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Contact your Senator and Representative and tell them you have had enough!

IN CASE YOU DIDN’T NOTICE WE ARE UNDER ATTACK!  This is a National Emergency:

Congress must enact laws now to save our Economy and Freedom:

1.  OPEN ALL FORMS OF OIL EXPLORATION NOW

2.  PASS EMERGENCY FINANCIAL RESCUE MEASURES

NEW YORK (AP) — Financial markets resumed their pullback Tuesday as investors worried that lawmakers were losing the sense of urgency seen last week when the government proposed a massive bailout for financial institutions as a way to dislodge clogged credit markets.

Why didn’t we know about the problems sooner?  The problems were known.  See below.

Why wasn’t something done before now? Democrats blocked attempts to fix problem.  Read below.

Why is Congress being asked to act now rather than debating the issues in Congress for two weeks?  Because our financial system is under attack.  

In 1993, the World Trade Center bombing was Radical Islam’s first major attempt to bring down the US on our soil.  It failed but they learned from their mistakes. 

On 9/11/2001 Radical Islam tried again to attack the World Trade Center AND our financial system.  Islam brought down the WTC but the attack did not succeed in collapsing our economic system.  They learned from their mistakes.  Radical Islam has tried to defeat us in Iraq and Afganistan.  Thanks to the Surge, the US and the Iraq people are winning.  They learned from their mistakes.   Islam has now shifted their war to another front…our financial system.

   ”Osama bin Laden has analyzed the obvious and concluded that while the United States could not be defeated militarily, Americans could be induced to defeat themselves.” 

Bin Laden has boasted that his followers understand Western financial systems as well as they know the backs of their hands. Osama bin Laden has adopted a new prototype for the “new terrorist.”  He has acquired capital, technical expertise and access to financial weapons by taking advantage of the “loopholes in the free economies of the West.” 

Hedge funds are largely unregulated and have distinct product and market characteristics that make them vulnerable to terrorist financing, money laundering and fraud.

A spokeswoman for Lehman Brothers, recently said, “There are a lot of rumors in the marketplace that are totally unfounded. We are suspicious that the rumors are being promulgated by short sellers of our stock that have an economic self interest.”  U.K.’s Times reported that the U.S. Securities and Exchange Commission (SEC) was probing whether hedge funds and other market players deliberately circulated false rumors about Lehman Brothers to push the company’s shares lower. 

The vast majority of the financial short selling around 9/11/2008 was coming from overseas bourses such as London and Dubai.

It is entirely plausible that Radical Islam elements were behind some of these speculators, and were even employing them.   Speculators not only can run the price down (or up in the case of oil) but become the object of criticism that deflects away from the true Islamic instigators.   What a convenient way to try to control the outcome of a Presidential Election. 

Bin Laden has said, “Governmental authority is the biggest obstacle to starting Islamic movements in the world….if government does not have much power, there is no serious obstacle in the way of …Islamic movement in that country.”

So, how is it that America is being induced to defeat ourselves?

We must ask, Who’s Fault is the Housing and Banking Crises?  Ironically, the root cause is the housing market and the Democrats, and some Republicans, prevented the use of sound financial practices to manage risk of their promise to broaden housing ownership.

1977: During the Carter Presidency, the CRA (Community Reinvestment Act) was passed into law by the U.S. Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community

1995: The Clinton Administration’s regulatory revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans.

2003: the Bush Administration recommended what the NY Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank(D-MA) claimed of the thrifts “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” Representative Mel Watt (D-NC) added “I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing.”

Summary:

1.  September 11, 2003, Bush proposed legislation to create a new agency in the Treasury Department to oversee Freddie Mac and Fannie Mae (which Democrats defeated.)  (see below) The Democrats denied the problem ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee.

2.  McCain in 2005 introduced a bill in  to rein in Fannie Mae which the Democrats also defeated. He said, “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy

THE REST OF THE STORY…YOU AREN’T HEARING

was the financial crises last week a terrorist attack?  Look at the chart below: the almost 1000 point decline took place during two days starting on 9/11/2008.    The decline could have been much worse if Bush and the Fed had not intervened.  In fact we were on the edge of a catastrophic failure of the US financial system.

Lehman Brothers’ World Trade Center offices were destroyed by the 2001 terrorist attacks.  Lehman Brothers has been around for a hundred and fifty years; one of the last and most prominent of the German-Jewish investment banking firms that have played a major role on Wall Street since the era of the Civil War.   Kerrie Cohen, a spokeswoman for Lehman Brothers, said, “There are a lot of rumors in the marketplace that are totally unfounded. We are suspicious that the rumors are being promulgated by short sellers of our stock that have an economic self interest.”  At midday, Lehman shares were down 4.28 percent at $40.67 on the New York Stock Exchange, after falling as low as $38.36.  The U.K.’s Times reported on March 19 that the U.S. Securities and Exchange Commission (SEC) was probing whether hedge funds and other market players deliberately circulated false rumors about Lehman Brothers to push the company’s shares lower.  Source:   http://in.reuters.com/article/governmentFilingsNews/idINN2728986020080327

The bear raids on the banks and brokers were NOT a case of piling on by US based hedge funds. And from what he was seeing and hearing about in terms of order flow, the vast majority of the financial short selling the past week or so were being done overseas. It appears that the lion’s share of shorting was coming out of overseas bourses such as London and Dubai. Source:  http://bigpicture.typepad.com/comments/2008/09/terror-attack-o.html

 www.WaterFrontJim.com

Contrary to the Obama’ speeches and the liberal media it was not the fault of Bush and McCain.  It started with Lyndon Johnson, Carter and Clinton and has ended with people like Obama, Chris Dodd and Barney Frank along with all the Democratic and some Republican cronnies.  Jim Johnson, who is now a top economic  advisor to Obama,  “earned”  $90 million during six years of misbehavior as CEO with Fannie Mae.  The problems in the financial market have nothing to do with capitalism and “deregulation”, it has to do with the Democrats abuse of power, primarily during and after Clinton’s administration.   Bush and McCain attempted to bring about reform, oversight and sound financial management but were defeated by the Democrats which you will learn by reading below.

Obama (and Jim Johnson) know this is true and Obama  is blatently lying to the American public.  Supporters  of Obama, should seriously question his integrity after hearing his flagrant misstatements about what actually happened.

How can Obama and Barney Frank lie and keep a straight face when they blame Bush and  McCain about the financial crises?    Bush and McCain warned about this years ago and tried to do something about it…the Democrats blatently ignored the warnings.   This is a coverup by the Democrats.   Here is the proof.  

1.  September 11, 2003, Bush proposed legislation to create a new agency in the Treasury Department (to replace the failed oversight agency in HUD) to oversee Freddie Mac and Fannie Mae.  The Democrats defeated this bill thanks to the lobbying and money spent by Freddie and Fannie  (see below) The Democrats denied the problem ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee in 2003.

2.  McCain in 2005 introduced a bill in  to rein in Fannie Mae which the Democrats also defeated. He said, “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.’ (see below) 

FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 . The United States Senate May 25, 2006

 Sen. John McCain [R-AZ]: Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

McCain said, “For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Democrats created the financial mess we are in today.

The top three U.S. Senators getting big Fannie and Freddie political bucks were Democrats. Number 1 is Dodd and Number 2  is Senator Barack Obama.  Now, remember, he has only been in the Senate four years but still managed to grab the number two spot ahead of John Kerry, decades in the senate, and Chris Dodd who is chairman of the senate banking committee.  Fannie and Freddie have been creations of the Congressional Democrats and the Clinton White House, designed to make mortgages available to more people, and as it turned out, some people who couldn’t afford them and others who didn’t need them.  Fannie and Freddie have also been places for big Washington Democrats to go to work in the semi-private sector and pocket millions. The Clinton administration’s White House Budget Director Franklin Raines ran Fannie and collected 50 million dollars.  Big Democrat Jim Johnson, recently on Obama’s VP search committee has hauled in millions from his Fannie Mae C.E.O. job. Now remember, Obama’s ads and stump speeches attack McCain and Republican policies for the current financial turmoil. It is demonstrably not the Republican policy and worse, it appears the man attacking McCain, Senator Obama, was at the head of the line when the piggy’s lined up at the Fannie and Freddie trough for campaign bucks.  Source

http://wizbangblog.com/content/2008/09/16/obama-one-of-leading-recipients-of-fanniefreddie-political-contributions.php  John Gibson

The leadership of Freddie and Fannie have been pawns of the Democrats

Freddie Mac Chairman and CEO

1987-2003

Leland Brendsel

2003-2008

Richard F. Syron

Member of Demcratic National Committee

http://www.nndb.com/org/674/000171161/

Democratic Congressional Campaign Committee

Official Website: http://www.dccc.org/  Alphabetically in line behind Barbra S.

Fannie Mae’s Chairmen and CEO

1991-1998

James A. Johnson.  The $10 billion “Opening Doors to Affordable Housing” initiative was launched.   “Opening Doors” expands campaign. The Trillion Dollar Commitment is launched, pledging $1 trillion in targeted housing finance that will serve 10 million low- to moderate-income families. James Johnson, got bonuses OFHEO criticized, was shortlisted as a possible Kerry treasury secretary. 

1998-2004

Franklin Raines  worked for Carter and was Clinton’s budget director.  In April, 1998, Fannie Mae announced the national availability of Flexible 97, a new mortgage product designed to expand home ownership through a low three percent down-payment requirement.  2001 Fannie Mae changes its Mission Statement to:  tear down barriers, lower costs, and increase the opportunities for home ownership. American Dream Commitment® (ADC) is launched. It is a ten-year, $2 trillion pledge to increase home ownership rates and serve 18 million American families  Under heavy pressure from regulators  forced out its chairman and chief executive, Franklin D. Raines after the company was found to have violated accounting rules. http://www.nytimes.com/2004/12/21/business/21wire-fannie.html?pagewanted=print&position=

2004-2008

Daniel H. Mudd, formerly vice chairman and chief operating officer, was named acting chief executive, after the regulators had insisted on splitting the chairman’s and chief executive’s posts….

September 11, 2003

New Agency Proposed to Oversee Freddie Mac and Fannie Mae (Congress defeated Bush’s proposal)

By STEPHEN LABATON

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

”There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,” Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

The administration’s proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies’ exemptions from taxes and antifraud provisions of federal securities laws.

The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session.

After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration’s proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall.

”The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,” Mr. Oxley said at the hearing. ”We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,” the independent agency that now regulates the companies.

”These irregularities, which have been going on for several years, should have been detected earlier by the regulator,” he added.

The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.

At the time, the companies and their allies beat back efforts for tougher oversight by the Treasury Department, the Federal Deposit Insurance Corporation or the Federal Reserve. Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. This year, however, the chances of passing legislation to tighten the oversight are better than in the past.

Mr. Raines said. The company opposes some smaller elements of the package, like one that eliminates the authority of the president to appoint 5 of the company’s 18 board members.

Company executives said that the company preferred having the president select some directors. The company is also likely to lobby against the efforts that give regulators too much authority to approve its products.

Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ”responsible proposal.”

The stocks of Freddie Mac and Fannie Mae fell while the prices of their bonds generally rose. Shares of Freddie Mac fell $2.04, or 3.7 percent, to $53.40, while Fannie Mae was down $1.62, or 2.4 percent, to $66.74. The price of a Fannie Mae bond due in March 2013 rose to 97.337 from 96.525.Its yield fell to 4.726 percent from 4.835 percent on Tuesday.

Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

”The regulator has not only been outmanned, it has been outlobbied,” said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ”Being underfunded does not explain how a glowing report of Freddie’s operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.”

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Support is holding…read yesterday’s Blog,  patronize your local pub and get ready to go buy some real estate before the rest of the world figures out that this is the beginning of the next real estate cycle.

 www.WaterFrontJim.com

Posted by WaterFrontJim

The free market is now doing its thing.  This will make people think about risk.   Risk management fell by the wayside.   Now we are re-learning our lessons of the past.   This problem will work its way through.  The U.S. is solvent. 

The market is going back to DOW 10,739 which will be the bottom…actually a double bottom going back to July 2006.   If the market bounces off of this, then a base will begin to be built.  The dollar is rallying, Oil is down, Euro is down and Housing Indices are up, as predicted six months ago.   (see my market reports)  This will take pressure off inflation and interest rates.   US will drill, drill, drill and grow, grow, grow by exploiting our own highly productive energy and agricultural resources as a matter of national defense as well as economic necesssity,  Democrats, going back to Carter and Clinton, started this problem with the socialization of capitalism, and Congress, Republicans and Democrats, perpetuated it.   

Every drop in gasoline price of one penny represents a tax decrease of $1 billion to the American public.  This is huge good news for consumer confidence and the economy.   If our energy and agricultural policies keep the price of oil at lower levels, the American economy will be just fine. 

Our technology sector is strong and will lead the stock market back.  The finance sector will clean up their act and restore conservative principles of risk management that the liberal business schools forgot to teach the last generation of MBA’s.   Also, Congress and Wall Street need to take back policy making from the lawyers, most of whom were not trained to understand sound financial management and the economics of the free market.

Support 10,739

Note how Housing Index has been moving up:

Oil is going down below $80 a barrel before the election…

Jim Morlock

 www.WaterFrontJim.com

We are at War-This is Not a Time for Congress to Compromise

This week we have witnessed three more reasons why the Congress should act immediately to terminate all prohibitions on drilling, in the interests of our National Defense:
 
Hurricane Ike:  We need to geographically diversify our drilling resources so that a natural disaster or terrorist attack will not jeopardize our supply of energy.
Chavez: In case you didn’t notice, last week Hugo Chavez declared war on the USA.  Chavez chose  9.11.2008 to suspend diplomatic relations with the US until after the U.S. election and threatened to cut off oil to the U.S.  
Russian War Games:   This week Russian ships, planes and troops are in the Carribbean on military maneuvers with Cuba and Venezuela. 
 
We may not have officially declared war on our enemies.
BUT OUR ENEMIES HAVE DECLARED WAR ON US!
 
Our oil rigs and refineries, concentrated in the Gulf of Mexico,  are vulnerable to terrorist and rogue attacks by Cuba and Venezuela in the event of hostilities with the U.S.   We need to increase our drilling in Anwar and other oil fields in the interior of the U.S. that are insulated from potential attack from our enemies as well as natural disasters.
 
The “Gang of 20″ Senate bill only opens up drilling in areas of the eastern Gulf of Mexico and 50 miles offshore of the eastern states, excluding Florida.  (apparently it is OK with the Democrats for Cuba and China to use slant drilling off the shores of Florida but not OK for US companies).
 
Polls show that over 70% of the American public overwelmingly want drilling offshore and in ANWAR.  Americans do not want a watered down compromise bill.  Keep it simple.  Drilling should be a stand alone bill. President Bush  lifted the executive moratorium six weeks ago with a simple Executive Order and the price of oil dropped from $148 a barrel to $97 as of this writing.  Think what would happen if Congress did the same thing.  It is time to find out who in Congress is for and against  Energy Independence for a More Secure America.    Congress can take the rest of the year to write a complicated, comprehensive energy bill.   We still have a fleet of 200 million gas burning vehicles, so we can’t say alternative energy is going to save us in the short run.
 
Congress needs to lift moratorium on drilling…Now!  Congress can develop a comprehensive energy bill after the moratorium is lifted….
 
EXPRESS YOUR OUTRAGE TO YOUR CONGRESSMEN
Contact them now…It’s easy..Tips for Communicating with Congress>
http://www.govtrack.us/congress/communicatingtips.xpd
http://www.govtrack.us/congress/findyourreps.xpd
http://www.govtrack.us/congress/findyourreps.xpd?state=FL
 
H.R. 6593: Domestic Drilling Act  To terminate prohibitions on leasing of areas of the Outer Continental Shelf and the Arctic National Wildlife Refuge for exploration, development, and production of oil and natural gas, and for other purposes.
House Speaker Nancy Pelosi, in a shift, on Aug. 18 promised a vote on offshore drilling as part of a comprehensive energy plan. Previously, she had characterized GOP claims that offshore drilling could reduce energy prices as “a hoax.”  (as of this writing oil prices just dropped to $97 a barrel!)  JUST A HOAX?  PELOSI AND REID ARE THE HOAX.  (Also didn’t Obama also say that lifting the ban would not affect oil prices?  I guess Barry was wrong again.)
In the Senate, majority leader Harry Reid is working closely with a bipartisan group of 16 senators to prepare a watered down “comprehensive” energy bill.
Unfortunately, “Comprehensive” is a code word for “Compromised”.  

There can be NO COMPROMISE DURING WARTIME!.
If the bills fail, drilling proponents have another shot at the issue when lawmakers vote on continuing government funding into the next fiscal year, when the next Congress would finish budget appropriations:
 
1.  GOP leaders plan to offer amendments that would strip the drilling ban out of the resolution.
2.  Also, urge President Bush to veto any spending resolution that renews the offshore drilling ban, even if it means shutting down the government.” 
 
Venezuela’s Chavez Expels U.S. Ambassador
You must watch these videos…scary.
Chavis, Caracas  9/11/2008 Threatening to Declare War?
http://www.youtube.com/watch?v=zTn6vkggoE8
Mussolini’s Declaration of War, 6/10/1940, Rome Piazza Venezia            
http://www.youtube.com/watch?v=csC3tfNpxfg&feature=iv
 
CHAVIS’ WORDS AND ACTIONS ON THE ANNIVERSARY OF 9/11 ARE HIS  EQUIVALENT OF A DECLARATION OF WAR AGAINST THE USA.   HIS PROVOCATIONS SHOULD BE THE CATALYST FOR CONGRESS TO UNITE TODAY TO IMMEDIATELY PASS A UNANIMOUS RESOLUTION TO LIFT ALL BANS ON OFFSHORE DRILLING WITHOUT LIMITATION, OPEN ANWAR AND PURSUE EVERY OTHER MEANS AVAILABLE TO BECOME ENERGY INDEPENDENT AS A MATTER OF NATIONAL SECURITY.   AS THIS WAS WRITTEN (2:10 PM 9/12) OIL JUST DROPPED BELOW $97 PER BARREL.  THINK HOW MUCH WE CAN LOWER THE PRICE OF OIL IF AMERICANS UNITE.  STOP SENDING OUR MONEY TO OUR ENEMIES!

Mortgage-rate drop bright spot in Freddie/Fannie takeover

Posted Sep 09 2008, 08:41 PM by Karen Datko

If you closed on a house recently, prepare to kick yourself. One of the outcomes of the federal takeover of Fannie Mae and Freddie Mac is the lowest mortgage rate in five months.

According to Bankrate.com, the rate on a 30-year fixed-rate mortgage dropped half a percentage point — to about 6% — on Monday after the takeover was announced. Rates dropped even further Tuesday, settling at 5.79%.  (To figure out how long that rate will last, you will need a crystal ball.)

www.waterfrontjim@yahoo.com

Smita Sadana

There’s certainly some positive sentiment brewing in the housing charts. Notice the 30% gain in the PHLX housing sector index since the middle of July.

Click to enlarge

Also, some key housing stocks made higher lows while the housing index hit a new low in July. Check out homebuilding stocks such as NVR (NVR), MDC (MDC) and Toll Brothers (TOL). Here’s the Toll Brothers chart, which clearly shows that it made a distinct higher low.

Click to enlarge

So that’s good news, and I would certainly keep housing stocks on my trading radar. I always like to follow the market leadership.

Click to enlarge

For instance, I remember the way homebuilding stocks peaked in fall of 2005, while home prices were still ascending. That was the first warning sign the prescient market gave to all those who would listen! The first cracks were felt in the housing sector in summer 2006.

With this preamble, let’s talk about your question. Charts definitely show positive and encouraging action - but this could be similar to the bounce we encountered in the second half of 2006. We had a meteoric 25% rise in the index, only to falter and swoon to new lows.

While the recent price action is constructive, I would await further guidance from the evolving chart patterns in these stocks. I am looking for higher lows (and higher highs), a strong basing action or a successful retest of the old lows that we hit in July 2008.

Once we see evidence of continued accumulation in this consolidation action, we can feel more confident that the market expects the housing quagmire to start resolving itself next year. And don’t worry, when that happens, traders will have ample time to make money.

Till then, it would be prudent to treat this merely as a rally that needs to consolidate soon.

On a closing note, let me leave you with the following words of wisdom from Jesse Livermore, who’s considered the greatest trader ever: “It isn’t as important to buy as cheap as possible as it is to buy at the right time.” 

Conservatorship of Fannie & Freddie and Implications

Summary of the 4 point plan below from well placed institutional fixed income and investment advisory firm research personnel which manage investment programs for and advise institutional and high net worth investors.  

Bottom line – huge positive for senior and sub debt of Fannie Mae (“Fannie”) and Freddie Mac (“Freddie”), huge negative for preferreds and common stock of Fannie and Freddie, which were both already down approximately 80% from their highs.  Day after announcements, markets responding as expected – LIBOR/swap spreads lower/tighter; US treasuries are selling off after period of substantial flight to quality. Credit spreads (notably finance companies, corporates, agencies and mortgages) are tightening leading to rising values.  Overall, for foreign govts and foreign central banks, this is a very good announcement as well as it substantiates the US govt’s explicit oversight and management of Fannie, Freddie and the US conforming residential single family and multi-family housing markets.  This governance framework provides a verifiable safety net to the conforming agency US mortgage market and penalizes Fannie and Freddie equity and preferred shareholders who should shoulder the losses as owners of those businesses.  The goal here is to further stabilize the mortgage bond market for US and non-US institutional investors, providing a structure which will lead to lower US mortgage interest rates, which in turn will lead to more affordable housing prices and will in turn bring more buyers back into the marketplace.  Ultimately this should also be a positive for the US dollar and will contribute to dollar stabilization and probable strength as it should cease future selling of agency MBS and agency obligations by US, and particularly by foreign investors.  

The summary of this quasi-nationalization is found below:

4 Point Plan:

1) Fannie Mae and Freddie Mac are placed into conservatorship by their regulator, under Federal Housing Finance Authority “FHFA” (James Lockhart)

v       New CEO’s.  Senior executives and other employees encouraged to remain on board

v       Immediate suspension of common & preferred dividends.  Estimated savings will be $2 billion+ in cash flow per year.  Equity will continue to trade, and value will be determined by market (Fannie and Freddie will remain private companies through and post conservatorship).

v       Senior Debt & Sub debt interest and principal will be paid – a plus for debt spreads

v       Indefinite duration - conservatorship will end when deemed appropriate by the FHFA (and Treasury). Most likely to occur after a deeper capital base is created and Fannie/Freddie mortgage portfolios are reduced in size.  Both are expected to remain as private companies at that point.  However, this could still change should Congress passes a new law that restructures them (note Dodd announcement to conduct added hearings).

2) Treasury Senior Preferred Stock Purchase Agreement

v       Treasury will inject capital into Fannie and Freddie on an as needed basis to keep taxpayer cost to a minimum. Immediately $1 billion to each firm in Senior Preferred Stock (w/ a 10% coupon), total authorized up to $100 billion each (the reality according to those close to the market is that the needed figure is really less than $50 billion each; in context remember, Iraq/Afghan supplementals have been running at $100 billion + per request).  Treasury will own warrants to purchase 79.9% of the common stock. 

v       Fannie & Freddie can increase their portfolio’s to $850 billion (currently between $750-800 billion) until Dec 31, 2009, then shall decline by 10% per year until they reach $250 billion in size, mostly from MBS maturities.

3) Treasury MBS Purchase Program

v       Initiated to further promote mortgage market liquidity, mortgage credit availability and reduce mortgage rates.  Purchases of new GSE MBS, timing subject to discretion of the Treasury Secretary.  Financed with issuance of new US Treasuries which are deemed as outlays and subject to the statutory debt limit.  Can hold to maturity.

v       Puts a downside level on MBS valuations

4) Treasury/GSE Secured Credit Facility

v       Not as important as the other three, however, this is essentially a stop gap for the GSE’s to secure short term funding if they cannot get it in the capital markets. Pledge of eligible collateral (GSE MBS or FHLB advances - the FHLB’s are included in this too) against 1 week to 1 month loans at L+50.  Expires Dec 31 2009 (could be extended by Congress).

Link to Paulson’s announcement below.

Paulson’s Announcement/Remarks:

http://www.treas.gov/press/releases

www.waterfrontjim.com

Jeff Master’s Latest Report…

http://www.wunderground.com/blog/JeffMasters/comment.html?entrynum=1070&tstamp=200809

It is also possible that the trough of low pressure will not be strong enough to turn Ike to the north, and that the storm will enter the Gulf of Mexico. A second trough of low pressure would then turn Ike north, resulting in a n eventual landfall on the Gulf Coast between the Florida Panhandle and Texas. This is the forecast of the ECMWF and GFS models. My current thinking is along these lines:
www.wunderground.com

20% chance Ike will hit the east coast of Florida.
30% chance Ike will hit the Florida Keys.
30% chance Ike will hit Cuba. If this happens, there is 30% chance it would miss Florida and head into the Gulf of Mexico.
10% chance that Ike will miss Florida, but hit further north along the U.S. coast.
10% chance Ike will curve north out to sea and not hit the U.S.