Saturday, October 30, 2010

R.A.M.B.O.s. to the rescue; Stop dancing around the unavoidable problem and the MUSIC of the Fed...

R - Residential Real property
A - Asset
M - Mega
B - Bond
O - Omnibus
S - Securities

The Fed, FDIC, US Treasury, Fannie, Freddie, Ginnie, FHLB, FHA, any state mortgage or housing finance authority issues are eligible too. Banks, Insurance companies including Monolines, and all private institutional mortgage market parties should consider the merits of RAMBOs. It's envisioned comprehensive basket security. An unleveraged public private vehicle, tax - enhanced LONG term vessel designed to hold effective good title for all mortgages and derivatives. The IRS temporarily suspends recognition of gain/loss, the FASB/SEC grants special balance sheet, but ring fenced capital treatment. Ratings agencies are increased to as many as 50. To encourage participation, during an initial limited window period assets may be transferred into RAMBOs at 100% of independent 3rd party valuation, 2 more later windows are envisioned however transfers are subject to haircut of 5% then 10% from the lower of initial and current independent 3rd party valuations.

Investors initial interests are valued proportionately. Public customers get priority and preferred pricing on the IPO of RAMBOs. RAMBOs will issue straight debt, preferred and common equity. Options on RAMBOs will be available.

1-RAMBOS allows the Fed to exit certain inappropriate markets.
2- Allows the swift, necessary wind down, and the end of the "Agencies",
3- Allows assets to return to public "markets" hands,
4-Returns the management of risk assets to professional NON conflicted investors.
5-With the Fed and the Agencies (the political/legislative factors now out of the picture) is hoped to reduce uncertainty, simplify private investors' evaluation, facilitate flow of risk capital, tax enhancements encourage longer holding periods - 7 years
6- Prohibited - Securitization, stripping, or any/all creation of derivatives, pledging, hypothecation or rehypothecation of RAMBos assets; a/k/a the no mini RAMBOs rule.
7-Sends a strong signal to global investors that we have "Capitalist aka Market" plan; open to market daylight.
8-RAMBOs success can be ported to create CRAMBOs for Commercial Real Estate related assets and derivatives.

Clearly there are more issues to consider in any eventual term sheet; but nearly anything is preferred to the Fed's, though well-intentioned, near lethal certainly dangerous masquerades.

Friday, October 29, 2010

Did you catch the Fed's d/b/a notice to "Investor of last resort?"...

And the Fed, like those it rescued sports a balance sheet with $57B or 2% equity supporting $2.3T in assets. Said another way the Fed owns over $2.2 T "worth" of assets that it has NOT fully paid for. And the Fed's leverage is...40 to $1...sound familiar?

So the USD is on path to a new currency but one of the oldest as in:
Seller (China) to US: "We have 10 cargo ships laden with Christmas toys and goodies ready to ship to your port, how do you wish to pay for them?

US (Bernanke) replies; flashing a wry grin "of course, with a smile...:)"

Laughing all the way to the bank - not.

Thursday, October 28, 2010

the Xxx factors, not reported...

All market prices have benefitted to the UPSIDE due to...the Federal Reserves' flood like pumping of cash into the "economy" eclipsing even biblical proportions.

And home foreclosures rates - look like they are heading sideways...why?
Because the denominator has NOT been reduced to reflect the millions of homes ALREADY foreclosed.

TV viewing audience increases.

Social media like Facebook, Facebook and Facebook reports viral increase in users.

Amazon, Apple's book reader devices sales volume increase.

Why? The surge in FREE time, cause = unemployment, part time employment and the age old under-reported under employment. People do not have to wake up in the morning and go to work; creating an abundance / surplus of free time.


For the millions of adults here in the US and worldwide dealing with their own unhappiness, depression and or sense of reality via SSRI's. It's estimated that over 30% of the US Adult population (overwhelmingly the segment with health care benefits) are and or have been on SSRI's.

Fed's QE2 survey like Santa Claus checking holiday wish lists; maybe open Factory Outlet stores but first the "F" word

Ann Taylor is going to open 40 new factory outlet stores, maybe the Fed, in quest of new channels of distribution of "securities" can take some space in those new outlets?

NEW Alternatives to any QE 2, 3, 4:
Correction - instead of buying US Dollar based securities like US Treasuries, Agencies
instead buy Euro-dollars, foreign currency (single or baskets thereof), SDR's. And this - in GOLD and other "precious metals" including the nascent REM's (the 17 Rare earth minerals). Since the Fed is already committed to uncharted territory seeking as they should to diversify hoping to both lower risk and costs, but there looms more to consider.

Was the "F" word in the Fed's Survey?
Back to the Fed's "survey," of the 18 Primary Dealers; did the Fed ask about the effect of the "F" word? Fiduciary duty owed to customers? Note Fiduciary duty, unlike suitability requires both Before and After ongoing due diligence, recommending a security to a customer-why? To determine that same is in the BEST interests of the customer.

Not with standing the recent passed Dodd- Frank, fiduciary duty may apply already depending on the unique facts and circumstances of each customer's relationship with the 18.

Wonder if or will the 18 need to look into their respective COLLECTIVE knowledge base' for the answers?

Wednesday, October 27, 2010

Gross on Bonds dead right. On Bernanke responsibility, dead wrong

In a Bloomberg News report today “This is not a Bernanke scheme, because this is his only alternative and he shares no responsibility for its origin,” Gross wrote.

You're kidding me - Mr Bernanke he of little awareness of all around him (when the review of HIS college textbook Principles of Economics published 2003, encourages students to become Economic Naturalists, talk about a primo example of do as I say not as I do). Tell me that real estate values which did not just amble up BUT rocketed in certain LARGE sand - based markets at 2, 3, 4, 5 times or more 200 year historical trend for 3 years or more running were unknown or unknowable??? This was "normal"?
Tell me that Mr Bernanke was not aware of house "flipping" rampant speculation; for goodness sake there was even a freakin TV show called "Flip this house!!!"

Mr Bernanke did NOT have to accept the position of Fed Chair in Feb 2006 did he?
Mr Bernanke admitted himself in print that he failed to see (and connect the dots) of the flaws in sub prime.

MAJOR flaw he missed 2,000 X L-E-V-E-R-A-G-E!
The most basic is 2,000 X financial and economic leverage.
Huh? Correct Take a group of zero down (=100 x leverage for the borrower) mortgages, pool them into MBS then an Investment Bank levers them 20 to 1, total leverage = 2,000 X (100 x 20). And remember that to begin with these were often NOT the most credit worthy risks!

Come on Bill wake up; you're so much better than that.

Correct the the Fed's Ponzi scheme is exactly that, virally infecting all asset classes, commodities, food prices, energy NOT JUST BONDS. Distorts global capital flows. Too much newly printed dollars; when even just one extra is too much.

Better to turn off the printing presses, shrink the supply of USD; the opposite of what investors expect. But rightful homage to the ALMIGHTY US DOLLAR. Including returning so - called AAA rated "assets" too long on Fed balance sheet to rightful issuers, creators / owners largely in a certain Federal Reserve district east of the Hudson.

Tuesday, October 26, 2010

Let the pitchforks pitch forth or why is Obama withholding the truth? Not telling the truth is a BFD!

In March or April 2009 Mr Obama traveled to Wall St to make his case directly to the CEOs' of the Too Big to be allowed to fail club members for financial reform; during that speech he stated "look, I'm the only thing standing between you guys and the pitchforks." Or maybe Obama plans a scary show this Hallowe'en weekend when the PITCHFORKS come out for Trick or Treat!

Mr Obama is fighting for his life - politically. There can be little doubt he knew something when he made the "pitchforks" comment. By definition the CEOs knew that feelings of "pitchforks" were widely held by taxpayers; as there was no debate then or now over the existence of same.

There can be little doubt Mr Obama, by all accounts a very smart guy and quick study, has been FULLY informed since Fall 2008 (or before) by his aides, Mr Summers, Mr Geithner, Mr Bernanke, Mr Emmanuel (the only senior adviser I believe who actually ever worked on Wall St,) and Mr Paulson in the dark days of Fall 2008 before the election and certainly after he won the election in November 2008. Or have these officials purposely withheld or marginalized certain critical information from the President under national security / currency concerns?

What is preventing Mr Obama from telling the unvarnished truth to the American public aka taxpayers - we're adults - we know there's a problemo that's not going away anytime soon - PLEASE TELL US WHAT YOU KNOW - AND WHEN YOU KNEW IT - NOT DOING SO MAKES IT A BFD! What are the likely parties who caused the never-been-seen-before economic and financial desperation???

BFD means breach of fiduciary duty to present and future generations of Americans including the all military and their families who in too many cases are making the ultimate sacrifice.

Go BIG money; I mean go - take your break...

Progressive Insurance's TV commercials are more than entertaining - they're instructive.
And apply to the Fed's potential redux of LSAPs Large Scale Asset Purchase programs.
See the recent NY Fed paper summarizing past programs' "effectiveness" but I suggest a reminder quoting the famous economist Yogi Berra "the game ain't over 'til it's over...".
When the Fed is NOT discounting the undeniable - that of flooding markets with cash money - so when claiming that certain programs yielded 36% recently - do as they did to Roger Maris and put an *.
See "Stock and Bond markets deserve an *..." from May 2009 here.
Why? Because it's 1) doable, 2) knowable and 3) the right thing to do.

Future Treasury issuance should include a list of all ingredients and secret ingredients - so as to match the intellectual capacity status of the current and future obligees; aka future generations. Why? This writer suggests that future generations may find the wiggle room; 1) in between the two levels of suitability analysis, 2) the new Dodd Frank Act requiring a fiduciary duty on the 18 Primary Dealers related to distribution of same and 3) the centuries - old pre - Revolutionary War maxim "no taxation without representation" to disclaim some or all responsibility for repaying this indebtedness. The current so called secret ingredients inherent in ALL on and off the run Treasury's - are secret for what reason(s)?

Remember that one of the reasons that Mr bernanke HIMSELF cited was he didn't appreciate the flaws as here "“What I did not recognize was the extent to which the system had flaws and weaknesses in it that were going to amplify the initial shock from subprime and make it into a much bigger crisis,” this from 2007.

In parallel, perhaps Mr Bernanke may recognize the need for ALL investors to have ALL and MORE available information? Then investors can make a fully informed decision to invest - in the meantime - they're sitting waiting watching from the sidelines; when the Fed actually needs investors to be on the field; INCREDULOUSY, it's as if the San Francisco Giants correction Texas Rangers would just let Cliff Lee sit the bench and only watch - not actually pitch in the World Series. It's preposterous! The Clearinghouse Association members may in fact benefit from investors return to the "markets" or is there some ominous, unflattering stuff being hidden?

And when the Supreme Court may decide to hear the case against the Fed to disclose such secrets perhaps it may look to its recent controversial decision to unleash political voice to corporate money - from any source - and in secret no less - at least temporarily. Perhaps that voice - may require accountability that certain banks' and NON FDIC insured affiliates of same under the FDIC's TLGP
program aka the "clearing house association"- Fed and FDIC secrets are outstripped by the Public's (current and future generations) right to know...deserving of timely and full disclosure. Or is it a matter that certain bank's franchise may be viewed near or close to the zone of insolvency - then and /or now? Or that the Fed may be similarly recognized?

Monday, October 25, 2010

New Mortgage Refinancings face similar problems?

Bloomberg reports 3rd quarter demand for refi's at some banks are near record levels given all - time record lows on mortgage rates.

The flip side of refi's comes after 3 disclosed issues confronting certain Banks:
1- Improperly documented and/or fraudulent foreclosures and the related 50 state Attorneys' General investigation into same.
2- Put back requests by investors (are not a new thing) due to deviations from reps & warranties; so far in a letter made public PIMCO, and the New York Fed and several others have asked, not sued, BofA to cure certain problems. BofA, although with 60 days to do so has come out swinging - as if there is a lawsuit pending.
3- The less covered but potentially enormous multi - Trillions dollars problemo looms over concerns that INITIAL improper pooling of mortgages into securities aka REMICs later CDO's, reincarnated again as CPDO's, some as reference securities as in Synthetic CDOs and related CDS on all of the above; and finally securities lending of or related to same. Some say opening the door to potential put backs in size; with the Fed being the largest holder at over $1T.
4- The headline - appears a silver lining to banks and borrowers alike - however, given 1, 2, 3 above especially 1 and 3 how do today's banks fulfill the absolutely required final payoff of remaining balance on the old mortgage; obtain the old note marked retired / paid off / satisfied and how do they know that the current servicer holds legitimate title? Along with determining compliance with the FDIC list a few here.

Oh and this little money saver - will the banks' or mortgage brokers suggest that borrowers ask and receive the re-issue rate for NEW title insurance?

Lets hope they do - otherwise today's refi's may emerge as MBS on Murphy's law - on steroids.

"Review lite" - No one put a gun to their head - the Fed's Bank examiners ONLY now doing "Intensive reviews" how about BEFORE buying $2T MBS???

Mr Bernanke stated today that the Federal Reserve will begin an "intensive" review of banks' documentation of mortgages and mortgage securitizations into REMICs real estate mortgage investment conduits - correction improper mortgage foreclosure processes and/or documents. And takes allegations about same "very seriously".

Uh and this tiny problemo - what due diligence was performed by the Fed and/or US Treasury BEFORE they bought, more likely removed $2T MBS and related derivatives from certain banks largely from a certain Federal Reserve district east of the Hudson??? And that most if not all so called "profits" from same are due to...the newly minted dinero; just as if when you walk in the door of a casino - they hand you $1000 dollars in chips - then you walk out thinking you're a winner when you walk out with more than you had in your wallet!

So what were the bank examiners of yore doing? A lite review - it appears. And for that they received full, 100% pay, benefits, pensions and health care - all courtesy of us. And we continue to pay for this?

And today FDIC's Ms Bair joins in to trumpet aka "signal" that:
1- It could take months including a "global solution" for banks "to work things out".
And - Bair acknowledged that there were warning signs that the servicing standards were eroding, which should have caused market participants and regulators to question existing practices. “Servicing fees declined significantly over the past several years,” Bair said. “We should have been asking how servicers were able to achieve such efficiencies without sacrificing quality,” Bair said. “Those kinds of questions were not asked.”

2- That Fannie and Freddie should NOT enjoy the implicit g'mint guarantee as here on Marketwatch

And in particular a commenter on the above story posted this:

Makes sense, thats why it'll never happen. Its in the politicians best interet to keep the on going US Housing Ponzi scheme up and running. We wouldn't want the free markets to determine the price of housing, because gasp, they might go down and ruin the Wall St. bonuses.

There you have it...and remember two things:

1) No one put a gun to the head of any banker:

a) to issue a mortgage

b) to create mortgage backed securities (MBS)

c) to sell MBS to investors

d) to leverage their own holdings of MBS 20, 30, or 40 or more to $1

e) to issue any ZERO down mortgages - which by definition, are 100 times leverage

f) then to leverage pools of "e" 20 to $1 - creating minimum 2,000 X financial leverage!!!

g) to, subject to proof, divert hundreds of billions of customers' money market funds into bank deposit accounts - at their own affiliated ILCs - then to loan same funds NOT to arms - length commercial borrowers as required by charter - BUT to their own affiliated, controlled entities...

2- NO BANKER, upon receiving a bonus check - back in the day a) raised their hand and b) asked or stated if it was too much...huh?

And see this writer's post to the FDIC's request about RIN 46 in December 2009 aka when it comes to "control" report it...

And was it me or did it both sound and look like in his presentation today, Mr Bernanke got kicked south of the belt by those same banksters' STD's er...MBS???

Sunday, October 24, 2010

Black on Foreclosures...and then some

Bill Black, UMKC law and econ professor on Bloomberg TV stated Friday October 22 that "of course there was fraud, and cited testimony of a Citigroup mortgage pro that upwards of 80% of certain mortgages were outside its underwriting guidelines during 2006 and 2007." Including an email he sent to Mr Rubin and others with specific concerns dated...Nov 3, 2007.

Jail time?
Black went on to relate how in this crisis NO ONE HAS GONE TO JAIL; compared to the 1,000 or so who were sent to jail as a result of the 1980s S&L crisis. Perhaps, this writer suspects, that certain regulators, gummint agencies, GSE's and elected gummint officials could, based upon potential industry fingering, be near the top of the list...more to come on this I'm sure.

And this whooops er whopper - in reviewing the 21 pages of the above man's statement to the FCIC - "Citi was criticzed by mortgage originators that it was TOO stringent," that others used outsourced so - called "contract" underwriters to vet mortgages and underlying REQUIRED documentation.

So, when it comes to other banks like BofA, JPM and others who later sold certain mortgage pools to investors or agencies like Ginnie Mae, Freddie Mac or Fannie Mae - how will their and Citi's mortgage underwriting, reps and warranties be viewed? 1) Not with standing past and recent improperly documented foreclosures and 2) the bond trusts which were supposed to own the underlying collateral; I commend this piece today from naked capitalism:

Posted: 24 Oct 2010 12:47 AM PDT

Gretchen Morgenson has written an uncharacteristically cautious piece, “One Mess That Can’t Be Papered Over,” which in a rather abstract manner, discusses the issue we’ve been harping on for over a month, that the trusts that were established to hold the promissory notes for residential real estate loans and the related liens (the mortgage) may in fact not have taken the steps necessary for them to have ownership.

The story only gives a rather hazy account of the issues, and also pulls its punches as to the implications. It does signal the problems could be serious for specific deals, but pointedly steers clear of suggesting they are widespread.

While it’s good to see a recognized writer acknowledge these issues, I’m puzzled as to the sketchy description and the pulled punches. It might simply have been vagaries of deadlines, however, that Morgenson couldn’t confirm as many details as she needed to to run a more definitive piece.

I wish the story line were clearer. The issue, as we’ve indicated, that some, and we have reason to believe many, residential backed mortgage securitizations failed to take the measures stipulated in the governing contract, the pooling and servicing agreement, for the trust to obtain the promissory notes. As we explained earlier:

The pooling and servicing agreement, which governs who does what when in a mortgage securitization, requires the note to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title, and the minimum conveyance chain is A (originator) => B (sponsor) => C (depositor) => D (trust). The note, which is the borrower’s IOU, is the critical document in 45 states. The mortgage, which is the lien, is a mere accessory to the note and can be enforced only by the proper note holder (the legalese is “real party of interest”).

The wee problem is that this apparently never done (I’ve been told one person trying to track down a particular note found it, at Countrywide. The guy who wandered down the corridor to produce it from his files claimed that Countrywide kept all the notes on its deals, and would send them out on request when someone needed them in a foreclosure. If this is true, it indicates there are pervasive and not readily remedied problems. The required endorsements were never done).

Why is this serious? The cure for the mortgage documents puts the loan out of eligibility for the trust. In order to cure, on a current basis, they have to argue that the loan goes retroactively back into the trust. This is the cure that the banks have been unwilling to do, because it is a big problem for the MBS. So instead they forge and fabricate documents.

There are actually two impediments. The first is that the note had to go through parties specified in the pooling and servicing agreement, in recent deals, at least two between the originator and the trust. Why so many moving parts? Because the investors wanted to make sure no creditor of the originator could later come back and demand the loans back, in case the originator failed close to the date of a securitization. In other words, the investors sough “bankruptcy remoteness” and they also wanted no exposure to claims by the FDIC. So the parties in between the originator and the trustee had to be independent (this independence was often nominal; all it took was one independent director) for the sales to be deemed “true sales” (crucial to establishing bankruptcy remoteness).

A second issue was timing. All the notes were supposed to be conveyed to the trust by closing. However, it did have a period post closing for clean-up, which effectively extended the time frame for any particular note to 90 days after closing (for some deals, the post closing period was only 60 days). After that, the exceptions permitted were very limited. And these trust were almost always were governed by New York law. New York law was selected because it is very well settled, but the flip side is it is also particularly unforgiving. New York trusts can operate only as stipulated.

Some of these ideas are included in the Morgenson piece, but I’m not certain this is at all clear to someone who lacks the full picture.

The notes, as Morgenson indicates via a quote from a real estate lawyer, normally remedy breaks in the conveyance chain. But that presupposes we are only looking at real estate law considerations. When you look at the additional complications created by the mortgage securitization, messing up the conveyance chain creates problems that look insurmountable. She eventually gets to the real issue:

For example, the common practice of transferring a promissory note underlying a property to a trust without identifying it, known as an assignment in blank, may run afoul of rules governing the structure of the security.

“The danger here is that the note would not be considered a qualified mortgage,” said Robert Willens, an authority on tax law, “an obligation which is principally secured by an interest in real property and which is transferred to the Remic on the start-up day.” If, within three months, substantially all the assets of the entity do not consist of qualified mortgages and permitted investments, “the entity would not constitute,” he said…

What if a loan originator failed to provide documentation substantiating that what’s known as a “true sale” actually occurred when mortgages were transferred into trusts — documentation that is supposed to be provided no longer than 90 days after a trust is closed? Well, in that situation, a true sale may not have legally happened, and that doesn’t appear to be a problem that can be smoothed over by revisiting and revamping the paperwork.

“The issue of bad assignment has many implications,” said Christopher Whalen, editor of the Institutional Risk Analyst. “It does question whether the investor is secured by collateral.”

In other words, were the loans legally transferred into the trust, and, if not, do the trusts lack collateral for investors to claim?

A mortgage securitzation lawyer, via e-mail, went through some of the ways this might play out:

It’s clear the parties intended a transfer. But it appears that they did not document the transfer. Based on the agreement, they described how the transfer should take place and then didn’t do it, apparently. Unfortunately, while this might have been the intention of the parties, they can’t produce any real, documented evidence that this mortgage is owned by the trust. I’ve provided affidavits that state that the requirements for a mortgage to be part of the trust are clear in the documents, that mortgages can’t be added to the trust after start up (as servicers have tried to argue), and that I see no evidence that this trust owns this loan.

On one hand, the problem is easily cured – the party who is the documented owner of the loan could foreclose (the original lender). The problem with this is that the proceeds of the foreclosed property, including the recoveries intended to reimburse the servicer for advances, would have no mechanism for getting back into the trust.

If the original lender foreclosed, took title and liquidated the loan, accountants would have an issue with how the proceeds could possibly end up back with the trust. The result would be a total loss for the trust for that loan.

The servicer’s attorneys have no desire to go this route – it terrifies them.

The servicer’s attorney’s could argue for some sort of documentary exception – that a mistake was made and the intention was for the trust to own the mortgage – an appeal to equity or fairness. Unfortunately, in many cases, they already submitted an affidavit stating that they had proper title and full right to foreclose in the name of the trust. So going this route would expose them to perjury.

The appeal to equity or fairness, given the intent of the parties to the trust and the relatively minimal harm to the borrower, seems like a logical route – except that a number of judges would argue that fairness might dictate a fair outcome for the borrower, such as a real modification. And you still have the issue of the possible damages and legal expenses for a wrongful foreclosure action.

The big argument people make against this approach is that the borrower is just a deadbeat who has failed to pay their mortgage, so there’s no reason why the borrower should be entitled to some sort of gain or benefit. While this may be true, real estate law is pretty clear – the party holding title is the one who should foreclose. Otherwise, someone else could come along after the improper foreclosure and be the actual title holder and sue the borrower for foreclosure and loan repayment again. The borrower is entitled to protection against this.

Most people assume that the parties followed the terms of the trust agreement – it’s so basic and fundamental to all MBS. It is hard to grasp that they screwed this up. As a result, it takes some work to pull through everything and see what actually happened. Without the mortgage documents showing the current title, combined with the affidavits from the foreclosure attorney, I wouldn’t have believed it myself.

As we’ve been saying, this is going to be difficult to resolve. Yet the powers that be keep acting as if they keep up the “nothing to see here” talk, this problem will abate. That is as likely to succeed as putting a band-aid on a gunshot wound.

Saturday, October 23, 2010

Bernanke: Can you spare a little intellectual capital? Remember that certain banks were NOT allowed to fail for a reason...

Committing to a course is one thing, as unpopular much less intellectually bankrupt, as QE2 seems, explaining one's actions is quite another; sharing a little intellectual capital, information sharing would go a long to help all investors; both bonds and equity better understand, help plan, invest, act for the future. Connect the financial and capital markets, transmit the confidence so hoped for into action. In sum, sharing seems to be a wiser, more professional approach than the decades-old "signaling".

As is it stands now #1, the time horizon for many investors, emotionally at least, has shrunk virtually back to the "do not be long over the weekend".

And #2, certain banks which the Fed now oversees need to disclose any/all potential material known or knowable failures NOW in:
1- mortgage foreclosure filings,
2- mortgage modifications processes,
3- MBS trust initial securitizations and/or re-securitizations,
4- MBS put back resolution processes - as Wells Fargo leaked memo here states.
total exposure, reps and warranties, servicer and/or trustee exposure, insurance thereon.
5- Loss mitigation - as fiduciary to shareholders, including the obvious litigation steps, raises this issue: will certain potentially exposed banks, WHILE waiting for more "information from the warehouse," think to short MBS, buy CDS protection or short competitors stocks?

After all, these are the certain banks that were allowed to live. Please walk the talk and "serve communities and customers FIRST".

Concerns abound that the Fed is hiding something, more broadly there is widespread concern that although legal, unilateral, seemingly unaccountable actions paints the Fed armored with all sorts of authorities as if it's infallible - perceived almost above the law. Previous extraordinary programs, facilities, asset purchases, liquidity actions have ALL proved less than billed.

If the Fed shared more directly, unvarnished information like Face value of MBS on its balance sheet - could do much to accomplish what this writer pointed out in July 2007 and before. Cash infusions by the operators or sponsors, market rescues, liquidity by Federal Reserve Bank through discount rate cuts, extended rollover provisions, open market operations band aid liquidity only; Fed action does not cure the credit (creditworthiness) and or valuation issues of these "securities".

So come on Ben spare a little bit of that "perfect information".

Thursday, October 21, 2010

Futures, Financial Markets record highs; Real-on-the-Ground Economy Dead - Cause: Fed Liquidity Overdose

In a post-mortem of what killed the Economy - the actions of the NEW trying-too-hard actor, the Fed - are implicated as the cause of the death of economy - it's just not yet been officially announced. One economy has been the exception, the one east of the Hudson; proxies for certain markets.

The original cause of death was Fed inaction during 2004-07.
Efforts to resuscitate the economy have only prolonged and distorted the patient, as on steroids in the last days of life.

Any reactions, comments, questions or corrections always welcome.

China announces its Louisiana Purchase and buys the US - turns the FED into worlds largest operating REIT...forms CHIMERA...

China has announced it will redeploy its US dollar holdings for a controlling stake in a new joint venture with the US Federal Reserve called USL4USM (Uncle Sam's land for Uncle Sam's money). Mr Geithner will continue to sign the new money. Mr Bernanke will continue his appearance before Congress. Both are banned from television appearances until they 1) admit minimum 2000 x economic leverage existed when zero down mortgages were levered 20 x by investment banks and 2) learn Mandarin. China creates CHIMERA (CHIna Mortgage Exchange Authority) to handle mortgage foreclosure processing, including moving that venue to a new city in a remote province in China to handle foreclosures , MBS investors put back requests and of course the trickle of payments from homeowners.

Man on street in Shanghai echo sentiments heard up and down say

Best way for China to spend its $1T plus US dollars – no?

Might as well get value for money – while it last right?

Back to reality:
Chris Whalen stated on Bloomberg a few days ago that "banks" are effectively morphing into operating REITs given the extra REAL ESTATE on the books.

When the Banks get swamped with PUT-back MBS who will they turn to? The lender of last resort, the Fed; effectively turning the FED into an operating REIT.

And so the FED may have no other choice but to once again (unbelievably) exchange more cash to certain banks and YET again take more toxic MBS onto its already bloated 200 hundred stories tall near ~$2T balance sheet; the enormous STD of Securtitization Transmitted Damages has emerged; it's only a matter of the next news cycles.

In the interim, France beats US to the pppppppp...not punch silly, protest, because they have told their citizens the truth - that being they will have to work 2 extra years to receive their PROMISED pensions.

Yesterday I issued a SPECIAL FiduciaryALERT entitled a new STD...any comments, questions, reactions or corrections appreciated.

Near the end of money? STD’s pose “Titanic-like” losses, sinking US Dollar, linked currencies, trading partners and Gold & Silver…heralds UPchuckEconomics™ not trickle down economics

A new STD; (Securitization transmitted damages), could make the Madoff fraud look ant-like. Potential losses may exceed hundreds of billions of dollars. Investments in Mortgage backed securities, Municipal bonds, and the value of every house may be in question. With property values under renewed pressure; every State, County and City budget could be at risk. If the above is true, then the US Dollar is at risk and worldwide currency panic could ensue due to the “just in time” worldwide financial settlement and trading mechanisms in place. As a result we seem to in the throes of the end of money, at least as we have come to know it. And for those seeking comfort in Gold and Silver be reminded that same is widely valued / priced in those same US dollars. Some US States may seek fiscal secession from Washington and issue their own currencies.

As Goldman goes so goes America so is this the direction others may want to consider?

Last year the Huffington Post reported some at sure footed Goldman applied for gun permits. Link here

A new enormous, indeed TITANIC risk area for all investors may arise from STDs™ (Securitization transmitted damages). McConnell has been calling for increased independent due diligence BEFORE investing since 2004 and specifically since July 2007. STDs arise when, for example, some mortgages were not properly assigned to trusts designed to hold certain legal documents. Investments, predominantly packaged by banks in a certain Federal Reserve district east of the Hudson, worth trillions of face value are potentially exposed. Investors believed negatively impacted include the Federal Reserve (ultimately the US taxpayer), NY Federal Reserve bank, large institutional investors like pension and 401k plans, charities, non profits, foundations and hedge funds, mutual funds, exchange traded funds ETFs and direct investors in any mortgage backed security (MBS) and/or Municipal Bond starting with Money market mutual funds; both taxable and tax-free.

State, county and local city government budgets may face unprecedented pressure due to declining house values which directly negatively impact property taxes. Property tax collections usually decline when a home goes into foreclosure. Remaining home values in the neighborhood then decline and those homeowners usually seek some relief from their property tax burden.

* Today - the tip of the Iceberg, MAJOR investors seek to put back bonds to Bank of America *

Bloomberg reports that the NY Fed, Pimco have asked Bank of America to take back $47 Billion of mortgage backed securities. Link here heading the obvious line of others not far behind. Earlier no less than 50 States’ Attorneys General began an investigation into the Foreclosure processing industry. Link here

Upchuckeconomics™ when put-back MBS becomes too much for certain banks to stomach.

Yesterday, Bloomberg TV aired an interview with a Texas cattle rancher who stated the undeniable, “if you eat then you’re involved in agriculture”; axiomatically when it comes to STDs Chris McConnell, AIFA® FiduciaryFORENSICS® expert says “if you live in a house or apartment then you’re involved in STDs.” It’s not a question of if but when the STD will affect you; whether you own your own home, rental property or rent or invest in these securities.

How did STDs come about?

When banks issued mortgages prior to the so called financial crisis they often assigned them to trusts which securitized them, hence Mortgage backed securities (MBS), These trusts then sold the MBS off to investors. But some bond trusts, investigations reveal, may not hold proper title; to the underlying collateral. Defective title virally permeates the MBS food chain; hence STD’s.

Expert Evaluation of Investors claims for Breach of Fiduciary Duty or Suitability.

There are two levels of suitability analysis that may affect claims evaluation, in addition to the fiduciary duty owed to investors. Investors and attorneys wishing to understand how to successfully evaluate claims related to MBS, RMBS, CMBS, CDOs, Synthetic CDOs, and CDS and fiduciary duty can contact Chris McConnell & Associates.

When it comes to Derivatives – Resources, Action steps you can take.

Assistance is available to help you better understand the “then & now” responsibilities, duties and securities industry compliance and supervisory requirements of a bank, trust company, brokerage firm, stock broker, branch manager, financial adviser, investment adviser, hedge fund, mutual fund or derivative security.

About Chris McConnell, AIFA® a/k/a McFid*, BFD Expert since 2003

Chris McConnell received a BA, Economics/Accounting option from Rutgers University in 1983, passed the CPA exam in New York in 1986, and received an MBA from Pepperdine University in 1990. He was certified as an AIFA® by the Center for Fiduciary Studies in 2003. He has over 27 years of combined experience as a recognized expert, including his considerable securities industry. Litigattion and arbirtration experience and formal fiduciary training. An expert who wrote the book on broker dealer compensation, accounting, margin, compliance and managed accounts and can help assist in learning all the ways a stock brokerage firm, broker may have caused losses or profited from assets in your account.

Since 2004, Mr McConnell issued annual, 1 page FiduciaryALERTS™ like July 2008's “Denial of Twin-flation™ is not a prudent investment strategy” McFid the combination of McConnell, his Irish family crest herald “not for himself” and fiduciary. BFD stands for breach of fiduciary duty.

If you have concerns FiduciaryFORENSICS® an independent expert, fiduciary evaluation is available.

For more information, visit

“Understanding the only agenda for McFid”

Copyright © Chris McConnell & Associates 2003 to 2010. All rights reserved.

Monday, October 18, 2010

Foreclosures and Muni Bonds...Will MUNI bond investors WAKEUP before homeowners revolt?

When the foreclosure crisis coverage abates - don't worry - our friends in the financial news media will spin a new news cycle sure as you know what.

Then - PROPERTY taxes, the essential underpinnings of nearly all municipal bonds (estimated market size in the multi trillions) come into better 15 megapixel relief; watch out for the real fireworks to go described in a recent post here in "S15" Where (not if or when) will it end?

TAMPON just like TARP to the "rescue" - not:
And then investors will recognize the value of independent due diligence and cease to wonder who and what due diligence was performed as it relates to suitability and breach of fiduciary duty in days gone bye. When investors in Tax Free money market funds, tax free Auction rate securities, commercial paper and longer term issuance wake up to the questions about the foundation of municipal finance and elected officials and investment banks - there you have it; TAMPON (Troubled asset MUNICIPAL political oversight needed) will be enacted to stem the hemorraging...but there seems to be an increasing number of homeowners bereft of an income, bereft of confidence in how taxes are spent and bereft of any thing but every man for himself; can you blame him?

Ending the siesta on the taxpayers' dime - one easy to read blog at a time.

Bernanke should go to the hospital...

and when he goes,
1) should not pass go, do not go to jail yet, but go straight to the maternity ward,
2) visit the newborn babies,
3) sing the famous lullaby rock a bye baby in MANDARIN
4) and pin IOU's to their diapers owed to the FOREIGN CREDITORS they will spend the rest of their lifetimes paying off due to the undeniable Fed's BFD committed:
before the so called financial crisis
during the so called financial crisis
and since then.

Ending the siesta on the taxpayers dime - one easy to read blog at a time.

So when will the Fed call its lawyers? Does the Fed have an STD? And when will "The Men who knew too much" resign?

Chris Whalen was on Bloomberg TV just now with Mark Crumpton. He related in his new book, "Inflated" we have effectively turned our banks into operating REITs - correct; but no surprise. Forecloures' predictable AND inescapable, dimunition of property tax revenues and related state, county and local gummint budget woes. (Within the inevitable backdrop, indeed march of IT servicing and outsourcing, not only in the just released IBM current earnings but in the "forecast".) And this - MBS trusts which are generally required under NY law to hold both original notes and mortgages often forgot this little detail.

His response to Mr Crumpton's final question - "So what are (MBS) investors doing?"
Mr Whalen replied "...contacting their lawyers".

Since the Fed owns near "200 hundred stories tall" ~$2T of the stuff, acquired by way of removal, absent any 3rd party independent due diligence or valuation in the Fall of 2008 from certain banks predominantly from a certain Federal Reserve Bank district east of the Hudson; for reasons undisclosed.

When, this taxpayer asks, on behalf of all current and future US taxpayers and global creditors, will the Federal Reserve "Contact its lawyers?"

When will the Fed, bearing undeniable, ultimate fiduciary responsibility to all US citizens - CALL ITS LAWYERS TO:
2) When will the Obama Administration and/or Congress, conduct a real investigation, and reveal the truth and begin to investigate and remove Mr Bernanke and Mr Geithner?

Both have failed in series:
1) in the PAST - prior to the so called financial crisis;
2) in 2008 by allowing certain otherwise failed institutions to remain in business;
3) Since 2008, continuing to perpetuate half truths about the reasons for the so called financial crisis and actions related thereto.

We can and should forgive their mistakes or errors in judgment due only to incomplete information; but not known errors, certainly not when possessed of near perfect information - indeed, these two ARE and Mr Paulson, the "Men who knew too much..."

And the previous post October 3 and later on the issues surrounding the Fed's ownership of MBS trust securities STDs (securities transmitted diseases) with potentially toxic titles.

Ending the siesta on the US taxpayers dime - one easy to read blog at a time.

Not my first rodeo.
Since 2004, my office issued annual, 1 page FiduciaryALERTS™. It’s not about me being right or lucky because I’m half Irish it's about this - recognizing the obvious. For instance, July 2008's “Denial of Twin-flation™ is not a prudent investment strategy” Copies available.

McFid, BFD expert, since 2003. (BFD means breach of fiduciary duty)
McFid the combination of McConnell, whose family Irish crest heralds "Not for himself" and fiduciary.
Copyright © Chris McConnell & Associates 2003 to 2010 All rights reserved

Friday, October 8, 2010

To Ron Paul - no need to audit the Fed; it's near the Fed's last dance - Fed creates then drowns in its own ocean of (excess) liqudity...

Mike Holland is on Bloomberg TV talking about an "Ocean of liquidity".
And that all asset classes are rising due to this ocean of liquidity.

The Fed’s Bake Shop
It’s not if but WHEN speculation runs rampant and PERMANENTLY affects the currency AND global trade (among the remaining source and hope for real economic growth).

More and more and more Dollars do NOT boost real economic on the ground activity
More and more and more dollars SIMPLY boost prices (NOT value) of financial assets & commodities until…the Fed loses control.

Hence the need to audit the Fed will be a thing of the past - when the Fed is finally recognized - and ceases to be what it was originally intended to be.

Wednesday, October 6, 2010

The Big Lies* exposed...excuse me *the whole story has not been told

Important Note: * The word "lies, lied" are used for brevity when in some or all instances the phrase "did not tell part or the whole story" may apply.

Much time, effort and hope has been poured into debate about "the economic recovery."

Growth by definition, zero based, needs to FIRST examine the baseline against which we expect "growth". If we finally agree that so-called "growth" during the hockey stick era 2004-2007 cash out refis. Cash out refi's were fed by securitizations of pools of mortgages, then derivatives, upon new classes of derivatives, fed by borrowed short term money leveraged 20, 30, 40 or 50 to $1 enabling the creation of ever more NEW derivatives then we can see clearly that debt-induced growth occurred NOT real economic growth. That will take YEARS to recover from. Why? Debt has a due date, both principal and interest need to be paid back. Because certain policy makers /actors placed self or narrow interests above the whole truth, some were lied to, some didn't know any better and perpetuated the lie and a certain coterie refused to let certain entities fail.

So yes economic RECOVERY but not growth - as many hope; that's not how it works, nor should it. To do so would be deny who and what caused the unsound growth.

Therein begins the BIG LIE*.
Lie #1 - the undisputed financial experts AT certain banks, over a period of years, did not tell the whole story to the Federal Reserve and US Treasury as to 1) their comprehensive safety and soundness and 2) the potential repercussions of future investment bank failures in the summer of 2008. These banks (commercial and/or investment) through, subject to proof, potential collusion, insured they would survive AFTER certain others were allowed to fail. Why?
Certain banks, in a Federal Reserve District east of the Hudson (supposedly supervised by Mr Geithner from 2003 to 2008), many of whom were primary dealers. Primary dealers are required to BID on new US Treasury debt. Certain banks may have gently "intimated" to the Fed that if the Fed and/or the US Treasury wanted to play hard ball (like get real marks or identities of counter parties) then the failure of just ONE more primary dealer (after the less popular Lehman and Bear Stearns) would cause disastrous consequences for existing US Debt and on the run issues; that of NO BID.
Lie #2 - The financial experts at the US Treasury lied* to other officials in the Bush White House.
Lie #3 - The Bush White House lied* to the public; as to the people, not systems, responsible and the dollar amount of the problem.
Lie #4 - The Obama Treasury officials - namely one BORN out of the scandal - continued the lie* to the White House and to the public.
Lie #5 - The Fed paid Taxpayers' Cash 100 cents on the dollar for so-called AAA rated paper. Why? And to whom? Near $2T of this paper sits on the Fed balance sheet today.
Lie #6 - The Federal Reserve hoped that artificial 0% interest would help certain banks REliquify their balance sheets back to life.
Lie #7 - Certain banks, upon receipt of US Treasury cash could NOT testify specifically what uses the money was put to - IN FRONT OF CONGRESS. Despite a few awarding $5B in CASH retention awards to their stock brokers in 2009. True.
Lie #8 - To this day - no one - not the Fed, US Treasury, the White House has revealed the names and amounts of indirect and direct support to certain banks, and other entities; especially the names of NON FDIC insured affiliates getting over $240B of loan guarantees by the FDIC.
Yes, your eyes did not deceive you - Non FDIC insured entities GOT and continue to GET FDIC backed loan guarantees. See line #3 in the table in this link
Lie #9 - NO, I repeat NO amount of MONETARY stimulus - will generate sustainable economic growth. Why? Because everyone SEES it for what it is - temporary money, that will disappear faster than the half life of an atom.
Lie #10 - The White House leaders must tell the truth - from the beginning or they will rightly be replaced or rendered useless. ONLY then will taxpayers (and foreign creditors) know and understand who and what caused the current spate of problems. Then the financial experts (private and public) will be exposed for what they did. Fiscal, structural solutions are called for: Reasonable medium to long term tax incentives for 1) future real estate investments in existing properties, 2) tax incentives for any green improvements in existing real estate 3) future income from NEW self employment and 4) NEW training and education. And the most important 5) Get the FED out of the securities markets STD's will continue until they're gone. STDs are Securities transmitted diseases.
Lie #10 - continuing to expect the culprits at certain banks and Wall St entities to cause economic growth exposes the LIE - they generally and simply leach OFF growth - as any middleman, trader will do. It's totally legal but needs to be seen for what it is and what it is not.

Lie #11 - holding up the "stock market" as the barometer for economic growth completely misrepresents reality, although an overwhelming amount of attention is devoted to "TV and media coverage" of DAILY trading. This represents ONE thing - it shows investors' relative appetite for financial PAPER speculation; NOT real on-the-ground economic growth.

Foreclosures - Real, Genuine Titles - but Investigation first over allegations of False Documents

These quotes are here today AFTER several lawmakers have requested invetigations into the "foreclosure process".

Update Ohio Attorney General Richard Cordray stated on Bloomberg, that the DOJ is investigating and criminal indictments may take place way IF certain parties KNOWINGLY submitted false documents to the courts.

At most, said Rick Sharga, chief economist of the foreclosure-tracking firm RealtyTrac, the snafus will probably delay foreclosures for the next 60 to 90 days. Servicers will review the documents in question and implement internal procedures to comply with regulators.
"Once that's done, we'll probably see an escalation of foreclosure activity," he said.

If the reviews turn up major mistakes, or if a court orders review of tens of thousands of other records on prior foreclosures, "things could get very messy very quickly," Sharga said.
Especially if the banks have sold these foreclosed houses.

"If the bank or its subsidiary obtained title by virtue of a final judgment improperly obtained, then the sheriff sold the property based on that same improper judgment," Garrabrant said. A sheriff's deed can be challenged in court, as can the final judgment authorizing a sheriff's sale and the resulting bank deed.

It's equally possible, RadarLogic's Feder said, that delaying foreclosures will only push the economic reckoning for some homeowners farther into the future.

Read more: Watch sports videos you won't find anywhere else

AND AS BEFORE - we ask - what are the implications for holders of MBS and related derivatives like the Fed (courtesy of US taxpayer cash exchanged for so called AAA rated MBS, et al paper)? As well as ratings of same. What if the ratings agencies DECIDE to lower ratings?
What then? Can the Fed put them back to the banks? Is the Fed obligated to put them back?
What impact would such put back have upon certain banks? Are we coming full circle? BACK to the CAUSE of the so - called financial crisis? Namely certain banks' failure to understand and evaluate the BASIC underlying credit-worthiness of collateral as posted here in July 2007

Excerpt here -Capital, currency and commodities are globally connected. Settlement of trades is nearly immediate, disruption could unsettle all markets. Cash infusions by the operators or sponsors, market rescues, liquidity by Federal Reserve Bank through discount rate cuts, extended rollover provisions, open market operations band aid liquidity only; Fed action does not cure the credit (creditworthiness) and or valuation issues of these "securities".

And again we ask - what will Global creditors of the USD think and more importantly DO?
Now AND in the FUTURE?

And we pay for this? LET ME COUNT THE WAYS.
Not once but now twice for current taxpayers.
Future generations will effectively pay 7 ways for the-from-the-start-ill-advised-certain-bank-MBS -leveraged-speculative-prop-trading-margin-call-bailout. The additional 5 ways are result of 1) higher future relative interest rates, 2) lower growth, 3) lower employment 4) HIGHER taxes that will be necessary to satisfy domestic and foreign creditors demands 5) lower currency value. The above does NOT count the higher taxes, lower growth at the state, county and city / local level. In combination ALL pointing to a LOWER not higher standard of living compared to the rest of the world. But NOT for the recipients of the Fed's bailout - oh no they're special.

Rather more like home-grown FINANCIAL TERRORISTS.
ALL THE RESULT OF THE OH SO FINELY TUNED "JUST IN TIME" FINANCIAL ENGINEERING - OH EXCUSE ME FINANCIAL INNOVATION. The result of massively leveraged spread trades between long term asset vs short term borrowings in the 2(a)7 money markets . INVENTED AND PROMOTED BY? YOUR FRIENDLY NEIGHBORHOOD WALL ST BANKERS & TRADERS. Watched over by your friends at the NY Fed and the Fed Reserve Board. CAUSED MORE DAMAGE TO THE ECONOMY THAN 9/11 BUT ONLY AFTER CASH BONUS PAYDAYS. Caused what looks to be a multi-generational long damage to trust.
NOW they (BB & TG) are claiming and getting credit for "healing and rescuing" the economy!

Come on gimme a break.

Ending the siesta on the Taxpayer's dime - one easy to read blog at a time.

Not my first rodeo.
Since 2004, my office issued annual, 1 page FiduciaryALERTS™. It’s not about me being right or lucky because I’m half Irish it's about this - recognizing the obvious. For instance, July 2008's “Denial of Twin-flation™ is not a prudent investment strategy” Copies available.

McFid, since 2003, BFD expert. (BFD means breach of fiduciary duty)
Copyright © Chris McConnell & Associates 2003 to 2010 All rights reserved

Monday, October 4, 2010

Why am I not surprised (so what will Moodys' Mr Zandi do if...)

Why am I not surprised, if Mr Zandi would be surprised if there's any thing more than a few weeks delay or a couple two three month "paperwork" delay. "I guess we're gonna have to wait and find out how courts interpret challenges to mortgage foreclosure process." paraphrased.

What about seriously commenting on how it may affect YOUR job (Moodys' unique protected, enshrined FUNCTION in the financial system)

HOW ABOUT MOODYS should be looking at HOW the ratings on certain MBS and related derivatives, counter parties thereto and HOLDERS (including the Fed) will be affected IF certain challenges hold up?

Then what?
Maybe a certain triple AAA rated, risk free, benchmark paper will be like Jethro Tull's "Living in the past"; indeed a relic of the past. Given certain unnecessary arrogance, hubris but intentional lack of transparency - it's as it should be.

Mr Zandi appeared on Bloomberg TV with Eric Schatzker earlier today Link here

Ending the siesta on the taxpayers' dime one easy to read blog at a time.

Since 2004, my office issued annual, 1 page FiduciaryALERTS™.
It’s not about me being right or lucky because I’m half Irish it's about this - recognizing the obvious. For instance, July 2008's “Denial of Twin-flation™ is not a prudent investment strategy” Copies available.

Chris aka McFid, since 2003, BFD expert.
(BFD means breach of fiduciary duty)

Copyright © Chris McConnell & Associates 2003 to 2010 All rights reserved

Sunday, October 3, 2010

A Serious Problem: Banks’ Florida foreclosure tremors may be felt as far away as China, travels through the Fed Balance Sheet

The Fed (holders of near $2T of RMBS and CMBS) MUST BE saying you know what if the post at naked capitalism today is anywhere near true. LINK

Update October 11, Housing Wire Paul Jackson writes about the decades long rot on the vine in attorneys' race to earn work and remain a preferred vendor to Banks

Update October 5, House Speaker Pelosi and members of the California Democratic Congressional delegation have formally requested the DOJ, the Federal Reserve and the OCC to look into among other things FORECLOSURE IRREGULARITIES

When China figures OUT that the FED does not have clear title to collateral of underlying mortgages in the trusts which are supposed to own and hold these instruments; the effect may be it seems DIS-electric; in other words UN - plugged.

Shortfalls in establishing chain of title dating to origination have surfaced, it appears for ALL major parties. Oh, it's just the mere trifling question of the TRUST which owns the notes to underlying collateral (title to real property) MAY BE DEFECTIVE, and that makes the Fed's holdings, not more valuable but the opposite, worth less than promised, less than expected, and so what effect will we see in the MBS and related derivatives markets manana?


2nd Request; my apologies but remind me again why the Fed had to purchase the AAA rated paper from certain banks in the first place.

At 100 cents on the dollar?

Oh, silly me - the Fed NEVER explained WHY it had to take certain paper off the hands of certain banks.

Guessing that BB, being a few years south of retirement age, may have his eye NOT on the Fed's balance sheet but a juicy vice-chairmanship, head of strategy or the like at one of the supervisees. Bet he'll prefer payment NOT in China's Yuan whose near Trillion US dollars foreign currency reserves may wind up slightly less precious - so BB may prefer payment in wheat; at least you can eat it.

Link here October 9, 2008 Is a prudent fiduciary result at all possible?

Link here September 28 , 2008 Where do I sign? Now that I'm a fiduciary to the US taxpayer.

Link here to the very first blog post September 21, 2008 US Treasury Bailout for MBS? NO!

What the Fed gonna do now? BB and TG better start learning how to say "Uh, aw shucks, good golly, geepers me - well we may have made a mistake, but don't worry it's only money" in MANDARIN presto.

Come on - give me a break. Ending the siesta on the Taxpayers' dime - one easy to read blog at a time.

Since 2004, my office has issued annual, 1 page FiduciaryALERTS™. It’s not about me being right or lucky because I’m half Irish it's about this - recognizing the obvious. For instance, July 2008's “Denial of Twin-flation™ is not a prudent investment strategy” Copies available.

Chris aka McFid, since 2003 BFD expert.
Call McFid, the Fiduciary Expert. (BFD means breach of fiduciary duty.)
Copyright © Chris McConnell & Associates 2003 to 2010 All rights reserved

Saturday, October 2, 2010

So far...Fed's rouge on (for) the Financial sector & securities holds off creditors acts...but unlike other assets DEBT HAS A DUE DATE

Bloomberg ran a story featuring pro's and con's and other views of the expected Fed QE2 $500B of asset purchases. Link here

The last sentence of the last paragraph was best - "Investors are buying into the strategy,” said Kos, who noted that prospects for further quantitative easing have depreciated the dollar without a rise in Treasury yields that foreign investors typically demand to compensate for currency risk. “You worry that at some point they don’t. A loss of credibility in central banking is really difficult to recover from.”

As Bell Labs engineers learned long ago how to separate the "Signal" from the "Noise" hence SDT Signal Detection Theory; as discussed on Charlie Rose recently.

When the Fed has to reveal - as it should - the parties and amounts of support extended to banks in a certain Federal Reserve district east of the Hudson - THEN - the you know what will hit the fan; also as it should.

I and many others were born at night but not last night. Think the creditors / owners of US Treasuries are NOT watching and waiting? Think they are NOT already long PAST the reality that the US is addicted to, reliant upon imports; think they are NOT reducing reliance upon US? Think they are not quickly selling higher value added products and THEN services?
Think there is any question; they know where they're going?

China, foremost among all others has like its many other endeavors, lifted the first page out of GE's playbook; either be #1 or #2 in the market or get out. China WILL be #1 or #2 in ANY market it chooses to pursue; they have all the advantages. They have "capitalism" on there side too; how's that? If the US engages in protectionism, China can rightly claim hypocrisy.

The Fed's NOISE is getting in the way, officially DIS-INTERMEDIATION, of NATURAL economic forces is a ruse, more like rouge on (for) the "financial sector" which the Chinese and many others KNOW; it's only a matter of time before they act as any rational actor; find substitutes.


It is undeniable, when the Fed acquired you know what of nearly $2T of "securities" directly from certain financial institutions on and off balance sheets entities the Fed simply transferred the credit and valuation problem onto its own balance sheet. The reality of the problem did NOT go away.
And when, not if, the Fed, encounters the same problem, the inability to roll over debt, the same problem which CAUSED the September 2008 "panic" the Fed will hopefully have learned the ultimate lesson, and be forced to let financial markets function as they should - find liquidating values.

Come on - give me a break. Ending the siesta on the Taxpayers' dime - one easy to read blog at a time.
Since 2004, my office issued annual, 1 page FiduciaryALERTS. It’s not about me being right or lucky because I’m half Irish – its about recognizing the obvious. For instance, July 2008's “Denial of Twin-flation™ is not a prudent investment strategy” Copies available.

Chris aka McFid* * Since 2003, when you need to know exactly what a BFD looks like. Call McFid, the Fiduciary Expert. (BFD means breach of fiduciary duty.)

Copyright © Chris McConnell & Associates 2003 to 2010 All rights reserved