There is little significant economic data out today. Stocks enter the final hour about even despite opening lower. The Fed’s termination of its MBS buying program has so far produced just a small increase in mortgage interest rates of around .2% and not the huge jump that some feared. Minneapolis Fed President argues for reducing the Fed’s balance sheet to a more manageable level through the sales of various assets collected over the last couple of years. Interestingly he notes that by selling 15 to 25 billion per month the Fed can exit the MBS market in about 5-years, gives you an idea of how large just that part of the Fed’s balance sheet is. The Financial Times is out with a piece this morning claiming the Treasury will earn a 10 billion profit on the TARP Program, adding AIG and the auto companies and that 10 billion profit changes to a 117 billion Dollar loss.
All of which brings me to the forced disclosure of the contents of the Maiden Lane LLC, the holding company the Fed created to facilitate JP Morgans purchase of Bear Stearns following its failure in early 2008. Despite two lawsuits filled by Bloomberg and the Fed fighting disclosure every step of the way, so much for then Treasury Secretary Hank Paulsons fine words regarding transparency, the Fed was forced to disclose exactly what it had done with some of our tax Dollars.
Low doc, no doc AKA liar loans from some of the most reckless lenders include Washington Mutual and Countrywide Finance. More than a billion in prime jumbo loans from bankrupt Thornburg Mortgage whose credit rating is now the lowest investment grade. Bets against the credit of bond insurers such as MBIA Inc., Financial Security Assurance Holdings Ltd. and a unit of Ambac Financial Group, bets that pay off when the firms can’t pay, incidentally these are the same folks that insure most of the nations muni bonds against default. Commercial loans for hotel properties in Malaysia, Hawaii and New Jersey, 618 million in Countrywide Finance MBS now rated CCC, which is low-grade junk, 8 credit steps below investment grade. 34.8 billion in Maiden Lane 2 Assets now worth just 15.3 billion. Another 56 billion in assets held by Maiden Lane 3 that are now worth just 22.1 billion.
The real kicker is the following statement released by the NY Fed after it lost in court and was forced to disclose this information, and I quote. “The Federal Reserve recognizes the importance of transparency to its financial stability efforts and will continue to review disclosure practices with the goal of making additional information publicly available when possible”. Which suggests that the Fed was much more interested in hiding money-losing taxpayer funded asset purchases than protecting weak financial institutions.
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.
