AS helicopter Ben Bernanke testifies before Congress, we see yet again that all the quantative easing that the Fed has done has yet to ‘jump start’ the economy. At best and this is a huge supposition, the economy isn’t in total shambles.
On the human end of things, most people that are still without jobs their lives are in complete shambles. I think it is fair to say that there are millions out there that would love to work, unfortunately there are damn few jobs out there.
Why can’t those that had jobs become employed you might ask? There are so many reasons such as; Age discrimination, the older you are the more likely that you are laid off first and will be the last to be hired-if at all; many have simply given up looking for a job now, after 99 weeks the benefits are all gone and the psychological toll on many is overwhelming. Calls to suicide hot lines have tripled since 2008.
The devastation to the economy just gets worse as these unemployed folds that have mortgages lose their homes, over 6 million foreclosures since 2008. Entire neighborhoods are affected as prices fall dramatically with no buyers. Many end up in shelters or if fortunate with family and/or friends.
The health consequences are also huge as the stress causes multiple health issues and without money to pay for insurance and/or treatments the medicaid system is taxed to the limits.
These are just some of the effects of our current state of affairs. The problems in our economy are now so systemic that it will take someone with incredible courage to ‘right this ship’. Again unfortunately politicians are not the guys that will do anything about this. They don’t really know enough about economics and business to make good judgement calls. They depend on special interest groups to educate them and that is really unfortunate as these groups have highly skewed view points.
Alas, it always comes down to money! Those that can pay the lobbyists get the rules that favor them to the exclusion of everyone else. It can get better but it will take the efforts of everyone united.
Why aren’t these unemployed out in the streets protesting the lack of attention on the economy? Well when you don’t have anything it is very difficult to drive down the street much less go farther afield to attend a rally….
What a system, wipe out the middle class and take away everything, even their voice! Have we become a feudal society?
We will continue to see more and more foreclosures, especially now that the government has ‘settled’ with the big banks that have abused the entire process from loan to foreclosure.
I am wondering what will happen to the funds awarded to the government to ‘help’ those homeowners that have been abused? I suspect that pennies on the dollar will actually end up in the hands of the abused and probably too late to matter, as the government in their efficient execution eats up all the dough and takes their sweet time in doing so.
The criminal activities will proceed most likely in many states. It appears to be difficult for these folks to actually follow the law while they use it to protect themselves. Way too much money involved here to not see abuses.
What have we come to?
States with the most homes in foreclosure
Five major U.S. banks accused of foreclosure abuses have agreed to a $26 billion settlement with the government, the largest payout from banks arising from the financial crisis. The amount, which will include aid from banks in the form of loan forgiveness and refinancing, is intended to help homeowners avoid mortgage default and foreclosure. Most economists believe this is a step in the right direction, albeit only a small one.
Homeowners in at least 49 states represented in the agreement will benefit, though some states have more homes in trouble than others. California, one the hardest-hit states in the foreclosure crisis, will reportedly receive mortgage relief of up to $18 billion. Based on Corelogic’s national foreclosure report, 24/7 Wall St. identified the states with the highest foreclosure rates.
Many of the states with the highest foreclosure rates experienced the worst of the housing crisis. However, analysis by 24/7 reveals that the primary driver of higher foreclosure rates is a lengthy foreclosure process.
Nearly all of the states with the highest rates also have the longest foreclosure periods. The average foreclosure process for the nation is 140 days. The average foreclosure process for the eleven states with the highest foreclosure rates is 220. As a result, many homes foreclosed in 2011 in these states were actually at the end of a process that began more than a year ago. New York, one of the states with the worst foreclosure rates, has an average processing period of 445 days.
The reasons why the foreclosure processing period is longer in these states is because it usually involves the court system. Judicial foreclosures are handled by the court and usual include filing motions and seeking a final judgment from a judge. Nonjudicial foreclosures, which tend to take less time to process, are governed by state law and do not require court intervention. Nine of the 11 states with the highest foreclosure rates have a judicial-only foreclosure process.
While some of the states with high foreclosure rates have had substantial improvements in their economies, others continue to be hit hard. In Nevada and Florida, two states with the highest foreclosure rates, homes lost roughly half of their value over the past five years — and prices are still falling. Foreclosures that began several years ago and that are still active cannot be the only reason nearly 12% of Florida’s homes with mortgages were in foreclosure last year. Home prices in the state fell nearly 50% over the past five years, unemployment remains extremely high, and 17.4% of people with mortgages in the state were 90 days or more late on their mortgage payments.
24/7 Wall St. reviewed housing data provided by Corelogic to rank the states that had the highest percentage of homes with mortgages that were in foreclosure in 2011. Corelogic’s report also provided the percentage of homeowners that were delinquent on their mortgages for 90 days or more last year. In order to highlight the conditions of these state economies and housing markets, we included unemployment rates from the Bureau of Labor Statistics and home price changes from Fiserv-Case Shiller.
Check out the five states with the most homes in foreclosure:
5. New York
2011 foreclosure rate: 4.6%
December, 2011 unemployment: 8% (23rd highest)
Home price change (2006Q3-2011Q3): -13.6% (23rd largest decline)
Processing period: 445 days
New York’s processing period for foreclosures is 445 days — by far the longest among all states. This could explain why the state has such a high foreclosure rate for mortgaged homes. And although New York’s housing prices didn’t decline as much as in other states, the 13.6% decline since the third quarter of 2006 is still quite large. Moreover, home prices are forecast to decrease among the most in the country over the next year and drop nearly 6% by the third quarter of 2012.
2011 foreclosure rate: 5.3%
December, 2011 unemployment: 12.6% (the highest)
Home price change (2006Q3-2011Q3): -59.3% (the largest decline)
Processing period: 116 days
For Nevada, things aren’t going well. Its already dismal economy and housing situation are still getting worse. Nevada didn’t experience a glut of foreclosures last year because the state has a particularly lengthy foreclosure process. Between the third quarter of 2006 and the third quarter of 2011, the median home value in the state tumbled by nearly 60%. By the third quarter of this year, Fiserv-Case Shiller projects home prices will fall an additional 13.9% — by far the worst drop in the country. Nevada has the worst unemployment rate in the country, at 12.6%, and 13.4% of mortgage owners were delinquent on payments for 90 days or more last year.
2011 foreclosure rate: 5.4%
December, 2011 unemployment: 9.8% (7th highest)
Home price change (2006Q3-2011Q3): -29% (7th largest decline)
Processing period: 300 days
Home prices in Illinois have dropped 29% from the third quarter of 2006 — one of the largest declines in the country. It also takes 300 days to process foreclosures in the state. And Illinois residents are not lining up to pay off their mortgages either. The state’s 90+ day delinquency rate for mortgage payments is 9.2%, the fourth highest in the country.
2. New Jersey
2011 foreclosure rate: 6.4%
December, 2011 unemployment: 9% (13th highest)
Home price change (2006Q3-2011Q3): -22.6% (14th largest decline)
Processing period: 270 days
New Jersey has one of the longest foreclosure processing periods in the country at 270 days. The state also has a 90+ day delinquency rate of 10.6%, which is the third highest rate in the country. On top of this, the state’s housing market is not expected to rebound for some time. In fact, home prices are forecast to decrease an additional 3.9% by the third quarter of 2012.
2011 foreclosure rate: 11.9%
December, 2011 unemployment: 9.9% (6th highest)
Home price change (2006Q3-2011Q3): -49% (3rd largest decline)
Processing period: 135 days
Florida’s 2011 foreclosure rate for mortgaged homes is not only the highest in the country, but it is almost twice that of New Jersey — the state with the second-highest rate. As with many other states on this list, Florida has a very long foreclosure processing period of 135 days. There is more to the state’s high foreclosure rate than just that, however. Home prices dropped 49% since the third quarter of 2006, which is the third-largest drop in the country. The state’s unemployment rate of 9.9% is among the highest as well. Finally, the state’s mortgage payment delinquency rate is 17.4% — the nation’s absolute highest
There is some good news though. Several cities in Florida including Miami have seen a bounce in home prices over the last year. Several other cities in the worst hit states have also recovered in home prices somewhat. I hope for the best here.
Reading about the steps taken to ‘remedy’ the economic/finanical disaster in Spain (all of Europe looks pretty much the same) is like looking at 2008/2009 here in the U.S. all over again!
Merging banks, huge write downs on real estate etc. My issue is why did it take so long to hit Europe? Did they think they were immune to financial mismangement?
Spain to Unveil Bank Overhaul to Clean Up Real Estate
By Emma Ross-Thomas – Feb 2, 2012 5:51 AM MT
Spain is set to announce today its plan to shepherd struggling banks into mergers and make the industry set aside 50 billion euros ($66 billion) for real- estate assets left over from the bubble that burst in 2008.
The government will issue debt and inject the funds into banks via contingent convertible bonds, or CoCos, which convert into equity if capital ratios fall below a certain level, a person familiar with the process said yesterday. It will only support banks that merge and those lenders will also have more time to apply new provisioning rules, the person said.
Economy Minister Luis de Guindos speaks to reporters at 5:30 p.m. in Madrid today and the plan is due to be approved by the Cabinet tomorrow. The ministry gave no more details in an e- mailed statement.
Prime Minister Mariano Rajoy, in power since December, has pledged a “true restructuring” of the industry at no cost to the taxpayer four years after the decade-long property boom collapsed. Lenders have about 176 billion euros of what the Bank of Spain terms “troubled” assets linked to real estate on their books, including land and unfinished apartments, and have provisioned about a third of that.
“They don’t want it to cost the taxpayer anything, they don’t want to use EU bailout funds and they need it to be credible for the market, and those three conditions are apparently incompatible,” Fernando Fernandez, a professor at IE business school in Madrid and a former International Monetary Fund economist, said in a telephone interview.
The former Socialist government’s first initiative to help banks was to create the FROB bailout fund in 2009, which spent about 10 billion euros buying preference shares in lenders it encouraged to merge. In a second phase, the government bought ordinary shares in struggling lenders last year and in October, in a bid to shield the budget from further strain, it decreed that any losses generated by the overhaul would be absorbed by the industry.
Rajoy, who leads the pro-business People’s Party, had considered creating a so-called bad bank to buy toxic real- estate assets from lenders, two people familiar with the situation said in November. A bad bank may have clashed with Rajoy’s election pledge not to spend taxpayers’ money cleaning up lenders. Rajoy and Guindos have also ruled out using the euro region’s bailout funds to finance the overhaul.
Spain, which pays about less than 4 percent to borrow for five years, will issue debt to fund its purchase of the CoCos, which will yield 8 percent, said the person, who declined to be identified because the plan isn’t yet public. The Treasury sold five-year bonds today at 3.455 percent, down from 4.021 percent last month, as the European Central Bank’s policy of extending longer-term loans to banks bolstered demand for sovereign debt.
The plan to be unveiled today won’t have any impact on the budget deficit, the person familiar with the process said yesterday. Still, the CoCos may end up being converted into equity, Fernandez said, as the IMF forecasts Spain’s economy will shrink for the next two years, adding to pressure on banks.
“Barring positive surprises on economic growth, it’s probable the CoCos will end up being converted into shares and so we would be just postponing the cost to the taxpayer,” said Fernandez, who used to be chief economist at Banco Santander SA.
De Guindos said on Jan. 27 that banks were themselves capable of funding the 50 billion euros of additional provisions he wants them to make for real-estate. Provisioning efforts will be “especially dedicated” to foreclosed assets, particularly “land and other kinds of property,” he said in an interview in Davos, Switzerland, last week. Lenders the government thinks aren’t viable in the medium term will have to merge, he said.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at firstname.lastname@example.org
The liklihood of a strong economic rebound worldwide is not a very high probablility in my mind, regardless of our stock market having the best January in many years etc…Economic outlook is still very bleak in my mind!
As if TARP money wasn’t enough…7.7 trillion in loans to bail out the criminals that caused the problem? Really? Someone needs to go to Jail in my opinion! If you or I did such things it would be fraud or worse…
That these guys still can’t get it right, look at Europe and our Too Big To Fail Banks with tons of derivative risk guaranteeing all that debt prompting yet another round of free money!
Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”
The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.
The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.
Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment.
The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.
“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.”
The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland.
The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.
The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment.
The six — JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.
While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says.
Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”
On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.
Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup.
“I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee.
Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.
“We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs.
“We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”
Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival.
It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank.
“The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.”
The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.
TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.
“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.
Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.
Lawmakers knew none of this.
They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.
Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.
Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.
Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard — the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.
If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.
Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.
“Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.
For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.”
Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.
‘Wanted to Pretend’
“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.”
Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.
Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase.
“These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo.
JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.
“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.”
The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms.
“When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.”
Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.
‘Can We Survive?’
“The amount of pain that people, through no fault of their own, had to endure — and the prospect of putting them through it again — is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?”
Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up — a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported.
Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF.
The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.
In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.
“The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”
Dearie says his group didn’t mean to imply that Williamson endorsed big banks.
Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.
On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission.
At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman.
Anthony Coley, a spokesman for Geithner, declined to comment.
Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says.
The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble.
Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner.
“Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter — getting loans at below-market rates during a financial crisis — is quite a gift.”
The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg.
The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest.
Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.
The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show.
The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion.
“The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia.
While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out.
Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.
Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed.
“Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?”
In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise — to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).
Occupy Wall Street
The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California.
The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor.
“The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”
In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries.
They take full effect in 2019.
Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”
To contact the reporters on this story: Bob Ivry in New York at email@example.com; Bradley Keoun in New York at firstname.lastname@example.org; Phil Kuntz in New York at email@example.com.
This is very serious business folks and your ability to Survive and Thrive are on the line now!
In my opinion, France will soon become the next victim of the sovereign debt fall out amongst the EU countries. Let’s fact it, there is a HUGE crisis of confidence and trust in the financial system worldwide. While the leaders are focused on the numbers, mostly from the worst possible perspective-at least in my opinion, the people are seething.
How can anyone in their right mind think that these illustrious leaders are going to get it right this time after multiple failures starting with the Lehman debacle to the recent MF Global catastrophe and, last but certainly not least, the European Sovereign debt debacle? Of course, to be fair it all really started with very loose regulations coming from decades of official deregulation of financial industries and the advice given to our leaders by none other than the people most responsible for creating this mess!!!!
Realize that the sovereign debt is just the tip of the iceberg, and it is melting down pretty quickly at this point. No matter the words you hear, because the news is tightly controlled and ‘they’ don’t want you to hear the truth of it, this entire financial system is in meltdown.
The most immediate problem, not the only one by a long shot, is that all the holders of this toxic sovereign debt which would include just about every large and medium sized bank in the world have to write down a ton of this debt. With that write down the banks have less capital and to maintain the required capital to loan ration they must either raise more capital-hardly likely right now given the economic/political disarray in the U.S. and Europe-sell assets and reduce their loan exposure and/or borrow from the Central Banksters.
As I see it, they are borrowing from the Central Bank, which just creates money out of thin air, to shore up their capital which is in itself not a long term strategy but only a very quick and short term fix and selling assets to raise liquidity while at the same time reducing their loans portfolios-which of course will put the respective economies into a recession…Does all this sound familiar?
We have been replaying this scenario from coast to coast and continent to continent for the past 3 years, over and over again with much the same results-slowing economies, rising unemployment, more real estate woes as foreclosures rise and values fall which leads to further deterioration of existing loan portfolios (did anyone catch that Fannie Mae and Freddie Mac require more billions to cover losses last quarter?) and the need to raise even more capital.
Of course as the economies slow down companies-large and small- have a harder time servicing their debts and have to layoff more people in the face of declining sales. You get the idea of how vicious this cycle is? I think we will continue to see this scenario play out except now we have entire governments/countries falling under the sheer weight of debts they cannot possibly repay!
I have very little faith, as do most people now, that our illustrious leaders can pull yet another rabbit out of the hat! We are seeing the beginnings of a ‘bank run’ on the European banks as the larger money market funds pull out of the larger European banks (Deutche Bank lost over 6 billion in one single day last week from this reaction by just one money fund). In my opinion it is just a matter of time before the people start to ask for their cash!
Once the people lose faith then to see what might happen rewind to the Argentinian crisis of the last decade! Perhaps a look at the first Great Depression from a historical perspective would be in order as well!
I hope I am wrong about the outcome here as it will make things so difficult that we cannot imagine. Not only that but very few have the grit and determination to weather such a storm! Chaos could ensue and that folks is not a pretty thing.
The good news, from the ashes comes the Phoenix…the people will get another chance at this and I hope that they will be much better informed of the possibilities than most are now!
Is anyone surprised that existing home sales declined? It appears that someone on the ‘street’ was by the tone of the article below. I don’t think we are in a recovery that means anything to the vast majority of Americans. Yes, Wall Street has done some recovering, just look at the bonuses that have been paid-a true sign of progress eh?
Main Street on the other hand is doing quite badly it appears. Small businesses are not hiring, although some claim that these businesses are hoarding cash, which makes sense when you look at the structural indicators like housing, overall employment, manufacturing and such which are all down in general.
Housing won’t be coming back anytime soon I am afraid!
Existing-Home Sales in U.S. Unexpectedly Fall
By Bob Willis – May 19, 2011 8:25 AM MT Bloomberg
Sales of existing U.S. homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.
Purchases of existing homes dropped 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today in Washington. A 5.2 million rate was the median projection in a Bloomberg News survey and the April figure was less than the most pessimistic forecast. The median sales price declined from a year earlier and 37 percent of transactions were of distressed dwellings.
Falling prices and the prospect of more foreclosures entering the market signal more Americans may be hesitant to purchase homes. With unemployment at 9 percent and wages stagnant, any sustained recovery in residential real estate may take years to unfold.
“The housing market continues to grind along the bottom,” said Richard DeKaser, an economist at Parthenon Group in Boston. “The bad news is there’s no market recovery unfolding. The good news is we’re not taking a double-dip in sales.”
Estimates for home sales ranged from 5.09 million to 5.40 million, according to the median of 75 forecasts in the Bloomberg survey. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.
Stocks trimmed gains after the housing figures and another release showing manufacturing may be cooling. The Standard & Poor’s 500 Index rose 0.3 percent to 1,343.98 at 10:11 a.m. in New York.
The Federal Reserve Bank of Philadelphia’s general economic index fell to 3.9 in May from 18.5 a month earlier. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 59 economists surveyed by Bloomberg called for a gain to 20.
The Conference Board’s index of leading economic indicators fell in April after nine months of gains, depressed by a pickup in jobless claims that reflected temporary setbacks including auto-plant shutdowns. The gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg survey.
Another report today from the Labor Department showed fewer Americans than forecast filed first-time claims for unemployment benefits last week. Applications declined by 29,000 to 409,000. Economists projected 420,000, according to the median forecast in a Bloomberg survey.
Of all purchases, cash transactions accounted for 31 percent after a record 35 percent in March, NAR chief economist Lawrence Yun said in a press conference as the figures were released. The Realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun has said.
Distressed sales, which comprise foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 37 percent of the total after 40 percent in March, Yun said.
“We still have a very large foreclosed, distressed inventory that needs to be worked through,” Yun said.
Existing-home sales decreased in three of four regions in April, led by a 7.5 percent drop in the Northeast. Purchases climbed in the Midwest.
The median sales price fell 5 percent last month from April 2010 to $163,700.
The number of previously owned homes on the market rose to 3.87 million in April from 3.52 million. At the current sales pace, it would take 9.2 months to sell those houses, the longest since November, compared with 8.3 months at the end of March. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
CoreLogic Inc. in March estimated about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the unsold supply of existing houses already on the market.
More than half of U.S. homeowners and renters say housing won’t recover until at least 2014, according to a survey released yesterday by Trulia Inc. and RealtyTrac Inc., collectors of real-estate data.
View of Market
The survey, taken in April, found that 54 percent of respondents don’t expect a recovery for at least three years, up from 34 percent in November. Those who see a turnaround by the end of next year fell to 15 percent.
Homebuilders are seeing no gain in demand as they are forced to compete with cheaper, foreclosed properties. Builders began work on 523,000 houses at an annual rate in April, down 11 percent from the prior month, the Commerce Department reported this week. Housing starts dropped to a record low of 478,000 in April 2009.
Douglas Yearley Jr., chief executive officer at Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”
Demand for new houses will remain weak into next year, said Bill Wheat, chief financial officer of D.R. Horton Inc., who last week also projected a housing recovery will take time to develop. “We feel it could still be a struggle in 2012.”
To contact the reporter on this story: Bob Willis in Washington at firstname.lastname@example.org
I would really like to sell my house up here in Colorado, in the mountains, beautiful setting and everything and very close to the ski slopes. Unfortunately, the housing foreclosures have also dampened prices up here also. Any buyers out there?
As some say the markets are front runners of trends, and I say this tongue in cheek since we have been trending to more and more economic trouble for years without any significant, sustained correction, we see several days of stock market sell off and Treasury prices rising with yields decreasing.
Now we have rising inflation, bond prices rising (strange since the value of the asset erodes with inflation), gold prices at highs as well as silver and a domestic and global economy mired in debt and no to slow growth.
What to do here? Stay focused and alert. Do what you think is best…my personal opinion is at the close of the article.
Dismal Data Boost Treasurys
By MIN ZENG
The steady drumbeat of dismal U.S. economic data continued Tuesday, driving investors into safe-haven Treasurys and pounding key yields down to five-month lows.
Disappointing U.S. housing and industrial-production figures are the latest underwhelming indicators in recent weeks as the market continues to focus on slowing growth. Inflation, the main threat to bond’s yields, remains the least of considerations.
Dimming growth prospects also undercut the appeal of riskier assets such as stocks and commodities, adding to the flight to safety.
“For now, the path of least resistance is lower yields,” said Mark MacQueen, partner and portfolio manager in Austin, Texas, at Sage Advisory Services Ltd., which oversees $9.5 billion in assets.
In late afternoon trading, the benchmark 10-year note was 9/32 higher to yield 3.118%. The yield earlier touched 3.096%, the lowest level since Dec. 7, when the yield last traded below 3%. Bond yields move inversely to their prices.
Chris Sullivan, who oversees $1.77 billion as chief investment officer in New York at the United Nations Federal Credit Union, said the 10-year note’s yield—which traded above 3.5% in early April—could test the 3% threshold in the short term. He said a break of that barrier could push the yield down to 2.92%.
Mr. MacQueen said 3% is possible in the near term, though he said the market is overbought and at risk of corrective selling. But, he added, a fall below 3% “will take an equity selloff, sovereign crisis or measurable deterioration of the economy.”
Many investors also have cut holdings in stocks and commodities in favor of Treasurys over fears that demand for risky assets could falter once the Federal Reserve completes its $600 billion Treasury bond buying program in June.
The Fed’s quantitative-easing measures to juice the economy, launched in November, have been a major driver pushing up prices of risk-based assets.
Investors now are worried about U.S. growth if monetary stimulus is pulled back at the same time fiscal stimulus is stymied by budget cutting in Washington D.C.
In addition, rallying Treasury prices on their own have created an updraft, as investors betting on price declines—or “shorting” the market—are forced to purchase securities, and increase demand, to unwind those bets.
Kevin Walter, head of Treasury trading at BNP Paribas, said Tuesday’s data forced some hedge funds to cover shorts, especially as the 10-year yield broke 3.14%, a level it has failed to close at in each of the past week’s sessions.
Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, said some investors were “caught off guard” by the continued decline in yields. He expects more unwinding of shorts as the 10-year yield moves closer to 3%.
Write to Min Zeng at email@example.com
I am planning on buying more silver sometime in the near future.
As we have been saying for sometime now, the home/equity/mortgage issues are not going away anytime soon and BoA is acknowledging this to it’s shareholders. With the proposed settlement of 5 billion for all the crooked mortgage docs etc. (which will probably be accepted to the chagrin of all the folks screwed) on top of falling prices as more homes are foreclosed on and sold at fire sale prices affecting all the other homes in the neighborhood and no end in sight, these banks are in a very precarious situation.
If it is bad enough to warn shareholders, you and I need to pay attention here as the ‘too big to fail’ banks continue to be at risk of failing! Another bailout would come, over the protests of the citizens, to ‘save’ the system. A system that is completely bankrupt, financially and morally!
We need to find solutions for our families and communities and these WILL NOT COME FROM GOVERNMENT! We have FEMA camps as the most likely government solution to upheaval…
I urge everyone reading this to consider these ideas. That this economy is in deep trouble should be clear to anyone with half a brain.
BofA CEO: Housing Faces ‘Enormous Challenges’
Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan told shareholders today the nation’s housing market faces “enormous challenges” and that the lender is still struggling to contain bad mortgages.
The bank, the biggest in the U.S. by assets, is putting “legacy” loans behind it and must resolve issues that arose after the acquisition of Countrywide Financial Corp., said Moynihan, 51, at the company’s annual shareholders meeting in Charlotte, North Carolina, where the bank is based.
Refunds and legal settlements tied to defective home loans dragged down first-quarter profit 36 percent to $2.05 billion, and the mortgage unit “still struggles mightily,” Moynihan said. Bank of America is the biggest servicer of U.S. mortgages, and is among firms negotiating with state attorneys general on potential penalties for faulty foreclosures.
Fourteen of the largest servicers including Bank of America signed a consent decree in April with the Federal Reserve and Office of the Comptroller of the Currency that compels them to pay back homeowners for losses on foreclosures that were mishandled, and to overhaul procedures for seizing homes.
Earnings are suffering from excess risk taken on when the firm acquired Countrywide in 2008, Moynihan said. While regulators at the time welcomed the bank’s rescue of Countrywide — which had been the biggest U.S. home lender — “attitudes have changed,” he said.
The bank has worked over the last year to rebuild a “fortress balance sheet” and capital cushion “to make sure we can handle anything that comes our way,” Moynihan said. Capital ratios are the strongest in a decade and the core franchise is strong, he said.
Moynihan told attendees today that the company needs to resolve concern about bad mortgages and lower the perceived volatility of the firm in the eyes of regulators before trying again to win approval of its capital plan, which would allow the company to raise its dividend. The plan will be resubmitted when management is sure regulators will accept it, he said.
Bank of America was left behind as competitors including JPMorgan Chase & Co. and Wells Fargo & Co. passed a Federal Reserve review of their capital plans and then increased their payouts. Moynihan had told investors in January and March that he believed the firm could raise its dividend this year. Bank of America had a 64-cent quarterly payout until 2008; it’s now a penny a share.
Promising a dividend before knowing you could deliver it was a “rookie mistake,” said Tony Plath, a professor of finance at the University of North Carolina in Charlotte who follows Bank of America. Moynihan became CEO in January, 2010.
“You can’t be a rookie CEO when you’re running a $2 trillion company,” Plath said in an interview before today’s annual meeting.
Investor Judith Koenick, who said her income was slashed when the dividend was cut, said Moynihan and other executives should forgo bonuses until they fully restore the payout.
“I would like you to explain how you’re entitled to all this money when you’re still sticking it to shareholders,” said Koenick of Chevy Chase, Maryland. “You should not be taking more than a dollar until you get the stock back up to where it was before you and your predecessors screwed it up.”
To contact the reporter on this story: Dawn Kopecki in Charlotte at firstname.lastname@example.org.
Continue to stock up on food and other supplies. I think we will get another great opportunity to purchase silver and gold in the next few days or weeks. Silver is now at around 35.50 as I write down from over $40.00 just a week ago.
I wish I had better news this Monday morning, but the housing crisis as we all know has not abated and is in fact picking up some steam. Since 2008 home prices are down about 30% from their peak and the foreclosures are going to really increase this year, up to 20% more this year than last as over 28% of homeowners are upside down now.
With that many foreclosures home prices are going to get really hammered as the distressed homes come into the market. Some homeowners are strategically deciding not to pay their mortgage even though they can while others just can’t. Some economists say that this ‘additional’ income that families are getting by not paying is really helping out our economy since it is about 70% consumer spending-in itself an unsettling statistic don’t you think?
Meanwhile Goldman Sachs is trying to talk the commodity markets down saying that the recent rout in commodity prices is taking all the steam out of the speculators engines. To me that is not a bad sign, however I would heartily disagree with their analysis. Commodity prices will continue to increase as the dollar becomes weaker. Gold and Silver are great hedges, especially silver considering the fall it experienced just last week. I am a buyer now.
Will the recent floods of crop land, tornadoes, fires and droughts affect our ability to buy food in the grocery store? I think we will continue to see some shortages and will see some items at very high prices in the days and weeks to come.
As always please stay focused on the events around you, read between the lines of the news and make some preparations if you feel so moved.
As we have been saying for some time now, the good ole U.S.of A. is technically busted financially! I guess we have been saying this for at least 2 years now if not longer (privately I have held this belief for a decade at least) and now Moody’s and Standard and Poor’s rating services have just now ‘almost’ agreed with me by putting the debt of these United States on CREDIT WATCH!
For those of us that cannot remember what this means think back to Greece, Ireland and Portugal…all countries that went on Credit Watch just before having their respective debt rating reduced, and in some cases to JUNK STATUS! So you might ask what might this mean for me? Well look at the Austerity programs introduced in these countries to control the debt and hopefully reduce it. While all the austerity measures were being put into place the cost to ‘roll over’ or ‘refinance’ debt coming due was, and in some cases remains, extremely high.
What does this look like? Well what you were paying for example for 10 years worth of money evidenced by a 10 year note might have been 3 or even 4% will now cost you maybe 8 or 9%…imagine the growth of debt at 2 times the interest rates! That is assuming you can attract enough buyers even at that price. And speaking of price what you paid 100 cents on the dollar for would now be worth a lot less, I mean a lot! This could cause such turmoil in the market that no one will be able to believe, as the holders of now almost worthless debt seek to sell at whatever price they can get driving down the prices even further and faster as the Central banks try to buy up everything that is offered just to keep the panic somewhat at bay!
Of course, when the Central banks buy anything they are using newly created currency…thus making whatever currency they are using more and more worthless! Imagine that a dollar that isn’t worth spit!
I expect gold and silver to continue to soar, the stock market to continue to trend lower and all hell to break loose very soon!
Imagine this situation exacerbated by some even larger natural disaster…massive evacuations of Japan as it becomes more and more uninhabitable…scenarios that are too hard for most to believe….but too hard not to consider, considering the nature of the natural events occurring with even more frequency throughout the world.
I have and continue to urge everyone to prepare or continue to prepare. Precious metals, especially silver and storable foods!