patrick.net

DinOR Says:
This type of mortgage fraud is what’s going to make “the recovery” so difficult.

In a different context, someone had used the analogy of a frantic attempt to scoop sh*t up from the diaper and get it back into the baby... i.e. can't really be done and the end result is worse than the problem you tried to fix.

"get my tax money back" LOL!

BAI, I dunno' I've said Gross was a "real" idiot for years. He's fought 'marking to market' and prefers mark to myth! No, the bond market is not well. With the implosion of the insurers there's been a 15-20% hit in the muni's. Muni's for crissakes.

Don't you remember his famous comment to Bush? Taunting him to immediate "action" and calling him "The Decider"?

DinOR

Not being an expert I don't follow Gross so closely so i don't remember the taunt. I just had this impression of him and PIMCO as 'serious' characters - whatever that means these days. Now he seems to be acting like Cramer, screaming "they know nothing, they know nothing!"...wtf?

By the way BB is not suggesting the gov. make up the difference in the loan reductions between lender borrower (may I am as naive as I am idiotic). He's endorsing Summers' scheme to come up with some new instrument which will allow the bank to share in any upside, should prices go up in the future. So they write down now and then sell those instruments - maybe even securitize them? That must somehow mitigate losses right? Assuming they can pull this off, the gov. is in the meantime helping out by throwing money into the economy, in amounts suspiciously close to what the economy used to get from MEW.

BAI,

BG's monthly newsletter was littered with Arthurian and Greek Mythology references that I guess guys in the bond pit really didn't have the luxury of appreciating? He should have retired when PIMCO was still respectable.

Agreed, he's become just another Cramer and reminds of one of my father's favorite sayings: "It's easy to act classy (when you're always winning)" :)

Isn't Maestro Greenspan working for Bill Gross right now?

Yeah, I think I heard something to that effect. They belong together.

BayAreaIdiot Says:
By the way BB is not suggesting the gov. make up the difference in the loan reductions between lender borrower (may I am as naive as I am idiotic).

Of course he is not going to come out and spell it out directly - it will be a complicated transfer of risk, through an alphabet soup of treasury-backed schemes - each of which will purport to serve a very honorable and politically popular purpose - but taken together they will form a conduit for neatly transferring risk to the taxpayer.

As a teenager, I once had the pleasure of having my pocket expertly picked in Naples (Italy, not FL) - didn't feel a thing. I think this will turn out the same way.

Wll if Greenspan now works for an outfit whose founder is calling for a bailout from the mess Greenspan was instrumental in creating......words fail me! Is there no shame?

As a teenager, I once had the pleasure of having my pocket expertly picked in Naples (Italy, not FL) - didn’t feel a thing. I think this will turn out the same way.

Well if it was a pleasure, then what are we worried about now? BB et al may not be Neapolitan, but as long as they are smooth about it... :-)

Is there no shame?

Shame is what you put on others.

Besides they may neatly transfer risk to the Chinese/Arab SWFs as opposed to the US taxpayer...keep hope alive!

Besides they may neatly transfer risk to the Chinese/Arab SWFs as opposed to the US taxpayer…keep hope alive!

SWFs are intelligent strong-hands, although much investments will be politically motivated. Let's see how it plays out.

AG's conscience (and record) are perfectly clean! He implemented 17 consecutive 1/4 pt. rate hikes to "quell" the froth!

(With the prospects of owning/flipping/squatting yielding hundreds of thousands of tax free dollars... 1/4 pt. hikes were the equivalent of beating someone with a wet noodle for chrissakes) but his conscience is clear!

1/4 pt. hikes were the equivalent of beating someone with a wet noodle for chrissakes

Not only that... it is like beating someone with a wet noodle at a pace that is likely to be measured. :)

Chinese SWF's main goal is to acquire resources. They've been f*cked real bad by Blackstone, Bear Stearns and a bunch of financial scams, so the latest mandate is to concentrate their effort on acquiring minerals, energy and even agriculture-related companies.

The Arab SWFs recently turned down the "offer" to continue injection in Citi.

American taxpayers will become the last resort for these financial scams on WS, while these WS executives have long moved their stolen money offshore.

It always baffles me why Bernanke would take that job in 2006? Is he stupid?

It equally baffles me why someone would run for Presidency for 2008? Are they collectively stupid?

That's why I think Bloomberg or Gore are truly smart people, I bet they will run in 2012.

Why do people ever want to invest in companies when they can invest in commodities? Why should I put faith in a management when I can buy something real?

I think the best outcome for Gore is to have President McCain in place. That old fart cannot even last through his first Presidency.

Either Obama or Billary in the seat will make it more difficult for him to stage a comeback. The opposite stands true for Bloomberg.

That’s why I think Bloomberg or Gore are truly smart people, I bet they will run in 2012.

Please no!

What is he doing? This is absurd:

http://www.mikebloomberg.com/en/news/mayor_plans_an_all_hybrid_taxi_fleet

I have great faith in McCain. I believe he is an honorable person.

Either Obama or Billary in the seat will make it more difficult for him to stage a comeback.

How did FDR get so many terms?

McCain already talks like an Alzheimer patient. I don't think he can even walk out of the oval office when he is done, in 2012. I predict he will last half a term.

Anybody who supported Bush at one point is not an honorable person.

Don't get me wrong, I dislike McCain so much that I will vote for him to put him right on the hot spot when the perfect storm hits.

He’s endorsing Summers’ scheme to come up with some new instrument which will allow the bank to share in any upside, should prices go up in the future. So they write down now and then sell those instruments - maybe even securitize them? That must somehow mitigate losses right?

Dicing risky debt and mixing it with other risky debt to come up with a security does not reduce risk. That fallacy was touted by the Maestro and is now completely exposed. Yes, in theory everything works fine, but there are always unintended and unforeseen consequences that kill the model.

And do we really need any more complicated debt instruments ? It's the terrible opacity of this "financial dark matter" that brought us here. And now an even more complicated scheme will save us ?

Peter P :

Without knowing any hard information, the cynic in me says - look at the lis of his campaign donors. You may find the answer behind all this eco-friendly taxi initiatives.

StuckInBA,

Amen. I need to hear someone say "we're putting an end to this Tom Foolery once and for all" before I can get comfortable with any kind of a recovery path.

Speaking of Tom:

seekingalpha.com/article/67197-foreclosure-proof-homeowners?source=feed

Barry Ritholtz calls 'em as he sees 'em.

And now an even more complicated scheme will save us ?

I am not expert enough to decide that issue. It just seems a reasonable way forward. At least I haven't heard any other "solution" which seems more reasonable. No magic - just a way to mitigate losses or at least spread them out over time so they don't become a calamity. I think everyone agrees houses will *eventually* appreciate again, particularly if the measure of that appreciation is the new value (after the writedown). If that has some value, maybe you can sell it today as a security? *If* you can find buyers, then you book less losses today and we can all move on with our lives. Maybe?

Besides, I thought we got to this point not because of the securitization per se, but because loan standards went to hell (for a variety of reasons).

Oops! Long story short, a SoFL developer friend of Barry's sells personal res. in 2005 and prepares for storm. Rents for over 2 years and notices every house (3 mil. +) he and his wife look at have "owners" that haven't made a payment since they moved in back in '05!

There's such a backlog of FC's in Dade Co. these squatters continue to live payment free! I guess renting really IS just throwing your money away! :)

Besides, I thought we got to this point not because of the securitization per se, but because loan standards went to hell (for a variety of reasons).

Without securitization, could loan standards have gone to hell?

I guess renting really IS just throwing your money away!

I guess so.

Since life is a zero-sum game, success hinges on the ability to privatize gains and socialize losses.

I don't know if people here read Patrick's links every day. Some today, 2/5/08 are as frightening as I have ever read.

Sometimes after building a particularly negative and massive economic meltdown case I run it through a reality checker of serial poababilites - or if I am really lazy I justtally up my own list of whos whos on a pro-con.

More and more very crdible sources are dramatically turning to the massive economic meltdown mode. The TAF, possible Fed margin calls (which happened and MASSIVELY exxacerbated the Great Depression), bank insolvency, the dollar destruction, the unwillingness of SWF to stem the tide of sentiment. . . It is all adding up.

To my mind, the clear signal the Fed sent out to the world's Central Banks was this, "Lower yuor rates with us or the crises of confidence will push the needed US receission in a quicker and deeper massive recession" And unlike the US, which has previously bailed out the Aisan Crises, the South American Crises, the Russain Crises, Long Term Capital Management, etc, the wolrd is saying, "No help for you." I don't think they get just how hard they will be hit by a large US recession until the damage is done.

If we do not see some help (formerly and temporarily in form of SWF) we are going to get some of the scariest activity since the Great Depression.

In additional to simple trade collapse, job destruction is at hand. It is clear Muni's cannot raise funds. 20%? Eegads.

If I could only watch one peice of data at this point, I would watch the ATF. It signals monetary destruction and the resultant de-leveraging across all asset classes will be world-rattling.

I would pay good money to hear a point/counter-point on the end-game of our current monetary deflatin, because the only one I envision has only the Great Depression as a precendent.

There was this guy, CrAzY guy in the 80's called Tom Vu that advocated not paying your rent for 6 mos. while the eviction process runs it's course to get the seed money to start a business.

Just think what Tom could've become in this fraud-fest?

Without securitization, could loan standards have gone to hell?

Absolutely agree. Of course there are always many reasons, but passing risk to others, who in turn slice-n-mix-n-package it and pass it on to "other others" must take the real blame in mis-pricing of risk.

The thing is all these proposals are coming in without complete analysis. Mish pointed out what would happen if lenders start agreeing to principal reduction. People will deliberately fall behind in payments to qualify for it.

This scheme would simply make people be creative about realizing any gains that might come. They will sell the house and car together. The house will sell for a loss and the car will be "sold" for 100K. Whatever. The point is people will come up with creative schemes to not pay the gains to the banks and keep it all for themselves.

We need to understand that this is about money. Every single person tries to maximize his/her profit. And even an honest person will explore all legal loopholes. Hence the saying. The road to hell is paved with good intentions.

The road to hell is paved with good intentions.

Well said.

In the world of unintended consequences, good intentions are not enough for the "greater good."

Anybody catch the PBS Newshour story on inflation in the US?
http://www.pbs.org/newshour/bb/business/jan-june08/dollarsworth_03-04.html
It was a eye-opener on many levels -- I mean, did you know that there are still companies making jeans in Amerika? They would be doing even better in the export market except for the fact that they also get hit by inflation as they source all their raw materials (cloth, zippers, etc) from outside the US. But still, who would have guessed?!
They also noted that container ships going back to Asia are now fuller than in the past. Apparently the export market for used paper is booming -- and US recycled paper is so much cheaper than that from European and other markets. I know, everyone let out a collective sigh... our economy is being propped up by those blue recycling bins in your office. Everybody do your part and print out this blog so that you can read it offline.
DWARD LEAMER, Director, UCLA Anderson Forecast: We're living beyond our means. We've got to tighten the belt. That means less spending on foreign products, fewer imports. And we're experiencing that in the last year, as a matter of fact. We're not as wealthy as we thought we were, which requires some significant belt-tightening and some planning about our futures.
PAUL SOLMAN: That's what the weak dollar is, says Leamer, the embodiment of a new, lower U.S. standard of living, at least for the time being, while the rest of the world splurges for a change.

Even more scary news:
www.nytimes.com/2008/03/05/dining/05glute.html

MSG may not be the bogeyman we thought, but food labeling laws certainly dance around it. Apparently "hydrolyzed soy protein" is roughly the same as MSG so people use it to circumvent sauce label disclosure. My bottle of Otafuku "Yakisoba" sauce says in a red box on the front "No added MSG" but the ingredients on the back includes hydrolyzed soy protein.

I dislike processed food and additives.

lower U.S. standard of living

Does it mean no iPods? :(

Does it mean no iPods?

No, only 3 iPods per person. So chances are your iPod will not match your purse color. So you will buy less purses. That means less revenue for purse industry and the cascading effect will slow down the economy.