Archives For Credit Crisis

It’s funny how one thing leads to another.

After I posted The Secret of Oz last week, I went to check out Bill Still’s website, The Money Masters. It was there that I saw John Trumam Wolfe’s book, Crisis by Design: The Untold Story of the Global Financial Coup and What You Can Do About It*. I found the Kindle edition for $5.99 and purchased it. What an interesting read! The book, which is essentially a collection of articles written by Wolfe, makes the case that the debt crisis was planned all along.

NOTE: Because the book is a collection of articles, one thing I found annoying was the repetitiveness of some of the pieces. I would have preferred that the author cleaned up the redundancies.

What I found interesting was his thoughts on the World Bank and the International Monetary Fund. From the book:

…I started following the activities of the World Bank and the International Monetary Fund (IMF). These are “sister” organizations that were set up at the end of the Second World War essentially to help rebuild war-torn Europe with low-cost loans (the World Bank) and to foster stability in the international currency markets (the IMF).

Despite their altruistic-sounding charters, these two organizations have become nothing less than global financial predators that have turned three-fourths of the planet into debt-ridden junkies.

Sometimes evil is hard to confront. But I tell you without equivocation that the activities of these two international banks have been motivated by a cold, calculated plan to control the populations of Earth.

I know, I know—conspiracy theory and all that. But if you study their trail of financial bondage across the planet, their real intentions become all too clear. And it is not a matter of studying their conduct for a year or two; their strategic plans started decades in the past and run decades into the future.

He continues later on with an example what this might look like…

Having tracked them now for more than three decades, I can tell you that their pattern of operation repeats itself, country to country.

First, they covertly facilitate a currency crisis in the targeted country. This is not difficult to do if one understands that currencies are commodities and can be manipulated on the exchanges on which they trade. It takes capital to do it, but the mechanics are not difficult to put in place. In recent years, people like George Soros have been involved. Think Indonesia, late nineties. Soros and well-placed media outlets push the message about how weak the targeted currency is. Because of this, he is able to sell the currency short8 (“betting” it will go down). In this way he drives the value of the currency even lower while making a killing. As the currency crashes, the country experiences growing economic chaos, riots, and internal strife.

With the country now trying to participate in international trade and commerce using a currency that has all the attraction of pet food from China, their credit rating nose-dives faster than a Nancy Pelosi popularity poll. They can’t borrow from traditional sources. Business falters. Unemployment skyrockets. And in some cases, again like Indonesia, riots ensue and blood flows. When the politicians have their colons sufficiently puckered, one or both of the twin sisters of the Apocalypse (the IMF and World Bank) ride in on a white horse.

“Gee, Mr. President. It looks like you’re having a problem here. Perhaps we can provide some assistance. Would, say, five or ten billion help to tide you over?”

“Yes, well, the New York bankers have turned their backs on us for no reason at all. This currency issue is temporary, I assure you. How much did you say?”

“Five or ten billion, but we’re flexible. Our concern is for the people of your great nation.”

“Yes, of course. Who controls how the money is spent?”

“You do, sir.”

The president suppresses a smile as he thinks of his private yacht moored in the south of France and his young mistress sunbathing on the foredeck in her topless bikini.

“And what would the terms be?”

“Interest only for the first three years and then we would work out a mutually agreeable repayment plan for the principal. And, of course, you would have to execute our standard loan agreement.”

“Certainly. Do you have a copy of that handy?”

One of the bankers pulls a multipage document out of a Gucci briefcase of shimmering Italian leather and hands it to the president. He begins to scan through it. His brow furrows. He looks up.

“Eh . . . why is there a clause here that mandates how we must educate our young women on matters of family planning and contraception? That has nothing to do with the country’s economic strength.”

“Well, Mr. President, we feel it does. The population level of the country certainly has a bearing on the nation’s prosperity. Wouldn’t you agree?”

“I . . . eh, suppose so. But I can’t agree to these stipulations regarding our agricultural production or our tax policies. Those are strictly internal matters.” The president stands and straightens his back.

The two bankers stand as well. “We’re sorry to hear that, Mr. President. We were hoping we could help you reduce those unemployment figures.” They head for the door. One of them turns, “And Marseille is . . . so beautiful this time of year.”

Two weeks later headlines blare: President Signs $10 Billion IMF Loan Agreement.

The president puts a cool $500 million in his Swiss bank account. A frenzied pack of federal bureaucrats feast on the balance until only the remains of the bloodied carcass are left for state and local vultures. Perhaps 10 percent will reach the people.

The country will never be able to repay the loan, which, of course, is exactly what the IMF wanted in the first place—control of the country’s assets and the ability to dictate social engineering policy.

One other thing I found very interesting was all the ties between Goldman Sachs and the government. Scary indeed.

My next read will be Ellen Brown’s Web of Debt*.

*Affiliate Link

A rundown of the changes for the iPhone 4s.

Here is Walt Mossberg’s take:

We ordered my wife one last weekend. Her other iPhone was the 3Gs and was well over 2-years old. I think she’ll be impressed with the new phone. We shall see.

Switching gears to the “Occupy” movement…

Here is an interesting piece in today’s WSJ by American Enterprise Institute’s Peter J. Wallison titled Wall Street’s Gullipble Occupiers, which echoes my thoughts regarding our government’s and politicians’ involvement in helping create the crisis.

Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities. The original legislative quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007.

It is certainly possible to find prime borrowers among people with incomes below the median. But when more than half of the mortgages Fannie and Freddie were required to buy were required to have that characteristic, these two government-sponsored enterprises had to significantly reduce their underwriting standards.

Fannie and Freddie were not the only government-backed or government-controlled organizations that were enlisted in this process. The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.

That, my friends, is how the crisis got started. No, it wasn’t the entire cause but it did kick it off. I read something very similar in Thomas Sowell’s The Housing Boom and Bust: Revised Edition*, a must-read if you desire a different take on the creation of the housing crisis. Thomas Sowell does an excellent job and he uses about 1/4 of the book to list his sources.

*Affiliate Link

Read this in this morning’s WSJ: For Lender, Foreclosure Has Become Dirty Word.

It’s a nice story. It’s also made possible by the fact that the bank is small and it owns 75% of the mortgages it services. That’s the difference maker.

My friend, Kirk Kinder, over at Swim UpStream to Wealth posted this excellent video interview with economist Steve Keen. Good stuff…

I do think Professor Keen was too easy on the politicians, who created the incentive for banks to do what they did. Other than that, I can’t disagree with anything else he says.

Brett Arends has written an interesting article titled The Next, Worse Financial Crisis.

I can’t say I follow Brett’s logic in his first point, which is:

1. We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, “liberals” and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.

Anyone who has read up on this crisis would know that it was not caused by Democrats alone. Lots and lots of events and behaviors caused this crisis. President Bush also did his part. Arrents also peculiarly leaves out the Fed and their actions. Brett claims we are learning the wrong lessons but he misleads us into thinking that Democrats had nothing to do with it. Okay…

I haven’t studied enough to understand what caused the bubbles in Ireland, the U.K. and Australia but I don’t understand his logic that IF the crisis in the U.S. was caused by politicians, why they would also have caused the crisis in other countries (I hope that makes sense. I know what I’m trying to say but I’m not sure I’m getting the point across.)?

I do agree with point number four:

4. The referees are corrupt. We’re supposed to have a system of free enterprise under the law. The only problem: The players get to bribe the refs. Imagine if that happened in the NFL. The banks and other industries lavish huge amounts of money on Congress, presidents and the entire Washington establishment of aides, advisers and hangers-on. They do it through campaign contributions. They do it with $500,000 speaker fees and boardroom sinecures upon retirement. And they do it by spending a fortune on lobbyists — so you know that if you play nice when you’re in government, you too can get a $500,000-a-year lobbying job when you retire. How big are the bribes? The finance industry spent $474 million on lobbying last year alone, according to the Center for Responsive Politics.

Sadly, I don’t know how we fix this problem. We could pass laws to outlaw lobbying but I don’t know how you stop companies from dangling speaker fees in front of future retired politicians.

If you get a chance, read Brett’s piece and tell me what you think. I’d like to know what you agree/disagree with.

Have a good weekend.

Question: When will the housing bad news end?

I live in Southeast Texas. We have been pretty sheltered from the housing crisis. That said, housing in our area is moving slowly these days and prices are very soft. Our neighbors across the street put there house on the market in late January at a price of $209,000. They didn’t it leave it there long before they started dropping the price. They are now down to $158,000. This is disheartening to me because their house is a 5 bedroom and has been redone (though it’s still far from perfect) and our house is only a 3 bedroom. I pray we don’t have to sell any time soon.

I do think this couple put their house in a bad price range too quickly. Those searching for houses may not be looking at houses in the $150,000 price range. If their lowest threshold is $200,000, my neighbor’s house will be missed. So, my theory is that they put their house on the market at the wrong time of the year and they dropped the price too quickly.


I read this in today’s WSJ:

Almost 40% of homeowners who took out second mortgages—extracting cash from their residences to cover everything from vacations to medical bills—are underwater on their loans, more than twice the rate of owners who didn’t take out such loans.

That statistic compares to 18% of underwater homeowners who don’t have second mortgages.

Overall, roughly 10.9 million homeowners (if you can call them that) are now underwater. The good news is that that number is down from 11.1 million in the fourth quarter of last year. The bad news is that some of those homeowners lost their homes to foreclosure.

I can’t help but wonder that maybe all our efforts to keep people in their homes has gone a long way in extending the misery by not allowing things to clear out. Something tells me that housing is going to be a mess for several more years.


June 2, 2011

I have been busy this week with kid-related stuff. Things should slow down next week.

That said…

Last night I was reading the WSJ while my daughter took swimming lessons. I want to share with you this snippet from an article I read about how banks were facing foreclosure hurdles. I thought this was ridiculous (emphasis mine):

Last month, the Maine Supreme Court reversed the foreclosure of Dana and Robin Murphy of Auburn, Me., after concluding that the mortgage company, a unit of HSBC Holdings PLC, filed “inherently untrustworthy” documents. An HSBC spokesman declined to comment.

The case began in 2008 when HSBC filed to foreclose on the Murphys, who hadn’t made a mortgage payment in two years. A trial judge initially rejected HSBC’s foreclosure because the bank couldn’t show it owned the promissory note—in effect, the borrower’s IOU. The court later granted the foreclosure after HSBC submitted new paperwork.

However, the Murphys found discrepancies and alleged that the documents were backdated. The court voided the foreclosure and sent the case back to the lower court to determine potential penalties.

So these people hadn’t made a mortgage payment in TWO YEARS and they are still in their house due to “discrepancies.” Wow. No, we don’t know all the details from the case. AND…I’m not siding with the banks. I’m just stunned that someone has the gull to live in a house for two years without making a payment. IT’S TIME TO MOVE.

I’ll write more on this later. The underlying issue is pretty interesting. Right now I have to get ready for 8th Grade Day.