Ex-Lehman CEO Cries Out Loud Because He Didn't Get a Bailout; On the Flipside, He and His Henchmen Made off Big with the Booty

Astonishing! Two Stories Tell Two Sides to the Lehman Debacle!


One of my favorite posters on Motley Fool boards, Goofyhoofy, just laid headlined post "Astonishing! Two Stories!" post on the METAR message board. This post was #258085 posted at 6:08 PM yesterday. To see the original post and the entire thread of answers to it, click here.

For a tease of what you can read from the links Goofyhoofy supplied to display Lehman's "It ain't easy being sleazy culture," I will simply print, word for word, what Goofyhoofy printed in his short post . . . including his two links to the bigger picture at what is wrong with white collar greedheads who used to work at Lehman:

Lehman's Fuld: Where Was Our Bailout?

Richard Fuld, the disgraced head of Lehman Brothers , said he would wonder "until they put me in the ground" why the U.S. government did not rescue the 158-year-old Wall Street firm and claimed regulators knew the full scale of its condition far before its collapse."Until the day they put me in the ground I will wonder," Fuld said in his first public comments since Lehman filed for bankruptcy protection. "I do not know why we were the only one" that was not rescued.


Lehman Managers Portrayed as Irresponsible

Even as the investment bank Lehman Brothers pleaded for a federal bailout to save it from bankruptcy protection, it approved millions of dollars in bonuses for departing executives, a Congressional committee was told Monday.One Lehman document among thousands reviewed by the House committee showed that four days before the bank filed for bankruptcy protection, Lehman’s compensation committee was asked to grant $20 million in “special payments” for three executives who were leaving, Mr. Waxman said. An e-mail exchange recommending a delay in bonus payments was apparently brushed aside.

(Note: the next words are those left by Goofyhoofy in his Original Motley
Fool post.)

Lehman spent $5 billion in executive bonuses, $4 billion in stock buybacks, and another $750 million in dividend payments in the last year, even as the company was being warned by its own internal auditors that it was facing a liquidity problem.

Now here are some important points which Goofyhoofy did not lay out in his short post and which I've scooped from both of his excellent links about the Lehman fiasco. My comments follow the bits I've taken from both New York Times articles.

From the first story Lehman's Fuld: Where Was Our U.S. Bailout?

• In several hours of testimony before Congress, Fuld spoke methodically and at times seemed to preach financial intricacies to lawmakers, losing patience several times with members who pressed him for precise answers. Well I'm sure His Arrogance, Mr. Fuld, made some friends in Congress with his short temper.

• Rep. Henry Waxman, a California Democrat who chairs the panel, is holding hearings to find out what went wrong and what changes are needed in financial services regulation. Waxman is a real congressional pitbull maverick who has been watching out for Americans best interest for years. The guy is not afraid to investigate any wrongdoing in either party.

• The committee obtained thousands of pages of e-mails and other internal Lehman documents that "portray a company in which there was no accountability for failure," Waxman said. Pride goeth before the fall. Chalk another one up for "Companies which are too big to fail."

• Lawmakers on Monday voiced opposition to the bailout bill, blasted Lehman's actions and took exception with Fuld's compensation, which the committee calculated as nearly $500 million in cash, stock and options from 2000 through 2008. Jeez O' Peet. His Arrogance Fuld received half a billion buckaroos for running Lehman into the ground? Where can I get me one of those jobs?

• Rep. Elijah Cummings, a Maryland Democrat, cited an e-mail exchange in which George Walker, President Bush's cousin and a member of the Lehman executive committee, mocked a proposal for top company executives to forego their 2008 bonuses.Walker responded to the proposal from a fund manager at Lehman unit Neuberger Berman by saying, "Sorry, team. I'm not sure what's in the water" at the unit's headquarters. Fuld also dismissed the idea. "Don't worry -- they are only people who think about their own pockets," he said in an e-mail to Walker. Why does this not surprise anyone who has followed members of the Bush family over the past 20 years? Why does this surprise anyone who followed the email trail in the Enron and Worldcom trials where we see over and over again men of no conscience enriching themselves at shareholders's expense.? These guys are sociopathic moneygrippers. If we don't regulate them, they always steal us blind.

• The Federal Reserve and Treasury Secretary Henry Paulson undertook a series of emergency measures to rescue mortgage finance companies Fannie Mae and Freddie Mac. U.S. authorities also orchestrated a deal to sell Bear Stearns to JPMorgan Chase & Co. However, as Lehman's stock continued to plummet and the investment bank was unable to secure a buyer, Paulson was adamant that no government money be used to rescue Lehman. Think about that Paulson guy, Your Arrogance Fuld. Paulson onced headed Goldman Sachs, one of your chief competitors. Did Your Arrogance ever piss off Mr. Paulson on a deal? Do you think this is some kind of payback for your legendary hubris?

From the second link:Lehman Managers Portrayed as Irresponsible

• Richard S. Fuld Jr. blamed the news media. He blamed the short-sellers. He blamed the government, as well as what he characterized as an “extraordinary run on the bank.”But the chief executive of Lehman Brothers Holdings, the bankrupt remnant of a once-great investment house, never really blamed himself. Yes indeed. You rise to the top of one of the biggest investment banks of the planet. You suck out $500 million in bonuses and salary in eight years, you seek the Hosannahs and praise of your cherry picked board, but when there's TROUBLE, you want no accountability? As the Church Lady used to say, "How convenient!"

• Members of the committee, several of whom mispronounced Mr. Fuld’s name as “Fold” or “Food,” also hammered the Lehman chief executive for making what they described as rosy public statements about the bank’s health that did not reflect a scramble for cash behind the scenes. I believe it's pronounced "Fool" rhymes with "cool".

• “I wake up every single night wondering what I could have done differently,” he said. “This is a pain that will stay with me the rest of my life.” Yo, dude, maybe someone would believe this act of being contrite if perhaps you gave back say 90% of what you took to your burned shareholders. Yeah, I'll bet that happen when there are ice bergs in Hell.

• Mr. Fuld, by turns combative and contemplative, and often pained by interruptions of his answers, repeatedly denied that any misrepresentations took place. Even when confronted with internal documents that seemed to tell a different story, Mr. Fuld said he believed until five days before the Sept. 15 bankruptcy filing that Lehman remained in decent health. His Arrogance Fuld must be pained he must sit and be told to shut the "F" up for the first time in his life. Sic Semper Tyrannus.

• At one point on Monday, Mr. Fuld was confronted with an internal memo dated June 8 that included warnings about Lehman’s condition and asked the question, “Why did we allow ourselves to be so exposed?” Mr. Fuld, after a long scan of the memo, said, “This document does not look familiar to me.” Note to His Arrogance Fuld: this is what "stepping on your dick" looks like to outside observers.

• Mr. Fuld was once worth close to $1 billion and now has a net worth estimated at about $100 million. He and his wife have been forced to sell some of their renowned art collection. "Oh my God, dear, don't let them take the Piss Christ, it's still accelerating in value!"

• Later in the hearing, Mr. Fuld was asked why Lehman approved nearly $20 million in payments for two departing executives about a week before the bankruptcy filing. Mr. Fuld said one payment, $2 million for Andrew J. Morton, the head of fixed income, was deemed “appropriate for his years of service.” Another $16 million, paid to Benoit Savoret, who was leaving as chief operating officer for Europe and the Middle East, was a result of a contractual obligation. "Hey, we're golf buddies. After this, I won't ever have to buy another round at the 19th hole."

• After the hearing — which started before a crowd of journalists and a smattering of protesters, then ended almost five hours later before a half-full room — a weary-looking Mr. Fuld approached Mr. Waxman and said he hoped his testimony was helpful. He then left under protection from Capitol Police officers, going to a waiting sport utility vehicle while members of the protest group Code Pink pelted him with insults and called for Mr. Fuld to be jailed. Later in the evening, over Chartre Nondrednon 1953, His Arrogance Fuld explained to his wife it was the Code Pink people who caused Lehman's downfall.

Thinking Globablly About Sustainable Living

(Click photo to enlarge)

Earth from above photos to be exhibited in NYC

I like sharing links with you. As I've only recently become interested in photography, I thought I'd share a new Boston Globe link with you. The beautiful shot above is of a forest in the region of Charlevoix, Quebec, Canada during Autumn. There are 37 more beautiful photos in a series shot from around the Planet.

For those of you who don't remember, the Globe was the online newspaper I linked you to in an earlier post with shots of Hurricane Ike's damage.

Today, the Boston Globe's Big Picture returns with a series of photos from photographer Yann Arthus-Bertrand. The intro to the 38 photos says the following. I leave you now to enjoy the photos with a morning cup of coffee:

Photographer Yann Arthus-Bertrand will bring his work back to the United States - to New York City for the first time in 2009. Aiming to inspire people to think globally about sustainable living, Arthus-Bertrand has been photographing unique views of our planet, seen from the sky, since 1994 - and has produced an exhibit of over 150 4-ft. by 6-ft. prints which will be on display in New York City at the World Financial Center Plaza and along the Battery Park City Esplanade from May 1, 2009 to June 28, 2009. When completed in New York City, the Earth From Above exhibit will also move on to California in 2010. Photographs and captions all courtesy of Yann Arthus-Betrand. (38 photos in all.)

Looking Back With a Cracked Mirror at the Housing Bubble

Looking back at the Housing Bubble's beginning: Part 1 . . . the role Fannie Mae leaders, Fannie Mae investors, the Clinton Administration and HUD played.

Over the past two months, I've read some incredibly shallow treatises on what caused the Housing Bubble. The Housing Bubble has finally turned into the Housing Crash which many of us bloggers predicted on message boards at Motley Fool years before the Mainstream Media were admitting to a Housing Bubble.

The Housing Crash has further developed into one of the largest financial crisis this world has ever seen. What we need to do as a nation is to objectively look back at what caused the Bubble/Crash cycle so that we do not repeat these mistakes again.

Having written objectively about this subject for years, I am now seeing too many Johnny Come Lately bloggers lay the blame of this whole mess on either Democrats or Republicans. Rarely do you see any blogger admit there's plenty of blame to go around on both sides.

I have no stomach for partisan politics when it comes to History. Like Howard Zinn, I feel we should go back in time, view transcripts of legal proceedings, view old laws still on the books, read old news stories with eyewitness accounts, and always let people's words quoted for the ages tell the truth about what happened "back when."

When truth be known, both parties, Democrats and Republicans, can be held to blame for their government meddling in the free markets. Both parties are guilty of causing the Housing Bubble and now the Housing Crash which is leading to a financial crisis of the ages.

Today, I will reprint an article from a nine year old New York Times story entitled, "Fannie Mae Eases Credit To Aid Mortgage Lending" which was written by Steven A. Holmes and published on September 30, 1999.

After you read the article, I will publish the takeaway points in bullets of my own so that you may include them when you have discussions with loved ones and friends trying to understand such a hard subject as the financial crisis we are suffering through now.

Without further delay, here is the NY Times story. You may click here to print the entire story direct from the New York Times website. I am going to print just the first four paragraphs to entice you to read the whole thing. After those paragraphs, I will print takeway points from the entire article:

By STEVEN A. HOLMES
Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

Here are the points you can takeaway from this article:

• Fannie Mae was the largest "underwriter" of home mortgages back in late 1999. As an "underwriter", Fannie Mae purchased loans from banks and other lenders. This gave much needed capital back to banks and lenders so that these entities could go out and lend even more money to more needy borrowers.

• In 1999, the Clinton Administration "pressured" Fannie Mae to expand mortgage loans among low and moderate income people.

• Also, in 1999, stockholders in Fannie Mae were pressuring Fannie Mae executives to grow their profits at an even faster clip.

• Hence, Fannie Mae eased credit requirements on loans it would purchase from banks and lenders. This prompted these entities to make more loans to people with shaky credit histories who could not get conventional home loans in days gone by. Again, so that you understand, and as the article clearly states: 'Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.'

• Fannie Mae's now fired CEO, Franklin Raines, showed his interest in pumping subprime loans when he said at the time of this story: ''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements, yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

• As a portent of what would begin the cascading downcall of subprime loans, Holmes in his 1999 NYT article planted what would become one of the first red flags warning investors in both Fannie Mae, and later, mortgage backed securities, why this social engineering plan to put every American into a home was a bad idea. As a resident American Enterprices Institue fellow so perfectly predicted in 1999: 'In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's. ''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' '

• Because minorities lagged behind non-Hispanic white people in home ownership, the Clinton Administration, Fannie Mae's leadership, and HUD were all behind this new proposal to lower standards on using down payments as "collateral" for minorities. What these three wanted to do was up home ownership by minorities, eventhough through the 90s, minorities home purchases through Fannie had accelerated faster than non-white Hispanics. As the article stated 'Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent. In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.'
  


• The Department of Housng and Urban Development set a goal to up its purchase of shakier loans. As the article states, 'In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups."

My Last Worlds on Fannie Mae's and the Government's stance back in 1999: guys, by bending over backwards to insure "all" Americans would become homeowners in the American Dream, you set in motion a Frankenstein Greedmonster which would, and did, devour every crappy loan sent its way. This Frankenstein, a Government Sanctioned Enterprise named Fannie Mae . . . once unleashed . . . could not stop binge eating until it exploded. If it quit eating the bad loans, vapor profits would evaporate and shareholders would complain. Bonuses for its executives would diminish. It had to continue to grow to satisfy all parties. And, if it continued to eat, it would explode.

In the beginning of the 21st Century, only prescient bloggers outside the mainstream media cheerleading section or smart investors such as Warren Buffet knew what the outcome would be. Bloggers who predicted the mess we are now in were touted as "doomsayers" and "Chicken Littles", but they knew their Shit from Shinola. The best Economics writers outside the mainstream media never believed the Goldilocks Economy crock from CNBC. They knew their turds from raisins. They didn't buy into Jim Cramer's view that America's FIRE Economy was too big to fail. They knew when the government pressured a Government Sanctioned Enterprise (a publicly traded corporation with "implicit" government backing) to buy more crapola from lenders, that the lenders would invent new crapola to sell.

And now here we are: Brave New World Disorder

Vanity, vanity, it's all vanity. Ashes to ashes, funk to funky, we know Major Tom's a junky.

As always, caveat emptor,

Rock Trueblood

Economists are Favoring Obama

The Economist's poll of leading Economists is heavily in favor of Barrack Obama

The most recent issue of The Economist contained an eye opening poll of Economists. The table above was printed along with this poll. The resluts of the poll are discussed here. Here is a taste of the short copy attached to the table in the latest The Economist:

The detailed responses are bad news for Mr McCain (the full data are available here). Eighty per cent of respondents and no fewer than 71% of those who do not cleave to either main party say Mr Obama has a better grasp of economics. Even among Republicans Mr Obama has the edge: 46% versus 23% say Mr Obama has the better grasp of the subject. “I take McCain’s word on this one,” comments James Harrigan at the University of Virginia, a reference to Mr McCain’s infamous confession that he does not know as much about economics as he should. In fairness, Mr McCain’s lower grade may in part reflect greater candour about his weaknesses. Mr Obama’s more tightly managed image leaves fewer opportunities for such unvarnished introspection.

A candidate’s economic expertise may matter rather less if he surrounds himself with clever advisers. Unfortunately for Mr McCain, 81% of all respondents reckon Mr Obama is more likely to do that; among unaffiliated respondents, 71% say so. That is despite praise across party lines for the excellent Doug Holtz-Eakin, Mr McCain’s most prominent economic adviser and a former head of the Congressional Budget Office. “Although I have tended to vote Republican,” one reply says, “the Democrats have a deep pool of talented, moderate economists.”

There is an apparent contradiction between most economists’ support for free trade, low taxes and less intervention in the market and the low marks many give to Mr McCain, who is generally more supportive of those things than Mr Obama. It probably reflects a perception that the Republican Party under George Bush has subverted many of those ideals for ideology and political gain. Indeed, the majority of respondents rate Mr Bush’s economic record as very bad, and Republican respondents are only slightly less critical.

Announcing Porno Loans for South Floridians!

Miami Condo Buyers, can you afford 40-45% down? Don't axe me, I'm just the blog writer. . .

Man, I had to pass this one on before hitting the hay.

If this doesn't show you we have a credit crunch going on, and if you don't think prices will continue to drop drastically for housing in South Florida, than you have overloaded on too many sippy drinks with Lawrence Yun at the NAR:

Check this story a few days ago in the Miami Herald:

Homes now affordable, but mortgages aren't

BY MARTHA BRANNIGAN

To understand how the credit crisis is hitting home in South Florida, consider the plight of Teresa and Hoover Encalada. The couple found a two-bedroom condo they loved at the Plaza on Brickell. At $434,000, the price was right. Their credit was good.

Friday, they got the bad news: The lender wants 45 percent down on a five-year loan with an initial interest rate of 7.8 percent. Now Encalada, a 39-year-old administrative assistant, and her husband, an Ecuadorean banana grower, are waiting on a second bank offer requiring only 40 percent down before they proceed.

Existing home prices in South Florida have fallen 20 to 30 percent over the past year, putting once-unaffordable homes within the grasp of buyers -- if only they could qualify for a loan at reasonable rates.

What a bargain! We found a lender who will drop the downpayment from 45% down to 40%! What's that lender's name, Soprano & Walnuts?

Just how tight have the credit markets become you ask? From the same story . . .

Credit markets have gotten so tight that in many cases it is impossible to qualify for a loan with less than 20 percent down. Compounding the problems of financing, especially with condos, is the dearth of PMI, or private mortgage insurance, which is required for down payments below 20 percent.

''For every broker and developer, the biggest issue in 2008 is a lack of mortgage financing. The pendulum has swung this year to the other side: No mortgages to anybody, unless they're Boy Scouts and Girl Scouts,'' said Craig Studnicky, president of International Sales Group, an Aventura firm that specializes in marketing new condos.

The Encaladas thought they'd have no problem. At most they planned to put 30 percent down, leaving enough money to buy new furniture. ''Now, I can only get the place,'' Teresa Encalada said.``Furniture and improvements will just have to wait.''

Gone are the days of easy credit. With home values on the slide and new capital tight, lenders are sometimes asking for extraordinary terms.

My note: Keep your daughters and sons off the streets if they are in their Scout uniforms. Predatory lenders are out looking for them .

p.s. Rock's Top Tip #1 on How to Swing a 40% Downpayment . . . and still be able to outfit your newly purchased overpriced home: If your "deal" goes through at 40% down and you can't afford furniture, just remember, a board and two cinder blocks is a bookcase. And since you live in Florida, near orchards, steal some shipping crates to use for tables and chairs. That "Early Orange Crate" look is sure to wow the neighbors!

Why do these loathsome lenders licking at your loins lust for larger downpayments, you ask?

Now even solid borrowers are facing stiff guidelines. Lenders want buyers to put some skin in the game, and with home prices in many markets still sliding, they want an extra safety margin. The problem is exacerbated by the billions of dollars in ailing mortgage securities on the balance sheets of many financial institutions that hamper their ability to offer new loans.

Real estate brokers, developers, and mortgage brokerages are watching closely as the Bush administration and Congress hammer out a $700 billion bailout plan with hopes it will stabilize U.S. banks so they can keep extending credit to businesses, home buyers and other individuals to keep the economy flowing.

By moving bad debts off their books, the banks would be in position to raise new capital and make new loans. Studnicky said his firm is seeing more people shopping for condos, but the deal-breaker often is they can't make the hefty down payment required or lack the credentials needed to meet rigorous new borrowing standards.

As Bill the Cat would say, "Aaaaaaaaack!" These lenders not only want your Sons and Daughters in their scout uniforms but now they want more "skin" from you? Why would anyone buy a house times such as these when banks are bankrupt and only Porno Loans are available?

There's got to be some good news. Surely prices coming down mean we can afford to buy, yes?

About 46 percent of single-family homes for sale in Miami-Dade and 62 percent of condos for sale are less than $300,000, according to Ron Shuffield, president of Esslinger Wooten Maxwell in Coral Gables. In Broward, 49 percent of the single-family homes on the market and 78 percent of condos are listed for less than $300,000.

SHORT ON CASH

The problem, Shuffield said, is buyers at the lower end typically are less able to put up a substantial down payment. FHA mortgages are available for as little as 3 percent down, but they're only available to select buyers.

As a result, inventories of homes on the market are still swelling in Miami-Dade, although they have dropped a bit in Broward.

In a normal market, where supply and demand are in equilibrium, the housing inventory amounts to a six- to 12-month supply, based on recent sales. Miami-Dade has a 32-month supply of single-family homes and a 41-month supply of condos, while Broward has a 20-month supply of single-family homes and a 29-month supply of condos, according to South Florida Regional MLS listings data.

''We've just never dealt with so much inventory and never dealt with so much fear in the market,'' Shuffield said.

Well there you go again, my friends: inventory is growing so quickly we now have 300 to 600% above normal inventory.

Loans are harder to get, and Realtors are still trying to put lipstick on shantys which used to cost $100,000 ten years ago, and which are still selling for $400,000 after a $300,000 drop.

You can fool the impatient. But you can't fool the serious buyer with cash who knows this is only the third inning of an extra innnings game.

Save your money. Buy some gold. Buy some cheap dividend payers and reinvest those dividends at these cheap prices for companies which sell necessities you'll always need: JNJ, ED, PG. You know the drill. If the market tanks, double down on these best of breed companies. If it goes up because the sods in Congress actually perform a bailout, you'll still be ahead of the game.

Remember, cash rules in a deflationary enironment. And South Florida housing is geared to go much much lower in price.

Meanwhile, hide your wife and kids and don't be bending over you car out front while you wash it. Lenders are looking for you to show 'em some more skin, and if you're bent over, you show willingness to the Sharks from FIRE Island.

Capiche?

Caveat emptor,
Rock

What One Lender's Deliquencies Look Like

Rodger Rafter of Motley Fool scoops the Mainstream Media on Novastar's Delinquencies






If you want to see what the bankers want you to rescue them from, then pay attention.

I am a big, big fan of Motley Fool's "METAR" discussion board, and I've been away for too too long.

I logged on tonight after coming home from work.

One of the most recommended posts from yesterday is one by a man who goes by the alias of Rodger Rafter.

What Rodger has uncovered with his usual web based investigating is something which the mainstream media is missing as it gets on its knees to kiss the collective butts of everyone in government and banking who are now requesting a $700 Billion bailout.

How to find Rodger's post on Motley Fool:

What you are about to read is Rodger's latest post, "Inside the Toxic Pool". I will not comment on this post this morning. I am simply going to lay it on you to show you the kind of brilliant minds which post regularly to Motley Fool's "METAR" board. (METAR stands for Macro-Economic Trends and Risks).

That said, I'm out of here. But you need to read this post here and now.

Compare month over month growth at one lender, Novastar, and see for yourself how bad the current Recession is, and how bad it will become . . . has to become . . . as foreclosures geometrically expand at what appears to be the speed of an investment banker's Tesla making it's way from Wall Street to the Hamptons on a Friday evening.

This post appeared October 1, 2008 on the METAR board at Motley Fool.
It was post #256820.

Click on the red highlighted sentence above and you will be taken to the original post and will also see responses to Rodgers Original Post.

Even if you are not a registered Fool, you can still read the post. But I would advise one and all of to join Motley Fool's discussion boards (now FREE) and look up the METAR board as soon as possible and learn how to protect your wealth.

I will not make any more comments on this data other than you stop, look over, look at the geometrical growth Month over Month (Rodger focuses mostly on month to month).

Compare January 2007 to January 2008. Compare February 2007 to February 2008. Look at the raging growth in late payments and foreclosures year over year.

That said, here's Rodger Rafter (his alias on Motley Fool) in all his glory showing Americans why the bailout is fruitless in its current form. All of Rodger's work is presented below in blue ink:

Inside a Toxic MBS Pool
Author: RodgerRafter
Motley Fool's METAR Message Board
10/1/08 12:15 PM
#256820

My note: everything printed here on out is Rodger without any interruption:)

So what kind of toxic waste would Paulson's buddies like to sell to the taxpayers? You know, the stuff they're saying we could actually make a profit on?

A look inside one of the mortgage pools shows how incredibly bad things are for these types securities:

https://www.novastarmortgage.com/BondRemittance.aspx
Table for the 2006-5 pool includes:

Payment Month
Total Delinquencies (including REO) as a percentage of outstanding principal
Percentage of balance 1 payments behind *(1PMT)
Percentage of balance 2 payments behind*(2PMT)
Percentage of balance 3 or more payments behind, but not yet foreclosed or in bankruptcy*(3PMT)
Percentage of balance in foreclosure *(Del.Fore.)
Percentage of balance held as Real Estate Owned after foreclosure *(REO)
*(Note: asterisks show my notes in parentheses to foster quicker understanding)

Month Total 1 PMT 2 PMT 3+ Del. Fore. REO
Sep-06 2.31% 1.32% 0.95% 0.00% 0.10% 0.00%
Oct-06 2.78% 0.90% 0.92% 0.07% 0.78% 0.16%
Nov-06 4.90% 2.43% 0.73% 0.21% 1.25% 0.19%
Dec-06 6.98% 2.93% 1.67% 0.18% 1.65% 0.32%
Jan-07 9.43% 3.15% 1.81% 0.31% 3.27% 0.46%
Feb-07 10.38% 2.23% 2.34% 0.34% 3.82% 1.09%
Mar-07 11.95% 2.54% 1.44% 0.64% 5.34% 1.42%
Apr-07 14.39% 3.25% 2.06% 0.45% 6.12% 1.95%
May-07 16.30% 3.01% 2.47% 0.46% 6.65% 2.67%
Jun-07 18.71% 3.29% 2.44% 0.72% 7.78% 3.57%
Jul-07 20.74% 3.53% 2.24% 0.72% 8.64% 4.51%
Aug-07 22.59% 3.65% 2.38% 0.80% 8.85% 5.69%
Sep-07 25.35% 4.53% 2.71% 0.86% 9.32% 6.78%
Oct-07 26.90% 4.57% 2.57% 1.92% 9.26% 7.42%
Nov-07 30.91% 5.58% 3.52% 3.65% 8.22% 8.55%
Dec-07 35.64% 6.57% 4.41% 6.66% 7.10% 9.38%
Jan-08 37.90% 5.09% 5.20% 10.15% 6.30% 9.46%
Feb-08 38.36% 4.40% 3.49% 11.48% 7.95% 9.12%
Mar-08 39.79% 4.71% 2.81% 11.97% 9.70% 8.50%
Apr-08 41.64% 5.29% 3.64% 12.85% 10.04% 7.86%
May-08 43.49% 5.30% 3.73% 6.81% 18.33% 7.31%
Jun-08 45.40% 5.16% 4.21% 8.50% 19.00% 6.40%
Jul-08 47.32% 5.47% 3.57% 10.85% 19.23% 5.96%
Aug-08 49.46% 5.10% 4.21% 12.34% 19.67% 5.74%

Almost 50% of loans in the pool are non-performing, and that number is increasing at an escalating rate. Losses haven't been realized on most of these loans yet, and the servicers have been dragging their feet through the whole foreclosure process.

Looking at the historical waves of activity:September '06, securities are sold and already more than 2% are delinquent. Some of these borrowers probably refinanced an old delinquent loan and never made a payment on the new one.

November '06 to January '07, the first wave of defaults starts as people choose heating and holiday gifts over mortgage payments.

Delinquencies begin rising at a record rate for a new Novastar mortgage pool.January '07 to March '07, the servicers promptly begin the foreclosure process on the first wave of defaults.
February '07, a down month for new delinquencies, as almost everyone who made it through the winter stays current.

April '07 and beyond, delinquencies pick up as credit tightens for subprime borrowers, cutting off access to easy refinancings.

May '07 to January '08, REO starts to swell as the servicers aren't willing to sell property quickly at a low price.

October '07 to January '08, foreclosure numbers decline, but 3+ payment delinquencies soar as the servicer holds off on foreclosures. Reduced foreclosure numbers only look good if investors don't look too closely. Down the road losses will be worse because of the foreclosure delays.
November '07 to January '08, the second wave of holiday defaults is much more severe than the previous year's.

January '08 to August '08, REO numbers decline, as properties are sold faster than new foreclosures are completed. The pool begins recognizing monthly losses.

February '08, the annual down month is still twice as high as February '07 for 1 payment missed. Some of these probably missed a payment earlier but still made their February '08 payment.

April '08, defaulted loans that haven't been foreclosed on hit a peak of 12.85%, but foreclosures have also started surging again.

May '08, the servicers decide to just foreclose on a big chunk of defaults, starting a big wave of foreclosures.
June '08 to August '08, delayed foreclosures climb again. Foreclosures continue to rise.
September '08, the big wave should start hitting REO.

November '08 to January '09, the next big wave of defaults should begin with the economy tanking and heating costs high.

Any wonder why Paulson is in such a rush to get as much of the load off of Wall Street and onto the taxpayer as quickly as possible?

With millions of unsold homes on the market, hundreds of thousands working their way through the foreclosure process, and the biggest default wave yet to come, the housing market has a longway to go before it hits bottom.