Figuring Out August 10th

(Conspiracy Nation, 08/27/07) – August 10, 2007 was the big panic day on Wall Street. Since then, various financial commentators have been explaining things. As usual, we have a puzzle. August 10th was of such significance that Conspiracy Nation soon opened a special file on the subject.

The event was presaged in July, when ratings firms downgraded “hundreds of mortgage bonds built on subprime mortgages.” An article in the August 15, 2007 Wall Street Journal gives a good explanation. (“How Ratings Firms' Calls Fueled Subprime Mess,” by Aaron Lucchetti and Serena Ng). Back in 2000, after the tech bubble crashed, the “Fed” stepped in and lowered rates to almost nothing. This increased the “sloshings,” i.e., as in when they say, “There is too much liquidity sloshing around in the system.” All those infusions and injections courtesy of the so-called “Federal” Reserve meant the “sloshings” were desperate to slosh somewhere, anywhere. “Just let us slosh! That is what we do!” was their cry.

Then, later in 2000, Standard & Poors, one of the ratings agencies, made a fateful decision. S&P decided “piggyback” mortgages, where borrowers afford the down payment by borrowing the down payment itself, were “no more likely to default than a standard mortgage.” (Lucchetti & Ng, op. cit.) In plain English, people wanting to buy a home could borrow the down payment, then use that borrowed money to qualify for a mortgage.

These loans were packaged and sold to investors. Many money managers lacked the resources to analyze the various mortgage securities. They relied on the ratings companies. And S&P, Moody's, and Fitch had given top ratings to many of those securities. (Lucchetti & Ng, op. cit.)

Lucchetti & Ng come at you with the slanted perspective that lenders began proposing the “piggyback” mortgages “as a way to make homes affordable as their prices rose.” Here is a different slant: without the “piggyback” mortgages, home prices could not have risen so high and would have been more affordable. But which came first, the “piggyback” mortgages or the rising home prices?

Towards the end of 2006, cracks appeared in the ratings. Moody's put out “early warnings” of downgrades. The downgrades “became an avalanche this summer. On July 10, Moody's cut ratings on more than 400 securities that were based on subprime loans. S&P put 612 on review, and downgraded most two days later.” (Lucchetti & Ng, op. cit.) Notice that date: July 10th, exactly one month before August 10th.

The “fundamentals” had been mentally funded! Remember (from above) how in 2000 S&P had made a fateful decision that “piggyback” mortgages were “no more likely to default than a standard mortgage.” But by 2006, according to Lucchetti & Ng (op. cit.), S&P was making evaluations on how the “piggyback” mortgages actually performed. Had the benign assumptions of 2000 been accurate? It turned out, decidedly not. The loans with piggybacks were 43 percent more likely to default!

Which brings us to August 10th. By then the concept of mentally-funded fundamentals had trickled down to average investors. Their investments were seemingly based on fanciful ratings from S&P, Moody's, and Fitch. When those rating firms did a U-turn, it seemed as if the mortgage-backed securities had little value all of a sudden. There was panic!

Calmer heads later prevailed, for the moment anyway. Former House majority leader Dick Armey pointed out, in Investors' Business Daily, that 85 percent of mortgages are not of the sub-prime type. “Let's put this in perspective,” he wrote. “For all of the media's hysteria, less than 15 percent of the 44 million mortgages in America are in the subprime sector. As a total of all mortgages, foreclosure rates are 0.6 percent, up slightly from 0.5 percent last year.” (“Market: A Tough Nut To Crack,” http://www.shout.net/~bigred/ToughNut.html)

Conspiracy Stuff

With the preceding prologue done, let us proceed to the conspiracy stuff. Market events are not entirely accidental. Curtis B. Dall, husband of Anna Roosevelt, had as his father-in-law Franklin Delano Roosevelt (FDR). Dall wrote a revealing book called “FDR: My Exploited Father-In-Law.” Dall records how, in the 1920s, the nation went on a stock market frenzy, but they were being set up. The 1929 stock market crash was “the calculated 'shearing' of the public by the World-Money powers, triggered by the planned sudden shortage of the supply of call money in the New York money market.” (http://www.theconspiracy.us/vol11/cn11-95.html)

In tandem with the August 10th panic, New York City police went on massive alert. That Friday, August 10th, the Debka.com web site posted a warning. Based on their analysis of Internet chatter, an alert went out about “trucks loaded with radioactive material” which were “rolling to 'America's biggest city and financial nerve center.'” (“Israeli site stands by dirty bomb warning,” by Tina Moore and Bill Hutchinson. New York Daily News, Aug. 13, 2007).

One of the messages picked up by Debka.com was financially significant: “The attack, with Allah’s help, will cause an economic meltdown, many dead, and a financial crisis on a scale that compels the United States to pull its military forces out of many parts of the world, including Iraq, for lack of any other way of cutting down costs.” (http://www.debka.com/headline.php?hid=4482)

It may be that we owe a significant “thank you” to the vigilance of Debka.com. The New York City police reacted and could well have thwarted phase 2 of a financial meltdown plot. As it was, August 10th, minus the radiological attack, limped on one leg. Media propaganda was in pre-planned panic mode that day, but the “terrorist” attack failed to materialize.

Also notice the date: August 10th (8/10). Add a “1” to those numbers and you get 9/11 (8+1/10+1). So August 10th would have been 9/11 minus 1.

Earlier this summer, Homeland Security chief Michael Cherthoff had had a “gut feeling” a “terrorist” attack was imminent. Conspiracy web sites continue to warn about this. But the “terrorist” attack may have already occurred on August 10th – except it got screwed up thanks to citizen vigilance.

Conspiracy Nation

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