January 03, 2008

It was cute watching all the little lenders go belly-up. Now watch the big boys like HSBC, WaMu and Wells Fargo go kerplunk, and that won't be cute.









What were they thinking?

Liar's loans. Interest-only. Piggybacks. No-down. No-doc. Poor credit. Teaser rates. Blah blah blah. The money ain't gettin' paid back.

It just makes me sick. Stupid bankers doing stupid things so they could make their short-term bonuses, f*ck the bank, f*ck their shareholders, f*ck their employees, f*ck their depositors, f*ck everyone but themselves. They got greedy, they destroyed lives, they blew up the financial system, they knowingly condoned and committed mortgage fraud, and the US taxpayer will end up paying the price.

History will not be kind.

Note - I'm short HSBC, Wells Fargo, Citi and WaMu and should've shorted each and every one of 'em, and a lot more aggressively. My mistake. Even I didn't realize the extent of their stupidity.

Frog marches. Investigations. Jail sentences.

It's time.

38 comments:

Mark in San Diego said...

When we all first started here, I don't think any of us thought it would get this bad - now we have a full scale world-wide financial crisis on our hands - essentially the banks are insolvent, the Fed is just proping them up. . .What really floored me today were the Fed Meeting Minutes - "they were surprised by the credit problems!!!" HEY - why can a few thousand bloggers and a few economists (Roubini and Shiller) be smarter and have more information than the Fed members? THAT scares the hell out of me!

Anonymous said...

Al-Queeferonio,

Thw word is -> Kaput

keith said...

I stand by kerplunk:

Kerplunk has several meanings:

Kerplunk, an onomatopoeia to represent the sound of something heavy falling down or a rock splashing in deep water

eric in vegas said...

I took my cash out of wells a long time ago.

Anonymous said...

I have a lot of cash and CDs in Wells Fargo bank. If their mortgage unit goes belly up, what are the chances of a freeze on deposits until FDIC prints the cash?

Frank@Scottsdale-Sucks.com said...

What were they thinking?

They were simply out to create junk paper they could sell to defraud foreign investors out of billions. That's all it was about.

I think a few key people will go to jail because the government will want to make examples of them, but most will escape free and clear.

Which pisses me off because if I, as a small business owner, had 1% the amount of FTC and AG complaints against me as these companies have against them, the FTC would freeze all my personal and business assets, raid my home and business, arrest me, and it'd be game over. It happens all the time to small business owners who get a fraction of the amount of complaints as these bozos have.

But I'm not a big crooked campaign contributor so oh well.

Anonymous said...

How is CountryWide still alive?

Anonymous said...

I look forward to the big bang....I am bringing marshmallows

Anonymous said...

How about H&R Block (HRB). They are the holding company of Option One Mortgage Corp?

Anonymous said...

Wow... great data. What struck me most was how overall lending was way down in every category in 07 Q2 and Q3... execpt in second mortgages.

This is clearly a shoe that hasn't dropped yet.

ivan said...

This development is not new, but it seems relevant for this discussion:

H&R Block Announces Mutual Agreement To Terminate Sale Of Option One Mortgage Corporation To Cerberus Capital

December 4, 2007

H&R Block announced that it has agreed to terminate the purchase agreement entered into in April 2007 (the April Agreement) under which an affiliate of Cerberus Capital Management, L.P. (Cerberus) would have acquired Option One Mortgage Corporation (OOMC), a wholly owned subsidiary of H&R Block. Under the termination agreement each party will bear its own costs in connection with the proposed transaction, and the parties exchanged mutual releases. All negotiations between the parties have been concluded in a fully amicable manner.

FDR said...

Keith,

You point your finger at the bankers greed and then in the next breath you tell how you plan to make money on the crash.

Pot calling the Kettle black?

And what do you propose to save the nation? Dont tell me Ron Paul either. Ron Paul is not capable of understanding the crisis let alone act like an FDR did to save the nation.

I still think youre a British agent set up to spread fear and pessimism as the British created financial crash picks up more and more momentum.

You'd also like to convince your followers to loath the US Government. It's an end game strategy by the City of London so they can come out on top of the rubble of a crumbling system.

Malcolm said...

In the old days (when there were lending standards), statisticians could predict, with fairly decent accuracy, the projected number of defaults. Bean-counters would sit in their little rooms, do the math, and build a fairly stable economic model where long term grough could be achieved, even with defaults.

The no-doc loans killed this idea, of course.

I think part of the blame goes with publically held companies who value share price more than fundamentals. Given the choice between doing what was right for the long-term stability of the company or the short term stock price, these bonus-heavy company leaders went for the quick buck, even though they knew in their hearts that they were eating their seed corn.

Growth is only good when it doesn’t involve destroying the company in the process.

I won’t get in the middle of the kerplunk/kaput debate, but I will suggest that here in the states, we don’t use the term frog-walk; we refer to it as a perp-walk.

This is not to be confused with the “walk of shame”, which is a term where sorority girls wait outside their house in the morning to mock the girls who try to sneak in the next morning wearing the same party dress they had when they disappeared from the bar the night before.

DOPES said...

Which pisses me off because if I, as a small business owner, had 1% the amount of FTC and AG complaints against me as these companies have against them, the FTC would freeze all my personal and business assets, raid my home and business, arrest me, and it'd be game over. It happens all the time to small business owners who get a fraction of the amount of complaints as these bozos have.

But I'm not a big crooked campaign contributor so oh well.

January 03, 2008 2:04 AM

Frank, go write another book so you can be twice as rich at age 60 as you were at age 30.

Youre a prime example of the stupidity of corporate America.

And for christ sake quit your whining.

Princess Mononoke said...

Mark in San Diego said...
>>>What really floored me today were the Fed Meeting Minutes -"they were surprised by the credit problems!!
January 03, 2008 1:34 AM
===========================
The FEDs eye's were WIDE shut!

They knew/know how bad it is... What I don't understand is why they continue to play the dumbfounded game, when they should be taking control of this situation!

Anonymous said...

A friend has a Wells Fargo loan...

refinanced it out of an adjustable 1 1/2 years ago...was so proud she was with a reputable A1 bank

Last month, she said her mortgage went down!? she insists it's fixed.

guess its "fixed" for 1 to 2 years.

keith said...

I and most HP'ers are desperately trying to protect our capital with the dollar tanking and stocks aren't going up. That means gold, commodities and limited shorting of the corrupt REIC via put options loudly and publicly.

It's not greed. It's survival.

Might want to look into it...

keith said...

BTW, 8 hour jetlag is brutal

Edgar said...

Good stuff keefer. I wish it were so, but nobody audits banks anymore.

Malcolm said...

@ dopes

>the FTC would freeze all my personal
>and business assets, raid my home and business…

Not to mention their new habit of seizing all of the cash you have on hand. So, if you keep a pile of cash in the house as an emergency fund, they take it all until you can prove where all of it came from. This has been a big factor in my decision not to keep a pile of cash in my house.

@ keith

> BTW, 8 hour jetlag is brutal

Yes, but it doesn’t help when you have to drag your suitcase full of gold with you through the airport.

@ keith

After doing research, I’ve noticed that “frog walk” is a valid term. I guess the difference, according to Wiki, is that a perp walk is when they are dragged in front of the media, but walk under their own power; whereas a frog walk is when they are actually dragged in front of the media against their will.

http://en.wikipedia.org/wiki/Perp_walk

Anonymous said...

HSBC is a massive company. Check size of banks before shorting. my gut says WAMU is on the edge.

happy homeowner in the stix said...

A friend has a Wells Fargo loan...

refinanced it out of an adjustable 1 1/2 years ago...was so proud she was with a reputable A1 bank

Last month, she said her mortgage went down!? she insists it's fixed.

guess its "fixed" for 1 to 2 years.


What could have happened is that her insurance rates went down. If she is paying her premiums along with her payment to the bank, her overall "mortgage" (as she put it) would have decreased. It happened to me this year and I have a fixed rate mortgage....it wasn't much to brag about, but I could always use the extra $15.

Anonymous said...

"I still think youre a British agent set up to spread fear and pessimism as the British created financial crash picks up more and more momentum.

You'd also like to convince your followers to loath the US Government. It's an end game strategy by the City of London so they can come out on top of the rubble of a crumbling system."

Huzzah! Huzzah!

Not to worry. The Brits are just as F-ed as we are on this side of the pond.

devestment said...

eric in vegas said...
I took my cash out of wells a long time ago.


DITTO

I told them it was because they were the nations number one sub prime lender before it was an issue.

DopesEvilTwin said...

BTW, 8 hour jetlag is brutal

Try doing those 12 hour asian flights every month, but as you said,

"It's not greed. It's survival."

Anonymous said...

we should all take our money out of the banks that caused this mess and put it into banks that stayed away from the ponzi scheme

keith said...

BTW I always disclose if I have a financial interest in a stock I mention

Does anyone know if bloggers have to do that legally?

Anonymous said...

I have applied for a new personal license plate here in Silicon Valley, California, home of stock backdating and the $800K 45 year old tract dump fixer-upper house with 4 mortgages on it, about to be foreclosed upon... (taxes are RIGHT around the corner, as well as those holiday shopping sprees on the multiple high-interest credit cards).

My new plate to read:

"DIE U PIG"

I hope all you real estate 'professionals' and homedebtors get the message... Honk if you see me.

Go F*ck yourself.

Anonymous said...

i think wells fargo is toast. probably city too.

D Gordon said...

Keith, great blog.

Regarding the shorts, do you think WaMu really can drop that much further at this point? WF looks like it has a tumble in its future I agree 100%.

You are not hurting anyone directly by shorting these stocks. It is simply using the writing on the wall to grow your portfolio and put yourself in a better position. Plain and simple.

Anonymous said...

Iceman says,

Look at the banks that are charging well over 2 points for a standard 30 year fixed loan. I suspect these banks are in deep trouble ex... WELLS FARGO, PROVIDENT BANK, INDYMAC BANK, etc.

Veronica Lodge said...

RE: What were they thinking?

They were thinking like Las Vegas gambling addicts.

"The more you bet, the more you get."

"Double up and you catch up."

The problem is that the US casino economy is now played out and all bets are off.

V.L.

Anonymous said...

Is Well Fargo coming clean in sub-prime mess

http://online.wsj.com/article/
SB119871715330351693.html?mod=
googlenews_wsj

the housing downturn is starting to tarnish even Wells Fargo's sterling reputation for conservative loan underwriting. And, the bank does have subprime exposure, although it likes to downplay the risks.

Anonymous said...

America is basically insolvent as we speak. That much is clear and the only way to sort out the mess is to have a deep recession so that greedy and inefficient banks and businesses fall by the wayside or get taken over. Any attempt to prevent this from happening will only prolong the insolvency. If you don't believe me just ask the Japanese.

DOPES II said...

HSBC is a massive company. Check size of banks before shorting. my gut says WAMU is on the edge.

January 03, 2008 3:11 AM

HSBC is also the leading bank of the international drug trade being run out of London.

Anonymous said...

Keith said:

I stand by kerplunk:

Kerplunk has several meanings:

Kerplunk, an onomatopoeia to represent the sound of something heavy falling down or a rock splashing in deep water


Wouldn't that be the same sound as a large turd hitting the water in the toilet bowl?

Smug Bastard

Toby said...

How did you short HSBC? Only the North American division of the bank holding company is traded in NY. HSBC has billions not to mention tacit Chinese backing. I doubt it will drop any more than the US bank index.

Allahu Akbar said...

"HSBC is also the leading bank of the international drug trade being run out of London."

Yes, it is. The patriot act forced U.S. banks to adopt very strict anti-money laundering and fraud monitoring.
The terrorists and drug smugglers are now washing the majority of their money through English, Dubai, and Singapore banks.

I was reading this great article recently about how Saudis and other jihadists were flipping real estate in the UK, and using the profits to fund international terrorism groups like Hezbollah/Hamas/Al-Queda and the islamic takeover of Europe.