Busted: Bankers and The Global Economy

December 1, 2008

It’s Academic: U.S. Recession

banking-house-of-cards-1For those that needed affirmation, the U.S. has been officially in a recession since December 2007. The Republican’s greatest political fears have finally been clarified by economic academic definitions.

Now that recession is officially here, what are we going to do about it? “It is clearly not going to end in a few months,” noted Jeffrey Frankel, a Harvard economist with the National Bureau of Economic Research. “We would be lucky to get done with it in the middle of next year.”

The White House says, “The most important things we can do for the economy right now are to return the financial and credit markets to normal.” If you’ve been watching the news on television, one idea continues to surface: the best ideas that politicians can come up is to somehow continue the obscene use of endless credit, especially where the American public is concerned. They haven’t awakened to the reality of the need for cost adjustments in the economy that simply make living more affordable and realistic. Instead, we cling to same ideals that brought the nation exactly where it is. However, the fact remains that economic price adjustments are already in process and will continue to work their economic magic whether politicians or economists like the news or not. We are in for another 5 quarters of economic contraction at a minimum along with concordant price adjustments. Business will suffer. Government will “suffer.” Americans will suffer.

Then, on the other hand, many more millions of Americans will also continue to prosper or at the very least, get by. Soon enough, the recession will be past if politics doesn’t keep trying to prolong the cycle by circumventing pain. Evaluating what really put us here beyond crooked banking is exactly what needs to happen. If you read this blog, you have a clue what this is. Otherwise, America hasn’t learned a thing. What do you think? ~ E. Manning

October 26, 2008

Leadership Needed in U.S. Foreclosures

New statistics now share that 2700 Americans lose their homes every day due to the banking and mortgage debacle combined with a sharply declining United States economy. That number is up from 1200 a day one year ago. What do you think? Clearly, Americans are losing ground.

Digital Economy has shared a wealth of information and perspective regarding the foreclosure crisis consuming the American populace. Sheila Bair, head of the FDIC, says that the nation is way behind the curve on getting anything done about the foreclosure crisis. The do-it-yourself attitude of the U.S. government has been no help at all. I’m not sure why the FDIC would bother commenting on the foreclosure crisis, but hey, I’m game. What she said next is much more important: “We need to act quickly, and we need to act dramatically to have more wide-scale, systematic modifications.…”

Sheila Bair is voicing something that Americans and politicians have been mouthing for the last year with little results. Part of the problem is the opaqueness of the mortgage system coupled with that of the securitized and bundled loans so prevalent in the U.S. The Federal Reserve would tell you that rules are the problem. Yet, the truth is that there is no speedy way to deal with the crisis. The mortgage process is outdated and hopelessly compromised by the new age of banking greed. Expediency is important to politicians and as a result, the crisis gets nothing more than plenty of lip service.

Naturally, there are plenty of excuses why foreclosure resolution is so difficult:
Homeowners walking away
Job losses
Negative equity
Availability of credit for new loans
Investor speculation
Complex investment banking instruments (mortgage-backed securities)

The credit market is such that no homeowner is able to get a loan, especially from a competing bank. Bankers don’t want any more trouble from strapped homeowners than they already have. If Congress and the Bush Administration had acted faster with determinant action, much of the carnage could have been avoided. Instead, they have placated the public with voluntary programs such as the Hope Now Alliance. Hope Now isn’t bad, it just isn’t powerful enough or fast enough. No meaningful provisions have been adopted to force the mortgage and banking industry to hold more responsibility for the loans they created.

Now, the nation faces a global meltdown of epic proportions. Can you imagine 2700 houses a day being dumped on the U.S. housing market? The fact is that little real U.S. leadership has been shown. Along with the commensurate lack of leadership, bankers and mortgage servicers are still being allowed to run amok. So far, too little, too late is the result of laissez-faire economics that the Bush administration has adopted. Yet the same laissez-faire politicians are providing taxpayer money as bailout grist for bankers and businesses that they deem as too-large-to-fail. America needs something more than a hands-off approach to business/consumer regulations and relations. Americans need real leadership and action with real protection provisions in place. Even if some American citizens are dead wrong in how they have handled their finances, Big Government needs to step up to the plate and hold back the tide of banking greed and process, while forcing foreclosure resolution to work. It is all in the rules and how they are enforced. So far, your United States government has lacked the will to act strongly and decisively. America needs real leadership, not excuses. ~ E. Manning
Selling Short to Avoid Foreclosure
Good New for Cheated Homeowners
Selling Short to Avoid Foreclosure

July 28, 2008

Banking & Lending Standards Threaten Economy

Pollster financial consulting firm Deloitte LLP has discovered that two out of three Americans have finally decided that getting a mortgage is more difficult. This fact creates quite a conundrum for financial authorities that want easy answers. Henry Paulson, U.S. Treasury Secretary correctly believes that without mortgages, there is essentially not a housing market. Paulson wants to jump start the ailing economy through the devastated U.S. housing market. That is why Paulson is so adamant about protecting mortgage cousins, Fannie Mae and Freddie Mac at all costs. They currently guarantee roughly 80% of U.S. mortgages and secure the future in the eyes of conventional wisdom.

In fact, without Fannie and Freddie, the U.S. government has little chance at stopping the bleeding in the mortgage and financial markets unless authorities were to reinvent the wheel. Unfortunately for the economy, bankers are no longer free-wheeling loans, making it tougher all the way around for good customers to buy a home. Why? Bankers are playing by the rules or “stricter standards”, which threatens to upend the entire economic recovery plan by the Treasury and Federal Reserve.

Now that the party is over, bankers are typically demanding a (more…)

April 17, 2008

Banking Changes Needed; Few Ideas

Government clearly dictates the direction that business and banking takes. Most appropriately, the banking and financial world fills the vacuum left by U.S. federal law. The changes in the past made nationally in the United States tend to be adopted and utilized by the world.

Until the summer of 2007, investor demand was strong for securitized credit from pension funds, mutual funds, residential mortgages as well as consumer credit lines for credit card and installment debt. From the humble beginning of packaging securities for residential mortgages in the 1970s, the market continued to increase with up to 60% of all mortgages being securitized. The mania of securitized bonds took hold because of the wild profits due in large measure to rapidly rising household wealth (more…)

March 25, 2008

Mortgage-Lovin’ Enron MLM Blues

Filed under: banking, investment, money — Tags: , , , , , , , , , , , , — digitaleconomy @ 12:00 am

securities2.jpgFederal regulators and government policies have clearly overcome any chance of market discipline or natural market correction in the mortgage market. A long-overdue correction in the United States mortgage sector began to rear its’ head last summer. If you’ve been listening, you know this well by now. What is happening with mortgage financing could be compared to Bush’s last financial crisis, the dot.com bust. America survived that financial bubble, although that bubble affected business and investors only. Like todays’ crisis, the production of income was secondary to complicated financial constructs which obfuscated the real mortgage business. The securities invented by the mortgage banking industry aren’t in reality a legitimate investment. Remember when Enron invented entire energy-investment markets that ultimately dealt in nothing but hype?

Turning mortgages into securities has been a great deal for early lenders, much like a wonderful multi-level marketing scheme. The directives market went gangbusters. The desire for non-stop heady profits has put the world where it is. The guys that joined the game later on (more…)

March 24, 2008

Mortgage Lenders Claim to Help Borrowers

Filed under: banking, government, investment, money — Tags: , , , , , , , , — digitaleconomy @ 12:00 am

mortgage-foreclosure-sketch.jpgLenders make the claim of wanting to help mortgage borrowers that are in trouble stay in their homes. In fact, it is in the best interest of all involved, especially in the current economy, that borrowers receive a reasonable amount of assistance. This is especially true since so many homes face imminent foreclosure, particularly in the United States. Foreclosure prevention counselors run into obstacles, most of which are built into the world of finance by securities profiteering. Because of the way that banks have handled home loans, repackaging them as securities and reselling them, working out loan resolutions is an excruciating time-consuming process. Since mortgages are typically packaged together and sold to investors as securities instruments, problems for the borrowers are many. These instruments are commonly sold and resold by investors (more…)

February 10, 2008

The Seduction of Convenience

Filed under: banking, credit, government, Islam, money — Tags: , , , , , , , , , , — digitaleconomy @ 10:25 am

Prepaid Banking Cards Sell in Muslim Banking

For years, the Muslim banking community has resisted the standard trappings of the banking industry. The National Bank of Abu Dhabi, one of the leading banks in the United Arab Emirates, has announced the issuance of its Dubai eGovernment Pre-paid card. Now, the Muslim is being offered an alternative to cash and checking as the New World Order of electronic banking and tracking further tightens the noose on the unsuspecting world: all in the name of convenience. The bankers are focusing on “the non-banked” like low-salaried employees, retirees and students.

islamicbankingandfinance.jpgThe typical publicity line is that the banking card “allows cardholders to better budget finances by limiting spending to the amount of funds that have been loaded to the card, ensuring greater convenience, benefits and security for all United Arab Emirates resident and visitors. Do you smell the control while the bankers and government officials rub their hands in glee? How easy will it be to round up tourists in the event of any uprising or government collection program? The government has absolute control of the money with this new card. Beware of the seduction of convenience.

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