Posts Categorized: USAWatchdog.com

Posted by & filed under Greg Hunter, USAWatchdog.com.

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

It has been called foreclosure gate, robo signing, foreclosure fraud or just sloppy paperwork; but no matter what you call it, it’s signaling a new financial meltdown for the U.S. economy.  The securitized mortgage debt created in the real estate bubble is being called the “largest fraud in the history of capital markets” by people like renowned gold expert Jim Sinclair.  The big banks packaged mortgages into securities (mortgage backed security) and then sold them to pension funds and investors.  The mortgages in these securities had to meet what is called “contractual representation and warranties.”   That basically means the bank had to legally be able to prove it owned the property it was selling in the security.  Once more, the mortgage applications and appraisals were required to be free of fraud.  The “robo signing” is all about creating paperwork that proves the banks owned the property in the “security” and the mortgage was done correctly.  In millions of mortgages, the banks either can’t find or do not want to produce the original paperwork with the borrowers signature  (promissory note).   Now, investors want to force the banks to buy back trillions in mortgage backed securities that have lost value.   In a recent interview on MSNBC, Congressman Brad Miller said, “. . . in almost every contract if they (the MBS’s) weren’t what they were contractually required to be, the bank had to buy them back.  That’s probably more than they could buy back and we may be back where we were two years ago.”  (Click here for the entire MSNBC interview with Rep. Miller.)

Two years ago, Treasury Secretary Hank Paulson warned Congressional leaders we were just days away from a complete “meltdown of our financial system, with all the implications here at home and globally.”  I think we will be getting to that point again and soon.  Sinclair says, “Securitized mortgage debt is going to be the final shot that kills all kinds of financial entities in the Western world.”  (Click here for the complete Sinclair post at JSMineset.com.)

Some in federal and state government are calling for a moratorium in all foreclosures across the entire country.  CNBC recently reported, “40 States to Launch Probes Into Foreclosure Mess.”  The story goes on to say, “The attorneys general of up to 40 states plan to announce soon a joint investigation into banks’ use of flawed foreclosure paperwork.”  (Click here for the complete story.)  Wall Street is sending up warning flares that the economy could be damaged even more if foreclosures are stopped.  (Many banks have already stopped foreclosures in some states.)  According to a Reuters story, “The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but said dramatic nationwide action could unjustly impose losses on the investors who help provide credit to the $11 trillion U.S. mortgage market.  “It is imperative…that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy,” SIFMA Chief Executive Tim Ryan said in a statement.”  (Click here for the complete Reuters story.)

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Posted by & filed under Greg Hunter, USAWatchdog.com.

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

This weekend, Bank of America became the latest lender to delay all foreclosures in 23 states because of possible problems with the necessary documents needed to repossess a home.  GMAC Mortgage and JP Morgan Chase have had similar problems recently with documents that prove the bank has the right to foreclose.   ADINews.com posted a statement from B of A, “We have been assessing our existing processes. To be certain affidavits have followed the correct procedures, Bank of America will delay the process in order to amend all affidavits in foreclosure cases that have not yet gone to judgment in the 23 states where courts have jurisdiction over foreclosures,” BofA spokesman Dan Frahm said in a statement.”  (Click here for the entire ADINews.com story.)

Florida Congressman Alan Grayson says the foreclosure document “problem” is really fraud on a massive scale.  He calls what is happening now a “foreclosure fraud crisis” that could affect 60 million properties in the U.S.  It is all because the banks have lost track of promissory notes signed by the homeowners.  I was the first mainstream media reporter to do a story on this problem in 2008.  (Click here for the 2008 “Produce the Note” story from CNN.)    Back then, some big banks could not “produce the note” that proved it had the right to take back a home.  The problem has gotten much bigger as more homeowners discover the banks do not have the original documents. 

After physical paperwork was filled out and signed by the borrower, the banks electronically filed the paperwork into a computerized system called the “Mortgage Electronic Registry System” (MERS).   According to Congressman Grayson, 60%, or 60 million, mortgages are in MERS.  The banks lost track of the original paperwork, the note, signed by the borrower.  That is what actually proves the bank owns the property.  Grayson says, “It appears that on a widespread and probably pervasive basis they (the banks) did not take the steps necessary to own the note . . . which means that in 45 out of the 50 states they lack the legal right to foreclose. . . .  So they have simply created a system where servicers hire foreclosure mill law firms whose business is to forge documents showing or purporting to show they have a legal right to foreclose.”  (Click here for the entire Congressman Grayson video statement from 9/30/10.)  

Please take a moment and grasp the enormity of this problem for the banks.  There are 60 million homes which banks loaned money on, and now they might not be able to legally get the property back if the homeowner defaults!  Another colossal problem for the banks is the trillions of dollars in mortgages bundled into securities.  Remember, the banks were giving anyone who could fog a mirror a mortgage which allowed them to create and sell lucrative mortgage backed securities.  So, there are trillions of dollars in mortgage backed securities that now could have NO backing!   Would you like to be the pension fund manager who bought that security?  Do you think this just might cause an accounting problem for the banks?  Do you think this could push some of the big banks into bankruptcy?  Will there be another financial meltdown and government rescue?

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Posted by & filed under Greg Hunter, USAWatchdog.com.

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

I was pulling up to a store yesterday in my car, listening to CNBC on XM Radio, when an interview with banking analyst Meredith Whitney came on.  I shut the car off and listened because, over the years, I have learned when Whitney talks, everybody should pay attention.  There are only two reasons why I think this way:  (1) Whitney has a track record of many good calls on the economy and banking.  (2) Her predictions are usually spot on.   

For those of you who are not familiar with Ms. Whitney, in November of 2007, she first raised the specter that Citigroup might have to cut its dividend because of losses in mortgage backed securities.  At the time, Citigroup stock was trading for around $50 a share, and everybody looked at her like she had two heads.  Whitney never backed off that call in her many interviews in the months that followed.  Citigroup, of course, did cut the dividend and almost went bankrupt.  The stock now sells for less than 4 bucks a share.

In June of this year, when everybody in the mainstream media was still hyping “Green Shoots” and the so-called “Recovery,” Whitney predicted on CNBC, “Unequivocally, I see a double-dip in housing.  There’s no doubt about it . . . prices are going down again.”  Bang!–another direct hit.  I wrote about this in a post called “Double Dips Coming Everywhere.”

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Posted by & filed under USAWatchdog.com.

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

My nephew, Luke, called me the other day vexing over the materials used in our coins.  He is a finance major in grad school and was researching money when he discovered that pennies were 97.5 percent zinc and nickels were mostly copper with only a nickel coating.  He told me he was going to start saving every pre-1982 penny he got because, after that, the mint stopped using 95% copper in the coin.  Luke told me the copper in a pre-1982 penny was worth more than two cents.   I told him, “Pretty soon the mint will have to punch coins out of plastic if the price of metal keeps going up.”  Then I asked, “Do you know why prices are going up?”  Luke said, “Yes, it’s because the Federal Reserve and its monetary policies.”  I was shocked and proud all at the same time!  It looks like he’s actually learning something in business school.  Currently, it costs about 1.8 cents to make a penny and nearly 9 cents to produce a nickel.  The government is considering cheaper metals to bring the cost of making coins down.  (Click here to see what our coins are currently made of.)  

It is said, when empires fall, one of the first signs of decline is a debasement of the currency.   Long before the Roman Empire fell, its leaders debased the currency.  The debasement was small at first, but over time, precious metals were watered down and coin sizes shrank.  For example, silver coins ended up having so little silver in them they became unpopular and shunned.  A debased Roman currency brought, what else, inflation.  Sound familiar?  

I have been asking myself for years “Why can’t we have honest money?”  We little guys are forced into the stock market to save for retirement and to stay ahead of inflation.  It now looks like the 401k is not such a good invention or investment.   

By and large, working people are pushed into 401k’s.  In the right business cycle with the right demographics (as in lots of baby boomers investing in stocks at the same time, such as the 80’s and 90’s, when business and inflation were relatively stable), the 401k is a not a bad deal, especially when you consider that companies often match or contribute funds to make the investment plan advantageous to participants.  But in the wrong part of the business cycle (aging baby boomer population and big government bailouts), the 401k can provide some gut wrenching lessons about “investing.”  People are painfully finding out that these plans have not been such a good “long term”  deal.  The S&P 500 has gone nowhere in more than a decade. Today, it’s back to 1998 levels.  (Click here to check out a chart of the S&P 500, and see for yourself.)  

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Posted by & filed under USAWatchdog.com.

Dear CIGAs,

There has been a flurry of proposals this week on how to get the economy growing again.  The President has been giving speeches across the country offering up plans for more infrastructure spending, business tax cuts and credits.  The Republican plan includes keeping all the Bush tax cuts in place and rolling back spending to 2008 levels.  Basically, the Democrats want more stimulus spending and some tax cuts, and the Republicans want more tax cuts and some spending reduction.

I do not hold out much hope for either plan to lift the deeply troubled economy.  The reason?  We are dancing around the problem child—the banks. (The  financial reform bill passed in July did absolutely nothing to fix the banks or the economy.)  On the bottom of the spectrum, about 120 banks have failed  so far this year.  Underwater commercial and residential real estate loans are swamping the banks.  The trend here is for more failures than last year.  Last week, economist Nouriel Roubini of Roubini Global Economics said more than half of the 829 U.S. banks on the FDIC’s “Problem List” are likely to fail.  (Click here for more on this story.)

In July, I wrote about the cash problems the FDIC will face next year in a post called“Banking Disaster Largely Ignored By Mainstream Media.” At the current bank failure rate, the FDIC will surely be out of cash and relying on a Treasury credit line well before this time next year.  FDIC Chairman Sheila Bair appeared on CNBC with Larry Kudlow this week.  Did he ask her about the extreme stress with the banking system because of the surge in failures?  Not a chance.  The mainstream media continues to ignore this gigantic problem.

On the top end of the spectrum, there are the “Too Big to Fail” banks.  Under Congressional pressure last year, the Financial Accounting  Standards Board (FASB) changed the accounting rules for toxic assets such as mortgage backed securities.  According to a Bloomberg report, “Changes to fair-value, or mark-to-market accounting, approved by FASB today allow companies to use “significant” judgment in gauging prices of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ write-downs and boost net income.” (Click here for the complete Bloomberg story.) To simply make up a value on questionable assets is nothing more than government sanctioned accounting fraud.  To abandon a major principal of accounting is a financial abomination!

Renowned precious metals expert Jim Sinclair of JSMineset.com has written a new book called “A Pocketbook of Gold.” Sinclair sites this mark-to-market accounting scheme, allowed by FASB, as a major reason to own gold.  Sinclair wrote, “Of course, if these toxic assets, for which there is little or no market, were ever properly taken onto the banks books, it would sink them completely. . . . The FASB changes are quite simply, a (now) legal way to lie about the financial health, and more specifically about the worthlessness of trillions of dollars of toxic assets on the Banks books.  ‘Mark-to-Market’ has become ‘Mark-to-Myth.’  In truth, the situation is dire, and banks and lawmakers are trying to push back the day of reckoning. . .”

The dramatically impaired U.S. banking system is the reason why the economy is not getting better.  According to financial writer Jim Willie, who holds a PhD in Statistics, there is only one solution to break the grip of this financial crisis.  Last week, Mr. Willie wrote, “The secret to a legitimate solution is easy. The big banks must write down their credit portfolios, and accept deep losses. If that results in liquidation, so be it!! Accounting fraud is not a substitute for restructure. Nor is dispatching badly impaired assets to the USFed, whose by all accounts is a Bad Bank Repository.” (Click here for the complete story by Willie.)

The economy cannot truly be fixed with tax breaks, stimulus, more debt or small spending cuts.  We have a deep financial insolvency dilemma.  A real recovery will only be achieved by honest reporting by the mainstream media, and honest accounting by the banks.  If we don’t demand this, then we will continue to dance around “The Elephant in the Room.”

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Posted by & filed under USAWatchdog.com.

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Dear CIGAs,

Second quarter GDP growth numbers were revised down last week to a paltry 1.6% from 2.4%.  Wall Street celebrated because some were expecting “growth” to be revised even lower.  The stock market shot up on this news, but should everyone feel relieved because the U.S. got at least some growth?  Consider this–we paid dearly for that 1.6% growth.  If you add up what was spent on TARP, the stimulus bill, nearly $2 trillion spent by the Fed buying mortgage backed securities and Treasuries and all commitments to Fannie, Freddie, FHA and the FDIC, you come up with a total of about $3.7 trillion.  This is what it cost to support the U.S. financial system according to Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program. (Click here for more on this story.) 

To me, spending or committing $3.7 trillion to the American economy and getting just 1.6% growth is frightening.  Expert trader Dan Norcini had a very sarcastic take on this subject in a recent post at JSMineset.com.  He said, “The fact that it has taken gazillions of conjured-into-existence-out-of-no-where dollars (some call that stimulus) to produce this pitiful growth rate number for the quarter, seems to have escaped the attention of the equity perma bulls who have yet to come to grips with the consequences of all of this. My own view is that it should be a relatively easy matter to get that growth rate up to double the figure given us. All we would need to do to get to 3.2% growth rate is to print twice the number of Dollars and double the rate of government indebtedness.”  (Click here to read Norcini’s entire article.)

To John Williams of shadowstats.com, anemic growth was not a surprise.  In an interview yesterday, Williams told me, “The money that was spent just went to support the banking system to help prevent a systemic collapse.  They have prevented a collapse, that’s a big plus. . . . It was not designed to stimulate the economy.  It was designed to prevent a systemic collapse.”  We did get some stimulus from the home buyers tax credit and cash for clunkers.  That’s now gone, and it probably robbed sales of cars and houses from the future.  

So where does that leave us?  We just had dismal numbers reported on jobs, housing and GDP.  Does that mean we are at a bottom?  Not a chance.  If we really were in this so called recovery, wouldn’t we have much stronger growth?  Sure we would, and the Fed also knows there is something very wrong.  It recently announced it would spend at least $10 billion a month buying Treasuries.  The Fed also suggested it would act to keep the economy from sliding further.  That doesn’t sound like a recovery to me.  It sounds like further money printing is in the cards as the economy continues to falter.   

Williams predicts the banks are going to need another “bailout.”  He also told me, next year holds a “particularly high risk for a major systemic disorder, a heavy sell off of the U.S. dollar and early stages of hyperinflation.” He also thinks the stock market is “irrational, unstable and terribly dangerous.”   

In my interview, I asked Williams where people should invest money for safety.  He would not give specific asset categories, but he did say, “You want to be in hard assets that will retain their value against inflation.”  

That sounds to me like a warning to lighten up on the stock market and buy things such as silver and gold coins.  If nothing else, be conservative and protect yourself from the downside risk.  It appears the economy is set for another slide.

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Posted by & filed under USAWatchdog.com.

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Dear CIGAs,

A little more than two months ago, banking analyst Meredith Whitney said on CNBC, “Unequivocally, I see a double-dip in housing.  There’s no doubt about it . . . prices are going down again.” I’d say unequivocally she was spot on.  A few of the hellish headlines dragging the economy down include: Existing home sales dropped 27.2 percent from June. That is a record drop and a 15 year low.  One in ten mortgage holders in America face foreclosure, according to a new report by the Mortgage Bankers Association.   U.S. home prices fell 1.6 percent in the second quarter from a year earlier as record foreclosures added to the inventory of properties for sale.  

Two months ago, in a post called “Double Dips Coming Everywhere,” I wrote, “Whitney warned as foreclosures and short sales go north, bank profits head south.”  The news stories, just this week, confirm Whitney was right again.   

A tanking housing market is not just a local issue.  Recently, one news paper in Myrtle Beach, South Carolina, explains succinctly how sour real estate problems on Main Street are traveling straight to Wall Street.  It said, “The role that mortgage-backed securities played in this nation’s economic meltdown is well-documented, both in congressional hearings and on the best-seller list.  That meltdown has led to a landmark lawsuit filed last month by an investment group that claims banks knew the securities were worthless but, driven by greed, sold them anyway.  But the Myrtle Beach area’s contribution to those toxic investments has largely been hidden in the minutiae of paperwork filed at Horry County‘s register of deeds office.  As more of the homes tied to those investments go through foreclosure, however, the path from here to Wall Street is becoming clearer.”  (Click here to read the entire article from The Sun News.)
Falling home prices and rising foreclosures are not the outcomes the Fed was looking for after spending more than $1.4 trillion buying mortgage debt.  Now, the Fed is at is again, this time, making an announcement to spend at least $10 billion a month buying U.S. Treasuries.  According to a recent Bloomberg article, it will be much more than that.  The article says,“JPMorgan Chase strategists estimated the Fed will buy about $284 billion in Treasuries during the next year.”  (Click here for the complete Bloomberg article.)

The Fed buying debt helps to suppress interest rates by creating demand.  It is no small wonder that mortgage rates fell to the lowest level on record this week!  30-year fixed-rate mortgages averaged just 4.36 percent according to government mortgage giant Freddie Mac.  Some of those cheap rates are due to low demand; but some, no doubt, are due to the Fed buying debt.  These kinds of actions by the Fed are not even close to signaling the end of a bad housing market—quite the opposite.

My favorite chart on housing says it all in one picture.  Billions of dollars in mortgage interest rate resets will be hitting the market from now until the fall of 2012.

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This chart must scare the Fed as much as anything out there.  Higher interest rates due to resetting adjustable rate mortgages will mean more defaults as people are unable to make the higher payments.  The mortgage market makes up the lion’s share of the more than $600 trillion Over-The-Counter derivatives market.  This is what some call dark pools of debt with few rules, guarantees, regulations and zero public market.  This dark pool of debt is worthless, or worth a lot less, than the original sales price.  (Some experts say the true size of the OTC derivatives market is more than $1,000 trillion.)  If these securities start going sour in mass, it will be “deja vu all over again.”  Another financial meltdown would occur, and there is no guarantee the Fed could stop it as it did in 2008.  

According to John Williams of Shadowstats.com, the recent bad housing news is signaling what he calls an “intensifying depression.”  The Fed is looking, once again, like the buyer of last resort by printing money to buy trillions in debt from Treasuries to mortgage backed securities.  This is very dangerous and could spiral out of control, according to Williams.  He’s been warning about this kind of scenario for a couple of years.  In May, he wrote, “. . .eventually domestic and foreign balking at buying U.S. Treasuries should become widespread, with Fed becoming the buyer of last resort, monetizing that federal debt. Coincident with that likely will be heavy dumping of the U.S. dollar and dollar-denominated paper assets. Such should spike U.S. money supply and dollar-based oil prices. The pace of inflation would tend to pick up significantly in response to these circumstances, setting the stage for . . .  hyperinflation.”

I think the choice is coming down to defending the dollar, or printing money to buy debt, which will stem defaults and hold interest rates down.  With zero interest rates and massive money printing, it sure looks like the dollar is damned.  The only question–how much will it fall?

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Posted by & filed under USAWatchdog.com.

Jim Sinclair’s Commentary

Slowly the Sheeple are waking up.

MOPE is becoming less effective. This is how trends start.

Dear CIGAs,

Recently, a new Gallup poll delivered some bad news to mainstream media–only one fourth of people asked believe what it says.  The Gallup story said, “Americans continue to express near-record-low confidence in newspapers and television news – with no more than 25% of Americans saying they have a “great deal” or “quite a lot” of confidence in either.”  (Click here for the complete Gallup story.)  

This is not a recent trend according to Gallup and other polls done on this subject.  Last summer, comedian Jon Stewart of the “Daily Show” was “Most Trusted” newscaster.  I wrote about this in a piece I did last year called “The Soft Truth.”  I said, “He had almost as many votes as Charlie Gibson and Brian Williams combined.  Katie Couric, according to the Time Magazine poll, came in dead last.  Boy, if that is a not a wake-up call to mainstream media, I do not know what is. . . . Doing superficial event type news programming is something I call “The Soft Truth.”  It is more or less superficial news and is cheap, fast to produce, and you will not make enemies. The news in mainstream media has mostly become just the stuff between the commercials. Then, there is what I call “The Hard Truth.” This story is not cheap, it ties up the company lawyers and management and, if done right, you will piss some people off.  And even if there are cutbacks because of advertising shortfalls, you can still ask hard questions.”  (Click here for the complete soft truth story for September of 09.) 

Do you see any reporters even asking any hard questions these days?  I guess I should be happy the mainstream media is in the tank because Internet sites like this one and many others are gaining popularity for exposing “The Hard Truth.”  I am also not exactly sure why the mainstream media acts this way.    

Maybe the press, as a whole, is just not brave enough to put out the real story.  Some journalists are doing good reporting, but often their stories are downplayed or are accused of spreading unfounded doom and gloom for telling the truth.   Maybe corporate America, which owns most of the mainstream media, is subtly distorting the news to make things look better than they really are.   The mainstream media completely missed the financial meltdown of 2008 and covered it like some unforeseen event.  There were plenty of signs we were headed for trouble, and no one wanted to report on them except a few people.  Here is what I said on CNN in March 2008.

Now, we are headed for trouble again and, yet, the mainstream media is engaged in this idiotic debate on whether or not there is going to be another plunge in the economy.  Nearly all the signs are pointing down, and difficult questions are arising about the solvency of America.  Recently, Laurence Kotlikoff, an economics professor at Boston University, cited an IMF report and said the U.S. is “Bankrupt.”  Why is this not news and at least worthy of as much equal time as the pin-headed Jet Blue flight attendant that slid down an escape hatch at JFK airport?  Please tell me why the USA being “bankrupt” isn’t of profound importance to every single American?  Every week, the mainstream media makes my point by pushing worthless cheap content.  It budgets for superficial stories (The Soft Truth) and ignores the really important stuff (The Hard Truth) that might call for some tough questions and ruffled feathers.

I worked for ABC and CNN for 9 years as an investigative reporter.  I didn’t get a story on the air without approval from the company lawyers and management.   The networks and cable are doing a lot less of that kind of work these days because they don’t want to spend the money.  Mainstream media is putting its resources on superficial stories instead of covering news that really affects your life.   So, when I hear polls that say people do not trust the mainstream media, I am not surprised.

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