First a quick update. Yesterday we ran a story
citing an example of the growing police state in the U.K. Well, it gets
worse.
One of our dear readers and regular
correspondents, Sadia, alerted us to this hot-off-the-press story from
The Times:
Councils get ‘Al Capone’ power to
seize assets over minor offences
Draconian police powers designed to deprive
crime barons of luxury lifestyles are being extended to councils,
quangos and agencies to use against the public, The Times has
learnt.
The right to search homes, seize cash,
freeze bank accounts and confiscate property will be given to town
hall officials and civilian investigators employed by organisations as
diverse as Royal Mail, the Rural Payments Agency and Transport for
London.
The measure, being pushed through by Alan
Johnson, the Home Secretary, comes into force next week and will
deploy some of the most powerful tools available to detectives against
fare dodgers, families in arrears with council tax and other minor
offenders…
…An “explanatory memorandum” says that a
swath of financial investigators attached to the newly empowered
bodies will be accredited, trained and monitored by another quango,
the National Policing Improvement Agency. The memo adds that asset
seizure will result in financial rewards: “Investigation bodies will
receive a share of money recovered as additional funding to
incentivise further work in recovering the proceeds of crime.”
Councils and other bodies had access to
asset recovery powers before but only with the authorisation and
involvement of the police. Now they will be able to act independently
of any police force or law enforcement agency.
The memo says councils and quangos will
employ “trained internal financial investigators” and be “less reliant
on more traditional law enforcement agencies, notably the police”…
If you want to read the whole story, including
a list of the agencies that will receive the expanded powers, please
click
here.
What’s happening here is that the Home Office
is incentivizing prosecutors and groups of bureaucrats to seize private
property by offering them the bribe of a portion of the money and other
assets they seize. Since it’s been proven that not even the police in
the U.K. can be trusted with these powers without mostly harming the
innocent, I wonder how good a job these other agencies will do. Methinks
they will find a criminal in almost everyone.
Who Owns Your Mortgage?
The New York Times ran an interesting
story a couple days ago, citing a federal bankruptcy court case in which
the judge wiped out a $461,263 mortgage debt on a property because the
lender hadn’t proved its claim to the delinquent borrower’s home.
That seems kind of strange. Why would the
lender not prove its claim to the property in question? Simple answer:
It couldn’t, because the note had gone missing.
To quote the article:
The reason that notes have gone missing is
the huge mass of mortgage securitizations that occurred during the
housing boom. Securitizations allowed for large pools of bank loans to
be bundled and sold to legions of investors, but some of the nuts and
bolts of the mortgage game — notes, for example — were never
adequately tracked or recorded during the boom. In some cases, that
means nobody truly knows who owns what.
So, the judge in this case ruled that the
homeowner’s mortgage debt was canceled because there was no hard proof
that anyone actually had title to it.
Is this a trend that could actually pick up
steam?
Real estate entrepreneur and friend of Casey
Research, Andy Miller, weighs in with some other thoughts for us:
This is happening in an isolated way. It
isn’t very significant at this point. However, there are many other
pitfalls for lenders today. The difficulty in being a lender today is
in trying to proceed against your collateral. Courts are not very
sympathetic to lenders, and the entire system is overloaded and being
tilted toward the borrower.
This is having an impact in the land of
unintended consequences. Private lenders are now finding it too risky
to make mortgage loans, and as a result, they have contracted. This
happens, of course, at the worst possible time. This is the time when
we need private lenders to enter the market, not exit the market.
Fannie, Freddie, and FHA are responsible for 80%-90% of the
origination of new U.S. residential mortgages.
Effectively, the home mortgage market has
been nationalized. This is the reason that I am very bearish about the
home market. If the government withdrew its support for home
mortgages, the entire mortgage market would implode. Values would
crater, and private money would rush in to fill the void – albeit at
large discounts and higher yields.
Are Fannie, Freddie, and FHA at risk of
being curtailed? No, not at this moment.
One must remember, though, that the entire
U.S. mortgage market is dependent on bond buyers purchasing
mortgage-backed securities. Right now, bond buyers are focusing on
bonds backed by the full faith and credit of the U.S.A. Fannie bonds,
Freddie bonds, and GNMAs. No one wants the junior bonds created by
uninsured private mortgages.
If the dollar continues to weaken, or if
inflation begins to take its toll on purchasing power, then buyers of
mortgage-backed securities will most certainly rethink their
purchasing strategy.
This would be catastrophic. However, I think
it is inevitable.
The Fed has sponsored the purchases of
“agency securities” to the tune of $1.5 trillion. That, if you recall,
was part of their strategy in “quantitative easing.” It sounds just
like the Treasury markets. It is. When Treasuries lose their luster,
which is highly likely, then the agency market will collapse as well.
This will happen at the worst possible time, when the government bond
market becomes tenuous. Yields will have to increase, which means that
mortgage rates will increase, and the vicious cycle will be initiated
in the home market and the attendant mortgage market.
Thank you, Andy. Very interesting and, as
always, much appreciated.
If you want to read more of what Andy Miller
has to say on all things real estate, sign up for a risk-free
three-month trial of
The Casey Report and access his exclusive interviews in the
archives.
Do Your Due Diligence
By Doug Hornig
Here's yet another reason to at least put
anything questionable seen on the web to the Snopes test:
It must have seemed so perfect. An obscure
blogger unearths some pages of President Obama's college thesis. The
report supposedly comes from big-time journalist
Joe Klein of
Time magazine. And the thesis has some real gems: like
Obama's disdain for the Constitution.
The whole thing was nothing more than a
satirical post on a
humor blog. But
Rush Limbaugh, who quoted from the supposed thesis on his radio
show, sure wasn't laughing. Here's how it went down.
An unknown blogger picked up on a made-up post
meant as a joke, which claimed that Joe Klein had gotten his hands on 10
pages of student Obama's college thesis. Rush Limbaugh jumped on it,
which immediately sparked web searches on "
obama thesis."
Supposedly titled "Aristocracy Revisited," the
excerpt revealed the president had "doubts" about the "so-called
founders." Juicy. Except not true. Limbaugh discovered halfway through
his show that he'd been had, but defended himself by saying basically
the thesis felt true.
Listen in to Rush's mea sorta culpa.
Joe Klein finally jumped in and called the
report "nonsense" on his
Swampland blog, and the blogger who thought the hoax was real
also apologized.
Let's hope someone kept their sense of humor
in all this. Still, for a humble post to go from humor blog to major
media outlet sure seems impressive. Someone ought to write their thesis
on it. For real.
Lazard Confirms Death of Dollar
In a surprise move, the World Trust Fund
managed by Lazard Asset Management has dumped the U.S. dollar as its
primary currency in favor of the pound sterling.
To quote the fund’s filing:
In response to comments from a number of
shareholders and potential investors in the Fund about the liquidity
of the Fund’s shares, the Board, having consulted with the Fund’s
brokers, Arbuthnot Securities, believes that having a larger number of
shares in issue with a lower share price than at present and changing
the currency in which the shares are traded from US dollars to
Sterling, should assist in improving the marketability and liquidity
of the Fund’s shares and support the attraction and retention of a
diverse shareholder base.
You’d think the fall in the U.S. Dollar Index
since March (down from 89 to 75) has something to do with Lazard’s
decision, but nevertheless, this is a stunning statement to read. Will
other asset managers follow suit? Could it be a sign that the U.S.
dollar is in jeopardy of losing its reserve currency status? Time will
tell, but this is something we are going to keep a close eye on. And you
should too.
Chris Wood
Casey Research, LLC
