A Sequel To What Was Happening A Few Months Ago
Some housing bubble news from Washington and the Wall Street Journal. “Merrill Lynch & Co., in a bid to slash its exposure to risky mortgage-backed securities, has engaged in deals with hedge funds that may have been designed to delay the day of reckoning on losses, people close to the situation said. In one deal, a hedge fund bought $1 billion in commercial paper issued by a Merrill-related entity containing mortgages, a person close to the situation said.”
“In exchange, the hedge fund had the right to sell back the commercial paper to Merrill itself after one year for a guaranteed minimum return, this person said.”
“‘Merrill has been making the rounds asking hedge funds to engage in one-year off-balance-sheet credit facilities,’ Janet Tavakoli, who consults for investors about derivatives, told clients in a recent note. ‘One fund claimed that Merrill was offering a floor return (set buy-back price),’ she said in the note, ’so this risk would return to Merrill.’”
“‘Ms. Tavakoli said such transactions would explain how Merrill’s mortgage-related exposure dropped in the third quarter.”
From Bloomberg. “Merrill Lynch & Co. fell the most in more than six years after Deutsche Bank AG said the world’s biggest brokerage may write down another $10 billion for losses on subprime assets.”
“‘We have increasingly lost confidence in the financials of Merrill,’ Mayo said in a report today. ‘If there are much higher CDO writedowns, Merrill may have additional credit rating downgrades.’”
From Reuters.”The risk of owning credit and bonds of Citigroup Inc and Merrill Lynch rose to the highest in at least a year on Friday and Merrill credit default swaps are trading like junk, Moody’s Investors Service said.”
The Financial Times. “The mood in credit derivatives markets turned ugly on Thursday, with the cost of insuring corporate debt hitting multi-week highs on both sides of the Atlantic. ‘It’s scary out there - there’s blood on the streets,’ a trader at a US brokerage said.”
“‘[These triple-A rated companies are] exposed to the crumbling housing market,’ said Gavan Nolan, an analyst at derivatives data provider Markit. ‘Investors in monolines will be waiting for the coming months of housing data with trepidation,’ Mr Nolan said.”
Dow Jones Newswires. “Bond insurers slumped on Thursday amid concern that they may be hobbled by rising defaults on subprime mortgages and downgrades of the asset-backed securities tied to those loans. There’s a ‘general level of anxiety about whether or not we will continue to see waves of rating agency downgrades of subprime mortgage-backed securities and of collateralized debt obligations,’ said Kathleen Shanley, an analyst at Gimme Credit LLC.”
“If subprime mortgage defaults and foreclosures get high enough to imperil insurers like Ambac and MBIA, investors will have a lot more to worry about, said Michael Grasher, an analyst at Piper Jaffray.”
“‘If that were to happen we’ve all got bigger problems. You, me, the whole world,’ he said.”
From MarketWatch. “‘There is no question that there is stress out there, and we are trying to be reflective of that stress in the marketplace’ when rating the creditworthiness of the bonds and other securities it guarantees, Ambac Chief Financial Officer Sean Leonard said Thursday in an interview.”
“Leonard noted Thursday that some of the CDOs Ambac guarantees that started out rated double-A have gone down to triple-B, one step above junk status, in the company’s own internal rating system.”
“The diminished expectations have ‘eroded some of the protections we had’ against having to pay out on its financial guaranties, he said.”
“The expectation is that loans written from late 2005 onward will perform worse than originally expected, though there is still uncertainty over ‘what level of poor performance’ the later loans in particular will demonstrate.”
“Emerging-market bonds fell, as losses related to subprime mortgages prompted investors to shed riskier assets.”
“‘Losses in financial markets are the main driver,’ said Tomasz Stadnik, who helps manage $3.1 billion of emerging-market debt. ‘There are rumors on Barclays, and the Merrill Lynch saga continues. It’s a sequel to what was happening a few months ago.’”
The Seattle PI. “New York’s attorney general has accused Washington Mutual Inc. of pressuring a real estate appraisal company to deliver inflated home values in order to justify making loans.”
“The suit filed Thursday in a New York court by Attorney General Andrew Cuomo doesn’t name Seattle-based WaMu as a defendant. But WaMu figures prominently in the complaint.”
“EAppraiseIT ‘improperly allows WaMu’s loan production staff to hand-pick appraisers who bring in appraisal values high enough to permit WaMu’s loans to close, and improperly permits WaMu to pressure eAppraiseIT appraisers to change appraisal values that are too low to permit loans to close.’”
“‘It’s about time,’ said Richard Hagar, who owns American Home Appraisals on Mercer Island, teaches anti-fraud classes and helped write Washington’s mortgage laws. ‘I have been surprised that no investigations have been started earlier on something like this.’”
“Graham Albertini, a former WaMu appraiser who now works for Hagar and teaches appraisal classes, said the bank’s appraisal process has been increasingly problematic since 2002.”
“‘Starting in 2002 they shifted the emphasis from quality to quantity,’ he said.”
“A hot home market caused buyers to bid prices to new heights. Now that prices have started to level off in the Seattle area and decline elsewhere, some buyers are finding they cannot sell their homes for what they owe, leaving them with few alternatives to foreclosure.”
“‘A lot of this doesn’t get revealed until you have a downturn in the housing market,’ said Scott Jarvis, director of the state Department of Financial Institutions.”
The LA Times. “The fraud suit by New York Atty. Gen. Andrew Cuomo represents the biggest regulatory crackdown yet on the type of allegedly abusive practices that many experts believe fed the housing bubble in California and elsewhere as well as the current rising tide of foreclosures.”
“The lawsuit is based on e-mails written by top executives at EAppraiseIT, who initially complained about pressure from Washington Mutual for high appraisals but ultimately acquiesced to it.”
“‘We have agreed to roll over and just do it,’ Anthony R. Merlo Jr., EAppraiseIT’s president, wrote in an e-mail to First American executives in February.”
“EAppraiseIT acquiesced to Washington Mutual’s demands even though it knew that was wrong, according to the suit. ‘We view this as a violation’ of federal rules, Merlo wrote in an April 17 e-mail.”
“In some cases, appraisers were removed from the preferred list if their numbers were too low, the suit said. A Washington Mutual sales assistant told one appraiser he was dumped from the list because he wouldn’t boost his assessments, according to the suit.”
“‘I have been singled out by WaMu and have been pressured on every appraisal I have completed that did not reach a predetermined value,’ another appraiser complained to EAppraiseIT. ‘I feel that WaMu is in the process of ‘blacklisting’ me as an approved WaMu appraiser by going after each appraisal I complete and looking for violations.’”
“Excessive appraisals have particularly dire consequences for so-called sub-prime borrowers who have weak or spotty credit, experts say.”
“‘When reality sets in, as it has today, these buyers, through no fault of their own, now face foreclosure,’ said Robert L. Gnaizda, general counsel of Greenlining Institute, a consumer group. ‘They’re paying for homes that aren’t worth anything close to what they paid.’”
“The rate of foreclosures in the United States will remain higher than normal for the next 18 months as the current home loan crisis plays itself out, a senior U.S. Treasury official said on Friday.”
“‘A rising foreclosure rate during a housing downturn is not surprising, but largely because of lax underwriting in recent years, especially in the subprime market, a higher than usual number of homeowners will face delinquency during the next year and a half,’ Robert Steel, undersecretary for domestic finance, told a congressional panel in prepared remarks.”
“A top U.S. Treasury official asked for congressional help Friday in reaching out to borrowers with risky mortgages.”
“Robert Steel said in prepared remarks to a House Financial Services Committee hearing that a direct-mail campaign to at-risk borrowers is starting up Nov. 19.”
“Steel told lawmakers that a group called ‘Hope Now’ — composed of mortgage servicers, lenders and counselors — is reaching out to borrowers to educate them about refinancing options.”
“‘When you are home in your districts over the weekend or for the holidays, please tell your constituents about this mail campaign,’ Steel said. ‘Tell them it is OK to contact Hope Now for assistance.’”
“But both the Bush administration and Democrats say they’re not in favor of bailouts.”
“‘We are not talking about any kind of bailout in the sense of public money,’ said Rep. Barney Frank, who chairs the House Financial Services Committee. ‘We are mitigating pain, we hope,’ by offering proposals to help troubled borrowers.”
“Rep. Al Green said lawmakers want to help those facing foreclosure but don’t want to interfere in the markets. ‘We want to let the market do what the market does,’ said Green.”
“Bill Longbrake, a Washington Mutual executive working on the Hope Now alliance, said the group is sending out 200,000 letters to at-risk homeowners beginning Nov. 19. ‘We want to show people that help is available,’ Longbrake said.”
From the LA Times article:
‘A spokesman for the Office of Thrift Supervision, the federal agency that regulates savings and loans, said it was unaware of Cuomo’s investigation until Thursday.’
‘We don’t know why the AG’s office didn’t notify us,’ said the spokesman, William Ruberry.’
‘The prospect for another ABX.HE index in the near future is not looking very bright, say Wachovia analysts in a research report today. Based on their analysis only three deals out of the 25 deals issued in the second half of 2007 would qualify for the new ABX.HE 08-1 index.’
Google and BIDU are the new Miami condos.
Disgusting.
Legg Mason’s Miller to cut tech stocks
Agreed. Tech is good but it is overbought. Why? Because it’s one of the few areas doing pretty good. But pretty good is not good enough to warrant those sky high evaluations, especially now that the economy is slowing and the first places businesses will cut is technology.
Gold, silver,oil and uranium haven’t even begun to run yet. When gold hits $2000 I’ll think about selling a little bit.
Merrill Lynch is bull$hitting America
Guess what Stan the Man was doing as Merril was flaming? You’re gonna love this Alad
and everyone else too!
http://jeffmatthewsisnotmakingthisup.blogspot.com/
“Golf is a good walk spoiled.”
Mark Twain
Adios all…
Going off on a walk to see my ancient friends, again.
One of the commenters observed that ONeill was playing 3-4 rounds of golf at different courses on the same weekend day, and surmised that O’Neill was posting weekday golf results on weekends. Good going Stan.
stock spliff is my fav.
Good heavens — 80 hour work weeks plus all that time on the golf course? The man must be super human!
Mellow Yellow’s up $13.30, and the PPT index is up 13.33 points…
Gold up 26% this year; beats flipping condos. Now where are all those talking heads to remind me it doesn’t pay any dividends?
Yea
But you cant get a no money down 120% with a 2 % teaser rate loan with a 510 fico to buy gold.
> “But you cant get a no money down 120% with a 2 % teaser rate loan with a 510 fico to buy gold.”
Which is why gold is a safe investment.
Aladinsane,
I believe it was you, the other day, who suggested you held AU in a Swiss account. If so, how did you set it up?
Did you:
1. open an account and buy AU through that account or
2. open an account and transfer AU in from another account.
3. other
Thanks for any info….
Switzerland was the “right” place to park your assets in 2 World Wars, but if I know my Zurich gnome mindset like I think I do, they are in this mess now just as hot and heavy, as everybody else…
The Swiss certainly tried to grab the Jewish gold left in their trust.
..not to mention that little tidbit about underwriting the entire German war operation while calling themselves “neutral”.
Ultimately Switzerland helped pay for the invasion of Belgium, the bombling of London and the decimation of half of Europe.
But they’re hands are clean. They’re just bankers.
Good one, soho… it was just bidness.
Right, Alad.
Well, that’s why I was askin’. With the CS news this week, doesn’t seem like they’re a better option than anyone else.
“….In one deal, a hedge fund bought $1 billion in commercial paper issued by a Merrill-related entity containing mortgages….In exchange, the hedge fund had the right to sell back the commercial paper to Merrill itself after one year for a guaranteed minimum return, this person said”
How can that be legal? Good God…
How is it different from selling stuff to Treasury endorsed FrankenSiv?
Legal to do is one thing. Whether it is legitimate to report the risk as off the company’s books while Merrill is just spending the year “dead” to that liability is something entirely different.
The real lesson is that this reeks of desperation. Not a good perfume for large financial institutions.
How is it different from Enron using offshore accounts to hide losses?
good point !
Mind the GAAP >; )
Ahhh reminds me of riding the tubes in London.
Yes it does.
But in this case… when the GAAP catches up…
This has only started up.
Munch munch munch.
Got popcorn?
Neil
I go back to London the week after Thanksgiving. It’s for work but around it will be trips to things in London, then to Paris for a day by taking the Chunnell then Scottland over the weekend and back to the states. Our Dollar sucks! But I am glad that the company is picking up most of the tab ;-)…
“‘We are mitigating pain, we hope,’ by offering proposals to help troubled borrowers.”
I’ve got a pain mitigating proposal for FBs — WALK AWAY!
dont walk, RUN!!!
That is right.
“Gimme Credit LLC.”
And the laughs just keep coming.
“Leonard noted Thursday that some of the CDOs Ambac guarantees that started out rated double-A have gone down to triple-B, one step above junk status, in the company’s own internal rating system.”
The dreaded triple-b…
Being Ben Bernanke?
AA to AA- or A (we’ll skip the plus and minus logos)
Down to BBB.
Mighty big drop for what was supposed to be a secure investment.
Got popcorn?
Neil
“The mood in credit derivatives markets turned ugly on Thursday, with the cost of insuring corporate debt hitting multi-week highs on both sides of the Atlantic. ‘It’s scary out there - there’s blood on the streets,’ a trader at a US brokerage said.”
Does this explain why the U.S. stock market is rallying at the moment? Because bad economic news is generally bullish for U.S. share prices.
What rally?
It’s up 9 points for the day (now it’s down 21). Financials (obviously) are down.
Prof., I disagree. However, if stocks slide hard, in some cases, it’s time buy and think long-term. I did this when I was 12 (bought BofA at 6$ per share). Thanks to that move, I am able to afford my mother’s retirement home costs and, in emergencies, help out family.
“What rally?”
The one that brought the DJIA back up to the flat line after the early selloff.
Hey kThomas:
You must have bought an awful lot of BofA to afford all that now. How’d you get all that $$ when you weren’t even old enough to work? Also, how’d you manage to buy stocks when you weren’t even 18 yet?
‘Merrill has been making the rounds asking hedge funds to engage in one-year off-balance-sheet credit facilities,’ Janet Tavakoli, who consults for investors about derivatives, told clients in a recent note. ‘One fund claimed that Merrill was offering a floor return (set buy-back price),’ she said in the note, ’so this risk would return to Merrill.’
Is there some legitimate reason for doing this? Or is this a long-winded translation of: This crap is making our balance sheet look like hell, so remove it for a year (until after our bonuses are paid) and then let someone else deal with it?
it sounds like one of those dreaded shell games! lol!!!
Enron again, except that this time, the devalued assets are hidden in plain view (though not marked to market).
Can you imagine the write-downs had they not transferred/sold that stuff? Oh, the humanity!
“EAppraiseIT ‘improperly allows WaMu’s loan production staff to hand-pick appraisers who bring in appraisal values high enough to permit WaMu’s loans to close, and improperly permits WaMu to pressure eAppraiseIT appraisers to change appraisal values that are too low to permit loans to close.’”
“‘It’s about time,’ said Richard Hagar, who owns American Home Appraisals on Mercer Island, teaches anti-fraud classes and helped write Washington’s mortgage laws. ‘I have been surprised that no investigations have been started earlier on something like this.’”
The WaMu tv commercials always flaunt the bank, as a remedy against stodgy old banker types…
If a direct lender was pressuring appraisers ,what do you think third party mortgage brokers were doing .
Stop it Wiz, you’re making sense…
“‘When reality sets in, as it has today, these buyers, through no fault of their own, now face foreclosure,’ said Robert L. Gnaizda, general counsel of Greenlining Institute, a consumer group. ‘They’re paying for homes that aren’t worth anything close to what they paid.’”
i see class action lawsuits down the road from homeowners on this one.
They should sue each other into oblivion. They signed the papers - no matter what the nanny state sez.
You don’t face foreclosure when your home drops in value. You face foreclosure when you are unable to make your payments. And whose fault is that?
If your job gets terminated or you get sick or divorced or something, then it’s “no fault of your own”. If you can’t pay because you never did earn enough to afford the stupid thing in the first place, then it it’s 1/2 your fault, 1/2 the bank’s fault, and an extra 1/2 for the Congress that failed to outlaw predatory mortgage lending.
Why doesn’t the MSM ever point this out? It’s so ANNOYING.
Now that prices have started to level off in the Seattle area and decline elsewhere, some buyers are finding they cannot sell their homes for what they owe, leaving them with few alternatives to foreclosure.”
You see the same comments everywhere. The value dropped so they are forced into forclosure?? Same question.
What does the “value” have to do with the agreed purchase price and terms?
The current owner doesn’t get his dream price. Tough.
Few alternatives? What about PAYING THE DIFFERENCE out of your own pocket!?
I don’t know what the solution is, short of debtor’s prison, but, there’s something wrong with a system when people who have NO SAVINGS can afford to pay any price for a home, but someone who had something to lose, like a big bank account, wouldn’t take a risk on an overpriced home.
Basically, only penniless people could “afford” houses during the bubble. People with money in the bank were smart enough not to pay bubble prices, and not to get ARMs, etc.
‘They’re paying for homes that aren’t worth anything close to what they paid.’
The question is, what if they stop?
Perhaps I have a misconception of how this is supposed to work.
1). The seller lists a house for what he/she thinks it is worth.
2). The buyer offers what he/she thinks it is worth.
3). A price is set that both parties agree to.
4). An application for a loan for some or all of the purchase price is applied for.
5). An appraiser conducts an appraisal in order to establish a collateral basis for said loan.
6). Loan company uses appraisal for underwriting a loan (along with buyers data).
Nowhere in this scenario is the appraiser telling the buyer that they made a good deal. The appraisal is for the benefit of the lending institution for underwriting guidelines, as I understand it. The price was set before the appraiser ever got involved in the situation. If there wasn’t a loan being applied for (purchased for cash) then an appraiser would never even enter into the picture. So why all of a sudden is the opinion of the appraiser somehow to blame for this mess the FB’s are in? I clearly understand that without appraisers hitting the number that the underwriting would have fallen apart and the lending would have stopped. The genesis of the problem started with buyers agreeing to high asking prices (IMO) not with appraisers buckling under to pressure (which just fed the fire). What am I missing here?
The genesis of the problem started with buyers agreeing to high asking prices (IMO) not with appraisers buckling under to pressure (which just fed the fire). What am I missing here
I don’t think you are missing anything, your explanation sounds perfectly logical to me. If I walked into a used car dealer and agreed to pay $80000 for a car worth $50000, is it the banks fault for not stopping me from my stupidity? Why should it be any differrent with housing purchases?
The appraisal is for the lender so he knows if the property is worth what he’s lending on. Secondly, if someone puts down a large downpayment 35-50%, most times the banks do not even ask for an appraisal. There’s no way they influenced what a buyer pays, since they come in after the contract is already written. Now if the appraiser, appraises the property lower than the offer, the buyer is notified.
There you go again using rational thought…have you not learned anything since being on this blog…
I guess this is just another one of the MSM’s ways of twisting the story around to make it look like there’s a cute little victim out there who deserves a break. The people who were really harmed by fraudulent appraisals were the investors who bought the mortgage on the assumption that the loan was properly lent. But a story about a wronged investor doesn’t sound as appealing as a story about a wronged first-time home-buyer with little means and a cute little face.
Oh, and of course, fraudulent appraisals contributed to the bubble by ALLOWING people to overpay for houses. Otherwise, some offers would have been culled from the market.
Um, the investor who bought these loans are also losers who didn’t do due diligence.
Yeah, but a lot of them are just people who have been dutifully contributing to the “safe” option in their 401(k). Unfortunately, there are a lot of regular folk out there who have very little control over their retirement.
Actually, the people on this blog were the real victims. People who invested in buying the “other end” of Subprime mortgages in some whiz-kid’s hedge funds were hardly victims.
The people ignored by the Main Stream Media: those whose fixed income investments are hurt by Bernanke’s efforts to prop up the housing market, those whose property taxes went up because of wacky valuations–these are the forgotten victims that nobody cares about. As far as I can tell, the government wishes we all were dead.
A-I~
Appraisals arent’ just used for sales transactions.
Re-fi’s have been the biggest source of appraisal work for the last 20 years.
Typcially scenario-Somebody buys a house. Deal is done.
2 years, 1 year, even 6 months later they are back to the ATM trough wanting to re-fi to clean up $25k in credit card debt or some other unexpected or imprudent debt.
So you get the selling price and sales date from the property from the assessor’s office.
Just say-for the sake of argument-you’re in a “flat” market.
So you say to the L/O-so what’s been down to the property to warrant another $25k in value from a year ago?
The L/O thinks for a minute, then says-they added a deck.
You reply-no deck is going to add $25k to value.
His retort-”So you’re not going to play ball here, huh? So he hangs up the phone and goes searching for a number hitter.
And he passes on your unwillingness to punch the ticket to a supervisor who in turn tells the loan processor to take your name off the approved appraisers list.
So the number hitter scores another account, enhances his rep as a “proven” player, while the appraiser who has done his job right is shit out of luck.
Now I’m only usin’ $25k as an example.
The big time gamers extracted hundreds of thousands by the same mechanism.
The system is all corrupt.
the whole thing is ridiculous finger pointing. but this shifts the blame from brokers to the banks-they are the final say. I sit across from them every day and fight for the consumer.
When lenders loan out other people’s money they have to get a fair market appraisal to insure that the funds are protected by the asset in the event of foreclosure .
In fact ,in prior lending cycles the appraisal of the property was the most important variable of a loan .
Accurate appraisals are for the purpose of protecting deposits or investments that are used for lending . How would you like it if the money you put in your checking account was based on a fake appraisal and you lost your money (if you didn’t have FDIC insurance ). Also ,in theory ,the buyer wants to know if they are purchasing a asset that the value is correct for the current market . In past lending cycles the buyers would either drop out of the deal ,get the seller to come down more ,or come in with a greater down payment ,if the appraisal didn’t hit .
A accurate appraisal is the stability of the real estate market because it prevent not only cash back fraud ,but it also prevents the bank from loaning to much money on a asset, therefore increasing the risk of the investors that buys the loan paper . You can’t give money lenders a faulty risk by having a faulty appraisal .In other words , people/investors are entitled to have the risk ratings on loans being accurate .This also involves what price will be charged for the loan .
If the appraisals are false or inflated ,than the whole system breaks down and people lose money because they were mislead on the risk of the loan and there are a million laws against this in lending and appraisal law. Faulty/fake appraisals is a very serious breach of appraisal and lending laws .
A appraiser can not just hit a number on a sale or refinance ,and it has to be justified ,otherwise any number could be put down ,(which I guess hit the mark numbers ended up happening during the boom.)
In prior lending cycles , if a appraiser got a high sale ,they would come in lower on the appraisal until they had three or four high sales to see that the market had changed .A price going up to much in to short a time would be a red flag .Of course the underwriters also use to check for fraud and abnormal changes in a marketplace where a price increase wasn’t justified . It also takes more than one comp to make a market, but the appraisers were hitting the mark on high sales and that was making the market ,even if they were fraudulent sales ,double escrow sales ,or they had to go outside the area to get comps .Don’t discount how much was paid in kickbacks to appraisers in the height of the fraud . Underwriters are usually a check and balance on appraisers ,but they were corrupt also ,or perhaps under the same pressure to hit the numbers .
When you borrow money from a bank ,you have to conform to rules .Also proper appraisals must be done for property tax and property insurance reasons . If you buy a house for cash you can overpay all you want ,but once you need regulated funds for that purchase ,the whole ballgame changes . A borrower is not even allowed to mislead or commit perjury on their loan application and how many borrowers did that during the boom ,but again it’s because loan fraud its misleading the final loan investor on the risk .It’s pretty serious how haywire and fraudulent the whole lending system got and now here comes the damage that is affecting us all .
I can’t stress enought that the credit markets/lending are based on rules and laws that define risk and these rules and long standing laws have been violated .
“‘When reality sets in, as it has today, these buyers, through no fault of their own, now face foreclosure,’ said Robert L. Gnaizda, general counsel of Greenlining Institute, a consumer group. ‘They’re paying for homes that aren’t worth anything close to what they paid.’”
—————————————————————————–
Yeah! It’s not their fault they went ahead with the purchase anyway. Sheesh, you’d think that the lendor would make sure the borrower didn’t get in over their head with debt.
(sarcasm off)
class action lawsuits against banks = cash settlement for the lawyers + coupons to Home Depot for the (former) home moaners.
Very valid point, but lenders used to do exactly that - make sure borrower’s didn’t get in over their heads - because it was in the best interest of the lender to make sure the borrower could afford to pay long term. Now the lenders don’t keep the loans, they have no reason to care.
“EAppraiseIT acquiesced to Washington Mutual’s demands even though it knew that was wrong, according to the suit. ‘We view this as a violation’ of federal rules, Merlo wrote in an April 17 e-mail.”
“Bill Longbrake, a Washington Mutual executive working on the Hope Now alliance”…..
“Bill Longbrake, a Washington Mutual executive working on the Hope Now alliance, said the group is sending out 200,000 letters to at-risk homeowners beginning Nov. 19. ‘We want to show people that help is available,’ Longbrake said.”
i wonder how many of those 200,000 letters will go to the same people. i could imagine that one person could get 10 or more letters. i think it is a waste of a good stamp!
Hope Now…what a bunch of dumbed down b.s. Instead of hoping now, the FBs should have brought a calculator, reading glasses, and some humility to the closing table.
“Knowledge and Skill overcome Superstition and Luck”
-ode to the Spartan School of Aeronautics, TUL OK
Hello FB…..this is one of the letters we told the politicians we would send out to stupid borrowers like you……what a waste of time…..but here goes…..your letter is a ‘Q’….do whatever you want with this letter ‘Q’……and….’PS’…..your next letter to arrive will contain the letters ‘NOD’ if you don’t pay the new much much higher payment. We have very large repo men standing by. Good luck chump……..from your (soon to be richer) Lender.
Id like to see the demographic profile of the HOPE NOW campaign.
love to see that.
“‘We have agreed to roll over and just do it,’ Anthony R. Merlo Jr., EAppraiseIT’s president, wrote in an e-mail to First American executives in February.”
And now he’s going to bend over as his fellow inmates enjoy a (gl)ass of Merlo.
Wall Street in denial and engaging in questionable business practices ? What else is new ! Sheesh.
I love how the stock market has been cycling up and down based on burps from the housing market. At first there was no bubble, then it was a small bubble, then the sub prime market became newsworthy, but it was contained, then it spread, then the banks started needing emergency funds… anyone see a pattern here ?
Wall Street doesn’t have any money managers anymore. They have gamblers, who ignore fundamentals and rely on bubbles and hype.
Great summary!
The Merrill Lynch thing… I’m at a loss for words. Stupidity and Greed. Stupidity. and Greed.
ironic meaning of the word lynch:
lynch
–verb (used with object) to put to death, esp. by hanging, by mob action and without legal authority.
What is the deal with the stock market today? Big swings up and down and lots of volume. All this volatility today and the past few months leads me to believe that the market is teetering on a steep correction or fall in the coming weeks or months.
Bad news and fear of the unknown being balanced with scavengers, people looking for a deal, and short squeezes.
some buyers are finding they cannot sell their homes for what they owe, leaving them with few alternatives to foreclosure.”
How about staying in the house, and just go on making those fixed payments? You need to live somewhere anyway, and home value don’t change that.
What’s that you say? You don’t really live in that shelter? And your payments aren’t fixed?
“If subprime mortgage defaults and foreclosures get high enough to imperil insurers like Ambac and MBIA…if that were to happen we’ve all got bigger problems. You, me, the whole world,’ he said.”
Well, shucks. Because far as I can see, that ‘if’ should really be a ‘when’.
“‘We are not talking about any kind of bailout in the sense of public money,’ said Rep. Barney Frank, who chairs the House Financial Services Committee. ‘We are mitigating pain, we hope,’ by offering proposals to help troubled borrowers.”
sounds like the moffia got to barney, i wonder what threat changed his mind on the bail-outs.
If bailout money isn’t public, than what business is it of Barney Frank, public servant? Is he going to bail people out of his own wallet?
Or was it fear?
Custer also requested help, it didn’t show up though.
“Bill Longbrake, a Washington Mutual executive working on the Hope Now alliance, said the group is sending out 200,000 letters to at-risk homeowners beginning Nov. 19. ‘We want to show people that help is available,’ Longbrake said.”
Does Longbrake see himself helping out all the long-brokes out there? With a letter? Saying what?
Even reverse-911 calls won’t help these people now.
The get-outta-housing siren was wailing two years ago…
“‘We are not talking about any kind of bailout in the sense of public money,’ said Rep. Barney Frank… ‘We are mitigating pain, we hope,’ by offering proposals to help troubled borrowers.”
I think Barney finally got his little brain wrapped around the magnitude of the problem. Like a flimsy tortilla bought from the discount grocery store, wrapped around too much bulgy beans and beef strips and right in the middle of eating it, it pops open and spills drippy contents all over your lap, causing you to scream angrily and vow to not buy those crappy quality tortillas anymore, even if they are on sale, dammit.
Oh, you know what I mean.
My thought is, that someone with a lot of patience sat down with ol’ Barney Frank and helped him laboriously count up just how much money any ‘bailout’ would mean, in dollar terms.
‘Okay, then, Barney, add another zero to that number, and now another, and now another, and now….’
Like that.
Burritos at Chipotle do that to me ALL THE TIME!
And check your mail.
“‘We are not talking about any kind of bailout in the sense of public money,’ said Rep. Barney Frank, who chairs the House Financial Services Committee. ‘We are mitigating pain, we hope,’ by offering proposals to help troubled borrowers.”
I don’t think these guys get the picture, which is that too many recent buyers are on the hook for an amount of mortgage debt they will never be able to repay, especially given the low wage inflation rate. It would be most humane to just encourage many of these folks to walk away and leave the keys behind, rather than bleeding themselves dry due to the unintended effect of measures designed to “help alleviate the pain.”
“If subprime mortgage defaults and foreclosures get high enough to imperil insurers like Ambac and MBIA, investors will have a lot more to worry about, said Michael Grasher, an analyst at Piper Jaffray.”
“‘If that were to happen we’ve all got bigger problems. You, me, the whole world,’ he said.”
Ahhhh, the ether is starting to wear off in some parts I see…someone’s having an “Oh $hit” moment…we need to see more of that.
“…someone’s having an “Oh $hit” moment…we need to see more of that. ”
It looks like the stock market is starting to have that moment again. Looks like the PPT team is failing today.
Not quite.
“‘If that were to happen we’ve all got bigger problems. You, me, the whole world,’
Not me !!!
My prediction:
All these private equity deals will be the next things to blow up.
KKR and Blackstone, look out!
Couldn’t happen to a nicer bunch of just plain folks.
Hehehe… Banks are bartering CDO’s now. Who’da thunk they’d be bartering stuff before J6P did.
“I think Barney finally got his little brain wrapped around the magnitude of the problem. Like a flimsy tortilla bought from the discount grocery store, wrapped around too much bulgy beans and beef strips and right in the middle of eating it, it pops open and spills drippy contents all over your lap, causing you to scream angrily and vow to not buy those crappy quality tortillas anymore, even if they are on sale, dammit.”
Olympia you just cracked me up. ROTFLMAO…
Jeebus Mary and Saint Joseph. Pass the aspirin.
Leigh
http://www.atimes.com/atimes/Global_Economy/IK03Dj03.html
THE BEAR’S LAIR
Level 3 storm about to hit Wall Street
Yeah, he made good points. He said, why did Merrill produce an 8 billion loass while Goldman had a 4 billion profit? Probably because of their accounting being different. He is predicting this to come home to roost and hurt Goldman in future quarters.
Hmmmm so is this what Hank Paulson is trying to do? Bailout Goldman?
Just curious, here’s a ‘curtsy’ to proove it….can we please LOSE the disparaging religious comments and show a little respect for those that excercise their religious freedoms?
Thanks, ‘giggles’ ooops….chuckles…..
curtsy and out. toodles…
Cute huh? Bow….
“Thanks, ‘giggles’ ooops….chuckles…..
curtsy and out. toodles…
Cute huh? Bow….”
Jeebus, ROFL…can’t…breathe…pounds…chest.
can we please LOSE the disparaging religious comments
NO
You choose NOW to comment on this? WTF?
Oh, and when you hear that very loud pop, that will be your head removing itself from you a$$.
Dip…giggles…chuckles…curtsey.
Leigh IS cute; I love her posts. And not only cute, but with good posts to offer.
I very much agree with you about showing respect for those who choose to exercise their religious freedoms. Baby Jeebus tells me that He doesn’t plan on shooting lightning bolts from His fingers over a bit of playfulness.
For verily;
“The fruit of the Spirit is love, joy, peace, patience, kindness, goodness, faithfulness, gentleness and self-control. Against such things there is no law (Galatians 5:22)”
Leigh, lovely lady, the level 3 accounting is “Mark to Fantasy” that is the reason so many banks, insurance companies and securities houses are in deep doodoo. It is also why Citi is so vulnerable and BAC etc. Citi has a lot of assets in residential RE, a 5.4% drop in the value of the RE asset is BK for Citi ditto for BAC, WFC, etc.
Have a great weekend all.
Hoz, I enjoy reading your posts but I don’t always understand them. In simple terms, could you explain why a 5.4% drop in the value of RE assets would cause Citi, BAC, etc. to declare BK?
clip from the link:
Securitized credit card obligations. $915 billion of credit card debt is currently outstanding, the majority of it securitized, and its default rate is likely to soar as the full effects of the home mortgage market’s crack-up spread to the credit card area. The risks in Level 3 portfolios derived from this asset class arise particularly in the areas of complex derivatives and manufactured assets based on credit card debt pools.
something just dawned on me, how much of this c.c debt is held by the specuvestors? there is a majority of people in america that dont use credit cards (mostly older folks). is the c.c. debt issue going to be the next big hit these banks are going to take as this fiasco unfolds?
Hi Taking Bets:
I am expecting cc defaults to become an issue, yes. But why do you think that older Americans don’t use/default on credit cards? Remember that the Baby Boom generation was raised on advertising and credit. I have heard more than a few 50-60 somethings say that “the American economic system is based on debt”.
All’s I can say is “… look out belooooowwww”.
Apologise if this made its rounds already…
http://money.cnn.com/2007/10/29/magazines/fortune/consumer_debt.fortune/index.htm?postversion=2007103013Jeebus
From the article: “Both Merrill and Goldman have Harvard chairmen - Merrill’s Stan O’Neal from Harvard Business School and Goldman’s Lloyd Blankfein from Harvard College and Harvard Law School. Thus it’s pretty unlikely their approaches to business are significantly different”
Huh??? I rate this article an “R” for “Retarded”.
Prediction:
Wall Street is down about 70 points here with about 45 minutes to go. I think it rallies to break even or end up positive on the day.
It is nearly there with 20 minutes to go.
Could just be a lot of people thinking there are “DEALS” out there at the end of a bad week. We saw Warren Buffet buy Bank of America. He thought it as a deal at the time now he is underwater. We saw Bank of America buy Countrywide. They thought they got a deal too. OOPS! They are underwater too.
At the current rate the Dow is rising, we may be up 100 pts. by close.
It’s positive. I think I just heard Maria Bartoromo have a HUGE Orgasm. That is fine. This sets us up for another bad day on Monday : )…
Up 20 points with 13 minutes to go. So let’s see here. In the span of 20 or so minuts, the DOW has rallied almost 100 points.
I used to like Maria B. but her cheerleading has just gotten annoying. I would like the market to move up as well but the economy has some very serious issues and she and many others on CNBC don’t seem to take the issues very seriously.
‘We want to let the market do what the market does,’ said Rep. Al Green
——–
TRANSLATION
——–
‘We want to let the market [gamed by the Wall Street Pig Men] do what the [scam] market does,’
——-
Way to go, Green-skum!
Published: November 2, 2007
WASHINGTON, Oct. 24 — The Bush administration will announce a long-debated policy of new sanctions against Countrywide Financial on Thursday, accusing the mortgage lender of supporting economic terrorism, administration officials said Wednesday night.
The administration also plans to accuse Countrywide of proliferating mortgages of mass destruction, the officials said. While the United States has long labeled Countrywide as a company sponsor of economic terrorism, the decision to single out Countrywide reflects increased frustration in the administration with the slow pace of negotiations over Countrywide’s mortgage programs.
The action against Countrywide, would set in motion a series of automatic sanctions that would make it easier for the United States to block financial accounts and other assets controlled by Countrywide and Angelo Mozilo. In particular, the action would freeze any assets Angelo Mozilo has in the United States, although it is unlikely that Mozilo maintains much in the way of assets in American banks or other institutions.
The decision will be announced on Monday by Treasury Secretary Henry Paulson, the administration officials said. “This is going to be a broad and wide-ranging effort,” a senior administration official said. “We will be freezing assets, and there will be ripple effects of where we can go from there.”
As Mrs. Broflovski would say: “What, what, what????”
Link? Or, did I just get punked?
Parody : ) not punked.
Countrywide replaced Iran.
LOL. Whew! You should have immediately followed that with one of Mozillo dying of heart failure before sentencing, his body cremated and ashes spread from a helicopter over the homes of the OC.
If anything, Mozillo will just happen to die before his hearing
…disregard that last line….
Here’s Schiff
http://www.europac.net
They Have Got to be Kidding
Yesterday, as the dollar fell to new record lows and oil and gold prices surged to new highs, Wall Street remained fixated on wholly meaningless government data that managed to report the lowest inflation in the last half century. These bizarre numbers were integral in allowing the Commerce Department to report 3.9% annualized GDP growth in the third quarter, which was heralded by the bulls as evidence that a resilient U.S. economy had shrugged off the problems in the housing and mortgage markets. However, the government’s ability to make “economic growth” magically appear is based purely on statistical finesse.
To arrive at this rate, the government had to assume that inflation during the quarter ran at an annualized rate of .8% (that’s less than 1%). That is the lowest rate of inflation used to calculate U.S. GDP since the Eisenhower administration. With oil priced at almost $100 per barrel, gold futures trading over $800 per ounce, the dollar hitting record lows, and the Fed printing money like it is going out of style, the government has the nerve to claim that current inflation is the lowest it has been in half a century. Unbelievable!
Just in case there is some confusion, the government adjusts nominal GDP gains using the GDP deflator, which represents the inflation rate during the time period being measured. This is done to strip inflation out of the GDP calculation so that only real growth gets counted: not nominal gains that result purely from inflation.
The consensus estimate for 3rd quarter GDP growth was 3.4%. The reason we beat that number was that the government adjusted the nominal 4.7% gain by a mere .8%. Had the government assumed a higher rate of inflation, say 2.6% (identical to the rate used to deflate second quarter GDP,) the 3rd quarter gain would have been only 2.1%, well shy of the consensus forecast. My guess is that inflation is actually running at an annualized rate closer to 10%. Therefore using a more honest deflator, the U.S. economy is actually contracting, which would explain the recent anecdotal evidence provided by various economic polls, voter dissatisfaction and consumer sentiment numbers. In fact, if one simply measures U.S. GDP using gold or any other currency, it is clear that we are already in a recession.
Similar illusions are created in other numbers, such as retail sales, corporate earnings, and stock prices, which are all rising merely as a result of actual inflation being higher than the official reports. For example, higher retail sales reflect consumers paying higher prices for the products that they buy. They may in fact be buying less stuff, but are paying more for it. Further, part of the gains result from tourists using their appreciated foreign currencies to buy products cheaper here than they can in the own countries. I have heard about Canadians checking into U.S. hotels with empty suitcases, crossing the border to indulge in weekend shopping sprees.
I think Schiff’s article makes sense, but the part about US competitiveness is a bit myopic. While our $$ is going down and we have a bad trade deficit, we have to weigh our clout against the clout of other countries to determine how competitive we are. We’re not the ony ones with problems and, apparently, other countries have worse problems than us (for the time being).
There’s always Myanmar to make us feel better.
RE: “EAppraiseIT acquiesced to Washington Mutual’s demands even though it knew that was wrong, according to the suit. ‘We view this as a violation’ of federal rules, Merlo wrote in an April 17 e-mail.”
“In some cases, appraisers were removed from the preferred list if their numbers were too low, the suit said. A Washington Mutual sales assistant told one appraiser he was dumped from the list because he wouldn’t boost his assessments, according to the suit.”
“‘I have been singled out by WaMu and have been pressured on every appraisal I have completed that did not reach a predetermined value,’ another appraiser complained to EAppraiseIT. ‘I feel that WaMu is in the process of ‘blacklisting’ me as an approved WaMu appraiser by going after each appraisal I complete and looking for violations.’”
“Excessive appraisals have particularly dire consequences for so-called sub-prime borrowers who have weak or spotty credit, experts say.”
Nobody should be under the impression for an instant that WAMU
and eAppraiseIT were the only ones engaged in this rackeetering
schemes of utilizing “proven appraisers” to hit pre-determined numbers.
Cendant (C21), Wells Fargo, Coldwell-Banker, et. el., all had their
little select group of number hitters.
The conflict of interest and coercion by these types of operations put legions of honest and legit appraisers out of business and literally destroyed the credibility of the appraisal profession.
State appraisal boards and the federal Appraisal Standards Board were made aware this shit goin’ on ever since the implementation of licensing put scores of inept and corrupt people into the appraisal profession.
But rather than engage in cleaning up the profession, the bureaucrats chose to sit in their ivory towers, turn a blind eye to it and simply demand that everybody take an ethics course every.
year.
And now that these chucks have been bagged, their not even honest enough to say, Yup-we did it.
hd74man ..How about the appraisers that went to Congress to complain about the pressure being put on them and Congress refused to respond to the appraisers .Didn’t you write a post about that 2 years ago ?
And the next domino falls:
Citi holds emergency board meeting: http://biz.yahoo.com/rb/071102/citigroup_boardmeeting.html
Citi’s CEO is out
http://biz.yahoo.com/rb/071102/citigroup_boardmeeting.html?.v=10
NEW YORK (Reuters) - Citigroup Inc (NYSE:C - News) Chief Executive Charles Prince plans to resign this weekend, the Wall Street Journal said, as the widening subprime mortgage crisis deals a final blow to a reign long under attack.
The largest U.S. bank by assets plans to hold an emergency board meeting on Sunday, at which Prince will step down, the newspaper said on Friday, citing people familiar with the situation.
“‘When reality sets in, as it has today, these buyers, through no fault of their own, now face foreclosure,’ said Robert L. Gnaizda, general counsel of Greenlining Institute, a consumer group.”
“…these buyers, through no fault of their own…” WTF!… is this guy on drugs or something!? How can it not be their fault? If an appraiser tells the bank a house is worth $1 Million and the bank approves me for a $1 Million loan, I would be very stupid for taking that loan knowing that I cannot afford to make the payments. That would be MY fault if I signed. Not the bank, not the appraisers. If people weren’t so stupid, they would have told them they’re full of $h**. If enough people had done this, prices would not have climbed through the roof. But these stupid buyers did not care that they could not afford the payments because of their own greediness… they just saw dollar signs and the life of the rich and famous in their future…
It’s about responsibility - people in the U.S. have been told for decades now that they aren’t reponsible for the trouble they find themselves in. What this country needs is discipline. From the Federal Government to the average citizen - discipline and the restriction of credit.
The federal government and citizens need discipline. Discipline and the restriction of credit. The country is out of control and people don’t like looking in the mirror.