CNBC's "House of Cards" Put Together in 8 Segments With Rock's Rant As An Intro

Greetings my friends,

Every once in a while I run across text, photo and video sources which I label "Must See" or "Must Read" on my blog at http://www.a1anews.com/.

What I've put together today is a "Must View" investigative piece from CNBC's David Faber which I would rate five stars *****.

I quit watching CNBC back in the earlier part of this new century after I lost a lot of money in stocks which were continually trumpeted on their shows. I also grew tired of their constant cheerleading of the so-called "Goldilocks Economy" which I suspected was built more and more on cheap credit pumped into the Economy by a worried Fed chief, Alan Greenspan, who wanted to curry favor with the new One Party Rule, a Party which deregulated business on every front.

So, it was with jaundiced eyes and ears that I sought out this CNBC piece by Faber called "House of Cards" which I had seen one minute snips and cuts of all over the Internet. It looked promising, I thought, but was Faber going to be a shill in the end for Wall Street like CNBC always seemed to be during the dotcom and Housing Bubble runs?

Well I'm here to tell you this is a very fine piece of reporting, well documented and balanced. Faber did not point his finger at any one person or institution which partook in the greatest Ponzi Scheme unleashed on our Economy. Instead, he simply interviewed the guilty (who agreed to be interviewed) and let them be hung on national TV by their own admissions.

What really takes my breath away while watching the summary of everyone we meet in this series is how many people who knew what was going on simply feel no guilt or remorse. The King Jackass of All is Alan Greenspan who brays at this series' end that he's still against regulations which hamper businesses, that his view of free market Capitalism with no overview (Ayn Rand's Objectivism) has brought millions of people out of poverty and has raised the living standards of Americans everywhere. That kind of bullshit analysis by "the Maestro" who ran the banking cartel's Federal Reserve just chaps my ass to no end. That Greenspan can't realize his artificial "Greenspan Puts" did more to damage our Economy than anything since the Great Depression simply makes me realize that the "best and brightest" minds which he touts as saviours of our economy are not smart enough or good enough to make sure this will not happen again.

Watching this entire documentary makes clear that unregulated Capitalism (let's call it what it really is a mixture of Unregulated Greed, Kleptrocracy, Oligarchy and Plutocracy which gives us Crony Capitalism) is every bit as bad for people as Totalitarianism Socialism/Communism for a world Economy.

I don't know what is going to come after this Great Recession. Will there be a Depression too? I don't know. But I do know this: housing is not going to recover and go back to the good ole go go years of the recent past. Housing as a surefire bet to beat inflation is probably going to be the absolute worst losing bet anyone can make for the next two decades.

I don't care what any Realtor in Key West or the national NAR thinks or says. Most all of them (Realtors that is) were pumping housing all the way to the top and over the cliff. They are still pumping housing telling you "There's never been a better time to buy."

And yet, after 2 to 3 years of fast depreciating home prices, we're expected to pony up our money now for housing when all the excess inventory and all the failing banks have not been wrung out of an artificially propped up so called Capitalistic market which looks more Socialistic by the day? Are Realtors out of their minds that they are still in denial so badly as to claim "There's never been a better time to buy a house?" After all, wasn't it time to buy last year? And the year before? And the year before that? If you bought in the past three years as Realtors kept pounding the table to buy, you have lost equity in your home. For believing the NAR words over the past 3 years, you are known as a Greater Fool or the Latest Bagholder.

People who push Real Estate now are not viewing this economy in a Macro-Economic way. They are like the idiots and fraudsters in banking, mortgage lending, appraising and Real Estate (especially Realtors who drank their own Kool-Aid and bought houses to flip)who only think locally, not nationally or globally.

In my home town, Key West, I heard, "Key West houses double every 3 years" as a reason to buy at the zenith of the market. One Realtor went so far as to say with certainty, "You will never see a Key West Home sell for less than $600,000 again". And yet recently, on this very blog, I showed you a house selling for less than $200,000 downtown that I wouldn't give you $100,000 for.

To the cheerleaders for housing and lending I ask you wake up and realize this: we are not going back to the days of giving away loans to anyone who can fog up a mirror. Those days are over for another 60 or 70 years, until everyone who understands the current crisis has died and gone to Money Heaven with their vaporized digital 0's and 1's in their insolvent bank's accounts.

Your kids' kids will be paying for this largess and "Affluenza" (I love that word and I only heard it for the first time today viewing this CNBC special) which the One Party Rule left unchecked and unregulated.

And, like Faber, I'm not pointing fingers at just the white collar criminals in this Housing Bubble. I point my finger at every single American who bought a home knowingly on no income, no job, and lies up the ass which got them into a home which they were going to flip and make hundreds of thousands off so they could buy an even more expensive home to flip to make millions off ad infinitum.

I point my finger, like Faber, at a whole society which has gone mad with Greed, and which shows little guilt for their actions and which asks for government bailouts to save their sorry asses from the "Invisible hand" of Adam Smith's Capitalism which is supposed to reward failure with economic death.

Today, Americans of all classes want riches without accountability or risk. We are sick. And to kill the cancer of greed, we must take the bitter medicine of living below our means for decades to come. To think we can easily go back to the "Me, me, me" society where everybody will be a millionaire simply by purchasing a house is absolutely denying the reality of the way our Economy has collapsed and is being changed to a new model which will no longer reward non-savers, shysters, loan sharks, white collar criminals with business degress and all sorts of sociopathic type of personality disorders who inhabit scams when they are hot. Regulations are coming, boys and girls, which will wreak havoc on risk taking and EZ Lending. There will never be another Housing Bubble in our lifetimes.

All these bellyaching right wing lunatics on talk radio taking Mr. Obama to task for telling us how bad the Economy is need to STFU! The country has partied at the punch bowl too long. We were so drunk with greed we couldn't think past first base and ask the simple question, "How the hell will I pay for all this stuff if Housing prices go down?" But then no one ever assumed this would happen because Realtors and their pimp Economists at the NAR would remind you "Housing never goes down. It's the best way to build your wealth." Never mind that in Florida in 1928 we had the Great Real Estate Crash which precipitated the 1929 Stock Market Crash and which preceded the Great Depression of the 1930s. And here's one more thought: certain mansions sold in Palm Beach, Florida during the Roaring 20s have never gotten back to their 1920s selling prices (in 1920s dollar terms) to come anywhere near matching or beating inflation over those last 80 years.

So, I predict housing bought in the early part of the 21st Century will never make up for lost buying power compared to inflation. I say this because median housing prices decreasing + a growing unemployment + declining wages + declining rents + DEFLATION across the board (which I believe will sooner or later lead to a double digit inflation in consumer prices, not asset prices) is going to equal decades of sub-par housing returns. When housing returns, it will need to catch up for many years of these sub-par returns. People who bought a house just two years ago only to see their equity drop more than 20% may be in for a rude awakening 28 years from now when they pay off their mortgage and realize their house has not kept up with inflation . . . not even close to keeping up.

While politicians play games, the country continues to burn with growing unemployment, inventory of all types growing and fetching decreasing prices, governments declaring bankruptcy, companies going bankrupt, manufacturing showing huge declines in orders, banks being declared insolvent, retailers going belly up, and yet, somehow, this all portends good vibes for empty headed Realtors with vested interests to declare they are still worth 6% commissions on services which all Americans now hold up to the light with jaded eyes?


Realtors are now on the losing end of History and marco-economics and they are not smart enough to come right and say, "Hey you, don't buy now, wait. There's no rush to buy something which you might be stuck with for the rest of your life. Prices will continue to freefall. They might flatline for decades, or at the very last, trail inflation for years to come."

There's no Realtor in the world who will assess the situation for what it is as Realtors aren't in the business of selling reality and mark to market pricing. (Realtors say they mark to market, but if that was true, why have they been artificially propping up the prices of MLS sheets by not showing the entire histories of listed properties and not showing foreclosure sales?) They are in the business of selling dreams built on future gains. And that's where they are dropping the ball. The future will not be like the recent past.

Anyone who doesn't realize there will be fewer loans in the future given out to unworthy people who are classified as huge credit risks will end up losing their shirts on Real Estate.

Anyone who doesn't realize that mortgage chop shops in cahoots with fraudulent appraisers and Realtors are a thing of the past is not reading Mortgagefraud.com to see the daily lineup of ex-white collar employees going to jail for defrauding borrowers.

Anyone not paying attention to falling median prices, artificially goosed MLS numbers, rising foreclosures and the rising sales of foreclosures. . . which will continue to pressure home prices to fall . . . deserves to continue losing money while believing the fallacy "It's never been a better time to buy a home."

Anyone not paying attention to the speed of falling rents . . . which is also a marker as to where home prices must recede . . . deserves to lose in Real Estate.

Anyone not capable of doing simple rent vs. own math deserves to buy a home now and watch it fall in value another 25% or more.

The question one must ask after viewing this CNBC special is, "If so many of the best and brightest were wrong about the Housing Bubble then, why is it they are right about the housing now?" Do Realtors really think the majority of American people believe anything they say any longer? I think the word Realtor connotes a more negative stereotype these days than car salesmen and politicians. Just ask anyone in a bar what they reall think of the Real Estate profession.

So, like many of my friends, I'm happy to rent, look for better rent deals at the end of my lease, and keep trading into better living quarters at smaller rents. It's just much easier to rent now, amass some cash (I'm investing in the stock market every paycheck buying solid companies which sell "necessities" such as electricity, water, consumer staples and I'm way, way ahead of the S&P 500)and pick the time to buy a house at our own leisure. When the housing market bottoms, we'll all have time to pick and choose as there are so few of us who will qualify for loans and who will have money amassed for a downpayment. Housing is not going to make a "V" shaped recovery. Everyone knows it except for the NAR and Realtors.

(An unoccupied housing development)

There is so much unreported inventory not shown on the MLS that one must wonder what the real inventory numbers are. Housing developments all over Miami are filled with Section 8 renters or have been taken over by squatters or abandoned to vandals and thieves. Many of these developments are not even 10% occupied. Many of these never sold homes are not shown on MLS rolls as developers are trying their best to keep home prices artificially propped up. But that too will give way.

Builders and developers are folding daily, weekly and monthly. There is more inventory than people who can afford to buy. And many people who can afford to buy can't sell their old homes at a price which will give them equity back to purchase another home. Prices must and definitely will continue to collapse. What I'm saying is people who bought housing a year or two before and after the housing top will see soon enough their purchases lose more value as prices fall to 1996 levels.

(As an illustration, I passed on buying a house in Key West in 1996 for $157,000 . . . which i felt was too high at that time. By 2005, that house was appraised at $600,000. Today, you could not get $300,000 for that place. By 2011-2012 that house will not command a $200,000 asking price as Key West medians continue to crash and Key West foreclosures continue to spike.)

All this bodes ill for developers, builders, lenders and Realtors who keep chirping that "Now is the time to buy Real Estate." What that motto of the NAR says to any sane investor/homebuyer is "We are beginning to panic now. We've been saying the same thing for the past two years while declining median prices in homes pick up steam. And we know we've been wrong, badly wrong, ever since we started this non-stop barrage of badly misplaced enthusiasm in our ads."(See my link on A1A News today which tells you California median prices dropped 10% between December 2008 and January 2009, and 41.5% in one year) In essence, the NAR's advertising that "now has never been a better time to buy a home" is saying, "Please, buy something, anything. Help save our sorry error prone asses."

That said, watch this introspective documentary on what caused the current crash. We can all learn from our mistakes. If you can view this entire investigative piece and still come away feeling our National Economy is not going to come away from this radically altered, then you have no anlaytic skills and should invest by saving money under a mattress.

For those paying attention, we know this about the forseeable future: people who cannot afford a home will not be given loans built on lies which are sold to an unregulated Wall Street which in turns slices and dices and has false AAA ratings assigned to this toxic waste which in turns enables them to sell this crap to unknowing and unwary investors who want a "safe" return on mortgages sold to Americans who can't afford to pay them. All of this folly which rewarded icompentence, unchecked greed and outright fraud is coming to an end.

Anyone who doesn't understand the radical shift in our Economy is going to lose more money and derserves to. Buy a house now? What's the rush. But if you must be the latest bagholder of an uneasy to unload asset, go ahead. Play the fool again. Believe in the nice smiling men in the Armani suits. Believe the Realtor who has vested interest in seeing Real Estate artificially propped up by any means so they can make a healthy living again. But leave me and my family and my friends alone. We won't take that trip with you. We won't be fooled again. Not in this lifetime.



House of Cards Part 1
*Two Unqualified Buyers Get Unaffordable Homes
*One immigrant making less than $900 a week gets a loan for a house valued at $584,000 by claiming he made four times what he actually makes
*Praise Jesus, one borrower visited in her Church by her loan brokers to give her the good news *Mortgage brokers love it, pizza delivery people become mortgage brokers, and Alan Greenspan the Maestro plays dumb as a damn garden hose



House of Cards Part 2
*Meet the poster company for EZ loans: Quick Loan Funding
*The EZ Money refinancing "No Brainer" swimming made possible by Quick Loan Funding
*Inside Quick Loan Funding where refis were wrapped pp in 20-30 minutes
*Ex-pizza deliverymen, ex-car sales people, ex-electronic store sales reps all make $20,000 to $30,000 monthly as loan officers who gave away loans to anyone who breathed
*Quick Loan Funding training was "Close The Loan"
*No California state regulatory body required licenses for loan officers
*A look at the founder of Quick Loan Funding, Daniel Sadek, who is an immigrant from Lebanon with a 3rd Grade education and who once pumped gas for a living \
*Ads for Quick Loan Lending's hook . . . "You Can't Wait, And We Won't Let You"
*US Air Force Sergeant returns from Afghanistan and refinances through Quick Loan Lending
*Homes turn into giant ATM machines: In 2004, $900 Billion is withdrawn in refinancings
*Quick Loan's owner Daniel Sadek (reminder: he had a 3rd grade education) was refinancing $200 Million monthly and got financing through Bear Stearns, Citigroup, Wells Fargo, etc, who gave him huge lines of credit
*Quick Loan Funding owner Daniel Sadek was making $5 Million a month for himself
*Quick Loan Funding's owner Daniel Sadek makes a cheesy action movie "Red Line" starring his B-Rate daytime soap opera girlfriend and he brags he never made a loan which Wall Street wouldn't buy



House of Cards Part 3
*Wall Street In Denial
*Bush in 2004: "The Economy is strong and getting stronger"
*Greenspan encourages new kinds of loans so more people can buy houses . . . which is music to the ears of Wall Street bankers
*The birth of the monstrous "Pay Option Negative Amortization Adjustable Rate Mortgage" Loan
*Wall Street Mantra: Have not gone down in a single year since the Great Depression
*Wall Street pools these shaky loans, carves them up, and sells them to Greater Fools
*Ratings Agencies label Wall Streets toxic waste "Investment Grade" AAA to BBB
*How Ratings Agencies lowered their standards: monetary incentives from Wall Street or "I'm going to take care of you because I'd like to see you come back for more of my ratings"
*Ratings Agencies compete harder for Wall Street bankers business, lowering standards during the rise of the Housing Bubble
*The birth of the CDO or "Collateralized Debt Obligation" built on home prices "which never go down", so what could possibly go wrong?
*CDOs work like a charm luring investors from around the country and the world



House of Cards Part 4
*Narvik, Norway - a town of 17,000 people above the Arctic Circle invests in CDOs
*Narvik, losing population and its tax bas, lured by "safe" returns of American CDOs as pitched to them by Citigroup
*Narvik "secures" a loan from a local firm, Tera Securities, built on future earnings from their hydo-electric plant and uses that loan to buy Citigroup CDOs from Tera which they labeled "a sure thing" AAA "really safe" investment
*Narvik's mayor explains the money earned from CDOs was to be put to use in supporting nurseries, schools, homes for elderly etc.
*Hindsight tells everyone in Narvik's government that no one, including Tera's brokers, did not fully understand the CDOs Narvik bought
*Narvik and other small Norwegian towns buy $200 Million of CDOs thinking their budget problems are over
*Back in New York City, CDOs are the new "Cash Cows" of Wall Street
*Faber interviews a Wall Street banker who says his old firm, Bear Stearns, could securitize anything with future revenues . . . films, sport stadiums, etc.
*Wall Street then packages "Mortgage Backed Securities", another new line of sliced and diced financial product built on these "future revenues" backed by what was thought of as "safer" assets: Mortgages on Americans' homes
*These MBS's built on the premise that Americans, for the most part, will have no problem making their loan payments as "home prices always go up"
*These Mortgage Backed Securities are what were bundled together, sliced and diced with Ratings Agencies's "safe" ratings, and sold down the line as "safe" CDOs
*As more demand rose for CDOs, the more Wall Street needed more Mortgage Backed Securities
*The more demand for Mortgage Backed Securities, the more money Wall Street bankers threw at lenders to give to Americans for loans
*This "financial engineering" makes credit available to everyone who can fog a mirror
*CDOs became "America's 21st Century Export" with "at least more than 50% of CDOs going overseas"
*Greater sales of CDOs means growing fees, revenues, profits and bonuses on Wall Street
*In 2000, maybe $50 Billion a year in CDOs. By 2004, CDO sales were up to $300 Billion per year
*At the peak in 2005, Wall Street Bankers are buying Mortgage Backed Securities with abandon
*With raging demand for MSBs, Wall Street lenders beg home loan lenders to find new ways to push more loans
*Freddie Mac and Fannie Mae plunge into the business they once shunned . . . Sub-Prime Mortgages
*Sub-Prime="Everybody Wants A Home . . . Nobody Qualifies"
*"Greed is a hard emotion to put in check"



House of Cards Part 5

*You never heard borrowers cry when they cashed in those refi checks
*Where were the watchdogs? Wall Street banker tells Faber he and his bosses never heard from the Federal Reserve or the SEC
*California's euphoria in 2005 from all this EZ Money: "Affluenza" where conspicuous consumption ruled
*Flipping homes for profit becomes a sport
*In 2005, Housing was our economy with 800,000 jobs created in housing related jobs just between 2001 to 2005
*In 2005, Greenspan did not realize the extent of the Housing Bubble. He simply thought the markets had a "little froth". He was oblivious to the growth in Sub-Prime Mortgages which represented 20% of all new mortgages
*Greenspan tells Faber the Fed could have prevented the stock market boom and the Housing boom by clamping down on EZ lending, but the country would have suffered 10% unemployment
*Greenspan says he could not have sold Congress on clamping down on EZ Lending, not when they were trumpeting home ownership which enriched our Society
*SEC says it never intervened because they believed "the banks would police themselves"
*This lack of oversight contributes to the "giddy growth" in the Housing Market




House of Cards Part 6

*One investor, Hedge Fund Manager Kyle Bass, bets against the Trillion dollar Housing Industry for many reasons, one chief one being it was the biggest "unregulated" industry on the planet
*Bass says warning sign number two was home prices were rising much faster than the incomes of people who were buying them
*Bass concludes rightfully that Housing Prices would have to crash for people to afford houses again
*Bass discovers the loans of Quick Loan Funding which underscore his thinking to invest against Housing
*Bass gets a loan officer at Quick Loan Funding to admit that the whole firm existed to finance Sadek's film career
*Bass watches the movie "Red Line" where two real $500,000 cars are catapulted and crashed and shakes his head at the waste. "That kind of flippant use of capital makes you raise an eyebrow."
*That movie tells Bass, this is where his hedge fund needs to be . . . on the opposite side of the trade of all the extravagance and "Affluenza" and greed which had swept America
*Bass follows Sadek's loans to Wall Street, he wanted to find the people buying these toxic loans
*Bass finds out that the bankers buying this sewage were fresh out of business school. These guys tell Bass they are not worried about the quality of the loans because "we package them up and sell them off as fast as we can".
*Bass asks, "What if the Chinese get burned buying this stuff and they decide to quit buying these MSBs and CDOs?" The young guy said, "This will never stop." Bass leaves that meeting more certain than ever that a catastrophe is coming
*Bass than has a serendipitous meeting at a wedding with a Wall Street guy who packages CDOs. Then Bass learns from this insider how Wall Street packages this waste to get the ratings of AAA so they can "get rid of them".
*Bass learns Wall Street was packaging crap to unknowing and unwary overseas buyers of anything labeled "AAA"
*Bass says, "The bottom line is they put lipstick on a pig so that they could sell it to anybody who didn't understand what they were buying"
*Bass then examines the thinking of Ratings agencies. He visits one and finds they make their ratings off assumptions that housing prices will "never fall".
*Bass learns the ratings agencies are pricing in 6% to 8% home price appreciation into their mathematical models, modeling this into perpetuity. It was clear to Bass this would never happen
*And yet nobody Bass met ever though it was remotely possible home prices could ever go down
*Analyst tells Faber on camera, "There's so many ways to take something that is crap and turn it into Triple A (AAA)."
*Analyst tells Faber there was not a tremendous amount of financial sophistication shown by people rating these radioactive CDOs
*Greenspan says to Faber even he with a heavy background in math does not understand the complexities of CDOs
*Kyle Bass bets that if the CDOs are made of garbage that someday they will be worth garbage
*Bass begins to buy huge insurance bets from the investment firms which sold CDOs, betting that these CDOs will blow up. He invests $1 Billion against the cheerleaders on Wall Street. He visits Bear Stearns and explains his thesis to them and asks them that if he's right, how will they manage their risk? They cut him off and tell Bass, "you worry about your risk, we'll worry about ours." As Bass walks out of the Bear Stearns meeting, one of the BS guys puts an arm around him and says, "It was a very compelling presentation, and God, we hope you are wrong."




House of Cards Part 7

*Faber interviews the Bill Dallas, CEO of Own It Mortgage Solutions which made $9.5 Billion in loans in 2006, or 15% more than they had lent in 2005
*In 2006, Dallas realized the good times were over.May of his loans were going bad, quickly. It only took a few of Sub-Prime loans to tank his whole operation.
*As delinquencies pick up speed, Wall Street banks quit buying bad loans from lenders such as Own It
*Without Wall Street money, guys like Bill Dallas couldn't make new loans. Consequently Own It folds in December of 2006.
*Mortgage credit begins to dry up. Homeowners can't get new loans to buy new homes.
*And then home prices stop rising
*When home prices quit rising, Americans could no longer refinance
*Those with Adjustable Mortgage Rates had no way to escape higher mortgage payments
*The House of Cards begins to collapse
*Quick Loan Lending goes out of business, 40,000 mortgage brokers lose their jobs
*More Americans fell behind on their payments
*US Air Force Sergeant we met earlier in the program and his wife put off her father's burial for a cheaper cremation. Took money saved from Dad's burial annuity to refinance her home so that she and now invalid husband (Post-traumatic syndrome injuries) could stave off foreclosure
*Several people we met earlier are foreclosed upon
*Brand new neighborhoods become ghost towns
*Home prices begin to fall quickly
*When the world realize the CDOs are junk, people quit buying Wall Street's toxic waste
*Then Faber goes back to Narvik, Norway and discovers the CDOs they bought and thought were built on Mortgage Backed Securities of American's homes, were actually built on corporate and municipal debt bonds. Eventhough Narvik's CDOs were not mortgage backed, it did not matter. Once Mortgage Backed Securities linked CDOs crashed, it took down all other types of CDOs too, even those based on future profits from film, government revenues, corporate future profits, they were all priced downward in the Credit Crunch
*Narvik is now crashing in turn. The town closed a school, slashed expenditures to elderly care, and may cut back on fire department hours. Mayor says, "I've learned not to trust "nice man in Armani suit".
*In a story filled with losers, only Kyle Bass's hedge fund which bet against the Housing Bubble won big . . . it went up 600% over 18 months
*Bass says, "The American Dream was pervasive fraud . . . clearly borrowers borrowed too much, clearly lenders lent them too much. That will not balance itself until we have the Darwinian Flush" . . . where the people who can't afford the loans get wiped out, where home prices get back to where people can afford them.




House of Cards Part 8

*Banks have already lost more than $1 Trillion and they are still racking up losses
*The Wall Street banker who sold CDO feels no guilt. "The borrower did not have a gun to his head to sign those documents."
*The other Wall Street banker who packaged these CDOs feels he did the work everybody else did, so he admits no guilt either
*Greenspan feels no guilt "the vast majority of them felt they knew when to get out." The best and the brightest were trusted to not bring on this thing on. Greenspan still believes in free markets without regulations. Greenspan feels we should most appreciative for our Economy which has brought so many out of poverty.