Iceland could be the model for economic crisis

As I have said many times in the past, Iceland stands out among all countries as the model for dealing with an economic/debt/housing crisis. At the very core it appears that their government, after a few crucial changes at the top, moved on behalf of their citizens and not with their core banks.

 

They nationalized them, a necessary step to rid the system of the wolves that were ready to eat their own children if necessary to make money, and then forgive a ton of debt of the citizens, especially those that had mortgages on homes that were out of balance with prices.

 

The results are a growing economy, 10 times the growth of the EU, and in general a satisfied populace, they know that they have the power to change the system now and will not forget it soon. Something that should have come out of the Occupy Wall Street movement.

 

Why Greece doesn’t do something similar, something that would fit into their particular situation is beyond me. Seems as if their government is all about becoming better serfs to the system and dragging all their citizens along with them.

 

By Omar R. Valdimarsson – Feb 19, 2012 5:01 PM MT

Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.

 

Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.

 

“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”

 

The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.

 

The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.

Crisis Lessons

 

“The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”

 

Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said.

 

Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.

 

Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”

People Vs Markets

 

Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.

 

Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.

 

Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.

 

“There are indications that some of the financial institutions in question haven’t lost a penny with the measures that they’ve undertaken,” she said.

Fresh Demands

 

According to Kristjan Kristjansson, a spokesman for Landsbankinn hf, the amount written off by the banks is probably larger than the 196.4 billion kronur ($1.6 billion) that the Financial Services Association estimates, since that figure only includes debt relief required by the courts or the government.

 

“There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjansson said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”

 

As a precursor to the global Occupy Wall Street movement and austerity protests across Europe, Icelanders took to the streets after the economic collapse in 2008. Protests escalated in early 2009, forcing police to use teargas to disperse crowds throwing rocks at parliament and the offices of then Prime Minister Geir Haarde. Parliament is still deciding whether to press ahead with an indictment that was brought against him in September 2009 for his role in the crisis.

 

A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.

Legal Aftermath

 

Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.

 

Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.

 

That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.

 

The U.S. subprime crisis sent home prices plunging 33 percent from a 2006 peak. While households there don’t face the same degree of debt relief as that pushed through in Iceland, President Barack Obama this month proposed plans to expand loan modifications, including some principal reductions.

 

According to Christensen at Danske Bank, “the bottom line is that if households are insolvent, then the banks just have to go along with it, regardless of the interests of the banks.”

 

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

 

I applaud the citizens of Iceland. They have shown the world what can be done when the people come together. Of course, they have the advantage of a relatively homogenous population that can agree on a single basic goal, criminal activity should never be rewarded and the good of the people trumps the ‘good’ of the corporate banksters.

BoA sees big problems in residential real estate

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.

 

Countrywide Impact

 

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.

 

Promises Made

 

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 dkopecki@bloomberg.com.

 

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.

 

 

 

Plot thickens in mortgage frauds

Now that the FED and others, both public and private, are going after Bank of America for failed mortgages, BoA is suing the FDIC for fraudulent mortgages they own generated by a ‘failed’ lender.

This is going to be an interesting tale to tell your kids and grandkids! How the banks and government fought a war and all we have to do is wait and see who wins! I have this nagging feeling that the winner will not be us…the people. No, we will be left holding whatever bag one or the other leaves behind.

FDIC Sued by Bank of America Over Taylor Bean Mortgage Losses

By Karen Gullo – Oct 19, 2010 10:01 PM MT

The Federal Insurance Deposit Corp. was sued by Bank of America Corp. over $1.75 billion in investor losses stemming from an alleged fraud by failed lender Taylor Bean & Whitaker Mortgage Corp.

The FDIC has denied claims by Bank of America against Colonial Bank and another financial institution in receivership that bought fake mortgages from a Taylor Bean unit, Ocala Funding LLC, according to a complaint filed Oct. 1 in federal court in Washington. Bank of America was the trustee for notes issued by Ocala Funding, according to the complaint.

Ocala financed Taylor Bean’s mortgages, issued debt and used the proceeds to buy the mortgages, Bank of America said in the complaint. Ocala then sold the notes to pay off the debt or buy additional mortgages, according to the compliant.

From 2000 to 2009, Taylor Bean and Colonial Bank schemed to steal from Taylor Bean’s borrowing facilities to hide liquidity problems, Bank of America said in its complaint. Taylor Bean’s former chairman was accused by the U.S. in June of helping run a more than $1.9 billion fraud scheme to deceive financial firms and the government’s Troubled Asset Relief Program by covering up shortfalls, the Justice Department said in a statement in June.

The scheme contributed to the failures of Colonial Bank, which had been one of the 50 largest U.S. banks, and closely held Taylor Bean, once one of the largest privately held mortgage companies in the U.S., the agency said.

David Barr, an FDIC spokesman, didn’t return a voice-mail message seeking comment after regular business hours yesterday.

The case is Bank of America v FDIC, 10-01681, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

I am a buyer of silver in here and always a buyer of storable legumes, rice and sprouts.

Securitization bites back

Do not let this get by you. That the FED is also saying BoA should buy back 47 BILLION in CDOs is huge news and significant. It plainly says that these securities are frauds and that the issuers will have to pay.

I don’t know about you but 47 Billion just from BoA alone is significant. I wonder how many more billions are out there among how many banks and just where will the dough come from to buy all this back?

Will Congress act to ‘bail out’ these rascals yet again so that they can repurchase all these fraudulent instruments? That would be our money once again going poof…down the rat hole.

Stay tuned for more as this bubble explodes and the economic fall out is felt around the globe!

Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages

By Jody Shenn – Oct 19, 2010 12:53 PM MT

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview. Recoveries for her clients, who own at least 25 percent of so-called voting rights in the deals, may reach “many billions of dollars,” she said.

MetLife, TCW

MetLife Inc., the biggest U.S. life insurer, is part of the group represented by Gibbs & Bruns, said the people, who declined to be identified because the discussions aren’t public. TCW Group Inc., the manager of $110 billion in assets, expects to join BlackRock, the world’s largest money manager, and Pimco, which runs the biggest bond fund, in the group, the people said.

The group is among investors seeking to use misstatements by sellers, such as faulty appraisals, about the quality of loans packaged into securities to force repurchases, the people said.

Countrywide also hasn’t met its contractual obligations as a servicer because it hasn’t asked for repurchases itself and is taking too long with foreclosures, either because of document or process mistakes or because it doesn’t have enough staff to evaluate borrowers for loan modifications, Patrick said. If the issues aren’t fixed within 60 days, BNY Mellon should declare Countrywide in default of its contracts, she said.

Trustee Duties

“The letter states a demand directed to Countrywide to cure the defaults,” said Kevin Heine, a spokesman for BNY Mellon. “It does not ask BNY Mellon to take any action. BNY Mellon will continue to perform its duties as trustee.”

Charlotte, North Carolina-based Bank of America will “defend our shareholders” by disputing any unjustified demands it buy back defective mortgages, Chief Executive Officer Brian T. Moynihan said today.

Most claims “don’t have the defects that people allege,” Moynihan said on Bloomberg Television, referring to so-called putbacks, in which guarantors or investors in mortgage-backed securities ask to return bad loans. “We end up restoring them, and they go back in the pools.”

Jeffrey V. Smith, a spokesman for the New York Fed, declined to comment. In August, Jack Gutt, another spokesman, said that it was involved in “multiple efforts related to exercising our rights as investors,” which would “support our primary goal of maximizing the value of these portfolios on behalf of the American taxpayer.”

Repurchase Costs

Mark Porterfield, a spokesman for Newport Beach, California-based Pimco, Brian Beades, a spokesman for New York- based BlackRock, and Peter Viles, a spokesman for Los Angeles- based TCW, declined to comment. John Calagna, a spokesman for New York-based MetLife, also declined to comment.

“We continue to review and assess the letter, and have a number of question about its content, including whether these investors have standing to bring these claims,” Bank of America Chief Financial Officer Charles H. Noski said today on a conference call with analysts. “We continue to believe the servicer is in compliance with the servicing obligations.”

The letter covered 115 separate mortgage securitizations, with $105 billion in original balances, from “eight investors purportedly owning interests in these transactions,” Noski said.

Banks’ costs from repurchases of mortgages in securities without government backing may total as much as $179.2 billion, Compass Point Research and Trading LLC analyst Chris Gamaitoni estimated in August, including costs related to lawsuits against underwriters.

JPMorgan Chase & Co. analysts said in an Oct. 15 report the costs may reach $80 billion, reduced in part by investors’ difficulties in getting trustees to act and a typical requirement that misstatements about loan quality were material. Losses on the mortgages packaged into bonds come amid “persistently high unemployment and other economic trends, diminishing the likelihood that any loan defect should one exist at all, was the cause of the loan’s default,” Noski said.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

Are you prepared for what can happen as all these financial machinations work their way to the ground?