The ongoing chatter about Healthcare has distracted us from the growing problems in our economy.
The new Japanese government has indicated that their days of buying debt from the United States is over. Come September 30th, U.S. banks are going to be forced to “mark to market” their assets. Now, we have heard the first shot in a growing trade was between China and the U.S.
In a twist of fate, these forces may conspire to help our country in the long run.
In the short-run, we are in for a storm.
Losing Japan as a sponge for our bad debt will drive down the prices of our bonds. This may end with a frenzy as holders of bonds seek to escape the collapsing market. We cannot buy our own debt (not since we already did so to the tune of a couple of trillion dollars.)
Forcing the U.S. banks to show the true value of their collateral will implode a large section of the banking industry this year and next. We have lost 91 banks this year and the FDIC reserve is depleted. All bank failures as of last Friday are not drawn straight from the U.S. Treasury, put on your unborn Grandchild’s credit card.
Now the inevitable trade war between China and the U.S. has started with tariffs on Chinese Tires. I expect this will be followed by more targeted tariffs as our current government desperately tries to preserve jobs (Union jobs first!). The response will be a cutting off of Chinese purchase of U.S. debt.
Our only hope of returning to a nation based on achievement and hard-work is going to be a demonstration of Government’s inability to provide cradle to grave care for the people. The post World War II world allowed some of the Western world the luxury of massive social programs. All of these programs are black holes that were unsustainable from creation. Social Security was known as a Ponzi-scheme from day one, underfunded by design, because to do otherwise would have been to admit that the program could not survive for more than a few decades.
We are at the end of that run. Where the Entitlement generation enjoyed a growing economy, GI bill free college, Medicare and so many other programs designed just for their cohort, the subsequent generations get nothing but bills and depleted resources.
My only advice is that you had better make plans to take care of yourself and your family. Phony concern for our fellow man, in the form of unfunded welfare programs and free healthcare is a lie.
If you can’t pay for it, certainly don’t make your kids pay for it.
Meet the fellow tasked with killing and burying the helplessly crippled General Motors.
http://money.cnn.com/2009/09/03/autos/ron_bloom_general_motors.fortune/index.htm?postversion=2009090311
Putting a Union manager at the helm guarantees that the company will flail and collapse in a humiliating and wasteful manner, all financed by my children and grand-children.
Here are some examples of what your tax dollars are doing to support unsustainable real estate prices.
http://money.cnn.com/galleries/2009/real_estate/0908/gallery.first_time_homebuyers/3.html
This hairstylist and her crane operator boyfriend just bought a $750,000.00 home! They used the $8,000.00 tax credit to pay of their equally poorly conceived wedding, a union born of debt and destined to end in a divorce and bankruptcy.
http://money.cnn.com/galleries/2009/real_estate/0908/gallery.first_time_homebuyers/5.html
These folks just bought $550,000.00 worth of deprecating real estate on a FedEx salesman salary combined with income from a physical therapist. See ya at foreclosure!
We have inundated with nonsense reports of a turn around in real estate. Sadly, only those who act on these reports will be “turned around”. most of this summer “bounce” was made up of disasters like the two above.
It seems to have started in the Great Depression. It started with the idea that We the People did not want to see elderly people, starving and homeless in the streets. Social Security was to provide that bare roof, food and shelter support to the destitute elderly.
That program metastasized into a “right” that all people 65 or older felt was “owed” to them at the requisite age. Today Social Security is less about helping the elderly survive and more about supplementing an retirement that already provides the basics. It has become pocket money, not survival support.
At the same time, the same people created health care support in Medicare and Medicaid, programs that grew from basic health support to the current ridiculous and economically unsustainable model that provides care for everything from a hangnail to erectile dysfunction.
For almost 7 decades we have seen a strip-mining of the Federal and State governments with mismanaged and ill-conceived social programs that are now reaching the point of collapse.
No one seems to be terribly concerned at the moment, but it is certain that when money runs out (or inflation renders fixed-incomes meaningless), we will have come through a full circle which will end with elderly people, starving and homeless in the streets.
We have options. We could stop squandering precious resources on non-citizens. We could stop the massive amounts of foreign aid we pour over the globe. We could stop manning military bases in Europe and Japan.
We could institute a means-test to Social Security and other welfare programs and assure the assistance only go to those in true need.
It would be nice if we made the changes now, while we can plan and implement, rather than wait for the coming collapse. Sadly, any move now is met with hordes of angry, grey-haired folks and the status quo remains.
When the money runs out, we will see those same angry, grey-haired folks on the streets. Holding cardboard signs, living the life these programs were intended to avoid, programs that eventually assured the very end they were meant to avoid.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAOhgVw78e3U
This case has the potential to change so many aspects of our lives. Will the Federal Reserve be permitted to operate in perpetual secrecy? They don’t want to disclose which banks took the loans so that we the people, as investors and economic actors, are misled into doing business, banking and investing in these banks. Look at how the financial sector has led our current stock market rally. Now factor in that we don’t get to know which, if not all, of them are simply zombie banks supported by unsustainable government loans.
When this comes down, it will be the little guy who bears the burden while the people responsible on Wall Street and in Washington laugh and walk away with your money.
We are being subjected to media propaganda encouraging us to get out and spend. Are the boom times back? Well, that is what corporate media is feeding us.
Meanwhile, back at the ranch, corporate insiders are selling their equity holdings at a 53:1 ratio!
http://www.kitco.com/ind/Thomson/aug252009.html
I think that the 401K zombies in middle America are about to be sheared again.
All the talk is about the mortgage crisis, in the meantime the real story is the collapse of the commercial credit market.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aM9Q_6ozzhMU
This is a far larger threat to the economy than the mortgage crisis and no one seems to even notice this while we waste time debating health care we cannot afford any way.
By taking our eye off the real economic disaster unfolding around us, the health care debate has wasted time and concern that should have been focused on averting another catastrophic market collapse.
Mr. Prompt and I began to unravel his Real Estate empire by contacting the people living in the 6 properties. My office assistant, a licensed Realtor, visited each property, some occupied, some vacant and destroyed. The residents of the occupied homes had documents, what is a known as a Contract for Deed, for their home and each thought they owned the property. The agreements were written by the Hill Group and their company named ilovehappyhomes.com and purported to convey ownership to the tenant upon a 6 year payment schedule. Most of these folks had been paying for months, making improvements and planning a future.
I contacted this Hill Group and got to talk to the head Hill himself. He told me that the properties were owned by his company and that they had merely titled them in Mr. Prompts name for financing. When I asked if they had brought Mr. Prompt to a closing when the property was bought, he explained that under their *system* closing was not necessary as all documents were signed with the permission of the *participant*, such as Mr. Prompt. I asked him to provide me some evidence of this agreement between the Hills and Mr. Prompt.
That is when he got nasty. That is when he got a lawyer and sent her after me.
Of course she was aggressive. She was going to put me in my place. She came to my office with a demand that I leave her client and his tenants alone.
I showed her the registered title to the property in Mr. Prompts name. She left. She quit, sent me a nice letter explaining that she had no idea what kind of operation Mr. Hill was running. I still see her now and again at the Court, she asks how Mr. Hill is.
The same day she quit, I get a package from the Hill group containing all the documents for the 6 properties and a letter telling me that they are my problem now. As I look through the file I come to see notice after notice indicating non-payment of mortgages, insurance and taxes.
None of these properties had been paying mortgages, 1sts or 2nds, no insurance, no taxes, nada.
It seems Mr. Hill had discovered a way to reduce his costs; simply ignore all the bills!
So my office assistant and I start tracking down the mortgage companies. Out of 12 mortgages on the 6 properties, 9 of them were written by the now infamous Bear Stearns.
What I learned from Bear Stearns made me realize that they had embraced and embodied their company initials to a ruinous degree. BS was all they had left.
Through a series of calls, we were finally directed to Mr. Ford, the man in charge of the mortgage fraud investigation dept. for Bear Stearns. Mr. Ford asked what we had, and we showed him the ilovehappyhomes.com scheme and the Hill companies behind it.
On that June day, Mr. Ford frightened me.
He told me that he knew all about the Hills. They had done HUNDREDS of homes in North Texas under this scheme. Mr. Ford told me that they had already been in contact with the FBI and that the Hill family was going to be sued by Bear Stearns.
Over the next few days I spoke with Mr. Ford about this case. He told me that the Hills were just one group and that he had files like this all over the country. I asked him what had happened? How had they got to the point where they had so many bogus mortgages.
He told me that the company was out of control. He even told me that he figured the company would not make it through this mess. There were too many bad loans.
This was in July 2007. By September of that year, Mr. Ford was gone. The phones to his dept. all rang fast busy.
Bear Stearns collapsed in public in March of 2008, but I can tell you that the company stopped operating as a viable concern sometime in September of 2007.
What of the property in North Texas?
No one wanted Mr. Prompts 6 properties, not Mr. Prompt, not Bear Stearns, not even the Hills. Many of the tenants remained, rent free, for the next 10 m0nths until the houses were finally foreclosed in the summer of 2008.
To this day, 2 of the properties remain unsold, vacant and not even listed for sale. This mess is not over.
In the summer of 2007 I was retained by a man (who shall remain unidentified), for our purposes named Mr. Prompt. Mr. Prompt had never been to Texas, but found himself the embarrassed owner of at least 5 homes in North Texas.
How he ended up with these homes was directly tied to the collapse of Bear Stearns just about a year later.
In 2005, Mr. Prompt had gone to a church function in his small home town in a southern State. Mr. Prompt is a member of a mostly black congregation that was eager to see its members do well and good. At this church function a few members of the Hill family showed up and everyone admired their apparent success in real estate.
The Hills told their tale of good fortune and God’s blessings that had allowed them to create an empire of rental properties returning a reaonable 10% return on investment.
Of course, once the bait was cast it was not long before the hook was set. Many members clamored to invest in the scheme, there was no shortgage of participation. Even Mr. Prompt wanted to know more.
So he, and others, handed over their identification and gave up their social security numbers and even mothers maiden names during the hustle. None of the church members or other participants felt any concern, because the Hills NEVER ASKED FOR MONEY!
Everyone assumed that the Hills would contact the interested people and then provide the opportunity to invest.
Instead of a request for funds, they started to be approached with documents to sign by Hill family members. They were told that the documents were offers on homes and if the deal went through, they would then be given a chance to invest. Of course, no documents were left with Mr. Prompt or the others.
Soon the Hill family faded away and all was quiet for a while, Mr. Prompt, assuming the deals had fallen through, had forgotten the whole thing.
Then came the calls. First they came from mortgage companies, then from collectors and then from tenants in homes in far away Dallas, Texas.
All of the callers claimed the same thing: Mr. Prompt was the owner of a number of properties in the Dallas area and he was not paying the mortgages and not taking care of his tenants.
Soon Mr. Prompt came to realize that the Hill family had bought a number of homes in his name, somehow getting mortgages totaling almost 1 million dollars (which included about $400,000.00 in cash out mortgages to the Hill family).
Mr. Prompt contacted my office and in the next few months got to see an inside view of just how our mortgage industry, and Bear Stearns committed a murder-suicide on the American economy.
Part Two: Bear Stearns and Mr. Ford at the Fraud Dept.
Pa
Having read over the GM Bankruptcy decision creating the new Union controlled, taxpayer financed automaker, I can only conclude that this *reorganization* will ultimately be transformed into a Chapter 7 liquidation. This decision addresses the issue of saving jobs while acknowledging that the plan has questionable economic merit. Seemingly the Judge is admitting that the plan will save some jobs in the short term, while in the long-term, GM will ultimately fail.
Does it take 95 pages for a Judge to admit that they don’t have the guts to what needed to be done?
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