See, I Told You So (HELOCs)

[MarketNeutral]

Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. may have to set aside an additional $30 billion to cover possible losses on home-equity loans, an amount almost equal to analysts’ estimates of profit at the three banks this year.
Oh, so now this comes out?

When did I start talking about this in detail, with numbers?

In early April 2008 - more than two years ago - before the market melted down.

And I've been talking about it since, including on February 2nd when I said:

Now go look at the big bank's balance sheets for second line (HELOC, silent seconds, etc) exposure. 70% of the outstanding dollar volume was written in California, Florida, Nevada and Arizona - on bubble houses. The clear majority of those have a first that is underwater and thus the recovery value on those HELOCs, if they default or are "put back" due to fraud, IS ZERO.

When you look at these large banks balance sheets and then take out of their capital the likely losses under this sort of analysis you find that every single one of them will be driven into regulatory capital trouble at best.
CreditSights numbers are low. They may represent what is forced down the gullet of the banks this year, but it is by no means the extent of the damage.

These loans that are behind underwater firsts are almost all worth exactly nothing. Mark-to-fantasy has allowed the carrying of these loans at dramatically above their fair value, to the point that even Barney Frank has written a letter to the banks about it.

It's that well known.

Yet you wouldn't know it given the stock prices of these institutions.

Why?

Because officially-sanctioned balance sheet scams - that is, government-sanctioned and approved fraud, is now the policy of The United States Government.

This is supposed to "help confidence", and it might well do so in the short term.

But in the intermediate and longer term it puts in place the conditions for an outright and unstoppable collapse, because cash flow always wins over all other considerations, and there is no way to fake that, as Lehman (and Bear Stearns) proved conclusively.

Let me know when the fraud goes away and balance sheets can be trusted once again, and I'm interested in investing in this market.

But not until, because if you do so you are risking a 100% loss when the scam is exposed by the insufficiency of cash flow, and you will get no warning before it happens.
http://market-ticker.denninger.net/archives/2184-See,-I-Told-You-So-HELOCs.html

[mamboni]

It makes perfect sense when one understands that we are a corporatist-fascist govenment and the Wall Street banks own and operate the corporation known as the Federal Government. The banks will play this balance-sheet scam and keep dumping all the bad debts and losses on the taxpayers until the taxpayers refuse to accepth this crap and fraud.

[Ares]

It makes perfect sense when one understands that we are a corporatist-fascist govenment and the Wall Street banks own and operate the corporation known as the Federal Government. The banks will play this balance-sheet scam and keep dumping all the bad debts and losses on the taxpayers until the taxpayers refuse to accepth this crap and fraud.


I think the tax slaves are a little restless at the moment. So maybe not too much longer. They pass this VAT tax, or the carbon slave tax then it might be enough to rile them up.

[k-os]

I think the tax slaves are a little restless at the moment. So maybe not too much longer. They pass this VAT tax, or the carbon slave tax then it might be enough to rile them up.


You would think so . . . but we shall see.

[Heimdhal]

It makes perfect sense when one understands that we are a corporatist-fascist govenment and the Wall Street banks own and operate the corporation known as the Federal Government. The banks will play this balance-sheet scam and keep dumping all the bad debts and losses on the taxpayers until the taxpayers refuse to accepth this crap and fraud.


I think the tax slaves are a little restless at the moment. So maybe not too much longer. They pass this VAT tax, or the carbon slave tax then it might be enough to rile them up.


Yeah, we said that with the healthcare act, and other than some alleged "racisit" comments and broken windows,t he people accepted it with a quiet and tamed whimper. We said it with the bank bail outs "How dare they!" and the same whimper was heard then too.

We said it when the patriot act II was coming around "after the first one, no one will stand for this.".....not a peep.

The line in the sand will never be crossed if the people keep moving it back, and they will keep moving it back until their heels are teetering over the edge of the cliff, but right now their heels are teetering over the edge of their sofas.