Mortgages, Foreclosures, Banking, Total Mess

I have spent some time reading all over the place to find out what is going on with all those mortgages, the foreclosures, and the banks. My conclusion? The financial world did not K.I.S.S (keep it simple, stupid!) and have created a mess that unwitting people all over the US got snared with. What is just as disturbing is the lack of any charges. What happened to the FBI investigations? I have seen nothing about this yet! Maybe because the investigation leads to companies like Wells Fargo, Fanny Mae, Goldman Sachs, and the company executives? Until there are charges or at least some grand juries convened, I have a feeling this is all just going to be wallpaper over cayuse crap. Those who knowingly defrauded, manipulated and created a huge problem need to be found and face the music. The Bush Administration has put some of the “old boys network” in the very positions where the investigations may well end up squelched.

The countries of the world elsewhere have K.I.S.S and that has allowed mortgages to be renegotiated directly with fewer foreclosures. What is the difference? “Securitized mortgages” where speculators, unscrupulous financial activity and banks all DELIBERATELY chose to “reduce risk” by cutting up the dealings to make far more money off housing.
There is obviously a HUGE problem with the U.S. regulations if this was even allowed to happen. Housing and other shelter lending should NEVER have been exposed to these practices.
What can be done now? First off, write a piece of legislation banning CDS, along with severe restrictions on shelter lending, whereby there is a simple process. Banks can ONLY lend directly to purchasers, period. The mortgages MUST be maintained within a single lender, and NO allowed contracts or other practices where there is ANYONE else allowed in. Keep It Simple, Stupid!
This may mean that the government now becomes the Master Servicer of mortgages, which is almost guaranteed to raise screams of protest from banks, and “investors” because this would put the government in the position of negotiator. For those who find their mortgages “repackaged” it would allow them the ability to renegotiate directly, simply, and probably effectively with the Master Servicer, the government.
Reform the shelter bankruptcy laws, along with an increased involvement of Fanny Mae and Freddy Mac as the holder of the mortgages. This reform MUST change the way mortgages are renegotiated, change the way mortgages are written, and MUST CUT OUT any contractual access from any other person than the banks and the mortgagee. Get those bloody contracts out of the housing market, now! Those contracts are crippling the ability of the banks, the holders of mortgages and lending to even find a clean, simple way to get things resettled.
If a housing market has dropped the value on the properties, then it is up to the banks to “eat” the losses. Why? Because BANKS are the ones that sold off the mortgages to others, complicated the hell out of the whole thing in the first place!
One reason most people have not figured this out IS because of the “securitization” of mortgages, the underlying manipulation and speculations that made millionaires out of people who NEVER had a stake in the shelter market at all!
Personally if I do go into the US market and buy a house, I am going to make DAMN SURE that the lending institution WILL NOT, HAS NOT, AND WILL NEVER turn my mortgage over to speculators. I want to have a clause that allows me to sue the hell out of the bank if they do!
KEEP IT SIMPLE! STUPID!

Fading Out

Up until a week ago, I had not seen much effect from all the turmoil here.  There were few signs of anything really changed.

This week the news here was broadcasting an item about a series of condominium towers that are now in receivership because the developer from Korea had used Lehman Brothers for financing. The owner has now been put in the position of declaring bankruptcy with the sub-company building two of four towers.

The developer had created a company just for those buildings, so the permits, etc. could all be done with local authorities and laws.

Housing prices are still very high, and there have been few here even close to foreclosure, yet. I do know other cities around have seen a slight rise in foreclosure, but those numbers are still in the hundreds, not the thousands.

Linens and Things is the other company that has disappeared here.  They were based in the US, so I gather the finance and company structure was weakened, then went under.  Another sign that some companies went over the capacity for expansion and put themselves into a bad financial position.

I am still confounded by some of the business practices in the US. Take WalMart for example. They tried and almost succeeded to bust unionization here. There was one store they opened, which after the employees did get unionized, WalMart promptly closed. I know of some of the business practices that Wal Mart use, and here they are against the laws. Discrimination against women, refusing to pay for holiday pay, firing with no reason, all kinds of very bad business practices.

Personally I will NEVER spend a dime there. I have no use for any company that will deliberately abuse the public, the courts, the laws, and especially their employees.

Some of the companies that wanted to expand to this country found themselves in lawsuits both from their former employees and from the federal and provincial laws. Most who ran afoul of the laws closed their businesses instead of trying to live up to our standards.  Minimum wages, tax, health care payments are all paid by every business here. I guess those who closed up shop did not realize that we are more “social” here, and our idea of the common well-being is much deeper.

With the disastrous down-turn in the US economy, I am still trying to figure out how on earth someone who is a parent, who has a child with a long-term medical condition like diabetes, can possibly deal with the cost of health insurance. It certainly gives me a stronger appreciation for the one man who started our “socialized” health care system. It may not be perfect, but from watching what others have gone through, even going without seeing any medical services because they cannot afford them, I shudder to think how this is going to work out.

Each person does have choices, every moment, to either get into the quicksand with those in trouble, or to stand on solid ground and put out a hand to help others get out of the quicksand. Mentally that means being strong, being able to maintain a healthy perspective, being someone who recognizes that we must take care of ourselves, otherwise we are basically useless to anyone else.  Jumping into the misery, diving into the quicksand, is no help, and those who are in the quicksand will definitely NOT thank us for doing it. Strength comes from within our own beliefs, and support is something everyone will need at one time or another. If I have strength to spare, then I guess I “socialize” myself enough to help someone out.

If you see a theme here, yes, there is one. Socialization is something every society does, and I am confounded that some would see banking regulation, knowing what is going on in the financial world, as a bad or unwelcome thing known as socialization. Sorry, but I believe that all of us have to depend on honesty, and if greed is going to wipe out integrity and honesty in business, then regulation, socialization, is necessary.

Differences in Mortgage Lending and Credit Cards

I live in one of the countries world wide that have gone way over the limit on personal debt. Credit cards and mortgages far over the ability to repay and savings basically non-existent. There will be repercussions coming. When? I don’t know.

The US consumer is not perhaps the worst, but with the way the banking and lending practices are allowed to be basically unregulated or very seldom watched, this makes it a highly volatile situation. What is remarkable in history is that the US is the ONLY country to go through this type of crisis, not once, not twice, but three times and a few lesser crises in between.

Why? Well, from what I can see, the government is seen as an enemy and regulations are seen to bind banks, lending and mortgages to unfavourable levels. Well, if unfavourable is the watchword here, then I would say the current situation is that.

JPMorgan just bought Washington Mutual, after the government seized it. One of the largest banking buys in history. The Treasury and Federal Reserve are trying, maybe in vain, to get a very unfavourable bailout of the lending industry passed using a very vaguely written bill.

Try looking at other countries, and see if those business practices would work for personal lending, mortgages and compare the differences.

In France, for example.

The BBC’s Emma Jane Kirby asks if other nations should take a leaf out of the thrifty Gallic book?
French credit cards are little more than debit cards, so there is no question of simply sticking a couple of flat screen TVs on your credit card and hoping to pay for them later – if there are insufficient funds in your account, your bank will immediately block the transaction.
“People here don’t believe you can just put your debts together and get them refinanced… But in London… it was as if wealth was something you could get from a bank, it’s a sort of miracle people seem to believe in England.
But France still believes in strict rules and regulations,
Finance Minister Christine Lagarde says.
“Expect two conditions – a down payment of 20% of the value of the house plus mortgage [repayments] which will not exceed 30% of income.
“You already have a pretty good safety net there and clearly no real estate financing similar to the sub-prime market that has existed in the US and which has hurt the financial system so much,” Ms Lagarde says.

Here, in Canada, all mortgages must be insured, must be registered and the banks insist on at least a 10% downpayment. This used to be lower, but with the way properties were selling to people who were noticeable way over their limit on the ability to repay, the regulatory agent, CMHC chose to change the qualification level and changed the amortization time. Just a short time ago, mortgages could be repaid over 40 years, now they are limited to 35 years.

Credit cards are still one of the highest risk debts out there, with up to 29% interest, and a lot of people here have done what is considered very high risk. They have put the debts into one consolidation loan, then started charging again on the cards.

North Americans, U.K. residents, are all very high consumers, with extremely high debt levels. This is now coming home to roost, unfortunately.

History has lessons, and I am not going to reiterate all of them. No point. But some of the historical commentary from people living during the Great Crash in 1929 ring ominously.

1929 Here is what happened.

“In August of 1929, the Fed began to tighten the money supply continually by buying more government bonds. At the same time, all the Wall Street giants of the era, including John D. Rockefeller and J.P. Morgan divested from the stockmarket and put all their assets into cash and gold.

Soon thereafter, on October 24, 1929, the large brokerages all simultaneously called in their 24 hour “call-loans.” Brokers and investors were now forced to sell their stocks at any price they could get to cover these loans. The resulting market crash on “Black Thursday” was the beginning of the Great Depression.

The Chairman of the House Banking and Currency Committee, Representative Louis T. Mc Fadden, accused the Fed and international bankers of premeditating the crash. “It was not accidental,” he declared, “it was a carefully contrived occurrence (created by international bankers) to bring about a condition of despair…so that they might emerge as rulers of us all.”

On Sunday, December 23, 1913, two days before Christmas, while most of Congress was on vacation, President Woodrow Wilson signed the Federal Reserve Act into law. Wilson would later express profound regret over his tragic decision, stating:

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world – no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”

Sound familiar? It is long overdue that the American policy makers, the guy on the street, called for regulation, freedom from the “duress” of a small group of men in Wall Street and the credit markets.

I, personally, would love to see the American voter, worker, business man, corporate CEO outside Wall Street, all demand that regulations be put in place and the funds provided to make sure those regulations were obeyed. Right now there are over 50 different agencies, and consolidating those into a few lesser number would make the whole situation far more effective, far more efficient, and maybe, just maybe, the american taxpayer WOULD find themselves never, ever again facing another meltdown.

Stupidity Explained, Now It “Figures” Literally

http://scienceblogs.com/goodmath/2008/09/economic_disasters_and_stupid.php

This one says a lot about the way this whole thing got so tangled up, so obscene in the ways banks, investment bankers, and insurance companies got into the game. Let it be no mistake, this was a game to them, without any families, any real touch with the pain that bad loans created.
The person who wrote this is NOT a politician, NOT someone whose specialty is economics, but IS someone with math skills, and logic.
I read just this posting and started to swear, my eyes bugged out completely at some of the sneaky, underhanded and just plainly obscene practices here.
Unfortunately it appears to be just another version of the Savings and Loan fiasco, with a few new twists.
How this all works out is beyond my capability to foretell, and what happens to those who pulled off some of the game strategies, I don’t know.
What I do know is that I live in a country where the banks, the investment firms, the insurance companies are regulated.
Paulson, the Federal Reserve Bank, and you, the unwitting tax payers, will be the ones to deal with this. International banks will get some of the funds here, but remember, they also built parts of your economy. Maybe some of them got suckered, like a lot of people apparently did, but with the international banks far more regulated, far higher scrutiny on them, at least your taxes will go to help you out with ethics being the underpinning on the international banks.
Paulson, the FRB, the Senate, the house of Representatives all knew the foreclosures, the money, the sucker loans and the insurance between each other were going on as long as two bloody years ago. This should never have come as a surprise, period. All of them experienced the fiasco with the Savings and Loans institutions, and definitely John McCain would be well aware because he was in with one of the Savings and Loans in Arizona.
However this works out, and it may well take a couple of DECADES to even get the strings unwound here, there will be some pain, there will be a serious slowing of the entire world economy, and maybe, although I hope not, a full recession which turns into a real depression.
Maybe this is what NEEDS to happen. People will learn to live without borrowing to buy a new tie, or a sandwich, by putting the charge to a bank charge card. People will learn that money that they put into deposits does have risk, some of it high, some of it very low. Maybe some will learn to be a lot smarter when dealing with the financial version of the Barnum and Bailey circus.
Remember, there is a sucker born every day. Maybe it is time even the bank CEO’s recognize their own faces in the “Great Mirror of Sucker”.
This is a harsh way to learn some lessons, but maybe that is what is needed now. I don’t know the future, and maybe that is a good thing. I DO know the day has come where the sucker punches to the economy finally took it down. Hard.