Busted: Bankers and The Global Economy

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…)

February 29, 2008

Fed Admits Truth after the Fact

Up until the end of December, the Fed was loathe to publicly admit any flaws in the economy:

The economic situation has become “distinctly less favorable” since July.
Strains in financial markets became evident late last summer.
Pressures on bank capital and the continued poor functioning of markets led to tighter credit conditions for many households and businesses.

Now that the Fed is on the admission bandwagon, it paints the following picture:

The growth of real gross domestic product (GDP) has since slowed sharply since the third quarter of last year.
Labor market conditions have similarly softened, but moved up somewhat.
Continuing contraction of the U.S. housing market
Increasingly lax lending standards, particularly in the sub-prime market, raised the effective demand for housing, pushing up prices and stimulating construction activity
As the housing market began to turn down, the slump in sub-prime mortgage originations, and general tightening of credit conditions has served to increase the severity of the downturn.
Weaker house prices in turn have contributed to the deterioration in the performance of mortgage-related securities and reduced the availability of mortgage credit

What the Fed is doing publicly:

Work with financial institutions, public officials, and community groups around the country to help homeowners avoid foreclosures
To pursue prudent loan workouts and support the development of streamlined, systematic approaches to expedite the loan modification process
Work toward finalizing new rules under the Truth in Lending Act
Reviewing potentially unfair and deceptive practices by issuers of credit cards and new rules
Using the Board’s authority under the Federal Trade Commission Act, to issue proposed rules for credit card issuers

February 7, 2008

Home Equity Lines Dry Up

Filed under: banking, credit, money — Tags: , , , , , , , , — digitaleconomy @ 12:02 am

Banking your life on the morality and goodwill of bankers is a dangerous way to live. Yet, many people have become entirely dependent on the main asset that they hold: their home. With the creative lending in existence, it’s a wonder that that people can’t see that they are at the mercy of the bankers goodwill and profiteering in order to survive or bolster their lifestyles. Ranging from reverse-mortgages for the retired to regular home equity loans, the bankers offer to bankroll for any purpose that holds your house as collateral. The problem with this kind of thinking is that bankers are not thinking of the asset itself, only the perceived value. Even in a stable housing market, in the event of a default or major catastrophe, the bank is always left holding the bag. Admittedly, banks hate to hold real estate. Banks will often liquidate at fire sale prices to get real estate off of their books since real estate does not generate interest.

With the Countrywide mortgage debacle and the subprime mortgage bubble bust, banks find themselves in a world of hurt. Wells Fargo, Washington Mutual and JPMorgan Chase released statements Friday saying they have also started halting equity lines because of tumbling home values. Recent declines in property values have stripped many local homeowners of personal safety nets as lenders freeze lines of credit. Even borrowers that are current on payments are being cut off because of declining values.

The reality is that bankers don’t really want your home, real estate or your affection. They want your interest, a stake in your assets and security for your debt.

FDIC Speech on Loan Modifications

February 2, 2008

British bank to cancel thousands of credit cards

Filed under: banking, credit, investment, money — Tags: , , , , , , , — digitaleconomy @ 7:49 pm

AFP Article 2/2/08

With the heat turned up on the British financial market and the Bank of England, it is no surprise that British banks are especially goosey right now. The British internet bank “Egg” owned by Citibank recently decided to drop customers with a “higher than acceptable risk profile. The move has hit seven percent of Egg’s two million credit card holders. It is not asking for immediate balance repayments or changing terms and conditions”. Naturally, seven percent of the customers affected might be unhappy. Institutions like Citibank are much more guarded than previously because of the unstable financial situation they find themselves in. The market can expect more cuts and closer scrutiny worldwide as the market and scrutiny of external government agencies tightens the banking and finance market. ~ E.M.

January 29, 2008

Americans and Addictive Banking

Filed under: banking, money — Tags: , , , , , , — digitaleconomy @ 11:42 am

Overdraft fees have increased. ATM fees are up. Credit card rates are expected to rise, followed by late fees as the market tightens. “Today, customers want more than a bank. They want a financial ally who makes itself available to them on their terms.” This is how a bank in India paints banking. Does your bank work on your terms?

TNTalk! Americans and Addictive Banking 1/29/2008

January 24, 2008

New World Banking Planned for Finance

Filed under: banking, money, politics, RFID, security, tracking — Tags: , , , , , , , — digitaleconomy @ 8:40 am

Radio Frequency Identification (RFID) technology has the potential to impact how every organization operates and how every person runs their daily life. RFID is becoming the catalyst that transforms entire marketplaces. We are looking at the same within (more…)

January 23, 2008

Bank of England Politics Among Uproar

“Reductions in the Bank Rate in two successive months might, given the current conjuncture, encourage observers to think that the Committee was focused more on stabilising demand than meeting the inflation target.”

“Mervyn King, the Governor of the Bank of England, who gave warning last night that the UK economy faced its toughest period in more than a decade during 2008.”

London Times Article by Grainne Gilmore

“He gave warning (more…)

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