An important new article from our friend James at Negotium

The primary players that caused the housing bubble are:

1) The banking institutions that bundled and sold very risky mortgages

2) The Wall Street firms that bought these instruments and hedged for a default hazard by booking speculative derivative insurance that could never pay off on massive defaults

3) Fannie Mae and Freddie Mac provided government backing, of last resort, on bad mortgages

In order to understand the how this came about, one needs to acknowledge the role of repealing the Glass-Seagall Act. In the account, Repeal of Glass-Steagall Act cause of housing boom, the conclusion is evident.

“The purpose of the Glass-Steagall Act was to control speculation and prohibit a bank from owning other financial institutions which would create a conflict of interest, such as investment banks and insurance companies. The Glass-Steagall Act was enacted in 1933 after excessive risk-taking that contributed to the Great Depression. Jean-Marie Eveillard, of First Eagle Funds, has said: “Glass-Steagall protected bankers against themselves. Bankers are sheep. They don’t mind going over the cliff if everyone else goes over the cliff.”

The reason banks were giving out such risky loans is that they were able to securitize them and sell them as mortgage backed securities and other collateralized debt obligations to investors. With the ability to both create loans and then underwrite, securitize and sell mortgage backed instruments under one roof, it is easy for banks to create a ponzi-like scheme.”

Additional explanation comes from Dirty secrets of the real estate collapse,

“The truth is that high-risk mortgages were “bundled” just like good mortgages and sold as iron-clad securities. Accounting practices allowed banks to “book” profit from these loans immediately and account for the risks later. The same practices were used on the infamous “credit default swaps.” These are insurance-like contracts that promise to cover losses on certain securities in case of a default—except they didn’t always work that way in the unregulated credit swaps market.

This created the short-term results that shareholders demanded. Could bank executives have booked less profit and held some reserve for the rainy day that was sure to come? Sure, and they would have been fired. The shareholders would have demanded they be replaced by their colleagues who were willing to show higher profit. So the money was taken as profit years ago, and there’s nothing left but debt.”

Politicians like Barney Frank advanced the utopian notion that even the most financially destitute deserve to own a home. Having the ability and income to make mortgage payments seems foreign to the social engineers. The government rescue net would fix any cracks in the money tree. Add the practice of packaging subprime mortgages and you have the perfect storm. The collapse of the housing market is a direct result of unrealistic expectations, unreasonable low interest rates and unlimited loans provided to unqualified borrowers.

The beleaguered mortgagor shares in the dislocation, when their dream of home ownership is stripped. Evictions are postponed for humanitarian reasons as unwinding of the financial markets drag on for years. Even historically low interest rates cannot prime the pump any longer.

The fair value for housing must have a reasonable collation to actual replacement costs. Yet a property is only worth a price that a buyer is willing to pay. The idea that securing financing of underwater properties, when current owners or fresh buyers can no longer qualify for a new mortgage, smacks of a designed policy to depress real estate values for years to come.

The draconian Dodd-Frank Act just added more layers of punitive regulations that adversely affect prospective buyers, while avoiding the needed rational regulations that would restore the separation that Glass-Steagall protected for decades.

The America Enterprise Institute article by Peter J. Wallison, Dodd-Frank and Housing Finance Reform offers this assessment of this recent legislation.

•The key flaw in the Dodd-Frank Act (DFA) is its effort to control the quality of mortgages by imposing regulation and regulatory costs on lenders and securitizers.

•Because it focuses on only a narrow part of the mortgage market, and exempts the government-backed sectors, the act will do nothing to prevent the deterioration in mortgage underwriting standards.

•A plan developed at AEI would define a “prime mortgage” by statute, making it possible to eliminate the qualified mortgage, the qualified residential mortgage, and the 5 percent risk retention.

•The fundamental flaws in the housing finance provisions of the DFA cannot be repaired by regulation; they should be repealed and replaced by the plan developed at AEI.

In late March, the bank and securities regulators charged with filling in the details of the DFA’s provisions on mortgage-market reform released a set of proposed rules outlining how the act’s broad terms will likely be implemented. The reaction in the market was something close to shock, as mortgage bankers, mortgage insurers, securitization specialists, and even the Center for Responsible Lending panned the rules in testimony before the House Financial Services Committee.

Examine the details of the AIE alternative on their web site that presents their plan.

Traditional mortgages written by your local bank that holds the note to maturity is as rare as a siting of Big Foot. The robo-signing foreclosures are a crime by any normal standard. Using false affidavits is a fraud. Perpetrators deserve jail time. However, a full-scale house cleaning is about as likely as bring Franklin Delano “Frank” Raines to justice. “As an executive at Fannie Mae, Franklin Raines illegally coerced his employees to falsify accounting facts so he’d get a maximum bonus. The government-backed firm used Enron-like fraud, in part at Raines’s orders, to create the largest bail-out in US history. Raines had the whistleblower fired.”

Owning a house may be out of reach for many people. The Wall Street refloat conveniently bypasses the strapped homeowner with a monthly mortgage. The American Dream is on life support. None of these pitfalls are accidental. The banking system now avoids writing loans to most individuals. The fallout has yet to subside. Banking, Housing and Mortgages will never be the same.

James Hall – February 8, 2012　

Discuss or comment about this essay on the BATR Forum

Source: http://www.batr.org/negotium/020812.html

Proponents of Gold Standard May Be Violent Extremists; Report ALL Suspicious Activity To the FBI

Mac Slavo
February 7th, 2012
SHTFplan.com

If you support returning the United States monetary system to sound money backed by the gold standard and believe that our country is bankrupt as a consequence of out-of-control spending and fiat money printing, then you may soon receive a visit from your local DHS/FBI office.

This morning your family, friends and neighbors were alerted by representatives of the Federal Bureau of Investigation that you and those who share similar ideas as you are potentially dangerous extremists that could threaten the national security of the United States:

Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday.

These extremists, sometimes known as “sovereign citizens,” believe they can live outside any type of government authority, FBI agents said at a news conference.

The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.

Source: Reuters

Whether you like it or not, if you promote the ownership of gold, reject the notion that forced taxation is your patriotic duty and prefer to live in a country with limited government interference, you have now been stereotyped and grouped in with the handful of criminals who have recently turned violent against law enforcement officials. And, chances are that those close to you, who may not necessarily share your views, have now been alerted to your volatile nature and potential for violence against local law enforcement officials and the free people of the United States.

Routine encounters with police can turn violent “at the drop of a hat,” said Stuart McArthur, deputy assistant director in the FBI’s counterterrorism division.

“We thought it was important to increase the visibility of the threat with state and local law enforcement,” he said.

In May 2010, two West Memphis, Arkansas, police officers were shot and killed in an argument that developed after they pulled over a “sovereign citizen” in traffic.

Last year, an extremist in Texas opened fire on a police officer during a traffic stop. The officer was not hit.

The narrative is clear: If you share the same ideas as someone who has made a personal choice to turn to violence in the past, then you too must be an equal threat. Furthermore, the FBI is actively instructing businesses in your local area to be on the look-out for suspicious activity which may be precursors to anti-government activities. In a related story from Infowars, Paul Watson reports that  FBI advisory aimed at Internet Cafe owners instructs businesses to report people who regularly use cash to pay for their coffee as potential terrorists.

The flyer, issued under the FBI’s Communities Against Terrorism (CAT) program, lists examples of “suspicious activity” and then encourages businesses to gather information about individuals and report them to the authorities.

…

Indeed, the flyer aimed at Internet Cafe owners characterizes customers who “always pay cash” as potential terrorists.

Of course, the vast majority of people who visit Internet Cafes use cash to pay their bill. Who uses a credit card to buy a $2 dollar cup of coffee? A lot of smaller establishments don’t even accept credit cards for amounts less than $10 dollars.

Other examples of suspicious behavior include using a “residential based Internet provider” such as AOL or Comcast, the use of “anonymizers, portals, or other means to shield IP address” (these are routinely used by mobile web users to bypass public Internet filters), “Suspicious communications using VOIP,” and “Preoccupation with press coverage of terrorist attack” (this would apply to the vast majority of people who work in the news or political blogging industry).

Source: Info Wars
Also See: FBI CAT - Potential Indicators of Terrorist Activities Related to Internet Café [pdf]

In a coincidental stroke of good luck and timing for the national security apparatus of the United States, the recently passed National Defense Authorization Act (NDAA) allows for the rounding up and detainment of  of these potential extremists without charge or trial, because the last thing we need is for courts, juries, and evidence to be involved in ensuring the security of American citizens.

Be warned fellow Americans. No one will be immune to the violative laws, policies and regulations of the police state which is quickly and forcefully embedding itself into all aspects of American life and culture.

In the new America, every man, woman and child is a suspect, person-of-interest and potential terrorist.

http://www.shtfplan.com/headline-news/terror-warning-proponents-of-gold-standard-may-be-violent-extremists-report-all-suspicious-activity-to-the-fbi_02072012

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H0430- Idaho House Bill 430

The first lesson of international business is that the monopolies that drive the commercial trading system only hold loyalty to the god of capital. Making money means retaining a profit on trading transactions of business companies. The notion of MAKING MONEY means something very different to the financial empires that speculate on currencies, commodities, bonds and equities. When the two worlds come together to celebrate the common interest of their pirate culture, the Davos port of call, is a necessary winter holiday.

No doubt, the world’s financial outlook is still bleak. The needed measures and will to repudiate the ill gained debt bubble, that has much of the world facing insolvency, is a taboo alternative. The proverbial can that cannot be kicked far enough down the road of postponement keeps the party going for a little while longer. The life style of the super wealthy accustomed to flying into the Alpine village on Gulfstream V’s, hardly relate to the plight of people eating cat food. No surprise, this is the reality that escapes normal reporting.

However, what happens when the EU collapses and nation-states return to their own national currencies? The cardinal rule of the financial buccaneers is to keep the serving of the interest on the debt instruments that they hold as assets, paid by their captive debtors.

When the Fox Business Channel sends a Warren Buffet “groupie” like Liz Claman to cover this year’s World Economic Forum in Davos, you know you will get soft interviews and approving reporting. The same can be said of the coverage by most of the financial media. Watching questions at a press conference usually provided a strong sucking sound coming from the journalists in a desperate hope to gain favor among the titans of financial business.

It is refreshing to read in The Economic Times an account about Britain’s Prime Minister David Cameron. His slamming of the eurozone as uncompetitive and branding a planned transaction tax “madness”, strays from the strategic objectives of the financial elites. The financial speculation leveraged by the City of London brought the UK to the brink of collapse. Nevertheless, as a lone voice that squelches a retooled “Tobin Tax”, Cameron deserves credit. He may just be serving his own domestic political interest, but any opposition to refloating the debt with another round of additional taxes, is a positive. Even if he falls far short with true systemic solutions, the road to global taxation needs derailing. Cameron scornfully dismissed French-led plan:

“Even to be considering this at a time when we are struggling to get our economies growing is quite simply madness,” he declared.

“Of course it’s right that the financial sector should pay their share. In the UK we are doing exactly that through our bank levies and stamp duty on shares. And these are options which other countries can adopt.”

The legally protected financial bandits are dedicated to the extraction of even higher taxes in order to rollover maturing obligations. As the EU economy falters and shatters, who will bail out the bankrupt economies? The answer may not exist. John Quelch, the dean of the Shanghai-based China Europe International Business School offers the following assessment in Forbes,

“Last year at Davos, there was wishful thinking about China. Surely China would stumble on its relentless path to economic superpower status, and give the West some breathing space to reboot and revitalize?

This year at Davos, there is also wishful thinking about China, but of a different kind. How can China save the world economy? Surely the Chinese can consume more? And can’t the Chinese government do even more than it already has to prop up the Euro and invest in more Euro denominated assets?”

When people mature in their economic understanding, the harsh reality hits them. The criminal elites who designed this perverted global monetary system actually benefit with a total collapse of the nation states. A total implosion of world markets will not bring down the crooks that already own most of the choice global assets.

Davos is not about advancing productive international business. It is about plotting the next global crisis that drives the plutocrats to demand control that is even more draconian and punitive. Trade often brings mutual benefits when the marketplace operates with balance and equilibrium. However, when cartels dominate commerce and transnational corporatists force monopolistic restraints upon competing enterprises, the net result dampens alternative markets.

The way to view the business practices of the authoritarian model of the privileged Davos cabal is to see their relationships and overlapping confederations as a filtering system that expels any opposition to their long-term plans for both economic and political domination.

The analogy that describes this difference is seen in the protective environments that the Davos connections operate as compared to the meager existence of the average consumer. The vast multitude is preoccupied with economic survival. This sharp contrast with the self-appointed shapers of the world financial system, know of no such constraint.

Businesses that actually produce a product or useful service never bridge the gap between practical consumable innovations and the monetary manipulators that feed off the dynamic and industrious efforts of legitimate commercial enterprises. The money interests that dominate gatherings like Davos bring little to the advancement of actual commerce. Wealth creation is different from the accumulation or theft of riches.

The insurmountable resolution of the world debt bubble is evident to everyone. Yet the banksters care little for solutions, especially since their efforts are the true cause of the coming disaster. The Chinese controlled model will not rescue the globalist trading system. What the Davos elites have in mind is to convert independent economies into subservient appendages of a top down dependent debtor society.

Lowering the standard of living for Western economies is an unpleasant fact. The masters of manipulation desire this outcome. Until society recognizes that the debt created financial system is the root cause of the next planned panic, none of us will be safe from the crony state/capitalist juggernaut.

James Hall – February 1, 2012

http://www.batr.org/negotium/020112.html

As historical memory diminishes and the lessons of past centuries are forgotten, the practice of systematically destroying economic independence grows. Forget about real prosperity, the concept of interdependence, coined in popular parlances by the Trilateral Commission, has made the United States economy a post industrial dependency and a bankrupt debtor. The global corporatists despise protective tariffs because these excise taxes must be paid by foreign manufacturing enterprises. Since the rush to escape American shores, the transnational ventures seek not just cheap labor, but scheme to evade any effective regulations for the paradise of third world exploitation.

America’s economy was built under the shield of tariffs. The nation became the greatest industrial engine and traded profitably with the rest of the world, when reasonable excise and duties were charged on products entering this country. Just remember, the budgets of government were paid without an income tax under this system of tariffs. Who can logically argue that the deception of Free Trade benefits our population, when the current record of trade deficits continues unabated?

Tariffs for Survival or Profits for Multinationals provides evidence that tariffs are the best method to combat the deficiencies of the Free Trade ruse.

“There is nothing free about the loss of living wage jobs and the demise of independent production capacities. The notion that America is best served when multinational ‘stateless’ corporations are allowed to leave our shores and dump their foreign built products back upon the society that developed, financed and provided a ready market, is insane.”

The mumbo jumbo of corporate economists, employed by financial institutions is nothing more than jive by paid shills to defend an indefensible system. Use common sense. Any economy that is systemically stuck with mounting trade deficits is going broke. As long as the American marketplace has the desire to buy foreign made products and the money to pay for them, the game will last a little longer.

However, as a nation, the country is broke and the day when the dollar loses its reserve currency status is nearly upon us. Trading countries want to sell their goods to Americans. These countries will continue to do so even after adding a fair excise tax for the privilege of exporting their items to the largest market in the world.

Yes, the cost to consumers may rise, but the balance of deficits will fall dramatically and would push the buying power of the currency higher, which will allow for purchases in more valuable dollars. The other worthwhile consequence is that offshore manufacturers will want to build plants, create products and employ American workers here at home. The invigoration of domestic growth can and would develop when the labor force is able to get back to work.

The chart that shows world GDP when compared to trade under free trade agreements demonstrates that much of the world is not bound to the restrictions that favor globalist enterprises. Then ask why is it so important for the United States to have free trade agreements with other countries, which result in opening up our markets for dumping products that force out our own production and close domestic businesses?

The false argument that free trade and a cheap dollar foster American exports is one of the most destructive myths that the corporatists spin.

Domestic exports are a very low percentage of national output and even if the dollar was to lose, 90% of its international exchange rate value products will not be exported because the country is phasing out most manufactured goods. The notion that exporting our natural gas resources will help is extreme lunacy in an infinite asylum of national denial.

In the Varying Verity series the following, written ten years ago, remains true today.

“The method to adopt for restoring a viable domestic economy would require reforms that drastically lower, if not abolish, personal income taxation – be linked to the passage of Pro-Competitive ad valorem Tariffs in the form of a national import sales tax. We all share in the goal of smaller government, less regulation and free usage of our own money. We have a mutual interest in building a domestic economy that will create higher wage scales and more retained after tax income for the greatest number of our own population. When the best jobs become government work, our society is doomed and reduced to the median worldwide income levels.”

Surely, you must acknowledge that our country is desperately in need of a dramatic job growth strategy. Hopefully you will accept that private employment enterprises are preferable to public section government make work positions. Certainly you must see the sense in lowering the trade deficits that are bankrupting our economy. Need more proof?

Look at the steady rise in the trade deficit for the last two years. With a November 2011 trade deficit of -$47.8 Billion Dollars, just how much of our wealth and resources need to be transferred overseas to narrow this real world wealth destroyer? The answer is that the deficit curve will never turn down until rational protective tariffs are levied on imports.

How can America exist as a viable economy, when our money sinks in purchasing power and the country must import consumable goods, especially when we have no money to pay for the products?

Obviously going into further debt is no alternative if the economy is to survive. This current course guarantees a lower standard of living and a dismal future for your children.

Whenever the topic of establishing reasonable protective tariffs comes up, you hear the claim that the Smoot-Hawley tariff of 1930 deepened the depression. Ian Fletcher in Protectionism Didn’t Cause the Great Depression debunks this misnomer.

“The Smoot-Hawley tariff was simply too small a policy change to have so large an effect as triggering a depression. For a start, it applied to only about one-third of America’s trade: about 1.3 percent of our GDP. One point three percent! America’s average tariff on goods subject to tariff went from 44.6 to 53.2 percent — not a very big jump at all. America’s tariffs were higher in almost every year from 1821 to 1914. Our tariffs went up in 1861, 1864, 1890, and 1922 without producing global depressions, and the great recessions of 1873 and 1893 spread worldwide without needing the help of any tariff increases.

If Smoot-Hawley had caused a global trade disaster, it would necessarily have been by triggering a sharp decline in American imports of goods subject to the increased tariff. Did this happen? The data say no.”

Do not be deceived by the globalists. Sensible tariffs are a solution. Trade deficits are the problem. Liberate yourself from the Free Trade agreements that only produce high unemployment and perpetual poverty.

James Hall – January 25, 2012

http://www.batr.org/negotium/012512.html

Duane Morris LLPEric SinrodUSA
January 18 2012

Source: http://www.lexology.com/library/detail.aspx?g=701f3890-aaa5-4195-8a27-4707b3401f24&