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Generational Dynamics Web Log for 17-Jun-2010
17-Jun-10 News -- Fannie / Freddie delisted by NY Stock Exchange

Web Log - June, 2010

17-Jun-10 News -- Fannie / Freddie delisted by NY Stock Exchange

Some 'good news': More workers are quitting their jobs

Fannie Mae and Freddie Mac are delisted by NY Stock Exchange

The Federal National Mortgage Association, nicknamed Fannie Mae, was created in 1938 in reaction to the massive homelessness of the Great Depression, after so many people lost their homes through foreclosure. Its purpose was to make sure that every American family could live the American dream with his own home. In 1968, Fannie Mae was made into a private, shareholder-owned agency, since it was felt that it could make money on its own. However, it still had special privileges as a GSE (government sponsored entity) that made it a virtual monopoly. As a result, Congress created a competitor in 1970 -- the Federal Home Mortgage Corporation, nicknamed Freddie Mac.

In the 1970s, housing began to be extremely politicized, with complaints that poor people and blacks were being discriminated against in the housing market. The political bickering resulted in giving Fannie and Freddie the freedom to do whatevery they wanted. And so in the 1990s, they turned to structured financing and hedge fund techniques to fund mortgages. They reduced requirements so that they could process a high volume of mortgages, and since the manager were paid according to the number of mortgages they processed, this allowed the managers to give themselves fat bonuses.

Fannie and Freddie have become the pathetic symbols of the financial institutions, rotten to the core, with people willing to screw anyone else for their own financial gain.

After the real estate bubble burst, Fannie and Freddy's mortgage portfolios began to collapse and, by September 2008, around the time of the Lehman Brothers bankrupcy, Fannie and Freddie were bailed out with about $140 billion of taxpayer money, and were put into government conservatorship.

Since then, Fannie and Freddy stock prices have continued to decline. NY Stock Exchange rules required that a stock price remain above $1 per share, or be delisted. The two companies' stock values have been around or below $1 for some time, and on Wednesday, their government regulators ordered that their stocks be removed from the NY Stock Exchange, according to Market Watch.

Fannie and Freddie have already received the biggest bailout in American history, but it's not over. Expect to have to bail them out further with at least another $160 billion, and in a worst case scenario, the figure could be as high as $1 trillion, according to Bloomberg.

The $160 billion bailout figure assumes that the economy will strengthen, that unemployment will fall, and that housing prices will stop falling.

From the point of view of Generational Dynamics, those assumptions are very unrealistic. Housing prices can be expected to fall another 20-25%, unemployment can be expected to go several points higher, and the economy will go deeper into a deflationary spiral. In the end, it's quite possible that $1 trillion won't be enough.

With Kyrgyzstan violence ending, it's time to assess the blame

The cities of Osh and Jalalabad in the Fergana Valley in Kyrgyzstan have been devastated, causing hundreds of deaths, thousands of injuries, and hundreds of thousands of refugees. Almost all of these are Uzbek victims of Kyrgyz violence. However, the shooting has stopped for now, for the most part, and so after a week of violence, it's time to find someone to blame.

The new Kyrgyzstan government, which took power through a coup in April, blames deposed president Kurmanbek Bakiyev, and claims that members of his family clan caused the violence by stirring up trouble. The Kyrgyz military arrested "several snipers in camouflage uniforms and provocateurs," who are suspected of having "stoked long-standing ethnic tensions between Uzbek and Kyrgyz groups with targeted murders."

From the point of view of Generational Dynamics, to blame this kind of violence on a few "provocateurs" doesn't make sense. No human being goes out and starts committing atrocities on their neighbors simply because of the word of some provocateur. When you read about the mass murders and destruction that occurred in the last week, you know that a great deal of hatred must have existed for a long time before. It's possible for a "provocateur" to trigger such violence, but not to cause it.

And besides, there's evidence that the violence against Uzbeks was committed in many cases by the Kyrgyz army, according to the NY Times:

"As the armored personnel carrier rumbled down the street, men in Kyrgyz military uniforms clinging to its sides, residents of an ethnic Uzbek neighborhood here felt a surge of relief. The peacekeepers, it seemed, had finally arrived.

But then the men in uniforms jumped down and began firing automatic weapons into homes while shouting anti-Uzbek slurs, more than a dozen residents of the neighborhood, Shai-Tubeh, said in interviews on Wednesday. They spoke of the terrifying moments last week when they realized that they were under attack from what appeared to be their own nation’s military. They said the assailants killed several people, wounded many others and set fire to buildings.

“We believed that they had come to protect us,” said Avaz Abdukadyrov, 48. “But instead, they came to kill us.”

Mr. Abdukadyrov and others said one memory of the events last Saturday haunted them: as they fled and their homes burned, the men in uniforms laughed and danced in the street."

Stories like this occur all the time in local conflicts, and you always have to ask yourself, what would make an ordinary man pick up a gun, start slaughtering his neighbors and burning down their houses, and then dance in the streets? When you understand that, then you can begin to understand generational crisis wars.

From the point of view of Generational Dynamics, this violence may or may not have ended for the time being, but it's far from over permanently. The same emotions that led to this slaughter could cause a new slaughter at any time, especially with hundreds of thousands of vulnerable Uzbek women and children camped out near the border to Uzbekistan.

Some 'good news': More workers are quitting their jobs

This is what passes for good news these days. According to CS Monitor:

"In a sharp reversal from the previous 15 months, more people quit their jobs in the past three months than were laid off. And that's a good sign, economists say.

"In general, that's a sign of better economic times," says Donald Siegel, dean of the school of business at the University at Albany, part of the State University of New York. "I interpret it as a sign of an improving job market -- when people feel confident enough to quit their jobs."

This shows the real harm caused by Pollyannaish, unrealistic economic predictions by the airheads on CNBC or in Washington. People listen to these things and make wrong decisions that they'll rue later.

From the point of view of Generational Dynamics, nothing has changed. We're still headed for a 1930s style Great Depression, as I've discussed many times.

I strongly urge all readers of this web site not to give up their jobs except in the most extenuating circumstances. It may take you many months or even years to get another job, and if you're older, then you may NEVER get another job.

Additional links

France's government announced that austerity programs will raise the retirement age from 60 to 62. Labor union protests have already begun. BBC

Annual figures released Tuesday by UNHCR, the United Nations refugee agency, show that there were 43.3 million new refugees last year -- people forced to flee from their homes by conflict and persecution. That's the highest since the mid-1990s. Furthermore, the number of refugees voluntarily returning to their home countries has fallen to its lowest level in 20 years. From the point of view of Generational Dynamics, this is all a consequence of the fact that the population grows faster than the food supply, and refugees go where they can find food. UNHCR

In developed countries, large human assembly lines have been largely replaced by automation. But in China, the use of human assembly lines has continued to grow, as businesses in America and Europe outsource their manufacturing to China to take advantage of cheap labor. But the new generation of Chinese workers are refusing to be part of an assembly line, according to Andy Xie. caing.com

Violence is heating up the on the border between Colombia, a US ally, and Venezuela, definitely NOT a US ally, and led by mercurial president Hugo Chávez. The violence is caused by battles between drug cartels, enhanced by the animosity between the two governments. ETH Zurick

In an echo of the Iran/Iraq war of the 1980s, Iran is launching air and artillery bombardments on Kurds in northern Iraq. NY Times

23 things not to write in an e-mail message. NPR

It's becoming increasingly common for cyber criminals to drive by ordinary people's homes and hack into their computer's router to steal personal identify information. Here are some wireless security guidelines for setting up your WiFi from an FTC web site. OnGuard Online (FTC)

(Comments: For reader comments, questions and discussion, see the 17-Jun-10 News -- Fannie / Freddie delisted by NY Stock Exchange thread of the Generational Dynamics forum. Comments may be posted anonymously.) (17-Jun-2010) Permanent Link
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Generational Dynamics Web Log for 17-Jun-2010 17-Jun-10 News -- Fannie / Freddie delisted by NY Stock Exchange

Fannie Mae and Freddie Mac are delisted by NY Stock Exchange

With Kyrgyzstan violence ending, it's time to assess the blame

Some 'good news': More workers are quitting their jobs

Additional links

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Generational Dynamics Web Log for 17-Jun-2010
17-Jun-10 News -- Fannie / Freddie delisted by NY Stock Exchange