Global financial system implosion begins

[Barking_Mad]

Barking_Mad is that graph from this article?
The Trade and Tax Doomsday Clocks WSJ OCTOBER 4, 2010

ah yes, sorry thought id included the link first time around

 

[A Dashing Blade]

the recent large scale quantitative easing hasn't caused widespread inflation because the banks are not lending the money to the majority

Or that the velocity of circulation multiplier hasn't risen

money seems to be finding its way to the mergers and aquisitions market where smaller companies are getting swallowed up by bigger corporations

M&A's pretty dead atm

the change of HMRC's banking suppliers in 2009 from the Bank of England to Citi and RBS has added to the steady supply of money into the banking sector

Could you expound upon this point as I seriously havn't a scooby what you're trying to say

more quantitative easing means that workers will, in effect, increasingly be paying taxes directly back to their paymasters

How does QE a priori lead to increases in taxes?

 

[ferrelhadley]

BoA stops forclosures due to bad doc

With banks expected to take over a record 1.2 million homes this year, up from about one million last year, according to the real estate data company RealtyTrac, the foreclosure issue is a hot political potato.

"American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud," said Senate Banking Committee chairman Christopher Dodd.

Given the piss poor documentation on everthing that was sold off to CDOs this is again another harbinger of great worry.

 

[ferrelhadley]

.

 

[ferrelhadley]

More than two-thirds of U.S. state attorneys general plan this week to launch a joint probe into charges some banks used fraudulent paperwork to kick struggling borrowers out of their homes, a source familiar with the effort told Reuters on Sunday.

Bank of America (BAC.N), the nation's largest mortgage servicer, an industry term for a firm that collects mortgage payments, on Friday said it would put a temporary halt to foreclosures nationwide as it looks into reports of shoddy paperwork.

Bank of America is the first bank to halt foreclosures in all 50 states. Bank of America, JPMorgan Chase & Co and Ally Financial Inc's GMAC Mortgage had earlier announced plans to suspend foreclosures in 23 states pending a review of foreclosure procedures.

Banks are expected to take over a record 1.2 million homes this year, up from about 1 million last year and just 100,000 as recently as 2005, real estate data company RealtyTrac Inc. said last month.

Reuters

 

[ferrelhadley]

MERS is back in the news.

This US mortgage mess just gets uglier and uglier.

 

[yield]

The Mortgage Morass Paul Krugman NYTimes October 14, 2010

The accounting scandals at Enron and WorldCom dispelled the myth of effective corporate governance. These days, the idea that our banks were well capitalized and supervised sounds like a sick joke. And now the mortgage mess is making nonsense of claims that we have effective contract enforcement — in fact, the question is whether our economy is governed by any kind of rule of law.

Still doesn't say capitalism once in the whole article.

 

[ferrelhadley]

The robodoc scandal is a threat to the ownership of repossesed homes. That is likely to put a hole in the market for repos.

 

[elbows]

The Mortgage Morass Paul Krugman NYTimes October 14, 2010



Still doesn't say capitalism once in the whole article.

Yes but I did laugh a sickly laugh when I read this:

The response from the right is, however, even worse. Republicans in Congress are lying low, but conservative commentators like those at The Wall Street Journal’s editorial page have come out dismissing the lack of proper documents as a triviality. In effect, they’re saying that if a bank says it owns your house, we should just take its word. To me, this evokes the days when noblemen felt free to take whatever they wanted, knowing that peasants had no standing in the courts. But then, I suspect that some people regard those as the good old days.

 

[deke t lefel]

Or that the velocity of circulation multiplier hasn't risen


M&A's pretty dead atm


Could you expound upon this point as I seriously havn't a scooby what you're trying to say


How does QE a priori lead to increases in taxes?

so, if the amount of money has increased, why hasn't the velocity increased?


the fifth wave of M&A passed through the recent recession without skipping a heartbeat - it's pulse may have slowed, however mergers still far outweigh demergers


tax revenues in the UK are/will be going direct to Citi and RBS which adds to the trend to denationalise the central bank
rather than taxes going to a national central bank and the money re-distributed for stuff like education, health and welfare, taxes will be held by private banks which will be too big to fail


"increasingly paying taxes" not "paying increased taxes"
the paymasters are the large corporations who increasingly take control of a bigger share of the labour market
workers are/will be paying taxes direct to private banks and the government continues to add a few zeros to the banks' accounts via QE
if the banks were to pay taxes, they would only be moving figures from one of their balance sheets to another

 

[ferrelhadley]

so, if the amount of money has increased, why hasn't the velocity increased?

Because, in part, people are saving more. More people are approaching retirement and retirement benefits are being scaled back, also investments in stock markets are less trusted and property prices have cratered so they are finally stuffing more cash under the proverbial mattress.

Or as a picture

 

[toblerone3]

What is the velocity of the circulation multiplier? I think we had one of them once but the wheels fell off.

 

[ferrelhadley]

What is the velocity of the circulation multiplier?

First I am assuming we mean the 'velocity of money' not the 'money multiplier'.

Basically velocity is the average time before money is spent. So if you get your wages and spend 100% of it in a month or are in fear of your job so save 50% of it by the end of the month, the velocity of money is much lower in the second instance. That is it takes people longer to spend the money, so the flow of money through the economy is lower.

This is the monetarists view....

Inflation is the quantity of money (M) times the velocity of money (V) which equals the general price level (P) times the index of the real value of final expenditure (Q) (lifted from wiki).

So inflation increases if the supply of money is the same but the velocity increases (i.e. people save less) or if the quantity increases (more money is created by central bank policy) but the velocity remains the same.

In the crisis initially the quantity of money was badly affected as the value of the assets on banks books dropped as house prices tanked and SIVs went toxic, so banks had to cut how much they lent rapidly to retain the proper ratios and hoard cash for a crash. Government stepped in and handed them oodles of dosh and took some of the toxic SIVs of off their hands, but the money was often used to butress balance sheets (creating liquidity traps) so the world governments set about quantative easing (monetizing debt) to increase the amount of money in the economy but joe sixpack and his middle class mates were now hoarding cash as they feared investing in the markets and needed to salt away the pennies for a looming retirement. AKA they reduced the velocity of money.

(dont take that as gospell as almost everyone will find a fault in it, its just a brief over view form one perspective of the shit we are now in)

 

[toblerone3]

Thanks I will have a look at that equation later on and try rearranging it a bit.

 

[A Dashing Blade]

Thanks I will have a look at that equation later on and try rearranging it a bit.

er . . .

m = pq/v
v = pq/m
p=mv/q
q=mv/p
mv/pq=1
pq/mv=1

. . . that's about it innit?

 

[ferrelhadley]

Thomas Cox, the lawyer who blew open the robodoc scandal.

 

[yield]

Interesting article by Michael Hudson in counterpunch. October 11, 2010
Why the U.S. has Launched a New Financial World War -- And How the the Rest of the World Will Fight Back

U.S. “quantitative easing” is coming to be perceived as a euphemism for a predatory financial attack on the rest of the world. Trade and currency stability are part of the “collateral damage” being caused by the Federal Reserve and Treasury flooding the economy with liquidity in their attempt to re-inflate U.S. asset prices. Faced with U.S. quantitative easing flooding the economy with reserves to “save the banks” from negative equity, all countries are obliged to act as “currency manipulators.” So much money is made by purely financial speculation that “real” economies are being destroyed.

Can't hotlink to FT? It's the top link on this google search.
Controls on currencies ‘doomed’
FT. October 17 2010

The (financial) tsunami has exerted upward pressure on emerging market currencies, prompting two countries, Thailand and Brazil, to impose capital controls in order to try to stem the inflows.

Earlier this month Brazil doubled a tax on foreign purchases of domestic debt, introduced a year ago, to 4 per cent, while Thailand reinstated a 15 per cent withholding tax on interest payments and capital gains on bonds held by foreign investors.

 

[ferrelhadley]

NY Fed, PIMCO and Black Rock sue BoA for $47 billion

A law firm on Tuesday filed a suit alleging failures by Countrywide Financial at properly servicing loans that were part of certain mortgage-backed securities. Countrywide was acquired by Bank of America in 2008.

"We want to enforce the holders' contract rights," Kathy Patrick, the lead attorney representing the bond holders, told CNBC. "Today's action begins the clock ticking ... If these issues of non-performance are not addressed and cured, then our clients will be able to enforce their rights in court."

 

[ferrelhadley]

New York University Professor Nouriel Roubini said Germany’s austerity measures, introduced to fight the aftermath of the financial crisis, are “fatal” for Europe’s largest economy, Capital magazine reported, citing an interview.

Chancellor Angela Merkel should take advantage of Germany’s ability to borrow money cheaply and “should only start to consolidate when the rest of Europe is in better shape,” Roubini is cited as saying.

He said Germany’s strong economic growth “looks good on paper but is primarily driven by statistical effects,” Roubini said, according to the magazine.

Roubini also said “the slightest external shock suffices” to derail Greece’s efforts to fix its budget deficit.

http://www.bloomberg.com/news/2010-...ill-be-fatal-for-economy-capital-reports.html

 

[yield]

NY Fed, PIMCO and Black Rock sue BoA for $47 billion

That's interesting thanks.

The New York Fed has an interest in the mortgage securities by virtue of the Maiden Lane Partnerships, which the reserve bank set up in 2008 as a financial vehicle to manage transactions involving Bear Stearns and AIG

Bank of America is too big to fail surely? Will it need more propping up from the American taxpayer?

 

[A Dashing Blade]

11161387New York University Professor Nouriel Roubini . . .

Prof Roubini's record speaks for itself!

 

[ferrelhadley]

The Subprime Debacle, Act II

This is pretty worth a read. It surmises part of the current malaise in terms of the break in chain of ownership by MERS. This problem has been bubbling for well over a year and is related to but not part of the robodoc scandal in the housing. I am not a lawer with knowledge of US housing law so cannot attest that this is a complete picture and youd think with this level of armagedon being predicted it would be a bigger issue, but then again the news media have sat on other equally big stories for a while before going public, things like the CDSs.

Read it and if anyone has any counter agruments I am listening.

 

[ferrelhadley]

Ok first up this has a big caveat with it. This is a bit sensationalist and might not be the full story with the family featured.

It echos other stories that have floated around that families are being foreclosed on when they are in the process of renegotiating there loans. This family claims to have fought it and been subjected to very dodgy bills from the debt holder that kept bumping up the costs, when they got to court the lawyers could not bring the proper documentation.

Huffington Post carries another of the mortgage stories.

There have already been lawsuits against loan servicers for wrongful foreclosure, misrepresentation, breach of contract, conspiracy, violation of state debt collection laws, and predatory lending, just to name a few. It's not as if we need another layer of obfuscation, confusion, and secrecy to further cloud the legal process. The owners of MERS are turning the corridors of justice into a hall of mirrors.

The Judge Calls It Fraud

Would a prestigious bank like JPMorgan Chase really deceive a court of law about ownership of a title? From a recent court ruling: " "The court finds WAMU (now owned by Chase), with the assistance of its previous counsel, Shapiro and Fishman ... knew that ... WAMU never owned or held the note and Mortgage ... the Court finds by clear and convincing evidence that WAMU, Chase and Shapiro & Fishman committed fraud on this Court ... a knowing deception intended to prevent the defendants from discovery essential to defending the claim."

Chase was only the servicer for this loan, but it wanted to score a foreclosure so it pretended that it actually held the title on the loan. That's the kind of deception that becomes vastly easier to carry out using the legal and electronic instruments provided by MERS. Was that why MERS was designed? They say no. MERS documents claim that the system was designed to provide transparency, consistent data, and a more streamlined system.

Having dug around a little this claims to explain why there is no problem.

However, according to the MERS website, at closing a borrower signs a security instrument - the mortgage or deed of trust - which names MERS as nominee for the lender and its successors. The lien is recorded in the name of MERS and as long as any sale of the note is to a MERS member MERS remains the mortgagee of record and continues to act as a nominee for each subsequent note-holder.

The rights of MERS to act on behalf of the note-holder in foreclosures as well as other actions have been upheld in a number of state court decisions. These decisions have variously recognized MERS' standing to foreclose and have confirmed the company's ownership of the security instrument.

Several of the lawsuits which upheld the rights of MERS as owner of the security agreements also addressed the issue of "in blank" endorsements. In Mortgage Electronic Registration Systems, Inc. v Ventura for example, the court observed that the current practice of bundling and servicing mortgages by third-party companies is now the rule rather than the exception. The note was endorsed in blank and was therefore bearer paper; MERS could therefore bring the action.

That though does not answer the question about the correct notification of who owns the loan being filed with states, IIRC that is one of the big legal issues is that the invidual state registers are not being updated so a private company is acting as the register not the states and this is why some judges have ruled against MERS.

Bloomberg raiseso other issues I had not heard of yet.

The company is accused in two whistleblower suits filed this year of cheating California and Nevada counties out of millions of dollars in recording fees. In 2006, New York State’s highest court told one county it had to record MERS mortgages against its wishes. The county said MERS cost it $1 million a year.

And addresses standing to foreclose again.

“It is axiomatic the same entity cannot simultaneously be both an agent and a principal with respect to the same property right,” Christopher Peterson, a law professor at the University of Utah in Salt Lake City, wrote in a law-review article about MERS this year.

Peterson wrote that courts should look to the actual economics of the transaction, which some have done, finding that MERS has no standing in proceedings to seize delinquent borrowers’ homes.

In a March 2009 ruling, U.S. Bankruptcy Judge Linda B. Riegle in Las Vegas decided MERS wasn’t a true beneficiary under a trust deed.

“If it doesn’t walk like a duck, talk like a duck and quack like a duck, then it’s not a duck,” she wrote.

Some states have ruled in favour of MERS though but this is not where it ends yet....

Complicating matters, MERS doesn’t handle foreclosures itself. Home-loan owners, including trustees of mortgage-backed entities, do so in its name. MERS Inc., which holds the liens, has no employees, and MERSCORP, the parent, has only about 50, Lejarde said.

MERS has also come under fire for allowing members to appoint their employees as MERS certifying officers -- as assistant secretaries or vice presidents of MERS -- to sign documents, including assignments. MERS has deputized “thousands” of such certifying officers, Arnold said.

People owing $9 trillion dollars worth of debt are not suddenly going to be given there houses for free, but this clusterfuck is going to run for a while yet. Most likely it will end with judges ruling something along the line of 'custom and practice' having changes or some such bollox and MERS is allowed to initiate the foreclosure but that is just one of many issues being raised here.

You could not believe that this is happening in a first world country could you.

 

[goebfwai]

Yeah, it's incredible. The sort of thing you'd expect to happen in Zimbabwee, not the USA.

 

[ferrelhadley]

Google pays just 2.4% tax rate.

We are all in this together.

 

[ymu]

Don't be evil.

Fucking cunts.

 

[Fruitloop]

There are a few false alarms with single Hindenburg omens. There have been five now since the first.

From your link . . .
"That said, there are plenty of Hindenburg false alarms, . . . "


The one thing markets don't like is uncertainty and there's plenty of that around (Greece etc, US recovery fears, double-dip recession, etc). I get a feeining that most startagists are assigning a 20% chance to a very sharp fall / crash

 

[ferrelhadley]

The 99ers, people in the US unemployed for 99 weeks.
http://www.cbsnews.com/video/watch/?id=6987699n&tag=contentMain;contentAux

 

[ferrelhadley]

Now look at today’s No. 1 crisis: jobs.

The official unemployment rate is 9.6%; the underemployment rate is about 17%. The real picture is even worse than that. One middle-aged man in four lacks a full-time job, and one in five lacks any work at all.

Ten years ago, 24.6 million Americans had goods-producing jobs, most of them in manufacturing — and these were good jobs, paying good wages and benefits. Despite the rise of Japan, South Korea and elsewhere, we pretty much held our own; the number hadn’t changed much.

Since then, that has collapsed by 6.5 million. Look at Michigan, look at downtown Detroit, look at Ohio, look at Pennsylvania. These were once among the richest and most productive places on earth. They’ve been flattened, lives and communities destroyed. And the devil, of course, makes work for idle hands.

Contrary to what you have heard, it’s not because jobs making things have somehow been made obsolete, like the jobs of those making buggy whips. During the past 10 years, the world economy has doubled in size. The world is consuming more goods than ever before. But most of the goods are made in China. Just look at the label on any product you own. It will come as a surprise to anyone under 30 that not long ago most things said “Made in U.S.A.” It was the best-known phrase on the planet.

Look at some simple numbers. Today there are 14.8 million official unemployed. (The true, unofficial numbers are of course much higher.) If we just had those 6.5 million jobs back, the number would only be 8.2 million.

That alone would be enough to cut the unemployment rate from 9.6% to 5.3%. No kidding: Just having back the manufacturing jobs that we’ve lost — even ignoring any growth — would cut the official unemployment rate to 5.3%.

Link

 

[yield]

Rainy-Day Funds Account for Half of Big Banks' Earnings
wsj. OCTOBER 26, 2010

The biggest U.S. banks virtually doubled their collective earnings in the third quarter just by injecting $8.1 billion into net income from funds they had set aside to cover loan losses.

There are 18 commercial banks in the U.S. with at least $50 billion in assets, and together they earned an adjusted $16.8 billion in the third quarter. Of those profits, nearly half, or 48%, were from drawing down what bankers call loan-loss reserves, according to an analysis by Dow Jones Newswires. A year ago, the same 18 banks earned $6.2 billion in quarterly profits; at that time, they added more than $7.8 billion to the same reserves, a move that reduced their profits. The analysis omits a $10.4 billion noncash charge to earnings that Bank of America Corp. disclosed during the third quarter.

Does that mean the american banks is question have enough capital then and won't be receiving more funding?