Freddie Mac will begin takeovers of a raft of delinquent mortgages. The move appears to be a follow-up to the Christmas decision to enable unlimited Fannie & Freddie credit lines. The USTreasury will be buying failed mortgages, after the USFed basically ruined its own balance sheet with toxic bonds. What has occurred over two decades is abuse of Fannie & Freddie as the nexus for several gargantuan federal programs spanning three decades, with claimed fraud and missing funds valued perhaps over $2 trillion. The Powerz had to nationalize Fannie & Freddie. They are not just mortgage programs. Their supply cannot be shut off without disturbing the massive channels of tainted funds, well placed under USGovt finance operations. Answering questions where the money went would bring about an extreme shift in US perceptions, probably deep global changes in recognition of the US governing bodies.

The USEconomy slides further into a masked depression, still not recognized, as morale is on the decline. Moves toward cost savings and improved productivity are backfiring. Worker morale is a sneaky undermine to productivity. The January official Jobs Report hid some deep wounds. Meanwhile, home foreclosures and home loan delinquencies continue unabated with new records, and bank credit remains on a strong decline. No recovery in sight. The tragedy of home foreclosures continues unabated except by moratoriums imposed. The national tragedy continues. Federal home loan modification programs continue to be inadequate, with lost opportunities at investor lawsuits. Forecasts call for much worse foreclosures in the current 2010 year. David Rosenberg expects a further decline in home prices, and a second stage of economic recession. He forecasts 50% of US households will be insolvent on home loans by end 2011. Rosenberg is chief economist and strategist at Gluskin Sheff & Assoc in Toronto. Small businesses are not in recovery. They are cutting capital spending. National economic statistics do not capture small business activity properly. Their optimism is at the historical low of the past four recessions.

The fiscal and political plight of California worsens. Look for their state bond yields to reach at least 2009 high levels. USGovt assistance seems at best too little too late. The biggest state in the nation offers major clues to the plight of the states. The seven most crippled US states compare worse to some European nations, but with 35% of its national population involved. Given the PIIGS nations are small, the United States is hampered by a much larger looming state problem than what unfolds in Europe. The states in the crisis list are California, Florida, Illinois, Ohio, Michigan, North Carolina, and New Jersey. Each distressed case state has a population above 8 million people. Each state has been forced to borrow more than $1 billion dollars, to pay for unemployment benefits. Each state currently registers broad unemployment over 15%. Each state is a large net importer of energy sources.

-JW-