Housing Bubble Trouble: Ohio judge places another straw on top of subprime camel…

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“A US Federal Judge, C.A. Boyko in Federal District Court in Cleveland Ohio ruled to dismiss a claim by Deutsche Bank National Trust Company. DB’s US subsidiary was seeking to take possession of 14 homes from Cleveland residents living in them, in order to claim the assets.

Here comes the hair in the soup. The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta of not longer.

Again why could Deutsche Bank not show the 14 mortgages on the 14 homes? Because they live in the exotic new world of “global securitization”, where banks like DB or Citigroup buy tens of thousands of mortgages from small local lending banks, “bundle” them into Jumbo new securities which then are rated by Moody’s or Standard & Poors or Fitch, and sell them as bonds to pension funds or other banks or private investors who naively believed they were buying bonds rated AAA, the highest, and never realized that their “bundle” of say 1,000 different home mortgages, contained maybe 20% or 200 mortgages rated “sub-prime,” i.e. of dubious credit quality.

Indeed the profits being earned in the past seven years by the world’s largest financial players from Goldman Sachs to Morgan Stanley to HSBC, Chase, and yes, Deutsche Bank, were so staggering, few bothered to open the risk models used by the professionals who bundled the mortgages. Certainly not the Big Three rating companies who had a criminal conflict of interest in giving top debt ratings. That changed abruptly last August and since then the major banks have issued one after another report of disastrous “sub-prime” losses.

A new unexpected factor

The Ohio ruling that dismissed DB’s claim to foreclose and take back the 14 homes for non-payment, is far more than bad luck for the bank of Josef Ackermann. It is an earth-shaking precedent for all banks holding what they had thought were collateral in form of real estate property.

How this? Because of the complex structure of asset-backed securities and the widely dispersed ownership of mortgage securities (not actual mortgages but the securities based on same) no one is yet able to identify who precisely holds the physical mortgage document. Oops! A tiny legal detail our Wall Street Rocket Scientist derivatives experts ignored when they were bundling and issuing hundreds of billions of dollars worth of CMOs in the past six or seven years. As of January 2007 some $6.5 trillion of securitized mortgage debt was outstanding in the United States…….”

More by Bill Engdahl on the financial tsunami ahead.

Tibor Kalman on crashing planes and the media

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“We live in a society and a culture and an economic model that tries to make everything look right…But by definition, when you make something no one hates, no one loves it. So I am interested in imperfections, quirkiness, insanity, unpredictability. That’s what we really pay attention to anyway. We don’t talk about planes flying; we talk about them crashing….”

– Tibor Kalman, influential New York designer/editor and radical activist

well known for his images of figures like the Pope and Queen Elizabeth II with a brown skin.

Comment: 

Collage, the juxtaposition of contradictory images – they all disrupt our ease. They make us look a second time at our logic, our comfortable narratives..

I want to create a kind of cubism of ideological fragments — from the left, from the right, from the secular and the religious, from east, from west. Where will that lead? No idea….

Cass Sunstein on distributed knowledge and prediction markets

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“Hayek’s claim is that in a system in which knowledge of relevant facts is dispersed among many people, prices act as an astonishingly concise and accurate coordinating and signaling device. They incorporate that dispersed knowledge and in a sense also publicize it, because the price itself operates as a signal to all.

Hence Hayek argues that it “is more than a metaphor to describe the price system as a kind of machinery for registering changes, or a system of telecommunications which enables individual produces to watch merely the movement of a few pointers.” Hayek describes this process as a “marvel,” and adds that he has chosen that word on purpose so as “to shock the reader out of the complacency with which we often take the working of the mechanism for granted.”

On the Internet, prediction markets are an obvious illustration of Hayek’s point. They can be found on many sites, and they tend to do exceedingly well, because they incorporate dispersed information so as to generate a price. That price often works as a probability, that is, the price of the “bets” accurately captures the probability that the event will occur. For elections, Oscar winners, and economic events, prediction markets have been uncannily accurate…”

Cass Sunstein on Hayek in TPM Cafe.

Comment: 

Wiki, the blogosphere, pricing….they all reflect the value of the decentralization of knowledge and decision making. They all support political devolution to the states and local governments and the elimination of much of the (unconstitutional) mandate of federal government.

From violent revolutionary to non-violent visionary: Aurobindo in jail…

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“…as it was the Almighty Power of God which had raised that cry, that hope, so it was the same Power which had sent down that silence. He who was in the shouting and the movement was also in the pause and the hush. He has sent it upon us, so that the nation might draw back for a moment and look into itself and know His will. I have not been disheartened by that silence because I had been made familiar with silence in my prison and because I knew it was in the pause and the hush that I had myself learned this lesson through the long year of my detention.”

“He turned the hearts of my jailers to me and they spoke to the Englishman in charge of the jail, “He is suffering in his confinement; let him at least walk outside his cell for half an hour in the morning and in the evening.” So it was arranged, and it was while I was walking that His strength again entered into me. I looked the jail that secluded me from men and it was no longer by its high walls that I was imprisoned; no, it was Vasudeva who surrounded me.

I walked under the branches of the tree in front of my cell but it was not the tree, I knew it was Vasudeva, it was Sri Krishna whom I saw standing there and holding over me his shade. I looked at the bars of my cell, the very grating that did duty for a door and again I saw Vasudeva. It was Narayana who was guarding and standing sentry over me….I looked at the prisoners in the jail, the thieves, the murderers, the swindlers, and as I looked at them I saw Vasudeva, it was Narayana whom I found in these darkened souls and misused bodies. Amongst these thieves and dacoits there were many who put me to shame by their sympathy, their kindness, the humanity triumphant over such adverse circumstances.

One I saw among them especially, who seemed to me a saint, a peasant of my nation who did not know how to read and write, an alleged dacoit sentenced to ten years’ rigorous imprisonment, one of those whom we look down upon in our Pharisaical pride of class as Chhotalok…(lower orders) Once more He spoke to me and said, “Behold the people among whom I have sent you to do a little of my work. This is the nature of the nation I am raising up and the reason why I raise them.”

When the case opened in the lower court and we were brought before the Magistrate I was followed by the same insight. He said to me, “When you were cast into jail, did not your heart fail and did you not cry out to me, where is Thy protection? Look now at the Magistrate, look now at the Prosecuting Counsel.”

I looked and it was not the Magistrate whom I saw, it was Vasudeva, it was Naryana who was sitting there on the bench….”

Aurobindo, in Karmayogin, vol. 2 Sri Aurobindo Birth Centenary Library (Sri Aurobindo Ashram, Pondicherry, 1972), pp. 1-15.

Business Wire runs “Mobs” promo….

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I just found that Business Wire had run a piece earlier this month on the book, using our promotional material.

 

November 15, 2007 12:00 PM Eastern Time

DUBLIN, Ireland–(BUSINESS WIRE)–Research and Markets (http://www.researchandmarkets.com/reports/c74288) has announced the addition of “Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics” to their offering.

Ron Paul Revolution: The Greenspan we want – Jeff Greenspan, that is…

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“Radio talk show host, Dale Williams, interviewed Jeff Greenspan, the Western Coordinator of the Ron Paul campaign. During the interview, Greenspan dispelled the accusations of racism in the Ron Paul camp. He spoke about his own Jewish heritage and stated that Dr. Paul’s campaign is comprised of people from a wide variety of ethnic backgrounds. …”

More at The National Expositor.

Business Pundit: thumbs up for “Mobs,” but with a warning label…

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Rob May at the hugely popular business blog, Business Pundit, wrote this great review of “Mobs, Messiahs, and Markets” that I just came across:

“Where do I begin with a book that takes a shot at pretty much anybody and everybody, including the authors themselves? To say that this book is skeptical or contrarian is like saying Warren Buffett has money. This book could set the standard for skeptical writing. That said, it’s part of the reason I enjoyed the book so much.”

But in the end, however, he doesn’t really recommend it to everyone:

“Francis Scott wrote that “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.” I do not think most people have this capacity, but if you do, I highly recommend this book. For everyone else, it will just be offensive.”

(sigh). Read the rest of the review here.

This is one of the nicest reviews we got. My other favorites include one by Daniel Ryan at the libertarian site, Enter Stage Right.

Here’s an excerpt:

“If you’re the alpha type, you’ll undergo something rarely experienced in this day and age, despite the number of Mencken imitators currently around: you’ll actually feel the same way that a good, worthy, successful U.S. burgher felt in the 1920s when reading one of Mencken’s works when it was hot off the presses. The two authors are that good at being intellectually detached from all parts of the popularity-and-leadership game.

Some may find it roundly offensive, but it would be tragic if the reader, through umbrage, expels him- or herself from the Bonner/Rajiva School for Creative Cynics. After reading this book, you will re-evaluate some of your more cherished ideas. Some will find grist for self-reflection in its material.”

And Dr. Jonathan Dolhenty of the popular philosophy site, Radical Academy also gave us a big thumbs up. Here’s a part:

“Mobs, Messiahs, and Markets by William Bonner and Lila Rajiva is a fascinating work which considers how people think and behave, privately and collectively, and the effects these different modes have within the public sphere. I haven’t quite decided which specific literary genre this book falls into; maybe that is inconsequential anyway. There’s a lot of history, much economics and politics and, well, almost every other recognized social science comes into play….Fortunately for the casual reader, this book is not the least bit “dry” or dull, as all too many book dealing with this or similar topics seem to be. In fact, there are many times in this work where the authors relate or allude to something that is downright hilarious. Be that as it may, this is a serious look at an important phenomenon in the human condition.”

Then there was this review by Mark Lamendola, which smacked us for lurching into lala land at the end with our gold recommendation (well, it was right so far, wasn’t it?), but was still pretty favorable :

“Mobs, Messiahs, and Markets provides insights that run counter to the propaganda spewed by the mainstream media. Thought-provoking and myth-challenging, it will delight those who value liberty. People who believe the government is “here to help you” or that the tooth fairy really does leave coins under your pillow won’t like Mobs, Messiahs, and Markets. That’s their problem.

Mobs, Messiahs, and Markets looks at how and why people do stupid things en masse. Understanding how mass manipulation works can help you avoid trotting off the cliff in a herd of lemmings, so this stuff is good to know. One of the tools of mass manipulation is the really big lie. Quite adroitly, Mobs, Messiahs, and Markets looks at specific lies and gives them a sound thrashing.”

Read the rest at the Mind Connection

So, let’s see. That’s

1. An electrical engineer/systems designer/business prof and major blogger (Business Pundit)

2. A widely- published philosopher of the natural law tradition (Radical Academy)

3. A time management/business self-help expert who’s written 6000 articles (Mind Connection).

Systems analysis, philosophy, and business management.

That was roughly where we hoped to be. I think if we had eliminated the antiwar stuff and toned down most of the language, we might have been mentioned in more mainstream reviews in print newspapers. But since one of the main targets of the book is the mainstream news business, I guess that would be missing the point….

But underground fav isn’t too bad…..

Bigger dollar crash predicted in 2008 – updated

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RHINEBECK, N.Y., Nov. 19 (UPI) — A financial crisis will likely send the U.S. dollar into a free fall of as much as 90 percent and gold soaring to $2,000 an ounce, a trends researcher said.

“We are going to see economic times the likes of which no living person has seen,” Trends Research Institute Director Gerald Celente said, forecasting a “Panic of 2008.”

“The bigger they are, the harder they’ll fall,” he said in an interview with New York’s Hudson Valley Business Journal.

Celente — who forecast the subprime mortgage financial crisis and the dollar’s decline a year ago and gold’s current rise in May — told the newspaper the subprime mortgage meltdown was just the first “small, high-risk segment of the market” to collapse.

From UPI.

But from Kathy Lien, chief currency strategist at Daily Forex, some caution:

“Even though the US dollar fell to a new record low against the Euro overnight, the Euro failed to hold onto those gains. The currency pair’s struggle to sustain its upside momentum over the past three trading days has everyone wondering whether this is the top. Unlike the US, there are fundamental reasons behind today’s intraday reversal. For the most part European economic data was weak. Manufacturing PMI accelerated but service sector PMI deteriorated and French consumer spending fell by the biggest amount in over a year. ECB President Trichet also said that he is opposed to brutal currency moves while Airbus is complaining loudly about the damage of a weaker dollar. It is important to point out that Trichet did not call the latest move in the Euro brutal, but simply indicated his discontent with volatility in the currency markets in general. The pressure is heating up for the central bank president to do something about the currency but his reluctance to do so reflects what must be very strong inflationary pressures.”

And Sebastian Malloy at the Washington Post references that futuristic digital currency of Ben Steil’s I blogged a while back.

Update: Meanwhile, Goldman Sachs predicts the dollar will stage a come back in 2008. This is likely to be so for the short or midterm — but its likely to be go back down after that….the fundamentals argue for more decline…

The Oxbow Incident: the law is more than words

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oxbow“A man just naturally can’t take the law into his own hands and hang people without hurtin’ everybody in the world, ’cause then he’s just not breaking one law but all laws. Law is a lot more than words you put in a book, or judges or lawyers or sheriffs you hire to carry it out. It’s everything people ever have found out about justice and what’s right and wrong. It’s the very conscience of humanity. There can’t be any such thing as civilization unless people have a conscience, because if people touch God anywhere, where is it except through their conscience? And what is anybody’s conscience except a little piece of the conscience of all men that ever lived?”

From the Oxbow Incident (1943).

The Oxbow Incident was based on a 1940 Western by Walter Van Tilburg Clark, and starred Henry Fonda and Anthony Quinn, among others. It tells the story of a posse that goes after suspected cattle rustlers in the Oxbow Valley in Nevada in 1885. The rustlers are also presumed to have killed a popular rancher. When the posse happens on three suspicious-looking men, it ignores its own qualms and the protests of the local judge and proceeds to hang them. On going back home, the vigilantes are overwhelmed with guilt to find the rancher alive.

A 75 minute classic that was one of Orson Welles’ favorites and the only Western he considered making, the film won an Academy Award in 1998 but performed poorly at the box-office. Although it was intended as a defense of war-time American values, audiences disliked the implicit connection it drew between Nazi mob rule and the Old West. It seemed to say that America might not be immune in the future to eruptions of cowboy justice and that even people who are mostly law-abiding in their daily lives can commit murder, while convincing themselves they’ve had a “reasonable accusation, fair trial, and just execution.”