[QUOTE=Fusion_power;236758]Ewmayer, That article is long on innuendo and short on facts. Reading your writing over the last 3 years has converted me into a sceptic and a pessimist of epic proportions. I want to see facts, not innuendo. He doesn't even bother to explain what is wrong with the mortgages, just says they are bogus, fraudulent, lies, etc. That does NOT cut it.

DarJones[/QUOTE]I think it is going to be a while before statistics and factoids that don't really matter are assembled. A problem is that all of this collateralized crapola that we have been talking about over the years here is of a scale that the courts can't handle -- couldn't, wouldn't, shouldn't. Then there is the fact that some states require court handling of foreclosures etc, while some don't. It is a patchwork all over the place and there is a freaking amazing backlog of stuff to process and it crosses all the state lines. Look at the legal web pages. Lawyers are having a hard time getting some judges to accept that these defendants are entitled to due process at all. Sure there is all the other stuff we have been talking about: upside down stuff, no personal responsibility, squatting, yada yada yada -- But - Most of that shouldn't matter when a defendant is having his day in court. It is his day. This portion of the process is getting the shaft. And people have a lot of bad to say about lawyers, but they are unsung heroes many times in my opinion. Look around the web especially on legal web pages. From the article I mentioned above:[QUOTE]Contrary to the banks' blanket denials that they've never tried to wrongfully foreclose on anyone, in cases that Forrest has defended he has encountered two banks trying to foreclose on the same mortgage; two foreclosure law firms filing suit to foreclose on the same mortgage; and banks trying to foreclose on properties sold for cash at a short sale. While those cases don't represent the majority of his clients, the numbers are significant, particularly when you consider that he doesn't represent all distressed Florida homeowners[/QUOTE]The other shoe has dropped and foreclosures are frozen all over the country, the details vary (attorneys general, and voluntary ones) and all this pending backlog is yet another pall on the hopes that the real estate market will ever recover.

[QUOTE=Fusion_power;236758]Ewmayer, That article is long on innuendo and short on facts. Reading your writing over the last 3 years has converted me into a sceptic and a pessimist of epic proportions. I want to see facts, not innuendo. He doesn't even bother to explain what is wrong with the mortgages, just says they are bogus, fraudulent, lies, etc. That does NOT cut it.

DarJones[/QUOTE]

I agree. He suggests that the foreclosures are being done to cover
up massive unerlying fraud, yet does not indicate the nature of this
fraud, does not indicate how foreclosures cover it up, and does not
indicate how banks profit from the foreclosures.

You all make good points, but you didn't think I was just relying on Taibbi's word for it, did you? ;) I like Taibbi because his work adds very human color to an issue which can seem numbingly faceless due to its sheer scale. Yes, he does have a tendency toward tendentious "little people"-favoring writing.

The article is short on wider-ranging statistics, but the illustrative case he provides of banks deliberately destroying the paperwork, using the MERS facility (set up by the banks in contravention of property and title law in just about every state) to allow electronic "titles" to be swapped like stock in an eTrade account, and then forging documents when pressed to show the original paperwork appears to be very widespread. Barry Ritholtz, Karl Denninger and ZeroHedge have done a much better job at assembling stories and statistics which indicate that the fraud is indeed massive. I suggest anyone who is interested spend a few weekend afternoons or mornings reading through headlines of articles on those sites from the past month to gain a better sense of the scale of this thing.

As to Bob's question about how banks profit from foreclosures, that is a good one, and the answer is the reason I dislike referring to the issue in terms like "foreclosuregate", which look at the issue from (IMO) the wrong end. The *real* underlying issue here is one of *securitization* fraud - that is where the real money was made. The fraud is only coming to light now that millions of those mass-securitized mortgages are in the foreclosure process. The banks may not make money from the foreclosure per se and in many cases have delayed foreclosure because it allows them to keep the mortgage on their books at a fake "performing" value longer - but at some point foreclosure followed by a short sale becomes more attractive than keeping the nonperforming asset. (And a short sale allows the new mortgage to - ta da! - be resecuritized, albeit typically at a lower "value" than the previous one.) Also note that many of the big securitizers additionally rigged the pooling and servicing agreements for the mortgages they made and securitized in a manner which does in fact [url=http://market-ticker.org/akcs-www?post=171392]allow them to profit handsomely[/url] from a default - this appears to be one major reason the Treasury-sponsored HAMP program has been such a dismal failure - because many of the banks have rigged the game so they stand to make more money from getting the debtor to default than they would from a loan modification!

Now the MERS system was key to the securitization business, because a typical securitization has each mortgage in the pool being securitized changing "hands" as many as half a dozen times. Destroying the original record not only allowed this process to proceed quickly, it also allowed for a whole lot of funny business in the securitization - mortgages already in foreclosure getting included in securitizations as "performing", the same mortgage getting included in multiple securitizations, that sort of thing. All of these things have been well-documented via the above sites and others.

And of course MERS allowed the banks to defraud the states out of tens of billions of dollars in [url=http://market-ticker.org/akcs-www?post=171930]recording fees[/url].

Perhaps the best "primer on the epidemic of mortgage fraud" is this 2-part essay by former S&L regulator Bill Black on the Huffington Post. Black focuses on the particular case of Bank of America, which is likely the largest participant in (and beneficiary of) mortgage fraud by way of its acquisition of Countrywide:

[url=http://www.huffingtonpost.com/william-k-black/foreclose-on-the-foreclos_b_772434.html]Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership[/url]
[quote]After a quick review of its procedures, Bank of America this week announced that it will resume its foreclosures in 23 lucky states next Monday. While the evidence is overwhelming that the entire foreclosure process is riddled with fraud, President Obama refuses to support a national moratorium. Indeed, his spokesmen on the issue told reporters three key things. As the Los Angeles Times reported:
[i]
A government review of botched foreclosure paperwork so far has found that the problems do not pose a "systemic" threat to the financial system, a top Obama administration official said Wednesday.
[/i]
Yes, that's right. HUD reviewed the "paperwork" problem to see whether it threatened the banks -- not the homeowners who were the victims of foreclosure fraud. But it got worse, for the second point was how the government would respond to the epidemic of foreclosure fraud.
[i]
The Justice Department is leading an investigation of possible crimes involving mortgage fraud.
[/i]
That language was carefully chosen to sound reassuring. But the fact is that [b]despite our pleas the FBI has continued its "partnership" with the Mortgage Bankers Association (MBA). The MBA is the trade association of the "perps." It created a ridiculous on its face definition of "mortgage fraud." Under that definition the lenders -- who led the mortgage frauds -- are the victims. The FBI still parrots this long discredited "definition." That is one of the primary reasons why -- in complete contrast to prior financial crises -- the Justice Department has not convicted a single senior officer of the large nonprime lenders who directed, committed, and profited enormously from the frauds.[/b]

Note that the Justice Department is not investigating foreclosure fraud. HUD Secretary Donovan's statement shows why:
[i]
"We will not tolerate business as usual in the mortgage market," he said. "Where there have been mistakes made or errors, we will hold those entities, those institutions, accountable to stop those processes, review them and fix them as quickly as possible."
[/i]
Note the language: "mistakes", "errors", "processes" (following the initial use of "paperwork"). No mention of "fraud", "felony", "criminal investigations", or "prosecutions" for the tens of thousands of felonies that representatives of the entities foreclosing on homes have admitted that they committed. Note that Donovan does not even demand that the felons remedy the harm caused by their past fraudulent foreclosures. Donovan wants them to "fix" "processes" -- not repair the harm their frauds caused to their victims[/quote]

[url=http://www.huffingtonpost.com/william-k-black/post_1214_b_779193.html?just_reloaded=1]Let's Set the Record Straight on Bank of America, Part 2: Eliminating Foreclosure Fraud[/url]
[quote]We did not call for a long-term foreclosure moratorium. Our proposal created an incentive for honest lenders to clean up their act quickly by eliminating foreclosure fraud. We will devote a future post to our proposals for dealing with the millions of homes that the fraudulent lenders induced borrowers to purchase even though they could not afford to repay the loans.

Bank of America's data add to our argument that hundreds of thousands of its customers were induced by their lenders to purchase homes they could not afford. The overwhelming bulk of the lender fraud at Bank of America probably did come from Countrywide, which was already infamous for its toxic loans at the time that Bank of America chose to acquire it (and also most of Countrywide's managers who had perpetrated the frauds). The data also support our position that fraudulent lenders are delaying foreclosures and the sales of foreclosed homes primarily in order to delay enormous loss recognition.

The fraud scheme inherently strips homeowners of their life savings and finally their homes. It is inevitable that the homeowners would become delinquent; that was the inherent consequence of inducing those who could not repay their loans to borrow large sums and purchase homes at grossly inflated prices supported by fraudulent inflated appraisals. This was not an accident, but rather the product of those who designed the "exploding rate" mortgages. Those mortgages' initial "teaser rates" induce unsophisticated borrowers to purchase homes whose values were inflated by appraisal fraud (which is generated by the lenders and their agents) and those initial teaser rates delay the inevitable defaults (allowing the banks' senior managers to obtain massive bonuses for many years based on the fictional income). Soon after the bubble stalls, however, the interest rate the purchasers must pay explodes and the inevitable wave of defaults strikes. Delinquency, default, foreclosure, and the destruction of entire neighborhoods are the four horsemen that always ride together to wreak havoc in the wake of epidemics of mortgage fraud by lenders.

Out of these millions of fraudulent mortgages, Bank of America claims to have modified 700,000; of these, 85,000 are under HAMP. Still, the Treasury says that the bank has another 375,000 mortgages that already meet HAMP terms. In other words, Bank of America has been shockingly negligent in its efforts to modify mortgages. The Treasury reports that the bank's performance is far worse than that of the other large banks. Alternatively, Treasury could be wrong about the mortgages; Bank of America may be refusing to modify mortgages for homeowners who appear to qualify for the HAMP terms because it knows the data Treasury relied upon is false. Their unusually low rate of HAMP modifications could be the result of the extraordinarily high rate of mortgage fraud at Countrywide.

Bank of America has admitted that HAMP's "implicit" purpose is to help the banks that made the fraudulent loans -- not the borrowers. That goal was the same goal underlying the decision to extort FASB to gimmick the accounting rules -- delaying loss recognition.[/quote]

By way of illustration of how widespread mortgage fraud on the part of the big banks may be, here is a [url=http://fcic.gov/hearings/pdfs/2010-0407-Bowen.pdf]snip from a recent deposition[/url] given by a former Citibank executive:
[quote]These mortgages were sold to Fannie Mae, Freddie Mac and other investors. Although we did not underwrite these mortgages, Citi did rep and warrant to the investors that the mortgages were underwritten to Citi credit guidelines.
[b]
In mid-2006 I discovered that over 60% of these mortgages purchased and sold were defective. Because Citi had given reps and warrants to the investors that the mortgages were not defective, the investors could force Citi to repurchase many billions of dollars of these defective assets.[/b] This situation represented a large potential risk to the shareholders of Citigroup.

I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group.

We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And [b]defective mortgages increased during 2007 to over 80% of production.[/b][/quote]

None of the articles are doing a good job of laying things out but there is more than smoke here. There are a lot of hands examining this elephant but they aren't understanding or explaining it that well themselves. I can't champion or really intelligently expand or even properly argue points that I feel are important without organizing and doing a lot more thinking on this than I care to, so I do understand that it is unfair that I am taking a position (and a somewhat strident one at that) in an intellectual discussion without doing reasonably backing up what I say with supporting information.

What I have been doing is, over time in the course of general news skimming that I do, developing an opinion, but without developing the clarity of noting the points that I would use if I were to try to explain or defend it.

When they were collaterallizing this stuff, among the untested processes they were doing was implementing new ways of documenting a trail of ownership of the note that corresponds to a particular piece of property debt. A lot of that got shoveled into something called MERS (Mortgage Electronic Registration System). But there are a lot of mistakes and omissions and carelessness in the entire process.

Now all kinds of large debt holders are trying to process and fairly get paid on the debt that they hold but a lot isn't properly documented. This is the part where things are going wrong. The big institutions who in past decades really did not act shoddy at all on this are relying on improper methods to present clear information for each piece of property that appears in court. It has taken considerable time for the Judicial system to realize that business is not the same as usual; it is not really the mindset on a foreclosure to think that they need to check all the notarized or otherwise attested facts or check the legal path or provenance of what appears in front of them. Nor can the process handle the need for them to do so.

The shlub defendants are not helping the process; they can't, or won't pay up the amounts in dispute before their day in court and they each have annoying or complicated stories to tell without clarity of what is important legally. Lawyers have been chary about getting involved in much of this because the defendants are broke already, etc. And much, much too often as different pieces unfold, it is hard to like the defendants. There are the delinquencies, the hemming and hawing about how many people, who is earning, where money comes from -- the usual things that turn up often as the defendants don't have things organized to present their facts -- not to mention the wrong, illegal, distasteful things and profligacy that turns up when effort is expended on their behalf.

But the process has been given much too much leeway on the big business side and they grinding too many debt holders through a messed up process. Big business has been doing all kinds of questionable things to push the process forward from their end. No chain of executives is standing in front of Congress saying things like cigarette smoking doesn't cause cancer. What is happening is that lots of documents that look like attested, notarized, ordinary signed documents don't have the attention to detail and the true facts that we have relied on in the past. Please look at all the robo-signing stuff. I can't do justice to explaining it. There is an imbalance here that is making it hard for the shlub to get genuine due process in court.

As you see I have a lot of opinion and not much fact. Also much of what is wrong about the process is not the courtroom stuff but instead the Wall Street side of big business and greed and hiding risk that we have been reading about over the last couple of years on this thread -- but on that side I am even less informed or capable of properly discussing.

The fundamental process is flawed start to finish. The U.S. govt backs securitization of mortgages because it enables more people to 'live the American dream'. If you want to question this, please take a look at the mortgages that fannie and freddie deal in.

The first flaw in the process is that the mortgages were marketed to a group of people who could not pay using the premise that property values always go up to justify doing so. This fell apart when property values collapsed. The people who had borrowed could not pay so the mortgage went into default.

The banks were effectively middlemen in this process. They wrote the mortgage and skimmed a percentage off the top in the process thereof. Once the mortgages were written and enough of them were aggregated, they were securitized and sold off to investors lured by relatively high returns. The bank slapped itself roundly on the back and chuckled all the way to the bank because they had made a cut of money and they no longer held the bag, it had been passed on to some unwitting schlup. And caveat emptor, if by chance a mortgage defaults, the banks wrote the rules that they get to collect another fee for servicing the foreclosure action. This means the bank makes money coming and going.

The various ratings agencies were seriously negligent because they rubber stamped millions of blocks of aggregated mortgages with triple A ratings. Now you can argue this several ways, but the underlying issue is that they did not care what the fundamentals of the mortgages were, all they cared was that a good rating on a mortgage group paid them big dollars. This was a case of the fox guarding the henhouse.

The buyers of the mortgages wound up being a huge number of banks and investor groups around the world. China in one way or another holds a huge chunk. These groups wanted to de-risk the mortgages they were holding so they did the obvious, they took out insurance policies.... with AIG. Thus, when the RE market collapsed, AIG was on the hook for about $200 Billion. Since our good public servants at the fed and treasury could NOT let the economy crash, they had to bail out AIG using borrowed money guaranteed by the taxpayer. Now we as taxpayers are on the hook for the outright fraud that started with a bank writing a mortgage and then selling it via securitization.

What amazes me is that these obliviots just went through an election and they STILL don't see what has the average Joe so upset.

Ewmayer, you may like Taibbi's writings, but imo, he does way too much blathering.

What do we do to fix the above failings? It would require a new legal framework for mortgage securitization where the writer of the mortgage is accountable in the event of default and where mortgages were much more regulated than they will ever be with our current political leadership.

DarJones

[QUOTE=Fusion_power;236908]
What do we do to fix the above failings? It would require a new legal framework for mortgage securitization where the writer of the mortgage is accountable in the event of default DarJones[/QUOTE]

I have suggested this before. Fat chance.

Or we could disallow securitization in the first place. You gave out a
mortgage? You own it.

We could also bring back laws requiring separating commercial from
investment banking.

Irekand gets "Respite" | The GM IPO
 

[url=]http://links.reuters.com/r/3KFH5/EL3RG/EXZC3W/C0MV9/7A5CY2/YT/h]Respite for Ireland, euro after sharp selloff[/url]: [i]Market pressure on Ireland and other euro zone states eased and the single currency made up ground on Friday after Europe reassured bondholders they would not be forced to take a hit in the event of a new bailout in the bloc.[/i]

[i]My Comment:[/i] And why on earth shouldn`t bondholders share in the pain? I`m with [url=http://www.bloomberg.com/news/2010-11-12/european-ministers-hold-crisis-talks-at-g-20-amid-ireland-bailout-concern.html]German PM Merkel[/url] on this: "We can’t constantly explain to our voters that taxpayers have to be on the hook for certain risks rather than those who make a lot of money taking those risks."


[This is a bit of catch-up from last week`s news]

[url=http://www.reuters.com/article/idUSTRE6A00U420101105?feedType=nl&feedName=ustopnewsearly]China and Germany belittle U.S. actions before G20[/url]: [i]China rebuffed on Friday a U.S. plan to set limits for trade imbalances and Germany dubbed the Fed's money-printing policy "clueless," setting the stage for what could be a fractious G20 summit next week.[/i]

[i]My Comment:[/i] I see Reuters has picked up the "clueless" meme ... the term German FinMin Schäuble used is "ratlos" (Same "Rat" meaning "advice or council" which appeats in "Rathaus", "Stadtrat", etc), which more accurately - and this changes the flavor of the comments significantly - translates as "at a loss" or "having not a clue" as to how to proceed. "Ratlos" lacks the extremely pejorative implications of "clueless", it can be used benignly ("I found myself at a loss") or mildly-critically in the sense of describing someone who appears to be in over his head, but the English "clueless" is more accurately conveyed in German as e.g. "Er hat nicht die leiseste Ahnung..."

But what I found most interesting about an-otherwise-typically-useless G20 meeting was that Obama, less than a week after Bernanke announced a fresh spurt of US money-printing madness, had the unmitigated gall (or perhaps cluelessness) to criticize China for its "currency manipulation." I suspect he may have lost whatever remaining tiny semblance of credibility he had on matters of economic and monetary policy with that little bit of pot-calling-the-kettle-black.


[url=http://links.reuters.com/r/YMQP2/S70XQ/081NWG/M4IRJ/97WTZU/YT/h]GM $13 billion IPO to cut Treasury stake to 43 percent[/url]: [i]General Motors on Wednesday finalized terms for a stock offering of about $13 billion to repay a controversial taxpayer-funded bailout and reduce the Treasury to a minority shareholder.[/i]
[quote]GM's filing with the U.S. Securities and Exchange Commission is the final step before it begins marketing what is expected to be one of the largest-ever IPOs. The investors are expected to span the globe and include sovereign wealth funds.

The automaker plans to sell 365 million common shares at $26 to $29 each, raising about $10 billion at the midpoint, according to updated initial public offering papers filed with the SEC.

In addition, GM said it planned to sell about $3 billion of preferred shares that would convert to common shares under mandatory provisions, a less risky form of equity that could attract dividend and growth-fund investors.

The IPO would value GM at just over $41 billion at the midpoint of the price range. Assuming exercise of warrants that are in-the-money, the share count jumps roughly 300 million to 1.8 billion and GM's value rises to just under $49 billion.

It is all but certain that U.S. taxpayers would face a loss on the automaker's still controversial bailout. GM needs a market value of roughly $70 billion if U.S. taxpayers are to break even.

By comparison, GM's more successful but smaller rival Ford Motor Co is currently worth about $49 billion.

"That would make sense," said Bernie McGinn, chief investment officer at McGinn Investment Management in Alexandria, Virginia, who owns Ford stock. "Ford has done everything right, and GM is a year out of bankruptcy and it has a new CEO."

McGinn said the discounted value for GM also reflected the urgency for the Obama administration to exit its investment in the U.S. automaker.

"I think this is a political thing. It's being driven by Washington," he said. "They just want to get out. And if you talk about eating $10 billion in losses, this is a city that can eat trillions of dollars."

One source familiar with the offering said, "(The Treasury) decided they wanted a massive upside." The source was not authorized to speak with the media and declined to be named.

"The tough actions that the Administration took to get the auto industry back on its feet and [b]save over one million jobs[/b] played a crucial role in putting our economy on the path to recovery," the U.S. Treasury said in a statement.[/quote]
[i]My Comment:[/i] Even if you take the Treasury shill`s number at facxe value - a highly dubious proposition - "Save over one million jobs" here or abroad. And if a significant chunk of those "ye shall be saved by the miraculous touch of Lord Keynes, praise be!" jobs are domestic ones, to what extent are they precisely the kind of uncompetitive overpaid, over-benefitted union-monopoly jobs which (coupled with decades of greed and shortsightedness at the executive level) helped propel GM into bankruptcy in the first place? The fact that I haven`t heard about mass howls of protest and pickets in the streets by workers at the "New GM" has me worried as to what extenbt the company has tackled its deep structural problems.

[QUOTE=ewmayer;237216][url=]http://links.reuters.com/r/3KFH5/EL3RG/EXZC3W/C0MV9/7A5CY2/YT/h]Respite for Ireland, euro after sharp selloff[/url]: [i]Market pressure on Ireland and other euro zone states eased and the single currency made up ground on Friday after Europe reassured bondholders they would not be forced to take a hit in the event of a new bailout in the bloc.[/i]

"We can’t constantly explain to our voters that taxpayers have to be on the hook for certain risks rather than those who make a lot of money taking those risks."

[/QUOTE]

Damn right. When one invests one takes risks. Sometimes bonds are
defaulted. Sometime stocks lose money. Bondholders should take the loss.

ZeroHedge on the GM IPO
 

Let`s just say the ZH crew are a wee bit skeptical as to the value proposition for retail buyers here - the value proposition for the US government in pumping the share price as high as possible so Treasury can dump its stake at a minimal loss is self-evident:

[url=http://www.zerohedge.com/article/hft-king-getco-make-sure-gm-ipo-does-not-crash-will-be-designated-market-maker]HFT King Getco To Make Sure GM IPO Does Not Crash, Will Be Designated Market Maker[/url]:
[quote]The administration is doing [b]everything[/b] it can to make sure that the worst IPO in history, that of Government Motors of course, will not be DOA. The latest news is that Getco has been appointed to be a DMM for the year's most important IPO. As Bloomberg reports: "The Chicago-based firm will be tasked with helping trading go smoothly when the auto maker returns to the New York Stock Exchange after a 16-month absence, expected to occur Thursday. NYSE Euronext (NYX) spokesman Christiaan Brakman confirmed that Getco was selected from among the exchange's five designated market makers, who are responsible for buying and selling shares, [B]smoothing trade imbalances and providing liquidity in designated symbols in return for incentives paid by the exchange[/b]." Well, by now it should be all too clear what "providing liquidity means."

In other words, expect Getco to internalize and churn any sell interest and make sure that the stock can only go up, up, up, until enough of it is in retail hands at which point it can find its fair value, somewhere in the neighborhood of zero.[/quote]
[i]My Comment:[/i] I'm amusing myself imagining a possible text message exchange between Timmay Gee over at Treasuray to his boss Barray Oh, should the IPO run into trouble despite the pulling out of all the stops:

TG: POTUS U THER?

BHO: POTUS HER. SUP, HOMES?

TG: BD NUZ, GM IPO DOA :(

BHO: WTF? R U KDING??

TG: NOT KDNG. MKT SEZ IPO = POS

BHO: WAT BOUT HFT PIMP?

TG: U MN PIMP R PUMP?

BHO: PUMP, SORY SPELING

TG: HFT CAUSE FLSH CRSH, HD 2 KBOSH HFT

BHO: GONA KL GTCO fTARDS FK FK FK!

TG: WAT 2 DO?

BHO: CN U BLAM FAT FNGR TRADE?

TG: HEL YA, LTS DO THAT

BHO: KOOL, POTUS OUT, LTR

TG: LTR, POTUS

Ireland given 24-hour take-this-bailout ultimatum
 

As reported by [i]The Guardian[/i]:

[url=http://www.guardian.co.uk/business/2010/nov/15/ireland-portugal-spain-european-debt-crisis]Ireland told: Take EU bailout or trigger crisis[/url]: [i]Dublin warned it has 24 hours to make decision as EU emergency talks loom amid fears Irish banks` contagion may spread to other eurozone countries[/i]
[quote]An increasingly isolated Irish government was coming under mounting pressure tonight to seek a European or International Monetary Fund bailout within 24 hours amid fears that contagion from its crippled banking sector might spread through the weaker eurozone countries.

Portugal, Spain, the European Central Bank and opposition parties all urged Brian Cowen`s coalition government to remove the threat of a second crisis in six months by putting a firewall between Ireland and its partners in the 16-nation single currency.

With finance ministers from the eurozone due to hold emergency talks tomorrow night, financial markets were expecting Dublin to finalise negotiations with the EU over the terms of a deal to allow Ireland to rescue banks laid low by the collapse of the country`s construction boom.

"The Irish problem is spreading, but it could get more volatile," said Ashok Shah, chief investment officer at London Capital, a fund management firm. "They have to get this bailout, they have a period of time before it gets impossible, before nasty things happen. The longer they leave it, the more difficult it will get."

Portugal has seen its borrowing costs rocket along with Ireland`s as speculation has grown that it too may have to consider a bailout. Its finance minister, Fernando Teixeira dos Santos, told the Wall Street Journal his country had been hit by a contagion effect caused by fears about Ireland`s ability to pay its debts.

"I would not want to lecture the Irish government on that," he said. "I want to believe they will decide to do what is most appropriate for Ireland and the euro. I want to believe they have the vision to take the right decision."

The Bank of Spain governor, Miguel Ángel Fernández Ordóñez, a member of the European Central Bank`s governing council, told a banking conference in Madrid he expected an "appropriate reaction" by Ireland to calm the markets. He later told reporters: "The situation in the markets has been negative due in some part to the lack of a decision by Ireland. It`s not up to me to make a decision on Ireland, it`s Ireland that should take the decision at the right moment." Ewald Nowotny, another ECB governing council member, said in a radio interview the EU wanted a "quick, good solution to Ireland, so that there will be no spillover" to other heavily indebted countries such as Portugal and Spain.

Weekend reports that Ireland was holding bailout talks with the EU helped ease pressure on Irish borrowing costs today, with the yield on benchmark 10-year Irish bonds easing to 8.1% from a peak of over 9% last week. The premium that investors demand to hold Irish 10-year bonds over benchmark German bunds (known as the spread) also fell to 545 basis points, down from a record 652 basis points last Thursday.

Analysts warned, however, that the selling would quickly resume if Ireland tried to go it alone. "The expectation of a bailout for Ireland helped its spreads to recover from last week`s capitulation," said Gavan Nolan, a credit analyst at Markit. "It`s good to talk." Despite Ireland`s insistence that it doesn`t need to be rescued, investors say the country needs support, given the fragility of its moribund banking system, and the high borrowing costs limiting the capacity of companies to raise funds.

Ireland`s Europe minister, Dick Roche, said rumours that it was on the verge of seeking a bailout could be "very, very dangerous".

He conceded: "There is continuous talk going on backwards and forwards about the level of our debt but the suggestion that that constitutes going to the IMF or the bailout is just irresponsible." Ireland`s opposition`s finance spokesman, Michael Noonan, said he believed European intervention was "under way" and matters would come to a head within 24 hours. The government, he said, was "fighting a rearguard action for appearances purposes".

Noonan said a bailout could lead to Ireland being suspended from the bond markets for three or four years.[/quote]
[i]My Comment:[/i] While not wishing to make in any way light of Ireland`s plight, "suspension from the bond markets for three or four years" - the nation-state analog of having one`s credit card cut up - seems a not-to-be-ruled-out option for weaning oneself off one`s debt addiction and making a fresh start. Hell, the Russains defaulted in 1998, and despite having a much weaker economy at the time than Ireland (and one much less able to generate wealth than Ireland`s strong tech economy), see to be doing quite well, although robust oil and mineral-commodities markets have helped there. (However note that the post-default currency depreciation and post-Soviet lack of a social safety net devastated many Russian retirees).

ZeroHedge readers - for what [url=http://www.zerohedge.com/article/ireland-told-take-bailout-or-be-responsible-pan-european-contagion]that`s worth[/url] - appear to be solidly in the "Do like Iceland and tell the international bankster cartel to sod off" camp. Denninger [url=http://market-ticker.org/akcs-www?post=172300]concurs[/url], noting that the proposed bailout would put every Irish man, woman and child on the hook for roughly 20,000 Euros of banking-system debt, on top of what they owe personally already, much of which is a result of buying into the speculative real estate bubble the same now-insolvent banking system helped inflate.

Any Irish readers care to give us a sense of the man-in-the-street feelings about the situation there? Garo, what`s your take?