August 30, 2007

Is the Chaos in Iraq on Purpose?

Management by Chaos is a recognized management technique, along with Management by Delegation and Management by Exception. I've seen it in practice. The manager who creates the chaos, or allows it, has the advantage of knowing the chaos is intentional. He also has a strategy to exploit the chaos.

I've raised the question of whether or not the Chaos in Iraq is on purpose. I'm not alone in asking this question.

Iraqi blogger Riverbend asked the question. I hear she was recently forced to flee.

Now, an article in the Baltimore City Paper poses the question again [1]. It seems that people cannot believe the Bush gang is so incompetent. An Iraqi, Haider Thamir, living in the US recalls how the United States used German bureaucrats to run Germany during the occupation after World War II and wonders why the US didn't do that in Iraq.
Thamir says the United States ignored history... But was, is, the United States merely incompetent? Or are American forces deliberately fostering conflict and violence? Mohammad Al-Khakani, alludes to stories he has heard from friends in Iraq about American troops blocking police action by Iraqi forces, essentially shielding terrorist activity. Prime Minister al-Maliki, he says, has "complained to Bush that he can't move without US permission."

Al-Khakani was a translator in Iraq, on the promise he'd be assisted in leaving Iraq.

Thamir says he has heard similarly chilling reports, "that when there's a raid on terrorists, that Americans would release them." Thamir continues, "The rationale is that chaos would reign supreme and there'd be an excuse for the occupation to be sustained."

Then there are the experiences of Jodie Evans, a peace activist who was in Iraq before and after the 2003 US invasion [2].

"Immediately after we arrived," said Evans, "we hear that it is not only worse than before the war. It is worse than during the war. People are upset, people are angry. There were lots of stories about how the Americans are doing this on purpose. A month after the '91 war, which was much worse than this one, everything was back and working. Now, the people live in this chaos they can't even imagine. People can't go outside. Women haven't left their homes. Lots of people haven't come back from Syria or Kuwait or wherever they fled to get away from the bombing, because life in Iraq is unlivable. There is 65% unemployment, and even the doctors and nurses and teachers who are going to work don't get paid, so there's no money."

Evans met a number of Americans in Iraq who are part of the 'rebuilding process.' The overall organization is called the Iraqi Assistance Center, or IAC. The man Evans met was a professor of religion and political theory at a religious college in America. He explained that his job was to collect intelligence for Bremer.

"That professor I spoke to, the one doing intelligence for Bremer, I told him that I had spoken to countless Iraqis and all of them felt this chaos was happening on purpose," said Evans. "He basically said this was true, that chaos was good, and out of chaos comes order. So what the Iraqis were saying - that this madness was all on purpose - this intelligence guy didn't discredit it. He said, 'If you keep them hungry, they'll do anything for us.'"

Regardless of whether Bush's people helped create the chaos in Iraq on purpose, it is playing to their advantage. We hear them say, "We need to stay and provide security because there's so much chaos." "We have an obligation to stay and help quell the chaos." "We can't leave because there would be even more chaos."

The Chaos also provides cover for activities that couldn't happen in as stable society.

"..the first thing America did was to fire 80,000 police officers. These guys weren't associated with the Hussein regime. That's like connecting a cop in LA to the Bush administration. All the people I've talked to over there, the ambassadors and others, said they warned Bremer not to do that. The cops knew who the criminals were, and 80,000 cops are gone. So now there are these little mafias that run neighborhoods. With no other work and no way to survive, people are going to become criminals. The borders are wide open - we didn't even get stopped when we came in - so everything is just flowing into Iraq."

On accident or on purpose?

Another example of being able to take advantage of the chaos is the Iraqi Oil Law. The passing of this law, one of the US Congress's benchmarks for "success" in Iraq. It is being portrayed as a revenue sharing agreement among Kurdish, Sunni and Shia regions; however, it's a Trojan horse. Inside the horse are foreign oil corporations who will have a majority vote on the Iraqi oil board and have 30-year leases to exploit Iraqi oil. And Bremer passed an edict that allows foreign corporations to take 100% their profits from Iraq, probably tax free.

The chaos started with the death squads, the Salvador Option. Now, the Iraq conflict has evolved. Al-Khakani says it well, alluding to the situation of the US:

"You see, on September 11, when the building is on fire, the person inside has a choice. He can jump from the top. If he stays, he's going to burn."

Then he nails it:

Al-Khakani says he fears that if the United States pulls out, it will arm the Sunnis and Wahhabis (al-Qaeda), the radical Sunni sect that dominates Saudi Arabia, to fight Shiites and Iran.

There is already evidence of this. First, in Iraq, the US is clearly working with the Sunnis. It's all over the establishment news. Second, in Lebanon, Seymour Hersh reports that the US is involved in Saudi funding of fundamentalist Sunnis (like al-Qaeda) to counter Shia Hezbollah. This backfired quickly when Fatah al-Islam took over, and hid, in a Palestinian refugee when the Lebanon Army decided they had robbed one too many banks or something.

Hersh continues saying the US is

"... in the business of supporting the Sunnis anywhere we can against the Shia. "... in the business of creating ... sectarian violence."

Why? The US doesn't really like Sunni's (Unless they're Saudi Royalty that don't fund al-Qaeda), and they don't like Shia... Iran is primarily Shia. So, what better strategy than to manage by chaos? Get the Shia and Sunni to fight with each other.


1. Baltimore City Paper, Tom Chalkley, Aug. 15-22, 2007

2. t r u t h o u t, "The Crime and the Cover-Up", William Rivers Pitt, 21 July 2003

August 29, 2007

Hedge Funds: The New Dot-Com

Hedge funds and private-equity firms today are like the dot-coms in 2000: Ask for money and you'll get it. They bid up the prices of everything. The amount of money flowing is almost out of control, and it's making everything overvalued. A client of mine said it's like there are 11,000 planes in the sky and only 100 good pilots -- an accident is bound to happen.

—Ray Dalio of Bridgewater Associates, quoted in Barron's, May 26th 2007 edition


The Hedge Fund Implode-O-Meter quote of the week.

August 28, 2007

US Kills 33 "Insurgents"

OK, as the CIA tells us, Bush's invasion of Iraq has created a failed state, which has become a magnet and training ground for fundamentalists.

when I saw this headline, I was reminded of a sequence out of R.J. Hillhouse's book, Outsourced.
[Our corporation] has taken out over five thousand insurgents and we all know the definition of an insurgent is pretty damn loose around here. It's more or less anyone we take out.

Some of the Iraqi friends and family members resent that. They join the legitimate insurgency that's trying to throw off the colonial occupation by the United States.

So, Bush says he wants to fight terrorists "over there," yet the CIA and common sense say Bush is creating insurgents and fundamentalist terrorist over there. The humiliation of house searches, and the common killing of innocent Iraqis, is creating a lot of secular insurgents (who target US soldiers and fundamentalist terrorists), and a few more fundamentalist terrorists (who target civilians and US soldiers).

In addition, Bush is training Americans in the methods of, and who are becoming desensitized to, violence. These Americans will come back to the US. A fraction of them will commit violence here in the US, either because they snap, or perhaps they'll turn on their corrupt government like Timothy McVeigh, or maybe in the hire of organized crime or corrupt politicians (think 'assassination of JFK' and 'murder of black panther leaders').

I predicted the dot-com bubble burst, saw the financial melt-down coming (it's going to spread to the economy or get bailed out by the US tax payer). I see dark days of violence in US coming thanks in great degree to Bush's Iraq training ground. Most of that violence will be among Americans, though a few of Bush's newly trained terrorists are likely to slip through too.


More on R.J. Hillhouse book.

August 27, 2007

What are the 18 Benchmarks?

The benchmarks for Iraqi "progress" were laid out by Congress in a May 2007 in an Iraq war funding bill. A synopsis is below, followed by a link.

(i) Constitutional Review

(ii) de-Baathification (I think un-doing it)

(iii) Equitable distribution of hydrocarbon resources of the people of Iraq (what's not taken by US Corporations).

(iv) Procedures to form semi-autonomous regions.

(v) Provincial election procedures.

(vi) Amnesty.

(vii) Militia disarmament program.

(viii) Services committees to support Baghdad Security Plan.

(ix) Three trained and ready Iraqi brigades to support Baghdad operations.

(x) Providing Iraqi commanders with all authorities to execute this plan.

(xi) Even handed enforcement of the law by Iraqi Security Forces.

(xii) No safe haven for any outlaws.

(xiii) Reducing sectarian violence and eliminating militia control of local security.

(xiv) Joint security stations in neighborhoods across Baghdad.

(xv) Increasing the number of independent Iraqi security forces.

(xvi) Protecting the rights of minority political parties.

(xvii) Equitable spending $10 billion in Iraqi revenues for reconstruction projects.

(xviii) No false accusations of Iraqi Security Forces by Iraqi politicians.

Maybe we should write some benchmarks for the Democrats: Meet 80% of them by September 2008 and we won't storm the Bastille.

Elaboration on the Iraq benchmarks can be found at Free Frank Warner.

For my personal views on the benchmarks, see More Make Believe from the Democrats: Benchmarks by which to Blame the Iraqis.

August 25, 2007

Excertpts from "I Can Taste It"

Alex, among the first group of soldiers in Iraq to have their tours extended three months*, is nearing the end of his duty,
Going home is a beautiful, terrifying thought to have once it gets this close to happening.

I’ll look back on the hysterical laughter during fifteen hour Baghdad clears, the terror of being pinned down by machine gun fire, the sight of a Stryker on its side and the unfolding of a body bag under the flames of a nearby school, unzipped tenderly to fit the body of Chevy as RPGs screamed overhead. Soon this place will all be in the past.

The key to it all [the surge] would be 24/7 interaction with Iraqi Army and a constant presence among the Iraqi citizens, giving them confidence in the mission of coalition forces. The building we picked used to be a whiskey distillery, and we’ve been busy putting up concrete barriers and wire around it. A house was too close to where the wall was supposed to be, so engineers blew it to smithereens and sent the family packing. The father owned the plot for forty years and comes by every so often to collect the useful bricks left scattered a hundred yards in every direction. Before he entered once, I patted his seventy year old frame down like a common criminal.

Next month we’ll be the first unit home that completed a three month extension. We were one of few to see Iraq before and after the surge. If the media got anything right, it was that the surge failed.

* One way the Pentagon increased the number of US soldiers inside Iraq during the surge was to make some soldiers stay in Iraq longer.


Full Blog Entry on Army of Dude "I Can Taste It"

Fed Bends Rules for Monopolistic Insiders

The bigger they are, the more monopolistic they are, and the more protection they get from the Federal Reserve. What's wrong with this picture in a competitive "free market" economy?

An August 24 article, "Fed bends rules to help two big banks" reports:
August 20 letters from the Fed to Citigroup and Bank of America state that the Fed... has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates.

The Glass-Steagall Act, following the 1929 stock market crash, separated investment and commercial banking. It's claimed that Glass-Steagall worked for many years, but then became "anachronistic" as the financial sector modernized. "Commercial banks watched their market share of U.S. financial assets erode from nearly 50% to less than 32%." "Mutual fund assets grew 24% a year while [commercial bank] deposit growth has averaged just 3.4%." These comparisons in a March 1998 article by Nicole Olmstead Coulter are true, but one has to ask if the "modernization" was all healthy in the first place.

Experience suggests that the so-called "modernization" of laws is actually the rigging of arcane rules with the intent of making profits for the sector funding the lobbyists making the "modernization" pitch, and campaign donations, to the US Congress.

Coulter continues, "Through securitization, investment banks have taken away some of banks' traditional markets." "Increasingly, consumers demanded higher yields on their investments." Which could be followed by, "regardless of any underlying fundamentals." Who doesn't want more return? But should we do so if it is predicted to create boom/bust cycles? One can argue that, while in some ways securitization is beneficial, the greed-driven market is designed to drive "securitization" to the brink, as we are now witnessing the effects of runaway morgtage securitization. Cow manure has legitimate value as fertilizer and soil enhancement. Imagine warehouses of bullshit bundled and used as collateral for bonds (it probably exists).

The larger point is, however, that huge commercial banks can become huger if allowed to enter the brokerage business. In 1987, banking laws (Section 20) were changed to allow commercial banks to have subsidiaries that could offer investment services. By 1997, banks had successfully lobbied Congress, and Clinton, to allow banks to underwrite up to 25% of the subsidiaries' revenues. This "essentially wip[ed] out barriers toward bank acquisition of investment banks and securities firms," according to Coulter.

The merger and acquistion flood gates opened. The consolidation reduced diversity in the market place. The big banks accumulated more influence over the market, until ... they began influence the market, and that by text book definition is monopolistic. To help mitigate this, a limit on funding is still supposed to exist between commercial and brokerage operations. But, today's fiscal crisis is so bad, the Fed just bent the rules, proving my point. They can't let the big ones fail, because they too strongly influence the market.

The little ones? Too bad; the market isn't rigged to help the little guys. It isn't really a free market, and we all know it. A growing question is, given that the market is rigged, why don't we rig it to generate broader benefits rather than to enrich a few?

Sources: article, "Fed bends rules to help two big banks", August 24, 2007.

Registered Rep, "Bank/Brokerage Marriages," Nicole Olmstead Coulter, March 1, 1998,

August 24, 2007

Save Kenneth Foster

Kenneth Foster was driving a car in 1996 when someone in the car got out, flirted with a woman, and ended up shooting and killing someone. This was a case of second degree murder.

The Texas "law of parties", however, holds Kenneth Foster responsible for capital murder. He is scheduled to be executed on August 30, 2007. For more on the case See DemocracyNow , August 9, 2007.

Act Now

Contact Texas Governor Rick Perry (It's easy):

CLICK for E-Mail Form

Opinion Hotline (leave a message): (512) 463-1782

Office of the Governor Fax: (512) 463-1849

August 23, 2007

How Bad is the Liquidity Crisis?

How bad is it?

Lets take a simple example. Suppose you're short on cash to pay your bills, because you're between jobs; however, your pay checks will start up again in a month. Then, all you need to do is bridge that one-month gap, and you will survive your "liquidity crisis."

Today's liquidity crisis is founded on bad mortgage loans, which were used as collateral for creating credit that is 5-to-10 times the amount of the underlying value of the mortgages. The magic of leverage... remember, banks are only required to hold a fraction of their outstanding loan value in reserve, because it is very unlikely that everyone will ask for their money back at the same time. Unfortunately, people are effectively asking for their money back at the same time, because they realize the collateral (mortgages) are turning sour. But the banks don't really have that money; the reserves are just a fraction of leveraged loans, hence a liquidity crisis on a large scale.

So, how bad is the liquidity crisis? In the simple example above, of being between pay checks, the "crisis" wasn't so bad, because the funds started flowing again after a month. Aside from the obvious issue of scale, the large scale crisis can be measured in several ways.

First, it is a crisis of leverage. If you a bank has 1 million cash dollars in its vault, and uses that as "reserve" on loans of 10 million dollars, it's taking a risk everyone will demand that $10 million in cash at the same time. it doesn't exist. Only $1 million in cash exists.

Second, if, suddenly, everyone finds out that the $1 million in "cash" is actually bonds "backed up" by mortgages, and those mortgages are bad loans, and they might never see "cash" again, they get panicky and start asking for the cash now... but again, there is no "cash," just worthless mortgage backed bonds.

Now, if only those bonds had some worth, then the panic would end. We'd be back to the normal mode of a fraction of reserves being held by the bank, with the unlikelihood that everyone would demand cash simultaneously.

So, like waiting for the next pay check, "how bad" depends on how long until those mortgages become solid again. One estimate has it as a long gap to fill. Referring to the increasing number of bad loans, Doug Duncan, Mortgage Bankers Association Chief Economist says:

We expect another two to four quarter[s] of modest rises in delinquencies. And foreclosures lag one to two quarters behind that.

So, the current reserves, based on mortgage backed securities, have at least a year's worth of increasing rates of defaults left to play out before the rate of defaults begins to taper off.

That's a very large time gap to fill. We can expect a bail out on the backs of tax payers.


Best and Worst U.S. Housing Markets, Forbes, Matt Woolsey, August 22, 2007.

August 22, 2007

Prediction for Iraq

As we approach the September 2007 deadline for Bush's progress report, it is important to hear alternatives to the establishment voices. Journalist Nir Rosen speaks in confident and sober terms in his assessment and predictions about Iraq and the region. He was prompted by Amy Goodman of DemocracyNow!
AMY GOODMAN: What do you think has to happen?

NIR ROSEN: In Iraq? It’s too late for anything good to happen in Iraq, unfortunately. If the Americans stay, we’ll see a continuation of this civil war, of ethnic cleansing, until all of Iraq is sort of ethnically -- or sectarian, homogenous zones, which is basically what’s already happened. If the Americans leave, then you’ll see greater intervention of Saudi Arabia, Jordan, Syria, supporting their own militias in Iraq and being drawn into battle.

But no matter what, Iraq doesn’t exist anymore. Baghdad will never be in the hands of Sunnis again. Baghdad will be controlled by Shia militias. They’ve been cleansing all the Sunnis from Baghdad. So Sunnis are basically being pushed out of Iraq, period. They can go to the Anbar Province, which isn’t a very friendly place. I think you’ll see that there won’t be any more elections in Iraq. Maliki is the last prime minister Iraq will have for a long time. There is neither the infrastructure for elections anymore, nor the desire to have them, nor the ability of Iraqi groups to cooperate anymore. So what you’ll see is basically Mogadishu in Iraq: various warlords controlling small neighborhoods. And those who are by major resources, such as oil installations, obviously will be foreign-sponsored warlords who will be able to cut deals with us, the Chinese. But Iraq is destroyed, and I think we’ll see that this will spread throughout the region, and this will destabilize Syria, Lebanon and Jordan, as well.

Rosen has extensive experience with the Iraq refugee debacle. For more on that, see the full interview with Amy Goodman, referenced below.


Nir Rosen is an independent journalist and the author of "In the Belly of the Green Bird: The Triumph of the Martyrs in Iraq." He is a fellow at the New America Foundation and has reported extensively from Iraq since the US-led invasion in 2003.

"Iraq Does Not Exist Anymore": Journalist Nir Rosen on How the U.S. Invasion of Iraq Has Led to Ethnic Cleansing, a Worsening Refugee Crisis and the Destabilization of the Middle East, DemocracyNow!, August 21, 2007.

August 21, 2007

Tally of Failed Mortgage Companies

Thanks to The Mortgage Lender Implode-O-Meter, we have a list of the mortgage companies that have quit doing business, gone under, or are seriously gasping for air. Click the link above for an update to the list below. Updated December 1, 2008

306. Mortgage Network Inc. - Wholesale
305. Fortes Financial - Wholesale
304. HSBC Mortgage Corp. - Wholesale
303. CBRE Realty Finance
302. Franklin Bank, SSB
301. Mortgage Lion, Inc. - Wholesale
300. HMS Capital, Inc.
299. American Sterling Bank - Wholesale
298. CTX Mortgage Co. - Retail
297. Equity One Commercial
296. Coldstream Financial Svcs.
295. Banco Popular North America - Wholesale
294. Ace Mortgage Funding, LLC
293. E-Loan
292. Gateway Bank, F.S.B. - Wholesale
291. First Call Mortgage Co.
290. Downey Savings and Loan - Wholesale
289. Prospect's Metrocities Mortgage - Wholesale
288. ComCor Mortgage - Wholesale
287. Chevy Chase Bank - Wholesale
286. Washington Mutual - Retail and Warehouse
285. Hometown Commercial Capital
284. Mid Atlantic Capital LLC
283. Kemper Mortgage, Inc.
282. Liberty Mortgage Funding Co.
281. Freddie Mac
280. Fannie Mae
279. Pacific Community Mortgage, Inc. - Gold Reverse, Inc.
278. Homecomings Financial, LLC
277. Thornburg Mortgage
276. CSB Mortgage
275. Carteret Mortgage Corporation
274. Accredited Home Lenders, Lone Star Funds - Wholesale
273. Western Residential Mortgage
272. Liberty Home Lending - Wholesale
271. Equipoint Financial Network, Inc.
270. Ideal Mortgage Bankers, Ltd. - Wholesale
269. Silver State Bank - Wholesale
268. Irwin Union Bank & Trust Co. - Wholesale
267. SunTrust Bank Equity Wholesale
266. Wachovia Mortgage, FSB - Wholesale
265. Lehman Brothers SBF
264. IndyMac Bancorp
263. Mortgages Ltd.
262. Wilmington Finance - Wholesale
261. Accredited Home Lenders, Home Funds Direct
260. Assured Lending Corp. - Wholesale
259. Homewide Lending Corporation
258. Vanguard Mortgage & Title, Inc.
257. Chase Home Equity - Wholesale
256. Chase Subprime - Wholesale
255. Evergreen Investment & Carnation Banc
254. Casa Blanca Mortgage/Shearson - Wholesale
253. Guaranty Bank - Correspondent
252. Citi Residential Lending
251. Montgomery Mortgage Capital Company
250. E*Trade Wholesale Lending
249. Shearson Financial Network, Inc.
248. American Bank Mortgage Group - Wholesale
247. AmeriBanc Corp.
246. Washington Mutual - Wholesale
245. Century Bank, F.S.B. - Wholesale
244. Diversified Mortgage, Inc.
243. National Wholesale Funding
242. Centennial Mortgage and Funding, Inc./Award Mortgage
241. Fidelity Home Mortgage Corp. - Wholesale
240. LMI Funding, Inc.
239. Millennium Mortgage - Wholesale
238. Origen Financial, Inc. (Correspondent)
237. CitiMortgage - Home Equity Wholesale
236. Bear Stearns Residential Mortgage
235. East West Mortgage Co. of VA
234. New Vision Residential Lending
233. Washington Savings Bank, F.S.B. - Wholesale
232. Macquarie Mortgages USA Inc.
231. Global Mortgage, Inc.
230. Unique Mortgage Solutions (UMS, LLC)
229. First Franklin - Merrill Lynch
228. First National Mortgage Sources
227. Resource Mortgage (Wholesale)
226. KH Financial
225. Lydian Mortgage
224. OMG Wholesale Lending
223. Saxon Mortgage (Wholesale)
222. Beazer Mortgage Corp.
221. Allpointe Mortgage (Broker Program)
220. Popular Warehouse Lending
219. Allied Lending Corp. (Wholesale)
218. BF Saul Wholesale Lending
217. Community Resource Mortgage
216. Lehman/Aurora Loan Services
215. Residential Mortgage Capital
214. Maverick Residential Mortgage
213. Countrywide Financial Corp.
212. First NLC Financial Services
211. First American Bank (Wholesale)
210. Soma Financial
209. National City Corp. (Wholesale)
208. Heartland Wholesale Funding
207. Homefront Mortgage Inc.
206. PNC Bank H.E.
205. Family First Mortgage Corp.
204. First Fidelity Financial
203. BSM Financial
202. 1st Choice Mortgage
201. Wescom Credit Union
200. Coast Financial Holdings/Coast Bank
199. WaMu (Subprime)
198. First Madison Mortgage
197. Southern Star Mortgage
196. TransLand Financial
195. Secured Bankers Mortgage Company (SBMC)
194. ComUnity Lending
193. Delta Financial Corp
192. BayRock Mortgage
191. Empire Bancorp
190. Option One - H&R Block
189. Citigroup - FCS Warehouse
188. Charter One (Wholesale)
187. Wells Fargo - Home Equity
186. Paul Financial, LLC
185. Webster Bank (Wholesale)
184. Fieldstone Mortgage Company
183. Tribeca Lending Corp. (Wholesale)
182. WAMU Comm. Correspondent
181. Marlin Mortgage Company
180. Countrywide Specialty Lending
179. UBS Home Finance
178. MortgageIT-DB (Retail)
177. Edgewater Lending Group
176. ResMAE Mortgage Corp.
175. Citimortgage Correspondent (2nds)
174. AMC Lending
173. Liberty American Mortgage
172. Exchange Financial (Wholesale)
171. FirstBank Mortgage
170. Bank of America (Wholesale)
169. Diablo Funding Group Inc.
168. Honor State Bank
167. Spectrum Financial Group
166. Priority Funding Mortgage Bankers
165. BrooksAmerica Mortgage Corp.
164. Valley Vista Mortgage
163. New State Mortgage Company
162. Summit Mortgage Company
161. WMC
160. Paragon Home Lending
159. First Mariner Wholesale
158. The Lending Connection
157. Foxtons, Inc.
156. SCME Mortage Bankers
155. Aapex Mortgage (Apex Financial Group)
154. Wells Fargo (various Correspondent and Non-prime divisions)
153. Nationstar Mortgage
152. Decision One (HSBC)
151. Impac Lending Group
150. Long Beach (WaMu Warehouse/Correspondent)
149. Expanded Mortgage Credit Wholesale
148. The Mortgage Store Financial
147. C & G Financial
146. CFIC Home Mortgage
145. All Fund Mortgage
144. LownHome Financial
143. Sea Breeze Financial Services
142. Castle Point Mortgage
141. Premium Funding Corp
140. Group One Lending
139. Allstate Home Loans / Allstate Funding
138. Home Loan Specialists (HLS)
137. Transnational Finance Wholesale
136. CIT Home Lending
135. Capital Six Funding
134. Mortgage Investors Group (MIG) - Wholesale
133. Amstar Mortgage Corp
132. Quality Home Loans
131. BNC Mortgage (Lehman)
130. First National Bank of Arizona
129. Chevy Chase Bank Correspondent
128. GreenPoint Mortgage - Capital One Wholesale
127. NovaStar, Homeview Lending
126. Quick Loan Funding
125. Calusa Investments
124. Mercantile Mortgage
123. First Magnus
122. First Indiana Wholesale
121. GEM Loans / Pacific American Mortgage (PAMCO)
120. Kirkwood Financial Corporation
119. Lexington Lending
118. Express Capital Lending
117. Deutsche Bank Correspondent Lending Group (CLG)
116. MLSG
115. Trump Mortgage
114. HomeBanc Mortgage Corporation
113. Mylor Financial
112. Aegis
111. Alternative Financing Corp (AFC) Wholesale
110. Winstar Mortgage
109. American Home Mortgage / American Brokers Conduit
108. Optima Funding
107. Equity Funding Group
106. Sunset Mortgage
105. Nations Home Lending
104. Entrust Mortgage
103. Alera Financial (Wholesale)
102. Flick Mortgage/Mortgage Simple
101. Dollar Mortgage Corporation
100. Alliance Bancorp
99. Choice Capital Funding
98. Premier Mortgage Funding
97. Stone Creek Funding
96. FlexPoint Funding (Wholesale & Retail)
95. Starpointe Mortgage
94. Unlimited Loan Resources (ULR)
93. Freestand Financial
92. Steward Financial
91. Bridge Capital Corporation
90. Altivus Financial
89. ACT Mortgage
88. Alliance Mortgage Banking Corp (AMBC)
87. Concord Mortgage Wholesale
86. Heartwell Mortgage
85. Oak Street Mortgage
84. The Mortgage Warehouse
83. First Street Financial
82. Right-Away Mortgage
81. Heritage Plaza Mortgage
80. Horizon Bank Wholesale Lending Group
79. Lancaster Mortgage Bank (LMB)
78. Bryco (Wholesale)
77. No Red Tape Mortgage
76. The Lending Group (TLG)
75. Pro 30 Funding
74. NetBank Funding, Market Street Mortgage
73. Columbia Home Loans, LLC
72. Mortgage Tree Lending
71. Homeland Capital Group
70. Nation One Mortgage
69. Dana Capital Group
68. Millenium Funding Group
67. MILA
66. Home Equity of America
65. Opteum (Wholesale, Conduit)
64. Innovative Mortgage Capital
63. Home Capital, Inc.
62. Home 123 Mortgage
61. Homefield Financial
60. First Horizon Subprime, Equity Lending
59. Platinum Capital Group (Wholesale)
58. First Source Funding Group (FSFG)
57. Alterna Mortgage
56. Solutions Funding
55. People's Mortgage
53. Zone Funding
52. First Consolidated (Subprime Wholesale)
51. EquiFirst
50. SouthStar Funding
49. Warehouse USA
48. H&R Block Mortgage
47. Madison Equity Loans
46. HSBC Mortgage Services (correspondent div.)
45. Sunset Direct Lending
44. Kellner Mortgage Investments
43. LoanCity
42. CoreStar Financial Group
41. Ameriquest, ACC Wholesale
40. Investaid Corp.
39. People's Choice Financial Corp.
38. Master Financial
37. Maribella Mortgage
36. FMF Capital LLC
35. New Century Financial Corp.
34. Wachovia Mortgage (Correspondent div.)
33. Ameritrust Mortgage Company (Subprime Wholesale)
32. Trojan Lending (Wholesale)
31. Fremont General Corporation
30. DomesticBank (Wholesale Lending Division)
29. Ivanhoe Mortgage/Central Pacific Mortgage
28. Eagle First Mortgage
27. Coastal Capital
26. Silver State Mortgage
25. ECC Capital/Encore Credit
24. Lender's Direct Capital Corporation (wholesale division)
23. Concorde Acceptance
22. DeepGreen Financial
21. American Freedom Mortgage, Inc.
20. Millenium Bankshares (Mortgage Subsidiaries)
19. Summit Mortgage
18. Mandalay Mortgage
17. Rose Mortgage
16. EquiBanc
15. FundingAmerica
14. Popular Financial Holdings
13. Clear Choice Financial/Bay Capital
12. Origen Wholesale Lending
11. SecuredFunding
10. Preferred Advantage
9. MLN
8. Sovereign Bancorp (Wholesale Ops)
7. Harbourton Mortgage Investment Corporation
6. OwnIt Mortgage
5. Sebring Capital Partners
4. Axis Mortgage & Investments
3. Meritage Mortgage
2. Acoustic Home Loans
1. Merit Financial

The people at Mortgage Lender Implode-O-Meter also have a "watch list," which includes Countrywide Financial, FNBA, GreenPoint Mortgage and others.

August 20, 2007

Campbell Co. on Wrong Side of Carry Trade

According to the Hedge Fund Implode-O-Meter, reporting August 19, 2007 from Bloomberg as the original source, Campbell & Co. is feeling some stresses.
This Towson, MD-based fund run by Terri Becks is said to be hurting as a result of the breakdown of the Yen carry trade, as well as the ensuing credit crunch in general. The "completely" computer-driven fund is down 10-12% as of the end of July, according to a source. The fund reportedly deals in futures, stocks, and bonds.

Once again, we cannot help but be amused as a fund claiming to be "hedged" for volatility is showing signs of sickness upon encountering some actual rough seas.

August 19, 2007

Alarming Countrywide Financial Liquidity Credit Line

What does Countrywide Financial do if the $11.5 billion credit line isn't enough?

The timing of the Fed's action was also notable as it followed in the wake of an alarming announcement Thursday from Countrywide Financial (CFC) that it had drawn down the entirety of its $11.5 billion unsecured credit facility to supplement its funding liquidity position.

Emphasis added to "entirety."


Weekly Recap - Week ending 17-Aug-07

August 18, 2007

Tony Snow's Money is Running Out

According to Think Progress, In an interview on the conservative Hugh Hewitt show, the President's Press Secretary explained why he would be resigning:

HEWITT: Your intention to go the distance, Tony Snow?

SNOW: No, I’m not going to be…I’ve already made it clear I’m not going to be able to go the distance, but that’s primarily for financial reasons. I’ve told people when my money runs out, then I’ve got to go.

You see, Tony Snow has colon cancer, and the medical bills are stacking up.... or maybe his Press Secretary income isnlt enough to support the lavish life style expected by a media celebrity. It seems that an elite life style is more important than serving the president until the end of his term.


Think Progress

August 16, 2007

US in Decline Like Rome Comptroller General Reports

The Comptroller General of the U.S. government, David Walker, has come out with a new report saying the U.S. is now facing many of the same factors that brought down Rome. These include “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government." Walker predicted the US is “on a path toward an explosion of debt”.


Democracy Now headlines for August 14, 2007.


August 14, 2007

The Chain in the Real Estate Reaction

The simple domestic chain reaction in the current financial crisis is outlined below. We're facing a systemic financial crisis; failure in one sector of the economy is spreading to the larger economy threatening a substantial reduction in aggregate economic activity.

Before outlining the chain reaction, some background. It didn't take an economist to know that this was coming. We've known that pronouncements about a robust economy were hollow, and reflect a phony Wall Street economy that has little in common with the Main Street economy.

First, we knew the dot-com phenomenon was a bubble built on hype, and it burst. In the run up to the burst, dot-com seminars devolved to lessons on how to hype a product concept and cash out to a big firm.

Next, we watched the dot-com bubble-wealth run to stocks on Wall Street in a transparent irrational exuberance. That new bubble burst as the fraudulent practices of the corporate sector were exposed. All of the corporate sectors were in on it: Banks were financing bogus business activities, the consulting divisions of accounting firms were helping cook the same books being certified by their audit divisions, legal firms were helping corrupt clients wiggle out of the illegalities, the corporate media was singing the praises of the robber barons, and the good will of various civic organizations was being purchased with philanthropy from the corrupt corporations. This is all continues.

Third, after the Wall Street bubble burst, the accumulated wealth ran to real estate, triggering an upward series of self-fulfilling cycles of price increases. Laws to prevent predatory lending practices were gone and boundaries on who could finance real estate were lifted. The bubble inflated as people bought multiple properties on the back of cash from refinanced properties. Some of that activity was legitimate, and the profits were somewhat real... "somewhat" real, as long as the Federal Reserves' current struggle to bail out the financial institutions doesn't cause inflation that decreases the "real" value of those profits. You know you have a bubble when practically everyone is saying, "You know, I couldn't even afford to buy the house I'm now living in." That bubble is deflating. Where will the money run to create the next bubble?

So, what makes up the the chain in the real estate reaction?

  • Home Buyer (Borrowers)
  • Lenders to Home Buyers
  • Mortgage Brokers (not always the lender themselves)
  • Mortgage Buyers/Bundlers (Create Mortgage-backed Securities (MBS - bonds))
  • MBS (Bond) Buyers (e.g, Pension Funds, University Endowments, Hedge Funds, Banks use them as reserves)*
  • Primary Dealers (21 large commercial banks that interact directly with the Federal Reserve and with whom large lenders deal)
  • Federal Reserve
How does the chain reaction work?

First, the prices on homes are artificially inflated by excessive accumulated wealth and rules rigged to help an elite minority make more wealth off of the real estate market as described above. This is a failure of the capitalist system, which makes homes unaffordable even to middle income people, setting them up as scapegoats.

Second, mortgage brokers scam buyers into accepting exotic loans, such as interest-only adjustable rate mortgages (ARMs), assuring them that "This is common these days. It's just the way things work." The mortgage broker has no risk. He just takes a fee and never holds the mortgage. The lender only holds the mortgage briefly, usually selling it to the secondary market, experiencing no risk. The secondary market buys bundles of mortgages that are used as collateral on bonds known as mortgage backed securities (MBSs). These are sold to pension funds, endowments, and others, including banks that use them to meet their reserve obligations.

The risk associated with the mortgage is passed on so far from the the point of initiation that the system seemed designed for failure. Actually, it was designed by votes in Congress paid for by lobbyists whose clients knew they could make money off the system before they knew it would fail. An insider's game. Yes, we could see what was coming, and we knew "the economy" was a house of cards, despite what well-paid business pundits were saying on phony TV.

If you think this type of game is limited to real estate sector, think again. This same game has become the American way, according the a recent report by the US Comptroller General comparing the United States to failing Rome.

But I digress...

Third, the buyer who, was scammed by mortgage brokers into taking a very risky mortgage, can't meet the payment; maybe the rate has finally adjusted on the ARM, or a health problem is limiting income and creating additional costs. They buyer becomes the scapegoat. The financial industry saw this coming and worked with both Republicans and Democrats in 2005 to toughen the US personal bankruptcy law, contributing to the creation of what Warren Buffet calls a "debt peonage" society.

Fourth, as the "debt peons" fail to pay their artificially inflated mortgages, the owners of the mortgage backed bonds don't receive their regular dividends. Many large banks to own such bonds as part of their mandatory reserve. Not only are their reserves losing value, but in many cases, banks and others take out low interest loans to buy such bonds (a carry trade: low interest loan pays for higher interest investment and the difference is taken as profit). Without the income from the mortgage backed bonds, these banks and others can't pay their loans. It's a classic carry trade trap that has caused the failure financial institutions in the past.

In many cases, the lender who provided the loan for the mortgage bonds also has debt payments to make, or has loaned out the same dollar 5 times as part of the leveraging that is implicit in fractional reserve banking (banks only hold a small fraction of hard money, or bonds, in reserve to back up their loans. They assume it is very unlikely for everyone to demand their cash at the same time. Note that some of that "hard money" is in the form of mortgage backed bonds...).

If the institutions caught in this kind of bind are big enough, there is a risk of a domino effect affecting the entire economy. It's already expected to happen, given layoffs of failed mortgage companies like American Home Mortgage, and First Magnus Financial Corp., and reduced purchases of hardware and home products associated with the exchange of home purchases, a large sector of the US economy. You know you have a crisis when the Federal Reserve steps in to give short-term loans in the hope that these chain reaction liquidity problems can be resolved. They buy bonds from primary dealers, who in turn make credit available to banks facing a liquidity crisis.

Macro-scale Liquidity Crisis

This is an example of a direct chain of liquidity crises at the micro economic scale among individual institutions. But there's also a macro economic liquidity crisis, which takes the form of less money available for loans. Recall above we mentioned that some banks use mortgage backed bonds as their reserves. The logic follows:

1. Much of the world's investments are in real estate and related financial instruments (MBSs), because of the historic real estate boom over the last six years. This means a lot of mortgage backed bonds are sitting in vaults out there, including as reserves (collateral to support loans).

2. As the value of these mortgage backed bonds declines, bank's reserves shrink. They can loan out less money, that is, credit liquidity shrinks on a macro scale.

Going International

That's the domestic story for the US. The macro-scale story continues as the financial problems jumped the Atlantic and Pacific Oceans . That's a separate story.

Beware the Bail Out on Our Backs, and Inflation

Julian Delasantellis, writing for the Asia Times, exposes the central banks via a funny analogy.

"There's an old story about the late British statesman Winston Churchill at a party. Probably on one of those many nights where never in the field of human excess had so much cognac, brandy and scotch been consumed by a person who historians now say was not an alcoholic, he staggered up to a socialite matron and posed a question:"

Churchill: "Madam, would you sleep with me for 5 million pounds?" (In the 1930s, when the British pound was worth more than twice as much to the US dollar than it is now, this was a particularly impressive sum over which to surrender one's virtue.)

Woman: "My goodness, Mr Churchill ... Well, I suppose ... we would have to discuss terms, of course."

Churchill: "Would you sleep with me for 5 pounds?"

Woman: "Mr Churchill, what kind of woman do you think I am?!"

Churchill: "Madam, we've already established that. Now we are haggling about the price."

"Thanks to last week's events in the financial markets, we now know the price at which the world's three largest central banks, the Bank of Japan, the European Central Bank and the Federal Reserve Bank of the United States, will drop their posturings about the importance of setting good examples regarding promoting sound banking, lending and credit usage policies and put their principles up for sale."

We are witnessing what happens when legislators change the rules to promote rampant capitalism, and the bubble it creates begins to deflate. In the US, the central bank (Federal Reserve) buys up bad debt (mortgage backed securities held by banks) thereby pumping new money into the phony "free market." Economics 101 tells us this monetary inflation will lead to price inflation as the value of the free flowing dollar drops.

But get ready to fight with Congress. The next thing we'll be hearing is that some of these banks and high-flying financial institutions, which give out six-figure bonuses, are "too big to let fail." Congress (read "the US tax payer") will be asked to bail them out. Our answer should be "No." Economics 101 says that businesses must be allowed to fail so that the word "risk" means something, and to clean out the dead wood.


Asia Times, August 14, 2007,
Central banks' easy virtue, easy money

Julian Delasantellis is a management consultant, private investor and educator in international business in the US state of Washington. He can be reached at

Beware the Bail out on Our Backs, and Inflation

Julian Delasantellis, writing for the Asia Times, exposes the central banks via a funny analogy.

"There's an old story about the late British statesman Winston Churchill at a party. Probably on one of those many nights where never in the field of human excess had so much cognac, brandy and scotch been consumed by a person who historians now say was not an alcoholic, he staggered up to a socialite matron and posed a question:"

Churchill: "Madam, would you sleep with me for 5 million pounds?" (In the 1930s, when the British pound was worth more than twice as much to the US dollar than it is now, this was a particularly impressive sum over which to surrender one's virtue.)

Woman: "My goodness, Mr Churchill ... Well, I suppose ... we would have to discuss terms, of course."

Churchill: "Would you sleep with me for 5 pounds?"

Woman: "Mr Churchill, what kind of woman do you think I am?!"

Churchill: "Madam, we've already established that. Now we are haggling about the price."

Thanks to last week's events in the financial markets, we now know the price at which the world's three largest central banks, the Bank of Japan, the European Central Bank and the Federal Reserve Bank of the United States, will drop their posturings about the importance of setting good examples regarding promoting sound banking, lending and credit usage policies and put their principles up for sale.


Central banks' easy virtue, easy money

August 8, 2007

Get to Petraeus

In five weeks, General Petraeus will report to Congress on the status of the Iraq war. We can also presume that he will give his recommendations on future steps.

The Chairman of the Joint Chiefs of Staff, General Peter Pace, describes General Petraeus as having, "First, absolute integrity ... and second, (being) smart as a whip."

OK then. We can appeal to General Petraeus' capacity to reason, and rely on his integrity to respond appropriately.

General Petraeus will agree that the US military does not establish policy, but instead conducts military actions to achieve policies set by civilians.

General Petraeus will agree that the US Congress has the Constitutional power to declare or stop the the Nation from engaging in war. James Madison said that the Constitution was written with the intent to give Congress the power to "chain the dogs of war."

Thus, because General Petraeus does not set policy, he should ask the Democratic leadership of Congress to clarify its objectives regarding Iraq before offering recommendations on military actions. Only then should he offer recommendations relative to the stated objectives of Congress.

If the objectives of Congress differ from those of the President, then we should expect Petraeus to offer alternative recommendations to the President that differ from those offered to Congress. If Congress does not initiate a process to end the war, or in some other way take clear command of the US military, it must concede to the will of the Executive Branch.

This is the only logical and honest way General Petraeus can provide recommendations. Otherwise, he risks setting policy, which would represent a subtle form of military coup.

CLICK to Contact General Petraeus:

CLICK to Contact Speaker Nancy Pelosi

Phone or FAX Senate Leader Harry Reid:

Phone: 202-224-3542
Fax: 202-224-7327


Associated Press, ROBERT BURNS, Gen. Petraeus readies Iraq war report, August 8, 2007.

August 7, 2007

Iraq War Plan Delivered to Bush

On August 7, 2002, President George Bush received the Iraq war plan from General Tommy Franks.

Although general contingency plans exist for many places around the globe, it takes a long time to develop an operational war plan. Bush had his in hand seven months before invading Iraq. According to the National Security Archives, Bush sought an update on the status of Iraq war planning from Defense Secretary Rumsfeld in November 2001, suggesting that he had ordered the development of an operational plan prior to September 11, 2001.


Mother Jones Magazine, Lie by Lie, How Our Leaders Used Fear and Falsehood to Dupe us Into a Mideast Quagmire: A Timeline.

Top Secret Polo Step, National Security Archive.

August 5, 2007

Lost Opportunity to Reign in the Rich

FLASHBACK to December 1994, Newt Gingrich is poised to be Speaker of the House. Business Week, not a liberal rag, has an article entitled, "Reining in the Rich: The costliest welfare load isn't for the poor, its for the well-to-do."

Americans were ready to do the right thing to set our economy on a steady course, representing Main Street interests, as opposed to Wall Street interests. The following poll indicated that 63% of the public wanted to direct government savings to either deficit reduction or government programs. Only 29% wanted tax cuts.

There was debate within the Clinton Administration between the the fearful pro-Wall Street wing, "nervous" about sounding "antibusiness," and the bold pro-Main Street wing. The later, including Labor Secretary Robert Reich, told Clinton, "Gingrich is on the verge of capturing the support of working-class people." He was right. He counseled Clinton, "We should sharply contrast Republicans, who want to cut taxes on capital gains for the wealthy, with Democrats", who want to help working people.'

Rather than be assertive, the pro-Wall Street faction of Hillary Clinton, George Stephanopoulos and Leon Panetta, "counseled laying back and letting volatile conservatives like Gingrich and Senator Jesse Helms... discredit themselves by lurching into extremist policies. History suggests that, in the very long run, their policies could be said to "succeed," but only after major irreversible damage had been done. Specifically, huge amounts of wealth and power were consolidated among right wing proponents before Gingrich finally self-destructed.

The pro-Main Street wing argued that modest proactive reforms could save $ billions. Business Week reported that the well-off were willing to forgo some social security benefits.

Similar modest means testing provisions for Medicare would have saved $1.1 billion per year (netting $13 billion between then and now in 1994 dollars).

While some agricultural subsidies help stabilize small farms, and protect the environment, others are pork. A modest trimming of the pork would have saved $4.3 billion per year (netting $52 billion between then and now in 1994 dollars).

Reduction of oil and gas mining subsidies could have saved $2.2 billions per year (netting $26 billion between then and now in 1994 dollars).

Housing subsidies come in many forms, including breaks for the financial sector. Ironically, today, we're hearing blame directed at people who bought houses they can't afford. Back in 1994, Business Week was reporting:

Fewer than 20% of the poor receive federal housing aid. but a large majority of those who earn more than $100,000 a year (about $179,000 in 2007 dollars) do so, through tax deductions for payment of mortgage interest...

More than 1/3 of the tax subsidies go to the 5% of tax payers who earn more than $100,000 ($179,000 in 2007 dollars). Limiting the deduction to mortgages of $300,000 in 1994 dollars ($420,000 in 2007 dollars) would have saved $4 billion per year, affecting only 1% of tax payers. ($48 billion accumulated by 2007).

Common to all of these policy options were modest proposals that would have reduced government subsidies that benefit the well-to-do Americans. Had those savings been realized, about $140 billion in 1994 dollars could have been used for national debt reduction, infrastructure maintenance, improved education, or preventive health care proven to save costs in the long run. Instead, much of that money went to people with excess wealth, contributing to the bubble economy that is now deflating and hurting Main Street.


Business Week, "Reining in the Rich: The costliest welfare load isn't for the poor, its for the well-to-do." December 19, 1994.