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And The Fraud Marches On....
Let's start with this delicious little piece of news:
"Dec. 1 (Bloomberg) -- Countrywide Financial Corp., the home lender acquired by Bank of America Corp., was sued by Greenwich Financial Services Fund over claims an agreement to reduce payments on mortgages by $8.4 billion would hurt investors.
The hedge fund claims investors will be harmed by Bank of America’s settlement, reached on behalf of Countrywide, with 15 state attorneys general. The value of trusts that bought 400,000 mortgages will decline under the deal, the fund said."
The gist of the complaint is that the settlement was not going to come out of Countrywide's (now BAC's) hide, but rather was to be effectively offloaded to the investors to whom CFC sold their loans!
That's a cute trick - settle a lawsuit but then force the costs of the settlement off on investors who had no vote in approving the settlement in the first place.
I'll bet this gets legs, and will derail not only this "modification" gambit but anything similar, until and unless the banks involved figure out how to pay down the investors on their own, thereby covering what would otherwise be their losses.
(It should be that way too - the investors didn't make the bad loans; if they're going to take losses it should be through outright defaults, not through forced cramdowns that benefit the banks but screw the bondholders!)
Next, Arnie has declared a "fiscal emergency" in Californicated. No, really?
Here's a hint to you Arnie: shut the hell up. Your time on stage is over dude. You came to power on the claim that you were going to solve these problems and then you turned your back on all of it.
Let's get down to brass tacks - Californicated is screwed because:
1. It has become a sanctuary for illegal immigrants, who do not pay their share of taxes but they do consume services, including police, fire, medical (especially) and education (especially.) The latter two cost the state an insane amount of money which they cannot recover. These liberal programs and policies are the cause of your funding shortfall and until and unless you address them, you've got no chance at solving the problem.
2. Second up is your insane union pay and retirement scales for state employees. Get over yourselves. These are well-publicized and outrageous, and must go.
3. You have an insane amount of energy resource available just offshore. Stop obstructing the development of it.
I applaud you bringing the legislature back into session but I have zero confidence that your state will face its problems and solve them. because there is no will to force all the illegals off the dole and back into Mexico where they came from. Until you do that you can't get the unemployment or cost problems under control - period - and if this pattern continues California will wind up fiscally destroyed.
Save us the crying about the size of your economy. California is absolutely dependent on external energy not due to geography or natural causes but due to intentional obstruction. I'm willing to bend a sympathetic ear when that stupidity ends and not one second before; my solution, were I able to wave a wand, would be to cut off all resource flows from other states (e.g. electrical, oil and water) into your state and see how long LA would sit in the dark before you cried "Uncle!"
You can't tax-and-spend out of this. You must slash costs and produce, and this means getting rid of the dead weight - the illegal immigrants - along with developing energy (especially) within your own borders.
The latter, of course, requires keelhauling the "greenie" contingent - like it or not.
There is one thing Arnie got right:
""We are right now spending money we don't have," Schwarzenegger said. "The federal government shouldn't give us a penny until we straighten out our mess and we can live within our means.""
Exactly.
Now let's shift to the FEDERAL government:
"WASHINGTON - The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents."
No really? Let's look at some of the quotes contained in that article:
“Expect fallout, expect foreclosures, expect horror stories,” California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.
“These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages,” David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history. (yeah, and in 2007 you were paying dividends out of capitalized interest, which is money you don't actually have in cash form - the event that "set me off" on your hairy butt. Who was right David?)
“It is not our role to be the regulator for the third-party lenders,” wrote Ruthann Melbourne, chief risk officer of IndyMac Bank. (but you bought their fraudulently-written crap - and it killed you!)
“To conclude that ’nontraditional’ equates to higher risk does not appropriately balance risk and compensating factors of these products,” said Lillian Gavin, the bank’s chief credit officer. (That's from Downey, which "boomed" last week. Oops.)
Funny how the truth has a way of intruding on people's pipe dreams.
Oh, one more point.
Remember how the pundits claimed that mortgage delinquency rates over 5% "all in" were lunacy? That it would never happen? Welll....
TransUnion LLC, which analyzed about 27 million consumer records in its database, predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009.
So much for that "it'll never happen" eh? While the culprit in this is clearly the OptionARM mortgages and similar, the point remains that every pundit who has said that delinquencies could "never" go past historical highs - that the market was pricing in something that can't happen - have been repeatedly proved wrong, starting with the WaMu securitization that Mish and I followed months back - and which went to a near-40% delinquency rate within months of being issued.
This ain't over folks - it won't and can't be until the bad debt is forced out into the open and defaulted.
Covering over it with TARPs and other fraudulent machinations simply guarantees we will have an experience similar to that of Japan with 10 years or more of a destroyed and flatlined economy - something that nobody in their right mind wants to see happen.
Those in Washington DC are clearly not in their right mind; more on that to come soon...... |
