foreclosure home price bailout federal reserve

Records set in foreclosures, prices, and gifts to Wall St
transparency transfer of wealth

Actual Bailout May Exceed $10 Trillion

This recession is still setting records, not the least of which is the amount of public money going to private elites. The only way to solve it is to get to the root of the problem. Meaning, what follows from speculation in land rents can only be corrected by recovering and sharing the socially-generated values of resources and locations, instead of tax our labor and capital. This policy prescription -- geonomics -- has worked wherever tried. We trim, blend, and append three 2009 articles from: (1) the AP, May 13, on foreclosures by Adrian Sainz; (2) CNNMoney, May 12, on home prices by Les Christie; and (3) TruthOut, May 13, on the bailout by Matt Renner. The first two highlight the record-breaking news cited in yesterday’s article.

by Adrian Sainz, by Les Christie, and by Matt Renner

One in every 374 US housing units received a foreclosure filing last month, the highest monthly rate since RealtyTrac began its report in January 2005.

April was the second straight month with more than 300,000 households receiving a foreclosure filing. "We've never seen two consecutive months like this," said Rick Sharga, RealtyTrac's senior VP for marketing.

Most of the foreclosures occured where most of the bubble occurred: the two southern corners of the US -- Florida and California plus Nevada and Arizona.

The steep slide in home price accelerated at a record pace during the first three months of 2009. National median home price fell 13.8% to $169,000 in first quarter, due to market flooded with lower-priced foreclosures and short sales. According to the National Association of Realtors, that was the largest year-over-year decline in the 30-year history of the report.

Regionally, prices fell the most in the West at 19.8%. They were down 15.9% in the Northeast, 10.8% in the South and 6.8% in the Midwest. A few small towns showed price increases.

Sales volume was weak as well. Homes sold at a 4.59 million annualized rate, off 3.2% from the last three months of 2008 and down 6.8% from first quarter 2008. Sales are up somewhat where prices are down the sharpest.

JJS: Instead of end the role of land (not “housing”) as an object of speculation, government bails out the biggest speculators, whose identity it keeps secret.

The current block of taxpayer money that has been pledged by the US government and the Federal Reserve, according to an analysis by Bloomberg News, is roughly $12.8 trillion as of March 31.

The Federal Reserve, the public-private partnership that controls the supply of dollars, controls $7.765 trillion of this bailout -- and is being secretive about where the money is going.

Rep. Alan Grayson (D-Florida) said the Federal Reserve has "socialized Wall Street's bad bets."

With years of experience battling corruption on behalf of taxpayers and whistleblowers, Representative Grayson said, "Look how the Fed is structured; Wall Street runs the show. This is something that people on the right have been complaining about for decades. We are seeing the transfer of literally trillions of dollars of wealth from the taxpayer to the bad banks," Grayson said.

Regarded by many as the most powerful institution in the world, the Federal Reserve operates in concert with the US government, but is not under public control.

The Federal Reserve has stepped in as the "lender of last resort," bailing out financial firms by lending them billions of dollars, directly purchasing their so-called "toxic assets", and guaranteeing or insuring some others. Corporations such as AIG, Citigroup, Bear Sterns, Bank of America, and others have been thrown a lifeline by the Fed.

Its balance sheet has more than doubled, now (as of May 6) holding $2.06 trillion of potentially worthless paper. But some transactions do not appear on the Federal Reserve's balance sheet.

Representative Grayson grilled Vikram Pandit, the CEO of Citigroup, and took the Federal Reserve to task for what he called a "heads I win, tails you loose" deal, under which the Federal Reserve agreed to absorb most of the possible losses on a $300 billion pile of the Citi's "toxic" mortgaged-backed securities.

"The underlying mortgages don't all go bad. These bank assets produce billions of dollars of income every year. Citigroup gets to keep the income as well as the appreciation on the assets and the government just takes the losses," Grayson said.

“In the case of the Citibank deal, it is on Citibank's balance sheet and off the Federal Reserve's balance sheet," Grayson said, adding "The Federal Reserve has adopted Enron book-keeping procedures."

The off-balance sheet activities of the Federal Reserve may have helped sick banks clear out their books and pass the so-called bank "stress test”. "Essentially what the Fed has done is to change Uncle Sam into Uncle Sap. We have become the saps for Wall Street," Grayson said.

Congress may need to use its subpoena power to pry loose more information about where the money is going and what the Federal Reserve is taking as collateral to back up their loans. Bloomberg News is suing the Federal Reserve for this and other information under the Freedom of Information Act (FOIA).

Federal Reserve officials have said that releasing the names of the companies which have borrowed billions of dollars would signal weakness to the market and could cause a run on the banks.

Famed former Senate Foreign Relations Subcommittee investigator and international finance expert Jack Blum said, "When everybody now knows how screwed up things are, once you've gotten past the point where you've guaranteed everything, how much longer do you have to maintain secrecy to protect the institution?"


Jeffery J. Smith runs the Forum on Geonomics.

Also see:

Forbes -- AIG's Larceny

Another call for the rule of law

Fed Keeps $2 trillion secret, Goldman Sachs shorted its sales

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