US Bank Enemies At The Gates

[Solve et Coagula]

US Bank Enemies At The Gates

by Jim Willie, CB. Editor, Hat Trick Letter | August 27, 2009

While all manner of attention remains transfixed inside the United States on a remedy and recovery of its bank sector, once again Americans make dangerous assumptions. They tend to assume that the US Federal Reserve near 0% interest rates, Quantitative Easing (aka exploding Printing Pre$$ output), endless liquidity facilities (e.g. TALF), TARP funds (aka Wall Street slush fund), Stress Tests (rigged), bank stock sales (aided by FASB accounting fraud), bank carry trades (exploiting low short-term & higher long-term rates), and the passage of time can revive the US banking industry. They tend domestically to overlook the gradually worsening insolvency condition. Banks are bracing for a new wave of commercial mortgage losses, of prime Option ARMortgage losses, and credit card losses. The delinquency rate of prime Option ARMs is now higher than subprime home loans!!

Harken back to the summer 2007 when the hack USFed Chairman Bernanke called the bank crisis merely a subprime problem with upper limit potential for $200 billion in bank losses, and no risk of spilling over to the real USEconomy, and surely not the cause of any recession. Hack Bernanke has understood next to nothing in advance, all forecasts hopelessly wrong, but is a great manager of the Printing Pre$$ Operation. So he is loved. This hack now is due for reappointment to USFed Chairman post, his past failure the qualifications for future service. The same is true of Treasury Secy Geithner, whose failure at the New York Fed was his qualification for current service. Such is the nature of the great financial syndicate. The approval of Bernanke is sure to cause a major rift with the Chinese credit masters. Their wishes and warnings have been ignored. Their vengeance is next.

The American perspective is almost always very limited in scope, due to chronic arrogance and delusions of grandeur. Their convenient parochial view tends to focus almost entirely within the United States, its bank leadership, its USFed monetary flexibility, its Wall Street syndicate influence, its federal tax latitude, its bank reserves management, and more. THE REAL THREAT TO US BANKS COMES FROM ENEMIES AT THE GATES, FOREIGN CREDITORS. The dangerous assumption made is that foreign creditors will remain firm and loyal. The arrogance extends from the continued belief that they have no choice, even if the trillion$ frauds on Wall Street occurred, even though such frauds were never prosecuted.

The real threat comes from foreign creditors who must contend with challenges greater than ever experienced, such as:

- Shrinking or vanished trade surpluses during global slowdown
- Their own financial systems in tatters (banks, stock & bonds, currencies)
- Vast regional construction booms gone bust (e.g. Dubai)
- Numerous nationwide housing bubbles gone bust
- Gathering storm from the need to liquidate insolvent banks
- Reserves erosion due to over-weight in US$-based bonds
- Systemic problems extended from a generation of USDollar reliance.

Continue to read:
http://www.financialsense.com/fsu/editoria.../2009/0827.html

[hilly7]

Most excellent find, and the rest of the article is spot on. Already in real estate here (we've not been hit as hard in general) we're seeing big dollar properties foreclose. I done a BPO on a log home (cabin) in Pigeon Forge last week (harder hit area) and it came in at 184,900.00, they listed it at 194,900.00. This thing was built in 2006 and sold for 349,000.00. Sold again in 2007 247,000.00. The comps pulled from other sales and listings brought the price that far down. Worse one was 369k bought in early 2009, short sale (fully furnished) was going through at 185k. Had a listing for 195k (buyers bought in 2007 for 229k) in Jeff City (just got a call today) foreclosed.

Many of the upper end houses have what is today called "Creative Financing", yesterday they were called Balloon Loans and Reverse Amortization. They were bought with the asumption that values would go up and either the mortgagor would not be there long or would renew the loan again. Balloon loans simply pay the interest without addressing the principle. Reverse [i]Amortization [/i]pays what the wish with the remaining balance being applied (with interest) to the back of the loan. You end up oweing more than you borrowed.