FiduciaryALERT™ - House Price Bubble Caused By Hidden "2,000X (times) Leverage"™ By: Chris McConnell, AIFA Email: Mr. McConnell Website: www.fiduciaryexpert.com

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"2,000X (times) leverage"™ caused housing bubble, Wall St bailout and Main St meltdown; and warnings to trustees for 2011 and beyond...

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Historical returns of the major asset classes should be required knowledge among all investors, banks, regulators; especially trustees and fiduciaries. Real estate's average annual increase was about 10% annually since the 1980's; prior to that it was in the low single digits.

House price bubble caused by hidden "2,000X (times) leverage"™

Briefly, the likes of zero down home loans (100% loan-to-value) are 100 times leverage on house prices multiplied by 20:1 bank leverage equals "2,000X (times) leverage"™; Wall St controlled house prices on Main St, like a puppet on a string. Mortgages were overvalued by any measure, in addition to credit underwriting issues. A Wall St trader's email stated "100% LEVERAGE...NO MTM...IT'S ALL DEALER RISK" code that mortgage securities were not valued according to market or arms-length trades but internal proprietary traders' models, financed for pennies on the dollar.

Pennies on the dollar leverage exposed short term financing pressure and created the "Mother of all Margin Calls"

The government authorized $14T in aid to certain banks, due to funding concerns. (Separately, in the Rajaratnam case, a July 2008 call touches upon funding.) Mr Bernanke, expected banks to make new loans; instead Main St got shafted at the hands of a massive bank media and lobbying assault. One may ask why, still today, the Fed owns nearly $1T of MBS and the FDIC guarantees $247B of banks' and non-FDIC insured affiliates' debt. Issuers of, investors in MBS, direct and indirect counterparties face increased funding uncertainty.

Warning to Trustees for 2011 and beyond...are trustees ignoring the news; again?

CBS' 60 minutes, FDIC's Sheila Bair, and the New York Times have reported it, however, trustees, their lawyers, CPAs and financial advisers seem as if in a "what me worry?" mind set.

Are trustees insane? What's "it"? And will mortgage-burning parties get smoked?

1. One definition of insanity is doing the same thing over and over expecting different results. Example, trusts paying fees and costs only to get sub-benchmark performance repeatedly.
2. The "it" is serious, public warnings related to promissory note, mortgage deed ownership, securitizations, notices and or public records rules.
• Predatory lending, REMIC and or foreclosure violations are also on the list.
• Mortgage backed securities, since the 1980's, have been the girder of credit acceleration in the U.S. and later globally; causing returns to shift as above.

Hidden "2,000X (times) leverage"™: The cause of US housing bubble, "Bubble Banker" paydays, Main St's meltdown

Home court of information asymmetry, hence control, and manipulation; certain banks focused more on proprietary profits. SIFMA reports trillions in face amount of MBS were issued, but some banks held MBS supposedly "valued" at 20 times (or in some cases or intra-quarter much more) what they put down to control them in the so-called Shadow banking system often, according in 2007 to Mr Dudley in the Asset Backed Commercial Paper (ABCP) market. Bank's leveraged MBS and related exposures stealthily inflated house prices.

FDIC's Mr Cave stated "Firms have deleveraged since the crisis, as measured by stronger leverage and risk-based capital ratios. Further, many of the complex structures that concealed additional leverage and exposure, such as structured investment vehicles and other off-balance-sheet conduits have been largely consigned to the history books. Cash and liquid securities represent larger percentages of the balance sheet, while reliance on short term debt has declined."

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