Aaron Layman's Katy Texas Real Estate Forum

ECB's LTRO Won't Stop Collateral Contagion - Trust Is The Only Asset Bankers Have, And It's Evaporating

If you think the Federal Reserve is finished bailing out Europe (and pretty much the entire global economy) on your dime, I have some bad news for you...The money printers are just warming up!

Gordon Long explains why the rescue plan in Europe is a complete train wreck.  Those low interest dollar swaps a few weeks ago were just a precursor of things to come.  European banks don't want to lend to each other because trust seems to be fading.  I guess they don't believe in the quality of the assets on their books.

"There are approximately $55T of banking assets in the EU. This compares to only $13T in the US. Bank Assets in the EU are 4 times as large as the US.

In the US, debt held by the bank is smaller because retail deposits are a primary source of funds. EU banks use wholesale lending and, as a consequence, the debt held by banks is closer to 80% versus less than 20% by US banks.

Wholesale bank lending in the EU approximates $30T versus only $3T in the US, a 10 X differential.

Wholesale lending is fundamentally borrowing from money market funds and other very short term, unsecured instruments. The banks borrow short and lend long. It all works until short term money gets scarce or expensive. Both have occurred in the EU and this recently placed DEXIA into bankruptcy, forcing them to be taken over by the Belgium and French governments. The unsecured bond market fundamentally closed in the EU in Q3 2011, as fears mounted that an EU solution was not forthcoming.

Assuming $30T of loans is spread over three years, EU banks have a requirement for $800B / Month of rollover financing for wholesale lending outstanding.

Where is this money going to come from? No one is waiting around to find out as there will be cascading counterparty failures soon surfacing. Banking money in Europe is fleeing to custodial and official accounts of the ECB, the US Federal Reserve and any other central Bank willing to accept their cash."

PIMCO bond king Bill Gross recently tweeted: " What does LTRO stand for? 1- A shell game; 2-Cash for trash; 3 Three-card Monti; or 4. All of the above."





 

Why Do Americans Pay So Much For Brand Name Drugs? - The Corporate Kleptocracy

Drugs are more expensive in the United States than anywhere else in the world.  A recent trip to my local pharmacy for a simple antibiotic known as Suprax drove the point home.  Our son had an ear infection and the pediatrician prescribed the Suprax which is apparently $85 even with a co-pay.  A quick check shows you can by the same drug at a Canadian pharmacy online for $25.

As it turns out, Suprax is manufactured by Lupin Pharmaceuticals in India.  Why am I not surprised!

30-Yr Mortgage Reaches Record Low Of 3.91%

The rate on the 30-yr fixed dropped to 3.91% this week.  The 15-yr stood at 3.21%.  Rates might drop even further should the Fed launch a new program of bond purchases.  It's possible the Fed could signal zero rates for short-term borrowing into 2014, or shall we say to infinity and beyond. 

So Much For The Rule Of Law

Ann Barnhardt recently described how the rule of law apparenlty doesn't apply at the top of the food chain.  If Jon Corzine can steal a $billion of customer's money with impunity, who's to say your IRA wouldn't be fair game as well? 

Fudged numbers from the NAR, manipulation of employment numbers by the BLS, and outright theft from those with the means and connections to pull it off.  What we are currently experiencing in the United States is outright manipulation of the economy and the real world for the benefit of a few.  Ben wants you to keep the tab running; don't let him fool you.  A properly functioning economy requires a little more than fairy dust.  The adults have left the building in Washington, and there is no one manning the ship.

Capitalism without failure is not capitalism, and there will be dire consequences for the manipulation of the economy at the expense of the general public.  When Nassim Taleb comments on Black Swan events, he's referring to the abomination of interfering with the natural order of markets and the corrections which make them viable, feedback-driven systems.  When you take the feedback out of the system (bailouts, cover-ups, manipulation of the data), something interesting happens; the system collapses.  We can either address the manipulation and the fraud or suffer the consequences.  Nature has a way of correcting imbalances, and it appears we are headed to one mother of a correction.  No one is above the law.

"The government is the potent omnipresent teacher. For good or ill it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy. To declare that the end justifies the means -- to declare that the government may commit crimes -- would bring terrible retribution."  Louis D. Bandeis, Supreme Court Justice (1916-1939)

Link to interview (mp3) (Great Interview with Professor William Black and Jim Puplava)

OCC And Adminstration Allowing Banks To Self Regulate Their Own Fraudulent Mortgage Abuses

Last week's 60 Minutes piece "There Goes The Neighborhood" was depressing enough, but the real kicker comes from this revelation by Legalprise founder Michael Olenick.  It seems the OCC and the current Administration continue to green-light foreclosure fraud at the behest of large banks.  Here, Olenick uncovers the conflict of interest with Allonhill and Aurora Loan Services.

"On September 9, 2011, Allonhill signed an engagement letter— a definitive agreement — with the Office of the Comptroller of the Currency (OCC), as part of the consent order wherein servicers agreed to submit foreclosure fraud for reviewby “independent” third-party companies. The engagement letter notes that Allon founded Murrayhill, “which pioneered the concept of independent third-party oversight of loans and servicers.” But there is no mention that Murrayhill was tasked with promulgating and monitoring Aurora’s default policies and procedures.

That is, OCC chief John Walsh signed off on hiring Allon to audit her prior work for fraud.

Let’s repeat that; the OCC — an arm of President Obama’s Treasury Department — signed off, allowing a company founded and managed by the woman who created Aurora’s foreclosure practices to audit her own firm’s work, and did so pursuant to a consent orderand under the guise of consumer protection. Allonhill, the firm that promulgated and enforced foreclosure policies, is based less than a mile away from the address listed for Murrayhill, the firm auditing for foreclosure fraud on behalf of borrowers.

Until now there has been a mountain of circumstantial evidence that the Obama administrationhas been comfortable with foreclosure fraud. There is the conspicuous lack of prosecutions, unwarranted and unwelcome intervention in the 50-state Attorney General review, and references that infer robosigning is a “victimless” crime. But, until this disclosure, there has been no solid evidence the federal government is actively covering up bank-perpetrated fraud.

This arrangement clarifies that the Federal Government, at the highest levels, are comfortable, or even arguably complicit, covering up foreclosure fraud."

Any homeowner who's struggled with a mortgage modification or short sale need only look at what's actually going on behind the scenes to see the government's true intentions.  Scapegoating a few execs at Fannie and Freddie (while their defense bills are being paid by taxpayers) won't fix the mortgage market.  For all the President's admirable rhetoric, there's been virtually nothing done to rectify rampant criminal fraud in the mortgage and securities markets.

National Association Of Realtors Revises Home Sales Downward By 14%

NAR released their benchmark revisions today.  The reductions amount to a roughly 14% decline from previous figures. The revisions apply to sales for 2007 through 2010.

Home inventory was also revised downward by a similar amount, but it should be noted that NAR's inventory figures do not include shadow inventory not currently listed.  Shadow inventory still stands at roughly 1.6 million homes according to CoreLogic's latest figures.

Guess Where $200 Million Of MF Global Customer Money Turned Up

It appears MF Global transfered $200 million in customer money to their JP Morgan clearing bank in the City of London just prior to bankruptcy.  Not surprisingly, the parties that received it (bonus time!) won't admit it and are refusing to give it back.

The transfer has drawn interest from investigators partly because J.P. Morgan asked MF Global in a letter the following day to attest that the Oct. 28 shift of funds didn't violate regulations designed to protect customer money.

The letter suggests that officials at J.P. Morgan, which cleared some trades for MF Global, had become concerned that the securities firm might have gotten the money by dipping into customer funds. Commodity Futures Trading Commission rules prohibit futures brokers from using customer money for their own trading purposes.

The scandal of MF Global will have far-reaching repercussions in the financial markets.  We are already witnessing the unraveling of the system, as the fraud at the highest levels of our government and financial institutions eats away at the fabric of what is upheld to the world as a representative democracy.

Real Numbers For Housing Starts & Completions More Sobering Than Headlines

Looking behind the headline numbers, the data coming from various government agencies is not what it seems.  As Zero Hedge points out, most of the "improvement" in the housing starts figures released by the census today is in the multi-family segment.  Single family starts & completions are still sluggish at best. 

Any sustainable recovery in real estate will have to include growth in single family home construction. The recent growth in multi-family housing simply reflects the reality that more people are opting to rent, many because they have no choice.  Housing completions are still poised to come in at a record low for 2011. 

Look Out Below! - Bank Of America Closes Below $5 Per Share

The EU bailout isn't looking so good, and Bankrupting America got smacked along with other financials today, closing the day at $4.99.  Many institutional investors are prohibited from buying stocks below $5, so the situation just became a little more complicated for one belweather of American bank bailouts.

Quelle Surprise! Rick Perry Collecting Retirement Pension And Full Governor's Salary

The Houston Chronicle and Bloomberg Newsare both reporting what is an obvious case of hypocrisy on the part of cranially compromised governor.  It appears Governor Perry retired in January to begin collecting his state pension.  I certainly wouldn't fault him for that.  The problem; however, is that he's also collecting a full salary as governor, even why he's in full campaign mode.  For those not familiar with Texas, there are rules against this type of double dipping pension behavior for other state employees.

This is simply another example of the double standard which exists for our "representatives".  When it comes to their own well being they seem to have no problem with insider trading, double dipping in the retirement system and receiving top notch health care courtesy of taxpayers.  Meanwhile, the general population is supposed to eat cake.

Welcome to the Assholacracy!  Perry has indeed proven himself to be the best little whore in Texas.