Banks Profit From Owning Homes They Foreclosed
MF Global's Corzine et al Still Not Behind Bars
There’s a double standard: leniency for the rich and harsh law for the rest. We trim, blend, append three 2012 articles from Rolling Stone, Mar 19, on GMEs by M. Taibbi; (2) CNNMoney, Mar 27, on prices by L. Christie; and (3) MarketWatch, Mar 27, on Corzine by D. Weidner.
by Matt Taibbi, by Les Christie, and by David Weidner
Gov’t Helps Wall St Collect Your Rent
In con artistry parlance, they call this the "reload." That's when you hit the same mark twice -- typically with a second scam designed to "fix" the damage caused by the first scam. Someone robs your house, then comes by the next day and sells you a fancy alarm system, that's the reload.
In this case, banks dumped huge volumes of subprime loans on, among others, Fannie and Freddie. Then the loans crashed in value, nearly bankrupting the two GSEs (Government Sponsored Enterprises). So the banks bought back the mortgages a big discount.
Further, the ever-ready state customers continue to buy mortgages from the big banks (until recently, even from Bank of America, whom the GSEs were already suing for sales of toxic MBS), giving the banks a permanent market for questionable home loans.
In sum, banks create the loans, make money selling them off on the market at high prices, then come back and buy them again when they're low. When the GSEs are in the middle of this transaction, it makes mortgage lending a basically risk-free proposition: Banks offshore the market risk to a government entity and/or to the idiot individual who bought the home mortgage in the first place.
Lately, many of the banks/investors who buy these home loans back from Fannie/Freddie will rent out their properties instead of reselling them, which can vastly increase their revenue streams.
From the WSJ: “Economists at Goldman Sachs estimate the annual yield on an investment on rental property nationwide averages about 6.3%, but can exceed 8% in cities that were hit hard during the housing bust.
Warren Buffett, considered a sage investor and chief executive of Berkshire Hathaway Inc., said in an interview with CNBC-TV last month that he would buy up ‘a couple hundred thousand’ single-family homes if he could do so easily, given the high yields on rental investments.”
Another potential buyer, according to the article, is John Paulson, the pillaging hedge-fund billionaire who was behind Goldman's notorious "Abacus" deal (in which Goldman allowed Paulson to pack a portfolio full of loser mortgages he was shorting before those same mortgages were dumped on a pair of Euro banks).
Is this what we had in mind when we created the "ownership society" -- helping billionaire bankers collect your rent?
To read more, click here .
JJS: Got cash? Buy low, sell high, just like the big guys. Better act now while the cycle is nearing its absolute bottom.
Home prices fall to 2002 levels
Home prices dropped for the fifth consecutive month in January, reaching their lowest point since the end of 2002.
The average home sold in that month lost 0.8% of its value, compared with a month earlier, and prices were down 3.8% from 12 months earlier, according to the S&P/Case-Shiller home price index of 20 major markets.
Home prices have fallen 34.4% from the peak set in July 2006.
Only three of the 20 index cities registered gains in January, led by Phoenix [where earlier speculation was outrageous], which climbed 0.9% month-over-month, Washington [capitals benefit from government spending], up 0.7%, and Miami [where earlier speculation was outrageous], which edged 0.6% higher.
Home builders have turned more bullish and are gearing up for more new construction. Mortgage rates are also still very favorable and the economy is getting better with hiring on the rise.
The housing market may be recovering. Regular sales, as opposed to bank sales of foreclosed homes, increased over the past few months.
Sellers have capitulated to the lower sales prices of foreclosures and have adjusted their expectations of the prices their homes can command in the market.
To read more, click here .
JJS: As long as people speculate on land, expect the business cycle to boom and bust. But siphoning off land rent -- which actually is our common wealth -- is not the only big scam in town. There’s also outright theft, excused because it’s committed by white-collar criminals with tight ties to the powers that be.
Corzine is getting a pass -- would you?
Do you think you would be walking free today if you told the police you “lost” $1.6 billion in other people’s money? Jon Corzine, ex-CEO of MF Global Holdings who allegedly authorized what amounts to theft of customer funds, hoofs it.
Billionaire Corzine, as a top Democrat, former governor of New Jersey, and one of Obama’s biggest campaign donors, is viewed as someone who used political influence to dodge paying the price for wrongdoing.
Why, nearly five months after the bankruptcy of MF Global, has not a single person has been charged in the looting of $1.6 billion in customer funds?
Until now, Corzine has lost only his reputation from the MF Global blow-up. He’s testified before congressional committees and given evasive answers. But an Oct. 28 email from MF Global’s assistant treasurer, Edith O’Brien, said she ordered a transfer “per JC’s [Jon Corzine’s] direct instructions.”
Someone in this case -- Corzine or O’Brien or both -- isn’t telling the truth. Shifting customer funds is illegal. And if these funds are “lost”, they certainly were shifted. They just didn’t fall off the back of a mail truck.
To see the whole article, click here .
JJS: The cash that customers invested with MF Global, where did they get it? Did they earn it? Not likely. Whenever someone has a ton of surplus cash to park somewhere, you can be sure much if not all of it is “rent” or profit from nature or privilege. For them, losing their money to Corzine turns out to be another case of no honor among thieves. But for the small savers whose nest-egg got sucked up into this and other Wall Street funds, it is a true crime and tragedy.
The only solution, really, is for all of us to quit leaving the trillions of dollars of value of nature and of government-granted privilege on the table for the unscrupulous to scoop up. How do we do that? How do we redirect the flow of “rents” from the few insiders to the entire society?
We use geonomics. We get government to charge full market value for all the permits it grants, everything from land titles to corporate charters. Then, from the raised public revenue, get government to disburse equal dividends to we the citizenry.
A convenient way to recover the socially-generated value of land, as Henry George noted long ago, is to tax land according to its value. It's a powerful and fundamental reform that's becoming part of the discussion in England. Martin Wolf, editor at London's Financial Times, said (Mar 21), "It would be better still to move to site value taxation and eliminate stamp duty, council tax, and business rates." To read more, click here .
Once we quit letting the values of nature and privilege be a lure to the unscrupulous, but instead become a nest-egg for everyone, then we’ll close this chapter on white-collar crime and start a new one on economic justice and security.
Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .
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