Investors spooked by U.S. Federal Reserve

Image via WikipediaInvestors are fleeing the stock market in favor of bonds, which they perceive to be a safer investment. The announcement by the Federal Reserve that they have developed a new strategy to get the U.S. economy growing seems to be a major contributor to this run for safety.

The Fed announced Wednesday that in hopes of reducing interest rates on long-term loans, it would shuffle $400 billion of its own holdings. In addition, the President of Strategic Energy & Economic Research, Michael Lynch, highlighted that this bleak outlook from the Fed combined with a rare public warning by the chief economist of the European Central Bank is a confirmation that the economy is not improving.

Investors appeared to take this as a sign that the economy was not about to recover anytime soon and that a recession may be closer now than at any point during the current recovery.

This caused oil and metal to dive sharply amid fears that demand for them would fall if the world does go into recession.

In spite of the lower interest rates investors spurned stocks in favor of bonds.

No doubt the polarization of U.S. politics also contributed to the stock market tumble, as it appears the Republicans are bent on bringing down President Obama even if this means a depression for the U.S.


On an unrelated matter, The Hoss sees some irony as during these turbulent times, we have millionaire NBA players and Billionaire owners unable to agree on a contract.There are many unemployed people willing to do any kind of work to feed their families, while these fat cats squabble over how to divide millions of dollars. The rich get richer and the poor, well they starve.

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FHFA: Will lawsuit benifit taxpayer?

Image by qthrul via FlickrHoss Cents Free Financial Money Magazine wonders if the FHFA lawsuit against the 17 banks will be beneficial to the tax payer or will the lawsuit jeopardize the already shaky financial situation in the United States?
If the FHFA is successful and recovers $25 to $30 billion dollars, the bailout of Fannie Mae and Freddie Mac will of course be reduced but at what cost? The banks will have to take some action to recover these losses. How many bank employees will be let go?  Will the banks cut back on loans? Will other private investors initiate similar lawsuits? How many of these unknowns will it take to create investor concern and what effect will this have on the stock market? Will this cause an increase in unemployment?
The Hoss does not have answers to these questions but does wonder what the management of Fannie Mae and Freddie Mac were doing when they acquired these mortgages. Do they not scrutinize mortgage securities before, during and after purchase? If not why not? 
Lawsuits of this magnitude usually take years before they are resolved, so the big winners will be the lawyers not the middle or low income tax payer. They will still be left trying to feed their family, pay their mortgage and send their kids to college.



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Bank Stocks Drop; FHFA Sues 17 Banks

Image by Getty Images via @daylifeBank stocks dropped late Friday as The Federal Housing Finance Agency (FHFA) sued 17 US and foreign banks claiming securities were sold to Fannie Mae and Freddie Mac based on documents that "contained misstatements and omissions of material facts concerning the quality of the underlying mortgage loans, the creditworthiness of the borrowers, and the practices used to originate such loans."

Shares of Bank of America fell more than 8.3 percent, JPMorgan Chase dropped 4.6 percent and Goldman fell 4.5 percent.

This FHFA action was preceded by the states attorneys general who sued the banks claiming faulty foreclosure actions. Next private investors jumped on the law suit band wagon claiming the mortgages they had purchased were misrepresented by the banks.

At this writing it is not known what specific damages the FHFA is seeking, only that it wants the sales cancelled and reimbursed for lost principal complete with interest payments and of course legal fees.

The FHFA claims that the securities were sold to Fannie Mae and Freddie Mac based on documents containing misstatements and omissions of material facts. i.e. the quality of the underlying mortgage loans, the creditworthiness of the borrowers, and the practices used to originate such loans.

Following is a list of the Banks named in the suit.

Ally Financial Inc. f/k/a GMAC, LLC
Bank of America Corporation
Barclays Bank PLC
Citigroup, Inc.
Countrywide Financial Corporation
Credit Suisse Holdings (USA), Inc.
Deutsche Bank AG
First Horizon National Corporation
General Electric Company
Goldman Sachs & Co.
HSBC North America Holdings, Inc.
JPMorgan Chase & Co.
Merrill Lynch & Co. / First Franklin Financial Corp.
Morgan Stanley
Nomura Holding America Inc.
The Royal Bank of Scotland Group PLC
Société Générale

The Hoss will have additional comments on this action taken by the FHFA in his next post.
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Michele Bachmann and God

Image via WikipediaMichele Bachmann is reversing direction faster than a yo-yo on a string. Last week Michele Bachmann implied that the recent natural disasters on the east coast (hurricane Irene and the earthquake) were a message to Washington Politicians. Following is her statement:

 "I don't know how much God has to do to get the attention of the politicians. We've had an earthquake; we've had a hurricane. He said, 'Are you going to start listening to me here?'"
"Listen to the American people, because the American people are roaring right now. They know government is on a morbid obesity diet and we've got to rein in the spending."

Well, naturally these statements received much negative attention and first she said she was only joking and now she claims it was just a metaphor.

So let’s say she gets elected President of the United States (Heaven Forbid) how will the citizens know when she is joking, or speaking metaphorically?  Will she advise the populace of all messages she receives directly from God?  Like her message from God to marry her husband.

How can the Republican Party possibly put forth this kind of candidate as one of the best available?
The Hoss's only comment is God help us all if she were ever elected president of the United States.

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