Bearish News

If you could ask Bernanke a question, what would it be?

Here’s mine:

What makes you believe the current recovery is sustainable? What happens if/when the Fed stops buying toxic MBS, the FHA no longer guarantees 25% of all U.S. mortgages, and Freddie/Fannie stop gobbling up the bound-to-fail mortgages?

With 25%+ of homeowners underwater, it’s fair to say that the housing market would crash as rates shot up. I’m pretty damn sure the Fed will not end their massive MBS buying-spree next Spring, as the original gameplan calls for.

So what’s the plan, Bernanke? Print, print, print. Delay the inevitable crash, and attempt to inflate our way out of it. Until our lenders really catch on.

Tarp II also seems inevitable, whether it’s 2010 or 2013. Much depends on whether the banks are actually required to value their assets at realistic levels. And whether they are forced to bring toxic off-balance-sheet assets into daylight. If/when they are forced to acknowledge the crap that exists outside their balance sheets (and the ones they used as Fed collateral), things could get ugly.

I’m following the FASB vs. Bank Lobby fight at CFO.com. It’s a crucial one to watch.

Nasty inflation is becoming more likely by the day. If gold continues to pull-back, we may get a great buying opp soon.

Who woulda thought the Hummer loophole would end badly? Another example of what happens when the government meddles in markets.

Lots of other food for thought in this chart by Jake from Econompic.

Looks like Bank of America plans to repay $45b of bailout cash to Treasury. Funds they didn’t want or need, apparently. But which they plan to pay for, in part, with $18b of fresh securities (which may later turn into a common stock offering). And they will also sell $4b of unspecified assets. Clear as mud.

They will declare themselves free of government assistance. But they continue to enjoy TBTF status. And while I can’t find an recent number, as of Feb of 2009, they had raised $33b in government-guaranteed debt. Nonetheless, after they pay back the $45b, they are free and clear of any government control. Back to huge bonuses and reckless spending with other people’s money.

FASB battle

If the FASB succeeds in eliminating “mark to imagination” accounting, this will not look like a good move for BAC in retrospect. Or if banks are forced to bring all the toxic off-balance sheet crap back onto their books. That would be ugly.

Fortunately bank lobbyists are fighting hard against transparency. From CFO.com:

SEC commissioner Elisse Walter is fighting a proposal that would weaken the regulator’s authority over accounting standards-setters. In a hearing Tuesday before a House committee, Walter called the concept of allowing bank regulators to have a significant say in accounting rules “a grave mistake.”

While Walter’s prepared speech included the usual caveat that her words were not representative of the entire commission, she noted that Securities and Exchange Commission chairman Mary Schapiro “endorses this testimony.”

Currently, the SEC has budget approval over the Financial Accounting Standards Board, which it has designated as the main U.S. accounting standards-setting organization. The commission also frequently provides input to the board’s standards-setting activities. In addition, the SEC has the ability to nominate and interview trustees of the Financial Accounting Foundation, FASB’s parent, which nominates and approves the five FASB members.

All this year, lawmakers have toyed with the idea of making FASB subject to a new oversight body as they work to pass sweeping financial regulatory reforms. Soon, Rep. Ed Perlmutter (D-Colo.) is expected to introduce an amendment to the Financial Stability Improvement Act — a key piece of legislation in the markup phase in the House Financial Services Committee — that would establish a new board of regulators, including bank regulators, to oversee accounting standards-setting. Critics are concerned that the body would give the bank regulators too much say on accounting rules.

The concept has been embraced by advocates of financial institutions — many of which have blamed fair-value accounting rules for exacerbating the financial crisis. Conversely, investors, business advocates, and accounting firms oppose such a move, as they fear it would harm FASB’s independence.

Disclosure: No positions in companies mentioned

This is a re-post from Karl Denninger’s site, which appears to be having technical difficulties. Hope Karl doesn’t mind.

Some will watch this film and be turned off by the over-the-top presentation. Fall of The Republic has a conspiratorial tone, which may limit its reach somewhat. But it has already racked up 500,000+ views on YouTube.

The movie conveys hard truths about American politics and economics. At times it veers into questionable territory, but the overall message is of critical importance — both parties in the U.S. are hopelessly corrupt. America is being pillaged.

After a cinematic intro on the New World Order, the film into some extremely relevant stuff. It’s over two hours long, so get a beverage. It features interviews with Bill Black, Max Keiser, Gerald Celente, Jesse Ventura, and Wayne Madsen.

The film’s official website is here, where you can order the DVD.