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Wall
Street Insiders
Flash Alert
16:30:00 EST Boxing Day
Saturday, December 26,
2009
T'was the
night before Christmas...
...and all was not quiet in the
house
and it sure as hell ain't
It's A
Wonderful Life if you got a mortgage
U.S.
Treasury turning America into a Hell hole like
Pottersville
Nick note: This is one of the saddest emails I've
ever written. The implications are tragic. It means
there isn't a chance in hell the little guy's real
estate can ever come back. Most everyone who has a
mortgage will take a wipeout. Home ownership for the
average American is over my friend.
This
is the part of my job I hate. Right smack dab in the
middle of the holiday season, the bastards do their
evil work. So I have no choice. I must report to you
the story.
It's more of the same. A bailout, with huge bonuses
for the bankers. A wipeout for the people who just
want to go to work, have a house, raise some kids
and put them through school. Thank God there's a
third way, for people like us, who are prepared for
what's coming and know what to do.
Dear
Colin,
Scrooge just struck again.
The
past several years Wall Street, the investment
bankers and government have perfected a favorite
trick. They sneak out bad news in the dark of night.
That's when as few people as possible are around to
hear it.
For
example, the FDIC usually closes banks over
weekends. They swoop in, seize the assets, fire
management, and do their dastardly deeds when
markets are closed, and can't react.
I
wish they would apply the same accounting standards
to the big money center banks. Every single one of
them would be closed down by morning.
Instead, the FDIC systematically shuts down only the
smaller regional banks. They destroy local
competition from the banking system. This
consolidates power and assets into the hands of the
big, dead-broke banks.
The
quietest time of all has to be the night before
Christmas. In the financial world, almost no one is
around. (Except a nut like me.)
No
surprise, then, that they chose that time to take
one of their most dangerous, underhanded actions
ever: a multi-trillion dollar bailout. Their biggest
yet.
As
you know, I've been quiet lately. Deep in research.
Watching the dominoes fall, as sovereign government
debt starts to default en masse. (Like Dubai, and
soon Greece, Spain, Mexico, Italy and Ireland, to
name a few.) I will soon post a tape and special
report on this. To say the least, it's serious.
But
now I have something truly astonishing and
diabolical story to report to you.
Fannie Mae and Freddie Mac are America's biggest
mortgage lenders. 60% of all residential mortgages
in the country go through them. In reality they are
the nation's biggest banks. Like all banks, they are
up to the gold-pin-on-their-starched collars in
derivatives. They are dead broke and have been for
years.
Some
time ago, they were fully nationalized. Freddie and
Fannie said they needed $100 billion in bailout
money then. A sick joke. Congress new and authorized
$400 billion. Four times as much as they said they
needed. This supposedly “guaranteed” the mortgage
system was sound. Not hardly! Their combined losses
are in the Trillions and mounting.
You
may not be surprised to learn even that $400 billion
wasn't enough. Freddie and Fannie kept losing more
and more money. Now things have gotten so bad, they
have been backed into a corner. They have stopped
foreclosing on overdue loans. Contrary to popular
myth, the housing market and mortgage defaults are
still in freefall.
Many
people have stopped making mortgage payments. Yet
for the past year, nothing has happened to many of
them. They get the usual threatening letters. But no
foreclosure. No attempt to move them out of their
homes. No court action.
Millions of people are in this position. Living in
homes they no longer make payments on. Waiting for
the sheriff to come knocking on their door to throw
them out.
Why
don't banks foreclose on these properties? Because
they don't have the money to cover the losses.
Once
they foreclose, they can't pretend any more that the
loans are above water. They have to take the capital
hit. They must remove the non-performing loans from
their asset side of the ledger...list them as a
liability... and come up with the money to cover the
huge losses.
The
cold, hard, ugly truth is they don't have anywhere
near enough capital to do this. Their losses would
be too huge. The world would know they are
completely broke. They would collapse, and drag down
the entire global financial system with them.
Remember, Fannie and Freddie are the biggest
mortgage lenders in the world. Countless
institutions hold derivatives with their mortgage
paper. A default would bring down the entire banking
house of cards. The global implications are
terrifying.
So
the mortgage crisis is being swept under the carpet
with a wink and a prayer. Across the U.S., Europe
and the rest of the world, bankers are holding their
breath, praying for a miracle.
Here
is how it works. The banks and mortgage lenders
simply don't foreclose. That lets them play their
mortgage shell game a bit longer. You know the
fraud. Don't count trillions in bad loans...claim
them at full value on their books...even though they
could only get 25 cents on the dollar for them, when
they finally get around to repossess the homes and
liquidate them. At most.
Let
me be clear here. In the U.S. alone, over $3
trillion worth of real estate loans have gone bad -–
yet banks have not taken the hits on their books.
Trillions more will go bad in the next 12 months.
That's on top of what has already gone tits up.
Christmas Eve, we got the clearest proof yet of how
bad things are. As people were celebrating
Christmas, a death blow was dealt to the average
American homeowner, and the U.S. housing market.
Even
with all the scam banker accounting, foreclosures
are soaring. In November alone, 300,000 NEW
foreclosures were filed. For 2009, U.S. foreclosures
will hit a staggering
four
million. An equal number of homes are in
default, but have not been foreclosed on. For the
reason I gave above.
From
here on, the story gets a little complicated. But it
is critical you understand. It goes to the heart of
the next big leg down, in the escalating mortgage
crisis and banking wipeout.
As I
told you, Fannie Mae and Freddie Mac are stone cold
broke. They are under what is called
“conservatorship.” That is a nice way of saying
government owns them.
When
government took over Freddie and Fannie, Congress
set up a bailout fund of $200 billion apiece. That
was the maximum bailout money each one could
receive. Of that $400 billion total lifeline, they
have officially taken $111 billion.
I am
told that paperwork is filed now, that brings the
total to $175 billion. Remember that is the tip of
the iceberg. Banks nationwide hold trillions more in
mortgage losses
off
the books: by the trick of not foreclosing on
defaulted properties.
Just
so you understand, this is taking place the world
over. It has the potential to bring down
governments. Spain immediately comes to mind.
As
part of the Fannie/Freddie bailout, they were
supposed to reduce their portfolios by 10% a year.
They do this by selling (or liquidating) mortgages
they hold...and not making new mortgage loans, when
old ones are paid off. Let me show you how the math
works.
Their combined portfolio is $2 trillion. 10% of that
is $200 billion. They were supposed to reduce their
mortgages (sell and/or liquidate them) by that
amount each year.
Through last year, they had charged off $250
billion. They were liquidating mortgages, and
getting back at most about 50 cents on the dollar.
Only
the real number is worse than that. Their capital
requirement was 7%: $140 billion of $2 trillion.
They ran through that as well. Add that to the $175
billion bailout cash received. You see they have
burned up $315 billion. In less than 12 months. And
that was merely on the properties they foreclosed on
and liquidated: a fraction of the bad paper they
hold. The best kept secret is they will book
trillions in losses as they foreclose and liquidate
all the houses on mortgages gone bad.
Now
Treasury has thrown out the $400 billion cap. (Which
in reality Freddie and Fannie have already burned
through 3 times over.) In the dark of night, on
Christmas eve, as Santa Claus was making his rounds,
Treasury authorized an
UNLIMITED
bailout for Freddie and Fannie.
They
can receive trillions more to cover their huge
losses.
Remember, Treasury is not bailing out the homeowner.
It isn't paying for the derivatives tied to home
mortgages. Treasury's new bailout only covers
Fannie's/Freddie's losses: i.e. the difference of
what they loaned on the foreclosed properties, and
what they will get when they sell them.
I
have often warned you properties will soon go for 10
cents on the dollar. Across the U.S., houses already
routinely sell for 50 cents on the dollar. Many
markets are approaching 25 cents on the dollar. But
you ain't seen nothing yet.
(If
the true numbers were revealed, the public would
know many properties will not even bring ten cents
on the dollar. They will get bulldozed into the
earth, worth nothing.)
Treasury gave Fannie and Freddie an unlimited
Christmas Eve bailout, when no one was looking, for
one reason. The $400 billion Congress authorized is
not enough. They need trillions more, and the last
thing they want is Congressional review and public
scrutiny. This action -- in the middle of the night
-- lets them bury the bad news in holiday cheer.
I
repeat. There is no recovery. There will not be a
recovery. We are in a Depression the furthest thing
possible from a inflation. Do not let the assholes
fool you. The next leg down in real estate is about
to occur. It will be three times worse than the
fiasco we have seen already.
Freddie and Fannie still have $1.6 trillion in
mortgages on their books. If they are lucky, they
will get 25 cents on the dollar for these mortgages.
Meaning they lose another $1.2 trillion. Probably a
lot more, as real estate values collapse more. We
are talking a wipe out years into the future here.
These guys have access to the best numbers in the
world. Though it's a closely-guarded secret, they
know the sorry ass shape their mortgage book is in.
What they know -– what their actions reveal -- is
that the vast majority of loans they hold will never
be paid. That is why they needed trillions more in
bailout money. It was that or go under.
Remember, their loan book is the core source of
mortgage paper. They are a key derivatives creating
machine. Like I said earlier, over 60% of all
originations go through them. Please note the rest
of the dead-broke mortgage derivatives business is
getting no bailout of any kind.
Freddie and Fannie are winding down operations. They
cannot maintain their existing portfolio. They can't
expand it, either, i.e. they can't make new loans.
And now they will foreclose on loans for years
(three years to be precise)into the future. Treasury
just gave them the funds to do so.
Thanks to Treasury, they have an unlimited
guarantee. So they will not care how much they get
on these foreclosed properties. (Properties they are
about to repossess en masse.) With the unlimited
bailout from Treasury, they have enough capital to
foreclose and take the horrendous losses. Their
coming fire-sale liquidations will drag the market
down even further. In fact it will give new meaning
to the term real estate fire sale.
Until now, the vast majority of defaulted-on
properties have not been foreclosed on. They haven't
been put on the market. If they had, real estate
would sell for a fraction of today's prices.
Now
those properties
will
get foreclosed in mass. They will be sold, at
fire-sale prices. The unlimited Fannie/Freddie
bailout guarantees it.
Which means a great tsunami of newly foreclosed
properties is about to enter the market. Another
round of price collapses in real estate is upon us.
It's
a vicious cycle. Prices drop. More and more people
go underwater on their mortgages. They owe far more
than the property is worth. And the past two years
have made one thing crystal clear. People who owe
far more on their property than it's worth, stop
making payments on it. Even if they can tote the
note.
By
authorizing trillions more in bailouts for Fannie
and Freddie, two things happen. a) there is no
incentive or mechanism to save homes from
foreclosure; and b) the incentive and mechanism to
foreclose homes and liquidate them at any price has
greatly increased.
This
is an incredible disaster. Money available for
mortgages will shrink even more. At the same time,
bank regulators have been forcing regional banks to
sell off their mortgage portfolios. At huge losses
and discounts. These are held independent of Freddie
and Fannie.
So
no money is available for new mortgages...the two
biggest mortgage providers have just been given
unlimited cash, to foreclose their bad loans, and
cover the losses on their books... and the market is
about to get flooded with even greater numbers of
foreclosed homes crashing values even further.
How
many? At least five million more foreclosures will
hit the market in 2010. Those are properties people
stopped paying on this year. Another five million
will get defaulted on next year.
You
see how bad the coming wipeout will be. Ten million
foreclosures next year alone. All liquidated en
masse, at the same time. Look out below.
Scrooge definitely came to town Christmas eve.
Potter is proud, in the end he won.
In
an incredible statement, Treasury said, “Treasury
does not expect Fannie Mae and Freddie Mac to be
active buyers to increase the size of the retained
mortgage portfolios...”
i.e.
Freddie and Fannie will NOT make new mortgage loans.
They could not be any more clear. This money is to
cover their losses, as they liquidate millions of
foreclosed properties and book trillions in losses.
That
is not all. On December 31, Treasury also ends its
$1.25 trillion bond purchase program to finance new
mortgages. They are also eliminating the short-term
credit facility, that was set up for Freddie, Fannie
and the Federal home loan banks. Why? Simple. Bail
out Freddie and Fannie and screw the little guy,.
Another
interesting sideline: you heard how the
Obama administration is supposedly limiting pay for
executives at government-owned Bank America,
Citigroup and AIG. You know, making the bankers pay
for their losses. Not rewarding them for wiping out
the modern financial system and sending our nation
back to the stone age.
More
b.s.
The
other day I read a regulatory filing about this. It
would have been laughable, if it were not such a
freaking tragedy. Fannie Mae CEO Michael Williams
and Freddie Mac CEO Charles Haldeman Jr. will
receive bonus compensation of $6 million each this
year. That is for the wonderful job they have done
bankrupting these companies. And wiping out the
housing market in the process.
Also, 10 other executives at the two companies will
receive a collective $30 million in compensation
(bonuses) this year. An average of $3 million each.
These people have ruined the biggest mortgage
lenders on the planet. Why give them tens of
millions in bonuses? Because they are being paid off
for their silence.
Treasury also made this unbelievable statement:
Recent announcements from the companies and the
Federal Housing Administration “demonstrate a
commitment to prudent housing finance policy that
enables a transition to an environment where the
private market is able to provide a larger source of
housing finance.”
On
what planet?! Private sector bankers are going broke
en masse themselves. They are drowning in a sea of
foreclosures. How can they make new mortgages?
It's
a sick, sad joke. They can't!
Let
me help you with your scorecard. These
government-owned enterprises guarantee $6 trillion
of the $12 trillion in U.S. residential mortgage
debt most of which will go up in smoke. We know they
Freddie and Fannie have lost a third to half of the
money they used to guarantee those $6 trillion in
mortgages. They constantly lose more. Meaning the
wipeout not only continues. Their losses gets bigger
by the minute.
There is no chance of recovery. No chance of a
turnaround. By giving them trillions more -– by
cutting off any future lending -- we devastate the
housing markets. We create a sell-only market, at
the most distressed prices imaginable.
This
is why we know things are about to get far worse.
Amazing what goes on the night before Christmas,
when all through the house, not a creature is
stirring, not even a mouse.
But
while everyone was sleeping this year, Scrooge came
to town. He stole Christmas for the next 20 years.
Sorry to be the bearer of such bad news. But I new
you wanted to know.
Nick
Guarino, Dw. X
Dish
Washer Extraordinaire
P.S.
I'm crying! It will not take much to turn America's
cities and suburbs into Pottersville's. If you don't
get my drift Google Pottersville.
P.P.S. And yes, I do know how to show you to turn
this into a buck or TWO.
Kottura LTD 3000 Des Laurentides Blvd, Suite 12-217,
Laval, Qc H7K 3G5 Canada
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