August 30, 2007

I spent too much this weekend in Prague, even lost $60 at roulette. Can I get a federal government bailout too?

Hey, that $60 meant a lot to me. I was taken advantage of. I didn't read the fine print. And I was led to believe that roulette spins were all winners.

And I didn't mean to spend that much going out to dinners, and shopping. And those Czech bartenders sure took advantage of us.

I want my taxpayer money! I want my bailout too!

Folks, if the US government spends one f*cking taxpayer dollar bailing out failed flippers and housing gamblers, I'll call for the overthrow of the government (peacefully, and at the ballot box of course). And I won't be alone. If the Federal Government gets into the subprime mortgage business, and then the loans don't get paid back, guess who ends up footing the bill? You got it. You do.

Housing Bailout Chatter Gets Louder

Add another surprising name to the housing-bailout chorus.

Punk Ziegel analyst Richard Bove became the latest high-profile market observer Wednesday to predict that the feds will take action to forestall the collapse of the U.S. housing market.

Bad mortgages "have become a major problem," Bove says in a research note Wednesday. He suggests that the government may end up proposing to ease the pressure on the sagging mortgage market by offering low-cost federally backed loans to homeowners whose adjustable-rate mortgages are about to reset to much-higher rates.


Anonymous said...

Did you check if those Casinos and Bars were not already part owned by Wall Street biggies. Smells like Wall Street con trick.

Anonymous said...

Keith, the ballot box is rigged.

Were you awake in 2000 and 2004 to name a few years of many?

Anonymous said...

It sucks, but when they default on the loans, then it's fire sale time.

Anonymous said...

Let them bail them out. Then I want them to give me 500k of free government assistance towards a downpayment on an overpriced house.

Anonymous said...

Yes, the easy money crackheads want their fix, and don't care if the Fed has to destroy the dollar to do it. Which is why precious metals are GOING TO GO TO THE MOON ALICE!!!!!!!!!!!!!!!!!!!!!!

Anonymous said...

Who the hell plays roulette anyways??

What a dumb*$$ game of chance.

SPECTRE of Deflation said...

Hell ya, but you are behind me. I didn't understand that my credit cards had teaser rates, and those mean banks took advantage of little ole' me. I feel violated.

What a omplete joke this is gonna be. It won't work, but they are set to hyperinflate.

Sheeple, stop with the political parties already. It's the elites against us goofballs, or doesn't the looming bailout attempt make that very plain.

SPECTRE of Deflation said...

Where the Hell were Chucky and Chrissy when this shit was happening? Oh, now I remember. They were heaping praise on Greenspan. What a f***ing joke!

`Subprime Chuck' Schumer Plays Fool in Crisis

By Jonathan Weil

Aug. 29 (Bloomberg) -- It's bad enough when a company's outside auditor is a pushover for management. Equally galling would be for the auditor to try telling management how to run the company. Yet that's what U.S. Senator Charles Schumer has asked the Big Four accounting firms to do at the subprime lenders they audit, pronto.

``One of the most promising solutions to the anticipated foreclosure crisis is the voluntary modification by lenders of existing unsustainable subprime loans,'' Schumer, a New York Democrat, said in an Aug. 23 letter to the firms' top executives.

The chairman of Congress's Joint Economic Committee then called on the firms to ``assist this country's mortgage crisis'' and ``urge your clients to do their part to keep our housing markets afloat, by modifying subprime loans that are at risk of default.''

In so doing, Subprime Chuck made a blithering fool of himself, though he probably doesn't realize why. So far, none of the four firms -- PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young, and KPMG -- has responded publicly to his plea for lobbying help.

You see, management's job is to manage, and the auditor's job is to audit. There's also the decades-old requirement under U.S. securities laws that accounting firms must be independent of the companies they audit, both in appearance and in fact.

Under the Securities and Exchange Commission's rules, that means the auditors, among other things, ``must act in an unbiased and objective manner.'' Lobbying audit clients to change their business practices is the mark of a biased auditor, not a disinterested one.

Apple Pie

To see why, let's take the senator's request to its logical extreme.

First, we have a subprime lender about to send default notices to thousands of people who can't afford to pay their mortgages now that the introductory teaser rates have expired. Then, hark! A partner from the company's ``independent'' auditing firm swoops in, brandishing an apple pie, and implores: ``Give the poor folks a break. Chuck wants it that way.''

Bowing to the auditor's pleas for patriotism, the lender softens up. ``Of course,'' its chief executive says. ``We shall extend the teaser rates indefinitely, never mind our investors. That should make you and Chuck happy.'' And it does.

Here's where it gets tricky. Months later, the company's top brass comes back: ``So, dear auditor, what are you going to do for us? Perhaps we could revisit the issue of those loan losses on our balance sheet that you now call `absurdly low.' We think they should stay at zero.''

Time to Resign

Whoops. The ashen-faced accountant suddenly realizes he crossed the line the moment he flashed that apple pie. Unable to opine objectively on the client's financial statements, because management has done him and the senator a huge favor, his firm must resign.

What's more, his conscience belatedly tells him, the firm must withdraw its latest audit-opinion letter, because it ceased being independent when it began lobbying the client at Schumer's behest. (A lot of good those campaign checks did for us!)

Then there's the problem of the clauses in the client's debt agreements that require the company to have audited financial statements. Antsy bondholders, already worried about the company's bleak prospects, rush to declare the company in default on its gazillions of dollars of debt.

Look Back in Dread

Looking back, the accounting firm has done more than its share to, as Schumer put it, ``assist this country's mortgage crisis.'' That's because the lender is headed for Chapter 11, and its creditors are pressing to foreclose as soon as possible on all those cash-strapped borrowers who thought they miraculously had caught a break. Nice going, senator.

There's a long history of politicians meddling in accounting matters. Only a few years ago, even the SEC's current chairman, Christopher Cox, resorted occasionally to accounting demagoguery. This was back when he was a Republican congressman from California, fighting what proved to be a losing battle against the Financial Accounting Standards Board's plans to start treating employee stock-option pay as an accounting expense, rather than a zero cost.

``What we are about to do at FASB is give corporate managers, the new Jeff Skillings, an opportunity to manipulate earnings,'' Cox said on the House floor in July 2004, in a fit of doublespeak that stock-option billionaires surely adored. Cox's old House Web site once said his efforts were ``a key reason'' for the FASB's initial 1994 decision ``to abandon a proposed accounting change that would have hindered small and start-up companies' ability to offer stock options as a way of attracting and retaining talented employees.''

Chuck's Way

In that same tradition of mistaking the accounting profession for the Chamber of Commerce, Schumer finished his letter to the Big Four chiefs by saying: ``The auditing firms of this country have played a critical role in keeping our economy strong, and I am confident you will continue to do so.''

Doing it the Schumer way, though, only would put our economy at further risk. Auditors aren't supposed to act as cheerleaders for the economy. Their job is to ensure that companies tell the truth about how well or poorly they are performing, so that investors and the broader economy can operate efficiently.

Butt out, senator.

Anonymous said...

Sure the gov't might bailout these dumba$$ homeowners. However, how many of these people realy want the help?

If I bought an overpriced shack, why would I want to be helped?? It's much easier to go bankrupt and makes all the sense in the world to. Especially, if prices for the same house down the doad are 70% lower.

These people who were dumb enough to sign on the bottom line are now smart enough to know what the hell's going on.

And sure, the politicians think that they're buying votes. Well BS to that too. There are far too many homeowners that have played by the rules and will not vote for such corrupt individuals.

The market is totally capable of correcting itself. Interfering in this would be the worst possible thing to do.

Anonymous said...

This sums it up exactly---

Creative Mortgages: Did Bernanke Really Say That?
In his letter to Sen. Charles Schumer, Fed Chief Ben Bernanke said:

"It might be worth considering at this juncture whether the private and public sectors, separately or in collaboration, could help the situation by developing a broader range of mortgage products which are appropriate for low-and moderate-income borrowers, including those seeking to refinance. Such products could be designed to avoid or mitigate the risk of payment shock and to be more transparent with respect to their terms. They might also contain features to improve affordability, such as variable maturities or shared-appreciation provisions for example..."

Hold on: Isn't that what we're trying to get away from? Didn't we already have a "broad range of mortgage products" that helped create this mortgage mess? Didn't we just learn that if you can't afford a standard mortgage you shouldn't get one? And should the Fed really be encouraging people who can't afford homes to find a "broad range of mortgage products...designed to avoid or mitigate the risk of payment shock"? (What, with neon signs alerting in investors rates may rise?) Don't we already have loans with "variable maturities?" (Uh,huh.) And what's with this "shared appreciation" provision? What -- share appreciation with the bank? So the bank now also becomes landholder or part landlord? If that's the case, why own? (I can only imagine how that will eventually end.)

I understand the need to help those stuck in mortgages they were sold by predators. But if anything, the mortgage and housing industries should be encouraging a more realistic approach to buying a home, especially with prices as elevateds as they are now: Either you can afford to buy using a standard mortgage -- with or without PMI, depending on your circumstances -- or you can't.

And if you can't now, just wait: If the Fed cuts the Fed Funds rate enough -- and prices continue to fall despite falling rates -- standard mortgages may be what the doctor (not as in, Bernanke) ordered for everybody. One for all, all for one.

Thanks Herb Greenberg for giving Bernanke a little dose of reality!! Someone needed to do it!

Anonymous said...

Keith -

The federal government spends over 50% of the budget on entitlements and about 17% on the military (even with the war).

Most entitlements are welfare - something for nothing. Just like the flippers want to be bailed out...

Are you becoming a republican?

Marky Mark

Anonymous said...

If these retards can't make the payment on a 4.5% adjustable loan, you really think they can make the payment on a 6.25% fixed loan.

Sixpercenter said...

Bob Brinker predicts no bailout. I've heard Hillary say the same. For whatever thats worth.

Anonymous said...

I have a friend that gambles alot at the dog track I called Him and told him to collect all His tickets and let the gov't pay him back for all His losses....

I see new lawsuits at casinos and gaming halls coming down the track

Marianne said...

It is obvious that the subprime home financing market is run amok. However, I think that a case can be made for the subprime/stated income commercial lending market. There are family owned financial institutions like Ocean Capital in Rhode Island that take a close personal look at their loan properties before lending. Sometimes, first time small businesses need help with gas stations financing, hotel and motel acquisition financing or auto shops financing. Oftentimes these folks do not meet the capital requirements to get started unless dealing with a non-traditional lender.

BitterRenter said...

Marky Mark- you are a dumbsh*t but your post well illustrates the ignorance of the American people.

Welfare is not an entitlement. Entitlements are funded by the people receiving the benefits- Social Security, Medicare, etc.

Welfare, AT ITS PEAK was never more than 7% of the budget and since "reform" is even less, more like 4%. That amounts to a few bucks from your precious paycheck to help feed and house poor women and children in your society.

The defense portion of the budget is 27% and rising.

This is why republicans have been so successful. They tapped in to the primal selfishness of ignorant Americans who think that 50% of their taxes go to welfare, 25% to foreign aid and 25% to the cranky people who work at the Post Office.

Man, I hate this country. The sooner it's destroyed the better. Hopefully this housing crash will hasten the demise.

Anonymous said...

Wake up, people! It's already happening.

The Fed is now pumping money into the system (through major banks to MBS investors to mortgage issuers to mortgage holders). That will devaluate the dollar and push up inflation. And who will pay for that?

You think the government will be stupid enough to pay out a direct subsidy to the home debters?

Anonymous said...

Umm, we got bridges falling apart. And they want to bail out speculators and people who lied on their no doc loans. Beam me up Scotty.

Anonymous said...

I would be happy to come over and buy your distressed chattel. How about 10c on the dollar? Does that help?

Anonymous said...

Geez, I just lost $900 in Las Vegas!
Although, my wife won $700 a craps while I held her purse!

Yes, I will emasculate myself while she rakes it in!

Anonymous said...

am looking for trophy properties as far from "society" and the grid as posible....something like the super wealthy Bin Laden cave. DOPES!!!!!!!!!!!!!!!!!!!!!!

Anonymous said...

Please choose to NOT participate in bailing out the hedge fund boyz this time! Just move your money out of the dollar and you've voted with your pocketbook.

Houses are crashing in terms of oz of gold. I sold my Seattle in 2001 for 1761 oz of gold and I could now buy it back for under a 1000 oz of gold. In about 5 years I plan to buy it back for less than 100 oz which was the price of a median exisiting house in the U.S. when gold was fully valued in it's last bull market (1980)

Forget about fighting this with politics. Just don't play the game. It really is THAT simple.

HauspocalypseNow said...

They should remove the home mortgage interest deduction and replace it with a gambling, drugs, and prostitution deduction.

That will get our priorities back on track!

Magoo said...

Actually I think we're closer to 50% going to military (no, it's not "defense") spending when debt on previous wars is included. It's big business saving people from the bogey man.

Daniel Wrong said...

There seems to be a mistaken assumption that a gov't bailout will be for the home buyers. It's not! It's for the banks and other mortgage holders.

The home buyers are simply going to lose their houses (and any equity they might have had). The banks will foreclose and then resell the homes. The problem is that with the bad housing market in addition to the cost to bank of foreclosure proceedings, they will wind up with huge losses on their books.

THAT'S where the bailout comes in. Rather than having to declare bankruptcy, the banks will get their loss covered by the tax payers and go on their merry way. Meanwhile, the home buyers will be out on their ass. Plus, due to the new personal bankruptcy laws they won’t be able to discharge any other debts they incurred while trying to stay afloat with their ARM. Furthermore, they can be sued by the banks if they "misstated" their income on their loan application…bye bye middle class.

Welcome to the new American Plutocracy!


turdly said...

Bailout is just rhetoric. No home owner will ever receive a check. Money is being pumped into the stock markets right now. The bailouts if anything ever happens, will be zero interest loans to the investor not the sheeple.

We tried giving checks to sheeple for katrina. We all know happened there. Beleive me, no checks will EVER be given directly to house serfs. They'll just use it to buy another Hummer. Which brings me to;

Only first mortgages will even be available for a bailout and again, not to the pubic.
Since no restriction was put on the monies given to sheeple for the HELOC, it will be considered consumer debt and transferred to that category. Why? So it won't show up on the housing roles and make housing debt look like it is 'recovering'.

Anonymous said...

Amazing. Bernanke has been bailing out Republican bankers for a month now, to the other of billions of taxpayer dollars and nobody gives a damn. Is that any different than bailing out flippers?

Anonymous said...

I think WAMU and CFC are still F*cked cause didn't they already book all those Option ARMS as profits? If they get a new loan won't those profits need to be backed out of their books?

Anonymous said...

I rather spend $60 on those hot Czech female bartenders. Man, they are hot.

Anonymous said...

More than 80% of condo buyers in Miami were flippers who own more than one unit, and have no intentions to live in it. Do you really think that they want to keep on paying expensive mortgage on something that won't flip, even if the government offers a bailout?

Bailout doesn't mean FREE; it means that borrowers will continue to be slaves of bankers, forever. That's the reality and bailouts won't fix a damn thing. These idiots don't want to keep their mortgages, they want to flip the property.

There's only one bailout: to Republican bankers who love socialism when they lose their shirts on gambling.

Paul E. Math said...

Keith, you have awakened the beast that haunts my worst nightmares: a government-sponsored bailout.

My skin crawls with a million microscopic insects. A liquid-nitrogen sweat bursts from every pore. My stomach does backflips and lands on the carpet.

No bailout! Stop the insanity!

What would Ghandi do? What about Jesus von Mises?

onceuponatimebomb said...

I live in Canada, but I have some investments in the U.S. for diversification sake, and part of my business operations are there.

Here me now...if there's any sort of bailout, I am pulling ever last penny out of the U.S., and moving my business operations elsewhere.