Here's Why Your Government Stalled on the FOIA for Two Years

Because the American taxpayer has bailed out the whole world, that's why. We're now the biggest suckers in history.

And the following information wouldn't have been released either, except for the Dodd-Frank legislation:

Citigroup ($2.2 trillion)

Merrill Lynch ($2.1 trillion)

Morgan Stanley ($2 trillion)

Bear Stearns ($960 billion)

Bank of America ($887 billion)

Goldman Sachs ($615 billion)

JPMorgan Chase ($178 billion)

Wells Fargo ($154 billion)

Swiss bank UBS ($165 billion)

Deutsche Bank ($97 billion)

Royal Bank of Scotland ($92 billion)

Fannie Mae and Freddie Mack ($1.25 trillion)

General Electric ($16 billion)

Harley-Davidson Inc. ($2.3 billion)

Caterpillar Inc. dealers ($733 million)

The story from yahoo.com is totally irresponsible for saying the Fed didn't take part in an appeal to the Supreme Court with a group of commercial banks seeking to prevent the disclosure of the names of institutions receiving emergency loans in 2008. Hell, the Fed appealed all the way up the line until it came time to appeal to the Supreme Court or comply with two (2! II! Zwei!) orders from lower courts to disclose the information. And we still don't have that.

Has anyone painted a clearer picture of the bankruptcy of our largest institutions and industries?

Only a fool would keep his money in a bank now.

Hell, only a fool would keep money.

The Mother of All Bailouts

Bloomberg.com had an important article in June about the Government Sponsored Enterprises in which it is estimated that they may reasonably require taxpayer bailouts of $1 trillion in coming years:

Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

Unlimited bailout authority for these failed government programs was granted in December 2009. That's what prepared the way for the idea behind the rumors now that underwater mortgage balances may be reduced by the Obama administration.

Read all about it, here.

WHERE BANKS' BAD PAPER GOES TO DIE

The taxpayer-backstopped Fanny and Freddie, of course:

The Obama administration is continuing one of the more horrific policies of the Bush administration: Using the GSEs as a back door bailout for the rest of the banking sector: These banks are selling their garbage to the GSEs — and according to some anecdotal evidence, are getting pretty close to full boat (100 cents on the dollar) for these bad loans.

Hence, Fannie and Freddie have become a dumping ground for all manner of bad bank loans.

The GSEs have had their own problems over the years — accounting fraud, recklessly chasing market share, lowering loan quality, etc. — but they have now become . . . the last stop for every crappy mortgage ever written.

Ritholtz has more here, on the story from Bloomberg.

Congressional Mandates Overheated Housing, Not Wall Street

Mort Zuckerman writes a helpful essay explaining the complex world of mortgage finance and the role of derivatives, and lays much of the blame for the crisis we are going through squarely where it belongs, on the Congress of the United States, instead of on Wall Street:

But we also need to understand how the housing market got as hot as it did. Why did it keep rising, generating more and more derivatives geared to a rising market? It turns out that Fannie Mae, Freddie Mac, and the Federal Housing Administration had financed a lot more subprime and Alt-A (alternative documentation) loans than anyone realized, mostly as a result of congressional mandates. Indeed, of their total outstanding mortgage portfolios of $10.6 trillion, roughly half turned out to be of low quality. Had this been known, it would have been clear that the American public's capacity to assume this amount of housing debt was at great risk.

That is at the heart of the now-famous Goldman-Paulson saga. Hedge fund manager John Paulson judged that the housing market was a bubble, so he shorted the securities through Goldman Sachs and an insurer called ACA, which sold the package to a German bank. The buyers judged that it was safe to count on housing prices continuing to rise. They chose which mortgage securities would be bundled by Goldman. And they have paid a heavy price for their judgment.

The American public has hereby had a peek into the bewildering complexities of the world of finance. The natural instinct is for the public to blame the housing decline on those who shorted. But it is the other way around. They should be blaming those who let the market get pumped up, inviting a dramatic and painful correction that took most people by surprise.

The complete story is well worth reading, here.

The Bailouts Still Do Not Add Up

Ritholtz gets it right on the bailouts, bringing up what others would still like us to forget. Notice the little problem of toxic assets he includes on his list of six things which today's happy talkers ignore. Those non-performing assets remain spread all over the place like so much pig manure, stinking up the springtime air. It's the huge problem which STILL remains unresolved, even though the public and Congress were fervently pitched the story that TARP was necessary and designed to address it, until a couple of weeks later when it wasn't. The old bait and switch. These bastards should all hang for it, starting with George Bush and Henry Paulson, and every member of Congress who voted for it.

The following appeared here, with supporting links:

- The Big Picture - http://www.ritholtz.com/blog -

An Improved Version of Bailout Math

By Barry Ritholtz

April 13, 2010

The New York Times one ups the Wall Street Journal, taking a more philosophical — and broader — look at the Treasury’s Bailout Math.

It is still incomplete, but a significant improvement. Recall yesterday we criticized the WSJ’s wide approach (Light At the End of the Bailout Tunnel) as so much happy talk.

The Times' Andrew Ross Sorkin followed our advice. In addition to a snarkier tone (Uncle Sam down $89 billion? “It’s enough to make us all feel rich, isn’t it?”) his article included the following bullet points:

• Probable losses from American International Group = $48 billion

• Losses from Fannie Mae and Freddie Mac = about $320 billion

• The Federal Reserve virtually interest-free loans to Wall Street = $1 trillion dollars

• Moral Hazard: Numbers don’t help avoid another financial mess in the future

• Last, its about right and wrong.

It's a more skeptical improvement over other less critical takes on the success of the Bailouts. Still, Sorkin’s piece is also incomplete, leaving out:

• Depleted FDIC reserves;

• FASB 157 suspension allowed banks to hide losses

• Bad loans on bank balance sheets

• General Motors & Chrysler Bailouts

• Ongoing Foreclosures and Housing Problems

• Highly concentrated banking sector/lack of competition

I believe the best we can honestly say about the bailouts (without any spin or bias) is that, so far, the worst case scenarios have not played out, and that the return on investment is in the top quartile of expectations. Further, we still do not know what the final costs will look like, given a variety of factors such as housing, economy, etc. Also, we have no idea what the longstanding repercussions and moral hazard will end up doing in the future. Lastly, we have created a less competitive banking system, and allowed banks to fabricate their balance sheets.

But other than that Mrs. Lincoln . . .

"Obama's Policies Risk Another Depression"

Scott S. Powell and Ron Laurent, in "Obama's Policies Risk Another Depression" for The Detroit News, ask:

Light at the end of the tunnel or an oncoming train wreck?

In the panic following the insolvency of Fannie Mae, Freddie Mac and Lehman Brothers in September 2008, the American taxpayer was stampeded into bailing out AIG and Wall Street. We were told that $700 billion was needed to establish the Troubled Asset Relief Program (TARP) because the country faced nothing less than a collapse of its financial system.

Inexplicably after Congress passed it -- almost like a bait and switch -- TARP was directed at banks rather than troubled assets. A little more than a year later, TARP Inspector Neil Barofsky reports that AIG's $1.5 trillion in credit fault swaps did not, after all, pose systemic risk. So if we were misled about the TARP bailout, it seems appropriate to question other aspects of government intervention since unemployment, foreclosures and bank failures have risen. ...

Scott S. Powell is managing director of AlphaQuest LLC and a visiting fellow at the Hoover Institution. Ron Laurent is the managing partner and chief investment strategist of Veritas Partners LLC.


There's much more at the link.