Slamland 2

You haven’t seen me make a Polyticks post for a while. I apologize. This is mostly because the blood-sucking Ticks in DC disgust me, as do most parasites.

The recent Occupy Wall Street movement has largely left me puzzled. Yes, I am well aware of the disparity that they complain about but between their inability to articulate and the incoherence of most of the media on this issue, the language of the issue is chaotic at best.  The one that brought it into focus for me was Gonzolo Lira.

Unlike GL, I am a Constitutional Conservative and not a moral conservative. Morally, I am as liberal as they come, which still leaves me as a hard-right anti-socialist. I am an anti-religious conservative and reject all the religiously moral arguments of the neo-conservative right, like the Tea Party. In my opinion, the Neo-Cons are preachers in Polyticks¹ suits; politically and economically, I am a pragmatic centrist.

On the surface, it sounds class-war-ish but it isn’t, exactly. True, the 1 percent are at the top of the wealth pyramid but it is not their wealth that puts them there. It is the corporate assets that they control and through that control, they also control political assets. In short, they’re the ones that really run the US and that’s been a known fact since the fifties, the eighteen-fifties.

     There is a revolving door between One-Percenters in the government and the private sector—so the former government employees make it a point to “help” the private sector One-Percenters, at the expense of the public good. Think of the Obama health care “reform”—which helped no one, save Big Pharma and Big Med.
     There is zero chance that a One-Percenters who breaks the law will go to prison. He can put toxic substances in food production, inject toxins into groundwater to get at some oil, bankrupt a pension fund, steal and cheat people out of their homes—and there’ll be no consequences insofar as the law is concerned.
     The things he might have done might be immoral—they might be despicable—they might even be outright wicked and evil: But they are not “illegal”—because the One-Percenters change the laws by way of their bought-and-paid-for politicians, and thus never do anything “illegal”. They only do things which are immoral, and wrong—and thus not subject to legal punishment. – Gonzalo Lira

I disagree with GL when he calls them Corporatists. They were around long before there were corporations. The old word, ‘Monopolist’, fits them better, its modern incarnation is Oligarch. In the days of the American Revolution, they were called Aristos and there was much less separation between their money and political power. Regardless of what we may call them, they are the privileged 1% that runs the US and through the US, the world.

As Al Gore accurately put it (and trust me, my skin is literally trying to crawl off my flesh as the reptilian part of my brain reacts to me praising something that Al Gore, of all people, has said), the Occupy Wall Street movement is basically a primal scream of democracy. – Gonzolo Lira

Actually, like it or not, there is nobody that is 100% wrong, even Old Woodenhead Gore. In this case, the scream was so primal that a dunce would have missed it. However there may be just cause in the scream, the real problem is about what we can do about it. Every thinkable solution is loaded chuck full of poison pills.

1. Poly= many + Tick=blood-sucking parasite but then politicians and preachers are both a species of parasite. [↩]

Mirrored from The Slamlander.

1. Second round of Quantitative Easing will cease on schedule.¹

Amid increasing political pressure and turbulent financial conditions in the world economy, the Federal Reserve is letting its massive bond-buying stimulus program expire in the next few days without a new initiative to prop up the weak American recovery.

Why we can’t afford more war.

The nonpartisan Congressional Budget Office said Wednesday the "explosive path" of the nation’s public debt would exceed 100% of GDP by 2021, even with expected policy changes.

On the Tea Party’s move towards austerity

On the U.S. budget, Bernanke said he didn’t think that sharp, immediate cuts in the deficit would create more jobs, as some Republican and other advocates for belt-tightening have argued.

"In the very short run," he said, "the fiscal tightening is … at best neutral, but probably somewhat negative for job creation."

So, that’s one hit.

2. US risks default on its debt!²

Neither side reported an alignment in positions about raising the nation’s debt ceiling, an unsettled issue that could force the government to default on its obligations by early August.

This is Repugnicans and Demorats playing chicken with our lives and economy. Strangely, neither side is pointing out that it was GW Bush’s policies that got us here. However, it is the ignorant yokels from the Tea Party that is keeping the rest of the GOP from helping to find the brakes. Some of them are even considering letting the US default for 30 days or so, as a tactical play. What fools we elect to congress these days!

Some Republican lawmakers have said a brief default, which would be inevitable in August if lawmakers fail to raise the nation’s $14.3-trillion debt ceiling, might be acceptable if it forces the White House to deal with large budget deficits.

The problem with that plan is that it isn’t Obama that sets the budget. According to the US Constitution, the budget is set in the US House of Representative and nowhere else. The US House is in Republican hands at the moment.

In 2003, when I came here to Switzerland, it cost about 1.20 CHF to buy a dollar. That same dollar now only costs 84 centimes, or 0.842CHF! The mighty are falling as I write this.

1. This round of quantitative easing expires at the end of June. [↩]
2. The debt ceiling must be raised by early August or the US goes into default. [↩]

Mirrored from The Slamlander.

Alejandro Lazo, of the Los Angeles Times, reports that fewer homeowners are underwater on mortgages. The first quarter of this year saw a miniscule drop in the number of upside-down mortgages from 11.1 million to 10.9 million. That’s a measly 0.2 million or only 200,000¹ .

The decline in the number of borrowers owing more on their mortgages than those properties are worth occurred despite falling home prices, which plunge borrowers underwater.

Yes, that is because of acceleration in the rate of foreclosure sales, which take such troubled assets off the market.

Home equity loans also are contributing to the negative-equity problem, CoreLogic said. Thirty-eight percent of borrowers with second mortgages were underwater, compared with 18% of borrowers without home equity loans.

Remember that Jobless Recovery? That is when many of those second mortgages were sold. It was a way for many people to fund their unemployment after the Telco-Dotcom Crash, of 2001-2002, cost over 12.5 million jobs, most of which were not recovered during the Jobless Recovery, of 2003-2006. In fact, that 38%, or 4.2 million, looks suspiciously like those are the same folks that had no job to refinance with, in 2007, before the Great Financial Meltdown, of 2007-2008, and the jobs market puckered up tighter than a duck’s hind end.

While the US economy has been slowly healing since then, it is yet another Jobless Recovery. In fact, it hasn’t really been a recovery, although Wall Street is looking well. It is more like the economy being in Intensive Care since 2009, that’s three years folks and yes it is that sick; sicker even. The elephant in the room are the toxic assets that are still on the books and these upside-down mortgages are exactly what they are talking about.

Of course, I also knew others that bought a Ferrari with the equity but, chances are that those aren’t the ones in trouble, due to them having been eliminated from the system years ago. Stupidity generally goes broke early unless they have vastly more money than sense. These are folks that have been working hard to stretch their assets while desperately hoping for things to improve. Those that were anywhere near 50, in 2001, have probably been under-employed, at best, this entire time. Basically an unfunded but forced retirement. Some have started their own business, funded from their home equity, and others have been scraping by anyway that they could. Most have advanced degrees and are over-qualified for most jobs that they can apply for². Now, due to Banker greed, their home’s value has dropped through the floor, removing yet another survival tool.

The sad bit is that nothing is being done for them. They are barely on the RADAR. Most of them have no retirement savings. After ten years of this sort of hardship; who has a retirement plan? All that they have is an ad hoc survival plan; scrimping by. That’s over 4.5 million households in this position. Think about that when the next dis-compassionate Tea Partier starts kicking the next homeless and disabled engineer that can’t find work because the company insurance refuses to cover him.

1. Note that, these are National numbers. [↩]
2. These are the same folks that Junior Bush offered $5K to so that they could educate themselves in a proper [sic] vocation. [↩]

Mirrored from The Slamlander.

Against the Swiss Franc, the US Dollar is now down to 83.4 centimes and dropping fast. This follows closely on news of the double-dip in the housing market and it is a not an inconsequential corollary.

The reason that it is called Real Estate is because land is the only real value. Given a sufficient a amount, you don’t need anything else because you can live on it. It is the ultimate commodity. Yes, it is subject to market prices but the market has been trading at well over the real value of the property (many multiples of the real value) for decades.

In the US West, the raw land shouldn’t be much more than $2K-$10K  per acre. The houses that are put on it can ALL be built for less than $100K. Remember that these are all stick-built houses and they are not very durable. In fact, most have trouble lasting even 50 years and some become unlivable within the first 25 years. Yes, I realize that the reason for that type of construction is earthquakes but let’s face it folks, it is only a temporary construct. It adds nothing to the value of the land and I don’t care how big it is. It might as well be a double-wide trailer and arguably, a double-wide might last longer. At least, it is easily replaceable.

Most folks in the US West live in housing tracts. These are developments where a cheap stick-built house is planted on a patch of land, called a lot, that is barely larger than the house. You can’t drill for water, you can’t mine it, it’s too small for a grove of trees, and in many communities you aren’t even allowed to plant a vegetable garden or raise animals. That house is good for one thing and one thing only; to sleep in. You can’t even do that for more than 25-50 years without major renovations and repairs. These repairs will often vastly exceed the original construction costs.

The result is that most houses in the US West, on their own, are barely worth their construction cost plus the price of the lot that they occupy. A very sticky point that; the lot price. Lots are typically 8,000 square feet, much less than an acre. It’s not much good for anything except to plant a building on. The only mitigating factor is it’s location and since  the land isn’t sizable enough to earn its keep and the recent tight job market works against home-workers, the lot needs to be close to available jobs. If there are few to no jobs within, roughly,  an hour’s distance than the lot becomes essentially, worthless. This is essentially the problem of the folks in North Las Vegas, for example. They are stuck in the trap of sunk cost and no more jobs.

The real problem is that these folks should never have paid as high a price for those houses in the first place nor should the banks have funded those high prices. They were all caught in the massive house price inflation of the past 50 years, the most recent of which was led by bank and realtor speculations that was enabled by a too readily available money supply (NINJA¹ loans and the like) that let anyone bid up the prices of housing, to unreasonable values, with little to no repercussions.

However, there is a safety valve built into the system and it works much faster than the foreclosure process. It was originally put into place hundreds of years ago under fears that the banks would put the entire country into improvident debt. At the same time, debtor’s prisons were outlawed. You are not obligated to pay an impossible to repay debt, which is probably a debt that shouldn’t have been incurred in the first place. This safety valve is called bankruptcy.

Unlike almost anywhere else in the world, Americans can simply walk away from improvident debt with few, if any, repercussions. If an American commits to a $100,000 house for the improvident price of $500,000 and that house falls back to $100,000 then they can simply declare bankruptcy and walk away, leaving the bank to hold the unsellable over-valued property. It puts the onus on the bank to make sure that the price paid for the house is not out of reason because the bank is out the larger part of the losses if the deal fails. The bank is supposed to be smart enough to know better. The bank is supposed to be on the buyer’s side in these things and that is by design.

The bankruptcy process allows you to keep the tools of your trade, 401K, your job, your car, and enough cash for you and your family to live on. If your property is Homesteaded, then you may even be allowed to keep living there for a token rent payment² At the end of that process, you won’t be rich but you will certainly be debt-free (except for child-support and certain tax debts). The important thing is that you will be rid of that upside down white elephant and can now rent a place for a lot less money. You will also be free to move to an area with more or better jobs, or better business opportunities.

If you are older, like I am, there are complications to hitting the big financial reset switch that is US Bankruptcy law. For one thing, I have less than 10 years of working life before I hit 65, mandatory retirement age. The trick there is to become self-employed in some manner. If you have a business, it’s incorporated (Delaware and Nevada preferred) , and you’ve managed to keep from co-mingling funds then you might be able to separate the business from your personal bankruptcy (IANAL so really go and see a lawyer on this one).

Too many folks get conned into continuing to pay on improvident debts. This is only to the benefit of banks which have already been indemnified against those losses by the TARP. Essentially, your actions let them collect double from your mortgage; once from the TARP and again from you. They should already have written down your mortgage to current market conditions. That they haven’t is only because they think that you are fool enough to pay them a second time (after their TARP bailout).

As an aside, the main reason that CDOs and CDSs should have never been rated above B is the presence of US Bankruptcy law.

1. No Income, No Job or Assets [↩]
2. Although I have been through this process twice, I am not a lawyer (IANAL) and you should REALLY have an attorney that is competent in the bankruptcy laws in your state. This will typically cost you approximately $2,500-$4,000 in up front cash. There are lots of them out there. [↩]

Mirrored from The Slamlander.

This guy actually traced the roots of the loan fraud CDOs back to early 1990’s, at least. The GW Bush administration was warned about this by the FBI fraud division. Bush’s Attorney General, in 2008, refused to prosecute.

We are doing everything possible to make the next crisis come more quickly and make it kick us in the teeth far harder – William Black.

Fraud is no reason to regulate – Alan Greenspan

Eh?

The real engine of destruction was Liar’s Loans. – William Black

A few bullets;

• Glass-Stiegel was intended to prevent fraud (During Clinton Administration and encouraged by Greenspan).

Recipe of Control Fraud for a lending CEO:

1. Grow like crazy
2. Make really bad loans but at a premium yield
3. Have extreme leverage
4. Have no to minimal loss reserves against the default losses

The whole point is that the CEO, for a short time, makes the company look outstanding while garnering huge incentive bonuses. When the organization goes bust, as it must eventually, they walk away from the wreckage with millions (20-50 million dollars) . This is before Securitization (CDOs and CDSs, aka Toxic Assets). Securitization lets this scheme continue and spreads the losses around. That same CEO now can make up to 150 million dollars.

I got the original embed from Gonzalo Lira’s blog.

1. A term already used for Alt-A loans by industry insiders. [↩]
2. Direct quote from William Black, I assume that he means it as a derogative that presupposes that all testimony is foney. [↩]
3. There were no actions taken by Congress or any regulatory body to follow up on the FBI report. [↩]
4. S&L Crisis lost 150 billion dollars. [↩]

Mirrored from The Slamlander.

Also from GL’s blog comments:

Three contractors are bidding to fix a broken fence at the White House.
One is from Chicago, another is from Tennessee, and the third is from Minnesota.
All three go with a White House official to examine the fence. The Minnesota contractor takes out a tape measure and does some measuring, then works some figures with a pencil.
"Well," he says, "I figure the job will run about $900 — $400 for materials, $400 for my crew and $100 profit for me."
The Tennessee contractor also does some measuring and figuring, then says, "I can do this job for $700: $300 for materials, $300 for my crew and $100 profit for me."
The Chicago contractor doesn’t measure or figure, but leans over to the White House official and whispers, "$2,700."
The official, incredulous, says, "You didn’t even measure like the other guys! How did you come up with such a high figure?"
The Chicago contractor whispers back, "$1,000 for me, $1,000 for you, and we hire the guy from Tennessee to fix the fence."
"Done!" replies the government official.
And that, my friends, is how the new stimulus plan will work.

Enjoy

Mirrored from The Slamlander.

0.899CHF=1US buck

It’s a milestone folks!

Mirrored from The Slamlander.

0.934 Swiss Francs to the Dollar!

All indicators are that it’s dropping fast. The Swiss National Bank has been ordered, by the Swiss Federal Government, to stop propping up both the USD and the Euro. It’s considered throwing good money after bad, at this point. Expect the drop to continue. It broke the 95 centime barrier last week. Without props, who knows where it will end up.

Mirrored from The Slamlander.