QE3 – Pay Attention If You Are in the Real Estate Market
I used to have a deputy who said that the FHA mortgage insurance funds were where mortgages went to die. That was, however, before the creation of MERS, derivatives and the explosion of mortgage fraud during the 1990′s which in combination with the "strong dollar policy" engineered what I have referred to as a financial coup d'etat.
The challenge for Ben Bernanke and the Fed governors since the 2008 bailouts has been how to deal with the backlog of fraud – not just fraudulent mortgages and fraudulent mortgage securities but the derivatives piled on top and the politics of who owns them, such as sovereign nations with nuclear arsenals, and how they feel about taking massive losses on AAA paper purchased in good faith.
On one hand, you could let them all default. The problem is the criminal liabilities would drive the global and national leadership into factionalism that could turn violent, not to mention what such defaults would do to liquidity in the financial system. Then there is the fact that a great deal of the fraudulent paper has been purchased by pension funds. So the mark down would hit the retirement savings of the people who have now also lost their homes or equity in their homes. The politics of this in an election year are terrifying for the Administration to contemplate.
Various court squabbles over the MERS system for registering mortgages are also nipping at the Fed and Treasury heels. It is hard to win a presidential election in 3100 counties when multiple federal agencies are in the local courts trying to foreclose on half the county while supporting arguments that a national registration system is free to violate local property laws with impunity.
Why should the sheriff respect your rights if you take the position that the county has no rights and local property laws are meaningless? In fact, the Sheriff does not have sufficient staff time to process foreclosures and protect the local citizenry from the growing crime that results from hard times. The Sheriff is also running for election and the people who vote for him or her comprise a much larger group than the handful of local professionals on the big banks payroll, including those processing foreclosures for FHA, VA, Farmers Home and Fannie and Freddie.
So, it looks like the Fed decision last week to buy $40 billion a month in mortgage paper is the ultimate plan to clear the market once and for all of fraudulent mortgages, mortgage backed securities and related derivatives. This means Fannie and Freddie will be bailed out and winding down through the back door. This means the big banks may be paid in full for your mortgage. It also means your pension fund assets will not be marked to market – at the price of debasing the purchasing power of your assets and benefits.
The Fed is now where mortgages go to die. Thousands of mortgages on homes that do not exist or on homes that have more than one "first" mortgage are now going to the Fed to disappear. Thousands of multifamily and commercial mortgages will be bought up as well. As this happens, trillions of dollars that have been amassed offshore will be free to come back into the US to buy up and reposition land, farmland, residential and commercial real estate and other tangibles.
With documents shredded, criminal liabilities extinguished and financial institutions made whole, funds can return without fear of seizure.
QE3 proves beyond any shadow of a doubt that the extent of the fraud was as bad as I said it was. You can count up the bailouts and QE1, QE2, QE3 the numbers speak for themselves. The fraud was indeed in the many trillions of dollars. It was intentional. It was a plan.
Now, the $64,000 question for those whose house is underwater or whose mortgage is in default is whether or not you still owe on your mortgage. Certainly, you still do as a legal matter. If the bank has been paid off, arguably in some cases several times, why not you? Let's see if Fannie, Freddie and the big banks are under orders to quietly pass through a portion of their largesse to troubled homeowners in amounts sufficient to unfreeze the market. If you are in a workout situation, you need to take notice. If enough mortgage write-offs flow through, the Democrats will quickly amass a lock on the elections in November.
If you are in the market to buy a home or other real estate, you also need to pay attention – a major turn is now underway. Watch to see how much the banks pass through to homeowners and property owners to see how fast and big the turn may be. Watch to see the inflow of funds from offshore. This is not only funds returning but investors around the world looking to exchange their dollars for tangible assets to protect themselves from debasement of the dollar denominated deposits and securities they hold. Watch to see what the renegotiation of federal tax policy and the reengineering of the federal budget in response to the "fiscal cliff" do to reposition housing and real estate prices and cost of financing for an inflow looking for large accumulations.
Finally, the way the Fed has engineered the Slow Burn to date is to continually offset monetary inflation with labor deflation. It is worth contemplating how much labor deflation will be required to offset QE3 and how sufficient additional labor deflation might be engineered. Ben Bernanke was quite clever to tie QE3 to unemployment. The problem has become the solution, which is the basis for QE-Infinity.
The Daily Bell is pleased to introduce our readers to editorials from Catherine Austin Fitts. Catherine is the publisher of The Solari Report, and managing member of Solari Investment Advisory Services, LLC and Sea Lane Advisory, LLC. Catherine served as managing director and member of the board of directors of the Wall Street investment bank Dillon, Read & Co. Inc., as Assistant Secretary of Housing and Federal Housing Commissioner at the United States Department of Housing and Urban Development in the first Bush Administration and was the president of Hamilton Securities Group, Inc. She graduated from the University of Pennsylvania (BA), the Wharton School (MBA) and studied Mandarin Chinese at the Chinese University of Hong Kong.
Posted by dave jr on 09/20/12 06:32 AM
This is very good. I have been suggesting for some time that the labor deflation is engineered. Commodity inflation and labor deflation simultaneously keeps fedgov published numbers tame. But the result is massive default and a real estate heist so large it rivals warfare.
Without the QE's, the criminals would be broke due to a heist gone bad, and Americans would be purchasing real estate for half price, and our economy would be in a nonfictional recovery.
Posted by inibo on 09/20/12 08:37 AM
Catherine Austin Fitts is a breath of fresh air. Thanks for posting this.
Posted by zeno on 09/20/12 09:14 AM
second what inibo wrote
Posted by Abu Aardvark on 09/20/12 09:14 AM
"The Daily Bell is pleased to introduce our readers to editorials from Catherine Austin Fitts"
Well, I'm pleased too. Catherine Austin Fitts is precious. See:
'The central banking-warfare investment model' is really a control model, through which a small group of people can control the most resources on the most profitable basis. Essentially what happens is: Central banks print money and then the military makes sure that other parties accept it and that the financial system continues to have liquidity. The question many people ask with regards to a fiat currency, which is a paper currency, is: Why would anybody take paper, which has no value? They take the paper, because it's part of the enforcement and military supervision, if you will, of the network that is printing the money. The system has created a fantastically profitable way of controlling large populations and access to resources very cheaply.
Let's say for a second that Mr. Global is in charge of 'the central banking-warfare investment model': Mr. Global prints money and then people take that paper and give him in essence what he needs to buy up and control the national resources. The population is dependent on his paper and then he controls all the real things. Also through the military, he can steal whatever he wants. And organized crime is a very important component as well, because it can be expansive to drop an army and to occupy a place. If he can take over a place and buy that place with the place's own money, it's much more efficient, and that's where the drug business traditionally comes in. It's basically part of a model for controlling a territory with huge resources in the cheapest way possible."
Click to view link
"9/11 Was A Fantastically Profitable Covert Operation"
Click to view link
"Narcodollars for Beginners: How the Money Works in the Illicit Drug Trade"
Click to view link
Thanks, DB, for having her!
Reply from The Daily Bell
Posted by Rrust on 09/20/12 11:59 AM
This introduction of Catherine Austin Fitts must be one of the high points in the lifespan of the Daily Bell… and that includes the truly remarkable links suggested by abuaardvark. Ignore them at your peril! (smile)... the world may never seem the same again! Ponder the issue: is evil a compounding entity?
Posted by Jeanna on 09/20/12 04:03 PM
Great to see her comments here. She has an excellent grasp of the situation. If hyperinflation is to be avoided, it has to be offset by a deflation somewhere else. Labor deflation has been on-going for more than twenty years. We're talking trillions of new monetary units. I think deflation will have to occur in several other markets as well. It's going to be worse before it gets better.
Posted by PaulRepas on 09/20/12 05:36 PM
So for homeowners in default:
- How does one follow the paper trail to determine if your note holder has been satisfied ?
- If the note was satisfied by Fed purchase (of the securitized RMBS) is the Fed your new note holder and do they have to establish "holder in due course" to continue foreclosure actions ?
Posted by patrickhenrylives on 09/20/12 10:18 PM
For more information about the mortgage issue I suggest a radio show on Republic Broadcasting Network (RBN). A guy named Kevin Clifford has a show at 7pm eastern time called the Mortgage endgame. He has a plan to sue the bankers to recoup damages for the criminal activity regarding the MERS system of recording mortgages. Call in # is 1=800-313 9443 .
Posted by Bischoff on 09/20/12 10:55 PM
The banks and mortgage companies hold title to the improvements, i.e. the house and other physical structures under an unpaid mortgage. The mortgagee however holds the "fee simple" title which guarantees him the use of the location (raw land) on which the improvements rest.
"Fee simple" titles are registered with the County Recorder, and real property recordings are used by the County Assessor to establish the location value for real property tax calculations. The local real property tax, based on the valuation of the location, is the only tax which is economically beneficial, since it does not touch the income of either labor or capital.
It is for that reason that commercial real estate interest groups, such as the "Howard Jarvis Taxpayers' Association", push for the elimination of the real property tax. They want to enjoy the benefits of public improvements paid for with income from labor and capital. The Howard Jarvis Taxpayer Association has been responsible for the passage of Prop 13 in California which suspended real property valuations in favor of valuation by purchase price. Since residential properties turn over at a much higher rate than do commercial properties, local property taxes have shifted more and more to people who earn income from labor or capital. The devastating effect which Prop 13 has had on the economy of California is self evident.,
The banks and commercial real estate interests want to control the use of the land, and threby enjoy the benefits provided by nature for themselves. It is for that reason that they work to eliminate the land value assessments sytem which depends on County Assessors. The ultimate goal of the banks and mortgage companies is to do away with the local real property tax.
It is extremely important that the county registrars insist on proper recording of "fee simple" titles. Banks and mortgage companies which foreclose on houses must register with the county recorder for a "fee simple" title. Based on the registration, the property location will be valued for tax purposes, and as long as the banks and mortgage companies hold the foreclosures, they will be liable for the local property tax. A federal agency cannot register a "fee simple" title with the county registrars. Therefore, they have to work through the banks.
The problem with most of the bank foreclosures is failure to properly register for "fee simple" titles with county recorders. Now, banks and mortgage companies are cozying up to the federal government to encourage them to run roughshot over the County Recorder and County Assessor system. Also, special interest lawyers seek help from federal courts in their effort to take "fee simple" titles by initiating eminent domain proceedings against mortgagees who have defaulted.
Posted by Robnen on 09/21/12 02:27 AM
I'm a little slow on the uptake on economic matters and not all that saavy regarding such issues. Was she immplying in the article that prices are about to drastically take off due to inflation? What if on the other hand you buy a residential income property and a massive inflation makes it difficult for your tenants to pay the rent, which in turn makes it difficult for the landlord to pay his mortgage? And what happens to those property values when interest rates come up to fight inflation? Can somebody more knowledgable please spell out what she was alluding to please? Thanks.
Posted by Abu Aardvark on 09/21/12 05:30 AM
@ Robnen on 09/21/12 02:27 AM
Howdy! You may find answers to some of your questions here:
"US Existing Home Sales Jump to 2-Year High"
Click to view link
"It's Now Cheaper to Buy Rather Than Rent in Top 100 U.S. Cities"
Click to view link
"It's Time to Lock in Mortgage Rates---Long Term - They aren't going much lower"
Click to view link
Posted by Bischoff on 09/21/12 06:48 AM
While Ms. Austin Fits paints a bleak picture about the instruments issued by the FHA, VA, Farmers Home and Fannie and Freddie which are government agencies and government sponsored agencies, she underestimates the problem with these instruents by a wide margin.
Much of the AAA paper to which Ms. Austin Fitts refers was sold due to derivatives, meaning interest rate swaps used to insure against interest rate fluctuations. These interest rate swaps amount to quadrillions of dollars, if they have to be unwound. While it is theorectically possible for the Fed to create 150 quadrillion dollars in computer blips to clear the derivative obligations, to try and do so without plunging the world economy into total disaster is impossible.
The situation which created the real estate bubble and the blizzard of MBSs, secured by derivative, began with the passage of Proposition 13 in California in 1979. By changing the California Constitution to by-pass the requirement for land value assessment, Proposition 13 enabled real estate speculation to reach a frenzied pace. Without property tax consequences, real estate values in 19 of California cities rivaled those of Downtown Manhattan during the early years of the 21st century.
When you consider that the physical structure of a house deteriorates and loses value, the only appreciation a "property" can realize is the speculative appreciation in the value of the location. If the location value is not tied to a local property tax, the plunder of those who earn their income from labor and capital by those who speculate in real estate is massive. The outrage of getting at the income of labor and capital through Proposition 13 had to sooner or later be reflected in the ratings of mortgage bonds bought by investors throughout the world.
To keep up ratings up for mortgage bonds and other MBSs, interest rate swaps were invented. These interest rate swaps amount to insurance against interest rate fluctuation. When Ms. Austin Fitts talks about fraud, what she in essence is talking about is interest rate swaps. Here is what I mean... .
Laying off risk in buying future contracts in commodity markets makes sense. Future contracts guard against "Acts of God". However, to sell interest rate swaps to guard against the risk of interest rate fluctuation, when interest rates are set by a body of twelve people on the FOMC at the Fed, is utter lunacy. To drive the derivative obligations to 150 quadrillion dollars is pure insanity, unless the purpose all along was to collapse the Anglo-Saxon land value taxation system as part of the constitution of all the states based on Article IV of the U.S. Constitution.
Californians broke the covenant that existed between them and the residents of the other fortynine states by changing the original constitution written according to the requirements of Article IV when they joined the Union.
When the derivative business finally collapses, the resultant legal actions will put the continued existence of the United States into question.
In the meantime, the Fed's QEs are at best a stop gap measure to get us through the next presidential election. The choice in the upcoming election is really between communist totalitarianism under Barack Obama, who will settle the mortgage problem as he settled the GM and GE problems, or Fascism which will solve the problem similarly, only with a lighter touch, unless Mitt Romney should receive enough of a mandate to let him become a statesman.
If that were to occur, the solution is to establish a parallel, redeemable currency under the RBD system of banking with employment of the gold standard. The investors holding their mortgage bonds denominated in irredemable FRNs could exchange their irredeemable currency investment for redeemable currency investments, thereby at least saving a small portion of their assets while letting free markets work their will.
Under RBD banking and the gold standard, the interest rate would then again be set by the willingness of savers to part with their gold savings for a return. This would do away with interest rate swaps which are a total fraud.
There really is no other solution. It is communism and Barack Obama's income redistribution, or fascism through control of land by banks and real estate interests who want to get at the income of labor and capital.
If it turns out that the country is saved through the creation of a parallel currency, as Germany successfully accomplished during the Weimar Republik when it created the redeemable Rentenmark under the gold standard to circulate along side with the highly inflated Reichsmark, we should consider ourselves lucky.
It is true enough that The German solution didn't last long, because of the election of Hitler as Chancellor, but we should hope that the hindsight of history will help us guard against electing a dictator after the country has been saved once more.
As regards your specific question about real estate investments, no matter what the Fed does with QEs, it will never be enough. QEs are in essence eliminating the "front running" of the Fed by the bond speculators which if bond speculation ceases, the result will be severe deflation. The QEs of the Fed will not save us from a deflationary spiral. The Fed's QEs amount to pushing on a string.
Posted by dotti on 09/21/12 07:21 AM
RE: Abu: "The system has created a fantastically profitable way of controlling large populations and access to resources very cheaply."
Good quote, thanks, Abu.
Just to add/clarify, put into the mix the idea of "democracy" and you have the icing on the cake. If people feel that they are a democracy, they will work harder and accept more negative consequences. The people of Greece brought on their own problems, now they must pay? The rebels in Libya fought for a democratic ideal? Really?
We have free elections in this country and freely choose our leaders who then determine our fate as a nation. Really?
Maybe I'm feeling particularly cynical this morning, but I think it's all a fraud.
Thanks to all of your for your comments.
Posted by debit55 on 09/21/12 07:27 AM
So how does QE3 help unemployment? Are they giving some of that money to the people that are unemployed. i mean more than the small amount we get from unemployment now, like a lump sum?
Posted by caljam71 on 09/21/12 10:30 AM
There is much more to Bernanke's action than the effects on housing and unemployment. He essentially threw the election to Obama. He flooded the market with a fat wad of cash right before the election in an attempt to drive up the stock market.
Also, because Romney has stated that he will not re-appoint him, he has poisoned the well for any other near term future Fed Chairmen. What meager tools are now left on the table after this "forever" action? Virtually nothing. His devious actions are shameful. The more I see... ..the more I think Ron Paul might just have something regarding this post created by the Big Banker cabal.
Posted by Hoss on 09/21/12 11:57 AM
Great article. But what is described in the third paragraph is going to happen anyway, and revolt will be forestalled by war. Look at the Drudge headlines. All the memes are being pushed together.
Posted by dave jr on 09/21/12 10:12 PM
Good post Hoss.
I have resisted the postulate of factions among the elite control freaks for some time now, but I am running out of alternative explanations.
Those who want to control through socialism, environmentalism, unions and big government vs. those who want to control through fascism, militarism, crony corporatism and big government. Globalism is happening, who will control?
Could it still be the royals vs. the technocrats?
Win lose or draw, it is peacefull, productive, freedom loving individuals who suffer, unless the unwitting support is withdrawn.