So, did the banks know what was coming and try to get as many properties safely in to their possession as they could before the hammer came down? If this is not the case then why the increase?
Now I am not a real estate lawyer – to put it mildly – so I don’t know the answer to the following: Is it legal for banks to foreclose if they know that they cannot substantiate ownership? My guess is no. I hope the 50 state attorneys general now looking into this hunt around for any signs of foreknowledge by the banks. If the banks were doing something they knew to be illegal – as opposed to just making more mistakes – then it raises the question of whether or not there was a conspiracy to commit fraud. Were any of this to be true it would worsen the already dubious condition of many banks’ balance sheets.
What makes this even more interesting that it was just yesterday that analysts were cooing over the better-than-expected earnings J.P. Morgan. This was one of the reasons the press gave for explaining the very odd fact that the Dow closed at or over 11,000 for a fourth straight day. It is worth noting that the Dow has risen more than 1,300 points since July 2, presumably on the basis of all the good economic news of late. Could someone please remind what that news was? Anyone? Bueller?
As long-time readers know I view the stock market as much more of a leading psychological indicator than an economic one. I am still hoping for evidence that will convince me otherwise.
THEN AGAIN IT COULD JUST BE A COINCIDENCE: Bill McBride, who writes Calculated Risk, says: The banks are still catching up on the earlier foreclosure moratoriums – and extended periods for trial modifications. This surge in repossessions was expected and I think unrelated to “foreclosure-gate”
This all came about because of better earnings by Goldman Sachs, Ford and and the great good news that sales of previously owned homes rose 3.6 percent in June, the third consecutive monthly improvement! Never mind that Goldman’s money is based on accounting tricks and a fixed game or that the sale of homes is up because the price of homes is falling faster than Alan Greenspan’s reputation. It’s all good.
THE STOCK MARKET AT 9,000 IS NO SMARTER THAN IT WAS AT 13,000.
There is a continuing and unfounded belief that stock markets somehow reflect reality. They don’t. They reflect the psychology of investors – whether individual or institutional. It is not a picture of what is but of what investors think will be. The Dow at 13,000 reflected nothing but the fact that too many people believed US housing prices could only move in one direction. Conversely, The Dow at 6,450 reflected people’s belief that our banking system was dead in the water.
I believe the current market numbers reflect mass denial. Denial that the US is populated by zombie banks, denial that unemployment is in double digits, denial that these profits have come because of slashed expenses – which is hardly sustainable. The rise in the Dow and other markets is more a reflection of wishful thinking and short-term profit-grabbing than it is anything else.
It could be that the above paragraph is wrong. Maybe recovery is upon us and the billions of dollars lost by banks and people in the meltdown do not need to be accounted for. Even if I am wrong about my assumptions and outlook I am right about this: The markets are no better at augury than the Romans were who relied on the flight of birds or examining the livers of sheep. If they were then we would never have crashes.
The markets continue to stagger around like drunks after last call and with every bit as much connection to reality. As I write this, a half hour before the final bell, the Dow is up 11%, nearly 900 points for the day. The NASDAQ and S&P 500 are both up around 10%. All this despite reports of consumer confidence and home prices dropping faster than President Bush’s approval ratings.