I called the death of Indymac Bancorp on Monday, July 7th. The Federal Deposit Insurance Corporation seized Indymac on Friday, July 11th.

  I called the implosion of the two Government Sponsored Entities in the mortgage business, Fannie Mae and Freddie Mac on Wednesday, July 9th. Sunday, July 13th the White House announced a bailout for them.

  Want to know what happens next? It’s ape ass ugly and it’s going to happen to you, so don’t say I didn’t warn you.

"The SEC's mission to protect investors, maintain orderly markets, and promote capital formation is more important now than it has ever been," said SEC Chairman Christopher Cox. "Today's Commission action aims to stop unlawful manipulation through 'naked' short selling that threatens the stability of financial institutions. We will continue our vigorous commitment to investors by working within the SEC and in close cooperation with our regulatory counterparts to promote the continued health and vibrancy of our markets."

- excerpt from a press release by SEC Chairman, Christopher Cox

  Over the last year I’ve educated myself on crude oil and natural gas economics, wind energy up to the farm placement and operations issues, the ammonia fertilizer market, ethanol plant operations, and I’m making rapid strides in grasping biomass efforts as well. Solar escapes me as that is an issue for places with a lot of sun and I’ve not been in such an environment since I became peak oil aware.

  One of the things that strikes me is the amazing accommodations made for the oil and coal industries on the financial and regulatory front ... and the utter lack of funds for R&D, pilot plant implementation, and the barriers smaller players face in ramping up renewable operations.

  Project financing is very challenging in the current environment and I'm going to rant a bit, in symbolic fashion, about our lack of progress in this area ...

On a day in which the entire American economy seems to be collapsing; when government officials don't know what next steps to take to bail out the mortgage, banking and housing industries;  when our Judicary Committee in the people's branch has caved to politics and opposes the rule of law; I thought we should take a moment to forget about the clowns in the beltway and remember a day, a time, a period in our lives when things were a bit simpler and pay tribute to a real clown who passed away earlier this month.  

For those of us who haven't heard, Bozo the Clown has passed.

The wonderful world of our capitalist society, small c for the few that capitalize!

With trouble brewing inside mortgage giants Freddie Mac and Fannie Mae, Armen Keteyian reports that the nation is learning more and more about the companies and their friends in high places.

This is a Good one, and what with the way our so called Capitalist Economy has been running for years now, I'm gonna enjoy reading this list, Really Enjoy!

Here is the what little of this I understand, and trust me, if more than half of what follows is correct, I'll be more shocked than anyone. I am no financial expert.

Back in the late 80's and all through the 90's (ahh... them good 'ole Clinton years), the Saudis were in a crude oil production war with the Russians and opened up the taps. Cheap oil flooded the market leading to $20/barrel oil and real economic growth spread through the non-industrial world. China, Brazil, India, SE Asia, Latin America, Eastern Europe. Explosive growth. Trillions and trillions of dollars of new real economic worth.

I found the news about IndyMac intriguing this morning.  Mortgage lender IndyMac of Pasadena, California has been diving down the path of illiquid insolvency since this time last year (here's a chart I posted elsewhere showing the skid as a reflection of stock price). The gradual failure prompted a letter from a Senator (Schumer, NY) a few weeks ago, which precipitated a run on this bank. The bank was seized by FDIC regulators yesterday subsequent to the run. This is the second largest bank failure in history.

John Reich, director of the Office of Thrift Supervision, a chronic Republican community banker who spent twelve years working for Republican Senator Connie Mack's staff, and appointed by President Bush in 2005, blames Schumer for the run on the bank. But looking at the institution's stock price over the past year, one readily sees that investors have known the place was cascading towards Armageddon for the past year.  In fact, it was Reich (BTW, it's pronounced "rich," and isn't that rich?) himself who...

Last November I wrote a diary called The Panic of 2008? in which I predicted:

This is NOT the Great Depression II.  Nor is this the stagflationary 1970s.  It is going to unfold as some other Beast.  Only the broad outlines of this Beast appear discernable now:  it will likely feature (1) increasing import prices; (2) wage stagnation (that does not keep up with price inflation); (3) real asset deflation; and (4) possibly a Japan-style "liquidity trap."

 
    That prediction has been borne out so far.  In view of the events of this last week, particularly the run on Fannie and Freddie, and the failure of IndyMac, revisiting the Big economic Picture seems timely.  The Panic of 2008 is unfolding like a neutron bomb over the financial and construction sectors of the economy, leaving the infrastructure of the rest of the economy basically intact.  Asset prices - stocks and real estate - are declining, wages are stagnant, import inflation is setting records.  But The Panic of 2008 nevertheless signifies an important turning point.

 Yesterday we hopped into the car, drove an hour, and the caught the Massachusetts Bay Transportation Authority line into downtown to see Widespread Panic play at the Bank of America pavilion on the Boston waterfront.

 I found a lot of allegory betwixt our trip, the current economic situation we face, and potential solutions. Bear with me as I wax poetic today ...

 The Federal Home Loan and Mortgage Corporation, a government sponsored enterprise(GSE) and publicly held company, gives every sign of being on its way into bankruptcy either this week or some time next week, having fallen 50% over the last day of trading, 24% the day before, and dropping from $60.85 a year ago to $7.72 as I write this tidbit of a diary.

 This company along with Fannie Mae have bought 80% of U.S. mortgages since the credit freeze started last fall and currently needs to raise $29 billion to continue operations. That, my friends, is going to come out of your wallet and mine, courtesy of the pickpockets of the 110th Congress ...

UPDATE:

 Ilargi got after Fannie and Freddie today, too, over at http://theautomaticearth.blogspot.com

I've been mulling over what to do about "electoral cleansing" in Zimbabwe by Mugabe and his ZANU-PF thugs, and I've been all over the place, varying from the frothing at the mouth kill him to Lincolnesque I laugh because I must not cry snark.

I have wasted electrons , and have not moved forward the discussion.

The problem is as follows:  

• The external actor most likely to create positive change is South Africa.
• The President of South Africa, Thabo Mbeki, has done everything in his power to prevent meaningful change, because the ANC is threatened by a trade union revolt too, and so success by the MDC, a party with its roots in the trade union movement, is a direct threat to the ANC's continued political hegemony in South Africa.


• The UN is unlikely to take swift action, as South Africa is currently on the security council, and is doing all it can to support Mugabe, and China is threatening a veto.

This conundrum has me thinking about what actions could be taken unilaterally by the US to fix this situation.
(more after flip)

Some very creative people in Charlotte created a very funny comic story of what really goes on in the world of giant banks.

So that is really what happens to pension funds and mortgages.   Hopefully not.

I have been educating myself over the last couple of years on the state of our nation's banking industry and its impact on our sovereignty and our way of life. I have read websites and watched videos from mainstream to "nut case" economists that have all said things may get very bad but never fully cleared up the mystery of our monetary system. It was not until today that I found a resource that explains in lay terms the root of the money/banking issue and why it is so deeply disturbing.

We're all aware - if only in our subconscious  - of the Federal Deposit Insurance Corporation.

The FDIC was created by the Glass-Steagall Act of 1933 and provides deposit insurance which currently guarantees checking and savings deposits in member banks up to $100,000 per depositor. Its creation was spurred by the large number of bank failures in the Great Depression.  In response the United States Congress creating the FDIC to guarantee deposits held by commercial banks.

I was startled and SHOCKED to find a FULL PAGE ad in the New York Times today - page A5, prime advertising real estate - for the FDIC.

Insuring deposits up to
(Image of a FRB $100,000 note - used for internal transactions only)

without anyone losing a
(Image of a penny)

For 75 years, the FDIC has been protecting people's money

Hmmmmmm...   do we NEED a reminder?  Seems a bit ridiculous celebrating the 75th anniversary of the FDIC in such a costly self-promoting way?  more.......

Inner City Press/Community on the Move filed an administrative complaint against the Federal Reserve Sunday demanding information about a closed-door meeting held earlier this month with the Clearing Corp. (made up of all the top investment banks) where new rules were made for the $60 TRILLION credit default swaps market.

The Administrative Procedures Act (5 U.S.C. Section 553) and related laws require that when the government engaged in rule-making, it must provide notice to the public, and allow and weigh public comments.

We've made an offer on a house...for the second time. Same house, same offer. And it still has not been accepted or rejected.  The house is a foreclosure, and evidently these things take time...a lot of time.  And apparently the realtor representing the bank has his hands full.  Too full to show us enough courtesy to keep us in the loop.  But what is he busy doing?  Certainly not presenting our offer(s) to the bank.  Certainly not informing us the house was up for auction.  Certainly not telling us whether the house had sold at auction.  Certainly not telling us whether our second, revamped offer was accepted or rejected.  With so many foreclosures  out there and so few houses in general being sold, I don't understand what's taking so long.  Don't the banks want to unload these houses and recoup at least part of their money?

More below.

So Jim Johnson, from Sen. Obama's VP search committee, is the subject of a Wall Street Journal article suggesting that he got below market average loans from Countrywide with the direct support of its ethically-challenged CEO  Angelo Mozilo under an unofficial program not readily available through your local mortgage broker (unless your local mortgage broker is Angelo Mozilo).  Well, yeah, perhaps a little distasteful, especially given Johnson had been CEO of Fannie Mae prior to this and was therefore the biggest buyer of mortgages.  Unsurprisingly, the Obama campaign called the foofaraw "overblown and irrelevant."  Speaking as a strong Obama supporter and long-time professional watcher of banking markets, this could possibly smell a bit, though in fairness I'd point out that anyone in a position to take out $7 million in mortgages had damn well better have an above-average FICO score.

That being said, sublime irony below the fold.