Busted: Bankers and The Global Economy

April 8, 2008

UK: The Tight Credit Effect

Filed under: banking, central bank — Tags: , , , , , , — digitaleconomy @ 12:55 pm

The credit market has grown tight. Refinancing is more difficult. As a result of the scarcity, housing prices in the United Kingdom have began to fall. The numbers fell about 3% last month. Compared to the 10% – 20% fall in the U.S. housing market, the British situation appears small and is very early in the process.

British bankers are concerned. When buyers cannot get a mortgage, most buyers don’t buy a house. Then housing prices fall because the mortgage market deflates the housing market. Apparently, the confidence levels of UK bankers is questionable. They have been directly comparing their economy to the economy of the U.S. before the mortgage crisis. They are alarmed by the larger debt of British citizens compared to American citizens and the market is cooling dramatically.

The global banking economy has been shaken. National bankers are worried about having a repeat of the U.S. mortgage crisis. Expressed fear has a way of operating as a self-fulfilling prophecy.

April 7, 2008

Bankers Reap What They Sow

Banks are being overwhelmed by the U.S. housing crisis. Recent federal law enacted by President Bush is supposed to prohibit bankers from making dramatic moves against home buying borrowers during the crisis. As a result, the predatory lending that bankers have engaged in has come full circle. As homeowners stop paying mortages, more banks are often looking the other way.

This new approach by bankers presents problems for being able to effectively measure the banking crisis as well as violating their own by-laws and internal economics. The poor real estate market presents a major adjustment problem for bankers as home value continue to drop. Bankers have began to rationalize that owning an empty house that vandals can destroy or having homeowners trash homes before they leave as a result of ill will is not desirable.

The reality is that bankers are dramatically behind on dealing with the crisis. As a result, a record number of borrowers are at least 90 days late (more…)

April 2, 2008

New U.S. Foreclosure Maps: A Snapshot

Filed under: banking, federal reserve — Tags: , , , , , , , , — digitaleconomy @ 12:01 am

economic-crunch.jpg

Subprime Mortgage Crisis

These new December 2007 maps show the U.S. Subprime Mortgage condition based on Federal Reserve data. Darker colors represent severity or intensity. Regular monthly updates are expected dependent on data from the Federal Reserve Bank.

The maps display regional variation in the condition of securitized owner-occupied subprime home loans. The maps are designed to show existing and potential foreclosure hotspots for the mortgage crisis in the U.S.A.

fedmap-subprime-intro.jpg

March 16, 2008

Fed Emergency Move (on Sunday)

In reaction to U.S. economic turbulence last week, the Fed reacted in emergency sessions on Sunday by dropping the primary credit rate from 3-1/2 percent to 3-1/4 percent. The Fed claims that its reaction is to preserve liquidity for well-functioning markets in the U.S. economy. Based on information that we possess, “Busted Bankers” expects a rough week for the U.S. financial community.

fed-reserve-shot-1.jpgIn a partial enhancement of a recent press release, the Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to Wall Street banking securities markets. This lending facility will be available for business on Monday, March 17 and will be in operation for at least six months. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities. In updated news regarding cost, the interest rate charged on lending credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York. The Fed is expecting massive “temporary” bailouts in exchange for banking securities this week and in the immediate future. The Fed has admitted to monetary profits from this endeavor at the cost of the primary credit rate.

The purchase takeover of Bear Stearns by JP Morgan, the fifth-largest U.S. investment bank and a major securities repackager, was also approved in this weekend session. Remember that the economy wouldn’t be in this position if the majority of bankers had not been involved in financial improprieties and blatant greed.

March 3, 2008

Kid Gloves for Bankers?

Filed under: banking, credit, federal reserve, money — Tags: , , , , , , , — digitaleconomy @ 7:55 pm

Today, the Fed sent out what I call a puzzling press release.

The Federal Reserve Board on Monday encouraged the institutions it supervises to report on their loan modification efforts in a consistent way and to consider using the HOPE NOW alliance’s loan modification reporting standards for their serviced loans.

We strongly support efforts to improve the collection of data on loan-modification activities. We encourage the institutions we supervise that service subprime mortgage loans to report on their progress in a consistent way. This will make it easier for regulators, the mortgage industry, lawmakers, and homeowners to assess the effectiveness of these efforts,” said Federal Reserve Board Governor Randall S. Kroszner.

What is with the banking cheerleading? We “encourage”? Where is the call to responsibility? Where is the demand for accountability? Not with the Fed and yet, they’ve been placed in authority to handle what the current administration will not. When are bankers going to be called out for what they’ve done or are the powers that be just too afraid? Tell me what you think!

February 22, 2008

The Mortgage Industry: Tail Wagging the Dog

mortgage-fraud.jpgRapidly escalating home prices have been a driving force behind the growth of “sub-prime” and “Alt-A” mortgages during the last number of years. These higher risk mortgages have recently been the mainstay of borrowers with good credit and a limited credit background. As home prices increased, one way to keep monthly payments under control was to use interest-only or payment-option mortgages, allowing zero or negative amortization of principal. After five years, large increases in payments were common. Still, these kinds of mortgages were the vehicle of choice for speculators intent on “flipping” property for a quick profit in an escalating real estate market. As long as real estate and home prices climbed, borrowers could refinance loans to prevent the ultimate catastrophe: default. (more…)

February 12, 2008

Major lenders put freeze on foreclosures

Filed under: banking, money — Tags: , , , , , , — digitaleconomy @ 2:58 pm

In a long awaited official move, commercial banks will halt foreclosure proceedings to give lenders and borrowers time to work out delinquency solutions. It’s the latest attempt to tackle the housing crisis.

CNN Money Article

A growing share of home sales are from foreclosures, especially in states hardest hit by the housing bust. In some parts of California lately, nearly 50 percent of home sales come from foreclosed houses.

AP Article

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