Thursday, October 14, 2010

A very strange finance story

Gonzalo Lira On The Second Leg Down Of America's Death Spiral

I'd better start with an apology: this is an American story (and there are some swear words in it.). As far as I can determine, it has no particular relevance to the way the UK mortgage system works. Lira gives a pretty good explanation of the trouble the big American mortgage lenders have gotten themselves into and opines that "This is a major, major crisis. This makes Lehman’s bankruptcy look like a spring rain, compared to this hurricane. And if this isn’t handled right—and handled right quick, in the next couple of weeks on the outside—this crisis could also spell the end of the mortgage business altogether. Of banking altogether. Hell, of civil society. What do you think happens in a country when the citizens realize they don’t need to pay their debts?"

Posted by quiet guy @ 10:48 PM (1942 views)
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19 thoughts on “A very strange finance story

  • general congreve says:

    Gotta love Zerohedge, get this:

    “People still haven’t figured out what this all means—but I’ll tell you: If enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loan and keep their house, scott-free? Sh1t, that’s basically a license to halt payments right the f4ck now. That’s basically a license to tell the banks to F4CK OFF.”

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  • The trouble with this sort of article is that it doesn’t quantify or qualify anything. Even the most basic enquiry will tell us that the numbers involved are actually quite small. Not all banks have suspended their repossessions and the low-range share price movement of the banks (that have temporarily suspended their repossessions), informs us that this is not the huge story implied by this article

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  • it does show the power of the people though…..I’ve always thought governments worst nightmare is when the people fight back!

    reality is banks lent to anyone ‘cos 3 weeks later they didn’t own the mortgage

    Its the biggest financial scandal ever.

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  • Even if a bank went bust it’s mortgage book would be bought from the receivers and then monies would be repayable to that party.

    I must admit that securitisation may complicate the matter somewhat, but I’m sure someone thought of that – right ?
    I mean they were intelligent people who invented securitisation weren’t they ?

    And to be in a position to purchase a securitised debt obligation you’d need to have been educated to degree level – right ?

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  • 1. general congreve

    There is truth carried in the wieght of your words, but a peace pipe never blows signals beyond a mountains ridge.

    Such is the way of the wind.

    Reply
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  • Cassandra Kernow says:

    A new related scandal is just breaking ……the mortgage Bond scandal which has direct links to UK pension funds and Banks.

    The enormous mortgage-bond scandal http://blogs.reuters.com/felix-salmon/2010/10/13/the-enormous-mortgage-bond-scandal/

    Is Bank Of America The Most Exposed If There’s A Brand New Mortgage-Bond Scandal? http://www.businessinsider.com/manal-mehta-branch-hill-capital-bac-2010-10

    Mortgage bonds are “high grade” bonds backed by a pool of mortgages on real estate assets such as houses. These bonds have been purchased by global investors wanting “secure” income i.e. pension funds, including UK pension funds.

    UK banks will also be implicated in this, as they also issued these bonds.

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  • “What do you think happens in a country when the citizens realize they don’t need to pay their debts?”

    errrmmm,, the prudent savers roll over and die??

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  • ” the low-range share price movement of the banks (that have temporarily suspended their repossessions), informs us that this is not the huge story implied by this article”

    I have to admit, I laughed out loud when I read that.

    ———————————————————————————————–
    “Even when Lehman’s own quarterly numbers started to take a real hit, the warning signs were drowned out with celebratory reminders that 2007 had been a record year for profits and with sage assurances about the absolute soundness of the bank’s risk management.

    What none of the Fuld team appreciated was that by the beginning of 2008 the world had changed – for Lehman Brothers and for everybody.”

    From: Exposed: Dick Fuld, the man who brought the world to its knees
    Dick Fuld ran Lehman Brothers as if he were at war. He drove the bank hard and ignored the signs of collapse. Andrew Gowers, former editor of the Financial Times, who was working at the heart of the bank as it brought the global economy to the brink of disaster, reveals the inside story

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  • I think Jesse Livermore summed it up best in Reminiscences of a Stock Operator

    “The next day we got the news of the San Francisco earthquake.
    It was an awful disaster. But the market opened down only
    a couple of points. The bull forces were at work, and the public
    never is independently responsive to news. You see that all
    the time. If there is a solid bull foundation, for instance,
    whether or not what the papers call bull manipulation is going
    on at the same time, certain news items fail to have the effect
    they would have if the Street was bearish. It is all in the
    state of sentiment at the time. In this case the Street did
    not appraise the extent of the catastrophe because it didn’t
    wish to.”

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  • The American mess up is monumental.

    Imagine Americans losing any fundamental sense of property rights …. quite ….

    So I guess the land registry isn’t on the list of quangos to cut?

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  • estrader: Yes, yes, I know, the experts know nothing and the ‘strong hands’ always know. The problem with these rather immature slogans of yours, is that they contradict each other. Or, do the ‘strong hands’ studiously avoid employing experts and only employ blog ranters? While we are at it please name these ‘strong hands’. If they exist, I’m sure that I’ll know many of them (unless, of course, they operate out of secretive bedsits). I’ll ask them to comment on your description. Should be worth a laugh. Out of curiosity, did you read about these ‘strong hands’ in a trading pamphlet or have you closely worked with them for long enough to be confident in the veracity of your slogans?

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  • The trouble with this sort of article is that it doesn’t quantify or qualify anything. Even the most basic enquiry will tell us that the numbers involved are actually quite small. Not all banks have suspended their repossessions and the low-range share price movement of the banks (that have temporarily suspended their repossessions), informs us that this is not the huge story implied by this article

    Funny, isn’t it Flash how you are never so cynical about believing good news?

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  • “Out of curiosity, did you read about these ‘strong hands’ in a trading pamphlet or have you closely worked with them for long enough to be confident in the veracity of your slogans?”

    Clearly flashman, the answer should be obvious seeing you think they are nothing but immature slogans. Have you ever seen ‘them’ mentioned in a pamphlet or in one of those pretty glossy trading books that you have read, you know the ones I mean…with pictures of money on the cover?

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  • hpwatcher: the problem with your posts is that you rarely think them through. I have posted hundreds of bearish opinions on house prices and hundreds of rebuttals of articles bearing ‘good news’ about the housing market. For your own sake, please think before you post, especially if you are trying to be cute (the same goes for estrader). I really would rather ignore you but you keep sniping away with inane comments and it makes me look like I’m clubbing a boisterous puppy (copyright quiet guy), when I respond

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  • estrader: you have studiously avoided explaining the apparent contradiction in your two ‘slogans’. You have also avoided explaining where you got the credentials to confidently talk about ‘strong hands’. I’m absolutely sure you’ve never been an industry insider, so unless you’ve published a prize winning, Woodward and Bernstein grade expose on the subject of ‘strong hands’, then it is just an empty (and contradictory) slogan. We have plenty of posters who use riddles and enigmatic sounding clichés (they are mostly multiple log-ins), to disguise the fact that they have almost zero useful information to impart. Hopefully you are better than that, so please think through your ‘slogans’, to avoid being tarred by the same brush.

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  • Flashman, when you post facts and figures they seem precise, well researched and relevant to backing up your point, but when it comes to things I say your argument involves nothing but baseless ad-hominem attacks. This is why I often avoid replying to most things you write. You are right, I’ve never published a published a prize winning, Woodward and Bernstein grade expose like you have on all the subjects you cover in this blog so I will never attain the credibilty you enjoy. That is fine by me.

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  • In other words, your ‘strong hands’ motif is a baseless slogan. You made it up to infer inside knowledge.

    “This is why I often avoid replying to most things you write”

    Ludicrous. I only noticed you because you kept aggressively sniping at my posts. You have an ever-present resentment/rage against anything you think looks like an ‘expert’ or ‘industry’ opinion. That’s absolutely fine but don’t go whining about ad hominem attacks when you haven’t got the tools to cope with any retaliation. There is no way I’d willingly choose to respond to anything you write, so if you don’t want to get egg on your face then stop your silly sniping.

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  • 17. flashman

    Just because there is a lack of evidence, or evidence that will not be exposed, doesn’t mean certain people are innocent.

    That’s not a snipe on you, but a snipe on a totally corrupt system. You can find comfort in that if you wish, but I personally would like to

    see it banished eventually. Justice for all.

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  • 17. flashman

    Find out who shorted American Airlines on 9/11 and the authority that blocked that information to the ‘general’ public.

    Then you might stop getting high a mighty.

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