Lower Rates Push Yield Seekers to Higher Risk By A. Gary Shilling – Bloomberg News - Jan 29, 2013, at: http://www.bloomberg.com/news/2013-01-29/lower-rates-push-yield-seekers-to-higher-risk.html
A couple of years ago I was reading Treasury Secretary, Timothy Geithner’s Wikipedia Bio.(1) I was surprised to read that Mr. Geithner served as a Treasury Department Attaché in the U.S. Embassy in Tokyo, Japan during the early years of what has become known as “Japan’s Lost Decade” (A “Lost Decade” which is now approaching its second decade anniversary).(2)
It’s widely recognized that Japan’s “Lost Decade” was a consequence of the deflation of an asset bubble.* Since reading how Geithner was in a unique position to witness the formation and the consequences of a severe asset bubble, and because I believe he has no doubt followed the efforts of the Japanese Government to stimulate its way out of its economic doldrums, I’ve found Mr. Geithner’s policy positions a little strange.For me, the strangeness of Treasury Secretary Geithner’s policies took on an even more strange dimension this morning.This morning I was watching a video of a May 11, 2009 New Yorker Summit presentation of a conversation between Nassim Taleb, Robert Shiller(3) and Nick Paumgarten. At about 4.5 minutes into the video Robert Shiller describes how, after being on the New York Federal Reserve Bank’s “Academic Advisory Panel” for 14 years, Timothy Geithner ‘fired’ him (presumably for Shillers presentation to the panel on asset bubbles). Shiller’s ‘firing’ took place shortly after the first meeting of the "Academic Advisory Panel" after Geithner’s appointment as President of the New York Fed.* As much as most economists agree on anything, most economist’s attribute Japan’s “Lost Decade” to the [changed] wealth effect and loss of confidence which followed the late 80’s early ‘90’s bursting of the Japanese commercial real estate bubble, which had inflated excessively during the early-to-mid 1980’s.I copied the portion of the longer video in which Professor Shiller describes what he interpreted as being fired by Timothy Geithner. If you are interested, you can see the video clip here:The complete video of the May 11, 2009 New Yorker Summit discussion between Nassim Taleb, Robert Shiller and Nick Paumgarten can be found here:Footnotes:(1) Timothy Geithner - Wikipedia, the free encyclopedia, at: http://www.bing.com/search?setmkt=en-US&q=Timothy+Geithner+Wikipedia(2) Japan’s “Lost Decade” at: http://en.wikipedia.org/wiki/Lost_Decade_(Japan)and Japan announces “new dimension” in quantitative easing wsws.org Saturday 6th April, 2013, at:(3) Robert Shiller is an economics professor at Yale University. He is the author of a book Irrational Exuberance (published in 2000) which describes the role of excessive confidence in the development of economic bubbles. Professor Shiller expressed concern about the stock market bubble before that bubble burst bubble, and he was one of the earliest, if not the earliest, to warn us of the real estate bubble. He is co-developer of the S&P Case-Shiller Real Estate Price Indeces. [see, http://www.irrationalexuberance.com/definition.htm ]
Flaws Cited in Foreclosure Review By Alan Zibel - Wall Street Journal - April 3, 2013, at: http://online.wsj.com/article_email/SB100014241278873239163045784008829358200...
It would be interesting to know how many of the 'wrongfully' foreclosed borrower 'victims' were in judicial foreclosure states and how many such 'victims' were in states in which the mortgage / trust deed had a power-of-sale clause. And, in each case, it would be interesting to know what number of borrowers were actually in serious default when the foreclosure notice was served, and how many borrowers not in default were served with a notice of foreclosure.
It seems one of the issues which has seriously complicated the foreclosure process arose out of the mis-management of note holder, mortgagee and land title records in the Mortgage Electronic Registration System (MERS). The Mortgage Electronic Registration System was conceived by Fannie Mae, and the development of the Mortgage Electronic Registration System was overseen and financed by Fannie Mae and Freddie Mac.
MERS is apparently seriously flawed. The system has few controls, a peculiar (or non-existent) managerial hierarchy, and MERS doesn't seem to be properly audited (or auditable).
"Reston Based Company in the Middle of Foreclosure Chaos" by Brady Dennis & Ariana Cha - Washington Post 10/8/2010, at: http://www.washingtonpost.com/wp-dyn/content/article/2010/10/07/AR2010100702742.html
"Two Faces: Demystifying the Mortgage Electronic Registration System's Land Title Theory" By Christopher L. Peterson - SSRN, at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1684729
Bill Maher finally sniffed the smelling salts:In the broadcast Rachel says, "As Bill says, money is cheap".What do Rachel Madow and Bill Maher know about the cost of money and the yield curve? What do Rachel Madow and Bill Maher know about the future cost-of-funds and how the U.S. Federal Reserve will accomplish rolling its’ massive debt in future interest rate environments?
Cheap and easy money (which inflated home prices in-rounds, and was serially loaned against ever escalating inflated real estate collateral) is the narcotic that caused the bubble we are currently attempting to work through.
Today, a friend sent me a link to an interesting article (see link below).
In his email my friend suggested that after reading the linked article, I read the first “Reader Comment”. The one from VonMises Jr.The VonMises Jr. comment mentions Mr. Richard Fisher. Richard Fisher is the President of the Dallas Federal Reserve Bank, and he also sits on the Open Market Committe of The U.S. Federal Reserve Bank.
I’ve been following Mr. Fisher’s speeches for about four years now. Recently he has become very critical of the U.S. Federal Reserve’s Monetary Policy. He has likened the U.S. Federal Reserve’s monetary policy to "Monetary Ritalin" and he has mentioned the difficulties of a monetary policy that lacks a clear exit strategy by referring to the Fed’s Quantitative Easing III (QE III) as the The Fed’s “Hotel California Monetary Policy”. This reference evokes the last lines of The Eagles song, “Hotel California”, which were:
The Bernanke MarketBy Bruce Johnson
Wall Street Journal - Developments February 7, 2013By Alan Zibel
Rep. Elijah Cummings (D., Md.) is among lawmakers calling on
President Obama to nominate a permanent director for the FHFA.
When will the White House finally have something to say about President Barack Obama’s pick to run the FHFA?
That question is on the mind of 45 House Democrats. The lawmakers, led by Reps. Elijah Cummings (D., Md.) and John Tierney (D., Mass.), sent a letter on Thursday to President Barack Obama urging him to nominate a director of the Federal Housing Finance Agency–-the federal regulator for Fannie Mae and Freddie Mac.
“We believe your re-election is a prime opportunity to put forth a new candidate who is ready and willing to implement all of Congress’ directives to meet the critical challenges still facing our nation’s housing-finance markets,” the lawmakers wrote.
The agency’s acting director, Edward DeMarco, has been criticized by Democrats on Capitol Hill, administration officials and liberal groups, all of whom have been calling on Mr. Obama to replace Mr. DeMarco.
Representatives for the White House and Mr. DeMarco were not immediately available for comment.
Why all the fuss about a seemingly obscure regulator? The most prominent area of conflict has been the FHFA’s refusal to accept the Obama administration’s offer to subsidize the cost of debt forgiveness for troubled homeowners.
Obama administration officials argued that Fannie and Freddie could actually save money by doing so but Mr. DeMarco said no, arguing that any potential savings would not be large enough to overcome other costs.
As Developments reported in December, the White House has been exploring potential leaders for the agency.
But the matter does not appear to be especially urgent for the administration as it focuses on confirming leaders for cabinet-level agencies such as the Treasury Department.
Another issue is that it may be difficult to find a FHFA nominee who could clear the Senate, where Republicans are likely to be skeptical of any choice: The administration’s first choice to run the FHFA, former North Carolina banking regulator Joseph Smith, withdrew his name more than two years ago in the face of intense Republican opposition.
Many on the left would like Mr. Obama to use a recess appointment to install Mr. DeMarco’s replacement. But that outcome is now highly unlikely, now after a federal court ruled that Mr. Obama’s use of that method to install three members of a federal labor panel was unconstitutional.
An historical observation relating to this pressure from the left on federal housing policy:
On Thursday (1/17/2013) The U.S. Federal Reserve Bank released the transcripts of its 2007 meetings. [Late 2007 was when the the great housing and mortgage bubble began to suddenly deflate.]If you depend upon the most knowledgeable economic and financial experts to anticipate the economy’s behavior, and / or to give you advice on how you should behave, so as to grow and protect your assets, the two articles below may cause you to doubt the ability of such experts, and to confirm the existence of Black Swans.(1)
Timothy Geithner's flat-footed reaction is even more amazing when you realize that Geithner worked in the Japanese Embassy, as a Treasury Department attaché, at the beginning of Japan's "Lost Decade".Japan's "Lost Decade' was a financial crisis which began with the collapse of the Japanese commercial real estate bubble. The collapse of the Japanese commercial real estate bubble created problems for the Japanese economy which are very similar to the problems U.S. and global economies have been experiencing since 2008.(2)From a January 18, 2013 New York Times article, "Days Before The Bust, Fed Doubted Need to Act" By Benyamin Applebaum (at the time of the Federal Reserve's transcript's creation William Poole, was the Chief Executive Officer of the Federal Reserve Bank of St. Louis).“The outcome would have been different only if the Fed and others had reacted back in 2004, 2005, 2006” to curtail subprime mortgage lending, Mr. Poole, now a senior fellow at the libertarian Cato Institute, said on Friday in an interview on CNBC.(3)Footnotes:(1) For more on Black Swans see Wikipedia entry, at: http://en.wikipedia.org/wiki/Black_swan_theory(2) For more on Japan’s Lost Decade see Wikipedia entry, at: http://en.wikipedia.org/wiki/Lost_Decade_(Japan)(3) For the full CNBC interview with Mr. Poole go to YouTube and watch, An Interview with former President of the St. Lewis Federal Reserve, William Poole:More:"The Role of the Government Sponsored Enterprises and Federal Housing Policy in the Financial Crisis”, at: http://www.scribd.com/doc/106248756/The-Role-of-the-Government-Sponsored-Enterprises-and-Federal-Housing-Policy-in-the-Financial-CrisisOn YouTube key-words-search, and watch, a January 1998 PBS NewsHour interview with then President Bill Clinton, titled "Bill Clinton: Laying the Foundation for The House of Cards"