Obsolete Certainty

It seems that AIG isn’t the only financial giant that is paying large executive bonuses after being bailed out by the U.S. Taxpayer.  Both Fannie Mae and Freddie Mac, the giant mortgage agencies, are reportedly set to pay over $210 million in bonuses over the next 18 months.

However, absent this time are the steady stream of the usual suspects denouncing the “obscene payments”. Apparently absent this time are the protests outside the homes of employees of Fan and Fred.  Interesting.

Apparently at least one Washington insider is upset.  Iowa Senator Charles Grassley is quoted as saying “It’s an insult that the bonuses were made with an infusion of cash from taxpayers. The elite in Washington and New York need to realize that bonuses for poor performance and at taxpayer expense do a lot of damage to public confidence.”

At least this time Grassley didn’t suggest that Fannie and Freddie executives go Japanese.

Acting Office of Thrift Supervision Director Scott Polakoff has been placed on leave pending an internal investigation of the agency’s role in allowing troubled thrifts to backdate capital infusions.

According to the Wall Street Journal, OTS Chief Counsel John Bowman will run the agency in the interim.

Congratulations fellow American taxpayer. We are going to write a check fo $165 million to fund executive bonuses at AIG. That is right! And not just any division of AIG, but the AIG financial products division that wrote all those toxic credit default swaps and other derivatives that threatened a financial doomsday.

Edward Libby, the government appointed head of AIG stated that “We cannot attract and retain the best and the brightest talent to lead and staff the AIG businesses – which are now being operated principally on behalf of American taxpayers – if employees believe their compensation is subject to continued arbitrary adjustment by the U.S. Treasury.”

In otherwords, keep sending us money but don’t tell us how to spend it.

More proof that Democrats want you and I to pay more taxes, but don’t believe they should have to pay their fair share. Another day, another Obama appointee.  This time it is former Dallas Mayor Ron Kirk who failed to pay close to $10,000 in taxes related to speaking fees that were donated to charity.

The White House stated that the failure to pay was a minor event.  Sure.  As they make plans to jack up my taxes to bailout every deadbeat banker and homeowner in the country.

Alabama’s largest county is making preparations for bankruptcy. Jefferson County, stung by rising debt service from $3 billion in bonds has asked their lawyers to begin the process if negotiations with creditors do not succeed. Should the county take this route it would be the biggest municipal bankruptcy since Orange County, California in 1994.

The problems began when the county issued the debt to pay for mandated sewer system upgrades, much of which was issued in the form of auction rate securities.

Ticor Title, a mortgage title insurance company, has sued Countrywide over the title claim to a Chicago home that was reportedly bought and sold THREE TIMES during a period where the previous owner, Randy Johnson, sat mummified in a chair next to his dead dog.

The 2007 loan in question is a $360,000 first mortgage loan on a Victorian on the south side of Chi-town in which Tricor insured title. However, Ticor argues Countrywide was “reckless and grossly negligent in its underwriting of the mortgage.”

It seems that the owner Johnson had grown up in the house but seemingly dropped off the face of the earth in 2005. Cook County officials then discovered that a fraudulent deed had been backdated to 1996, which improperly transferred the property from Johnson’s deceased mother to a woman named Rhonda Evans. Evans then “sold” the house to a Donald Franklin who borrowed the money from Countrywide. The loan reportedly soon went into foreclosure and was then sold to another owner who discovered the bodies of Mr. Johnson and his loyal pet.

The Royal Bank of Scotland, the second largest bank in the U.K., posted a net loss which was the first loss recorded by the bank since becoming a public company 40 years ago.  However, the apparent good news is that the company believes that the $11.4 billion (U.S.) in write-downs announced earlier this year may be the only markdowns needed for the remainder of 2008.  Of course that hasn’t been true for other large banks, so we will all have to wait and see.

The mortgage meltdown continues as Freddie Mac reported a worse than expected loss in the second quarter driven by a $2.5 billion dollar provision for loan losses.  The second quarter loss of $821 million or $1.63 a share was significantly worse than analyst expectations.  Freddie will now cut the third quarter dividend and continue to seek new ways to improve the mortgage giant’s capital position.

Bill Gross, who manages the world’s biggest bond fund, estimates that the total write-downs related to the current mortgage mess will hit a trillion dollars.  Gross, manager of the Pacific Investment Management Company (often referred to as PIMCO) states that the total investment in “risky assets”, such as subprime and Alt-A mortgages, total $5 trillion. He estimates that 25 million U.S. homes are at risk for negative borrower equity.

Gross wrote that “The problem with writing off $1 trillion from the finance industry’s cumulative balance sheet is that if not matched by capital raising, it necessitates a sale of assets, a reduction in lending or both that in turn begins to affect economic growth.”

Here is an interesting twist on things. Because of the growing foreclosure problem in Texas, Mexican citizens are finding the opportunity to take back Texas. Or at least little pieces of it.  As detailed in a Bloomberg exclusive article written by Thomas Black, the rising peso and the slumping U.S. real estate market have created an a rising interest in the acquisition of Texas foreclosures.

As one American wag has predicted elsewhere, “If things in the U.S. real estate and debt markets don’t improve soon, it will be Mexico that erects the fence…to keep us out.”