KeNo's Housing and Economic Portal: Saturday March 27 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

ADMISSION By FDIC: Massive Balance Sheet FRAUD - (market-ticker.denninger.net) Remember this Ticker from a few days ago? I am constantly amused by those people who claim there is some vast "conspiracy" in this country when it comes to banks, balance sheets, and fraudulent lending and accounting. There is no conspiracy. It is, in fact, "in your face" fraud. Well, one of the people on the forum emailed The FDIC to ask about what I had alleged. This was their response:

That’s the value the bank had them on their books on their year-end financials, but the true value is much less. It is similar to someone in Las Vegas saying that their house is worth $300,000 because that’s what they paid for it three years ago, but the reality is, if they had to sell it in today’s market, they’d only get $250,000 for it. The FDIC has to sell assets in today’s market.

Or tomorrow's market. The simple fact of the matter is that there it is, right in front of you. A raw admission that the banks are carrying these loans at dramatically above their actual value. Yes, this means that essentially all balance sheets must now be considered fraudulent, and thus the valuations assigned by the market to them are also fraudulent. Extending this to the stock market as a whole you now have a market that is intentionally overvalued as a direct and proximate consequence of fraud, permitted and endorsed by the government, of somewhere between 25-40%.

Iceland votes 'no' to debt deal for collapsed bank - (finance.yahoo.com) Icelanders blew whistles and set off fireworks in the capital as referendum results Sunday showed they had resoundingly rejected a $5.3 billion plan to repay Britain and the Netherlands for debts spawned by the collapse of an Icelandic bank. Voters in the tiny Atlantic island nation defied both their parliament and international pressure to display their anger at how their nation was being treated. "This is a strong 'No' from the Icelandic nation," said Magnus Arni Skulason, co-founder of a group opposed to the deal. "The Icelandic public understands that we are sovereign and we have to be treated like a sovereign nation -- not being bullied like the British and the Dutch have been doing." Despite the vote, all three governments promised to work on a new agreement between Britain, the Netherlands and Iceland, which is depending on international assistance to help drag itself out of an economic morass. "It is not a matter of days or a few weeks, but it is important that we do it as quickly as possible," said Icelandic Finance Minister Steingrimur J. Sigfusson. The Dutch Finance Ministry said it and Britain were committed to finding a solution, and British Treasury chief Alistair Darling said his country was prepared to be flexible about repayment terms.

An Irish Mirror - (www.nytimes.com) Well, in a way the sheer scale of the crisis — the way it affected much, though not all, of the world — is helpful, for research if nothing else. We can look at countries that avoided the worst, like Canada, and ask what they did right — such as limiting leverage, protecting consumers and, above all, avoiding getting caught up in an ideology that denies any need for regulation. We can also look at countries whose financial institutions and policies seemed very different from those in the United States, yet which cracked up just as badly, and try to discern common causes. So let’s talk about Ireland. As a new research paper by the Irish economists Gregory Connor, Thomas Flavin and Brian O’Kelly points out, “Almost all the apparent causal factors of the U.S. crisis are missing in the Irish case,” and vice versa. Yet the shape of Ireland’s crisis was very similar: a huge real estate bubble — prices rose more in Dublin than in Los Angeles or Miami — followed by a severe banking bust that was contained only via an expensive bailout. Ireland had none of the American right’s favorite villains: there was no Community Reinvestment Act, no Fannie Mae or Freddie Mac. More surprising, perhaps, was the unimportance of exotic finance: Ireland’s bust wasn’t a tale of collateralized debt obligations and credit default swaps; it was an old-fashioned, plain-vanilla case of excess, in which banks made big loans to questionable borrowers, and taxpayers ended up holding the bag.

S&P Rally Slowed by Fastest Cash Depletion Since 1991 - (www.bloomberg.com) Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow. Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P 500 began a 57 percent drop, according to data compiled by Bloomberg. For Parnassus Investments and Janney Montgomery Scott LLC, depleted reserves is a sign returns will fall from last year, when the S&P 500 rose 23 percent, the most since 2003. Bulls say any pullback is a buying opportunity because investors have $3.17 trillion in money-market funds and may return to stocks after putting 16 times more money into bonds since last March. “It’s not a red light, but it’s a flashing yellow light that the strongest part of the rally is probably over,” said Jerome Dodson who oversees $3.6 billion as president of Parnassus in San Francisco and estimates the S&P 500 will climb 6 percent to 9 percent this year. “There’s not as much buying power out there.”

Papandreou Says Speculation May Fuel Spread of Crisis - (www.bloomberg.com) Greek Prime Minister George Papandreou will press U.S. President Barack Obama to help Europe combat “unprincipled speculators,” who he said have roiled financial markets and threaten a new global financial crisis. “Europe and America must say ‘enough is enough’ to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system,” he said in a speech yesterday in Washington. Papandreou, who is struggling to convince investors his government is serious about taming Europe’s biggest budget deficit, meets Obama and Treasury Secretary Timothy F. Geithner in today in his first U.S. visit since being elected in October. “If the European crisis metastasizes, it could create a new global financial crisis with implications as grave as the U.S.-originated crisis two years ago,” Papandreou said. Papandreou and other European leaders such as French President Nicolas Sarkozy have blamed speculators for much of the surge in Greek financing costs, rather Greece’s budget gap of more than four times the European Union limit. Germany and France are pushing for curbs on “speculators” who use derivatives to bet against Greek debt, officials in Berlin and Brussels said yesterday. Papandreou singled out credit-default swaps as being particularly disruptive, saying their use to protect against a Greek default was the equivalent of allowing someone to buy fire insurance on a neighbor’s house and then burning it down to collect.

OTHER STORIES:

Not till they’ve nothing left to lose? - (www.blogs.reuters.com)

The Swaps That Swallowed Your Town - (www.cnbc.com)

Don't be fooled by funds' shiny short-term results - (www.marketwatch.com)

Trading Away Productivity - (www.nytimes.com)

Company Debt Risk Falls to 7-Week Low on Greece: Credit Markets - (www.bloomberg.com)

Long-Term U.S. Budget Gap Threat to Borrowing, Economists Say - (www.bloomberg.com)

Oil and Gasoline Prices Begin to Creep Up - (www.nytimes.com)

Fannie Mae Mortgage-Bond Spreads Fall to Record: Credit Markets - (www.bloomberg.com)

FDIC Said to Encourage Pension Funds to Invest in Failed Banks - (www.bloomberg.com)

S&P Rally Slowed by Fastest Cash Depletion Since 1991 - (www.bloomberg.com)

Volcker Says Euro to Survive as Greek Budget Crisis Manageable - (www.bloomberg.com)