Jimmy Lathrop

Has President Obama's Mortgage Modification Plan Failed?

The biggest problem with the mortgage modifications is that they shave off payments for a period of time and stick it on the end of the loan capitalized as extra principal or paid in a balloon note. This has the effect of driving the mortgage rates higher pushing the home deeper underwater. When the modification period ends, the borrower is right where they were in the beginning unless they manage to drastically increase their income to manage the original payment. Worse yet, this increases the true cost of borrowing and probably removes any equity which may be in the home by the end of the loan. Until serious efforts are made to reduce principal by federal subsidy guaranteed personally by the borrower and non-dischargeable in bankruptcy will any true progress be made in granting relief to homeowners.

Big Banks in Trouble: Huge Mortgage Write-Downs Seem Inevitable

I'm reading all of these hardship vs. loser comments and I only want to mention one thing - if you bought your house for no money down with 106 percent financing and you have no skin in the game, and your mortgage resets to 75 percent of your gross income, are you a homeowner, or a person who put himself in the chains of slavery just to give a mortgage or real estate broker a commission?

Why This Rally Is Unsustainable

I thought this was a very well-written and well-thought out article as opposed to the other 250-line jabberwocky posted by money managers looking to attract more hits to their websites. Thanks for contributing. I appreciate your article.

Bank of America: A Risky Bet That May Be Worth It - Barron's

it does NOT make a difference whether or not Lewis stays or Lewis goes.

Bank of America: A Risky Bet That May Be Worth It - Barron's

I wrote about Bank of America back in July when I was still fooling around with SKF. I'm not shorting anything anymore because it's easy to get squeezed, but BAC's problems go beyond mere mark-to-market and it make a difference if you exile Lewis, Clark or Sacajwea. Sheila Baird's comments on 60 Minutes tonight clearly distanced the FDIC from the mega-banks, calling them financial companies, in which case, it is only a matter of time before they go the path of Citi.

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Bank Liabilities: Why the Discussion Isn't Explicit

user 366533 or whatever number you are hiding behind:

Remember National City? They got bought by PNC.

Wamu? Absorbed by Chase

The insurers? They'll be taken over by the state insurance commissioners

Did photosynthesis end when Lehman Brothers declared bankruptcy?
I remember eating a salad with dinner, maybe it was hoarded.

The bottom line is that the politicians can't be in office forever and they will want jobs in the industry. You want to help them have a soft landing, knock yourself out.

Bank Liabilities: Why the Discussion Isn't Explicit

I have to weigh in on the imminent collapse of the financial system. Let me define what that means. If you work on wall street, its the imminent collapse of the financial system and you need taxpayer money to meet collateral requirements for your super risky RMBS and other dumb financial instruments that you paid for with borrowed money in direct violation of your fiduciary duty.

If you don't work on wall street, the imminent collapse of the financial system means they take the sign off of the WaMu bank and put a Chase sign on it AND there still won't be enough tellers when you need to make a deposit.

Wake me when the imminent collapse of the financial system suspends photosynthesis and we start trading arrowheads and wampum.

Bank Liabilities: Why the Discussion Isn't Explicit

Re: The title of your article. The reason why the discussion isn't explicit is it is a hard sell to the American public that taxpayer money is being spent to prop up truly stupid derivative bets for the benefit foreign institutions and a select few banking institutions like GS. The discussion isn't explicit because we have a concept in economics called risk premium, meaning that writing derivatives or CDOs involve a certain amount of risk, and that risk was mispriced and instead of allowing those defaults to occur, the we have to dilute the triple AAA rating of the government to bail out cronies of the administration. The day after Lehman Brothers collapsed the sun still shone, photosynthesis continued unabated but a lot of bankers realized that they could be out of work so they redoubled their efforts to rattle their tin cups in the face of uninformed members of Treasury and the Fed who have been overwhelmed with events. The market understands the administration has no plan, or at least no plan which will not involve either lowering the governments AAA rating by pumping money in zombie banks or actually letting these losers go, and they are indeed losers. People speak in soulful tones about pillars of the economy and other nonsense but the truth is that when this administration has finished their time in the drivers seat, they want their executive director positions an investment bank but in order to do that they need the American taxpayer to do it. Yes, my stocks in Rite Aid have some intrinsic value if my models can predict that they will weather the economic downturn but the CDS and market prices says otherwise. But if I had 20 to 1 leverage on these dumb investments and I was in the ear of the government, we would all be singing the praises of Rite Aid. It is time for America to accept that derivatives are gambling and that there are too many political concerns wrapped up in securitizing residential mortgage backed securities to continue underwriting them. Unfortunately, that flies in the face of Barney Frank's goal of home slavery, excuse me, home ownership for anyone who knows how to spell the word home and for a few people who couldn't spell the word home if you spotted them the H, M and E.

Why Is Everyone Blaming the CEOs? It's the Government's Fault

Tom, I had been patiently waiting for you to make another post since most of the stocks in your financial fund have crashed and burned. I was hoping you would tout a stock which is always a clear sell signal or a great reason to short, but instead you come up with this disappointing sour grapes rant about the CRA and government regulation causing all the problems, as though Barney Frank looked at this risk models, weighed in on the arguments from the traders and personally gave the go ahead for a 20 to 1 leveraged position on the lowest tranche of mortgage backed securities. That is really the issue - that the banks can't carry these securities under normal capital requirements, that these assets make the bank insolvent, that they want money from the government to keep the capital requirements in the hope that the investment will turn it around and they want cheap money from the government with no explanation on why the situation won't happen again. A simple cursory read through any of your past posts demonstrate how you have been consistently wrong in your predictions as to valuation of these institutions or as to their solvency or their value as an ongoing enterprise, and this general policy tirade is unhelpful to the short-sellers who monitor your posts so please, humor us, stop the editorializing and just give us some picks to bet against.

Solving the Bank Crisis: More TARPs Are Not the Answer

John, time would not be an issue for the financial banks if they had sufficient reserves to offset defaults. The problem is that the toxic assets, which are really just mortgages, were purchased with leverage. So not only has the value of these assets have gone down, the obligation to repay the money used to purchase these assets remain. It is not to the banks detriment that time is not reflected on the balance sheet. Essentially, what the government suggests to do is to continue putting money into the banks balance sheet to provide a capital reserve against the markdown of the assets in the hope that the assets value will raise and they will not only recoup their costs but earn a profit. That is the subtle distinction that has been lost on everyone. This is not an governmental effort to make banks whole, it is a governmental effort to allow the banks to ride out this period and clean up if the economy stabilizes. The truth of the matter is that these assets have to wildly outperform every other asset class in existence in order to pay back the original leverage and then pay back the government's loans to hold these investments. It is this mass denial of the financial system perpetuated by Paulson and the other investment bankers that the trade will come around. It makes a mockery of their risk management systems, completely trashes the concept of accountability, and worse, it makes the entire compensation issue look ridiculous as the only thing these bank executives have done is hold a knife to the throat of the American banking system at the expense of the taxpayer, not to mention their own shareholders in a naked survivor play. Until these assets are relinquished and written down, more money will be poured into a hole, with recovery of said money to be doubtful.

Why I Need a Government Bailout

I need the bailout to make up for losing all of my inherited money from a guy called Bernie. Waaah!

Thursday Market Preview: The Bears Are Firmly in Control

Isn't it interesting that the congressional mandate to provide affordable homes to anyone without six months of credit delinquencies through securitization of MBS resulted in a collapse of trade credit? We got the redistribution of wealth that we wanted! So why is everyone so unhappy? Oh that's right. Instead of some people being broke, now we're all broke. Misery loves company I guess. Bill Rogers is right. When you hear about Cabinet members secreting their cash into overseas markets, we have officially become a third world nation. Someone should set up some prop bets on which administration member is going to be caught hiding cash to avoid taxation You have until February to make your picks, so start research.

Memo to Warren: AmEx Preferred at 15%, Warrants at $12

I think the long term perspective is that Amex has done some stupid things in the past (purchasing EF Hutton) and overcome them. Warren tends to see things in the industry from when he purchased Salomon Brothers. Both BRK and AMX got out of that situation when the opportunity presented itself and survived. AMX is like a financial cockroach and that's the kind of company that appeals to him. Its a long term play designed to shake out the weak hands and from the comments above, weak hands have been shaken out.

Schumer Is Way Off

Chuck Schumer is like the houseguest who comes over to dinner and starts hovering around you in the kitchen, making suggestions as to your ingredients and methods, getting in your way and then announcing at dinner that you are a terrible cook.

Bank of America's Desperate Move for Capital

Yeah, this isn't going to end well at all.

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