The scramble began when the game broke in 2008. Public bailouts, massive liquidity injections, and accounting flexibility arose from the ashes of crisis to save the market value of “structured” loans. Now the linkage to the collateral (property and structures) that stand behind these loans has been questioned. This raises serious concern to the valuation of the “structured” loans the banking system is trying desperately to preserve.
Why? The revaluation of structured loans has played a critical role in recapitalizing the financial (banking) system. Anything that raises further concerns as to their value would have to be recognized. This recognition would be extremely difficult in an environment where loan demand, particularly in the influential business and real estate sectors, continues to contract sharply. The red boxes in the table below highlight the year-over-year collapse in business and real estate loans.
Break Down of Total Bank Credit:
Frustration and rage is certain to grow as more details emerge from the “mortgage game.” This process, however, also places increasing strain on an already fragile financial system that’s beginning to stumble. If second or shock wave crisis materializes as the collateral linkage is broken, will the taxpayer stand behind another bailout?
Gold is answering this question right now.
In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in "foreclosure expert" jobs with no formal training, a Florida lawyer says.
Source: google.com
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