Full Catastrophe Banking in 2011

Submitted by Mary Bottari on January 3, 2011 – 08:00

With a $4.7 trillion dollar bailout under their belts with no harm done to their billion-dollar bonuses, don’t expect Wall Street bankers to be chastened by the 2008 financial crisis. Below we list eight things to watch out for in 2011 that threaten to rock the financial system and undermine any recovery.

1) The Demise of Bank of America

Wikileaks founder Julian Assange is promising to unleash a cache of secret documents from the troubled Bank of America (BofA). BofA is already under the gun, defending itself from multiple lawsuits demanding that the bank buy back billions worth of toxic mortgages it peddled to investors. The firm is also at the heart of robo-signing scandal, having wrongfully kicked many American families to the curb. If Assange has emails showing that Countrywide or BofA knew they were recklessly abandoning underwriting standards and/or peddling toxic dreck to investors, the damage to the firm could be irreparable.

2) Robo-signers Wreaking Havoc

With lawsuits abounding, new types of fraud in the foreclosure process are being uncovered daily, including accounting fraud, fake attorneys, destroyed promissory notes and false notarizations. The crisis not only calls into question the legality of untold foreclosures, it also calls into question the value of trillions of dollars worth of mortgage-backed securities held by banks, pension funds, federal, state and local governments. The only government report on the topic by the feisty Congressional Oversight Panel for the TARP acknowledges that “it is possible that ‘robo-signing’ may have concealed deeper problems in the mortgage market that could potentially threaten financial stability.”

3) MERS Madness

In addition to outright fraud, numerous state Supreme Courts have questioned the legal standing of the Mortgage Electronic Registration or “MERS” system. MERS is listed as the mortgagee for 60% of U.S. mortgages. It is an electronic clearinghouse created by industry to bypass the property registration system developed by our forefathers in precolonial days to ensure that the King could not easily rob the subjects of their land. Wall Street turned to MERS to speed securitizations (and now foreclosures), but its legal standing is now in doubt and its shoddy processing of documents has major ramifications for the securitization process as well. Look for a rotten “MERS fix” in the new Congress. Let’s hope it gives consumer advocates some leverage to demand justice for Americans being robbed by the new Kings on Wall Street.

4) Flash Crash Calamity

The “flash crash” of May 2010 rattled the markets and caused a stunning 700 point drop in the Dow within minutes. Regulators think they know what occurred, but they are moving too slowly to put the brakes on hair-trigger trading. Seventy percent of Wall Street trades take place in milliseconds, so it is no surprise that mini-flash crashes are becoming a constant. With traders now gearing up to trade on raw news feeds and Twitter, we can anticipate even more volatility. A small financial transaction tax targeting high-volume, high-speed trades is long overdue. It would throw sand in the roulette wheel and raise much needed revenue for the federal government.

5) Bigger Behemoth Banks

The Federal Reserve is planning to “stress test” the big banks again. The same 19 banks that underwent the first stress tests in 2009 will be tested again, but this time the Fed says it won’t release the results. Why not? Banks with toxic mortgages and mortgage-backed securities on their books and concomitant legal exposure to “put back” law suits are being kept afloat by accounting tricks, TARP and Fed loans. Honest stress tests of still weak financial institutions may well result in sales and buyouts that will further consolidate the already concentrated banking industry and create larger and more unwieldy “too big to fail” behemoths — backed by the guarantee of the American taxpayer.

6) Foreclosure Tsunami

Housing foreclosures may top nine million in 2011 and Goldman Sachs predicts the number will reach 12 million in the next few years. The result will be another significant drop in home prices in 2011 and even more families underwater. Civilized nations see the forcible migration of a city the size of New York as an economic and humanitarian catastrophe, but not the United States. The Obama administration and Congress have callously refused to take meaningful action to aid families facing foreclosure even in the face of widespread predatory lending and rampant foreclosure fraud. The only hope now for millions of American families is aggressive action by the 50 state Attorneys General who are actively investigating foreclosure fraud. Whether they have the guts to wrestle a settlement out of the big banks that slows the foreclosure machine and offers families meaningful options has yet to be seen.

7) Bankrupt Cities and States

Meredith Whitney, a research analyst who correctly predicted the credit crunch, is now warning that over 100 American cities could go bust next year. She anticipates billions worth of municipal bond defaults and warns: “next to housing this is the single most important issue in the U.S. and certainly the biggest threat to the U.S. economy.” States are also in dire straits. The economic shock of mass unemployment on top of years of population decline, deindustrialization and the like have left cities unable to meet their obligations to taxpayers and retirees. With an austerity anschluss underway in the House, it may take a bankruptcy of a major player to prod an appropriate federal response to this looming disaster.

8) Gas Prices above $4.00

The price of energy and other commodities shifted into high gear in late August when the Federal Reserve Chairman decided to stimulate the economy with quantitative easing. Speculators quickly began bidding up the value of asset classes like crude oil, metals and food commodities. In December, the Commodities Futures Trading Commission failed to apply position limits to these commodities, delaying rules that would crack down on speculators and aid consumers who are already seeing big price hikes at the pump. Without swift action, skyrocketing gas prices will further tank an already stalled economy.

As we hope for the best in 2011, let’s prepare for the worst. The big banks are sure to deliver.

Mary Bottari’s blog Add new comment

Comment viewing options

Flat list – collapsed

Flat list – expanded

Threaded list – collapsed

Threaded list – expanded

Date – newest first

Date – oldest first

10 comments per page

30 comments per page

50 comments per page

70 comments per page

90 comments per page

150 comments per page

200 comments per page

250 comments per page

300 comments per page

Select your preferred way to display the comments and click “Save settings” to activate your changes.

Banking

Submitted by Anonymous on January 9, 2011 – 04:18.

Since privately held Wall Street has once again proven that is cannot be trusted with managing hard earned taxpayers’ savings, I suggest that we draft the Social Security Administration to create a department offering full service banking. By putting our hard earned money in the hands of public stewardship, we keep it out of the hands of wall street. The infrastructure is already there. Hence, as politicians tend to follow money, the taxpayers, who would be the depositors, would gain political influence as it never had before. We can start calling the shots rather than submitting to those called by the corporations.

reply

Countrywide Eyes Shut

Submitted by Anonymous on January 5, 2011 – 02:48.

As a loan officer attending a training session in a huge Italian (job) restaurant in 2004, I was dumbfounded by the parade of Vice Presidents of this departments including the smiling Alt A and B&C Divisions touting their shiney new stated income and no ratio wares. The training we received (hundreds of us) included how to fool their own underwriters: i. e., wink wink nod nod describe the high Fico score hospital janitor as a ‘sanitation engineer’, look up his new title on Monster.com and then insert that number for his income and viola, approval city. Had I the presence of mind to have a video camera with me that day recording for the world those very VP’s of fraud I would be a very rich woman today. Of course they knew exactly what they were doing! Training the order takers to take the fall: in case anything went wrong our signatures were on the applicatons.

reply

Abandoned Malls

Submitted by Anonymous on January 4, 2011 – 13:52.

Have to mention all those great developments in malls across the US that are currently running way over on unoccupied spaces. Those empty windows will be more frequent and the damage potential is enormous.

reply

My worst premonitions since 1974 are coming to pass…

Submitted by Anonymous on January 3, 2011 – 18:39.

Bush/Obama administrations have allowed the vultures to swindle Americans, lay them off, take away their stability, send their jobs offshore, allow illegal aliens to destroy fair pay and benefits, operate Eminent Domain by private citizens over those who land they covet, deprive them of health care, make criminals of good citizens, tax them steal their retirement pay/pensions.

Mary this is not simply a group of Wall Street raiders selling out the nation, this is an attempt by legalized pirates to by force, foreclosure and other nefarious means to destroy the middle class and lower classes. This is a war, not merely a financial undertow, it is a war that could not be waged until corporations and government had the electronic/automated means to wipe out/replace those classes by automation, That time is now and Obama as like Bush, is a willing and active participant in the Greatest Bank Robbery of all time. The prize? Four% of the citizens of the USA by one fraudulent means or another want to wipeout all but themselves and their bodyguard, mercenaries.

The crash was merely a means to start the crushing of our people. There are no terrorists, if there were they would be stalking Bush, Cheney, Obama and the bankers instead of the working classes. The “Terrorists” are American fascist, bankers. There is no place safe for your money. Gold as nearing $1500 an ounce, gas is climbing from its low in December 2008 of $1.44 because the speculators and oil companies thought Obama was another Jimmy Carter and feared oil price caps and Windfall Profits taxes. The unions thought Obama would tax outsourcing Corporation, Obama is a combination of Big Brother and The Rebel Leader of Nineteen Eighty Seven, and the target is the cash and homes and land of every living person. Hell has broken Loose and we are all in the cross hairs.

The Bilderbergs, Bush, Obama are the enemy of the people and the people are in the cross hairs of the self-styled “elites”. The devastation of 90+% of those now living is the dream of the fascists whose avarice is a form of mental illness, which dwarfs any evil that ever existed. St. Paul, “The love of Money is the root of all evils.”

“Avarice is the sign of a soul held hostage in Hell and a Body wreaking vengeance inspired havoc on the living out of envy.

PS: Mary Bottari are you any relation to my old friend, Urano Bottari of Italy and Chicago?

reply

middle east

Submitted by Anonymous on February 2, 2011 – 04:08.

what do you see happenning in the middle east and the war of armegadon

reply

Follow Us

Blogs and Resources

A New Way Forward

Americans for Financial Reform

Angry Bear

Big Picture

Calculated Risk

Campaign for America’s Future

Center for Economic and Policy Research

Center for Responsible Lending

CitizenVox

Congressional Oversight Panel

Dean Baker Blog

Defend Your Dollars

Dollars and Sense

Economic Policy Institute

Eyes on Trade

Felix Salmon

Matt Taibbi

Naked Capitalism

New “Pecora Commission”

New Deal 2.0

Nouriel Roubini

Paul Krugman

Political Economy Research Institute

Rortybomb

SEIU Stop Big Banks

Simon Johnson

The AFL-CIO Blog

U.S. PIRG Blog

Zero Hedge

Contact Us Privacy Policy

520 University Avenue, Suite 260 | Madison, WI 53703, U.S.A. | Tel 1-608-260-9713