U.S. Economy

The "Mortgagegate" Scandal: Congratulations America, You're Now in the Title-Insurance Business

U.S. taxpayers already own pieces of such problem-plagued companies as General Motors Corp., Chrysler LLC, American International Group Inc. (NYSE: AIG), Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC). Now the increasingly problematic "Mortgagegate" saga could land American taxpayers in the trouble-ridden title-insurance business.

On Oct. 8, Bank of America Corp. (NYSE: BAC) indemnified Fidelity National Financial Inc. (NYSE: FNF) against any losses that Fidelity might sustain in litigation over title insurance it writes on foreclosed homes - the same homes, coincidentally, that Bank of America wants to sell to new buyers.

This arrangement amounts to U.S. taxpayers, who are the ultimate backers of the Federal Deposit Insurance Corp. (FDIC), backstopping a giant, publicly held title-insurance company, which is backstopping a huge commercial bank, so that the bank can sell properties that it might not have proper title to.

It sounds like a Wall Street version of the "Six Degrees of Kevin Bacon," but it's no game - it's a daisy-chain scheme that once again sets American households up as the biggest losers.

To understand the latest "Mortgagegate" developments - and see the steps to take - please read on...

An Open Letter to Washington: How to Fix the Deficit and End the Bush-Tax-Cuts Debate

Dear Mr. President and members of Congress:

In the months that follow Tuesday's midterm elections, and into the New Year, you all face three very significant challenges. You must:

  • Find a solution to the Bush-tax-cuts controversy.
  • Rein in the huge-and-growing U.S. budget deficit.
  • And better police Wall Street, which got us into this mess in the first place.
You can solve all three of these problems with a single, simple proposition. And you can do so without having to ask U.S. taxpayers to dig into their wallets or savings.

Let me explain.



To see Hutchinson's solution, and to see how to join our campaign, please read on...

Investment Strategies: Three Ways to Profit – No Matter Who Wins Tuesday's Midterm Elections

If you're worried that next week's midterm elections could further cloud an already-uncertain investment landscape, take a page from the investment playbook of Money Morning's Keith Fitz-Gerald: Position yourself to profit no matter which party wins on Tuesday.

During an interview with Fox Business Network journalist Stuart Varney yesterday (Tuesday), Fitz-Gerald detailed three strategies that will afford investors both safety and significant profit potential - whether the Democrats or Republicans carry the day.

For the full story - and a look at the video - please click here...

Question of the Week: Mortgagegate Makes Investors Wary of U.S. Banking Industry

A potentially crippling crisis is flashing through the banking industry and threatening to derail the already struggling housing market and U.S. economic recovery.

But Gilani said the headlines aren't telling the full story.

Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices. 

Money Morning Contributing Editor Shah Gilani warned about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.

Read More…

We Want to Hear From You: What Are the Top Three Issues You Want To See Addressed After Midterm Elections?

A tense Congressional tug-of-war will come to an end in less than a week, when the intensely sought-after seats in the U.S. House of Representatives and Senate are filled after the Nov. 2 midterm elections.

The Republican-Democrat contest is the hottest in years. The voter debate is about which candidates will be the most likely to lift the United States out of a morass marked by near-double-digit unemployment, sluggish economic growth and a terrifying $1.29 trillion budget deficit.

As campaigning time wanes, it's clear that an increasing number of seats are vulnerable.

"Let me tell you something," U.S. Vice President Joe Biden wrote Monday. "I've been around campaigns for a long time and I have never seen a midterm election with this many races in play."

Experts described this campaign season as more volatile than most because of a major possible shift in power.

Read More…

Wall Street Bonuses Will Cost Us All in the Long Run

Wall Street firms may not be reaping the record-breaking revenues of 2004-2007, but they're paying themselves the lofty bonuses of that lavish era - and they're doing it at our expense and with the government's blessing.

Wall Street's pay packages, including bonuses, are set to total 4% more in 2010 than in the already record year of 2009, The Wall Street Journal recently reported.

I yield to nobody in respect for the investment banking business - having served as an investment banker for 27 years - but these salaries and bonuses derive from U.S. Federal Reserve subsidies, and are mostly being taken out of the hide of the rest of us. 

Wall Street's record bonuses come out of bank earnings that have been pretty robust, though not necessarily record-breaking. This is mainly the result of two Fed subsidies:



To find out how you're paying for Wall Street excess and how the economy stands to lose read on...

Is the U.S. Federal Reserve Setting the Stage for Hyperinflation?

The U.S. government wants to stimulate growth in the moribund economy by stoking the fires of inflation. But by leaving interest rates low and buying up bonds - a policy known as quantitative easing (QE) - the U.S. Federal Reserve risks debasing the dollar, which could lead to a prolonged period of hyperinflation that would send prices skyrocketing.

After their most recent meeting on Sept. 21, Fed policymakers said low inflation warranted looser monetary policy. Minutes from the meeting said central bankers were prepared to ease policy to boost inflation expectations "before long."

The Fed is seeking ways to boost the U.S. economy after keeping interest rates at record lows and buying in $1.7 trillion of U.S. securities. The next move may be another round of quantitative easing that would expand the Fed's balance sheet even further.

But as it feeds more and more money into the financial system, the central bank may very well be sowing the seeds of hyperinflation.

Read More…

How Bernanke Will Keep a Fire Lit Under Stocks Until Year End – And Which Sectors Will Soar

While many investors have solid reasons to remain concerned about the broader economic picture, there are some market sectors roaring forward that no one can afford to miss - and they will continue to provide profit opportunities thanks to the work of U.S. Federal Reserve Chairman Ben Bernanke.

Stocks rattled around in 295-point range of the Dow Jones Industrial Average over the past five days like pebbles in a maraca, but ended quietly -- a fraction above flat. The big-cap indexes have now posted six of their past seven closes within half a percent, hemmed in by some sort of spooky gravitational pull.

Earnings came in quite a bit better than expected for most major companies, as the cheap dollar has helped overseas sales for Caterpillar Inc. (NYSE: CAT) and McDonald's Corp (NYSE: MCD). Over in the exciting web content space, Netflix Inc. (Nasdaq: NFLX) wowed the crowd with outstanding third-quarter results, logging a sales increase of 31.0% and adding 1.9 million net new customers. That's a lot of new buyers in an economic environment that is supposed to be so terrible that the Federal Reserve thinks unprecedented medicine is required.

To read about how the Fed can keep stocks soaring, click here

Author Chat: Money Morning's Martin Hutchinson Talks About "Alchemists of Loss"

The Nobel Prize panel granted its top award to seven leading economists - whose theories went on to cost investors trillions of dollars in losses.

This story - as well as some of the other top financial fiascos through the ages - is detailed in the new book, "Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System," which was written by Martin Hutchinson, a former merchant banker and Money Morning columnist, and Kevin Dowd, an economist and respected academic.

Money Morning Executive Editor William Patalon III recently sat down with Hutchinson, to talk about the book. Here are some excerpts from that discussion.

Read More…

The 10 Most Pressing Questions About the U.S. Economy – And Their Answers

Will the economy lapse into a double-dip recession? What can be done about the soaring U.S. budget deficit? What's next for the stock market?

These are just a few of the tough questions facing investors. And there may be no one better to offer answers, insight, and advice than Money Morning Contributing Editor Shah Gilani.

A retired hedge-fund manger, Gilani has routinely been there to shepherd investors through blinding market uncertainty. He's used his contacts on Wall Street to give Money Morning readers the inside scoop on the collapse of American International Group Inc. (NYSE: AIG), the May 6 "Flash Crash," and most recently the "Mortgagegate" scandal that currently threatens to undermine the fragile U.S. recovery.

Indeed, Gilani has been a tireless advocate for investors and a prescient market maven. That's why Money Morning's editors recently sat down with Gilani to talk about today's most pressing issues and discover what he expects for financial markets in the months and years ahead.

In the partial transcript of that interview below, Gilani discusses why it's a good time to invest in stocks, what steps should be taken to fix the U.S. economy, and whether or not gold prices have peaked.

In short, the U.S. government has failed the public as a matter of course, but there is still a way out of our current economic malaise and ample opportunity for investors to profit.

To find out the answers to the ten most pressing questions facing the economy, read on...

Read More…

What We Can Learn From The Stock Market Genius That Wall Street Loves to Ignore

Mathematician Benoit B. Mandelbrot, the inventor of fractal geometry, died Oct. 14.

As mathematicians go, Mandelbrot was very likely the best of the last half-century. And that brilliance extended to the financial markets. In fact, his groundbreaking insights into the operations of the stock market could have been used to avert the 2008 crash - had those insights only been heeded.

But Mandelbrot - for all his stock market genius - has been largely ignored by Wall Street.

As investors, let's not make the same mistake.

To understand how to profit from Mandelbrot's insights, please read on...

To understand how to profit from Mandelbrot's insights, please read on...

We Want to Hear From You: Will "Mortgagegate" Affect You?

A potentially crippling crisis is flashing through the banking industry and threatening to derail the already struggling housing market and U.S. economic recovery.

Question of the Week Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices.

Money Morning Contributing Editor Shah Gilani reported last week about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.

But Gilani warned that the headlines aren't telling the full story.

Read More…

What You Don't Know about "Mortgagegate" Could Crush the U.S. Banking System

What most Americans don't know about " Mortgagegate" is that "robo-signing" of foreclosure documents is the tip of the iceberg.

The breadth and depth of this newest mortgage crisis is so dangerous that the U.S. Federal Reserve last month pre-announced another potential round of quantitative easing (pundits are calling it "QE2") to address "potential negative shocks."

In fact, the fallout potential is so numbing and the actions that birthed it so scandalous that commentators have given the crisis the Watergate-esque title of " Mortgagegate" (or, as some prefer, "Mortgage Gate").

Here's what the news-story headlines aren't telling you.

For an investment strategy that will protect your portfolio from "Mortgagegate," please read on...

De-Coupling Back in Vogue as Emerging Economies Outshine the U.S.

While the U.S. economy is struggling to break its slump, growth remains strong in other places around the world - so strong, in fact, that analysts are breaking out a term that's spend much of the past two years on the shelf: De-coupling.

U.S. gross domestic product (GDP) will meandered along with a meager 1.7% expansion in the second quarter and is expected to grow by less than 2% for the full year.

Meanwhile, Brazil's GDP is on pace to expand by 7.5%, India's economy is projected to grow by 8.5% and China's economy is expected to grow by 9.5% this year.

Emerging market economies are moving ahead at such a brisk rate that their combined GDP will be bigger than developed countries by 2015, according to the World Bank.

Now, the biggest Wall Street firms - including Goldman Sachs Group Inc. (NYSE: GS) Credit Suisse Group AG (NYSE ADR: CS) and Bank of America (NYSE: BAC) - are betting that the global economy has de-coupled from the United States, and will shake off any slowdown in the world's largest economy.

Read More…

Controversial House China Tariff Bill Will Take America Down the Wrong Road

The U.S. House of Representatives this week overwhelmingly passed a bill that would enable the Obama administration to impose punitive tariffs on almost all Chinese imports into the United States - a controversial move that's intended to punish China for refusing to revalue its currency.

The House China tariff bill faces opposition in the Senate and from the Obama administration and isn't expected to become law. Let's hope that reluctance continues to hold: This bill is little more than a political con job and is quite possibly the stupidest thing that Washington could do right now.

Not only will this touch off a war the United States literally cannot afford to fight, but it's going to hamstring millions of already cash tight Americans by raising the cost of living dramatically while further eviscerating our already fragile gross domestic product (GDP).

Let me show you why...



To understand the hidden costs of the China tariff bill, please read on...

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