Yum! It's Ben Bernanke Credit Crunch for Breakfast Again! Free helicopter included!

Note to the MSM: We are not having a SUBPRIME PROBLEM. We are having a CREDIT PROBLEM as the smart people in the room and many on this blog point out.

SUBPRIME was just the start. Now we move into Alt-A, Option ARMs, Piggybacks, Prime loans, credit card loans, student loans, auto loans, commercial loans and every other credit instrument known to man.

Get those helicopters ready. And say goodbye to the American Dollar, thank you Alan Greenspan and Ben Bernanke.

Here's could-go-bankrupt Countrywide Mortgage's Orange Mozilo on CNBC earlier today

Smooth.

Real smooth.

Here's the video.

Man, I'd check my watch after shaking hands with that cat.

Meanwhile, Maria sure is a softball tosser.

What questions would you ask Mozilo HP'ers? I'll see if he'll give us an interview. He he he.

Interesting to hear him say that CFC can't go to the Fed discount window because if I heard him right, THE BANK HAS NO ASSETS or access to Countrywide Home Loan assets.

Break that one down HP'ers. And yes, I'm short CFC. Nice to see the market call BS on this blatant pump and dump today.

Mozilo also called the Merrill analyst who reported that CFC might go bankrupt "irresponsible" who was yelling fire in a crowded theatre, and who (sob sob) negatively effected 61,000 Countrywide employees. Angelo, Angelo, Angelo, don't blame the messenger. Blame yourself for giving loans to liars while selling hundreds of millions of dollars of your sinking ship.

Angelo Mozilo - the new posterboy for greed, housing bubble style. Will he go the way of Ebbers and Lay? Time will tell.

Want to see the housing version of f*ckedcompany.com? Just go to the data section at National Mortgage News

Thought you'd find these numbers and charts interesting. What's most amazing about the charts is how the MSM and NAR spin these housing numbers as "down slightly" or "bottoming" or even "improving". Man, my eyes must deceive.

Keep in mind on the lenders that in many cases, the lender is not the bag-holder. Take Wells Fargo, who makes the loan then gets rid of it as fast as they can like a toxic hot potato. So yes, now that these types of loans are no longer being made, their lending business will collapse, destroying their revenue and profits, but it's the bag-holders that are really gonna take it in the shorts.

Think you're safe putting your cash into money market funds? Think again - they're CDO mortgage investors, and they ain't FDIC insured

The biggest problem with the CDO con-game is that S&P and Moody's hilariously gave this toxic loan cancer AAA or investment grade ratings, so "safe" funds (money markets, pensions, etc) could barrel in.

Oops.

"Cash is King" means one thing. But damn, if cash isn't safe (goodbye dollar) and money markets aren't safe (hello subprime), every asset class is being liquidated to raise cash, and even gold is dropping (hedge fund selling to pay debt) then it's getting tougher and tougher to find safety. Watch the US T-bills be the last island, which in itself is kinda funny since we're $50 trillion in the hole and essentially bankrupt.

Amazing. Good luck out there.

Aug. 20 (Bloomberg) -- Money market funds were invented 37 years ago to offer investors better returns than bank savings accounts while providing a high degree of safety. Most of the $2.5 trillion sitting in these funds is invested in such assets as U.S. Treasury bills, certificates of deposit and short-term commercial debt.

Unlike bank accounts, money market funds aren't insured by the federal government. They almost never fail.

Unbeknownst to most investors, some of the largest money market funds today are putting part of their cash into one of the riskiest debt investments in the world: collateralized debt obligations backed by subprime mortgage loans.

Under SEC rules, money market managers must invest in securities with ``minimal credit risks.'' Joseph Mason, a finance professor at Drexel University in Philadelphia and a former economist at the U.S. Treasury Department, says subprime debt in money market funds is far from safe.

``This creates tremendous risk for today's money market investors,'' says Mason, who wrote an 84-page report on CDOs this year. ``Right now, I'm not comfortable investing anything in CDOs.''

Special open thread to talk about the housing collapse, stock swoon and mortgage meltdown - are you prepared?

"Cash is king"

Seemed like three silly words to so many before the crash hit. But now with global central banks rushing hundreds of billions of dollars worth of desperately needed cash to failing banks who were holding US mortgage cancer while lending to imploding hedge funds, "Cash is king" isn't a theory - it's reality.

What are you doing out there during the meltdown? Did you prepare, or did you get whacked? And do you think the Fed's panicked discount rate cut this morning will stop the bleeding? Or is it a sign of FedPANIC?

WASHINGTON (AP) -- The Federal Reserve approved a half-percentage point cut in its discount rate on loans to banks Friday, a dramatic move designed to stabilize financial markets roiled by a widening credit crisis.

The most important paper you'll ever read in your life - CEPR's "Midsummer Meltdown: Prospects for the Stock and Housing Markets.”

Folks, you must, I repeat, YOU MUST, not only read this paper (go to link and hit the PDF) on the US housing and mortgage meltdown from Dean Baker and the CEPR, but you must print it out or send it to anyone and everyone you care about. You owe it to yourself to read the whole report, two or three times if you need to.

Yes, some people still won't get it. Some people will refuse to listen. Some are corrupt and don't want the truth getting out. And many folks out there are just too dense to understand (supply? demand? huh?). But at least you will have tried. And you will have prepared.

Here's some of the key points from this paper - the most well written, thorough, explanatory and shocking expose I've ever seen on the US housing bubble and crash - and just think, this cancer will spread around the world... Get ready.

* Total loss of wealth with the collapse of the housing bubble and stock market will be $8 Trillion to $12.5 Trillion (or more if the crash overshoots)

* Real economists who were warning about the bubble were ignored by the MSM in favor of fake economists at NAR and NAHB

* There is no factor of supply and demand that led to an $8 Trillion housing bubble - and no increase in rents to justify it.

* Inventory of unsold homes is 50% above the previous record - and the inventory of vacant units for sale is more than 100% higher than the previous record, while rental vacancy rate for owned units is soaring

* Homeowners are not prepared for a sharp drop in housing prices - and will enjoy a much less comfortable retirement than they had anticipated

* Median Price reports during the meltdown will be deceiving, as mortgage meltdown decimates the affordable home buyer pool, skewing median purchase price in favor of more expensive homes - Case Shiller index only good gauge available

* Very severe recession coming, pension shortfalls, and annual consumption drops of $415 Billion to $950 Billion

We knew what was going to happen. And now it's here. This liquidity crush is simply "revulsion" and "discredit". Housing panic is here.

It's panic folks, and it is here. Panic. In all your lives, you'll never see such a thing again. After the biggest financial bubble in the history of humanity, the biggest crash follows. It hath been foretold.

It's time to head to the cellar. Right on schedule, housing panic is now here.

Again, from the textbook:

Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

And just one of the headlines from reality today:

ECB injects €98bn but markets are gripped by panic

The European Central Bank released nearly €100bn (£68bn) in emergency funds into the banking system yesterday in an effort to kick-start the crippled credit markets, but its move only sparked panic selling on stock markets across the world.

The sudden cash injection was the largest since 12 September 2001, when the central bank released billions to stabilise the market after the terrorist attacks in New York.

The trigger for the €98bn package was a major overnight spike in inter-bank lending rates that if unremedied threatened to disrupt the normal functioning and stability of Europe's financial system.

As with the other market upheavals in the last month, the root cause was traced to America where the fallout from the meltdown of the market for risky, or sub-prime, loans continues to widen.

Colbert. Cramer. Housing Crash. Video. Cool.

How do you like your hedge fund blowups - scrambled or over-easy?

Ah, ya gotta love "our fund isn't blowing up" announcements even though the fund is blowing up. They've gotta do it though - only way to get rid of the assets before they hit firesale pricing.

Deny, Deny, Deny. Then run like the dickens.

LONDON, Aug 9 (Reuters) - Goldman Sachs said on Thursday that it was "business as usual" at its Global Alpha hedge fund but declined further comment on the fund's operations.

The fund has been the subject of persistent speculation for the past couple of days, with Goldman on Tuesday denying market talk that it was liquidating the fund.

On Thursday, French bank BNP Paribas (BNPP.PA: Quote, Profile, Research) froze 1.6 billion euros ($2.21 billion) worth of funds, citing problems over U.S. subprime mortgages.

Mortgage Mess: Clean-up in Aisle Three!

Looks like we're not gonna need government regulation of the mortgage market after all. The market is gonna take care of this mess for us

The days of liar's loans, stated income, no-money-down, negative amortization, teaser rate, adjustable rate, high LTV toxic mortgage crap went the way of the pets.com puppet.

Why? Because the loans didn't get paid back, and the bagholders said no-more.

So all of the companies involved in that crap have gone out of business, or are on their way out.

It's funny, the Senate will hold hearings in 2008 on this disaster, all kinds of new laws and regulations will go into effect, and in the end it won't matter. The market, as it always does, cleans up its own messes.

The only problem though is that this mess was massive and historic, and the clean-up will be devastating.

A little regulation would have gone a long way in 2002, 2003, 2004. But now that the market had to do it, versus our corrupted and incompetent Congress and President, the cleanup will go on and on an on...

2007, 2008, 2009, 2010, 2011, 2012, 2013, ...

"Panic". "Meltdown". "Nightmare". Is it just me, or is Housing Panic here?

Seriously, folks, you'd have to be a clueless fool to buy a home in this market. Even if you were one of the few lucky enough to secure financing as the mortgage lenders implode.

It's a bloodbath out there. Hold tight. This week will be wild. Check that - the next few years will be wild. Good luck out there everyone.

Housing Market to Weaken Even Further As Mortgage Industry Takes Cure

"This week is going to be a nightmare," says Melissa Cohn, chief executive of Manhattan Mortgage in New York. Lenders are scaling back so fast that it isn't clear which loans are available or on what terms, and rates are jumping even on large loans, known as jumbos, for prime borrowers.

These stricter lending standards reduce demand for homes and nudge some people who can't refinance toward foreclosure. Higher foreclosures add to a glut of homes on the market in most of the country. And, completing the vicious circle, a weaker housing market comes back to bite the lenders by wiping out owners' equity in their homes and increasing the risk of even more foreclosures down the road.

"The market is in a panic," says Larry Goldstone, president of Thornburg Mortgage Inc., a lender in Santa Fe, N.M. He says he thinks the mortgage-bond market, which supplies most of the money for home mortgages, will calm down within a few months, but the housing market may need at least another year or two to heal.

And then the Great Housing Ponzi Scheme ended for all to see, and the blood ran in the streets

Remember "Discredit" from Manias, Panics and Crashes. Then go pick up a Wall Street Journal, and it will all become clear my friends. It hath been foretold.

Credit Woes Hit Stocks Again

A host of housing and mortgage-related stocks have seen punishing selloffs in recent sessions as investors moved to flee at the first whiff of trouble.

Countrywide, Accredited Home Lenders and Beazer Homes are among those who have endured precipitous drops, regardless of whether the problem was more imagined than real.

Bear Stearns was getting crushed after Standard & Poor's cut its rating outlook for the broker to negative from stable. Earlier this week, the company said it is facing losses in a third mortgage-related fund. Bear Stearns, which has lost 19% over the last month, was down another 7.5% to $106.90.

And then governments wrote new laws to stop mortgage fraud and stupid lending (thus limiting the pool of buyers even more)

Only one question: Who's gonna buy all these damn houses now?

Mortgage industry's wild ride ends with new laws

A trio of new laws aimed at protecting Minnesotans from reckless mortgage lending go into effect today, demarcating the end of an easy-money era when anyone who could fog up a mirror could get a mortgage.

The new laws make mortgage fraud its own felony punishable by up to two years in prison, restrict adjustable rate mortgages and outlaw stated-income loans - so-called "liars' loans" that came to symbolize the era's lending excesses.

While housing activists cheered the regulatory crackdown, it is expected to knock out a sizable chunk of the mortgage lending business in the Twin Cities, affecting consumers and business alike. Just how much is hard to say since a sagging housing market and tightened lending standards due to the crumbling subprime mortgage market already have cut into business.

"It's going to slow the industry down," said Louis Olsen, president of River City Mortgage and Financial, a mid-sized lender in Eagan that has stopped making stated-income loans. "I think everybody has pretty much succumbed to the fact that everybody has to do business the way we did 10 years ago."

Here's Jon Stewart and the Daily Show video on subprime mortgage meltdown and housing crash and black people

Politically incorrect and I love it.

Hattip to immobilienblasen for the link

And then Jim Cramer (correctly) panicked, and (finally) said sell all the lenders - "Tremendous panic" and "First man out lives"

Jim, a bit of bad news for you (but I'm glad you finally found HousingPANIC - BOO-YAH) - The lenders have already gotten destroyed, their stocks are down 50%+, over a hundred have gone belly up - and NOW you say get out? NOW you say sell and be first man out?

Jim, Jim, Jim - glad to see you wake up, but you're not first man out. You're late.

But still, even though you're late, really late, good call. Get out at any cost - housing, lender stocks, homebuilder stocks, anything to do with real estate worldwide. Get out.

Thanks Morgan for the link

Jim Cramer:

"Why don't more people talk about this? Because it inspires tremendous panic. It's first man out lives."

FLASH: And then the hedge funds kept imploding. And imploding. And imploding. Bear Stearns nukes the market (again)

Come on now, you can't be serious! Bear Stearns is the gift that keeps on giving, but the thing is, they're just the tip of the iceberg. Thousands of hedge funds, pension funds and foreign countries will now implode as the CDO-uber-leveraged US housing market melts down.

Just turn in the keys and walk away Jim Cramer says. And that's exactly what folks are doing.

Tilt. Head for the hills. This sucker is gonna blow. Err, make that "blowing", active tense.

Bear Stearns Halts Redemptions on Third Hedge Fund

July 31 (Bloomberg) -- Bear Stearns Cos., manager of two hedge funds that collapsed last month, halted redemptions from a third fund after a slump in credit markets prompted investors to demand their money back.

The Bear Stearns Asset-Backed Securities Fund had about $900 million invested in asset-backed securities, including mortgage bonds, spokesman Russell Sherman said today in a telephone interview. The fund was overwhelmed by redemption requests, Sherman said.

The fund's stumble is a setback for New York-based Bear Stearns and illustrates how the crisis in the subprime mortgage market has spread. The fund had less than 0.5 percent of its assets in securities linked to loans to subprime borrowers, Sherman said. The two funds that collapsed invested almost fully in subprime bonds. Losses have spread to banks, insurers and hedge funds in France and Australia, including one run by Macquarie Bank Ltd.

``This shows you don't necessarily have to be a subprime fund now to be having problems,'' said Bryan Whalen, a portfolio manager in Los Angeles at Metropolitan West Asset Management, which oversees more than $21 billion in fixed-income assets.

Alt-A "Liar's Loan" mortgage king IndyMac reports today. Three words you may or may not hear: Mark to Market

Unfortunately the dolt running IndyMac didn't understand Econ 101 (or SEC regulations) when their cancerous loan portfolio starting going bust this spring. They could no longer sell their liar's loans on the open market except at a huge loss, so they held the cancer on their books, but didn't adjust their values ("Mark to Market") or substantially adjust their loan loss reserves.

Here's a pretty ignorant and arrogant statement from their CEO back in May on this. HP's question then was - where were the auditors? HP's question today is - where are the auditors? It really doesn't matter what the CEO thinks the cancer is worth - WHAT MATTERS WHAT THE F*CKING MARKET THINKS THEY'RE WORTH. Geeze, how dense are some people? Kinda like homedebtors thinking their home is worth X, when the market is telling them the home is worth 1/2 of X.

Yes, I'm short IMB. And I'd be shocked if they don't come clean today. Sarbanes-Oxley demands it. Truth or Jail? I'll update on IndyMac throughout the day... and you can listen to their conference call at 11am EST here

Michael Perry, chief executive of IndyMac Bancorp, is stubborn when it comes to delinquent loans.

He refuses to ditch them, even as they expand rapidly on the books of Pasadena-based IndyMac, which has two units based in Irvine and is the largest U.S. lender in a credit category dubbed "Alt-A," which is one level above the risky subprime niche. It turned in a company record of $90 billion in loans last year.

During an April 26 conference call with analysts, Perry said the company didn't sell a single dud loan in the first three months of the year because no one wanted to pay what he thinks they're worth.

"No way is IndyMac selling to a hedge fund for "pennies on the dollar," Perry said.

Alt-A / "Liar's Loan" mortgage king IndyMac's newest spin - "It's all good - we suck only just as bad as Countrywide"!!!

I think this would be like WorldCom saying that everything was OK because Enron was in a similar boat. Or buggy whip Company A saying all would be fine because they were tracking nicely against buggy whip Company B.

These guys really are amazing.

Yes, I'm short IndyMac via put options. I figure one day this company will have to stop with the spin and report the truth - but my guess is that it'll be the public auditors or Feds who come clean first, not IndyMac, their CEO or their PR flak Grove Nichols. What they don't mention in this posting are three very very important words, the 800 pound guerrilla in the room:

MARK TO MARKET

Here's just some of IndyMac's latest spin:

Update on Delinquencies in Our Mortgage Loan Servicing Portfolio
July 20th, 2007

In line with our expectations and as we communicated last quarter, delinquencies in our $184 billion servicing portfolio increased in the second quarter of 2007. As the following table illustrates, 30+ day delinquencies for our servicing portfolio in the second quarter of 2007 were 5.35 percent, up from 4.10 percent a year ago and 4.37 percent last quarter. Foreclosures also increased to 1.15 percent in the second quarter, up from 0.89 percent in the prior quarter.

While our delinquency rates have increased, they are comparable to Countrywide Financial Corp., which was ranked by the National Mortgage News as the No. 1 residential mortgage originator and the No. 2 residential servicer in the U.S. for the first quarter of 2007. On July 16, 2007, Countrywide reported a 30+ day delinquency rate in their servicing portfolio of 4.77 percent for the period ending June 30, 2007. Indymac’s modestly higher delinquency rate can be attributed to the fact that Countrywide carries a much higher mix of agency/conforming loans in their servicing portfolio relative to Indymac.

Grove Nichols
Communications Director

URGENT FLASH: Nautilus Capital issues panicked "liquidate your inventory now" recommendation. Systemic mortgage meltdown now firmly underway

And then the whole house of cards caved in...

Wow. Thanks Blown Mortgage for the tip. Here's the full warning letter

And again, remember these words HP'ers. Remember these words: MARK TO MARKET.

Loan sale pricing is not going to improve in the foreseeable future; in fact, it will probably get worse. Unless you are prepared to hold the loans to maturity, our advice is to liquidate your inventory now. You may not like today’s pricing, but you will like tomorrow’s even less.

As everyone in the industry now knows, most mortgage loans ultimately wind up on Wall Street in a securitization trust. The securitization market thus plays a vital role not only in pricing in the secondary market, but also in establishing underwriting criteria. An illustration of market-driven tighter lending standards was provided by today’s announcement that subprime 2/28 ARM loans will no longer be purchased by many investors. This is a direct result of recent changes by the rating agencies (Standard & Poors, Moodys, etc.), who determine the subordination and overcollateralization levels necessary for the different risk grades (or “tranches”) of the securitization trusts. If you have any such loans in your inventory it is probably too late to sell them except in the scratch & dent market.

Separately, several recent events are having a significant adverse effect on loan pricing, of all credit grades. The bankruptcies of a number of large subprime lenders (the latest being Alliance Bancorp, last week) is well known, but what is not widely understood is that their portfolios are being dumped on the market in huge volumes by their creditors. Similarly, a pair of highly-leveraged mortgage hedge funds managed by Bear Stearns recently collapsed, causing near-total losses to their investors. Their portfolios are being liquidated, but the sales apparently are not going well; rumor has it that only a small portion has yet been sold, and at a significantly higher discount than anticipated.

These massive sales are depressing pricing across the board. Prices on the ABX indices (used by mortgage bond traders to manage risk) have declined severely in just the last week. The trend lines for the AAA and BBB- tranches (the highest and lowest risk grades, respectively) are shown in the graphs above. Note that the AAA line, which was stable for so long, has now collapsed. Investors in these highest-quality bonds, who once thought they were immune to credit quality issues in the underlying loans, are now not so sure. The BBB- tranche, which is necessary to support pricing for all the higher grades, is trading for half of what it was in January.

What this all means to lenders is that loan prices are dropping precipitously, and you should complete any pending sales (premium as well as scratch & dent) as quickly as possible. If you have received a bid on a pool but have not yet decided whether to accept it, check with your investor; the bid may no longer be there. If it is, hit it now.

FLASH: Bear Stearns Tells Hedge Fund Investors There's `No Value Left'

Ruh-roh! Mark to market anyone? Anyone?

You gotta wonder how many more "suprises" are out there

Hint: Lots.

July 18 (Bloomberg) -- Bear Stearns Cos. told investors in its two failed hedge funds that they will get little if any money back after ``unprecedented declines'' in the value of AAA rated securities used to bet on subprime mortgages.

Estimates show there is ``effectively no value left'' in the High-Grade Structured Credit Strategies Enhanced Leverage Fund and ``very little value left'' in the High-Grade Structured Credit Strategies Fund, Bear Stearns said in a two-page letter. The second fund still has ``sufficient assets'' to cover the $1.4 billion it owes Bear Stearns, according to the letter, which was obtained yesterday by Bloomberg News from a person involved in the matter.

``This is a watershed,'' said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. ``A leading player, which has honed a reputation as a sage investor in mortgage securities, has faltered. It begs the question of how other market participants have fared.''

Bear Stearns provided the second fund with $1.6 billion of emergency funding last month in the biggest hedge fund bailout since the collapse of Long-Term Capital Management LP in 1998. The losses investors now face underscore the severity of the shakeout in the market for collateralized debt obligations, or CDOs, investment vehicles that repackage bonds, loans, derivatives and other CDOs into new securities.

Ralph Cioffi, the 22-year Bear Stearns veteran who managed the two funds, sought to minimize risk by investing in the top- rated portions of CDOs, hence the ``high-grade'' label. Under Cioffi, 51, the funds also borrowed money in an effort to boost returns. Instead, as defaults surged on subprime mortgages, they grappled with declines in the values of AAA and AA securities, Bear Stearns said in the letter.

Market Implications

``That has implications for credit weakness in the next several days and weeks,'' said Peter Plaut, an analyst at New York-based hedge fund Sanno Point Capital Management. ``There's going to be more risk aversion.''