dimelab: losses Topic in The Credit Debacle Catalog at Feed-Adept

losses Topic in The Credit Debacle Catalog

Calculated Risk Wed 2009-11-25 11:38 EST

Fannie Mae: $18.9 Billion Loss, Requests Another $15 Billion

Press Release: Fannie Mae Reports Third-Quarter 2009 Results Fannie Mae (FNM/NYSE) reported a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009. ... Third-quarter results were largely due to $22.0 billion of credit related expenses, reflecting the continued build of the company's combined loss reserves and fair value losses associated with the increasing number of loans that were acquired from mortgage backed securities trusts in order to pursue loan modifications. ... As a result, on November 4, 2009, the Acting Director of the Federal Housing Finance Agency (FHFA) submitted a request for $15.0 billion from Treasury on the company's behalf.

15; 18; 9; Calculated Risk; Fannie Mae; losses; requesting.

Wed 2009-11-25 09:59 EST

Hussman Funds - Weekly Market Comment: "Should Come as No Shock to Anyone" - November 16, 2009

John P. Hussman

The big picture is this. There is most probably a second wave of mortgage defaults in the immediate future as a result of Alt-A and Option-ARM resets. Yet our capacity to deal with these losses has already been strained by the first round that largely ended in March. The Federal Reserve has taken a massive amount of mortgage-backed securities onto a balance sheet that used to be restricted to Treasury securities. The purchase of these securities is reflected by a surge in cash reserves held by banks. Not only are the banks not lending these funds, they are contracting their loan portfolios rapidly. Ultimately, in order to unwind the Fed's position in these securities, it will have to sell them back to the public and absorb those excess reserves, so to some extent, the banking system can count on losing the deposits created by the Fed's actions, and can't make long-term loans with these funds anyway. Increasingly, the Fed has decided to forgo the idea of repurchase agreements (which require the seller to repurchase the security at a later date), and is instead making outright purchases of the debt of government sponsored enterprises (GSEs such as Fannie Mae and Freddie Mac). Again, the Fed used to purchase only Treasuries outright, but it is purchasing agency securities with the excuse that these securities are implicitly backed by the U.S. government. This strikes me as a huge mistake, because it effectively impairs the Fed's ability to get rid of the securities at the price it paid for them, should Congress change its approach toward the GSEs. It simultaneously complicates Congress' ability to address the problem because Bernanke has tied the integrity of our monetary base to these assets. The policy of the Fed and Treasury amounts to little more than obligating the public to defend the bondholders of mismanaged financial companies, and to absorb losses that should have been borne by irresponsible lenders. From my perspective, this is nothing short of an unconstitutional abuse of power, as the actions of the Fed (not to mention some of Geithner's actions at the Treasury) ultimately have the effect of diverting public funds to reimburse private losses, even though spending is the specifically enumerated power of the Congress alone.

2009; comes; Hussman Funds; November 16; shocks; weekly market comments.

Dr. Housing Bubble Blog Fri 2009-11-20 08:25 EST

Fannie Mae and Wells Fargo Announce Creative Mortgage Solutions: A New Thing Called Renting. Option ARM Scenarios, Lease for Deed, and Delaying the Financial Future.

Last week, foreclosure Hall of Fame member and government stepchild Fannie Mae announced a stunning $18.9 billion loss. Remember last year when we were told that bailing out the enormous Government Sponsored Entities that we would be turning a profit? Well that didn't exactly pan out and both Fannie Mae and Freddie Mac have been a vortex for taxpayer money. With that said, Fannie Mae announced a ``lease for deed'' program that will essentially convert struggling homeowners to that feared word, renters. In the same week after Attorney General Jerry Brown sent his letter to the top option ARM wheelers and dealers in California, Wells Fargo came out with its ingenious solution. Wells Fargo has decided, at least as it stands, to convert their Pick-A-Pay option ARMs into glorious interest only loans for periods of six to ten years.

deed; delays; Dr. Housing Bubble Blog; Fannie Mae; financial future; leased; New Thing Called Renting; Option ARM Scenarios; Wells Fargo Announce Creative Mortgage Solutions.

Bruce Krasting Thu 2009-11-19 10:52 EST

FHFA's DeMarco Speaks - Ouch!

Bruce Krasting

FHFA's Acting Director Edward DeMarco provided written testimony to the Senate today. I would give his presentation a B+. There is little room for optimism in this story. Mr. DeMarco did not gloss that fact over. A few snips from that speech: -From July 2007 through the first half of 2009--combined losses at Fannie Mae and Freddie Mac totaled $165 billion. In the first half of 2009, Fannie Mae and Freddie Mac together reported net losses of $47 billion. -Since the establishment of the conservatorships, the combined losses at the two Enterprises depleted all their capital and required them to draw $96 billion. The combined support from the federal government exceeds $1 trillion. -The short-term outlook for the Enterprises remains troubled and likely will require additional draws...

Bruce Krasting; FHFA's DeMarco Speaks; Ouch.

Thu 2009-11-19 10:26 EST

How Goldman secretly bet on the U.S. housing crash | McClatchy

Greg Gordon

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies. Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk...

Goldman Secretly Bet; McClatchy; U.S. housing crash.

naked capitalism Tue 2009-10-27 12:18 EDT

Guest Post: Capitalism, Socialism or Fascism?

George Washington of Washington's Blog

What is the current American economy: capitalism, socialism or fascism? ...Nouriel Roubini writes ``We're essentially continuing a system where profits are privatized and...losses socialized.'' Nassim Nicholas Taleb says ``the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren.'' Nobel prize winning economist Joseph Stiglitz calls it ``socialism for the rich'' ...leading journalist Robert Scheer writes: ``What is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as ``financial fascism'''' ...Italian historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because ``the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social'' ...one of the best definitions of fascism -- the one used by Mussolini -- is the ``merger of state and corporate power`` ...Nobel prize-winning economist George Akerlof co-wrote a paper in 1993 describing the causes of the S&L crisis and other financial meltdowns...[Looting is the] common thread [when] countries took on excessive foreign debt, governments had to bail out insolvent financial institutions, real estate prices increased dramatically and then fell, or new financial markets experienced a boom and bust...Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society's expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations ...Whether we use the terminology regarding socialism-for-the-giants (''socialized losses''), of fascism (''public and social losses''), or of looting (''left the government holding the bag for their eventual and predictable losses''), it amounts to the exact same thing. [kleptocracy] Great comments, including Joseph: Three core ideas characterize the myth of our society: 1. Free market; 2. Capitalism; 3. Democracy. The conceptual error that people make is to think that they are compatible, or indeed represent aspect of the same thing. In fact they are all deeply antagonistic towards each other. It is the miracle of post-war society that we managed to hold them in balance for so long. That balance has now been destroyed. A simple example of the contradiction, and the one that the over-socialised right finds most confusing, is the contradiction between capitalism and the market. Capitalism is a system of ownership; the market is a system of distribution. The perfect world for the capitalist is one in which they are price setters in terms of the commodities they produce and labour they employ -- ie a state of monopoly. Each individual capitalist seeks the destruction of the market. What has occurred over the past year is not corruption; it is the triumph of capitalism. The market and democracy have been defeated. Not socialism, not fascism,...

capitalism; Fascism; Guest Post; naked capitalism; social.

zero hedge Fri 2009-10-23 09:05 EDT

The Big Picture Sun 2009-10-11 16:08 EDT

Kaptur & Johnson on Bill Moyers

Former International Monetary Fund chief economist Simon Johnson and US Rep. Marcy Kaptur (D-OH) report on the state of the economy... MARCY KAPTUR: Think about what these banks have done. They have taken very imprudent behavior, irresponsible. They have really gambled, all right? And in many cases, been involved in fraudulent activity. And then when they lost, they shifted their losses to the taxpayer. So, if you look at an instrumentality like the F.H.A., the Federal Housing Administration. They used to insure one of every 50 mortgages in the country. Now it's one out of four. MARCY KAPTUR: Because what they're doing is they're taking their mistakes and they're dumping them on the taxpayer. So, you and I, and the long term debt of our country and our children and grandchildren. It's all at risk because of their behavior. We aren't reigning them in. The laws of Congress passed last year in terms of housing, were hollow. ... SIMON JOHNSON: And Rahm Emanuel, the President's Chief of Staff has a saying. He's widely known for saying, `Never let a good crisis go to waste'. Well, the crisis is over, Bill. The crisis in the financial sector, not for people who own homes, but the crisis for the big banks is substantially over. And it was completely wasted. The Administration refused to break the power of the big banks, when they had the opportunity, earlier this year. And the regulatory reforms they are now pursuing will turn out to be, in my opinion, and I do follow this day to day, you know. These reforms will turn out to be essentially meaningless.

Big Picture; Bill Moyers; Johnson; Kaptur.

Calculated Risk Sat 2009-10-10 13:33 EDT

FHA Bailout Seen

CalculatedRisk

From Bloomberg: FHA Shortfall Seen at $54 Billion May Lead to Bailout...The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because of $54 billion more in losses than it can withstand, a former Fannie Mae executive said. ``It appears destined for a taxpayer bailout in the next 24 to 36 months,'' consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae...

Calculated Risk; FHA Bailout Seen.

zero hedge Sat 2009-10-10 13:09 EDT

Former Fannie Chief Credit Officer Says FHA Is $54 Billion Underwater

In keeping with the warnings presented by Kyle Bass warned that the entire housing bubble is now being ported over to the taxpayer's balance sheet, Edward Pinto, a former chief credit officer for Fannie Mae claims that the Federal Housing Administration will likely require a major taxpayer bailout "in the next 24 to 36 months" as it is likely to incur $56 billion more in losses than it can withstand.

54; Fannie Chief Credit Officer Says FHA; underwater; Zero Hedge.

Bruce Krasting Sat 2009-10-10 12:57 EDT

FHFA's DeMarco Speaks

Bruce Krasting

FHFA's Acting Director Edward DeMarco provided written testimony to the Senate today...From July 2007 through the first half of 2009--combined losses at Fannie Mae and Freddie Mac totaled $165 billion. In the first half of 2009, Fannie Mae and Freddie Mac together reported net losses of $47 billion. Since the establishment of the conservatorships, the combined losses at the two Enterprises depleted all their capital and required them to draw $96 billion. The combined support from the federal government exceeds $1 trillion. The short-term outlook for the Enterprises remains troubled and likely will require additional draws...

Bruce Krasting; FHFA's DeMarco Speaks.

Wed 2009-10-07 10:31 EDT

Beijing's derivative default stance rattles banks

Reuters

For banks that are hoping to sell more derivatives hedges in China, the world's fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like...Air China, China Eastern and shipping giant COSCO -- among the Chinese companies that have reported huge derivatives losses since last year -- had issued almost identical notices to banks.

Beijing's derivative default stance rattles banks.

Tue 2009-09-29 11:33 EDT

How Bad Will It Get?

Mike Whitney, CounterPunch

In the two years since the crisis began, neither the Fed nor policymakers at the Treasury have taken steps to remove toxic assets from banks balance sheets. The main arteries for credit still remain clogged despite the fact that the Bernanke has added nearly $900 billion in excess reserves to the banking system. Consumers continue to reduce their borrowing despite historically low interest rates and the banks are still hoarding capital to pay off losses from non performing loans and bad assets. Changes in the Financial Accounting Standards Board (FASB) rules for mark-to-market accounting of assets have made it easier for underwater banks to hide their red ink, but, eventually, the losses have to be reported. The wave of banks failures is just now beginning to accelerate. It should persist into 2011. The system is gravely under-capitalized and at risk...The economy cannot recover without a strong consumer. But consumers and households have suffered massive losses and are deeply in debt. Credit lines have been reduced and, for many, the only source of revenue is the weekly paycheck...The current recession has exposed the fault-lines dividing the classes in the US. Neither party represents working people. Both the Democrats and the Republicans are supportive of "social engineering for the rich"; regressive taxation and economic policies which shift a greater portion of the wealth to the richest Americans. The question of inequality, which has grown to levels not seen since the Gilded Age, will dominate the national conversation as the recession deepens and more people slip from the ranks of the middle class...After Obama's stimulus runs out, consumer spending will again sputter and the economy will slide back into recession.

bad.

The IRA Analyst Mon 2009-09-21 17:23 EDT

Exposure at Default: As Banks Shrink, So Does the Economy

...before Treasury Secretary Tim Geithner and the other G-20 finance ministers set about to raise capital levels, they need to understand that the earnings of the banking industry are going to be impaired for years as the cost of resolving failed banks is repaid. Restoring solvency is the first issue for many banks, then we can talk about increased capital and restrictions on risk taking equally. And as the banking industry shrinks defensively in order to conserve capital and fund liabilities impaired by realized losses, the credit available to the US economy also shrinks. You can't have economic growth without credit growth...Bottom line is that deflation is still the chief threat to the US economy, driven by a relentless contraction in bank and nonbank credit. Until we see a restoration of the market for nonbank finance and a sustained turn in the EAD of the large bank peer group, which accounts for almost 70% of the entire US industry balance sheet, we do not believe that any economic recovery will be meaningful in terms of jobs or asset prices.

Banks Shrink; default; economy; exposure; IRA Analyst.