Speaking before the Senate Banking Committee, SEC Chairman Christopher Cox said commercial banks and broker dealers who sold subprime mortgage backed securities are also being looked at.

“We are investigating whether mortgage lenders properly accounted for the loans in their portfolios, and whether they established appropriate loan loss reserves,” he told the committee.

The Securities and Exchange Commission revealed Tuesday that it has 50 pending subprime related investigations involving residential lenders, investment banking firms, credit rating agencies, and other players involved in the securitization process.

The agency, which is responsible for overseeing bond disclosures on publicly registered securities, said it is investigating whether lenders adequately disclosed the risk profiles of the mortgages they were securitizing.

In late 2006 Lewis S. Ranieri, the co-inventor of the MBS, criticized the SEC in a speech at the National Press Club, saying the agency needs to play a central role in forcing issuers to increase disclosures on bonds collateralized by nontraditional residential loans. At the time, Mr. Ranieri told National Mortgage News that “this isn’t an indictment of the SEC,” but added that “the transparencies are not what they should be.”

Marc Faber said on CNBC on Tuesday that the best (solution) is to let the crisis burn itself out and clean the system, even with pain for people on Wall Street, and the banning short sellers won’t solve anything.

A simple guide explaining how the Federal Reserve, the central bank of the United States that is responsible for regulating the supply of money in the US economy, has created the recession the US economy is experiencing.

From our friends at http://www.kidmercuryblog.com

House Republicans slam steps to alleviate crisis as ‘bailout mania’; Bunning introduces legislation challenging Fed’s authority; Bunning says recent actions remind him of China, Venezuela; AIG gets $85 Billion Fed loan, Cedes control to government; Fannie/Freddie takeover could cost $200 Billion; Analysis by Sen. Jim Bunning, (R) Kentucky

Part 2

The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.

The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.

I thought I heard Treasury Secretary Henry Paulson say that there would be no more support from the government, (meaning you and I) yesterday??? By the way how much will this cost me?

The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy.

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.

The interests of taxpayers are protected by key terms of the loan (So where are they getting the money from?). The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.

We the American Public will be paying, the middle class.  Without regulation what is to say they will not do it again. Our company buys defaulted second mortgages that usually the first mortgage was done at the same time. The loans that were approved at 100% just amazes me. $1,000,000 loans that the buyer works at a car wash. Yes a car wash. Not manager or general manager an employee. A customer that is not an American citizen and has never had a job buys an $800,000 property, a vegetable picker buys a $300,000 property , a cashier at grocery store 400,000 property. Keep in mind the sale price is the loan amount. We present a case on each loan that is foreclosed by the first to get approval to zero it out. I always input the place of employment because it just blows my mind. You know that these people cannot possibly afford the loans and most default on the first payment. When they agree to insure the loans is it based on “trust” they just take the lenders word??? If that is the case shame on them for being so stupid.
I could go on forever with the things that I have seen. I have very little sympathy for these companies.

Thanks

Barbra Orr

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.

The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S.  Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.

For anyone that watches ESPN’s Jim Rome, this is my burn. I am going to talk politics here, but I am not going to give away my party preference. It is not necessary. This is a commentary against both Democrats and Republicans, and the way that the people’s business is conducted.

The reality, unfortunately highlighted by Freddie Mac and Fannie Mae, is that our business is always secondary to the business at hand. That business is the never ending cycle of re-election. The tough decisions are never addressed until we reach crisis mode. Once that point is reached, it turns into a game of partisan finger pointing leading to a decision made out of desperation.

It has been known for some time that there were problems brewing. Accounting irregularities were announced on a fairly regular basis. Fortunately for these two companies, they had a strong and extremely effective lobbying and political contributions team that kept both parties at bay.

By doing nothing to address the problems, these political contributions remained safe, and the end result is what it usually is. You and I are going to bail it all out, there will be a couple of fall guys with beautiful golden parachutes, and no one in government will be held responsible.

Let’s hope that this government takeover will relieve the situation, rekindle mortgage liquidity, save the banks and brokers and stabilize housing prices. Without costing the taxpayers a fortune. Watching trading today in some financial’s leads me to believe there may still be some issues. We’ll all keep our fingers crossed on this one.

What could our next big problem be that our politicians will have to “deal” with after this one is “resolved”? Cast a glance over to the partisan bickering that is going on with drilling for oil and our foreign dependency, and get a front row seat to the self serving rhetoric by people who say that they understand the pain at the pump that you and I are going through, but who I suspect have absolutely no idea. It could be a long cold winter.

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