In a surprise move to me, the Democrats are the ones that opposed the bill, nearly all Republicans voted to over-ride. Very interesting, and possibly a warning of what is yet to come once republicans take office.
HR 3808, represents it is improving process by allowing electronic records legal and interstate paperwork binding. The problem I have with it is, it's retroactive to past mortgages. Currently when a mortgage is signed, the physical legal papers signed are the proof of ownership, and historically must be maintained. In the event the paperwork is lost, burned, or eaten by the banks pet dog, there are legal processes that can be triggered to re-establish ownership.
The reason I opposed the bill is the retro-active nature of the bill. If the law changes stating NEW mortgages are recorded electronically or out of state documents are deemed legal, I am not vehemently opposed.
New mortgages originated under new guidelines, will give the opportunity for the lawyers involved to ensure all items are in order. When I purchased my house, I paid a lawyer to represent my interests and ensure the legal paperwork was in order. I am OK with creating an electronic process to record my house purchase, and it could involve interstate documentation. I do work in the computer industry, and change is required to be acceptable (if not preferred).
What I opposed was to change the agreement I made when I purchased my house, retroactively, to state the paperwork and process I paid my lawyer to review, was no longer required to prove home ownership.
The purpose of the bill wasn't to just merely change process to a computerized recording system, it was to cover up the problems with the book keeping an legal process the banks used.
In short, the combination of being retro-active, to NOT recording the votes for or against the bill, and the adopting out-of-state papers that are not easily verifiable - retroactively applied, just smelled to me to be abuse of law and power.
Thank you for those who took action and called your representatives. Each call lets your representative know you are paying attention.
Back on October 15th, in post titled "Is US Government is Owned by the Banks?", I noted that HR 3808 was passed by congress but was pocket vetoed by President Obama. In that post, I made the argument that banks do not own the government.....I may need to reconsider my position with the action being taken today....
HR 3808 will force states to accept documents that are notarized in other states, without verifying any of the documentation. This in effect allows foreclosures on property to be done with documents not verifiable. It has been uncovered that foreclosures have occurred in all 50 states, with multiple different banks, but not following the legal process. This was dubbed foreclosure gate, and has resulted in state attorney's in all 50 states to issue an investigation into the robo-signing practice for foreclosures.
Therefore it is critical that you call your representative ASAP to tell them you expect the law that was in place when a mortgage was issued to be the same for foreclosing. That the legal documents that where specified under law to be kept to prove ownership, stands. That foreclosing on homes with paperwork that is not verifiable is not acceptable.
If you support the bill, at the very least please call your representative and encourage them to be proud of their voting record, and demand a written record is taken of the votes.
(The fact no record is kept should indicate something is wrong here.......)
This blog entry will be updated as needed, to revise my view of the US economy and the world economy. You will see text colored (blue). Click on these words to see a blog post or other material to provide detail of the basis of my view. This blog entry will be linked at the top of my blog for future new readers. If you are new to my blog, this post will help get you up to speed to better follow my current entries.
Welcome to my blog, my name is Mike Murphy, a Computer Consultant/Programmer turned arm-chair financial blogger, with help from other bloggers and friends (John Chinnock). The goal of this blog is to serve two purposes, one is to help me continually focus and articulate current thoughts of the Financial Market & US economy for my own trading. A second is to hopefully help those who know me to safeguard their savings from buy and hold mentality in this historic economic problems the US faces.
Video of various economic forces the world faces This video series gives a great synopsis of many global and US economic issues. It is a MUST for anyone new to this blog. This video was created by Chris Martenson, a pay-for-blogger. CLICK HERE TO WATCH THIS GREAT VIDEO SERIES. Short take The US Stock market and the US economy will see substantial pressure from a massive deflationary collapse that will not end until the US government enforces honest accounting and loses by US banks are realized. Current target for S&P500 and DJIA for a "bottom" is 550/5000 respectively or lower. The US economy will be in a recession/depression that will span 5 to 10 years from the initial downturn in Dec 2007.
During the economic turmoil storage of wealth in stocks, bonds, cash, real estate, or natural resources (gold) all involve risk. In my opinion, physical gold/silver or natural resource based companies such as gold/silver miners are "safer" investments than most others in the time frame between 2009-2012+. A MUST read for new users is this blog entry (click) on buy and hold as a bad strategy.
Therefore I strongly advise against keeping money in general stock funds, better off in US short term treasury notes (cash), and/or natural resource based investments. There will come a time where US cash will have turmoil (devaluation). However this is likely to happen after 2010, but it could be triggered at any moment due to US government actions. Please read the next section, my verbose view, to better support this view.
Where US (and the world) went wrong What we are witnessing unfold before our eyes is the deleveraging of INSANE amount of money/investment leverage that was allowed during the last 10+ years. The leveraging was done at all levels, citizen, corporations, states, and the US with debt represented as an asset. (Click for good video on current leveraging as of 7/18/09) Much of the over-leveraging was "pulling forward" demand (demand today, pay tomorrow) for profit taking today. Over leveraging accelerated with the repeal of Glass-Steagall act from 1930, designed specifically to prevent banks from taking part in high risk investments. Unfortunately, America created a new "investment vehicle" called Mortgage Backed Securities. Normal investments are valued at what others pay for it, called Mark to Market accounting. For example, a 2 year old Honda Element car may be valued at $9,500 because that is what people will pay to purchase it. Mortgage Backed Securities are NOT valued by what they are worth on the open market. They are valued by a "computer model". Basically, the banks can state their worth without proving it. This worked until the MBS where losing money instead of gaining, uncovering the reality behind the curtain. To this day (7/18/09) the US and the world refuses to value MBS and other securities according to their true value. This has created distrust and prevents normal lending. The problem ISN'T banks won't lend as much as they used to back in 2007. The problem is that banks can't tell WHO is fiscally sound to lend to or they actually now have some standards (where they didn't before). Politicians are trying to force the banks to lend, which will only repeat the act of debt faulting and causing more banks to fail. This fraudulent accounting was expanded, in April 2009 existing FASB rules on Mark to Market accounting where SUSPENDED, expanding the fiscal fantasy beyond MBS to the entire banking system, creating a second equity bubble starting immediately.
A secondary problem is "Credit Default Swaps". Credit Default swaps is basically Company A "insuring" Company B for potential risk (fiscal loss) for a premium. This is an INSURANCE POLICY. But banks have worked with politicians to classify CDS as NOT insurance polices. By doing so, CDS contracts can be written with NO regulation on risk taken, or even the ability to PAY if the policy becomes activated! This is what AIG faced, large losses from CDS contracts they wrote that required payment. Also, many companies still write HUGE CDS contracts "assuming" they won't fail, so they can take the premiums today as profit. If they are wrong, AIG is small time stuff compared to a CDS market collapse. The Bank for International Settlements estimates outstanding derivatives total $592 trillion, about 10 times global gross domestic product!
Both the above issues, combine with the issue that the US does not follow international accounting standards and is falsely representing valuations of corporations by not valuing "debt" properly. (level 3 assets) Until the US achieves honest accounting and proper valuation for debt, and enforces CDS contracts to follow similar risk-management as insurance policies, the world economy cannot return to normalcy.
US Banks Many large US Banks are taking losses from MBS investments, CDS, residential, and soon commercial real estate investments. Hundreds of US banks will fail in 2009/2010, as of 7/16/09, about 120 US banks have imploded since 2007. ONLY 22 banks failed between 2001-2006! Unfortunately, the FDIC does not have the money to cover bank accounts. However I believe the US government will cover "at any expense" personal accounts, so I am not panicking about safety of US bank accounts (under 250K per couple per bank). Further, banks refuse to sell foreclosed houses, since the price they would get would trigger write-offs. Therefore many banks are solvent on paper, but insolvent based on true value of assets.
NOTE: I will post on my blog when this entry post is "done", to allow regular readers to check back. Please feel free to add your own comments to help improve this page.
This post doesn't technically belong on the topic of stocks/finance.
But since the primary driver has been collapse of bubble created from real estate, at some point buying real estate on the cheap will be a good investment.
