"High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets, and the broader economy," Bernanke said in remarks prepared for delivery to the Columbia University School of Business in New York.
Naturally none of this prevents him from a strict whatever-Wall-Street-wants policy of cushy bailouts and rate cuts. What next? Is Bernanke going to boldly state that interest rate cuts to banks don't transfer to individuals or that when the dollar goes down, gas prices go up with each rate cut?
Where the heck were Bernanke and Greenspan, the Fed, and the Republicans when this fragile system was being built up? They're all supposed to be so smart, so how did they honestly think that real estate would always increase? Have they never studied bubble economies before? How did we get stuck with such an incompetent bunch?
Their big mistake was not being worth billions and having connections to the highest levels of Congress and the Administration. If they did, they too would receive billions upon billions and nobody would ask questions and everyone could live today as they did yesterday. Polite company doesn't ask uncomfortable questions about money. Especially when it's not even theirs to shovel out. What do the Democrats have to say for themselves now? They all too easily allowed the banks to get their bankruptcy law and then bailed out the damned banks without question.
Bankruptcy filings by U.S. consumers jumped 47.7 percent in April from one year ago as families cope with fallout from the subprime mortgage crisis, the American Bankruptcy Institute said.
The 92,291 bankruptcy filings in April also marked an increase of 7 percent from March, the non-partisan institute said.
This is a really interesting bit of information pulled out of the home foreclosure report that came out on Tuesday. Just another sign of how excessive the real estate market was and is even today. This suggests much more room to fall before prices even come close to stabilizing.
The numbers were pretty nasty nationwide, as expected, with activity up 23 percent quarter to quarter and 112 percent year over year.
When you break down the sub-categories, however, you find that the number of bank-owned properties is rising faster than ever before. “Typically you’ll see about 20 percent of the foreclosure filings being bank-owned,” RealtyTrac’s Rick Sharga told me in an interview this morning. “We’re getting to a point now where it’s well over 1/3 and aiming at 40 percent, so that just suggests that a lot of these homes can’t even be sold to investors at auctions – because there’s just no equity in the properties.”
Not a problem though because we just bailed out Wall Street so Mozilo, O'Neil, Prince and their millionaire buddies could all keep their tens of millions in bonus money. They're all a great bunch and the trickle down economics will surely be kicking in at any moment.
If the Democrats fail to speak out and join the rest of America, they deserve to get kicked aside in the fall. People are furious and yet the Democrats miss another opportunity to join voters of all political stripes.
While it may seem odd that so many banks are scrambling around the world for cash, I can somewhat live with it. Raising capital from foreign governments that will now have a role in a major bank is unsettling if you think this out into the future, but it could be worse. What is much more problematic is that these banks continue to be fed by taxpayers in the US and UK (and no doubt elsewhere) to prevent them from having to raise even more capital.
The banks have no issue with raising more capital to pay for their problems so why are taxpayers - who are already suffering due to banking problems - bailing out banks? It's obvious they get much better terms from taxpayers during this process but what taxpayer wouldn't want to see some friendly terms given back in their direction? To hell with the gamblers in the banking industry, but politicians on both sides of the pond are much too proper to say what everyone in the real world is already thinking. Maybe the voters will just say to hell with the politicians who are going along with this and vote them out.
The Republicans like to look back at certain events in history and selectively remember bits and pieces. For example, even today many believe that if only we did (fill in the blank) we could have won Vietnam. Uh huh, right. Another classic theory is that the Great Depression ushered in unnecessary 'socialist' programs that block individual initiative, forcing people to rely on government handouts. Read through this link and think about just how much the likes of Mozilo, O'Neil, Prince and their kind have manipulated the US system in their favor at the expense of everyone else. Let these people play on the same level field as the rest of us and let's see how well everyone does. Here's one of the more interesting perks for America's executives:
Perhaps the most bizarre compensation a CEO receives is assistance paying their income tax on their pay and perks. A new report from The Corporate Library delves into the increasingly common practice of "grossing up".
In a nutshell that means the company picks up the income tax liabilities a CEO faces on his perks, and sometimes even his pay and bonuses. The Corporate Library, in examining 3,297 proxy statements filed between February 2007 and February 2008 found that 20% of CEOs (more than 650 individuals) receive tax gross-ups on part of their income.
To many, Angelo Mozilo is the face of failure. Under his watch he managed to build Countrywide Financial into the largest lender in the US and then almost as quickly, drive it in to the ground where Bank of America would buy it in a fire sale and reap tax benefits for years. Jobs lost, house evictions, ruined lives, it's all there courtesy of Mozilo. So just how tough are times for this failure? They're so bad that he scraped together $132 million in 2007 despite his magnificent failure.
As I've said before, these people who scream about the free market wouldn't know the free market if it bit them in the ass. In an earlier time, after the Crash of '29 for example, people such as Mozilo would be standing on a street corner begging for handouts much like the people who have lost their houses courtesy of his schemes. When I listen to Republicans talking about people needing to toughen up and quit relying on the system, well, what about Mozilo? How is it possible in this day and age to screw up so badly yet walk away so wealthy? It's easy, because this is the system that the GOP created where only the middle class and poor lose. Risk has been minimized at the top and it's everyone else who is stuck with the bill. Good work, when you can find it.
If only Massachusetts was the only state to see such figures. Ignoring pesky oversight issues was definitely the way to go. In fact, the financial industry is still thankful that Congress is letting them slide and not questioning the bailout for Wall Street. See how well industry can self-regulate? Charles Prince, Stanley O'Neal and Angelo Mozilo really appreciate the lack of serious action. Democrats are completely missing the issue if they continue their inaction. Enough of the talk, time to take some action.
Almost 1,200 Massachusetts properties were seized by mortgage companies in March, an increase of more than 140 percent from the number of foreclosures in March 2007, according to data from Warren Group.
Foreclosures during the first three months of the year topped 2,800, also up about 140 percent over the same period last year. Massachusetts is on pace to shatter the previous record for the most foreclosures in a year, set in 1992.
Yet another hidden cost to this Republican created problem. As spring arrives in the US, there is concern over increased mosquito infestations due to neglected home swimming pools as others abandon their homes.
In what appears to be the latest symptom of the US mortgage meltdown and credit crisis, insurers, law enforcement, and state agencies nationwide have reported a jump in home and auto fires in the past year set by owners unable to pay debts. The numbers are small, but they're leading the insurance industry to scrutinize what seem to be routine blazes.
"We've seen a dramatic increase in this kind of fraud," said Dan Bales, director of fraud investigations at Mercury Insurance. "People upside down on their house with variable interest-rate loans, or upside down on their cars, are pretty quick to burn their property right now."
Lehman Brothers and Wall Street cheerleaders can say whatever they like but we are nowhere near the end of this. Anyone who says they know the full extent of the losses is either a liar or a fool. The range continues to grow but it's only a range and could be considerably worse.
Nine months after the crisis in the American mortgage market began to tear through the financial world, the cost to banks, in terms of their own sinking investments, is approaching $300 billion. To shore up their weakened finances, one bank after another is racing to raise capital — a total of $160 billion so far.
The pain is far from over. Even the most optimistic forecasters say banks will suffer billions of dollars in additional write-downs on mortgage investments and other debt in the months ahead. The final figure for the banks write-downs could eventually exceed $750 billion — twice some early estimates — if the economy sinks into a prolonged recession, some analysts say.
It's no surprise that the banks are adjusting their risk calculations and receiving more 'jingle mail' (house keys in the envelope) as housing prices decline. Since McCain is talking about the economy now, can we see his detailed record from his long Senate history, where he speaks out against the system that his party and advisers created? What's that? He supported all of this? Oh...nevermind.
Mark Zandi of Moody's Economy.com estimates that 10.6 million homeowners will have zero or negative equity by the end of June, or 21 percent of first mortgage holders.
The impact of a new wave of defaults will also be potentially important.
Banks and other investors in mortgages, as has been seen, will take further hits to their already weakened capital.
While few might shed tears for banks, this means a longer and deeper credit crunch.
When the Republicans talk about an ownership society, they mean the banks and collection agencies own everything. I can't wait to hear McCain tell us how his economic plan would have avoided all of this but gee, I don't think he is going to throw his entire economic team who built this system under the bus. Not yet at least:
The numbers, compiled by online foreclosure marketplace RealtyTrac, also show increasing numbers of homeowners content simply to walk away from their mortgages as the amount they owe on their homes exceeds their value.
RealtyTrac said there were 234,685 foreclosure findings in March, up 5 percent from February and 57 percent from March 2007. One in every 538 US households received a foreclosure filing -- a default notice, auction sale notice or bank repossession -- during the month.
Could McCain be any worse with his grasp of economics? Who is he talking about and what kind of investors? Wall Street? Pension plan companies? American individuals planning their 401K? Real estate? Republicans who engineered this problem? Marrying heiresses to family fortunes? Who is he talking about? McCain is attempting to get the word 'greedy' out there but is too much of a coward to point the finger at anyone so one has to assume he's blaming all Americans. Greed has always played a role on Wall Street and our economic system with the drive to make more money (selling beer, for example) a cornerstone of the system. Right or wrong, it's just how the US system works.
It's pretty obvious that there was excessive greed on Wall Street as well as with real estate speculators but instead of throwing out blanket statements, how about some details or is McCain afraid of angering his base? Is he straight talk or mushy-mouth talk? Is it too much to ask to have McCain specify what went wrong and how we ended up with this recession? McCain needs to admit that his own party with his own votes created the severe economic problems in the US. His party and his advisers supported the excessive greed by Wall Street and they failed to offer any proper balance to the dream list requested by the financial industry. Where was his outrage about greed when all of this was happening? The problem didn't just start yesterday, so let's get more details from McCain.
Impressive. How many times over the course of the last two bubbles have we heard this talk? Royal Bank of Scotland (RBS) has had their own multi-billion dollar run-in with subprime write downs so now, surprisingly like Lehman Brothers who also have been in trouble, they are forecasting a soft landing. What are the odds of such a statement coming from a troubled institution who desperately needs positive spin? No conflict of interest there.
Forget about the billions that have been wiped away from the books. Ignore the retirement plans that have gone up in smoke. Don't even think about the bank lending that has pushed away possible clients. Pretend that people and businesses are not over-extended with credit and that the US economy - the traditional global economic engine - is not imploding. Got that? Forget about every reality that you see around you and then yes, it's easy to see that a soft landing is ahead. No one else sees the soft landing, but they're all just being negative. I hear prosperity is just around the corner too.
Will anyone in Congress, White House or Federal Reserve ever learn? Lehmen Brothers, rumored to be the next Bear Stearns only weeks ago and who just downplayed the seriousness of the subprime loss (surely by coincidence) has just used some more "innovative" financing to move a few billion of absolute shite into cash to help their books, all courtesy of the American taxpayer. Great. Just as they played games and took the country (and beyond) into this recession with funny business, they're doing it again but this time with the backing of the hapless Bernanke and Federal Reserve.
We bail out this bunch of bums and to say "thanks" they do it again. Does anyone in Washington have any common sense? Are they going to let Wall Street pull these games forever?
Touchy, touchy. It must really suck when everyone else already sees the truth.
"What is fairly clearly the case from the data, is that if adjustable rate mortgages weren't available, the purchases (of homes) still would've occurred," he said.
Um, OK, but what about the rate cuts? And to say that the Fed was a helpless little lamb is absurd. If Greenspan spoke up, people who have at least listened but no, he chose to go along with whatever Wall Street wanted just as Bernanke is doing today.
That news is not much of a surprise (though it may be to Mr Bubble who still says it's a 50% risk) but the troubling news is that this forecast says it's going to be nasty. Read the full article because Martin Feldstein has a lot of interesting things to say, including about the rebate and failure to address the core problems.
“I think the professional forecasters have been a little slow to come to the recognition that we’re in a recession,” Feldstein said in a live interview.
Feldstein, president of the National Bureau of Economic Research, said the downturn could go on longer and deeper than the two most recent recessions.
He also said the U.S. gross domestic product would be a misleading, positive number.
“But within this quarter, we’re seeing the monthly numbers coming down,” he said. “As I said, employment, sales, production, all of that are trending down at this point.”
The poor little lamb sounds like he's getting a bit testy. To hear him tell his side of the story, it's as if he was a casual observer during his terms as Chairman of the Federal Reserve. He endorsed tax cuts yet could not manage to have his concerns on poor regulation heard. And his policy of low lending rates? Nope, had nothing to do whatsoever with the latest bubble. How convenient.
Remember, this is the guy that McCain thinks is a great economic leader.
Dammit, when is Congress or heaven forbid, a presidential candidate going to get serious about this? People on both sides of the isle are fuming about these handouts to the people who have created this recession. Of course nobody wants to trigger major bank failures but for goodness sakes, we keep giving and are not seeing any signs of cutbacks from Wall Street. A lot of the taxpayer money is going right back in to help them finance their bonus system and when these people wrap up the year, bonuses will be as high or higher than last year. It's the American public who will be financing those bonuses and guess what they get in return? A swift kick in the ass, loss of a job or house and a new demand for tax cuts.
The time to negotiate with this bunch is not two years from now, but now. Wall Street never hesitates to demand "what's in it for me?" and this is exactly what we ought to be asking from them today. It also makes me wonder why we only see nastiness between Democrats running for President instead of that same aggression against Wall Street and the damned GOP who started this. How could anyone possibly have faith in a Democratic candidate who can only attack a fellow Democrat and not the owners of this? Wall Street borrowing is up 200% in three weeks and you would never know it by the pathetic doddling in Washington. It looks like the Democrats are ready to let yet another key issue slip through their fingers.
So much for the theory that the worst is behind us in the first quarter. UBS is writing down an additional $19 billion but they won't be the last to deliver hideous numbers this quarter.
Phil Gramm, McCain's economic guru, is the Vice Chair of UBS -- and he claims he knew nothing about the company's subprime holdings:
The spiraling crisis in the credit and housing markets has kept Gramm in focus, fairly or not. His employer, UBS, revealed yesterday that investment losses tied to the U.S. housing market reached $37 billion over the last six months. For the last three months, UBS posted a $12 billion loss.
Gramm, UBS's vice chairman, said yesterday he was "totally unaware" of his bank's massive holdings of securities tied to subprime mortgages, but, he added, "I'm confident we'll recover."
And, he's going to help McCain run the economy? Gramm's whopper earned him the designation "liar" at The Stump.
