Tuesday, October 12, 2010

Hoisted From My Own Comment at Naked Capitalism

I had decided that there are enough top-notch bloggers (e.g., Yves, Karl, Barry and Rortybomb) out there covering the fraudclosure mess that there was no reason for me to post more about it here, but the latest info coming out of Wall Street is very interesting.  Since I shared it over at Naked Capitalism, there's no reason not to do so here:
From Karl Denninger, a link to a Citi analyst report regarding their meeting with a law professor about the possible outcomes of foreclosuregate.

From the paper Karl links to:
“Levitin articulated three possible outcomes to the aforementioned issues and assigned an equal likelihood to each. In his best case scenario, these issues are deemed merely technical in nature and are successfully resolved but it takes at least year to do so and all foreclosures are delayed by at least a year. Levitin disputed the claim by banks that these issues can be resolved in a month or so and attributed the banks’ claims to “legal posturing.” In the medium case scenario, litigation ensues and it takes years to sort out these matters. In the worst case scenario, the aforementioned issues become a “systemic problem” which causes the mortgage market to grind to a halt as title insurers refuse to insure mortgages involving existing homes.”
Even the best case scenario all but assures Chris Whalen’s prediction from last week of of a new banking crisis within 3-6 months. http://www.aei.org/docLib/Whalen.pdf

I was betting on the under, but I now think it will come before Nov. 2nd to ensure that the expected QE2 is as big as possible . . .

And now I guess we know that QE2 is really intended as just another bank bailout, but this time we’re not even pretending that the government has a say in it.
Addendum:  I speak to my investment advisors almost every day, and when I told them of the depth and legs of the foreclosure mess today, it was news to them.  Since they were at Lehman when it collapsed, they were very, very concerned.  I'll get their take on the Citi report tomorrow.