Stocks struggled early and fell late on little real news. Weekly claims for unemployment fell to 502,000 while the 4-week moving average slipped to 519,750. While still painfully high a dip below 500,000 claims would provide some comfort at least psychologically. Following losses of 18.9 billion by Fannie Mae during the 3rd quarter and 6.3 billion by Freddie Mac we have a piece by the NY Times detailing the deplorable financial condition of the FHA. Seems the FHA reserves have fallen to .53% as per their annual audit, far below the 2% minimum required by Congress. Further this represents a truly stunning drop of over 80% of total reserves in just 1-year from a reserve level of 3%. Like Fannie Mae and Freddie Mac the FHA problems trace back to a combination of declining real estate values and reckless lending standards. In all cases these loans are backed and guaranteed by Uncle Sam directly and us taxpayers indirectly. If this isn’t bad enough Fannie Mae and Freddie Mac face substantial counterparty risk because AMBAC, the nations largest bond insurer, is facing bankruptcy. Thus exposing Fannie and Freddie to potentially considerably more losses. Now AMBAC like MBIA and the rest of the bond insurers have been more or less effectively bankrupt for quite some time now. What’s kept them going is official extend and pretend just like the latest guidelines for the banks allowing them to ignore asset value impairment of commercial loans so long as the payments are current despite the assets backing these loans suffering 30-50% value impairments. Back to the FHA who are experiencing substantial losses, spiraling defaults and delinquencies compliments of reckless lending programs just like Fannie Mae and Freddie Mac. The best definition of insanity I have ever encountered is continuing to do the same thing expecting a different outcome. Yet our government has done exactly that with these agencies, at taxpayer expense. Same with the banks, I imagine same with the insurance companies. Through all of this, where are the prosecutions? Where is the regulation to prevent this from happening again. For god sakes had they enforced the existing regulations this would not have happened in the first place. Yet they didn’t despite warnings going all the way back to the beginning of this decade. I wouldn’t mind so much were it not for the small fact that my tax Dollars are being used to pay for this fiasco and the seemingly caviler attitude towards the electorate, perpetrators and the subject in general by the politicians.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. Much like my daily radio show on KPIG 107.5 FM in Santa Cruz California and KPYG FM 94.9 Cayucos/San Luis Obispo California. A thousand Blogs were able to spot the current problems and many began discussing it years before it reached crises proportions. While there were exceptions, and these exceptions are becoming more common, the mainstream media failed to get it and largely continue to do so.
