U.S. borrowers are increasingly missing payments on home equity lines of credit they took out during the housing bubble, a trend that could deal another blow to the country's biggest banks.
The loans are a problem now because an increasing number are hitting their 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.
Remember that the "HELOC game" was a foundation of the 2003-2007 bubble -- the consumer spending bubble. Remember too that it was never unwound, in no small part because of the 2009 Kanjorski hearing in which mark-to-fantasy was rammed down FASB's throat. Remember that this means that banks are sitting around with hundreds of billions worth of these loans that may not have defaulted yet but on which a dispassionate analysis, absent mark-to-unicorn, would force the taking of massive reserves.
How massive? 90% of the expected defaulting amount, roughly, if not 100%. The reason is simple -- as a second line if you try to foreclose on it the first mortgage gets the entire sale amount of the property until it is exhausted and for most of these properties they are either still underwater on the first -- or close to it. This makes the recovery value on these lines zero, as I have repeatedly noted since 2007.
But there is no recognition of this on bank balance sheets because they were given the "gift" of being able to make up valuations on these loans in 2009 -- it was shoved down FASB's throat by Congress.
If you want to know where the real action was that "supercharged" the stock market and financial conditions it's right there. But as with all lies of this sort distorting the balance sheet does not remove a loss, it only hides it until the loss becomes impossible to ignore.
So the bank-par-excellance announced it was going to do a "ask anything" sort of event and requested tweets at "#AskJPM".
The response wasn't quite what they expected.
You can look it up; it's quite amusing really -- and is still trending.
Just a couple of the good ones near the top right now...
They canceled the event.
I wonder how JP Morgan feels about this, shall we say, outpouring of love? And more to the point, exactly how secure is the economy right now? After all, isn't that -- the levitating stock market -- pretty much all that's holding things together against what looks to be a rather, uh, pointed set of opinions.
Bank Revenues Surge on Trading Over What Fed Will Do
Diverging monetary policies are creating ideal conditions for banks to make money from trading currencies as Credit Suisse Group AG (CSGN) to Goldman Sachs (GS) Group Inc. say rising volatility is boosting earnings.
“If there’s higher volatility, there’s higher volume and higher opportunities for us to generate revenue,” Bernie Sinniah, the London-based global head of corporate foreign-exchange sales at Citigroup Inc. (C), the second-biggest currency trader, said in a phone interview.
How does a bank "generate revenue" from such activities?
Remember that trading is inherently a negative-sum game. That is, due to the fees and costs not only does someone lose for everyone who gains the total amount left between the two participants in the trade is less than the sum of what the two started with as the exchanges and other intermediaries all siphon off a piece of the action for themselves.
At its core all this activity is non-productive; it is effectively stealing from the productive part of the economy.
Oh sure, it's legal stealing, but make no mistake -- every dollar of this "revenue" is a dollar that used to belong to someone else and now it doesn't. In addition the fees and costs are siphoned off and those are also removed from the original owner.
There is no "there" there. And there is no net economic activity that accrues as a consequence of this activity either. At best it's a push (the banksters have some funds and spend them, but the other person does not and thus does not spend them.)
There's no "benefit" here folks.
Quite to the contrary.
Homeland Security used a confidential informant, based in Maryland, to conduct the investigation. The informant simply created accounts with Dwolla and Mt. Gox, bought bitcoins, and then changed them back into dollars. Tracing that money, HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized signer: Mark Karpeles, the president and CEO of Mt. Gox. The Dwolla account shows transfers to Dwolla going back to at least December 2011, according to the warrant.
The problem is that Mt. Gox specifically declared that they are not a firm involved in money services.
Uh, yeah, ok.
Dealing in such without a license is a crime punishable by up to five years in prison (and/or a big fat fine.)
There are those who claim that this is no big deal and that it doesn't reach into the realm of what is to come. I disagree. The entire premise of a fungible means of exchange requires exactly that -- fungibility. If I am subject to having my funds seized because of what someone else did then I have custody and control of nothing.
There are those who argue (and rightly so) that one can keep all their "bitcoins" in their own personal wallet and deal with all that is required to do so. This is true but immaterial if most of the exchanges of said "currency" happen while under the control of a handful of such intermediaries as Mt. Gox and the "miners" who both look for and validate such exchanges. If the latter is the case (and it is) then you have once again a centrally-controlled system that is subject to destruction by outside forces.
The ultimate problem for Bitcoin (and other similar crypto-currencies) is that they are not self-validating. A dollar bill, with reasonable certainty, is. I can accept one from you and know with a reasonable degree of certainty that it is unique and valid, rather than printed off your color printer the same morning (that is, counterfeit.) The need for self-validation is very high in face-to-face transaction use. It is very desireable in many uses as well; if I must refer to some online source for validation (or worse, must wait any material amount of time beyond a few seconds for that validation) then friction is placed into the economic transaction stream and to the extent a third party is involved the transaction becomes subject to discovery and tracking.
This goes directly to what many of the proponents of Bitcoin claim -- "anonymous" transactions. In point of fact Bitcoin provides no such thing since transactions must be validated by external parties and the transaction stream going all the way back to the origin of any given coin is irrefutably and indelibly recorded in the block chain.
In this particular case the information necessary to "bust" Mt. Gox didn't reach into there, but if there is a debate over whether the alleged transactions took place there will be no ability to claim otherwise, since once again the block chain will prove that to be the case. As soon as either the recipient or sender of a given transaction "out" themselves (e.g. one is an informant) you are cooked.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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