Dick Syron, Freddie Mac chairman and CEO took home nearly $20 million last year and can take home another $20 million this year reports the Associated Press.  This for the man that has guided Freddie Mac’s stock to it’s lowest point since 1991 and presided over a $3 billion net loss for the company in 2007.

This is obscene.  How do these people who are supposed to be leaders get rewarded for driving these companies straight in to conservatorship? If the government does take over Fannie and Freddie it must come with pay controls for executives of these companies.  The American taxpayer doesn’t deserve to pick up the tab of the mortgage mess, but if they are forced to they certainly shouldn’t pick up ridiculous salaries of non-performing executives.

From CNN:

Freddie Mac Chairman and Chief Executive Richard Syron pocketed nearly $19.8 million in compensation last year, according to a Securities and Exchange Commission filing Friday, even though the mortgage company’s stock lost half its value in 2007.

If Syron stays at the helm of Freddie Mac (FRE, Fortune 500) through the end of next year, he will receive nearly $20 million in stock awards if the board says he has met certain goals. This year, he is guaranteed to get $8.8 million in stock grants regardless of performance.

For 2007, Syron received a $1.2 million salary, a $3.45 million bonus, including $1.25 million to remain at the company, and $771,585 in other compensation. He also received stock and options valued by the company at $14.3 million at the time they were awarded.

The company last year picked up the tab for Syron’s financial planning expenses, car and driver for commuting, home security system, business-related dining and travel costs for his wife and $100,000 in legal fees from negotiating his employment contract.

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Citigroup chairman Win Bishcoff said that housing prices in the US and Britain could fall for another two years before leveling off.  It sounds nice, but it’s wrong.  House prices are going to continue falling for long than two years - especially in highly-speculative areas like California, Florida and Nevada.  The reason?  Option ARM and Alt-A loan resets that start to kick-in in earnest around 2010.  See below graph.

So while various pundits and “people in the know” will continue to throw out numbers that sound far enough off to not sound foolish, they will continue to be wrong until they address the second wave of resets that must wash through the system.

From Reuters:

Citigroup chairman Win Bischoff has warned that house prices in Britain and the United States are likely to keep falling for another two years.

The chairman of one of the world’s most powerful banks told the BBC in an interview that he expects it will take two years for the markets to stabilise.

He also said he expected the credit crunch could continue through until 2009.

And the graph that makes me highly skeptical of any talk of a recovery prior to the second wave.

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JP Morgan’s CEO Jamie Dimon said that prime mortgages are “terrible” during the company’s earnings report which saw the Wall Street bank beat earnings estimates.  The rapidly rising prime mortgage delinquencies may signal the second wave of the credit crisis; and one that we’ve been pointing to for a long time now.

In an article I wrote last year I said that “your FICO score can’t pay your mortgage” when times get tough, money gets tight and loans reset.  I predicted that we would see a severe uptick in prime delinquencies and suggested that credit scores were overweighted in loan underwriting.  Alas, I appear to be right.

Dimon also issued a refrain that I’ve been bandying about for a long time - “we’re very early” in the mortgage loss game.

See the below graph (from Housing Wire) that shows the exponential growth in mortgage delinquencies in JP Morgan’s prime mortgage portfolio.

From Housing Wire:

Part of that weak economic outlook can clearly be attributed to mortgages. In a surprisingly short conference call with analysts, Dimon suggested that losses in JP Morgan’s prime mortgage book could triple in the foreseeable future as the credit mess moves out of subprime and into Alt-A and jumbo loans.

30-day delinquency trending among JP Morgan’s prime mortgage porrfolio. (Source: investor presentation)

“Prime looks terrible,” he told analysts on the call. “And we’re sorry, and there’s nothing else we can say.”

The company currently holds $34.4 billion of jumbo mortgages, along with $2.5 billion of Alt-A mortgages. Net charge-offs among prime loans in the second quarter rose to $104 million, more than double the $50 million recorded just one quarter earlier. JP Morgan jumped in headlong into jumbos and Alt-A mortgages during 2007 — obviously an ill-timed bet, given where the market has headed.

“We were wrong, we obviously wish we hadn’t done it,” Dimon told analysts. “We’re very early in the loss curve.”

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The explicitly guaranteed GSE, Freddie Mac, is mulling a possible $10 billion equity round to raise capital to try to avoid from kicking in the taxpayer-financed bailout that Hank Paulson is hot and heavy on.

I don’t know how you raise that much cash at such a terrible stock price without completely diluting the hell out of the rest of the shareholders; but onward I say.  Better the stockholders than the taxpayers.  I say raise away until the stock is worth nothing (better get moving).

From Market Watch:

Freddie Mac is considering raising capital by selling as much as $10 billion in new shares to investors, the Wall Street Journal reported Friday, citing unnamed people familiar with the matter. The move, which comes as emergency regulatory actions have triggered a two-day rebound in its stock, would have the potential to avoid a full-blown government rescue for Freddie…

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Securities regulators have raided the St. Louis headquarters of Wachovia to investigate the company’s actions  around their issuance of auction rate securities (h/t Don) .  The regulators are looking particularly hard at how the company valued and marketed the securities which have caused more than 70 complaints filed with the state from investors that have had assets frozen by the company during the mortgage meltdown.

From CNBC:

Missouri has also served subpoenas on more than a dozen Wachovia Securities agents and executives after receiving more than 70 complaints representing more than $40 million in frozen investments over the last four months. 

The move on the headquarters comes three months after Wachovia Securities failed to fully comply with requests by the Missouri securities division for certain information, state officials said.

“Hundreds of Missouri investors have called my office because of inability to access their money. They were told these investments were safe and easy to cash in, but now they cannot run their business, make medical payments, or pay school tuition,” Carnahan said in a written statement.

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Citigroup chairman Win Bishcoff said that housing prices in the US and Britain could fall for another two years before leveling off.  It sounds nice, but it’s wrong.  House prices are going to continue falling for long than two years - especially in highly-speculative areas like California, Florida and Nevada.  The reason?  Option ARM and Alt-A loan resets that start to kick-in in earnest around 2010.  See below graph.

So while various pundits and “people in the know” will continue to throw out numbers that sound far enough off to not sound foolish, they will continue to be wrong until they address the second wave of resets that must wash through the system.

From Reuters:

Citigroup chairman Win Bischoff has warned that house prices in Britain and the United States are likely to keep falling for another two years.

The chairman of one of the world’s most powerful banks told the BBC in an interview that he expects it will take two years for the markets to stabilise.

He also said he expected the credit crunch could continue through until 2009.

And the graph that makes me highly skeptical of any talk of a recovery prior to the second wave.

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JP Morgan’s CEO Jamie Dimon said that prime mortgages are “terrible” during the company’s earnings report which saw the Wall Street bank beat earnings estimates.  The rapidly rising prime mortgage delinquencies may signal the second wave of the credit crisis; and one that we’ve been pointing to for a long time now.

In an article I wrote last year I said that “your FICO score can’t pay your mortgage” when times get tough, money gets tight and loans reset.  I predicted that we would see a severe uptick in prime delinquencies and suggested that credit scores were overweighted in loan underwriting.  Alas, I appear to be right.

Dimon also issued a refrain that I’ve been bandying about for a long time - “we’re very early” in the mortgage loss game.

See the below graph (from Housing Wire) that shows the exponential growth in mortgage delinquencies in JP Morgan’s prime mortgage portfolio.

From Housing Wire:

Part of that weak economic outlook can clearly be attributed to mortgages. In a surprisingly short conference call with analysts, Dimon suggested that losses in JP Morgan’s prime mortgage book could triple in the foreseeable future as the credit mess moves out of subprime and into Alt-A and jumbo loans.

30-day delinquency trending among JP Morgan’s prime mortgage porrfolio. (Source: investor presentation)

“Prime looks terrible,” he told analysts on the call. “And we’re sorry, and there’s nothing else we can say.”

The company currently holds $34.4 billion of jumbo mortgages, along with $2.5 billion of Alt-A mortgages. Net charge-offs among prime loans in the second quarter rose to $104 million, more than double the $50 million recorded just one quarter earlier. JP Morgan jumped in headlong into jumbos and Alt-A mortgages during 2007 — obviously an ill-timed bet, given where the market has headed.

“We were wrong, we obviously wish we hadn’t done it,” Dimon told analysts. “We’re very early in the loss curve.”

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JP Morgan’s CEO Jamie Dimon said that prime mortgages are “terrible” during the company’s earnings report which saw the Wall Street bank beat earnings estimates.  The rapidly rising prime mortgage delinquencies may signal the second wave of the credit crisis; and one that we’ve been pointing to for a long time now.

In an article I wrote last year I said that “your FICO score can’t pay your mortgage” when times get tough, money gets tight and loans reset.  I predicted that we would see a severe uptick in prime delinquencies and suggested that credit scores were overweighted in loan underwriting.  Alas, I appear to be right.

Dimon also issued a refrain that I’ve been bandying about for a long time - “we’re very early” in the mortgage loss game.

See the below graph (from Housing Wire) that shows the exponential growth in mortgage delinquencies in JP Morgan’s prime mortgage portfolio.

From Housing Wire:

Part of that weak economic outlook can clearly be attributed to mortgages. In a surprisingly short conference call with analysts, Dimon suggested that losses in JP Morgan’s prime mortgage book could triple in the foreseeable future as the credit mess moves out of subprime and into Alt-A and jumbo loans.

30-day delinquency trending among JP Morgan’s prime mortgage porrfolio. (Source: investor presentation)

“Prime looks terrible,” he told analysts on the call. “And we’re sorry, and there’s nothing else we can say.”

The company currently holds $34.4 billion of jumbo mortgages, along with $2.5 billion of Alt-A mortgages. Net charge-offs among prime loans in the second quarter rose to $104 million, more than double the $50 million recorded just one quarter earlier. JP Morgan jumped in headlong into jumbos and Alt-A mortgages during 2007 — obviously an ill-timed bet, given where the market has headed.

“We were wrong, we obviously wish we hadn’t done it,” Dimon told analysts. “We’re very early in the loss curve.”

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U.S. Bancorp, Minnesota’s biggest bank, is facing a similar fate of the other super-regional banks such as Downey Savings, National City, Bank United and others as loan losses continue to mount for the lender.  Loan delinquencies have risen in the Northern part of the country and U.S. Bancorp is feeling the pinch.

As we looked at the other day, more banks are going to be in trouble in the near future.  Unfortunately it will be these super-regionals who lent a ton of money when money was cheap but do not have the balance sheet or the means to raise new capital to protect against these losses.

More from Bloomberg:

U.S. Bancorp, Minnesota’s biggest bank, said second-quarter earnings slumped 18 percent as more customers fell behind on loans. The shares fell as much as 12 percent in New York trading.

The bank more than tripled its provision for credit losses to $596 million from $191 million second-quarter 2007. Assets for which U.S. Bancorp no longer received interest rose 34 percent to $1.14 billion from last year as more homebuilders and homeowners fell behind on their payments.

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it really is.  Consumer prices rose the most since 1982 as the consumer price index (CPI) surged 1.1% led by increased fuel and food costs.  May’s increase was .6% meaning inflation doubled month-over-month, never a good sign.  But hey with all the money being printed out of the treasury, bailouts being handed out left and right and interest rates being kept artificially low to save our Wall Street institutions what else could you expect?

From the New York Times:

The increase in June caps a year where inflation has risen to proportions seen by some as threatening the stability of the American economy. In the last 12 months, the price index has risen 5 percent, the biggest year-over-year jump since 1991. Core inflation is up 2.4 percent compared to June 2007.

The report reinforces what many economists, including those at the Fed, have warned about for months: Americans are being forced to pay significantly higher prices for retail goods and services, even as the job market weakens and big employers like General Motors are laying off thousands of employees.

The number adds to the financial woes of the last week, which has seen the near-meltdown of the nation’s biggest mortgage finance companies and continued turmoil in the stock markets. Investors are also awaiting the release of minutes from last month’s Fed meeting, expected Wednesday afternoon.

From The Big Picture:

Medical care prices, meanwhile, increased a modest 0.2%, while clothing prices rose just 0.1%. These were the only bright spots, as other components posted sharp gains:

Transportation prices rose 3.8%
Airline fares swelled 4.5%
Energy prices jumped 6.6%
Gasoline prices spiked 10.1%
Natural gas prices rose 4.9%.
Food and beverage prices rose 0.7%
Commodity prices soared 1.9%  (a record monthly high).

The core rate increased 2.4% from June 2007, also far more than consensus expectations.

Adding insult to injury, the Labor Department noted that “average weekly earnings of U.S. workers, adjusted for inflation, fell 0.9% in June.” This means that the typical American household income is failing to keep up with rising prices.

Check out The Big Picture for inflation-related charts.

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