You Fucked It Up

Worries over fast-tracked foreclosures send bank stocks plummeting

Stocks of major banks declined sharply Thursday amid concern that widespread corner-cutting in the foreclosure process could saddle the financial system with a costly and paralyzing mess.

The sell-off was one of the most vivid indications yet that the foreclosure problems could take a toll on banks that had been recovering from the financial crisis of recent years.

You fucked it up
You should’ve quit
‘Til circumstances
Had changed a bit

In early afternoon trading, share prices declined by 3.3 percent for J.P. Morgan, 4.5 percent for Citigroup, 4.9 percent for Wells Fargo, 5.6 percent for Bank of America and 6.1 percent for SunTrust Banks.

In contrast, the Dow Jones industrial average was down by 0.34 percent, and the Standard & Poor’s 500-stock index, a broader market gauge, was down by 0.62 percent.

You fucked it up
You jumped the gun
I swore you off but
You climbed back on

Some major lending institutions have frozen foreclosures in response to evidence that employees in what were essentially foreclosure mills signed the paperwork to seize homes without properly vetting it.

A similar but potentially broader concern has cast an additional cloud over the system.

And when you said
Of course you know
Could I be blamed
If I’d wished it so
I don’t think so

Some analysts are concerned that huge pools of mortgages that are bought and sold like stocks might be defective. Court documents show that in many cases the paperwork transferring legal ownership over those loans to the pools was lost, ignored or even forged.

The mortgage securities were traded around the world and widely held by investors, including mortgage finance giants Fannie Mae and Freddie Mac, which are wards of the government.

You fucked it up
Or was it you
‘Cause when you said it
I said it too
What of it

It is not yet clear what the consequences would be if large quantities of mortgage-backed securities turn out to be defective – or how the trouble could be solved.

“If the basic principles of property law have been violated here . . . it may be extremely difficult to fix,” said a source involved in government oversight of financial institutions, who spoke on condition of anonymity because of the uncertainties involved. “There is a chain of questions that no one seems to know the answer to.”

And all that stuff
I knew before
Just turned into
Please love me more
Please love me

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3 Responses to You Fucked It Up

  1. Pingback: You Fucked It Up, cont’d. | Notes from Underground

  2. StringonaStick says:

    As Driftglass said, these guys are like German soldiers fleeing the ruins of Berlin, stopping only long enough to burn their uniforms. All those CDO’s that the individual mortgages were packaged into were created and sold at such a rapid rate that they are as defective as the crap these foreclosure mills are cranking out. The market wanted to buy these things, so they “built” as many as they could and sold them to both knowledgeable investors and the not so informed (like pension funds for smaller entities like cities, counties, colleges, etc – a lot of people are going to find out at some point that the CDO debacle ate their pension). Hey, they were sold as “can’t lose” investments, right? They won’t get punished for that lie either.

    They were trying to rush the foreclosure process in the hopes of covering up what a pile of illegal paperwork many of the CDO’s that contain these mortgages are; a way to tidy up the apparent mess so to speak. What really stopped the foreclosure process was title insurance companies saying they would no longer issue title insurance unless an actual physical mortgage document is produced; thanks to how CDO’s were created, that is nearly impossible in many, many cases. Without title insurance, no bank is going to issue a mortgage now, and no doubt the title insurance companies are having visions of AIG in their nightmares with theit own company in the starring role.

    What Wall Street is really scared about is that when push comes to the shove, what has to happen in order to clean up this mess is going to force nationalization of the banks. That scares the shit out of them because it will finally take the dollar out as the world’s reserve currency (which = huge devaluation) and the US stock market will from then on never be at the top of the world’s pile again (after it loses a shitload of value). Sweden nationalized it’s banks in the mid 1990’s over a similar problem, did so in an orderly way and was able to fix their mess and return banks to private ownership within 2 years. But Sweden wasn’t the backer of the world’s current reserve currency or the biggest swinging dick in the war business so it was hardly noticed here. I can only imagine how crazy the teabaggers and their militia fellow travelers will respond to bank nationalization, but something along the lines of 1936 in Germany does come to mind.

    • Something tells me that even conservatives will eventually come around to realizing how fucked this situation really is. When it is unclear who actually owns what, the very concept of property rights, which is near and dear to conservatives and glibertarians, comes into question. They will either have to demand transparency from the mortgagers, or admit that everything is fucked up beyond the ability of the free market to fix anything.

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