COMPUTERWORLD MAGAZINE ON “WAR DRIVING:” “The recent arrest of Albert Gonzalez (no relation to the former U.S. attorney general) for stealing credit card information using an advanced technological attack called “wardriving” underscores the point. Gonzalez drove by and scanned corporations looking for unprotected wireless networks. Once a vulnerability was found, he installed sniffer programs on the network designed to ferret out personal information, especially credit card information. This type of advanced technological theft could not possibly have been imagined in the U.S. at the time credit cards were being introduced.


ECONOMIC ISSUES RISE AS REAL BATTLE BEGINS
MUSHARRAF BIDS ADIEU, PEOPLE’S PARTY PARTIES
DENVER PREPARES FOR ELECTOTAINMENT

Obama seems to have finally recognized that the economy is his issue. He lashed out at John McCain today for “not noticing” whats going on. Both candidates were criticized by NY Times columnist, economist Paul Krugman, for ignoring the issue. Meanwhile, the markets were crumbling as the real estate market remains in decline.

NEW YORK - AP: Wall Street retreated Monday after Fannie Mae and Freddie Mac fell to their lowest levels in nearly 20 years on concerns that the government might need to bail out the mortgage financiers. Weakness in the overall financial sector sent the Dow Jones industrial average down more than 175 points.

ARE BAILOUTS COMING?

The United States Treasury Department may soon be forced to broker a recapitalization package for mortgage giants Fannie Mae and Freddie Mac.

Not only will this move wipe out common stockholders, it may also leave preferred shareholders and others with losses.

The “recapitalization” plan is a failsafe in the case that the government-sponsored giants are unable to raise substantial capital to cover future delinquencies. This plan would act to reestablish stability in the nation?s two largest mortgage-finance firms, but it would do so while continuing to undermine our economy, thus only making the problem worse.

If the Treasury Department chooses to step in it will do so with revenue taken from taxes; and with no plan in place to increase taxes, any money redirected from the tax pool will equate to nothing more than deficit spending.

FINANCIAL TIMES: “Fears about the financial system grew on Monday as money market liquidity tightened and sharp falls in the share prices of mortgage financiers Fannie Mae and Freddie Mac led the US stock market lower. Fannie’s and Freddie’s shares lost 22 per cent and 25 per cent, respectively, after an article in Barron’s suggested that the US government was considering recapitalising the companies on terms that would all but wipe out existing shareholders.”

BBC: TREASURY DENYING BAILOUT

Q&A: Freddie Mac and Fannie Mae

Shares in US mortgage finance giants Freddie Mac and Fannie Mae have plunged again on fears that the government will be forced to bail out the pair.

The slide reignited concerns about the health of the financial sector and sent the US stock market sharply lower.

A report by US financial weekly Barron’s suggested that the chances of a government rescue were increasing.

However, the Treasury said that it had no plans bail out the two firms, which underpin the US mortgage market.

LIAR LOANS SPURRING NEW WAVE OF DEFAULTS

AP reported last night:

In the mortgage industry, they are called “liar loans” — mortgages approved without requiring proof of the borrower’s income or assets. The worst of them earn the nickname “ninja loans,” short for “no income, no job, and (no) assets.”

The nation’s struggling housing market, already awash in subprime foreclosures, is now getting hit with a second wave of losses as homeowners with liar loans default in record numbers. In some parts of the country, the loans are threatening to drag out the mortgage crisis for another two years.

“Those loans are going to perform very badly,” said Thomas Lawler, a Virginia housing economist. “They’re heavily concentrated in states where home prices are plummeting” such as California, Florida, Nevada and Arizona.

VICTORY IN THE TARHEEL STATE ON LENDING REGULATION

The Center for Responsible Lending writes: In all the ongoing analysis of the foreclosure crisis, one point should not get lost: mortgage brokers played a key role in making the abusive subprime loans that continue to wreck the U.S. economy.

Today North Carolina became the first state to ban systematic overcharging by brokers. Governor Mike Easley signed into a law a number of new consumer protections, including a ban on subprime “yield-spread premiums” – essentially kickbacks that brokers routinely receive on subprime loans for steering a borrower into a higher interest rate than the lender has set for the loan.

In 2006, up to 81% of all subprime loans came from brokers, and the overwhelming majority of these came with prepayment penalties—the refinance “tax” that makes lenders willing to pay brokers yield-spread premiums. The results of these perverse incentives are clear: The Wall Street Journal has reported that six out of ten borrowers who got subprime loans could have qualified for better.

“By getting rid of yield-spread premiums on subprime loans, we are eliminating one of the root causes of the foreclosure crisis,” said Chris Kukla, Senior Counsel for Government Affairs at the Center for Responsible Lending. “This will go a long way in aligning the interest of lenders with the best interest of homeowners.”

FORECLOSURES MAKING THE LAWYERS, (MAKE THAT VULTURES) RICH

Miami Herald: Bad News is Good News for Some in Real-Estate Law

Law firms representing lenders, condo associations and, to a lesser extent, homeowners, have been extremely busy with foreclosure cases over the last few months. For example, the Katzman Garfinkel firm, which represents 1,000 condo and homeowner groups, is handling thousands of foreclosure cases…

DOG AND PONY SHOW—FROM THE AGE (AUSTRALIA)

David Hirst writes:

THERE seems little point in compiling the list of woes to sweep through the financial world, but here are some the market needs to shrug off: the latest consumer price explosion, appalling housing figures (with general agreement that next month’s US foreclosure figures will be worse, possibly the worst ever), the acknowledgment that subprime will be dwarfed by Alt-A and even prime debt and adjustable rate mortgages paving the way for a new wave of foreclosures.
US professors Robert Schiller and Nouriel Roubini and many others are now working on the assumption of systemic breakdown, with Schiller suggesting we must shore up things by rethinking the US bankruptcy system.

Schiller is right in highlighting the terrifying consequences that a major bankruptcy, or two, would have for the financial world.

The only thing saving the dog and pony show that we call the markets is the secret activities of the President’s Working Group on Financial Markets (otherwise dubbed the Plunge Protection Team). When all is revealed, this will be seen as the greatest scandal, and that’s saying something, of this entire era. That, and the massive co-ordinated activities of the world’s central banks are the subject of an essay by Ellen Brown, a Los Angeles-based US civil litigation attorney and author of In Web of Debt, an analysis of the Federal Reserve and “the money trust”.

“On July 16, 2008,” she reports, “the Federal Reserve reported holding $US249 billion of US government paper in custody for central banks.” The Fed has reported that “this amount had grown over the past three weeks to $2401 billion, a 38.4% annual rate of growth … So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit.

The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others….