Why Gold Might Soar Over the Next Four Weeks
Patrick A. Heller
Oct 28, 2008
http://www.numismaster.com/ta/numis/
Article.jsp?ad=article&ArticleId=5514
Whether or not you acknowledge past efforts by the U.S. government with other governments, central banks and private trading partners to suppress the gold spot price, events coming to pass in the next four weeks could create overwhelming pressure causing much higher gold prices.
Last Friday, the Taiwan government announced that it had completely liquidated its holdings of Fannie Mae, Freddie Mac and Ginnie Mae bonds. If a long-time ally of the United States is willing to admit that it is bailing out of dollar-denominated debt, will other nations continue to show restraint?
Last Friday and Saturday, leaders from 43 Asian and European nations met in Beijing to discuss the global financial crisis. The United States was specifically excluded from this meeting.
These events are just appetizers on what is coming up in the next few weeks:
- Oct. 28: Comex November gold and silver options expire.
- Oct. 28-29: The Federal Open Market Committee meets to discuss, among other subjects, the possible 0.5 percent reduction in benchmark interest rates.
- Oct. 29: Last trading day for COMEX and Chicago Board of Trade gold and silver futures contracts.
- Nov. 4: The U.S. elections will be held and end the need for politicians seeking re-election to try to look good for the voters.
- Nov. 6: European Central Bank meeting at which one of the subjects will be cutting benchmark interest rates.
- By Nov. 10: Adrian Douglas's Market Force Analysis" indicates that the temporary bear market rally in the value of the U.S. dollar will come to an end.
- Nov. 15: The G-8 summit meeting in New York City will discuss plans to reform the international financial and monetary system. There is a strong likelihood that one of the major topics will be the replacement of the U.S. dollar as the major international currency.
- Nov. 20: December gold options expire. Currently, there are about 70 percent more outstanding call options (which gives the owner the right to buy gold at the contract price) than there are put options (which give the seller the right to sell gold at the contract price). If the price of gold starts to rise to any degree, owners of call options might be able to demand physical gold for their contracts at below-market prices. Thus, any modest rise in gold prices could lead to an extreme supply squeeze and rocketing prices.
Other continuing pressures for higher precious metals prices include:
- The TOCOM, the Tokyo Commodities Exchange, provides daily reports of trading positions for major traders. Goldman Sachs and six other firms had huge short gold positions in early 2006. Goldman Sachs and these others have been continuously reducing their short positions. Late last week, Goldman Sachs TOCOM gold position turned into a net long of 370 contracts. The other large short sellers as a group are in their lowest short position in the past 30 months. These companies now have less incentive to want to hold down gold prices.
- There is a significant effort underway by would-be gold and silver buyers, dismayed by the current high premiums for physical gold and silver to purchase December COMEX contracts and ask for physical delivery of the 100-ounce gold and 1,000-ounce silver ingots. Since the COMEX only has a tiny coverage of physical metal for its outstanding contracts, there is a growing risk that the COMEX gold and silver contracts may default. If this occurs, the COMEX allows contracts to be settled for cash rather than gold or silver. If defaults occur, the spot prices for physical gold and silver will soar instantly.
- AIG, America's largest insurance company and beneficiary of over $100 billion in government liquidity over the past six weeks, is still at great risk of financial collapse. From a high of $63.68 per share within the past year, the stock settled at $1.35 on Oct. 27. AIG is widely regarded as holding the largest number of gold and silver derivatives (especially silver) of any company in the world. If it fails, the counterparties on these derivatives contracts could be forced to quickly acquire large quantities of gold and silver to minimize their financial losses.
It would only take one or a few of these events to get out of control for the prices of gold and silver to explode.
The U.S. government and its partners are pulling as many strings as it can to try to hold down prices. A large number of 400-ounce gold bars have been appearing on the market with markings that indicate that they may either be coming from the U.S. Treasury or International Monetary Fund reserves. The IMF is not yet authorized to sell any gold, but apparently can lease gold without restriction. If it becomes public knowledge that the U.S. or the IMF is sneaking gold onto the market to help hold down prices, the news will actually have the opposite effect because it would represent an admission that the U.S. dollar deserves to be worth much less than it is today.
For other news and articles on NumisMaster.com, Click Here.
Showing posts with label Freddie Mac. Show all posts
Showing posts with label Freddie Mac. Show all posts
Friday, November 14, 2008
Tuesday, September 30, 2008
A great example of how we got to the credit-market meltdown
A great example of how we got to the credit-market meltdown
Ed Morrissey
Sep 25, 2008
http://hotair.com/archives/2008/09/25/a-great-
example-of-how-we-got-to-the-credit-market-meltdown/
It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.
Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat "redlining" by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.
Requiring banks to serve their low-income communities. That’s shorthand for taking on more risk and lowering what had been standard prerequisites for purchasing homes. Normally, lenders would have demanded at least 10% down, and preferred 20%, and demonstration of stable income, of which the mortgage payments would not exceed 30%. Under threat of prosecution for bigotry, lenders had to start taking less-qualified borrowers as clients.
But the government had a way for them to spread that risk throughout the investment community:
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains.
Congress told the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to buy up the paper and transform these marginally-qualified loans into what’s known as mortgage-backed securities (MBS). The purchase of these loans made them much more attractive to lenders, who rushed to create more of them. Fannie and Freddie then kept buying the paper and turning them into MBSs and selling them to investors, who assumed that the government would back the GSE securities Congress mandated into existence.
Thanks to this massive intervention in the lending marketplace, what followed was utterly predictable for anyone who had ever completed Econ 101 at a junior college:
The massive influx of new home buyers drove up housing prices.
The rising prices pushed borrowers and lenders into adjustable-rate mortgages to allow the purchase of homes for no down, on the premise that the rising prices (which reacted to massive new demand) would allow them to refinance before the ARMs adjusted to their maximum, at which point borrowers would refinance with the new-found equity as their down payment to get better rates and lower monthly payments they could afford.
Housing prices rose so quickly that builders invested in new houses on a massive scale to produce inventory to meet the demand.
As long as prices continued to rise, and as long as the two GSEs kept issuing the MBSs, investors kept buying them - with their government backing.
Ed Morrissey
Sep 25, 2008
http://hotair.com/archives/2008/09/25/a-great-
example-of-how-we-got-to-the-credit-market-meltdown/
It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.
Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat "redlining" by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.
Requiring banks to serve their low-income communities. That’s shorthand for taking on more risk and lowering what had been standard prerequisites for purchasing homes. Normally, lenders would have demanded at least 10% down, and preferred 20%, and demonstration of stable income, of which the mortgage payments would not exceed 30%. Under threat of prosecution for bigotry, lenders had to start taking less-qualified borrowers as clients.
But the government had a way for them to spread that risk throughout the investment community:
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains.
Congress told the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to buy up the paper and transform these marginally-qualified loans into what’s known as mortgage-backed securities (MBS). The purchase of these loans made them much more attractive to lenders, who rushed to create more of them. Fannie and Freddie then kept buying the paper and turning them into MBSs and selling them to investors, who assumed that the government would back the GSE securities Congress mandated into existence.
Thanks to this massive intervention in the lending marketplace, what followed was utterly predictable for anyone who had ever completed Econ 101 at a junior college:
The massive influx of new home buyers drove up housing prices.
The rising prices pushed borrowers and lenders into adjustable-rate mortgages to allow the purchase of homes for no down, on the premise that the rising prices (which reacted to massive new demand) would allow them to refinance before the ARMs adjusted to their maximum, at which point borrowers would refinance with the new-found equity as their down payment to get better rates and lower monthly payments they could afford.
Housing prices rose so quickly that builders invested in new houses on a massive scale to produce inventory to meet the demand.
As long as prices continued to rise, and as long as the two GSEs kept issuing the MBSs, investors kept buying them - with their government backing.
Thursday, September 25, 2008
Bailouts will lead to rough economic ride
Bailouts will lead to rough economic ride
Ron Paul
Sep 23, 2008
http://www.cnn.com/2008/POLITICS/09/23/paul.bailout/index.html
Many Americans today are asking themselves how the economy got to be in such a bad spot.
For years they thought the economy was booming, growth was up, job numbers and productivity were increasing. Yet now we find ourselves in what is shaping up to be one of the most severe economic downturns since the Great Depression.
Unfortunately, the government's preferred solution to the crisis is the very thing that got us into this mess in the first place: government intervention.
Ever since the 1930s, the federal government has involved itself deeply in housing policy and developed numerous programs to encourage homebuilding and homeownership.
Government-sponsored enterprises Fannie Mae and Freddie Mac were able to obtain a monopoly position in the mortgage market, especially the mortgage-backed securities market, because of the advantages bestowed upon them by the federal government.
Laws passed by Congress such as the Community Reinvestment Act required banks to make loans to previously underserved segments of their communities, thus forcing banks to lend to people who normally would be rejected as bad credit risks.
These governmental measures, combined with the Federal Reserve's loose monetary policy, led to an unsustainable housing boom. The key measure by which the Fed caused this boom was through the manipulation of interest rates, and the open market operations that accompany this lowering.
Ron Paul
Sep 23, 2008
http://www.cnn.com/2008/POLITICS/09/23/paul.bailout/index.html
Many Americans today are asking themselves how the economy got to be in such a bad spot.
For years they thought the economy was booming, growth was up, job numbers and productivity were increasing. Yet now we find ourselves in what is shaping up to be one of the most severe economic downturns since the Great Depression.
Unfortunately, the government's preferred solution to the crisis is the very thing that got us into this mess in the first place: government intervention.
Ever since the 1930s, the federal government has involved itself deeply in housing policy and developed numerous programs to encourage homebuilding and homeownership.
Government-sponsored enterprises Fannie Mae and Freddie Mac were able to obtain a monopoly position in the mortgage market, especially the mortgage-backed securities market, because of the advantages bestowed upon them by the federal government.
Laws passed by Congress such as the Community Reinvestment Act required banks to make loans to previously underserved segments of their communities, thus forcing banks to lend to people who normally would be rejected as bad credit risks.
These governmental measures, combined with the Federal Reserve's loose monetary policy, led to an unsustainable housing boom. The key measure by which the Fed caused this boom was through the manipulation of interest rates, and the open market operations that accompany this lowering.
Tuesday, September 16, 2008
Last Gasp of a Doomed Currency
Last Gasp of a Doomed Currency
Euro Pacific Capital
Sep 12, 2008
http://www.europac.net/externalframeset.asp?from=home&id=13975
By transforming $5.5 trillion of suspect mortgage-backed securities into seemingly bullet-proof Treasury bonds, the move has sparked a relief rally in the dollar as foreign investors no longer have to worry about defaults or markdowns. In fact, to holders of Fannie and Freddie debt, it no longer matters what happens to the housing market. Home prices can drop another 50%, every single homeowner can default on their mortgage, and bond holders will not lose one dime. This has emboldened foreign investors, and temporarily increased demand for both dollars and Freddie and Fannie debt.
Had the government done the right thing and not guaranteed Freddie and Fannie debt, I believe we would now be experiencing an outright financial crisis. The dollar would be falling sharply along with real estate prices, gold would be soaring and the recession would be deepening. However, by nationalizing Freddie and Fannie, the government has merely delayed the crisis. The borrowed time will cost us dearly, as the day of reckoning will now likely involve much steeper losses for our currency.
Euro Pacific Capital
Sep 12, 2008
http://www.europac.net/externalframeset.asp?from=home&id=13975
By transforming $5.5 trillion of suspect mortgage-backed securities into seemingly bullet-proof Treasury bonds, the move has sparked a relief rally in the dollar as foreign investors no longer have to worry about defaults or markdowns. In fact, to holders of Fannie and Freddie debt, it no longer matters what happens to the housing market. Home prices can drop another 50%, every single homeowner can default on their mortgage, and bond holders will not lose one dime. This has emboldened foreign investors, and temporarily increased demand for both dollars and Freddie and Fannie debt.
Had the government done the right thing and not guaranteed Freddie and Fannie debt, I believe we would now be experiencing an outright financial crisis. The dollar would be falling sharply along with real estate prices, gold would be soaring and the recession would be deepening. However, by nationalizing Freddie and Fannie, the government has merely delayed the crisis. The borrowed time will cost us dearly, as the day of reckoning will now likely involve much steeper losses for our currency.
Monday, September 8, 2008
US Government takes over mortgage giants
US Government takes over mortgage giants
Sep 07, 2008
By Alan Zibel and Martin Crutsinger, AP Business Writers
http://biz.yahoo.com/ap/080907/mortgage_giants_crisis.html
US Government seizes control of mortgage giants Fannie Mae and Freddie Mac
WASHINGTON (AP) -- The Bush administration seized control Sunday of troubled mortgage giants Fannie Mae and Freddie Mac, aiming to stabilize the housing market turmoil that is threatening financial markets and the overall economy.
Treasury Secretary Henry Paulson is betting that providing fresh capital to the two firms will eventually lead to lower mortgage rates, spur homebuying demand and slow the plunge in home prices that has ravaged many areas of the country.
The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.
"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.
But more importantly, "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe," he added in a televised announcement.
Sep 07, 2008
By Alan Zibel and Martin Crutsinger, AP Business Writers
http://biz.yahoo.com/ap/080907/mortgage_giants_crisis.html
US Government seizes control of mortgage giants Fannie Mae and Freddie Mac
WASHINGTON (AP) -- The Bush administration seized control Sunday of troubled mortgage giants Fannie Mae and Freddie Mac, aiming to stabilize the housing market turmoil that is threatening financial markets and the overall economy.
Treasury Secretary Henry Paulson is betting that providing fresh capital to the two firms will eventually lead to lower mortgage rates, spur homebuying demand and slow the plunge in home prices that has ravaged many areas of the country.
The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.
"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.
But more importantly, "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe," he added in a televised announcement.
Thursday, August 28, 2008
How Much Will Government Bailouts Actually Cost The American Taxpayer?
How Much Will Government Bailouts Actually Cost The American Taxpayer?
Richard Benson
Benson's Economic & Market Trends
August 11, 2008
http://www.financialsense.com/editorials/benson/2008/0811.html
What is this economic disaster going to cost the taxpayer? Let's try to add it up.
The Federal Reserve: Let's say the Fed gets stiffed for $10 billion, a modest sum. That translates into $10 billion less in profits from the Fed to send the US Treasury, and $10 billion more for the taxpayer to pay.
Student Loans: We estimate that several hundred billion of student loans are outstanding, and the average debt per student is $20,000. Conservatively, put the cost down at $20 billion.
Pension Benefit Guarantee Corporation: This government agency insures $2.5 trillion in Defined Benefit obligations. The PBGC covers 30,000 business plans and 44 million workers. The PBGC charges an insurance fee and has $55 billion in assets. Let's put the cost to the taxpayer at a conservative $30 billion.
Federal Housing Administration: The FHA has given insured single-family mortgages to about five million people and 17 percent (or one in six) are delinquent. These catastrophic losses represent the worst of "cash for trash" lending that is crushing financial institutions in subprime. Conservative cost is $20 billion.
Small Business Administration: At the end on 2007, the balance of these SBA loans totaled $235 billion, with cumulative losses of about six percent. But don’t let history of only 6 percent losses fool you. As the economy turns down, many of the businesses with SBA loans will fail. For now, let's put this bill at a $20 billion loss.
Federal Home Loan Banks: The FHLB has over $1 trillion in assets, but what are these assets really worth? Well, a lot of mortgages that went into the collateral are Alt-A loans (interest only, no income verification, principal deferred). The real challenge, though, will be between the FHLB and FDIC as they fight to determine who gets stuck with the losses when the banks, thrifts, and credit unions fail. Either way, we’ll foot the bill. Let's put this one down for $50 billion, which is only five percent of the assets of the FHLB.
Federal Deposit Insurance Corporation: Even if a large portion of the bad single-family mortgage debt can be pushed back into the FHLB or over to Fannie Freddie, total losses on construction, commercial properties and consumer loans will easily cost the FDIC, and therefore the US taxpayer, $100 billion. If the government encourages people not to pay their mortgages and live rent free at our expense, we’ll need to increase the expected FDIC bill to the American taxpayer to $150 billion.
Fannie Mae and Freddie Mac: With a record number of homeowners considering whether to live free for 300 days by skipping their mortgage payments, imagine the cash gap that will open up between the cash that comes into Fannie & Freddie from mortgage payments, and the cash that must go out to cover the GSE security payments. For the government, it is more important to spread the losses into the future than to minimize them. Losses on defaulted mortgage loans at the GSEs will be horrible. Put the bailout cost at $300 billion.
Richard Benson
Benson's Economic & Market Trends
August 11, 2008
http://www.financialsense.com/editorials/benson/2008/0811.html
What is this economic disaster going to cost the taxpayer? Let's try to add it up.
The Federal Reserve: Let's say the Fed gets stiffed for $10 billion, a modest sum. That translates into $10 billion less in profits from the Fed to send the US Treasury, and $10 billion more for the taxpayer to pay.
Student Loans: We estimate that several hundred billion of student loans are outstanding, and the average debt per student is $20,000. Conservatively, put the cost down at $20 billion.
Pension Benefit Guarantee Corporation: This government agency insures $2.5 trillion in Defined Benefit obligations. The PBGC covers 30,000 business plans and 44 million workers. The PBGC charges an insurance fee and has $55 billion in assets. Let's put the cost to the taxpayer at a conservative $30 billion.
Federal Housing Administration: The FHA has given insured single-family mortgages to about five million people and 17 percent (or one in six) are delinquent. These catastrophic losses represent the worst of "cash for trash" lending that is crushing financial institutions in subprime. Conservative cost is $20 billion.
Small Business Administration: At the end on 2007, the balance of these SBA loans totaled $235 billion, with cumulative losses of about six percent. But don’t let history of only 6 percent losses fool you. As the economy turns down, many of the businesses with SBA loans will fail. For now, let's put this bill at a $20 billion loss.
Federal Home Loan Banks: The FHLB has over $1 trillion in assets, but what are these assets really worth? Well, a lot of mortgages that went into the collateral are Alt-A loans (interest only, no income verification, principal deferred). The real challenge, though, will be between the FHLB and FDIC as they fight to determine who gets stuck with the losses when the banks, thrifts, and credit unions fail. Either way, we’ll foot the bill. Let's put this one down for $50 billion, which is only five percent of the assets of the FHLB.
Federal Deposit Insurance Corporation: Even if a large portion of the bad single-family mortgage debt can be pushed back into the FHLB or over to Fannie Freddie, total losses on construction, commercial properties and consumer loans will easily cost the FDIC, and therefore the US taxpayer, $100 billion. If the government encourages people not to pay their mortgages and live rent free at our expense, we’ll need to increase the expected FDIC bill to the American taxpayer to $150 billion.
Fannie Mae and Freddie Mac: With a record number of homeowners considering whether to live free for 300 days by skipping their mortgage payments, imagine the cash gap that will open up between the cash that comes into Fannie & Freddie from mortgage payments, and the cash that must go out to cover the GSE security payments. For the government, it is more important to spread the losses into the future than to minimize them. Losses on defaulted mortgage loans at the GSEs will be horrible. Put the bailout cost at $300 billion.
Thursday, August 14, 2008
Housing and Economic Recovery Act of 2008
Crony Capitalism for Dummies: Housing and Economic Recovery Act of 2008. How the Bailout will not Help you and Cost you Money. A Deep Look at the 694 Pages of the Bill.
Dr. Housing Bubble’s Blog
July 28th, 2008
http://www.doctorhousingbubble.com/crony-capitalism-for-dummies-housing-and-economic
-recovery-act-of-2008-how-the-bailout-will-not-help-you-and-cost-you-money-a-deep-look
-at-the-694-pages-of-the-bill/
As you will see in this article when we deconstruct this part of the legislation, very few people stand to benefit from this smoke and mirrors. The more troubling aspect of the legislation is a stealth bailing out of Fannie Mae and Freddie Mac with an almost bottomless pit of financial access. The bill practically guarantees a taxpayer bailout for these two.
The problem with our current politicians is this. Democrats with control of the House should have fought harder to simply come out and nationalize the two mortgage giants. If their mission of providing liquidity to the secondary mortgage market and helping provide affordable housing to the American public is so vital, these two should be nationalized, allow shareholders who knew these were quasi-private enterprises take their hit and move on. Unfortunately, the party had no backbone of standing up for fear of being labeled a “socialist” or for fear of their political life come this November. Incredibly the market is the only thing living up to the original mission of the GSEs; ironically lower prices via this correction are making homes more affordable. That is why we have seen some increased action in sales for the Inland Empire where prices have fallen drastically.
Yet the majority of Republicans are playing even a more clandestine game of politics. What the current administration is playing is verbally acknowledging free market capitalism but in reality, what they are doing is nothing more than crony capitalism. Some have called what is currently going on as socialism but socialism by definition is a redistribution of wealth from those at the highest income brackets to the vast majority of those at the bottom. Simply by looking at how the lower to middle class of our country is being on the verge of financial destruction, there is nothing socialist about this. Bailing out Bear Stearns was a targeted effort at propping up a few big key players. The market still ended up going into bear market territory and now here we stand at passing a bill that the current Republican administration strongly said it would not sign.
Dr. Housing Bubble’s Blog
July 28th, 2008
http://www.doctorhousingbubble.com/crony-capitalism-for-dummies-housing-and-economic
-recovery-act-of-2008-how-the-bailout-will-not-help-you-and-cost-you-money-a-deep-look
-at-the-694-pages-of-the-bill/
As you will see in this article when we deconstruct this part of the legislation, very few people stand to benefit from this smoke and mirrors. The more troubling aspect of the legislation is a stealth bailing out of Fannie Mae and Freddie Mac with an almost bottomless pit of financial access. The bill practically guarantees a taxpayer bailout for these two.
The problem with our current politicians is this. Democrats with control of the House should have fought harder to simply come out and nationalize the two mortgage giants. If their mission of providing liquidity to the secondary mortgage market and helping provide affordable housing to the American public is so vital, these two should be nationalized, allow shareholders who knew these were quasi-private enterprises take their hit and move on. Unfortunately, the party had no backbone of standing up for fear of being labeled a “socialist” or for fear of their political life come this November. Incredibly the market is the only thing living up to the original mission of the GSEs; ironically lower prices via this correction are making homes more affordable. That is why we have seen some increased action in sales for the Inland Empire where prices have fallen drastically.
Yet the majority of Republicans are playing even a more clandestine game of politics. What the current administration is playing is verbally acknowledging free market capitalism but in reality, what they are doing is nothing more than crony capitalism. Some have called what is currently going on as socialism but socialism by definition is a redistribution of wealth from those at the highest income brackets to the vast majority of those at the bottom. Simply by looking at how the lower to middle class of our country is being on the verge of financial destruction, there is nothing socialist about this. Bailing out Bear Stearns was a targeted effort at propping up a few big key players. The market still ended up going into bear market territory and now here we stand at passing a bill that the current Republican administration strongly said it would not sign.
Tuesday, August 12, 2008
US economy still has impact on Malaysia
US economy still has impact on Malaysia
By Shankaran Nambiar
Monday August 11, 2008
http://biz.thestar.com.my/news/story.asp?file=/2008/8/11/business/22028171&sec=business
The Federal National Mortgage Association (or Fannie Mae) and the Federal Home Loan Mortgage Corp (otherwise known as Fannie Mac), both government-sponsored enterprises, were hit hard by the subprime mortgage crisis in late 2007.
The fallout of that problem has required a housing rescue bill, and a rescue plan that might cost the US government anything from US$25bil to US$100bil, depending on whose estimates you look at.
There are legislators who do not agree with this bailout since it encourages irresponsible borrowing and lax lending procedures. It is hard to be stern with Fannie Mae and Freddie Mac, when between them, they own or guarantee a significant portion of the mortgage market, which has been estimated to be close to US$6 trillion.
Besides, Fannie and Freddie cannot be punished at a time when the housing recession is at its worst since the Great Depression, even at the risk of invoking serious moral hazards.
Some reports claim that more than a million Americans have lost their homes.
The rescue package is necessary to extend a hand to homeowners who need cheaper loans, and to curtail massive mortgage foreclosures.
By Shankaran Nambiar
Monday August 11, 2008
http://biz.thestar.com.my/news/story.asp?file=/2008/8/11/business/22028171&sec=business
The Federal National Mortgage Association (or Fannie Mae) and the Federal Home Loan Mortgage Corp (otherwise known as Fannie Mac), both government-sponsored enterprises, were hit hard by the subprime mortgage crisis in late 2007.
The fallout of that problem has required a housing rescue bill, and a rescue plan that might cost the US government anything from US$25bil to US$100bil, depending on whose estimates you look at.
There are legislators who do not agree with this bailout since it encourages irresponsible borrowing and lax lending procedures. It is hard to be stern with Fannie Mae and Freddie Mac, when between them, they own or guarantee a significant portion of the mortgage market, which has been estimated to be close to US$6 trillion.
Besides, Fannie and Freddie cannot be punished at a time when the housing recession is at its worst since the Great Depression, even at the risk of invoking serious moral hazards.
Some reports claim that more than a million Americans have lost their homes.
The rescue package is necessary to extend a hand to homeowners who need cheaper loans, and to curtail massive mortgage foreclosures.
Friday, July 25, 2008
8,500 U.S. banks; many will die soon(updated 3x)
8,500 U.S. banks; many will die soon(updated 3x)
by Stranded Wind http://stranded-wind.dailykos.com/
Sun Jul 20, 2008 at 03:49:28 AM PDT
http://www.dailykos.com/story/2008/7/20/64928/7807/206/554077
Bear Stearns got bailed out ‘cause they were highly visible (read: failure would have exposed aforementioned funny money to the average Joe), Freddie Mac and Fannie Mae are Government Sponsored Entities who now have their sickly balance sheets backstopped by the U.S. Treasury (read you & me), but all the commercial banks have is the Federal Deposit Insurance Corporation.
Great! All accounts are insured to $100,000! We’re saved!
Way wrong. The FDIC is an insurance operation. They make an educated guess as to how many banks will fail and what the total exposure is, then they collect insurance premiums from them. They’ve got $51 billion ... and Indymac alone sucked up 10% of that. If a big one lets go, like Washington Mutual or Wachovia, then the FDIC will look just like FEMA did facing down hurricane Katrina. Don’t go and look at the scoreboard on the Bank Implode-O-Meter unless you’ve got a very strong stomach. Oh, and do note that a good bit of those write downs are investment banks - the FDIC does not cover their activities.
by Stranded Wind http://stranded-wind.dailykos.com/
Sun Jul 20, 2008 at 03:49:28 AM PDT
http://www.dailykos.com/story/2008/7/20/64928/7807/206/554077
Bear Stearns got bailed out ‘cause they were highly visible (read: failure would have exposed aforementioned funny money to the average Joe), Freddie Mac and Fannie Mae are Government Sponsored Entities who now have their sickly balance sheets backstopped by the U.S. Treasury (read you & me), but all the commercial banks have is the Federal Deposit Insurance Corporation.
Great! All accounts are insured to $100,000! We’re saved!
Way wrong. The FDIC is an insurance operation. They make an educated guess as to how many banks will fail and what the total exposure is, then they collect insurance premiums from them. They’ve got $51 billion ... and Indymac alone sucked up 10% of that. If a big one lets go, like Washington Mutual or Wachovia, then the FDIC will look just like FEMA did facing down hurricane Katrina. Don’t go and look at the scoreboard on the Bank Implode-O-Meter unless you’ve got a very strong stomach. Oh, and do note that a good bit of those write downs are investment banks - the FDIC does not cover their activities.
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