We need gas to be at $2.50 a gallon. Use our reserves and start drilling so that in 5 years we can put it back. If we stay on the current course we will have to relay on our enemies to supply us with the oil it takes to take them out with our planes,trucks and everything else that runs on gas/diesel. If we got the gas prices down to $2.50 the economy would be fixed in 30 days.

Why was this article posted on the Google Finance page for MBIA and then removed soon after. never seen a notice vanish in mid air before

I have worked for both PMI and MGIC and have been in the mortgage business for over thirty years and I can tell you with complete confidence that your assesment of the mortgage insurance companies is BULL. We are in this mess because Fannie Mae began providing A-minus loans starting back in 2002, they just don't call them by that name. Since Fannie Mae is the BIG DOG many lenders had to resort to making riskier loans in order to compete. The mortgage insurance companies relied on Fannie Maes automated underwriting system to provide them with quality loans and I can tell you from personal experience Fannie Maes Desktop Underwriting system is seriously flawed. If you really want to figure this mess out look at Fannie Mae,check out their relationship with Countrywide, one of the major suppliers of A-minus loans with stated income,stated assets etc, loans specifically designed for borrowers with questionable income.If anything the mortgage insurance companies are victims of Fannie Mae.

This mess is simple to understand - regardless of the complexity everyone will try to apply to it.

1. Government wanted economy to never experience a recession (a cyclic event meant to heal improper investments)
2. Rates were dropped too low for too long. (Federal Reserve System)
3. Banks were all too willing to cash in on this as they were given/created new financial instruments (CDOs, etc) to offload the debt from there balance sheets.
4. Rating agencies were compromised to secure more business adding to the improper valuations of computer simulated debt.
5. Mortgage Brokers pushed people into unrealistic programs fully knowing the clients they represented had no method of paying back. (look at the general practices of a loan officer - and you will understand this.)
6. Homeowner willing and knowingly knew the risks of overstating their income but looked the other way. Most people who are in danger of foreclosing (first round) were repeatedly denied loan programs before.

Who is at fault? America plain and simple. This sort of failure is NOT one individual - it is the entire system of greed (give me, give me more...) Well you may be an exception to one of the steps above.. but it does not change the REAL reality of the above. Now we ALL will pay for this.

Gas is NOT $4.00 - it is $2.00. The dollar has dropped by 48% since 2000 (and still dropping). And the beauty of it.. the Bernanke is on record in April 08 - telling everyone a weaker dollar does not matter... same CRAP advice as Greenspan telling everyone to get ARMs (adjustable rate mortgage).

priceless..

Better watch out cramer the SEC might start investigating you for giving out your opnion their calling it a probe into info given out that causes a bank to fail. I call it telling the truth and what the rating agencies won't tell you.

Don't forget a very important piece of info! Lots of states allowed people to take out a 1st and 2nd mortgage right from the start. One mortgage lender held 80% and the other took on 20%. This did three things. It lessened the risk for the first mortgage holder. It removed the requirement to carry PMI or what is known as mortgage insurance. It let anyone who got these type of loans to move in with no money a.k.a. equity in the house. I don't know how many states or how many mortgages where taken out this way. I suspect though that tens of thousands are out there. The firms holding these notes are on the hook for the full default of the balance on these notes until they sell the home for what ever they can get for it. I'm sure the rating agencies never told any investors of the additional risk these types of mortgages carried.

No one has mentioned a very important part of this whole mortgage mess. A lot of states allowed people to take out both a 1st and 2nd mortgage to get into a home. Since the first mortgage lender only held 80% tlv on the home it felt it was at less risk if a default occured. Also no PMI or as you might know it as mortgage insurance for the lender wasn't required under the rules. I'm not sure how many of these type loans are out there but I would think it is signifigant. The banks who bought these loans probably are holding tons of these bad loans. The rating agencies also probably didn't convey the additional risk onto the buyer of these types of mortgages. No insurance means no safety net. I was offered this type of loan by several different companies is how I came to be aware of the practice. Also the buyers got in with no money down and two different lenders to deal with if payments fell behind. Either lender can foreclose on the property and the other one looses their """.

Jim:


You are quite right on the mess being everyone's fault. In one case I have we discovered one bank was paying a mere $10 per loan - that is not a misprint - for underwriting. When questioned how they expected to get decent underwriting for $10, the answer was, the arrangement was approved by the regulators!

Here is my take and proposed solution. Let me know what you think.

Fannie and Freddie are holding CDO's. The "market" - (which really does not exist because just like 1988, no buyers exist) - has determined the value of these holdings has declined precipitously. The decline in the value of these assets, based on their mark to market value, means Fannie and Freddie may be insolvent. It is all up to what someone is willing to pay for these CDO's. Like 1929, everyone is selling. Only Potter is buying, and only at a small fraction of true value.

SOLUTION

The answer is quite simple. Washington is getting closer but they do not seem to have figured it out quite yet.

Instead of handing $180 Billion out to consumers, Washington needs to hand $180 Billion to Freddie and Fannie WITH INSTRUCTIONS. A preferred stock purchase would get the money to the right place, a la, the Chrysler bail out, which is one of the few times the Federal government has ever made money. (The IRS takeover of the Bunny Ranch in Nevada being the other).

The dilution would not be a problem because the instructions on the use of the money will make Fannie and Freddie hundreds of billions.

The key instructions are - (A) use half the $180 Billion to buy up CDO's at a discount. This will solve two parts of the housing crisis. First, it will help Wall Street liquidate their illiquid investments. Second, it will solve that part of the housing crisis where homeowners cannot negotiate changes to their loans because the owner of the mortgage is some strange investment vehicle with no one able to make decisions. (B) F&F must use the other half of the money to replace the soured loans in those acquired CDO's with 4.5% 30 year fixed rate mortgages. The 4.5% rate will save a lot of the existing homeowners who are losing their homes only because the payments are skyrocketing on their adjustable rate mortgages. Fannie and Freddie can afford the 4.5% return because they didn't buy this money in the market at 4 to 6%, they got it from the Fed as capital and while 4.5% may be below normal, it is still a positive return on investment. Fannie and Freddie could also take haircuts since they bought the CDO's at a discount. As these soured mortgages are "bought out" of the existing CDO's, the existing CDO's will go up in value. In a year or two, these Fannie/Freddie "washed" CDO's will be resold for a sizable profit.

On other point. Let's not overlook the role leverage used by hedge funds had in pumping up this market. When the profits were there for the taking, the market could not keep the hedge funds supplied with product. Now that sounds like the stock market of 1928. I guess the lesson of the Long Term Capital mess went right over someone's head.

LOANS TO UNQUALIFIED AND IRRESPONSIBLE BORROWERS: How can you expect borrowers to try everything possible to repay loans when Fannie Mae and Countrywide loan 125% of the selling price? Our neighborhood is experiencing a forfeiture that goes like this: Fannie Mae loaned Countrywide who loaned people 125% of the selling price of a home. The selling price was 76,000 and the mortgage was 95,000. The borrowers took the 19,000 and bought a new van. They paid nothing down for either purchase. The house was valued at 60,000. In my days when I began purchasing homes; the loan company would have loaned only 80% or 48,000 for the house instead of 95,000. I had to have 20% down of my own money; it made a person work to pay the loan and protect their 12,000 downpayment. The purchaser of the 125% loan walked away from the house with a free van. The neighbors are stuck with cutting the grass to try to maintain their neighborhood until the lenders foreclose and take the house back to sell. It has been 8 months since a payment has been made and 5 months since they abandoned the house with their free van. SOMETHING IS WRONG WITH THIS PICTURE

SADLY WE WILL BE IN A DEPRESSION NOT RECESSION BY MARCH OF 2009