I’ve posted this news article to both foreclosure news and market news because it is both and all things - tied into one. And, point in fact I agree with everything it says having been personally intrinsacly engaged in the lender driven real estate market these last few years…
If we do not stop the banks and lenders from fomenting whatever “law” they deem fit as they control the entire scenario from short sale to foreclosure, then we might as well roll over and hand their institutions the real assets of the American landscape: every home, commercial building, park, and ultimately government building and open space - just turn it over now; because reasoning is useless and the terms they agree to unreasonable in most cases.
Who signed over our entire country to the lenders? We did, with a little encouragement from the advertisers and marketers - 
yup. That’s pretty much how it happened.
But that does not mean we are powerless to turn it around and into something different and more equitable and reasonable from now on. We simply have to be a little smarter on our feet and not assume that anyone trying to give us money is our friend…
So here it is again, in case you missed it the other two places: the heart of the article:
Toxic Assets PPIP Death Rattle
The real problem is this: The banks have been and still are lying about the value of these loans.
Nowhere is this more evident in the mortgage arena. People are being “allowed” to remain in homes where they have stopped paying the mortgage and banks are sitting on the foreclosure process.
Why? Because if they foreclose and sell the house they are forced to book the loss. But if they “forget” to foreclose they can hide the fact that there’s an embedded loss, sometimes as much as 50%, from both regulators and shareholders!
The same thing is going on in Commercial Real Estate. Rather than force the defaults that are occurring to be recognized and foreclosed, the banks are “pretending and extending” terms. That is, ignoring the default and extending the terms of loans even though they are not performing, as this way they can (and are) avoiding taking the write-down.
This is accounting fraud, by the way, but nobody in the regulatory or law enforcement apparatus of this country seems to care.
When PPIP was proposed I noted the fact that banks were not taking realistic marks; this has not changed.
Nor am I alone in this:
Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”
Further deterioration of loans will eventually force banks to recognize losses that their bookkeeping lets them ignore for now, says David Sherman, an accounting professor at Northeastern University in Boston. Janet Tavakoli, president of Tavakoli Structured Finance Inc. in Chicago, says the government stress scenarios underestimate how bad the economy may get.
The simple fact of the matter is that for the PPIP to “work” assets must be sold into it at somewhat of a realistic price.
But if banks do that, they will be forced to recognize losses they (in conspiracy with their regulators, including The Fed, OTS, OCC and Treasury) have been hiding for the last two years - losses that are sufficient to force all of them under critical Tier Capital Ratios and thus subject them to FDIC seizure and liquidation.
We should have done the right thing and forced recognition of fair-market-value of these securities and whole loans, sent in the FDIC and closed these institutions.
We still should.
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Toxic Assets Death Rattle - Karl Denninger
Tags: Add new tag, Bailouts, Banks, CitiGroup, Credit Bubble, foreclosure law in California, Foreclosure Mistakes
Sounds like NO banks are going to be in business. They are loaning play money anyway. The books don’t lie people do.