Top Ten Reasons Bush is NOT Responsible for the Recession

Top Ten Reasons Bush is NOT Responsible for the Recession

10) “Since when has George ever been responsible for anything.” — Barbara Bush

9) “There’s still 11 months time for wealthy benefactors to bail out U.S. economy, just like they’ve always done when Jr. screwed up in business.” – Anonymous Administration Official

“Dick told me for sure that “Deficits don’t matter.”" — G.W.B

7) “As consumers spend the economy will mend.” — New Cliché/Slogan/Policy the brain trust in the Bush Administration has come up with to deal with the financial crisis.

6) “The Fed Chairman assures me that they have enough green ink and krinkly paper to continue printing dough as long as needed. And may I add, they’re doing a heck of a job over there at the Treasury.” — George W. Bush

5) Bush ordered super-duper secret program to buy Lotto tickets just in case the economy went south. Critics will be eating crow when the Commander-in-chief hits the jackpot.

4) “War, recession, and natural disasters. I’m sure glad my last job as the part-owner of the Texas Rangers prepared me to be a great leader.” — George “Dubya” Bush

3) “Wealthy foreigners have no choice but to keep lending us money or we won’t be able to afford their products. We really have them over a barrel, Big Time.” — Top administration figure speaking from a secure location (well stocked with ammo and canned goods) who would only identify himself as D.C.

2) “The Book of Revelation predicts the mother of all financial meltdowns just before the end of times. This recession is part of God’s plan.” – Mike Huckabee (presidential candidate).

1) Sure, it easy to blame Bush for mishandling Katrina, the disaster in Iraq, failing to capture bin Laden, and the what is shaping up as the worst financial crisis since the Great Depression, but you got admit the guy is a barrel of laughs.About the Author — Scott D. O’Reilly is an independent writer with degrees in philosophy and psychology. His work has been published in The Humanist, Philosophy Now, Intervention Magazine, Think, and The Philosopher’s Magazine. He is a contributor to the book The Great Thinkers A-Z (Continuum, 2004).  You can find his regular political humor and analysis at his blog: neuroscott.blogspot.com

Food riots as Rice prices go parabolic

Rising prices and a growing fear of scarcity have prompted some of the world’s largest rice producers to announce drastic limits on the amount of rice they export.The price of rice, a staple in the diets of nearly half the world’s population, has almost doubled on international markets in the last three months. That has pinched the budgets of millions of poor Asians and raised fears of civil unrest.

Shortages and high prices for all kinds of food have caused tensions and even violence around the world in recent months. Since January, thousands of troops have been deployed in Pakistan to guard trucks carrying wheat and flour. Protests have erupted in Indonesia over soybean shortages, and China has put price controls on cooking oil, grain, meat, milk and eggs.

Food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen. But the moves by rice-exporting nations over the last two days — meant to ensure scarce supplies will meet domestic needs — drove prices on the world market even higher this week.

This has fed the insecurity of rice-importing nations, already increasingly desperate to secure supplies. On Tuesday, President Gloria Macapagal Arroyo of the Philippines, afraid of increasing rice scarcity, ordered government investigators to track down hoarders.

The increase in rice prices internationally promised to put more pressure on prices in the United States, which imports more than 30 percent of the rice Americans consume, according to the United States Rice Producers Association. The price that consumers pay for rice has already increased more than 8 percent over the last year.

But the United States is fortunate in also exporting rice; poor countries ranging from Sengal in West Africa to the Solomon Islands in the South Pacific are heavily dependent on imports and now face higher bills.

Vietnam’s government announced here on Friday that it would cut rice exports by nearly a quarter this year. The government hoped that keeping more rice inside the country would hold down prices.

The same day, India effectively banned the export of all but the most expensive grades of rice. Egypt announced on Thursday that it would impose a six-month ban on rice exports, starting April 1, and on Wednesday, Cambodia banned all rice exports except by government agencies.

Governments across Asia and in many rice-consuming countries in Africa have long worried that a steep increase in prices could set off an angry reaction among low-income city dwellers.

Editor – This is extremely dangerous and is well worth keeping an eye on. China has had a history of calamities all stemming from food shortages – and this situation is being exacerbated by Chinese Government officials insisting farmers switch out of water intensive rice and switch to Corn – because of the upcoming Olympics. There are also issues about water use in the Provinces as well.

If the proletariat get unruly – then the food crisis could bring down whole Governments and their economic system will descend into chaos.

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A glimmer of hope in Flordia

Back in November, John Moran, president of a local bank here, was at a loss over what to do with a swelling list of customers who had stopped making payments on their home mortgages.

For months, the homeowners had been refusing to return the bank’s phone calls or respond to letters.

“Finally, we realized we had to say, ‘Look, we’re a different kind of bank,’ ” says Mr. Moran, president of Riverside Bank, a community bank with 13 branches.

Mr. Moran sent out what looked liked Christmas cards to dozens of delinquent customers with a personal note saying, “We just want to help you.”

Then the bank pulled together a team of about 18 employees — “basically anybody who could use a calculator and calculate a monthly mortgage payment” — to come into work on a Saturday and call up customers behind on their payments, recalls Mr. Moran. “Out of that one move, we probably saved 25 to 30 places from foreclosure.”

Across the United States, lenders big and small are scrambling to figure out how to cope with borrowers in trouble.

A record 2% of the country’s home loans — about one million borrowers — were somewhere in the foreclosure process at the end of last year, while nearly 6% of home loans, or almost three million homeowners, were behind on their monthly payments. The number of defaults on first mortgages is forecast to hit 1.9 million this year, up 36% from 2007.

The situation isn’t helped by the fact that half of homeowners facing foreclosure never contact their lender before losing their homes.

“When people get into trouble, the last people they want to talk to is their bank,” says Elmer Tabor, a longtime Cape Coral resident who co-founded Riverside Bank about 10 years ago. “They go into lockdown.”

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Canadian Banks come clean – monolines collapse

To some it was nothing more than a pleasant surprise.

To others, this week’s news that the Canadian Imperial Bank of Commerce has an additional $25-billion exposure to investments tied to the health of monoline insurers, was nothing more than a confirmation of what some market participants had known for a few months. Indeed, there has been considerable talk about such exposure among some U.S hedge funds, who were presumably getting their information from other U.S. market participants. That talk had made its way into reports compiled by some Canadian-based analysts. And some of those details had appeared in the press. So the “new” information was neither a surprise nor pleasant.

But until this week, CIBC had played mum on the whole matter. CIBC, which has written off $4.2-billion, used to claim that its disclosure was the bets of all the banks. That may have been the case but Royal Bank of Canada’s first-quarter results contained enough to satisfy the deepest probing analyst.

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Regulators checking into Lehman trades

U.S. regulators are investigating whether traders spread false rumors about Lehman Brothers Holdings Inc.’s financial soundness to profit from a drop in the company’s share price, two people familiar with the probe said.The Securities and Exchange Commission has expanded an inquiry into whether investors including hedge funds tried to manipulate Bear Stearns Cos. stock to also review a decline in Lehman’s shares, said the people, who declined to be identified because the inquiry isn’t public. The Lehman probe examines short sales of the company’s stock, one of the people said.

Lehman, the fourth-largest U.S. securities firm, has tumbled 26 percent this month amid speculation that Wall Street firms can’t fund their operations. A run on Bear Stearns two weeks ago forced the fifth-largest U.S. securities firm to sell itself to JPMorgan Chase & Co. at a fraction of its market value with financial support from the Federal Reserve.

“It makes a lot of sense to me to look at Lehman if you see the same movements,” said Tamar Frankel, a law professor at Boston University. “If someone is spreading baseless or misleading rumors in order to profit from the impact on the market, that’s really a threat to the system.”

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1.5 trillion in losses

Goldman Sachs forecasts global credit losses stemming from the current market turmoil will reach $1.2 trillion, with Wall Street accounting for nearly 40 percent of the losses. U.S. leveraged institutions, which include banks, brokers-dealers, hedge funds and government-sponsored enterprises, will suffer roughly $460 billion in credit losses after loan loss provisions, Goldman Sachs economists wrote in a research note released late on Monday.

Losses from this group of players are crucial because they have led to a dramatic pullback in credit availability as they have pared lending to shore up their capital and preserve their capital requirements, they said.

Goldman estimated $120 billion in write-offs have been reported by these leveraged institutions since the credit crunch began last summer.

“U.S. leveraged institutions have written off less than half of the losses associated with the bursting of the credit bubble,” they said. “There is light at the end of the tunnel, but it is still rather dim.”

Of the cumulative losses expected by these leveraged players, bad residential home loans will represent about half, while poor-performing commercial mortgages will represent 15 percent to 20 percent.

The rest of the losses will come from credit card loans, car loans, commercial and industrial lending and non-financial corporate bonds, Goldman economists said.

Facing more credit losses, leveraged institutions have raised about $100 billion in new capital from domestic and foreign investors and reduced dividend payouts. This amount is more than three-quarters of the write-offs to date, the report said.

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Crazy ways lead to…

In the summer of 2005, I lived in Orange County, Calif., home to one of the most overblown real estate markets our country has ever seen. A friend’s uncle was the CEO of a local subprime mortgage company that recently had gone public. I asked him a simple question: “Do you think we’re in a housing bubble?”

“Bubble!? You’ve got to be crazy!” he said. “Morgan, let me tell you something. I’ve been in this business for 20 years, and I’ve never seen real estate this hot. I’ve never seen people this excited about buying a home, and I’ve never seen it this easy for nearly anyone to do it. This is the dawn of new era, not a bubble!”

“Thanks,” I said, “you’ve just confirmed my suspicions.”

His company filed for bankruptcy 18 months later.

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The Real Estate mess

Economic bubbles start with a shining story and end with a tragedy, which keeps reminding people that nothing can be overdone. Surprisingly, bubbles are built on top of solid fundamentals. Once people believe in them, people start to over-leverage them until, of course, the situation becomes so extreme that everything is afloat, detached from their roots. This real estate bubble is no difference.

It is normal that low interest rate will energize house purchases, and consequently, jack up the price. However, it should be bound by debt-to-income ratio. Further, it is also bound by available liquidity. Creatively, “smart” people in financial system built up models based on historic data analysis, proving that house price will keep going up in the foreseeable future.

Thus, the risk of sub-prime loans becomes acceptable and it is safe to hedge a booming housing market. Now, the only issue is to find ways of borrowing money for lending. Thanks to these smart guys, we landed up with tons of SIV (Structured Investment Vehicles), CDO (Collateralized Debt Obligations), CMO (Collateralized Mortgage Obligation) and other toxic papers, and a shaky economy. This is exactly what has been repeated many times in other bubbles. The bubble model is built on the assumption that there would never be any liquidity issues. In this case, the combination of over-leveraged home buyers, over-leveraged mortgage lenders, relatively high mortgage rate, and increasing inflation rate eventually weighted in. Subprime loans triggered the downward spiral.

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Is A Housing Crash Worse Than a Stock Market Crash?

The housing crash, currently in its infancy, will soon grow up into an economy killing monster that the Federal Reserve has no weapon strong enough to defeat. A housing crash is unlike a stock market crash in that there is no easy way out.

Let’s take a walk back in time to the tech stock crash just 8 years ago and compare it to a housing crash.

The tech stock bubble crashed in the spring of 2000 and the Fed then went on a rate cutting spree ending in June of 2004. The Fed dropped rates something like 15 times to stave off recession. The tech stock bubble and crash could be managed said the Fed with an increase in liquidity to the economy in the form of cheaper money. The banking industry helped him out by offer anyone with a pulse a mortgage flooding the economy with even more money.

And it worked…or did it?

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