Economist Roubini: The U.K. is NOT Iceland
2009-01-25 – calculatedriskblog.com
“In many ways the UK looks more like the US than Iceland: a housing and mortgage boom that got out of control; excessive borrowing (mortgage debt, credit cards, auto loans, etc.) and low savings by households; a large and rising current account deficit driven by the consumption boom (and private savings fall) and the real estate investment boom; an overvalued exchange rate; an over-bloated financial system that took excessive risks; a light-touch regulation and supervision system that failed to control the financial excesses; and now an ugly financial and economic crisis as the housing and credit boom turns into a bust. This will be the worst financial crisis and recession in the UK in the last few decades.”
Obama Banking Plan?
2009-01-25 – NY Post.com
As the Obama economic team huddles this weekend in an attempt to hammer out the framework of their plan, three options have been bandied about:
* Nationalizing the banks.
* Creating a government-owned “bad bank” to take the toxic assets off of the bank’s balance sheet.
* Continuing the Bush Administration rescue plan of pumping in taxpayer money on an as-needed basis.
Nationalization?
2009-01-26 – Calculatedriskblog.com
Bankruptcy Courts May Be Allowed To Consider MALPRACTICE
2009-01-26- Housingdoom.com
This infuriates me… “There has been a “foreclosure prevention” idea that has been kicked around for awhile now. It is to allow bankruptcy judges to alter mortgage loan terms and even to reduce a borrower’s principal balance. I have not seen a short, concise name for this suggested mortgage “cram down” program so I would like to suggest one of my own”
Flood of foreclosures: It’s worse than you think
2009-01-24 — cnn.com
“Banks are moving slowly to list repossessed homes for sale, which could mean that housing inventory is even more bloated than current statistics indicate.”
Mortgage default notices up 121% over year ago
Bank Failures and Commercial Real Estate
2009-01-23 — calculatedriskblog.com
Volcker Group’s recommendations for financial reforms
Paul Volcker is “the last honest guy” in the world, according to one of the foremost critics of the financial industry, Martin Mayer. Volcker was the guy who beat inflation in the early 1980s by raising interest rates as high as 18%. He also warned against the repeal of Glass-Steagall and many other excesses of our financial economy.
Another heavy hitter is Domingo Cavallo, the guy who beat inflation in Argentina by pushing through the currency board regime that took monetary policy out of the hands of the Argentine authorities.
But you’re right that others in this Group of 30 were indeed present at the scene of the crime. The signature right next to Volcker’s on the report is Jacob Frenkel’s, the vice chairman of AIG. Excerpts from the report are below. ————–
“All systemically significant financial institutions, regardless of type, must be subject to an appropriate degree of prudential oversight.” [this would include investment banks and insurers]
“Large, systemically important banking institutions should be restricted in undertaking proprietary activities that present particularly high risks and serious conflicts of interest…” [Prop trading should be outlawed entirely for commercial banks. They've got their hands full just measuring the credit risk of their loan books.]
“To guard against excessive concentration in national banking systems…limits on deposit concentration should be considered at a level appropriate to individual countries.” [Too bad the government's chosen method for resolving failed banks is to kick their assets upstairs to a bigger balance sheet, concentrating deposits even more. E.g. B of A---Countrywide, JPM---WaMu and Wells Fargo---Wachovia.]
etc, etc…. see the reports below.
WaMu’s New $1 million 5-year 1% Balloon Loan (mod) – $878 Per Month!
2009-01-08 — ml-implode.com
“It is obvious that these loan modification plans have been born as a result of panic and the need to protect the bank’s balance sheets rather than doing what is beneficial for the home owner and broader housing market.”
No Recovery for Real Estate as Speculators Dominate Sales
2009-01-08 — bloomberg.com
“We’re creating a shadow inventory of homes that will be right back on the market as soon as the economy and the housing market begin to improve,” said Stiglitz, a Columbia University professor of economics. “We could see a double-dip in the housing recession if that happens.”
………………..
“In past housing recessions, we didn’t see as many mortgages under water, so it didn’t matter if the focus was on speed and not on maximizing value,” Stiglitz said. “Now, the same banks that created the problems by mismanaging their risk are mismanaging the disposal of their assets.”
US fiscal policy: the Keynesian fallacy on steroids
The government’s attempt to spend (read borrow) our way out of this situation may lead to a total collapse of the dollar.
The Fed meeting minutes released today sure paint a picture of a Federal Reserve with very little regard for how to unwind these measures or what the long term consequences could be. I think a collapse in dollar assets is a very real concern after years of being considered nearly lunatic fringe talk.
Willem Buiter wrote a great piece on this.
Analysis of Destroying the Dollar
Peter Schiff vs the Federal Reserve – LIVE!
Among other unpleasant observations, Peter calls the U.S. a banana republic and mocks the Fed with ‘the idea’ of exporting prosperity via printing endless money (debt) to the rest of the world!
This should be a real thrill for those of us that want to see the money masters face that we know the truth about our multi-fractional reserve ponzi scheme banking system.
More Citi-style Bailouts on the way….
2009-01-02 — ml-implode.com
”Treasury issued a report today articulating the “guidelines” for its “Targeted Investment Program,” the program under which taxpayers bailed out guaranteed $306 billion worth of Citigroup’s toxic assets in late November. Why do you care? Because this program will likely be used to offer similar “guarantees” when Bank of America, Chase, Wells Fargo, Goldman and Morgan Stanley show up hat-in-hand on taxpayers’ doorsteps…”
Peter Bernstein’s biggest worry? The dollar
2009-01-03 — ml-implode.com
”As as has been argued here previously, Schumpeter was right: creative destruction is necessary for a capitalist economy to thrive. The business cycle can’t be inflated into oblivion. In attempting that during his years at the Fed, Greenspan allowed financials to grow too large. Now they have to fail, but they can’t be allowed to. In Bernstein’s words: there’s too much debt, but reducing it “quickly” will “bring down the whole system.” Presumably the only solution is to bring it down slowly. That may just happen if we’re lucky. Despite the government’s efforts to reflate the debt bubble, it is deflating as banks deleverage. My personal belief is we won’t be lucky. The stupendous growth of U.S. liabilities, via bailouts and the Fed’s growing balance sheet, will lead to a large fall in the value of the dollar. A view I think Bernstein shares…”
Printing Money – And The Steep Price That Comes With It
2008-12-29 – NY Times
“We got into this mess to a considerable extent by overborrowing,” said Martin N. Baily, a chairman of the Council of Economic Advisers under President Clinton and now a fellow at the Brookings Institution. “Now, we’re saying, ‘Well, O.K., let’s just borrow a bunch more, and that will help us get out of this mess.’ It’s like a drunk who says, ‘Give me a bottle of Scotch, and then I’ll be O.K. and I won’t have to drink anymore.’ Eventually, we have to get off this binge of borrowing.”
Quite Possibly The Scariest Housing-Related Chart Ever
This chart is the average decline of home values in CA since peak years. What will 2009 bring? When will this stop? This is terrifying.
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