Economic Headlines

Fannie, Freddie `Insolvent' After Losses, Poole Says

July 10 (Bloomberg) -- Borrowing at Fannie Mae, the U.S. government-sponsored mortgage company, has never been so expensive and it may not get better any time soon.

Fannie Mae paid a record yield relative to Treasuries on the sale of $3 billion in two-year notes yesterday amid concern the biggest provider of financing for U.S. home loans won't have enough capital to weather the worst housing slump since the Great Depression. The company's credit-default swaps show traders are treating the AAA rated debt as if it were five steps lower. Fannie Mae shares tumbled 13 percent yesterday in New York to the lowest level in almost 14 years.

Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae's assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said.

``Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,'' Poole, 71, who left the Fed in March, said in the interview yesterday.

Foreclosures Rose 53% in June, Bank Seizures Tripled

July 10 (Bloomberg) -- U.S. foreclosure filings increased 53 percent in June from a year earlier and bank seizures rose the most on record as deteriorating property values and higher rates on adjustable mortgages forced more people to give up their homes.

More than 252,000 properties, or one in 501 U.S. households, entered a stage of the foreclosure process, RealtyTrac Inc., a seller of default data, said today in a statement. Bank seizures rose 171 percent, the most since the Irvine, California-based company began tracking statistics on default notices, warnings of a scheduled auction and repossessions in January 2005.

``The foreclosure problem is getting worse and will stay with us well into the next decade,'' Mark Zandi, chief economist for Moody's Economy.com in West Chester, Pennsylvania, said in an interview. ``The job market is eroding and homeowners have less equity. Lenders are much less willing to work with you if you've got negative equity, and you're more likely to give up your house if you're deeply underwater.''

Foreclosure activity is the highest since the Great Depression of the 1930s, said Rick Sharga, RealtyTrac's vice president of marketing. Home prices, which fell the most on record in April, according to the S&P/Case-Shiller index of 20 U.S. metropolitan areas, have created a cycle where shrinking equity drives homeowners into foreclosure, which in turn further pushes down home prices, Sharga said.

Bernanke, Paulson outline strategy to make working class pay for Wall Street crisis

Bernanke indicated that the Fed would extend its policy of offering unlimited loans to major Wall Street investment banks. The provision of Fed funds to non-commercial banks and brokerage firms, a departure from the Fed’s legal mandate without precedent since the Great Depression, is part of a policy of bailing out the banking system to the tune of hundreds of billions of dollars. The Fed announced its loan program for investment banks last March when it dispensed $29 billion to JPMorgan Chase as part of a rescue operation to prevent the collapse of Bear Stearns.

In his speech, Treasury Secretary Paulson acknowledged that home foreclosures in 2007 reached 1.5 million and predicted another 2.5 million homes would be foreclosed in 2008. But he made clear that nothing would be done to save the vast majority of distressed homeowners from being thrown onto the street.

Paulson, the former CEO of Goldman Sachs, said that “many of today’s unusually high number of foreclosures are not preventable.” With a callous indifference reminiscent of Marie Antoinette’s “Let them eat cake,” he went on to say that “some people took out mortgages they can’t possibly afford and they will lose their homes. There is little public policymakers can, or should, do to compensate for untenable financial decisions.”

In other words, low-income home owners who were lured into high-interest mortgages by predatory mortgage companies and banks are getting their just deserts! Of course, the Wall Street CEOs and big investors who made billions of dollars by speculating on these loans, creating a vast edifice of fictitious capital that was bound to collapse, are not to be held accountable for any “untenable financial decisions.” On the contrary, they are to be subsidized with hundreds of billions of dollars of credit, ultimately to be paid for by public funds.

Crisis wipes $1 trillion from financial stocks

NEW YORK - U.S. financial companies have lost more than $1 trillion in value this year, and yet another decline on Monday shows concerns aren't going away soon.

Banks and brokerages began the week lower on the same fears that have been proven toxic since last summer in the ongoing credit crisis. The financial sector was hit with a confluence of troubles on Monday: cautious remarks from a Federal Reserve official and new capital concerns at Freddie Mac and Fannie Mae .

The drop in names like Lehman Brothers , Morgan Stanley and Merrill Lynch caused the financial section of the Standard & Poor's 500 index to lose almost $150 billion in value on Monday, according to the rating agency. That means S&P 500's 85 financial components have lost some $1.3 trillion since the sector reached a high last October.

Even more startling is that shares of 35 of the companies, which include insurers, have lost more than half their value so far this year. The financial sector used to be the index's main driver, and many economists believe that the broader market will rise or fall on their health.

Black Clouds Continue to Gather

Central bank body warns of Great Depression

The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.

In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.

RBS Says Switch to Cash to Avoid 'Nasty' Selloff

The Royal Bank of Scotland issued a stark warning to investors Wednesday, stating global stock and credit markets could be on the verge of a steep market sell-off as central banks have their hands tied by soaring inflation, the Telegraph reported. "A very nasty period is soon to be upon us - be prepared," Bob Janjuah, credit strategist at RBS, told the UK daily paper.

Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve

The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe's exchange rate crisis in the 1990s, a team of bankers has warned.

Not many reports about these things in the American mainstream media, nor are they reporting much about the growing food crisis. How many Americans will be caught totally off guard when the depression hits? Most I think, and it is going to be a horribly ugly situation. So much information available today, right at our fingertips, and yet so many of the sheeple are oblivious to the real world. How very sad, as intellectual laziness will likely be the downfall of this country. Suicide by willful ignorance.

Florida at the Precipice of Depression

The banks will fail, just as they failed in 1929 . . . but worse because this time some of this leverage is as high as 40:1. Insurance? Where is that going to come from? There is no insurance that can cover the cost of the coming bank failure, unless we just print more money. We are two generations removed from 1929. I am talking about Biblical 40 year generations. And when you look at who we were in 1929 and who we are now, you'll realize just how ugly it is going to be. In 1929 there was a stronger base of family values. There was a work ethic that we don't see today. The generation from 1929 - 1969 grew up with a totally different set of values than the generation from 1969 - 2009. The first generation worked their way out of the Depression. Today's generation doesn't understand work. We only understand creative financing and how to live off the next generation. And sadly, that is where we are today. We are at the precipice, and we are going to push our children over the edge because we lived so far above our means and ignored all of the warning signs. We lived just like the Romans in their final days.


Another interesting viewpoint ...great article and don't miss the comments section that follows...the link is, as always, in the title

Duck and Cover: It’s the New Survivalism

The traditional face of survivalism is that of a shaggy loner in camouflage, holed up in a cabin in the wilderness and surrounded by cases of canned goods and ammunition.

It is not that of Barton M. Biggs, the former chief global strategist at Morgan Stanley. Yet in Mr. Biggs’s new book, “Wealth, War and Wisdom,” he says people should “assume the possibility of a breakdown of the civilized infrastructure.”

“Your safe haven must be self-sufficient and capable of growing some kind of food,” Mr. Biggs writes. “It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson. Even in America and Europe there could be moments of riot and rebellion when law and order temporarily completely breaks down.”

Survivalism, it seems, is not just for survivalists anymore.

Faced with a confluence of diverse threats — a tanking economy, a housing crisis, looming environmental disasters, and a sharp spike in oil prices — people who do not consider themselves extremists are starting to discuss doomsday measures once associated with the social fringes.

They stockpile or grow food in case of a supply breakdown, or buy precious metals in case of economic collapse. Some try to take their houses off the electricity grid, or plan safe houses far away. The point is not to drop out of society, but to be prepared in case the future turns out like something out of “An Inconvenient Truth,” if not “Mad Max.”

How interesting, the prepare for the worst crowd seems to be gaining momentum..and hitting the main stream media an awful lot lately. Perhaps a few folks who still have some semblance of a conscience are thinking its time for a subtle warning to the masses....

Imagine My Surprise......

to open an Email and find I am apparently part of a "movement" ...I had no idea....

Energy fears looming, new survivalists prepare

Convinced the planet's oil supply is dwindling and the world's economies are heading for a crash, some people around the country are moving onto homesteads, learning to live off their land, conserving fuel and, in some cases, stocking up on guns they expect to use to defend themselves and their supplies from desperate crowds of people who didn't prepare.

The exact number of people taking such steps is impossible to determine, but anecdotal evidence suggests that the movement has been gaining momentum in the last few years.

These energy survivalists are not leading some sort of green revolution meant to save the planet. Many of them believe it is too late for that, seeing signs in soaring fuel and food prices and a faltering U.S. economy, and are largely focused on saving themselves.

Some are doing it quietly, giving few details of their preparations _ afraid that revealing such information as the location of their supplies will endanger themselves and their loved ones. They envision a future in which the nation's cities will be filled with hungry, desperate refugees forced to go looking for food, shelter and water.

Yep, The Shocks Do Indeed Keep Coming...More Economic Headlines

Bank failures: How bad will it be? Washington Mutual, Wachovia and National City are among the financial institutions that have announced huge losses and are looking for billions of dollars from private equity firms or others in the industry just to keep their doors open.

Fed's Direct Loans to Banks Climb to Record Level May 15 (Bloomberg) -- The Federal Reserve's direct loans of cash to commercial banks climbed to the highest level on record in the past week as money-losing lenders increasingly turn to the central bank for funds.Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed's loans to Wall Street bond dealers rose by $75 million to $16.6 billion.

Flood of Foreclosures Prove Loan Modification Isn't Working U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier as mortgage industry efforts to modify loans fell short.
More than 243,300 properties were in some stage of foreclosure, the highest monthly total since RealtyTrac Inc., a seller of default data, began in January 2005. One in every 519 households received a filing and Nevada, California and Florida had the highest rates. Filings rose 4 percent from March.

Bank repossessions jumped 145 percent in April from a year earlier to 54,574, according to Irvine, California-based RealtyTrac. The company has database of more than 1.5 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank seizures.

Banks will seize about 60,000 properties a month through December, when about 1 million U.S. homes, or a quarter of all homes for sale, may be bank-owned, Rick Sharga, RealtyTrac's executive vice president of marketing, said in an interview.

Farmers unable to cash in on soaring food prices All over the world, prices for basic foods -- barley for beer, milk for cheese, corn for tortillas, and the rice that serves as a staple for more than half the world's population -- are soaring.

But farmers aren't rushing to cash in on the boom by planting more of the crops.

The amount of corn planted in the U.S. is expected to dip this year. Rice acreage in California, which sells as much as half its crop overseas, is predicted to increase by only a small amount. Instead, farmers are planting cheaper-to-grow wheat and soy.

They say the reason is simple. The cost of planting some crops is rising as fast as their prices, and sometimes faster, leaving little incentive to increase production of some foods that remain in high demand around the world.

Global Food Shock With increasing world demand and poor weather in the Southern Hemisphere, the margin for error has become very thin. This year, global wheat supplies are projected to hit a 60-year low, and barley will plunge to a 42-year low. Corn stocks are expected to drop to the lowest level since 1984. Global grain supplies are down to 50 days, less than half the amount just 8 years ago.

What was discussed at a closed session of the U.S. House of Representatives? Last week's session was only the fourth time in 176 years that Congress has closed it's doors to the public.

Word has begun leaking from last weeks special, closed-door session of the United States House of Representatives.

Theorists wrote "Not only did members discuss new surveillance provisions as was the publicly stated reason for the closed door session, they also discussed: The imminent collapse of the U.S. economy to occur by September 2008, the imminent collapse of US federal government finances by February 2009, the possibility of Civil War inside the USA as a result of the collapse and advance round-ups of "insurgent U.S. citizens" likely to move against the government.

Oil prices spike to record near $128 a barrel, as retail gas and diesel hit new highs
Even more important, the traders placing the bets expect prices to just keep moving higher.
Goldman Sachs, one of the world's most influential investment banks, underscored that sentiment Friday when it hiked its oil price forecast for the second half of the year to $141 a barrel, up from $107 previously. Analysts at the bank argue that the oil market is undergoing a "structural repricing" that will continue to play out for some time to come.

The Start of a New Way of Life

The previous post was written the day before we left NY...but I had no time to publish it amid the insanity. It was indeed insanity, packing up three separate households, moving the few possessions we decided to keep into storage, then loading our purchased for the trip motor home with...get ready for this folks....my sister, myself, six children, ten dogs...my three Great Danes and one smaller mixed breed, and my sister's six Great Danes, my four cats, a pair of cockatiels left in our possession when my mother passed, and my son's turtle. Not to mention a large assortment of school books, clothing for everyone, and food for people and animals, and assorted other items. We were loaded to the gills. Two more family members followed in a car, just as loaded, with my brother's two Greyhounds and a large trunk strapped to the roof. Well, we made it anyway, but what a trip it was.

We landed five days later in our new desert home, and it is beautiful. No more snow and we all had a great tan by the end of February. The views are incredible no matter in which direction one looks. My view as I have my morning coffee is of a stunning mountain range in the distance that turns pink in the light of the sunrise. Quite a change from the view had in NY, the row of cookie cutter houses across the street, the side of my neighbors house, or our little tiny grassy yard.

Of course, our land here is completely undeveloped, so I have been out of touch for a while as we waited to have Internet access installed. No regrets...we all love it here, and judging from the latest headlines about spiraling food prices and rationing all over the world...right here in the US even...$120 a barrel oil prices, and the threatened collapse and multiple bailouts of many large financial institutions, and so many others, it seems we have made our move towards self sufficiency at just the right time.