Mish Makes Senate Hearing Docs Exhibit #51 on the Financial Crisis

Inquiring minds are digging extremely deep into a 666 page Senate hearing document on the financial crisis.

I am now part of the official record of the US Senate Permanent Subcommittee On Investigation Exhibits of the Wall Street and Financial Crisis, the Role of High Risk Home Loans published April 13, 2010.



Exhibit 51 starts is on pages 434-439 of the document.

The next several pages are screen snapshots from Evidence of "Walking Away" In WaMu Mortgage Pool written Saturday February 23, 2008.

Here are some of my comments at the time.

Let' do the math.

• The total pool size is $513,969,100.
• $476,069,000 was rated AAA.
• 92.6% of this cesspool was rated AAA.
• Yet 15% of the whole pool is in foreclosure or REO after a mere 8 months!

In addition, the data suggests that people are not even bothering to wait for delinquencies to hit 90 days. Instead they are handing over the keys right now.

Washington Mutual was the underwriter. If you bought a slice of this cesspool from WaMu, are you going to buy their next offering? One final question: Does anyone have any reason to trust any rating from Moody's, Fitch, and the S&P?

Those comments and various screen shots I posted (the entire blog post actually) are now part of the official Senate investigation. It's too bad they were not reading me in 2006 when I warned this would happen.

By the way, there is no way I would have found that reference on my own accord, but somehow a reader did.

Brian writes

Hello Mish

Thought you would like to see this. Looks like a few folks in WaMu were reading the blog by 2008. Just to give you a sense of the cluelessness of this group, they didn’t even recognize a Bloomberg mortgage screen when they saw it – they speculated as to whether it was an internal WaMu screen shot.

Lehman Brothers Examination Report

I am also pleased to report I am an official part of volume 3 the Lehman Brothers Examination Report on Why Lehman Failed starting on page 822 (PDF page 106 of 336 of volume 3)

In mid‐to‐late 2007, Lehman faced a growing challenge: the market began demanding that investment banks shrink their balance sheet and lower their leverage. 3166 Before mid‐2007, rating agencies, media, and outside analysts who observed Lehman focused on the firm’s revenues and profit and loss, “P&L.” 3167 Sometime in mid‐2007, however, those same outside rating agencies and analysts pronounced the metrics of an investment bank’s balance sheet and capital at least as important, if not more, than revenue and P&L.

3167 Mike Shedlock, MISH’s Global Economic Trend Analysis, Bank Balance Sheets and Earnings, http://globaleconomicanalysis.blogspot.com/2007/09/bank‐balance‐sheets‐and‐earnings.html (Sept. 30, 2007, 1:38 PM);

I am also in footnote number 3170.

One analyst wrote in late September 2007: “[Banks’] net incomes this quarter don’t matter. And they don’t matter because of one simple rule for financial services firms: The income statement is the past. The balance sheet is the future. . . . At the top of a credit cycle, the income statement for a financial institution shows ‘the best of times’ but buried in the balance sheet is ‘the worst of times’ to come.”3170

3170 Mike Shedlock, MISH’s Global Economic Trend Analysis, Bank Balance Sheets and Earnings, http://globaleconomicanalysis.blogspot.com/2007/09/bank‐balance‐sheets‐and‐earnings.html (Sept. 30, 2007, 1:38 PM) (emphasis added)

A big tip of the hat and full credit actually belongs to Minyan Peter who wrote the phrase I quoted "The income statement is the past. The balance sheet is the future, especially now."

Inquiring minds may wish to revisit Bank Balance Sheets and Earnings written well in advance of the collapse of Lehman on September 30, 2007 and Minyan Peter's (now Peter Atwater's) post Bank Earnings 102: The Best of Times, The Worst of Times on Minyanville.

For recent developments on Lehman please see Lehman's Alter Ego - How Lehman Hid Risk In Shell Corporations; Where is The Indictment of Ex-CEO Dick Fuld?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List