MS) — had $50 billion in risk tied to the GIIPS.  So-called cross-border outstandings to France, for all except Wells Fargo were $188 billion, including $114 billion to French banks.  Risk to Britain and its banks was $225 billion and $51 billion, respectively.

So far, Europe’s debt crisis has toppled FOUR elected governments.  Italian bond yields remained at about 7 percent, which was the threshold that led Greece, Portugal and Ireland to seek bailouts — and shares of French banks, including BNP Paribas (BNP) SA and Societe Generale (GLE) SA, dropped due to concerns that they’ll need more capital… meaning ANOTHER BAILOUT.

We might as well face it… the Euro is dead.  And we are living on a razor’s edge.

Have no fear, the GOP candidates are here…

With the GOP presidential race just about in full spin, the statements being made are getting pretty inflated as well.  Romney came out swinging with a statement about how Obama has made “massive defense cuts,” which caused me to spit out my coffee first thing one morning.  The more accurate statement might have gone something like this:

“In an effort to curtail deficit spending, Congress and the administration agreed to slow the pace of defense spending.  That doesn’t mean we’ll be spending less on defense… next year’s budget is still increasing as compared with this year’s, but it’s not going up as fast as in past years.”

It’s just not the same, is it?  No punch whatsoever.  Kinda’ made me drowsy writing it.  Never mind then.  Memo to Romney Campaign: Go back to the lying.

And Perry plans to have U.S. troops invade Mexico in order to combat drug violence in that country.  See, it’s hard to tell whether I’m lying or not, isn’t it?  But, no… I’m not… that’s what Perry said during the last debate.

Apparently, Freddie Mac paid Newt Gingrich between $1.6 million and $1.8 million in consulting fees over roughly eight years.  During that period, Gingrich consulted with Freddie Mac executives on a program to expand home ownership, an idea Mitchell Delk, Freddie Mac’s chief lobbyist, said he pitched to President George W. Bush’s White House.

Delk was quoted by numerous media outlets as saying:

“I spent about three hours with him talking about the substance of the issues and the politics of the issues, and he really got it.”   He added that the two discussed “what the benefits are to communities, what the benefits could be for Republicans and particularly their relationship with Hispanics.”

The multi-million dollar amount is quite a bit more than the $300,000 payment from Freddie Mac that Gingrich was asked about during a Republican presidential debate on Nov. 9^th.  It also exceeded the amount disclosed during the congressional investigations into the collapse of the housing industry.

Newt also announced his proposal to repeal our bothersome child labor laws because, according to Newt:  “Currently child-labor laws and unions keep poor students from bootstrapping their way into middle class.”

Newt went on to explain that in his way of thinking, “In poverty stricken K-12 districts, schools should enlist students as young as 9 to14 to mop hallways and bathrooms, and pay them a wage.”

According to Politico, he also said one thing that’s absolutely true: “This is something that no liberal wants to deal with.”

The New York Times quoted Newt as saying the following about his controversial… no, that’s not the right word… his IDIOTIC proposal:

“You say to somebody, you shouldn’t go to work before you’re what, 14, 16 years of age, fine.  You’re totally poor. You’re in a school that is failing with a teacher that is failing. I’ve tried for years to have a very simple model. Most of these schools ought to get rid of the unionized janitors, have one master janitor and pay local students to take care of the school. The kids would actually do work, they would have cash, they would have pride in the schools, they’d begin the process of rising.”

Of course, none of this should come as any sort of surprise.  It was Newt, after all, that proposed bringing back orphanages for children on welfare, back in 1994.

The New York Times article actually quoted the president of the American Federation of Teachers, Randi Weingarten, who labeled Newt’s proposal: “Absurd.”  She went on to say…

“Who in their right mind would lay off janitors and replace them with disadvantaged children — who should be in school, and not cleaning schools.  And who would start backtracking on laws designed to halt the exploitation of children?”

Hopefully, that was rhetorical.

Newt was speaking to an audience at the John F. Kennedy School of Government at Harvard University when he announced this… umm… innovative… no, that’s not the right word… oh yeah… IDIOTIC proposal.

In his closing remarks, Newt promised: “You’re going to see from me extraordinarily radical proposals to fundamentally change the culture of poverty in America and give people a chance to rise very rapidly.”

That must be where that colloquialism comes from… you know, you hear people saying it all the time… “Rising like a janitor.”

One more thing…

Fannie Mae and Freddie Mac are two giant bankrupt mortgage banks… we had to bail them out to the tune of $170 BILLION… SO FAR, and everyone agrees that the final number will be well in excess of $220 BILLION.

There is no question about it… Fannie and Freddie were the single biggest recipients of bailout money from the taxpayers.  And now… filings show that nearly $100 million of those tax dollars went to lucrative pay packages for their “top” executives.

The top five executives at Fannie Mae received $33.3 million in 2009 and 2010, while the top five at Freddie Mac received $28.1 million. And each company has set pay targets of as much as $17 million for its top managers for 2011.

Acting Director of the Federal Housing Finance Agency Edward DeMarco approved over $12 million in bonuses for government backed… no, government OWNED… Fannie & Freddie.  He says, and with a straight face mind you… that it was necessary to keep experienced executives at the companies.

Without looking it up, I want to say that in the fall of 2008, Fannie was leveraged at around 176:1… Freddie was leveraged at 110:1.  Together they represent the most irresponsible borrowers the world has ever known.

So, what do we do?  We give them a hundred million in bonuses and then let them foreclose and repossess 8 million homes to-date… the vast majority of which will never sell at anything more than a severely distressed price.  Many will have to be torn down, having lost their economic viability en total.

And there you have it…

Mandelman out.