Juggling Dynamite

Once a sleepy brokerage firm dealing with financial products like corn futures and pork bellies, MF Global appeared to be rejuvenated when Jon Corzine — a Marine, former senator, former governor, one of Wall Street’s top bankers and a man on the shortlist to succeed Treasury Secretary Tim Geithner — joined as CEO in 2010.

But last October, with the financial crisis still fresh, MF Global failed spectacularly, filing for bankruptcy after a $6.3 billion bet on European sovereign debt went bad. The firm’s downfall reveals lessons not learned and the danger of the revolving door between politics and finance, as FRONTLINE’s Martin Smith reports on today’s Marketplace.  Here is a direct link.

Good segment on the Housing Market last night on CBC. Worth a watch. Here is the direct link.

Main supports to this bubble have been the usual suspects of artificially suppressed interest rates and government (taxpayer) underwriting of lender risk through Canada Mortgage and Housing Corporation. Canadian lenders use the EMILI automated application program to qualify buyers on line.

Informal surveys of current practices reveal that an estimated 90% of all mortgage applications in Canada over the past few years have been done through this on line system and generally with no physical appraisal, no tax returns to verify income (only pay stubs) and no verbal confirmation of employment. At the same time mortgage broker/dealers incented by commission have the capacity to tweak square footage, house amenities, property taxes, even income/assets/debt servicing to get the deal done. And although lenders do get the odd CMHC audit, in most cases CMHC never sees supporting documentation. All of this suggests that the amount of mortgage “abuse” and fraud in Canada over the past few years may well be higher than was experienced in the US housing market leading up to its bubble bursting. This is a major negative for Canadian consumers, our economy and we tax payers who have unwittingly underwritten upcoming losses through CMHC.

The perpetual discussion about the ongoing battle between rich and poor, between the one percent and the ninety-nine percent, has generated a great deal of heat, but not much light. With The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It, New Republic columnist Timothy Noah brings a well-reasoned array of high-wattage spotlights.

Here is a direct link.