Aurora

One of my dreams is to see the Northern Lights someday.

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photo by sho33y

House of Cards: Collapse of the Mortgage Market

crossposted 25 april 2008 at firedoglake

Sometimes you have to wonder what country we're living in. Reading Christy's post on tent cities and food rationing, contemplating a trillion dollar war and $4 a gallon gas, you just want to shake your head and wonder how the hell things could slide down so far so fast.

On the political side we see that the usual checks and balances on a power-mad executive have been damaged: Congress, what's left of the judiciary, the Mask Media, and intimidated whistleblowers.

And on the economic side, you can imagine where this is going, the same prosperity-loving administration -- and by prosperity-loving, I mean for the insiders, not the little people out there -- has removed most of the checks and balances from the financial world as well.

Calculated Risk heaps scorn on the regulatory incompetence:

Shocked? Homebuyers were speculating with no money down. Mortgage brokers didn't care because they would sell the loans immediately and collect their fees. Wall Street didn't care because they could package the loans and sell them to investors.

Investors would have cared, except they trusted the rating agencies.

[snip] ...the rating agencies weren't evaluating the underlying loans - they were performing statistical analysis using models based on lenders that cared if the borrower would repay the loan.

At the same time, regulators - despite numerous warnings - mostly ignored the problem, apparently for ideological reasons ("let the free market work"). What a mess. [bold added]

Ian Welsh has given us an overview of the mortgage crisis and proposals for how to unwind this tangled mess. Kevin Phillips joined us last week for Book Salon to discuss how the government systematically removed all the guardrails from the financial markets.

Blame where blame is due: the repeal of Glass-Steagall ripped down the firewall between banks and non-regulated financial firms during the Clinton administration. Then the Bush-Cheney administration finally found something where they were competent: tearing down all the remaining regulations keeping investment firms from going bonkers with the nation's savings.

So, whee! Anybody can start an investment firm, buy a bank, and have the bank invest in their gambling habit stock manipulation great ideas. I mean, what could go wrong?

Do you have a bank account, a pension plan, a mortgage? You could be in trouble without knowing it. Your bank account is probably not FDIC insured, ever check the fine print about that "new kind of account" that they switched you over to, to get more interest? Your mortgage, if taken out recently, might have a clause that allows the monthly payments to double or triple.

If you try to sell your house, you are caught in a market where housing prices are falling [of course, this is good news for people trying to buy houses, silver lining]. People who were counting on selling their homes to get retirement funds are about to get some sad news: home prices are likely to plummet in the next year, and will not recover for several more years.

Millions of people are already "underwater" where the value of the house is less than the money still owed on the mortgage and home equity loans. Millions more will be there soon.

Why Worry

Dire Straits
"Why Worry"
Live, Australia

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vid from dannyqb

Hilarious vid: engineers and cats

Take the next seven minutes of your life and watch this seriously ridiculous video on engineers and cats.



By Paul Klusman and friends. These are strange and demented people: engineers. Maybe I can meet them someday.

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Foreign Object Debris

Photo of the lovely Fod, discovered in the wheelwell of a jet by folks in the Navy.

Fod stands for Foreign Object Debris, which is generally what they are looking for.

I found it very cool that they had several people with birding and falconry experience nearby.

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Shake, Rattle, and Roll

A miracle has occurred. They fixed my car.

You know how you take the car in for them to fix that funny sound it makes sometimes, and then the car behaves perfectly normally when you get to the repair place? This was my likely destiny.

Monday: Drive my car half hour to the repair place.

Tuesday, surprise:" We can't find anything wrong with your car."

Wednesday: "Can you come in and show us where the sound is coming from?" [Of Course this is a very busy day already.]

So I get to the repair place, jump in my lovely car and start driving, expecting to hear nothing wrong. But apparently the universe owed me one, because the sound started right up. "Oh, THAT sound..."

Turns out it was a broken rod in a rear window, which would eventually have caused the glass to fall into the door, either before or after the noise caused me to tear all my hair out.

So they fixed it. I brought her back home. All is well.

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photo by ny156uk

Financial Markets: Storm Approaching

Have been spending a lot of time reading up on the latest in financial market disasters. Coming soon to a bank near you.

Folks, if you think you have your funds in an FDIC-insured bank account, check on it. A lot of banks have shifted funds over into a money market account and simply told customers it was a way to get higher interest, without being clear that you were losing your FDIC coverage.

The broader picture is not simply that the financial system is teetering on the edge and the taxpayer will bear the brunt. The broader picture is how to keep things from falling into a true financial panic of the kind not seen since the 30's. Or worse.

Just as I took some time away a couple years ago to study up on war against Iran, which wasn't much discussed back then, or the demise of constitutional democracy in the U.S., which not many people believed could REALLY be happening, could it? Just like those times, I'm following some traces of ideas to see where they may lead.

Highly recommend Ian Welsh's weekly columns, Saturdays at 7pm eastern at the mother ship, firedoglake, for the fundamentals. Serious business, yet understandable to non-economists.

So if you're wondering what's up with me, fear not, all is well. Have seen all three of my lovely children and am settling in nicely in my apartment, waiting for housing prices to go down which they most assuredly will here in California.

Am spending a fair amount of time over at the capital markets blog Calculated Risk, where I'm mostly a silent newbie but occasionally piping up with an egregious comment. When there's a storm approaching, I want to be out there at the edge, observing and warning.

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photo by jaroslaw pocztarski