WEDNESDAY, APRIL 14, 2010
April 14 2010: A fragile teetering tower of debt
"Itinerant preacher from South Carolina saving souls of construction workers at Camp Livingston job near Alexandria, Louisiana"
Ilargi: I watched footage today of adult women and men who’d been abused by priests when they were kids, and whose main concern was to regain their faith and their place in the church. They even traveled all the way from the States to the Vatican, hoping the pope would actually and personally receive a letter they wrote. Of course the Vatican just brushed these poor folks off without a listen. Got to do better than a letter if you want your faith back, so seems to be the message. The Vatican has paid over $1 billion in hush and blood money so far, and them robes don’t come cheap. 10 hail mary’s and an open wallet might get you right back where you once thought you belonged. And do bring the kids.
There isn't really any difference between blind faith in Rome and blind faith in Washington, though, is there? Benedict, Obama, they all have a billion souls depending on them for faith, hope, charity and salvation. And whatever they do to you, you keep coming back for more. Because in your eyes, they’re the only game in town.
Or so I was thinking anyway when I saw that JPMorgan announced a $3.3 billion profit, while the bank still owes the US taxpayer $41 billion+. Now, I can't speak for you, but if someone owes me a big wad of cash, and instead of paying me back first, goes all prancing about town ordering champagne and farm fish eggs, I’m thinking kneecaps. Not the White House, though. And I know why. The $41 billion (and a lot more if you include the WaMu and Bear Stearns takeovers) is not owed to the White House. It’s owed to you, poor sodding anonymous you.
Major US banks have close to half a trillion dollars worth of junior lien mortgage loans on their books. Junior basically means anything not first mortgage, like home equity loans (my house is an ATM), second mortgages (an ATM with a different name), and more creativeness like that. All quite jolly and innovative and brilliant, providing it’s not your money at stake. But it is, and that’s the catch.
The problem with the junior liens is that they will be wiped out first, under "normal" circumstances, when a loan goes bad, when there’s a default, a repo, ... or even a modification. The big lenders got rid of just about any and all first lien loans through securitization, but they hold just a little bit more of the juniors still on their own books. And like so many other US loan portfolio's, government endorsed reality- and gravity-bending of FASB accounting standards make them look real fine and healthy, thank you very much.
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