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EducateWorthington.org

The 912 Project - Glenn Beck

912 Group of Central Ohio

Please let me know if you'd like your link added

The Subprime Mortgage Market Collapse:
A Primer on the Causes and Possible Solutions
by Ronald D. Utt, Ph.D.
Backgrounder #2127

The collapse of the subprime mortgage market in late 2006 set in motion a chain reaction of economic and financial adversity that has spread to global financial markets, created depression-like conditions in the hous­ing market, and pushed the U.S. economy to the brink of recession. In response, many in Congress and the executive branch have proposed new federal spending and credit programs that would greatly expand the role of government in the economy but do little to alleviate the distress caused by the financial crisis that has spread rapidly to nearly all sectors of the economy.

The Subprime Bust

Exactly when the subprime boom became the subprime bust is open to debate, but 2006 is a good estimate of when the system began to unravel. In 2006, many sophisticated investment institutions in the U.S. and abroad realized that their vast portfolios of subprime mortgages and derivatives thereof were not as safe as they had assumed and that they would likely incur significant financial losses. Little did they know at the time that these financial losses would be quite substantial and that this discovery would send finan­cial markets and parts of the U.S. economy into a downward spiral that some fear will lead to a recession.

Although the subprime market encompasses a highly diverse set of financial instruments and types of borrowers, the Congressional Research Service (CRS) has offered a workable definition of a sub­prime mortgage:

Generally, subprime mortgages are defined in terms of the credit bureau risk score (FICO) of the borrower. Other credit imperfections…can also cause borrowers to be classified as subprime for a particular loan. For example, the addition of the mortgage loan might increase the borrower's debt-to-income level above traditionally prudent thresholds. Gen­erally, bank supervisors look for one or more of the following credit-risk characteristics when deciding to label a loan subprime:

    * Recent payment delinquencies (30-day or 60-day depending on recency)
    * Judgment, foreclosure, repossession, or charge-off within prior two years
    * Bankruptcy in last five years
    * Relatively high default probability (FICO below 660 or similar measure)
    * Limited ability to cover living expenses after debts (debt-service-to-income ratio of 50 percent or more).[1]
http://www.heritage.org/research/economy/bg2127.cfm

<a href="http://www.youtube.com/v/9WBnDFSh2BE&rel=0" target="_blank">http://www.youtube.com/v/9WBnDFSh2BE&rel=0</a>
<a href="http://www.youtube.com/v/7Fh77X4wz6E&rel=0" target="_blank">http://www.youtube.com/v/7Fh77X4wz6E&rel=0</a>

[dis]

BTW, I 100% disagree with this analysis:

Part I: Geithner's Plan "Extremely Dangerous," Economist Galbraith Says
Posted Mar 23, 2009 11:08am EDT by Henry Blodget in Investing, Newsmakers, Recession, Banking
Related: ^gspc, ^dji, c, bac, jpm, WFC

From The Business Insider, March 23, 2009:

Tim Geithner has finally revealed his plan to fix the banking system and economy.  Paul Krugman, James Galbraith, and others have already trashed it.

[We spoke with noted economist Galbraith this morning. In the accompanying segment, he calls the Treasury Secretary’s plan “extremely dangerous.”]

Why?

In short, because the plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit

http://finance.yahoo.com/tech-ticker/article/216311/Part-I-Geithner%27s-Plan-%22Extremely-Dangerous%22-Economist-Galbraith-Says?tickers=^gspc,^dji,c,bac,jpm,WFC?sec=topStories&pos=2&asset=TBD&ccode=TBD

Part II: Geithner, Obama Kowtowing to "Massively Corrupted" Banks, Galbraith Says
Posted Mar 23, 2009 12:07pm EDT by Aaron Task in Newsmakers, Banking
Related: XLF, FAS, SKF, C, BAC, JPM, ^DJI
Like it or not, many people seem to be resigned to the idea there's no alternative to the public-private investment fund scheme Treasury Secretary Geithner detailed this morning. (Click here for part one of our discussion of the plan.)

That's hogwash, says University of Texas professor James Galbraith, author of The Predator State. Of course there's an alternative: FDIC receivership of insolvent banks.

Aside from being legally proscribed, the upside of FDIC receivership is the banks are restructured and reorganized for potential sale (either in whole or parts), Galbraith says. Such was the fate in 2008 of, most notably, Washington Mutual and IndyMac.

http://finance.yahoo.com/tech-ticker/article/216480/Part-II-Geithner-Obama-Kowtowing-to-%22Massively-Corrupted%22-Banks-Galbraith-Says?tickers=XLF,FAS,SKF,C,BAC,JPM,^DJI

Killing the Golden Goose: I wonder where Paris Hilton stands on this one?
http://www.meetingsmeanbusiness.com/

Kroft to Obama: Are you punch-drunk?

President Barack Obama said he believes the global financial system remains at risk of implosion with the failure of Citigroup or AIG, which could touch off “an even more destructive recession and potentially depression.”

His remarks came in a“60 Minutes” interview in which he was pressed by Steve Kroft for laughing and chuckling several times while discussing the perilous state of the world’s economy.

“You're sitting here. And you're— you are laughing. You are laughing about some of these problems. Are people going to look at this and say, ‘I mean, he's sitting there just making jokes about money—’ How do you deal with— I mean: explain. . .” Kroft asked at one point.

“Are you punch-drunk?” Kroft said.

“No, no. There's gotta be a little gallows humor to get you through the day,” Obama said, with a laugh.

And he seemed intent on cooling the populist anger rising in the country, particularly over AIG’s $165 million in bonuses. He signaled that he would like to see changes in a House resolution that would tax the bonuses at 90 percent, saying “we can’t govern out of anger.”

“Main Street has to understand, unless we get these banks moving again, then we can’t get this economy to recover. And we don’t want to cut off our nose to spite our face,” he said.

The interview captured the balancing act that Obama must strike on the economy. He gave a nod to public anger at Wall Street while saying it could not dictate his response.

http://www.politico.com/news/stories/0309/20339.html

One Way to Stop Bear Raids
Credit default swaps need much stricter regulation.

By GEORGE SOROS

In all the uproar over AIG, the most important lesson has been ignored. AIG failed because it sold large amounts of credit default swaps (CDS) without properly offsetting or covering their positions. What we must take away from this is that CDS are toxic instruments whose use ought to be strictly regulated: Only those who own the underlying bonds ought to be allowed to buy them. Instituting this rule would tame a destructive force and cut the price of the swaps. It would also save the U.S. Treasury a lot of money by reducing the loss on AIG's outstanding positions without abrogating any contracts.
http://online.wsj.com/article/SB123785310594719693.html#printMode

Downturn will only end when 'banks are fixed'

The recession gripping the world will not end until the banks are cleaned up, the International Monetary Fund (IMF) said today.

In the latest in a series of a bleak assessments, Dominique Strauss-Kahn, head of the IMF, said that bailouts may be politically unpopular but the banking sector needs to be overhauled if the economy is to recover and businesses and households are to function normally.

"You can put in as much stimulus as you want. It will just melt in the sun as snow if, at the same time, you are not able to have a generally smaller financial sector than before but a healthy financial sector at work," he said.

The global economic situation remained "bluntly dire" and was "extremely worrying and difficult," he said.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5959194.ece

'I'm having a very good crisis,' says Soros as hedge fund managers make billions off recession

 A hedge fund manager who predicted the global credit crunch has said the financial crisis has been 'stimulating' and the culmination of his life's work.

George Soros, who predicted the global financial crisis twice before, was one of the few people to anticipate and prepare for the current economic collapse.

Mr Soros said his prediction meant he was better able to brace his Quantum investment fund against the gloabal storm.

But other investors failed to take notice of his prediction and his decision to come out of retirement in 2007 to manage the fund made him $US2.9 billion.

http://www.dailymail.co.uk/news/worldnews/article-1164771/Im-having-good-crisis-says-hedge-fund-manager-1billion-world-plunged-recession.html

Dollar dips on Geithner’s ‘loose talk’

By Krishna Guha and Tom Braithwaite in Washington and Peter Garnham in London

Published: March 25 2009 14:19 | Last updated: March 26 2009 01:14

The dollar fell briefly on Wednesday after Tim Geithner, the Treasury secretary, appeared to suggest that the US was open to exploring a Chinese proposal to reduce reliance on the dollar as the world’s reserve currency.

Mr Geithner told the Council for Foreign Relations that he had not studied the proposal by Zhou Xiaochuan, Chinese central bank governor, for greater use of special drawing rights – a synthetic currency maintained by the International Monetary Fund that represents a basket of actual currencies – in global reserves, but added: “We are quite open to that.”

http://www.columbustownhall.com/index.php/board,17.0.html

EU leader condemns US ‘road to hell’

By Tony Barber in Brussels and Edward Luce in Washington

Published: March 25 2009 20:00 | Last updated: March 26 2009 00:12

European Union hopes for a new era in relations with the US were thrown into chaos on Wednesday when the holder of the EU presidency condemned American remedies for the global recession as “the road to hell”.

Barely a week before Barack Obama is due to arrive in Europe on his first official visit as US president, Mirek Topolanek, the Czech Republic’s prime minister, put the 27-nation EU on a collision course with Washington.

http://www.ft.com/cms/s/0/1d3fa8fa-1975-11de-9d34-0000779fd2ac.html

<a href="http://www.youtube.com/v/94lW6Y4tBXs&rel=0" target="_blank">http://www.youtube.com/v/94lW6Y4tBXs&rel=0</a>

China Calls for New World Reserve Currency
http://www.voanews.com/english/2009-03-26-voa9.cfm

Senate Bill Would Allow Tax-Exempt Status for Newspapers
http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003954802

I saw this comment on the proposed bill, "I think newspaper are already non profit. There hasn't been one to make money in years."

Seriously, when will the bailouts end?  Remember, this started with the Bush Administration and the Democrat controlled Congress.

Rahm Emanuel's profitable stint at mortgage giant
Short Freddie Mac stay made him at least $320,000

By Bob Secter and Andrew Zajac, Tribune reporters
March 26, 2009

Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.

One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.

As gatekeeper to Obama, Emanuel now plays a critical role in addressing the nation's mortgage woes and fulfilling the administration's pledge to impose responsibility on the financial world.

Emanuel's Freddie Mac involvement has been a prominent point on his political résumé, and his healthy payday from the firm has been no secret either. What is less known, however, is how little he apparently did for his money and how he benefited from the kind of cozy ties between Washington and Wall Street that have fueled the nation's current economic mess.
http://www.chicagotribune.com/news/politics/obama/chi-rahm-emanuel-profit-26-mar26,0,5682373.story

Freddie Mac scandals began during Emanuel's watch

By Bob Secter and Andrew Zajac | Tribune reporters
    March 26, 2009

Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.

One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.

As gatekeeper to Obama, Emanuel now plays a critical role in addressing the nation's mortgage woes and fulfilling the administration's pledge to impose responsibility on the financial world.
http://www.chicagotribune.com/news/local/chi-rahm-emanuelmar26,0,1946702.story

Do you know the real Rahm?
http://www.chicagotribune.com/news/local/chi-rahm-emanuel-obama-quiz,0,7754340.triviaquiz

From the Tribune archives: The House Rahm Built
How Chicago's profane, ruthless, savvy operative, remade the Democrats in his image
http://www.chicagotribune.com/news/politics/obama/chi-0611120215nov12,0,2221283.story