Subprime

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As Scary as it Seems, Greek Debt Crisis Won't Spawn Second Global Meltdown

By , Money Morning -

The Greek debt crisis is starting to display an uncanny resemblance to the subprime crisis that sank the U.S. housing market, sent the global economy into a tailspin and touched off the worst financial crisis since the Great Depression.

Indeed, Greece has behaved very much like a subprime country:

  • It has borrowed more money than it can possibly repay - all the while lying to everybody about its true state of affairs.
  • "Liar loans" have been made, in Greece's case, to enable the country to "cook the books" with regard to its budget deficits.
  • New problems continue to emerge - apart from the liar loans - making it impossible to be sure all the troubles have been unveiled.
  • And as was the case with the subprime-mortgage crisis, embattled Wall Street investment-banking-giant Goldman Sachs Group Inc. (NYSE: GS) appears to have been intimately involved in the business.
And the similarities don't end there.

To understand why the Greek debt crisis won't spawn another global financial crisis, please read on...

Mortgage Markets Show Increased Stability, But Limited Opportunity

By , Contributing Writer, Money Morning -

[Editor's Note: This analysis of the U.S. mortgage market is part of a two-story package that appears in today's issue of Money Morning. To read a related story on the outlook for adjustable-rate mortgages (ARMs), please click here.]

It doesn't have four letters, but "mortgage" has definitely been a dirty word in the financial world the past few years. That's especially true when the word "mortgage" is paired up with such other terms as "subprime," "delinquent," and "foreclosures."

Little wonder that mortgages - along with the derivative securities backed by them and the often-unseemly practices of the people pushing them - have gotten much of the blame for precipitating the economic meltdown from which the American economy is now struggling to recover.

There's still plenty of woe in the mortgage world. But in recent months there have also been some signs that the real-estate-financing markets are at least regaining some semblance of stability, with foundations being poured for a rebuilding phase that might not be too far down the road.

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Warning: This is Not Another Wall Street Conspiracy Theory, These are the Facts

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

Just last week, the House Committee on Oversight and Government Reform held a hearing on the U.S. Federal Reserve's decision to directly pay billions of dollars to banks as part of its scheme to bail out insurance giant American International Group Inc. (NYSE: AIG).


According to committee Chairman Dennis Kucinich, D-Ohio, the testimony that congressmen heard just didn't "pass the smell test."

What really stinks about the whole mess is not only the cover-up of what really happened and why, but the inability of anybody in Congress to actually do their homework and be able to frame pointed questions and get to the truth.

It's not complicated, but it is convoluted. Here are the facts and some questions that Congress needs to ask - and that the American people deserve straight answers to.

For the inside story on AIG's collapse, read on...

My Confrontation With Ben Bernanke: The One Question He Refused to Answer

By , Guest Columnist, Money Morning -

The Secret Service agents watched me warily as I approached U.S. Federal Reserve Chairman Ben Bernanke.

I didn't waste any time. After introducing myself, I showed him a copy of the talk he gave at the American Economic Association (AEA) meetings in January 2007. I circled all the times he used the words "panic," "crisis," and "stress" in his speech, entitled "Central Banking and Bank Supervision of the United States."

A total of 36 occasions.

I asked him point-blank: "Did you know in advance that a financial crisis was headed our way?"

He looked nervous. I could tell he was uncomfortable with my question. He looked at me stoically and smiled.

And he refused to answer.

But there was no doubt in my mind what the correct answer was. I think he was worried about his job if he said, "Yes."

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Wall Street's Stranglehold on the Economy Is Choking Americans

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

America's Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.

And yet today, 234 years later, our Founding Fathers' worst fears have come true. Wall Street's stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.

It's high time we address the truth about Wall Street's tyranny and set a course for a more secure economic future - one that's anchored by a safe banking system, not a system rigged by banks.

How Wall Street is Choking America? Read on...

A Note to Bernanke: Sorry Ben, More Bureaucracy Isn't the Answer

By , Money Morning -

U.S. Federal Reserve Chairman Ben Bernanke's latest thesis is that the home mortgage bubble had little to do with record low interest rates, and was actually much more a problem of regulation.

It sounds plausible - until you give it some real thought. After all, I believe that humanity has already tried a system with tight, vigorously enforced regulations, and no price mechanism.

It was called the Soviet Union.

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With T-Bill Yields at Zero, it's Time to Beware of the "Bond Bears"

By , Contributing Writer, Money Morning -

There is some interesting action unfolding in the dark corners of the credit market.

Although this exploratory sojourn takes us fairly far afield from our regular stomping grounds in the equity markets, it could have important implications for our investments. So grab a thinking cap, and let's go exploring.

First, let's have some context. As you know, governments around the world have unleashed tons of stimulus spending over the last year. Against a recessionary backdrop, it's no surprise that tax revenue has plummeted while fiscal deficits have soared.

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It Was a Wonderful Life - And Then Came Securitization

By , Money Morning -

Massachusetts Land Court judge Keith C. Long recently ruled that foreclosure sales of two properties with securitized mortgages were invalid, a decision that ties up thousands of Massachusetts real-estate transactions.

If nothing else, this landmark court case should make one thing very clear: Securitization - the product of the finest brains of Wall Street for more than two decades - doesn't work as advertised.

Historically, mortgage loans were made by small local institutions, which knew the borrowers personally and took the credit risk themselves.

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Special Report: How the Government is Setting Us Up for a Second Subprime Crisis

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

[Editor's Note: Shah Gilani, a retired hedge fund manager and noted expert on the global credit crisis, predicted this developing FHA debacle in a July 2008 Money Morning essay.] Is the government creating another subprime-mortgage bubble? The first time around, the three-headed federal serpent - the Bush administration, the Treasury Department and the U.S. Federal […]

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The Slow Death of General Motors

By , Money Morning -

By Martin Hutchinson Contributing Editor Money Morning U.S. President Barack Obama's firing of General Motors Corp. (GM) Chief Executive Officer G. Richard Wagoner Jr. may be the beginning of the final act of a long and sad drama - the slow death of GM. The company nameplate may soldier on in some form, but it […]

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Plan to Repair U.S. Banking System Unveiled by Former Hedge Fund Manager

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

The economic house of the United States is ready to collapse upon itself, leaving us exposed and defenseless against the next Great Depression. Bureaucratic handymen with a staple gun and a trillion-dollar roll can't paper over holes in bank balance sheets or fill in the others created by plunging consumer spending.

It won't work.

What is needed - and what would arrest the slide in U.S. housing prices - is a renewed general confidence in protective regulations, and tax incentives for investors to buy troubled assets and to make equity investments in banks.

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Why the U.S. Government Should be Cut Off Like a Subprime Borrower

By , Money Morning -

By Peter Schiff Guest Columnist Money Morning With millions of homeowners now struggling to repay money that they clearly never should have borrowed, our leaders have been righteously wagging fingers at predatory lenders who allegedly enticed innocent borrowers, and the country, into a financial snake pit. While the mortgage industry clearly deserves a good share […]

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The Real Reason for the Global Financial Crisis...the Story No One's Talking About

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

[Part I of a three-part series looking at how so-called “credit default swap” derivatives could ignite a worldwide capital markets meltdown.] By Shah GilaniContributing Editor Are you shell-shocked? Are you wondering what's really going on in the market? The truth is probably more frightening than even your worst fears. And yet, you won't hear about […]

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Subprime Crisis Again in the Spotlight as the Meltdowns of Fannie Mae and Freddie Mac Fuel Fears of a Deeper Downturn

By , Executive Editor, Money Morning -

By William Patalon III Executive Editor Money Morning/The Money Map Report We've been warning you since the start that the subprime crisis would have some real staying power. Indeed, every time optimistic prognosticators have predicted an end to this global financial debacle, we've had the same response: Don't you believe it. Again just recently, after […]

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Wachovia's Surprise Loss, Financial Ills, Reignite Subprime Mortgage Fears

By , Money Morning -

From Staff Reports Wachovia Corp. (WB), the fourth-largest U.S. bank, stunned investors yesterday (Monday) by posting a surprise first-quarter loss, announcing a dividend cut and revealing plans to raise $7 billion in capital. Chief Executive G. Kennedy "Ken" Thompson said the "precipitous decline in housing market conditions and unprecedented changes in consumer behavior" damaged the […]

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