Another "unsettled" weather day. I sure wish things would settle into a nice warm summer pattern. That would be just aces. I may go to check out the 2008 Infiniti G35x this weekend as I need to trade my 2005 in pretty soon to get good trade in value. Seems like the longer I can wait the better deal I may get as car sales are collapsing all across the auto spectrum.
Countrywide Sweetheart Deals May be Too Common to Uncover
Picture this scenario:
You are the Republican party going into this years election. With approval ratings in the gutter, an unpopular president, a presidential nominee nobody is excited over, and the blame the incumbents mentality common to US voters, things are looking bad. Very bad. Along comes a story of a couple of DEMOCRATS that have received special mortgage deals from Countrywide Financial (CFC). What a break! With the whole "subprime targets the poor" and all that predatory lending anger, this is a huge story to hit with.
Only one problem: the republicans are in the same jam. Big surprise. Are you surprised because I know I am. From the great blogger Instapundit.com, I saw this great piece on the current state of CFC mortgage investigation (from politico.com):
GOP member calls for mortgage inquiry
By MARTIN KADY II 6/17/08 4:22 AM EST
A leading House Republican called Monday for hearings to determine which lawmakers received discount mortgage deals from Countrywide Financial Corp., but his colleagues in the House and the Senate don’t seem particularly eager to start turning over rocks.
In the wake of reports that Sens. Chris Dodd (D-Conn.) and Kent Conrad (D-N.D.) received special VIP discounts on Countrywide mortgages, Texas Republican Rep. Jeb Hensarling said Monday that he wants to know which members of Congress “might be knowingly or unknowingly receiving preferential treatment while millions of hardworking Americans struggle to repay their mortgage debts and cope with $4-a-gallon gasoline and soaring food prices.”
In what looks to be a rough election cycle for Republicans, a Democratic-focused mortgage scandal could be just the break the GOP needs. But no other Republican leader jumped on Hensarling’s bandwagon Monday, and aides said they were reluctant to push forward with a probe because they didn’t know what it might reveal.“You have to be very careful about opening Pandora’s box,” said one House GOP aide. “We could use it [politically], but we’d have to do due diligence on our side.” Added a Senate GOP aide: “You don’t see many people jumping on this, because you don’t know if anyone else is dirty.”
Color me unsurprised that the same congress we may need to investigate illegal mortgage practices cannot do so because, drum roll, they are part of the illegal mortgage game. This is especially galling seeing that both the banks and home builders are screaming for federal bailouts (and getting them) and some senators are on the hook for special treatment. What a mess.
"I Triple Dog Dare You!"
Flick: Are you kidding? Stick my tongue to that stupid pole? That's dumb!
Schwartz: That's 'cause you know it'll stick!
Flick: You're full of it!
Schwartz: Oh yeah?
Schwartz: Well I double-DOG-dare ya!
Ralphie as Adult: [narrating] NOW it was serious. A double-dog-dare. What else was there but a triple-dare-you, and then, the coup de grace of all dares, the sinister triple-dog-dare.
Schwartz: I TRIPLE-dog-dare ya!
Ralphie as Adult: [narrating] Schwartz created a slight breach of etiquette by skipping the triple-dare-you and going right for the throat! -from the film "A Christmas Story"
It seems like some firms just cannot go gentle into that goodnight. The NY Times Gretchen Morgenson with Vikas Bajaj have a great story up today about MBIA. Full article here:
The boiled down version: MBIA has lost its triple A rating, and this will end their business pretty much. They will be required to raise large amounts of cash to cover their massive underwriting obligations, but instead of getting pushed into anything, MBIA can hold the spector of massive, and I mean massive, credit default swap implosion as a sword of Damocles. How big? Around $137 Billion in swaps are backed by MBIA. MBIA market cap today: 1.6 Billion. If you just whistled out loud, you are not alone. WOWZA!
And so what about all those intertwined positions? If Bear Stearns had to be bailed out by the FED to avert a total systemic collapse, surely the MBIA and matching Ambac blow up will have to backstopped by the FED, yes? The FED can ride to the rescue with their stash of treasuries. Oh, the FED has lent out 80% of those already? And they have a bunch of the toxic mortgage paper in return? Ouchie indeed.
Truly, only the very brightest minds could have come up with such an interwoven mess of junk. Wall Street designed a situation where they stood to collect huge profits, but need to pass any losses onto the taxpayer to keep the system running. Could not have made up a better plan if I had time to try. This is going to be a very interesting summer.
Have a good night.