November 26, 2007

FLASH: US banking system on verge of collapse: Senator Schumer calls for federal investigation of $51 billion in loans to Countrywide Toxic Mortgage

Folks, the United States banking system is about to collapse.

If you have money in US banks (especially Countrywide) beyond the FDIC limits, get it out tomorrow. Get it out fast. If you have money in money markets, which are NOT FDIC insured, get it out tomorrow. Get it out fast. If you still own bank and financial stocks, sell them tomorrow. Get out fast, while you still can.

The British government and Bank of England are in a whole heap of trouble for the reckless and stupid decision to bail out failed bank Northern Rock, and now they're coming to the realization they're not gonna get paid back.

But we all knew about the stupid actions in the UK. That's NOT the case in America today, where Countrywide Soon to Go Bankrupt Toxic Mortgage has secretly been fronted $51 BILLION by the
FHLB member banks in order to keep them afloat, backed up by toxic loan paper that is becoming worthless real quick.

I can't believe this is happening. We (and our banks) are run by monkeys. And now even our friend Senator Schumer is freaking out, asking for a federal investigation today. When banker-owned Schumer is scared, you should be scared too.

U.S. Sen. Charles Schumer on Monday called for federal regulators to probe more than $50 billion in advances made by the Federal Home Loan Bank of Atlanta to troubled mortgage giant Countrywide Financial

In a letter dated Nov. 26 to Chairman Ronald Rosenfeld of the Federal Housing Finance Board, Schumer (D., New York) expressed "serious concern" that loans Countrywide Bank was pledging as collateral for those advances "may pose a risk to the safety and soundness of the FHLB system as a whole."

FHLB Atlanta has made $51.4 billion in advances to Countrywide Bank as of Sept. 30, Schumer wrote, citing the most recent Securities and Exchange Commission filings. The amount represents 37% of the bank's total outstanding advances and the $62.4 billion in loans Countrywide has put up as collateral represents 78% of its total mortgage holdings, Schumber said.

"I find these numbers alarming as reports continue to emerge about how Countrywide's reckless and predatory lending practices were a leading contributor to today's foreclosure crisis," Schumer wrote in calling for the probe.

60 comments:

Anonymous said...

ENRON

Edgar said...

Yeah, I'm sure Schumer is all busted up about the $51 billion. Actually, it was over a hundred billion in all. Schumer really cares about the taxpayers, the rich ones like mozilo, that is.

Anonymous said...

The entire corrupt CNBC is blaming today's bear on Shumer, including the guys at Fast Money. One day is Gisele's fault, the next is Schumer...

ZZwcck said...

I highly doubt anyone in Congress is surprised with this news. They are just acting like it so they can keep the sheep in line. The political establishment can claim nobody knew this was happening not even the lazy a$$ in charge of the FHLB. How can anybody be held accountable other than Agent Orange Man himself (instead of destroying jungle he destroys neighborhoods)? -- I think Mozilo should take all his money and jump to China before he spends the rest of his life in prison. Heck, even dying won't save him now that the courts have taken Ley's ill begotten gains away from his estate...

Anonymous said...

why doesn't he investigate how many dual citizenship twits are in our government and what they are doing there....

Anonymous said...

One day is Gisele's fault, the next is Schumer...

if she was my wife, i would say.......hey yo gisele....go get me a beer baby? step on it sweety!

stuckinthecity said...

expressed "serious concern" that loans Countrywide Bank was pledging as collateral for those advances "may pose a risk to the safety and soundness of the FHLB system as a whole."
-----

NO DUH!

shtove said...

I've been following this blog and others since January - and I think this is the moment when all the expected consequences of lunatic lending accelerate to light speed.

Anonymous said...

What about the 190 lending institutions that have imploded according to the implode-O-meter?

Neither the news media or senators have said anything about all these lenders now bankrupt.

I believe Schumer knows exactly what is happening with the banking industry. He is doing everything possible to prevent a run on the banks here in the U.S.

Anonymous said...

Ahhh, you gotta love the brainless sheeple who follows Cramer to their graves. Here's "Jim Cramer's 5 Bulletproof Stock Picks" holdings:

1. ALTRIA GROUP INC (MO)
2. FREEPORT MCMORAN (FCX)
3. FOSTER WHEELER (FWLT)
4. TRANSOCEAN INC (RIG)
5. MEDCOHEALTH SOLUT (MHS)


Well, if you followed him, you're losing your shirt since it was a rearview mirror pick (as usual). My strategy now is shorting whatever Cramer picks as hot.

Anonymous said...

Hey Keith, could you post that video again in which Cramer says that there's no housing bubble? We have to bust the balls of all these charlatans.

Anonymous said...

Lee wrote:

Just another back door bailout.

The French SIV, the Brits are setting one up, our M-LEC and the FHLB loans to CFC and others.

They are putting it all off their books, and hoping that the U.S. Government and ECB will cut that 500 Billion Dollar/Euro Check.

By printing more dollars and euros, of course.

I wish I had more money to short bank stocks. This is the Opportunity Of The Century.

Damn...

Malcolm said...

Pretty Boxes, Pretty Boxes….

Anonymous said...

Hi, I need 2 mortgage brokers to help me move a couch, willing to pay $5 per hour because the illegals Mexicans on the corner are asking $10 per hour?

If I had $50 Pesos I'd hire the Mexicans because they work harder and are not worried about breaking thier fingernails but all I have is US dollars.

Malcolm said...

Keith:

I’m a little worried.

You seem to be running out of people willing to tell you how you’re wrong about everything.

I’m afraid of two things in particular:

1. You might start to get a big head, turn into another Rush, and start making unreasonable demands (I said FIJI water, not Hawaii water).

2. After the crash comes, you’ll have to retool your blog with a new topic. Just stay away from the Four Horseman, the shelf life on waiting for them appears shorter each day.

To Other Readers:

If you haven’t already, now would be a good time to read the book Atlas Shrugged.

I hesitate to mention the book, because I don’t want to sound like so many of the crazed Ayn Rand groupies you’ll see from time to time.

But it is such a good book, so relevant to what is going on these days, and so perfectly targeted to the type of person who frequents this site; that reading it from time to time can be a cleansing to the heart.

Princess Mononoke said...

Toot Toot... Heeeey... Beep Beep!

Tangelo has been in such deep mire it's beyond comprehensible.

Everybody keeps criticizing the sheeple for being sooo irresponsible and in hawk up to their ears. However, take a good long look at Tangelo and other institutions. They have borrowed $100s of billions from anybody who will lend them the money, perpetuating the same dramas, digging the deepest hole of debt. Just die, close, get it over with!

Just like the sheeple, these heads of corporations need to feel the pain of their mismanagement and incompetent strategic decisions.

The Fed, FHLB, Fred and Fannie, money managers, etc. are attempting to SAVE an already sinking ship! And WHO might I add ends up paying for all of this?

abb said...

I'm not sure banks can collapse in the US. The Fed will lend (create) whatever money is necessary.

The dollar is the thing that will collapse (as soon as the planet figures out what's happening).

Anonymous said...

Indeed, the Fed already has twice cut its overnight interest-rate target, and options markets show investors expect the Fed to cut by another quarter-point at its Dec. 11 meeting, taking the Fed funds bank-lending rate down to 4.25%.

Anonymous said...

"We've had consumer recessions before,The world doesn't end."

Paul E. Math said...

Looks like Orangelo neglected to give 2-buck Chuck Shumer his Christmas bonus.

I guarantee you there was some backroom dealing where the banks decided us sheeple needed a scapegoat and Orangelo drew the short straw.

"Orangelo - you ARE the weakest link!" Ha! Givin' ya a little new millenium pop culture - wazzaaaap!

Anonymous said...

If the collapse means we will all go to the check cashing place like illegals, not pay any taxes, and get benefits from the govt. as a suppliment to our income can it really be that bad?

Seriously, our entire economy has been based on BS for a long time. We just transfer goods and assets to e/o to create wealth from nothing. The practice of building or doing something of real value has been going away for the longest. This banking crash will be our salvation.

Anonymous said...

Anonymous said...
why doesn't he investigate how many dual citizenship twits are in our government and what they are doing there....

November 26, 2007 10:49 PM

Interesting, tell us more. How many of those dirty Brits are inside our government making policy?

Anonymous said...

Schumer just found out about this? The "news" is months old.

Halifax said...

Were the Countrywide wrist bands pulled off ebay? Not even a coffee mug!

Anonymous said...

The Republicans keep falling!!!!

Trent Lott oddly and abruptly announced his resignation from the U.S. Senate on Monday.

And now we know why!

The Mississippi Senator reportedly has had a relationship with one high-rent male escort!!!!!

Anonymous said...

FHLB advances are the most senior debt. There is no risk to the taxpayer from that direction

Anonymous said...

WOW Peeps....
Isn't it absolutely F'ing mind boggling how late to the party Shumer and our Govt. is on the whole Mortgage blow up??

This whole, inept, corrupt administration makes me want to puke my guts out. They have gutted our country and throwing it to the WOLVES....Sickening.

no bullshit here said...

breaking news

Coutrywide financial is seeking an injunction against kb homes for failure to properly disclose loan terms to buyers at thier subdivisions. Judge Nicholas ferrier in los angles ca is looking into the matter.They are trying to blame kb home for this mess, give me a break.

polar express 2007 said...

I think Bush should have another conversation with Jesus -

like when bush said, "Jesus told me its OK to conduct massive bombing raids over Iraq." (2003)

What will the king and his hell bound court do next?

* I'm now signing off from HP.

I was here to witness the pre-fall data, and have seen enough destruction and government and corporate lies to last a lifetime. So sad, but I must start to focus on myself and try to stay positive in this new world of government created chaos. Nobody can stop bush's trainwreck now...and its just around the corner.

I choose to avoid more bad news. I must now leave the HP boards that have provided me with much wisdom, warnings and quality-entertainment!

Thank you Keith for all your good works! Cheers to your future - and the end to the world's evil doers. Happy holidays...

WORLD PEACE!
(*ARREST DICK AND BUSH)

PS: I will be voting for Ron Paul! If he's not on my state's ballot, then I'll just vote for nobody and walk out. :) ...

Anonymous said...

Yo Dopes:

Mozillo has the last laff here - first he rapes the borrowers and then he rapes the gov programs - a total twofer...
Next up: Branson's Virgin Group buys Countrywide.

westwest888 said...

Bloomberg: Dollar carry trade has begun.

Unrelated - gold up.

http://tinyurl.com/2ko4yz

``With the dollar giving the appearance of being in free fall, it increases the attractiveness of using the currency to fund investments,'' said Avinash Persaud, chairman of London- based Intelligence Capital Ltd., which advises hedge funds that manage more than $89 billion. ``That process will only add more fuel to the decline.''

Anonymous said...

How is it that nobody seems to know WHO engineered all these FHLB
deals? Someone has to be working in the background to take credit for this - IT DID NOT JUST HAPPEN AS A ROUTINE MARKET TRANSACTION.
I've been asking this several places and gotten no answer.
ALSO NOTE - IT IS NORMALLY ILLEGAL AND AGAINST SOUND BANKING PRINCIPLES TO LOAN MORE THAN A SMALL % OF YOUR PORTFOLIO TO A SINGLE BORROWER. HOW WAS THIS RULE BYPASSED?

chris g said...

Wow. $51 billion advanced to Leatherface. What the hell is going on? If any bank should take the fall, it's Countrywide.

Anonymous said...

But...but...but...

Just this evening I saw the very 1st commercial for the new season of American Idol!?!?! Aw' man, this CANNOT be happening NOW!?!?!?!

Anonymous said...

Just because Schumer did this DOES NOT make him our friend. He is one of the slimiest, anti - American senators around. He is always trying to get his name in the spotlight.

history rhymes said...

This is the set up act for history's biggest bank bail out. Schumer teed up the ball, and Bernanke is going to whack at it.

What have they got to lose? China can't do diddly else they will lose face right before the '08 Olympics, the Arabs have already said they're going to jack oil prices, and the EU just wants Paulson to go first so they can point fingers.

Wall Street and the Fed are going to inflate away the debt problems because it's the only option left. Inflation is a tax on the masses. Bend over Bubba...

Anonymous said...

Amazing what happens when everyone in charge is fu$*%in braindead.

Sequoia

Anonymous said...

banks ARE regulated as to how much they can lend vs deposits. That's why they sell the majority of mortgages to Wall Street.

The banking system itself is fragile and based on nothing but perceived value and promises to pay. A bank provides nothing other than a safe keeping of your dollar. If you deposit 100 bucks cash, the bank then lends it to some other guy, thereby increasing the money supply.

Banks can make money by borrowing money at low short term rates from the Fed or other banks. They also pay interest on deposits. They then have to lend that money out at higher rates. Right now financing is hard to come by and depositors are getting scared.

It's pretty scary to know that your checking account is really only a loan given to the bank with a promise to pay you back on demand.

zombie said...

Anonymous 1:19 said...
"FHLB advances are the most senior debt. There is no risk to the taxpayer from that direction"

First, I doubt that's true, because it can't be senior to the most senior contractual debt without the consent of the senior debtholder.
Second, the loan from FHLB represents a LTV of about 82% of CFC's stated value of collateral that is so worthless no real investor wants to lend against it . . . at all. Does this not sound risky given the skyrocketing foreclosure rates and plunging value of the collateral underlying the CFC mortgages.

Anonymous said...

Lee wrote @ Malcolm:

We aren't discussing if the top 4% go away to Mars, we are discussing the very real possibility that the top 4% won't be able to get a loan no matter if they have an 850 FICO or 990 Vantage.

If the markets tank and multiple banks fail, the governments will step in, for certain.

But the stock markets will crash - if all financial stocks become non-market entities and get 100Billion from The Fed, what does stock price mean? It could go to zero, and everyone knows it still has SOME value, but how much?

No, first we will see The Panic, and the PPT will try and fail to prevent this.

What, is the U.S. Government just going to print $2Trillion to recapitalise the entire U.S. Financial Sector?

Inflation and Falling Stocks, here we come.

Anonymous said...

Moved my entire 401k to FXE until this blows over

Anonymous said...

Because of this Bernanke will cut to 0% and the dollar will crash too

Anonymous said...

"What, is the U.S. Government just going to print $2Trillion to recapitalise the entire U.S. Financial Sector?"

There were rumors to that effect last year. The word from employees at the Bureau of Engraving and Printing was that the U.S. Treasury had ordered printing of an unusually large, $2 trillion batch of paper money, and placed it in storage.

We all should remember that Bernanke's nickname is Helicopter Ben.

Anonymous said...

.



We need to investigate Schumer!


.

Anonymous said...

The entire corrupt CNBC is blaming today's bear on Shumer, including the guys at Fast Money. One day is Gisele's fault, the next is Schumer...

Fox News will be blaming it all on terrorists tomorrow.

"There are reports that Islamo-fascist terrorists may be to blame for the recent downturn in the housing market. Al Qaeda has reportedly claimed responsibility for signing record numbers of subprime mortgages over the period 2002-2007 and failed to meet mortgage payment obligations. George W Bush has vowed to nuke Iran's housing industry in response to these terrorist acts. Angelo Mozillo, representing Countrywide Financial says it is terrorist acts like these that destroy the integrity and respectability of the US mortgage lending industry."

Princess Mononoke said...

Anonymous said...
>>The Mississippi Senator reportedly has had a relationship with one high-rent male escort!!!!!
November 27, 2007 1:08 AM

Thanks for this update. I had no idea, really. One down a thousand more unethical, corrupt, greedy bastards to go???

Still this is nothing new. That kind of activity has been going on for centuries by all top people. He just happened to get caught through her little black book. You see, she is a good example of keeping good "records". ALWAYS ;)

Princess Mononoke said...

Always CYOA!!!

Princess Mononoke said...

Anonymous said...
>>FHLB advances are the most senior debt. There is no risk to the taxpayer from that direction
November 27, 2007 1:19 AM

Wow! That was an incredibly nice spin. I have to give you credit for that.

It's still debt nonetheless.

Anonymous said...

So much advice here from $11 an hour McFlipper workers. Please tell me mor.

Anonymous said...

Princess Mononoke said...
Anonymous said...
>>The Mississippi Senator reportedly has had a relationship with one high-rent male escort!!!!!
November 27, 2007 1:08 AM


==========

Any link to this? And by link I mean something reputable, not www.somedouche.blogspot.com

Money Bagz said...

QUESTION for everyone--!!

Since we all know the a stock market crash is not a matter of "if" but "when", Do most of you feel safe having money in FDIC-insured checking accounts thesedays??

I have pulled most of my funds out of the market, and put them into a few savings accts at ING and BofA, (both accts way under the $100K FDIC limit)-but with all the talk about how even the Banks don't know what they are holding thesedays, I am getting nervous that if the shytt really goes down, even the FDIC might fail...??!! Also, ING is a Dutch company, and they will probably find some way to suspend all American withdrawls at that point, if it really turns into the Wild West!

Am I just completely paranoid here?? I mean, WTF?? Stashing cash under the mattress is starting to sound like the best way to go, and that's F'd!!

What do HP'ers really think??

Anonymous said...

Am I just completely paranoid here??

Most definitely. Although in the paranoid world of HP,Ron Paul, peak oil, John Birch Society, etc you are very much in the mainstream.

brokersleaveyoubroke said...

Wow, I was shocked to read "Bail em out" Schumer was blasting FHLB for bailing out Countrywide. And, I read it in the "New York Post" which is the print version of Fox news. Things are getting really crazy.

Anonymous said...

From a really good blog post on RGE Monitor:

(snip)

Countrywide (is) the poster child of reckless mortgage lending and of the current mortgage disaster. (R)ather than kicking out a reckless CEO - whose actions are now under SEC investigation – and putting the lender under public control, Countrywide has been rewarded with $51 billion of public money that was provided in a stealth bailout operation while the current shareholders and incompetent managers are still firmly in charge of the bank.


The right approach would have been - as Martin Wolf suggested for Northern Rock – to take over the bank and put it formally under public control. Instead the US Treasury, the FHFB, the Fed and the banking regulators have been tacit and/or explicit accomplices of the stealth public bailout of most egregious example of reckless and predatory lending, the core institution at the center of a subprime and mortgage disaster that is now taking the entire US economy into a recession.

http://www.rgemonitor.com/blog/roubini/

Katie in Houston

Peter T said...

> Do most of you feel safe having money in FDIC-insured checking accounts thesedays? (...)
> with all the talk about how even the Banks don't know what they are holding thesedays, I am getting nervous that if the shytt really goes down, even the FDIC might fail...?

Someone else wrote: If the FDIC fails, you will have other worries than money: guns, ammo, and canned food. The FDIC is a federal explicite guarantee of your deposits. When a FDIC insured bank fails, the depositors will get their money back into an account at another FDIC insured bank, but it can take some time until the transfer is complete. Be sure to have some cash during the transition.

grave dancer said...

ALL YOU BANK ARE BELONG TO US!

"Investors from Dubai to China could be considering similar deals with cash-strapped U.S. banks, hoping to ride a recovery in their stocks and avoid the political barriers that could have been thrust in their path in better times, analysts said.

"There will be more such investments," said Giyas Gokkent, head of research at the National Bank of Abu Dhabi. "The other buyers will likely play the same white-knight role," he said of other Gulf Arab investments in Wall Street firms."


The great bargain hunt begins. 兄弟, can you spare a dime?

LauraVella said...

"Well, if you followed him, you're losing your shirt since it was a rearview mirror pick (as usual). My strategy now is shorting whatever Cramer picks as hot."


I also saw that "shills" episode last night. Agree, that's a great strategy!

LauraVella said...

No BullSh*t said:"Coutrywide financial is seeking an injunction against kb homes for failure to properly disclose loan terms to buyers at thier subdivisions."


Now the mud slinging begins!

Princess Mononoke said...

This article has priceless information for all of my fellow HPer's. Cheers!

>>"I think we're headed into a deep recession, the worst since the Depression, as dozens of banks will fail," Burry says.<<

>>Banks are hoarding cash like Scrooge McDuck.<<

http://articles.moneycentral.msn.com/Investing/SuperModels/GettingRichOffTheSubprimeMess.aspx?page=1

Don said...

I have to vent this somewhere... Why should I, as a taxpayer, be responsible to help folks with poor credit (and should have never been given these loans) get our of their loan problems (i.e., ARMs that are maturing) when they should have never been approved for the loan in the first place!?

Banks should have never loaned the money!... and the borrowers should have known that they couldn't afford the ARM once it matured!!! How is this now my problem?

This is so frustrating.