By STEPHEN GANDEL
Trevor Douglas, 54, may soon lose his Orlando house. Sure, Douglas hasn’t paid his mortgage in more than two years, which is what a Bank of America spokesperson tells me “is important to remember.” It is. Still, if it happens, I will feel partially responsible. I helped push Douglas closer to eviction.
Like many other home loans, Douglas’ IOU was bought and sold numerous times and finally packed into a bond. So when his foreclosure notice finally arrived, the entity trying to kick him out was one he had never heard of, something called GSAMP 2005-HE3. Worse, GSAMP said it had lost the original document — called a promissory note — to prove they owned his loan. Douglas hired a lawyer, who got the foreclosure put on hold. And that’s when I showed up. Much of the ire focused on the banks recently has been on their use of robo-signers — low-wage workers hired by banks to witness and sign hundreds of thousands of foreclosure notices without verifying that the grounds for the evictions were valid. On Thursday, a Federal Reserve official told lawmakers on a House Financial Service subcommittee that U.S. bank regulators are conducting a review of the banks’ foreclosure practices. In hundreds of thousand of cases, the promissory note that proves a bank owns a borrower mortgage is now gone. Vanished. Some borrowers may walk away scot free. In other instances, banks may be forced to dramatically reduce what a borrower owes. Many foreclosures have already been halted by the courts or by the banks themselves. Still, bank officials say, even if they are missing the original promissory note, they have the paperwork to prove they own the mortgages
Just how bad is the problem? TIME dug into the mortgage of one troubled borrower. What we found suggests that many promissory notes are not lost. In an effort to rush homeowners to foreclosure, and hide damaging information, bankers’ have needlessly created a huge legal mess that once again questions the financial industry’s credibility and ethics. “They [banks] don’t comply with the law when they’re taking people’s homes,” says Michael Olenick, who owns Legalprise, a legal research firm.
Douglas’ mortgage broker got him a loan from subprime lender Fremont General, which before it went bankrupt in 2008, was based in Brea, California. In mid-2005, Fremont sold the loan to New York-based Goldman Sachs, which packaged it up with other loans and sold it off to investors. In June, Iris Owens, an official in the servicing arm of Bank of Amerca, signed an affidavit attesting that after a “diligent search,” Douglas’ original note could not be recovered. But even without the bank’s internal record it took me about four hours to find Douglas’ loan
Where is it? About five miles east of downtown Minneapolis, in a warehouse owned by Wells Fargo.
A simple search of public documents on the Securities and Exchange Commissions website was able to produce the address and telephone number of the building it was in. Bank of America now concedes it made a mistake. Instead of calling Wells Fargo, an associate in Bank of America’s mortgage-servicing division requested Douglas’ note from Deutsche Bank, which runs the mortgage trust Douglas’ loan is in, but is not the document custodian. Wells, as the SEC documents say, has that job. What’s less clear is why Deutsche didn’t tell the associate to call Wells or why someone at Bank of America didn’t look up the same SEC filing I did. Instead, Owens, based on the information from her associate and doing no checking of her own, signed the lost-note affidavit. Douglas’ loan had officially disappeared.
In early November, based on my research, Bank of America retrieved Douglas’ original promissory note from Wells Fargo. The bank spokeswoman says it plans to soon file the note with the court. Bank of America says it is reviewing Douglas for a loan modification. But if he doesn’t qualify, now that Bank of America has the original note, Douglas is sure to lose his house. If Douglas’ mortgage is any indication of what’s out there, while embarrassing for the banks, it suggests the cleanup will be less costly than feared. Still, it’s not going to end soon. Multiply the four hours it took me to find Douglas’ loan by 400,000 — one professor’s estimate of the number of missing notes. Banks will be at this for a while.
This is an abridged version of an article that appears in the Nov. 29, 2010, print and iPad editions of TIME magazine.
http://www.time.com/time/magazine/article/0,9171,2032110,00.html#ixzz16SvpzwNo
Tuesday, November 30, 2010
Interpol Issues International Arrest Warrant For Julian Assange For "Sex Crimes"
by Tyler Durden
Per BreakingNews.com, Interpol has just issued an international arrest warrant for Julian Assange. The offense listed: SEX CRIMES. And somehow Interpol does not have access to the Internet and is unable to pull an image of the wanted criminal. Unclear if Ben Bernanke will follow suit in the same Sex Crime category for repeated involuntary fornication with the world's middle class. In other news, we are now taking odds on a dramatic, globally televized slow speed chase on a California highway in Julian Assange's future?
Per BreakingNews.com, Interpol has just issued an international arrest warrant for Julian Assange. The offense listed: SEX CRIMES. And somehow Interpol does not have access to the Internet and is unable to pull an image of the wanted criminal. Unclear if Ben Bernanke will follow suit in the same Sex Crime category for repeated involuntary fornication with the world's middle class. In other news, we are now taking odds on a dramatic, globally televized slow speed chase on a California highway in Julian Assange's future?
Bank of America Accused by Staten Island Attorney of Changing Rules on Mortgage Loan Modification
by Daniel Martin Featured News, Finance
Bank of America has been accused by a New Brighton woman of not respecting the federal loan modification program. Marie Freeman believed the federal loan modification program called Home Affordable Modification Program (HAMP) was the answer to her prayers and would solve all her problems. The federal loan modification program gave the woman the hope she could keep her home as it made her monthly payments on her $418,000 mortgage more manageable. The $75 billion Home Affordable Modification Program was launched last year as a consequence to the financial and housing-market collapse. The program was meant to help homeowners keep their houses until they manage to pay off their mortgage loan at a reduced monthly rate.
Ms. Freeman said in a statement that despite the fact she had respected the trial payments and made the right monthly payments on time, one of the bank’s subsidiaries denied her a permanent loan modification. Therefore, Ms. Freeman and others alleged the Bank of America of changing the regulations within a trial filed in Brooklyn Federal Court.
Stephen Rodd, a private lawyer, who is working for Ms. Freeman, said Bank of America violated the HAMP rules as his client has respected the federal loan modification program. He has also said her modification was denied after her file was transferred from one of Bank of America subsidiary to another.
Ms. Freeman, 50, purchased her house in 2000. In 2006, she refinanced her mortgage loan for $418,000 with a California-based company which was later acquired by Bank of America. In October 2009, a Bank of America subsidiary, offered Ms. Freeman a trial period plan under HAMP. The homeowner can make modified payments for three months and if he satisfies all the trial-period requirements, the bank offers him a permanent loan modification.
According to Ms. Freeman’s statements, she had made the payments until February, when she received a notice saying the servicing of her loan would be transferred to another Bank of America subsidiary, BAC Home Loans Servicing. In July, BAC informed Ms. Freeman she was not eligible for the HAMP program because she had not made all the required payments.
Stephen Rodd said this was not he only case when a bank does not respect the federal regulations and that there are hundreds of people who have had the same problem.
editor note: reading material for:
and FHEO
Bank of America has been accused by a New Brighton woman of not respecting the federal loan modification program. Marie Freeman believed the federal loan modification program called Home Affordable Modification Program (HAMP) was the answer to her prayers and would solve all her problems. The federal loan modification program gave the woman the hope she could keep her home as it made her monthly payments on her $418,000 mortgage more manageable. The $75 billion Home Affordable Modification Program was launched last year as a consequence to the financial and housing-market collapse. The program was meant to help homeowners keep their houses until they manage to pay off their mortgage loan at a reduced monthly rate.
Ms. Freeman said in a statement that despite the fact she had respected the trial payments and made the right monthly payments on time, one of the bank’s subsidiaries denied her a permanent loan modification. Therefore, Ms. Freeman and others alleged the Bank of America of changing the regulations within a trial filed in Brooklyn Federal Court.
Stephen Rodd, a private lawyer, who is working for Ms. Freeman, said Bank of America violated the HAMP rules as his client has respected the federal loan modification program. He has also said her modification was denied after her file was transferred from one of Bank of America subsidiary to another.
Ms. Freeman, 50, purchased her house in 2000. In 2006, she refinanced her mortgage loan for $418,000 with a California-based company which was later acquired by Bank of America. In October 2009, a Bank of America subsidiary, offered Ms. Freeman a trial period plan under HAMP. The homeowner can make modified payments for three months and if he satisfies all the trial-period requirements, the bank offers him a permanent loan modification.
According to Ms. Freeman’s statements, she had made the payments until February, when she received a notice saying the servicing of her loan would be transferred to another Bank of America subsidiary, BAC Home Loans Servicing. In July, BAC informed Ms. Freeman she was not eligible for the HAMP program because she had not made all the required payments.
Stephen Rodd said this was not he only case when a bank does not respect the federal regulations and that there are hundreds of people who have had the same problem.
editor note: reading material for:
and FHEO
Mother Kept In “Glass Cage” For Almost An Hour By TSA For Resisting Over Breast Milk
Following their own guidelines will not get you anywhere because they make the rules up as they go along
The latest case of TSA tyranny to hit the headlines comes in the form of a young mother who was subjected to enhanced groping and then shut inside a screening box for almost an hour by agents after she refused to allow them to put her breast milk through an x-ray device, a legitimate request that is even written into the TSA’s own guidelines.
The ordeal, which took place at Phoenix airport earlier this year, was captured on security cameras, which Stacey Armato, who is also a lawyer, gained access to, but only after repeated requests and careful editing by the TSA had taken place.
After being told that her breast milk might have to be put through an x-ray scanner, Ms Armato attempted to show the TSA agents a print out of their own guidelines allowing non x-ray screening for breast milk. This act of serious disobedience resulted in the agent pushing Ms Armato into a glass cage, telling her “to be quiet if you know what’s good for you”, while calling for “back up”.
“Standing 50 ft away are the same manager and supervisor I had dealt with the previous week.” Ms Armato writes in her description of events, referring to a previous 30 minute delay at the security gate for the exact same reason.
After being shut in the box for some 20 minutes, in full public view of other passengers, Ms Armato began to cry and remonstrate with TSA agents. She was then approached by a police officer who told her that she had been singled out by TSA agents who recognized her because she had filed a complaint against them regarding the handling of her breast milk the previous week.
Ms Armato writes:
About 10 minutes into all this, a Phoenix PD comes to calm me down. I explain to him that there is no reason I should be treated this way and I have every right to be upset.
He then says “they” (aka TSA) saw me coming, have it out for me (from my complaint against TSA the week before when they didn’t know the breast milk rules then either), and I should travel out of a different gate in future weeks.
He said TSA wants me to play along with their horse and pony show and if I don’t then TSA can have the Phoenix PD arrest me! Well, I wanted to get home to my baby and my flight was 30 minutes from departure so I ‘played along.’ Three Phoenix PD watched in the background…I could tell they all knew this was a waste of their time but I was happy to have them standing by in case TSA continued to act out of line.
Eventually Ms Armato was released from the box, and subjected to a full groping from another TSA agent.
A TSA manager then approached her and told her that the milk had to go through the x-ray scanner because the containers it was in were “too full” and it was “not a clear liquid”. These are both made up rules that are not mentioned anywhere in TSA guidelines, proving that even the TSA manager had no regard for the official laws in this instance.
The guidelines allow “Mothers flying with, and now without, their child be permitted to bring breast milk in quantities greater than three ounces as long as it is declared for inspection at the security checkpoint.”
According to TSA rules breast milk is to be treated as a medical liquid, which should not be subjected to x-ray radiation.
Ms Armato writes:
He read the first form which stated that medical liquids can have alternate screening (no x-ray). He was quick to say “well this isn’t a medical liquid!” So I had him read the second form which says breast milk is to be treated like a medical liquid. He then says, “well, not today.” I started balling all over again once he said that.
Again this is clear evidence of a TSA supervisor acting like a supreme authority and simply making up the rules as he goes along.
Ms Armato was then forced to pour out the milk into 8 different containers, only half filling each, as per the TSA’s new completely made up rule.
Because of all this, she missed her flight home to feed her hungry baby in Los Angeles.
The following video, which shows some of the lengthy screening process, was edited together by Ms Armato with the help of her family. The full unedited set of videos can be viewed at the foot of this article:
According to Ms Armato, the TSA edited out almost 30 minutes of footage, including a section where a TSA manager demanded and took down her personal information, took pictures of her breast milk and shouted at her for not watching closely as the agents tested it for explosive residue.
Ms Armato has vowed to fight the TSA on the issue.
“Southwest put me on the next flight home and, as luck would have it, I was standing in line right behind my Constitutional Law professor from my law school days. At that point I knew I needed to stand up for my rights and help myself and other mothers against the uninformed, retaliatory, and harassing TSA employees that help ‘keep us safe.’” she writes.
Last week we detailed reports of a woman being forced to remove her sanitary towel following TSA screening. These are the type of dangerous terrorists America must now be protected from.
The latest case of TSA tyranny to hit the headlines comes in the form of a young mother who was subjected to enhanced groping and then shut inside a screening box for almost an hour by agents after she refused to allow them to put her breast milk through an x-ray device, a legitimate request that is even written into the TSA’s own guidelines.
The ordeal, which took place at Phoenix airport earlier this year, was captured on security cameras, which Stacey Armato, who is also a lawyer, gained access to, but only after repeated requests and careful editing by the TSA had taken place.
After being told that her breast milk might have to be put through an x-ray scanner, Ms Armato attempted to show the TSA agents a print out of their own guidelines allowing non x-ray screening for breast milk. This act of serious disobedience resulted in the agent pushing Ms Armato into a glass cage, telling her “to be quiet if you know what’s good for you”, while calling for “back up”.
“Standing 50 ft away are the same manager and supervisor I had dealt with the previous week.” Ms Armato writes in her description of events, referring to a previous 30 minute delay at the security gate for the exact same reason.
After being shut in the box for some 20 minutes, in full public view of other passengers, Ms Armato began to cry and remonstrate with TSA agents. She was then approached by a police officer who told her that she had been singled out by TSA agents who recognized her because she had filed a complaint against them regarding the handling of her breast milk the previous week.
Ms Armato writes:
About 10 minutes into all this, a Phoenix PD comes to calm me down. I explain to him that there is no reason I should be treated this way and I have every right to be upset.
He then says “they” (aka TSA) saw me coming, have it out for me (from my complaint against TSA the week before when they didn’t know the breast milk rules then either), and I should travel out of a different gate in future weeks.
He said TSA wants me to play along with their horse and pony show and if I don’t then TSA can have the Phoenix PD arrest me! Well, I wanted to get home to my baby and my flight was 30 minutes from departure so I ‘played along.’ Three Phoenix PD watched in the background…I could tell they all knew this was a waste of their time but I was happy to have them standing by in case TSA continued to act out of line.
Eventually Ms Armato was released from the box, and subjected to a full groping from another TSA agent.
A TSA manager then approached her and told her that the milk had to go through the x-ray scanner because the containers it was in were “too full” and it was “not a clear liquid”. These are both made up rules that are not mentioned anywhere in TSA guidelines, proving that even the TSA manager had no regard for the official laws in this instance.
The guidelines allow “Mothers flying with, and now without, their child be permitted to bring breast milk in quantities greater than three ounces as long as it is declared for inspection at the security checkpoint.”
According to TSA rules breast milk is to be treated as a medical liquid, which should not be subjected to x-ray radiation.
Ms Armato writes:
He read the first form which stated that medical liquids can have alternate screening (no x-ray). He was quick to say “well this isn’t a medical liquid!” So I had him read the second form which says breast milk is to be treated like a medical liquid. He then says, “well, not today.” I started balling all over again once he said that.
Again this is clear evidence of a TSA supervisor acting like a supreme authority and simply making up the rules as he goes along.
Ms Armato was then forced to pour out the milk into 8 different containers, only half filling each, as per the TSA’s new completely made up rule.
Because of all this, she missed her flight home to feed her hungry baby in Los Angeles.
The following video, which shows some of the lengthy screening process, was edited together by Ms Armato with the help of her family. The full unedited set of videos can be viewed at the foot of this article:
According to Ms Armato, the TSA edited out almost 30 minutes of footage, including a section where a TSA manager demanded and took down her personal information, took pictures of her breast milk and shouted at her for not watching closely as the agents tested it for explosive residue.
Ms Armato has vowed to fight the TSA on the issue.
“Southwest put me on the next flight home and, as luck would have it, I was standing in line right behind my Constitutional Law professor from my law school days. At that point I knew I needed to stand up for my rights and help myself and other mothers against the uninformed, retaliatory, and harassing TSA employees that help ‘keep us safe.’” she writes.
Last week we detailed reports of a woman being forced to remove her sanitary towel following TSA screening. These are the type of dangerous terrorists America must now be protected from.
Servicer-Driven Foreclosures: The Perfect Crime?
BY Yves Smith
As much as I’ve seen a lot of financial services industry misconduct at close range, sometimes even a cynic like me is not prepared for how bad things can be. And mortgage abuse is turning out to be one of those areas.
I’ve been in contact for over the last six months with attorneys involved in foreclosure defense. Unlike the foreclosure mills, which seem to coin money, the attorneys on this front are either laboring pro bono or making considerably less than they could in other lines of work. They also can back up their views with depositions and trial transcripts.
One thing they stress is that a significant number of their clients facing foreclosure has made every single mortgage payment. . Read that again.
Now how can that be? How can that square with the banks’ assertion that in every instance, their foreclosures were warranted, that the borrower was hopelessly behind?
It’s actually very simple. It’s called servicing errors and fraud. And whether by mistake or design, when a borrower gets caught in the servicer hall of mirrors of compounding fees and charges, there is no way to appeal and pretty much no way out.
Let’s look at how this begins. A payment is credited as being late. It might actually legitimately be late, the borrower might have neglected to send it in on time. Or the bank might have been slow to process it. That might be simple queuing meets bad controls, or it might be deliberate. Servicers have been found to delay posting checks to incur late fees. Unless the borrower incurs the cost of sending mail via a service that provides proof of time of delivery, the bank can always claim the payment arrived late.
Let’s say the late fee is $75. It will be charged against the next month’s payment. But the borrower doesn’t know that he owes more that month. He gets a mortgage coupon and sends his regular payment in.
Now the servicer starts playing the sort of tricks practiced elsewhere in retail banking. Under the terms of the loan and Federal law, monthy payments are to be applied to principal and interest first, fees second. But the bank applies it to fees first. This makes his second month come up short. He gets charged a fee for insufficiency, and perhaps a late fee too.
Once the borrower has had two late fees, the servicer is often required by the pooling and servicing agreement to get a broker price opinion (BPO). This is a typically $250 exercise in form in which a broker drives by, takes a couple of pictures of the house, and offers a guesstimate of what it might be worth.
Many servicers double dip and also charge the BPO to the borrower as well. So the fees and arrerage charges and interest charges are compounding at a faster rate now.
It takes a remarkably short amount of time for pyramiding fees to add up to a few thousand dollars, unbeknownst to the borrower, until he gets a call from the servicer, or worse, a foreclosure notice.
This is where it gets even better. Even when the borrower hires an attorney, it is remarkably difficult to get the servicer to disgorge its records showing the borrower payment history and its fees and charges. I’ve also been told by attorneys that the reports are difficult to decipher and reconcile with the borrower’s records of payments that have cleared his account. So unless the attorney is tenacious, or has been down this path before, he may not realize that the borrower isn’t nuts when he says he was late only once, maybe twice at most, and doesn’t understand how they bank is now foreclosing.
In the first part of the Senate Banking Committee hearings on mortgage modifications and foreclosure, Diane Thompson of the Consumer Law Center and Professor Adam Levitin forcefully disputed the banks’ claim that all foreclosures were warranted. Each pointed to servicer driven foreclosures as well as consumers being instructed by their serivcer to become delinquent so as to qualify for a mod program, being led to believe they would qualify (and even encouraged to use the money saved to pay down other debt), then either foreclosed upon while the mod was under consideration, or denied the mod and foreclosed upon. And to add insult to injury, homeowners who are denied “permanent” mods are not only charged the difference between their reduced payments and their regular amount due, but they are charged late fees, which per our example above, compound in nasty ways.
Thompson, who defends borrowers herself, estimates that servicer-driven foreclosures represented about 50% of the cases she handled. The attorneys I have been dealing with put the estimate even higher, for the simple reason that servicer errors also led to refis that failed.
Remember how this pattern would have worked pre-bust. Borrower finds out from servicer that he is, for reasons he cannot fathom and cannot get the servicer to explain, $4000 behind on his mortgage. He can’t swing that now, and if he only pays part of the overdue amount down, it will quickly compound back up to a big bad number. So sooner or later, his only way out is a refi.
I had always assumed cash-out refis (where the borrower took out a mortgage on a refi that was bigger than his previous mortgages) were to pay down credit card debt, invest in home upgrades, or fund consumption. But at least a portion of those refis were to pay off the mortgage to prevent a foreclosure due to an inabilty to make up for a major arrearage. And some of those were servicer induced.
This pattern of servicer abuse is far from new. I hope readers will watch the second installment of the Senate Banking Committe hearings on the mortgage mess (the Senators were quite entertaining in their first go on this topic), this Wednesday at 9:30 AM. One of the witnesses, Kurt Eggert, law professor at the Chapman University School of Law, must feel like a Cassandra. He was writing about subpime origination fraud in 2002, and in a 2007 article, “Limiting Abuse and Opportunism by Mortgage Servicers,” goes through a sad and familiar litany of servicer misconduct: attempting to foreclose when borrowers were current (!), not giving borrowers time to get current, charging late fees when payments were made on time, improper force-placed insurance, and chicanery with escrow funds. As Eggert pointed out:
Late fees on timely payments are common when consumers are making payments through a ankruptcy plan. Moreover, some servicers have added false fees and charges not authorized by law or contract to their monthly payment demands, relying on borrower ignorance of the exact amout owed…Some servicers may add a fee by conducting unnecessary property inspections, having an agent drive by even when the borrower is not in default, or conducting multiple inspections during a single period of default to charge the resulting multiple fees….
Moreover, servicers can frustrate any attempts to sort out which fees are genuine. On McCormack v. Federal Home Loan Mortgage Corp., when the borrower challenged Chase Manhattan Corporation’s insistence on collecting disallowed attorneys’ fees and mortgage payments that had been cured in a bankrutpcy, the servicer subjected the borrower to what the court called “a barrage of totally meaningless and in fact misleading printouts” that was “”truly egregious and outrageous conduct”. The servicer repeatedly promised to correct its errors, but did not do so.
Servicer bad conduct is a long-standing problem, but in a rising housing market, no one much cared if the banks were effectively stripping borrower equity to pad their profits. And perhaps even worse, many people are still inclined to trust banks when they trot out their party line. Recall the bunk their representatives offered with touching shows of concern in the pre-Thanksgiving Senate and House hearing on the mortgage mess: their policies are pro-consumer, they don’t make money on foreclosures (!), any problems are “mistakes” and they of course correct them as soon as they become aware of them. The over-decade long record of persistent servicer abuses shows this spin to be pure fabrication. The sooner the media and the public learn to assume banks are liars until they offer solid evidence to the contrary, the better off we will all be.
As much as I’ve seen a lot of financial services industry misconduct at close range, sometimes even a cynic like me is not prepared for how bad things can be. And mortgage abuse is turning out to be one of those areas.
I’ve been in contact for over the last six months with attorneys involved in foreclosure defense. Unlike the foreclosure mills, which seem to coin money, the attorneys on this front are either laboring pro bono or making considerably less than they could in other lines of work. They also can back up their views with depositions and trial transcripts.
One thing they stress is that a significant number of their clients facing foreclosure has made every single mortgage payment. . Read that again.
Now how can that be? How can that square with the banks’ assertion that in every instance, their foreclosures were warranted, that the borrower was hopelessly behind?
It’s actually very simple. It’s called servicing errors and fraud. And whether by mistake or design, when a borrower gets caught in the servicer hall of mirrors of compounding fees and charges, there is no way to appeal and pretty much no way out.
Let’s look at how this begins. A payment is credited as being late. It might actually legitimately be late, the borrower might have neglected to send it in on time. Or the bank might have been slow to process it. That might be simple queuing meets bad controls, or it might be deliberate. Servicers have been found to delay posting checks to incur late fees. Unless the borrower incurs the cost of sending mail via a service that provides proof of time of delivery, the bank can always claim the payment arrived late.
Let’s say the late fee is $75. It will be charged against the next month’s payment. But the borrower doesn’t know that he owes more that month. He gets a mortgage coupon and sends his regular payment in.
Now the servicer starts playing the sort of tricks practiced elsewhere in retail banking. Under the terms of the loan and Federal law, monthy payments are to be applied to principal and interest first, fees second. But the bank applies it to fees first. This makes his second month come up short. He gets charged a fee for insufficiency, and perhaps a late fee too.
Once the borrower has had two late fees, the servicer is often required by the pooling and servicing agreement to get a broker price opinion (BPO). This is a typically $250 exercise in form in which a broker drives by, takes a couple of pictures of the house, and offers a guesstimate of what it might be worth.
Many servicers double dip and also charge the BPO to the borrower as well. So the fees and arrerage charges and interest charges are compounding at a faster rate now.
It takes a remarkably short amount of time for pyramiding fees to add up to a few thousand dollars, unbeknownst to the borrower, until he gets a call from the servicer, or worse, a foreclosure notice.
This is where it gets even better. Even when the borrower hires an attorney, it is remarkably difficult to get the servicer to disgorge its records showing the borrower payment history and its fees and charges. I’ve also been told by attorneys that the reports are difficult to decipher and reconcile with the borrower’s records of payments that have cleared his account. So unless the attorney is tenacious, or has been down this path before, he may not realize that the borrower isn’t nuts when he says he was late only once, maybe twice at most, and doesn’t understand how they bank is now foreclosing.
In the first part of the Senate Banking Committee hearings on mortgage modifications and foreclosure, Diane Thompson of the Consumer Law Center and Professor Adam Levitin forcefully disputed the banks’ claim that all foreclosures were warranted. Each pointed to servicer driven foreclosures as well as consumers being instructed by their serivcer to become delinquent so as to qualify for a mod program, being led to believe they would qualify (and even encouraged to use the money saved to pay down other debt), then either foreclosed upon while the mod was under consideration, or denied the mod and foreclosed upon. And to add insult to injury, homeowners who are denied “permanent” mods are not only charged the difference between their reduced payments and their regular amount due, but they are charged late fees, which per our example above, compound in nasty ways.
Thompson, who defends borrowers herself, estimates that servicer-driven foreclosures represented about 50% of the cases she handled. The attorneys I have been dealing with put the estimate even higher, for the simple reason that servicer errors also led to refis that failed.
Remember how this pattern would have worked pre-bust. Borrower finds out from servicer that he is, for reasons he cannot fathom and cannot get the servicer to explain, $4000 behind on his mortgage. He can’t swing that now, and if he only pays part of the overdue amount down, it will quickly compound back up to a big bad number. So sooner or later, his only way out is a refi.
I had always assumed cash-out refis (where the borrower took out a mortgage on a refi that was bigger than his previous mortgages) were to pay down credit card debt, invest in home upgrades, or fund consumption. But at least a portion of those refis were to pay off the mortgage to prevent a foreclosure due to an inabilty to make up for a major arrearage. And some of those were servicer induced.
This pattern of servicer abuse is far from new. I hope readers will watch the second installment of the Senate Banking Committe hearings on the mortgage mess (the Senators were quite entertaining in their first go on this topic), this Wednesday at 9:30 AM. One of the witnesses, Kurt Eggert, law professor at the Chapman University School of Law, must feel like a Cassandra. He was writing about subpime origination fraud in 2002, and in a 2007 article, “Limiting Abuse and Opportunism by Mortgage Servicers,” goes through a sad and familiar litany of servicer misconduct: attempting to foreclose when borrowers were current (!), not giving borrowers time to get current, charging late fees when payments were made on time, improper force-placed insurance, and chicanery with escrow funds. As Eggert pointed out:
Late fees on timely payments are common when consumers are making payments through a ankruptcy plan. Moreover, some servicers have added false fees and charges not authorized by law or contract to their monthly payment demands, relying on borrower ignorance of the exact amout owed…Some servicers may add a fee by conducting unnecessary property inspections, having an agent drive by even when the borrower is not in default, or conducting multiple inspections during a single period of default to charge the resulting multiple fees….
Moreover, servicers can frustrate any attempts to sort out which fees are genuine. On McCormack v. Federal Home Loan Mortgage Corp., when the borrower challenged Chase Manhattan Corporation’s insistence on collecting disallowed attorneys’ fees and mortgage payments that had been cured in a bankrutpcy, the servicer subjected the borrower to what the court called “a barrage of totally meaningless and in fact misleading printouts” that was “”truly egregious and outrageous conduct”. The servicer repeatedly promised to correct its errors, but did not do so.
Servicer bad conduct is a long-standing problem, but in a rising housing market, no one much cared if the banks were effectively stripping borrower equity to pad their profits. And perhaps even worse, many people are still inclined to trust banks when they trot out their party line. Recall the bunk their representatives offered with touching shows of concern in the pre-Thanksgiving Senate and House hearing on the mortgage mess: their policies are pro-consumer, they don’t make money on foreclosures (!), any problems are “mistakes” and they of course correct them as soon as they become aware of them. The over-decade long record of persistent servicer abuses shows this spin to be pure fabrication. The sooner the media and the public learn to assume banks are liars until they offer solid evidence to the contrary, the better off we will all be.
Consumer Confidence At 54.1 On Expectations Of 53.0, Prior Revised Lower To 49.9
by Tyler Durden
The propaganda crew is out in full force today, as virtually the entire growth in the confidence number was in expectations. We expect a presidential address on how Americans are delighted that Europe is disintegrating, that Ireland is on the verge of civil disobedience, that jobless benefits are expiring and that one can barter a roll of toiler paper for a house.
Some more irrelevant numbers:
•Jobs Plentiful: 4 vs. Prev. 3.5
•Jobs Hard to Get: 46.5 vs. Prev. 46.1
•Inflation: 5.1% vs. (Prev. 5.0%)
Elsewhere, the ABC Consumer Comfort index will come out today after the close, and will post another near all time low reading.
Goldman's take on the number:
The Conference Board reported a 4.2-point improvement in its index of consumer confidence, to 54.1. While obviously better than in October, this is still in the low range (bounded by 46 on the low side and 63 on the high side) that has prevailed since the recovery began in mid-2009. Almost all of the increase was in expectations; the present situation index rose only 0.5 point, to 24.0. That said, it is the expectations component of the Michigan index that is part of the index of leading economic indicators. Consumers' assessments of job availability-the percentage of respondents saying jobs are plentiful less the percentage saying they are hard to get-registered a back-door improvement by edging up to -42.5 from a downward-revised -42.8 in October; the October figure had previously been reported at -42.1.
The propaganda crew is out in full force today, as virtually the entire growth in the confidence number was in expectations. We expect a presidential address on how Americans are delighted that Europe is disintegrating, that Ireland is on the verge of civil disobedience, that jobless benefits are expiring and that one can barter a roll of toiler paper for a house.
Some more irrelevant numbers:
•Jobs Plentiful: 4 vs. Prev. 3.5
•Jobs Hard to Get: 46.5 vs. Prev. 46.1
•Inflation: 5.1% vs. (Prev. 5.0%)
Elsewhere, the ABC Consumer Comfort index will come out today after the close, and will post another near all time low reading.
Goldman's take on the number:
The Conference Board reported a 4.2-point improvement in its index of consumer confidence, to 54.1. While obviously better than in October, this is still in the low range (bounded by 46 on the low side and 63 on the high side) that has prevailed since the recovery began in mid-2009. Almost all of the increase was in expectations; the present situation index rose only 0.5 point, to 24.0. That said, it is the expectations component of the Michigan index that is part of the index of leading economic indicators. Consumers' assessments of job availability-the percentage of respondents saying jobs are plentiful less the percentage saying they are hard to get-registered a back-door improvement by edging up to -42.5 from a downward-revised -42.8 in October; the October figure had previously been reported at -42.1.
Olli Rehn's Upcoming Executive Diktat To Ireland #2: "Double Your Tax Rate"
by Tyler Durden
If you thought Olli Rehn's "intervention" in Ireland's "democratic" process would end with his yesterday involvement in the voting process, you may be surprised to learn that diktat #2 is coming up. As we speculated last week, the first casualty of the Irish loss of sovereignty will be the country's lowest among the DM countries corporate tax rate. Today we read in the RTE that we are one step closer to being proven right: "A row has broken out in the European Parliament over Ireland's 12.5% corporate tax rate. It has emerged that eight, mostly French and German, MEPs have issued a declaration attacking Ireland's corporate tax rate and calling for a minimum EU wide corporate tax rate of 25%." Furthermore, these are not just any MEPs: "What has heightened the dispute is the fact that the eight MEPs are all co-ordinators for the different political groupings in the parliament and are, as such, representatives for those groupings on an influential parliamentary committee." While it is not a done deal yet, the days of the Irish tax haven may be numbered: "The declaration invites signatures from other MEPs and if it can gather the support of 350 MEPs it then becomes the position of the European Parliament." And here is how the new diktatura will spin its control over the Irish state:
The statement claims that European taxpayers and citizens have been put at risk 'in order to stabilise a financial system which has been profiting from the exceptionally low Irish corporation tax rate of 12.5%'.
It goes on to suggest that Ireland's corporate tax rate is unfair and goes against the spirit of European solidarity, especially given the fact Ireland is receiving a bail-out.
'We urge the European Commission to advance on the dossier of a Common Consolidated Corporate Tax Base. We urge the European Commission, the Eurogroup and its members to ensure that the corporation tax rate will be increased to the average EU level of 25% in a spirit of solidarity,' the declaration concludes.
Sure enough, the Irish response is vocal:
Irish MEPs are understood to be furious at the declaration given that - as co-ordinators on the Economic and Monetary Affairs Committee (ECON) - they technically represent the same political groups of which Irish MEPs are members.
For now, Ireland retains what it believes is a veto:
Any Commission proposals concerning taxation, either the CCCTB or Corporate Tax, require unanimity, so Ireland retains a veto in this area.
Then again, Ireland seems to not recognize that its opinion no longer counts: after all it has ceded sovereignty to Olli Rehn and his merry band of thieves. Shortly, we expect Europe will make the tax issue a key trigger for any additional funds in the bailout process, taking any veto ability away from Irish control.
Elsewhere, the Irish parliament has slammed the bailout deal, making any discussions of ongoing leverage over Ireland possibly moot if Ireland does the right thing and says "no mas" to its abdication of sovereign control. From the Irish Times:
During leaders’ questions Fine Gael leader Enda Kenny described the scheme as a “bad deal for Ireland” and said the future of the Irish people and the future of sovereignty had been decided upon behind closed doors.
“What happened last Sunday was a demonstration of art, craft and skill of national destruction," Mr Kenny said.
"This deal…was done as if people didn’t matter, as if people didn’t count and as if people didn’t exist. Do the deal in Brussels and let them [the people] eat cheese as the sleek limousines drive through the slush.”
Here is what Ireland should do: its citizens should quietly convert all their existing capital and savings into precious metals, force the government to default, convert PM into a de novo currency if so desired, give Olli Rehn the middle finger, and preserve their indepedence.
We are not holding our breath.
If you thought Olli Rehn's "intervention" in Ireland's "democratic" process would end with his yesterday involvement in the voting process, you may be surprised to learn that diktat #2 is coming up. As we speculated last week, the first casualty of the Irish loss of sovereignty will be the country's lowest among the DM countries corporate tax rate. Today we read in the RTE that we are one step closer to being proven right: "A row has broken out in the European Parliament over Ireland's 12.5% corporate tax rate. It has emerged that eight, mostly French and German, MEPs have issued a declaration attacking Ireland's corporate tax rate and calling for a minimum EU wide corporate tax rate of 25%." Furthermore, these are not just any MEPs: "What has heightened the dispute is the fact that the eight MEPs are all co-ordinators for the different political groupings in the parliament and are, as such, representatives for those groupings on an influential parliamentary committee." While it is not a done deal yet, the days of the Irish tax haven may be numbered: "The declaration invites signatures from other MEPs and if it can gather the support of 350 MEPs it then becomes the position of the European Parliament." And here is how the new diktatura will spin its control over the Irish state:
The statement claims that European taxpayers and citizens have been put at risk 'in order to stabilise a financial system which has been profiting from the exceptionally low Irish corporation tax rate of 12.5%'.
It goes on to suggest that Ireland's corporate tax rate is unfair and goes against the spirit of European solidarity, especially given the fact Ireland is receiving a bail-out.
'We urge the European Commission to advance on the dossier of a Common Consolidated Corporate Tax Base. We urge the European Commission, the Eurogroup and its members to ensure that the corporation tax rate will be increased to the average EU level of 25% in a spirit of solidarity,' the declaration concludes.
Sure enough, the Irish response is vocal:
Irish MEPs are understood to be furious at the declaration given that - as co-ordinators on the Economic and Monetary Affairs Committee (ECON) - they technically represent the same political groups of which Irish MEPs are members.
For now, Ireland retains what it believes is a veto:
Any Commission proposals concerning taxation, either the CCCTB or Corporate Tax, require unanimity, so Ireland retains a veto in this area.
Then again, Ireland seems to not recognize that its opinion no longer counts: after all it has ceded sovereignty to Olli Rehn and his merry band of thieves. Shortly, we expect Europe will make the tax issue a key trigger for any additional funds in the bailout process, taking any veto ability away from Irish control.
Elsewhere, the Irish parliament has slammed the bailout deal, making any discussions of ongoing leverage over Ireland possibly moot if Ireland does the right thing and says "no mas" to its abdication of sovereign control. From the Irish Times:
During leaders’ questions Fine Gael leader Enda Kenny described the scheme as a “bad deal for Ireland” and said the future of the Irish people and the future of sovereignty had been decided upon behind closed doors.
“What happened last Sunday was a demonstration of art, craft and skill of national destruction," Mr Kenny said.
"This deal…was done as if people didn’t matter, as if people didn’t count and as if people didn’t exist. Do the deal in Brussels and let them [the people] eat cheese as the sleek limousines drive through the slush.”
Here is what Ireland should do: its citizens should quietly convert all their existing capital and savings into precious metals, force the government to default, convert PM into a de novo currency if so desired, give Olli Rehn the middle finger, and preserve their indepedence.
We are not holding our breath.
More Fed Shenanigans: TILA
by Karl Denninger
Under the radar I'm sure The Fed would like this to stay..... no dice jackasses.
First, some background: The Truth in Lending Act from 1968 gives borrowers the “right of rescission,” the ability to undo a home refinancing or home equity loan within three years of the closing if the lender did not make proper disclosures — generally of the loan amount, interest rate and repayment terms. The law makes allowances for mere mistakes by the lender, but otherwise requires strict compliance, as well it should: disclosure is the main — often the only — consumer protection in the mortgage market.
...
The Fed proposal would change all that. Citing concern over banks’ compliance costs, it would require a borrower to pay off the remaining principal before the lender gives up its security interest. That would be clearly impossible for troubled borrowers. So the Fed’s proposal would benefit the creditor who violated the law rather than the borrower, paving the way for foreclosures that otherwise could be avoided.
In short, what this means is that if the bank violated black-letter law in making a loan to you the change would require you to pay off the entire principal before you could assert your rights and remedies.
This is like requiring someone who was robbed to somehow come up with the money to repay the owner of the property that was stolen before the robber can be held to account for his criminal act.
Yeah.
No wonder The Fed doesn't want this one out in the public eye.
Sorry BerScrewTheCommonMan - now there's 300,000+ people who know about it.
Spread the word.
Under the radar I'm sure The Fed would like this to stay..... no dice jackasses.
First, some background: The Truth in Lending Act from 1968 gives borrowers the “right of rescission,” the ability to undo a home refinancing or home equity loan within three years of the closing if the lender did not make proper disclosures — generally of the loan amount, interest rate and repayment terms. The law makes allowances for mere mistakes by the lender, but otherwise requires strict compliance, as well it should: disclosure is the main — often the only — consumer protection in the mortgage market.
...
The Fed proposal would change all that. Citing concern over banks’ compliance costs, it would require a borrower to pay off the remaining principal before the lender gives up its security interest. That would be clearly impossible for troubled borrowers. So the Fed’s proposal would benefit the creditor who violated the law rather than the borrower, paving the way for foreclosures that otherwise could be avoided.
In short, what this means is that if the bank violated black-letter law in making a loan to you the change would require you to pay off the entire principal before you could assert your rights and remedies.
This is like requiring someone who was robbed to somehow come up with the money to repay the owner of the property that was stolen before the robber can be held to account for his criminal act.
Yeah.
No wonder The Fed doesn't want this one out in the public eye.
Sorry BerScrewTheCommonMan - now there's 300,000+ people who know about it.
Spread the word.
Now We're Forging (Comments, That Is)
by Karl Denninger
This is interesting...
Forged comment letters purportedly from an H.J. Heinz Co. executive, a Burger King Co. franchise and at least five other Arkansas-based officials or businesses were sent to the Commodity Futures Trading Commission.
Some of the letters to the agency, which is writing rules for derivatives trading, contain identical passages criticizing banks for their “cartel-like control” of the $583 trillion swaps market. They include signatures from a circuit court judge, a county sheriff and a mental health counselor. All were forgeries, according to interviews conducted by Bloomberg News.
Well gee, the people who did that have good role models.
After all, the banks emitted over 150,000 (admitted) events of perjury before state courts related to foreclosures. The number of indictments for same, even though this is a felony in most jurisdictions? Zero.
How many certifications of compliance with pooling and servicing agreements were made by Trustees related to MBS that were materially false (due to the lack of document transmission to and inspection by the Trustee for compliance with the offering circulars and prospectuses)? We don't know, but I bet it's a large number.
So why would anyone be surprised that we have "comment forgery" in official submissions to the CFTC?
And further, is anyone seriously expecting that we'll see any handcuffs as a consequence?
Neither am I.
This is interesting...
Forged comment letters purportedly from an H.J. Heinz Co. executive, a Burger King Co. franchise and at least five other Arkansas-based officials or businesses were sent to the Commodity Futures Trading Commission.
Some of the letters to the agency, which is writing rules for derivatives trading, contain identical passages criticizing banks for their “cartel-like control” of the $583 trillion swaps market. They include signatures from a circuit court judge, a county sheriff and a mental health counselor. All were forgeries, according to interviews conducted by Bloomberg News.
Well gee, the people who did that have good role models.
After all, the banks emitted over 150,000 (admitted) events of perjury before state courts related to foreclosures. The number of indictments for same, even though this is a felony in most jurisdictions? Zero.
How many certifications of compliance with pooling and servicing agreements were made by Trustees related to MBS that were materially false (due to the lack of document transmission to and inspection by the Trustee for compliance with the offering circulars and prospectuses)? We don't know, but I bet it's a large number.
So why would anyone be surprised that we have "comment forgery" in official submissions to the CFTC?
And further, is anyone seriously expecting that we'll see any handcuffs as a consequence?
Neither am I.
But But But.... Hosing (sic) Was Improving!
by Karl Denninger
Well, no, it's hosing.
You.
And the economy.
The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas declined 0.8 percent in September from August on a seasonally adjusted basis.
Economists polled by Reuters had expected a decline of 0.3 percent.
Yeah. Remember, it was all going to be ok.
Well, no it's not.
And what's worse is that the cause of this is entirely the government which has tried to prevent asset price deflation - yet that's exactly what's necessary to clear the market!
As Gary Shilling said:
Shilling expects another 20 percent drop in home prices.
"As prices go down, more people get underwater, leading people to walk away," leading to more write-downs by the banks, Shilling said "That will be Act II in the whole drama of the housing collapse," Shilling said.
The big banks must be taken into receivership NOW.
Force the bad debts into the open, write them off, and for each institution that this bankrupts, recognize it and reorganize them.
That's what bankruptcy law is for, it's why it's in the Constitution, and it's the proper move to make.
We should have done it in 2007, we should have done it in 2008, and we should do it now.
Nobody wants to, but this isn't about "wants." It's about what we can realistically support in the economy and whether the debt levels are sustainable.
They're not.
Well, no, it's hosing.
You.
And the economy.
The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas declined 0.8 percent in September from August on a seasonally adjusted basis.
Economists polled by Reuters had expected a decline of 0.3 percent.
Yeah. Remember, it was all going to be ok.
Well, no it's not.
And what's worse is that the cause of this is entirely the government which has tried to prevent asset price deflation - yet that's exactly what's necessary to clear the market!
As Gary Shilling said:
Shilling expects another 20 percent drop in home prices.
"As prices go down, more people get underwater, leading people to walk away," leading to more write-downs by the banks, Shilling said "That will be Act II in the whole drama of the housing collapse," Shilling said.
The big banks must be taken into receivership NOW.
Force the bad debts into the open, write them off, and for each institution that this bankrupts, recognize it and reorganize them.
That's what bankruptcy law is for, it's why it's in the Constitution, and it's the proper move to make.
We should have done it in 2007, we should have done it in 2008, and we should do it now.
Nobody wants to, but this isn't about "wants." It's about what we can realistically support in the economy and whether the debt levels are sustainable.
They're not.
Pension Crisis - Schrodinger's pension
Posted by Golem XIV
The last line of defence, the Maginot line, of the present policy of keeping insolvent banks alive no matter what is, "But if we don't, all our pensions will die."
This nonsense has been gumming up any attempt at a reasoned discussion like a shit impregnated piece of old gum for long enough.
So let us deal with it and consign it to the pedal bin of history.
Many people have heard of Schrodinger's cat - the famous quantum mechanics thought experiment of the cat in the box. Fewer people have heard of his pension. It's a valuable, though less well known, thought experiment.
Schrodinger imagined he had put his gold plated pension in a box. It was a great pension. Backed by many AAA rated investments and mortgage backed securities wrapped in highly rated CDO's and the like.
Now his question was this. If, in the outside world, the apparent value of all the real world things, houses and the like, that his pension was based on declined hugely, BUT he didn't open the box, was his pension alive or dead? In the outside world events were taking their physical course, house prices declining, banks needing to have other people's blood pumped into them to offset the arterial spray of losses from untreated wounds. But inside the box the figures and valuations of his pension were unchanged.
So, if he did not look was it worth what it once had been or not? So long as he didn't actually open the box to look, then he could not be sure. And if he wasn't sure, then that meant there was an element of doubt and no one could say for sure his pension was dead. In fact, according to the spooky logic of quantum economics, his pension could be both alive and dead, or in both states at once. And would stay in the super-position of multiple states just so long as the box was not opened and no one checked. You see why suspending mark to market rules was so vital.
This apparently is the interpretation, we'll call it the Wall Street Interpretation, of Schrodinger's Pension, that our leaders, both political and financial adhere to. It's closely related to the theory which says, so long as you don't have the pregnancy test you won't be pregnant. Of course there are biologists who maintain that there is a brute level of biological reality which carries on its way in defiance of theory. I tend to agree with them - being a biologist.
Let's look at the consequences of the Wall Street Interpretation. It basically says, so long as we don't look inside the box and read the figures, as long as we don't allow anyone to actually value the 'assets' but keep them hidden (the famous Hidden Variables that Quantum finance talk about) - so long as it all remains sealed away, off-balance sheet - then the value is still there. By this view, the value of the pension, of all our pensions, only disappears, only dies, WHEN the box is opened. Only when the box is opened is the outside world and its assets suddenly zeroed, by some myserious "spooky action at a distance" acting faster than the speed of light. This is the Wall Street interpretation.
This is the basis of the saying IF we allow the banks to go down, THEN our pensions will die. I would say, the pension died some time ago and that is what that peculiarly unpleasant smell is. They say to pay no attention to the smell and 'assume' the pension is fine.
But think about it. Their interpretation means they believe the value of the mortgages and the actual houses they in turn are based on are still today worth what they were at the height of the bubble. It will only be at the moment we allow the banks to go down (open the box) that magically, by some 'spooky action at a distance' working faster than light, that FOOM - the houses which were valuable till that precise moment suddenly fall into a state of decay, neglect and worthlessness.
I find that a difficult concept to swallow. I think, call me simple if you want - that the houses already are worth a fraction of what is claimed on the pension paper sealed in the box.
IN WHICH CASE no value will be lost from your pension should the banks be allowed to go down for the simple reason that the value WENT SOME TIME AGO. Your pension is already mauled. We've just been playing a very expensive game of pretend-with-bailouts.
Just because no one is admitting that the 'assets' being held by your pension lost their worth 18 months ago, doesn't mean it is not in fact the brute physical reality. No amount of 'not looking' will hold this reality at bay.
Conservative estimates of how long it will take for property prices to 'recover' is five years. And that is for the properties that still exist. Many no longer do. They are already worthless shells. They will not recover any value at all. Neither will those mortgage backed assets which were backed with fraudulent developments which were never bought by anybody except a developer hoping to flip them at the height of the bubble. Neither will all the CDO's holding bits of other CDOs created in the last two years of the bubble. Neither will the landfill of CDS paper insuring it all, because the companies which wrote the insurance have long since been found dead and rotting in their own little boxes.
That is Schrodinger's pension.
But gum never comes off in one piece does it? There is always that piece rammed into the tread. Let's cut that one out while we're here.
The other pension panic is even if people tentatively accept that the pension might already be dead, they'll still say, 'But isn't it best for us to simply bail everything out, no matter how unpleasant it is for us to pay off the bankers' losses, in order to save the pensioners from penury. So no pretence any more just pragmatism.
Fine. Let's look at the best test case of the policy of 'deny the insolvency and the losses and keep the lid on the box' - Japan.
Twenty years ago the Japanese had a massive property and bank lending bubble that burst. Immediately there was a chorus of panic - save the banks or the market's will crash, the world will end, Japan will become poor and all our pensions will be ruined. They, just like us today, were shouted at to save the banks or else.
They did. The result is that twenty years later the Japanese banks are still wraiths of their former selves. The banks were not 'saved' in any meaningful sense. They, or rather their owners and directors were 'maintained' in luxurious uselessness. But far more seriously, twenty years later the Japanese stock market too, has not been saved. At its height, the Nikkei traded around 30K. It has never 'recovered' and for twenty years has ground and splintered along in the dirt at 9K. All those pension funds invested in it have dragged along in the same dirt.
What has that meant for the pensioners? Well the one cohort of pensioners who were about to retire twenty years ago and would have been pole axed were saved from immediate loss. BUT every cohort after them for TWENTY years has had their pension massacred. Twenty years when pension payments should have accumulated worth as they have to, but DID NOT. Twenty years of pensioners hurt because of the policy which kept all the losses in the banking system and used public money and taxes to endlessly and pointlessly bail out dead banks.
The Japanese kept the box closed and have never let anyone look. But outside everything in their garden has withered and died.
Pensions require some growth so that the money invested accumulates in your pension. The policy the Japanese followed and which we are slavishly following killed growth and recovery except for the wealthy few.
The truth is that the total accumulated pension loss over twenty years has been massively greater and affected many more pensioners, than would have been the case if the losses had been taken twenty years ago.
Not only that but the long refusal to deal with reality has killed off the entire savings of the Japanese people AND their economy's ability to grow. There has been no growth capable of pulling Japan from its long recession and decline, poverty levels among the young an old together have risen inexorably and now their jobs are being off-shored by the companies they 'saved'.
This WILL be our fate too if we allow it.
The truth is this. If banks had gone down in Japan or if we had let ours go down two years ago, the stock markets would have toppled, Pension funds would have shrivelled like a wrestler who stops taking steroids. But the bad debts would have been flushed like a poison from our blood stream, and a film base for recovery would have been achieved.
What about the poor pensioners? There was and is nothing to stop the government of the day topping up the pensions up to a certain point. What? Bail out private pensions? Yes. We have a government guarantee for private deposits. Guaranteeing pension 'savings' up to a government limit is little different. For those saying where would the money come from? - the same place we got the money to bail out the banks. Only this use of a bail out would actually help real people rather than save a few banker's bonuses. The guarantee would have saved the vast bulk of those with modest pensions. Those with the gold plated pension would have lost. AND?
Such a bail out of pensioners would have saved all the doom and panic of 'what about the pensioners'. It would also have saved the hundreds of billions wasted on futile bank bail outs. And best it would have cleared the bad debts and allowed the financial system to do what the Japanese system has not been able to do for twenty wasted years and ours has not been able to do either and won't, which is to start a real recovery.
If you are worried about your pension - and you should be- then kill the banks and allow productive activity to restart in the economy. ONLY a healthy economy will give your your pension. Keeping dead banks alive, keeping the box closed WILL NOT save you or your pension.
The last line of defence, the Maginot line, of the present policy of keeping insolvent banks alive no matter what is, "But if we don't, all our pensions will die."
This nonsense has been gumming up any attempt at a reasoned discussion like a shit impregnated piece of old gum for long enough.
So let us deal with it and consign it to the pedal bin of history.
Many people have heard of Schrodinger's cat - the famous quantum mechanics thought experiment of the cat in the box. Fewer people have heard of his pension. It's a valuable, though less well known, thought experiment.
Schrodinger imagined he had put his gold plated pension in a box. It was a great pension. Backed by many AAA rated investments and mortgage backed securities wrapped in highly rated CDO's and the like.
Now his question was this. If, in the outside world, the apparent value of all the real world things, houses and the like, that his pension was based on declined hugely, BUT he didn't open the box, was his pension alive or dead? In the outside world events were taking their physical course, house prices declining, banks needing to have other people's blood pumped into them to offset the arterial spray of losses from untreated wounds. But inside the box the figures and valuations of his pension were unchanged.
So, if he did not look was it worth what it once had been or not? So long as he didn't actually open the box to look, then he could not be sure. And if he wasn't sure, then that meant there was an element of doubt and no one could say for sure his pension was dead. In fact, according to the spooky logic of quantum economics, his pension could be both alive and dead, or in both states at once. And would stay in the super-position of multiple states just so long as the box was not opened and no one checked. You see why suspending mark to market rules was so vital.
This apparently is the interpretation, we'll call it the Wall Street Interpretation, of Schrodinger's Pension, that our leaders, both political and financial adhere to. It's closely related to the theory which says, so long as you don't have the pregnancy test you won't be pregnant. Of course there are biologists who maintain that there is a brute level of biological reality which carries on its way in defiance of theory. I tend to agree with them - being a biologist.
Let's look at the consequences of the Wall Street Interpretation. It basically says, so long as we don't look inside the box and read the figures, as long as we don't allow anyone to actually value the 'assets' but keep them hidden (the famous Hidden Variables that Quantum finance talk about) - so long as it all remains sealed away, off-balance sheet - then the value is still there. By this view, the value of the pension, of all our pensions, only disappears, only dies, WHEN the box is opened. Only when the box is opened is the outside world and its assets suddenly zeroed, by some myserious "spooky action at a distance" acting faster than the speed of light. This is the Wall Street interpretation.
This is the basis of the saying IF we allow the banks to go down, THEN our pensions will die. I would say, the pension died some time ago and that is what that peculiarly unpleasant smell is. They say to pay no attention to the smell and 'assume' the pension is fine.
But think about it. Their interpretation means they believe the value of the mortgages and the actual houses they in turn are based on are still today worth what they were at the height of the bubble. It will only be at the moment we allow the banks to go down (open the box) that magically, by some 'spooky action at a distance' working faster than light, that FOOM - the houses which were valuable till that precise moment suddenly fall into a state of decay, neglect and worthlessness.
I find that a difficult concept to swallow. I think, call me simple if you want - that the houses already are worth a fraction of what is claimed on the pension paper sealed in the box.
IN WHICH CASE no value will be lost from your pension should the banks be allowed to go down for the simple reason that the value WENT SOME TIME AGO. Your pension is already mauled. We've just been playing a very expensive game of pretend-with-bailouts.
Just because no one is admitting that the 'assets' being held by your pension lost their worth 18 months ago, doesn't mean it is not in fact the brute physical reality. No amount of 'not looking' will hold this reality at bay.
Conservative estimates of how long it will take for property prices to 'recover' is five years. And that is for the properties that still exist. Many no longer do. They are already worthless shells. They will not recover any value at all. Neither will those mortgage backed assets which were backed with fraudulent developments which were never bought by anybody except a developer hoping to flip them at the height of the bubble. Neither will all the CDO's holding bits of other CDOs created in the last two years of the bubble. Neither will the landfill of CDS paper insuring it all, because the companies which wrote the insurance have long since been found dead and rotting in their own little boxes.
That is Schrodinger's pension.
But gum never comes off in one piece does it? There is always that piece rammed into the tread. Let's cut that one out while we're here.
The other pension panic is even if people tentatively accept that the pension might already be dead, they'll still say, 'But isn't it best for us to simply bail everything out, no matter how unpleasant it is for us to pay off the bankers' losses, in order to save the pensioners from penury. So no pretence any more just pragmatism.
Fine. Let's look at the best test case of the policy of 'deny the insolvency and the losses and keep the lid on the box' - Japan.
Twenty years ago the Japanese had a massive property and bank lending bubble that burst. Immediately there was a chorus of panic - save the banks or the market's will crash, the world will end, Japan will become poor and all our pensions will be ruined. They, just like us today, were shouted at to save the banks or else.
They did. The result is that twenty years later the Japanese banks are still wraiths of their former selves. The banks were not 'saved' in any meaningful sense. They, or rather their owners and directors were 'maintained' in luxurious uselessness. But far more seriously, twenty years later the Japanese stock market too, has not been saved. At its height, the Nikkei traded around 30K. It has never 'recovered' and for twenty years has ground and splintered along in the dirt at 9K. All those pension funds invested in it have dragged along in the same dirt.
What has that meant for the pensioners? Well the one cohort of pensioners who were about to retire twenty years ago and would have been pole axed were saved from immediate loss. BUT every cohort after them for TWENTY years has had their pension massacred. Twenty years when pension payments should have accumulated worth as they have to, but DID NOT. Twenty years of pensioners hurt because of the policy which kept all the losses in the banking system and used public money and taxes to endlessly and pointlessly bail out dead banks.
The Japanese kept the box closed and have never let anyone look. But outside everything in their garden has withered and died.
Pensions require some growth so that the money invested accumulates in your pension. The policy the Japanese followed and which we are slavishly following killed growth and recovery except for the wealthy few.
The truth is that the total accumulated pension loss over twenty years has been massively greater and affected many more pensioners, than would have been the case if the losses had been taken twenty years ago.
Not only that but the long refusal to deal with reality has killed off the entire savings of the Japanese people AND their economy's ability to grow. There has been no growth capable of pulling Japan from its long recession and decline, poverty levels among the young an old together have risen inexorably and now their jobs are being off-shored by the companies they 'saved'.
This WILL be our fate too if we allow it.
The truth is this. If banks had gone down in Japan or if we had let ours go down two years ago, the stock markets would have toppled, Pension funds would have shrivelled like a wrestler who stops taking steroids. But the bad debts would have been flushed like a poison from our blood stream, and a film base for recovery would have been achieved.
What about the poor pensioners? There was and is nothing to stop the government of the day topping up the pensions up to a certain point. What? Bail out private pensions? Yes. We have a government guarantee for private deposits. Guaranteeing pension 'savings' up to a government limit is little different. For those saying where would the money come from? - the same place we got the money to bail out the banks. Only this use of a bail out would actually help real people rather than save a few banker's bonuses. The guarantee would have saved the vast bulk of those with modest pensions. Those with the gold plated pension would have lost. AND?
Such a bail out of pensioners would have saved all the doom and panic of 'what about the pensioners'. It would also have saved the hundreds of billions wasted on futile bank bail outs. And best it would have cleared the bad debts and allowed the financial system to do what the Japanese system has not been able to do for twenty wasted years and ours has not been able to do either and won't, which is to start a real recovery.
If you are worried about your pension - and you should be- then kill the banks and allow productive activity to restart in the economy. ONLY a healthy economy will give your your pension. Keeping dead banks alive, keeping the box closed WILL NOT save you or your pension.
Bailout Contagion Hits Europe As Pensions Seized In France, Hungary & Ireland To Pay Banks - Who's Next?
A round-up of several stories.
Contagion strikes Italy as Ireland bail-out fails to calm markets
The EU-IMF rescue for Ireland has failed to restore to confidence in the eurozone debt markets, leading instead to a dramatic surge in bond yields across half the currency bloc.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8169225/Contagion-strikes-Italy-as-Ireland-bail-out-fails-to-calm-markets.html
Spain could be forced to seek a bail-out within months, warns Barclays
The weight of bank debt needing refinancing next year could threaten Spain's solvency and force it to become the next European country to seek a bail-out, according to a report from the investment banking arm of Barclays.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8163705/Spain-could-be-forced-to-seek-a-bail-out-within-months-warns-Barclays.html
Pension reserve funds to be spent on Irish banks
Amid speculation last night that the rate of interest to be charged on the EU/IMF bailout could be as much as 6.7%, Fine Gael’s finance spokesman Michael Noonan said that kind of rate was "far too high" and unaffordable on any reasonable projection of growth.
The Department of Finance said the interest rate had still not been finalised, but given that much of the loan would be repayable over nine years the rate could be higher than the 5.2% charged to Greece but would not be as high as the 6.7% being quoted by some brokers.
Meanwhile, Anglo Irish Bank, which was downgraded to junk status yesterday evening, is expected to be closed swiftly, together with the Irish Nationwide Building Society, under the EU/IMF loan plan.
Officials hope to finalise the details of the €85bn package later today and have EU finance ministers approve it tomorrow.
http://www.irishexaminer.com/home/pension-reserve-funds-to-be-spent-on-banks-137796.html#ixzz16kXUGvzu
Hungary Follows Argentina in Pension-Fund Ultimatum
Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.
Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.
“This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”
http://www.bloomberg.com/news/2010-11-25/hungary-follows-argentina-in-pension-fund-ultimatum-nightmare-for-some.html
Ambrose Evans-Pritchard
Germany faces its awful choice as Spain wobbles
Desperate moments call for desperate measures. In June 1940, the British War Cabinet led by Winston Churchill offered a total national merger to a shattered France.
“All debts of Greece, Cyprus, Italy, Spain, Portugal, and Ireland will be fused immediately with German debt; a single treasury will control spending, and issue euro-bonds for all Euroland,” or some such formula.
This is the sort of game-changer that may now be required to save EMU and the Monnet dream. Germany must contemplate doing for Euroland what it has done for its own Volk in the East over the last 20 years – pay big transfers – or watch its strategic investment in the post-War order of Europe collapse with a bang, and in hideous acrimony. Tough call.
It is clear to those working in the bond markets that the debt crisis in the EMU periphery is nearing danger point, and risks spiralling out of control as quickly as the Lehman-AIG-Fannie-Freddie crisis in 2008.
Prof Willem Buiter, chief economist at Citigroup, said last week that Portugal is likely to need a rescue before the end of the year and that Spain will follow “soon after”.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8166198/Germany-faces-its-awful-choice-as-Spain-wobbles.html
Analysts consider country next in line for a bail-out
With Europe agreeing a €85bn bail-out for Ireland's banks, analysts consider who, if anyone, could be next.
"The market seems to think it's inevitable Portugal requests assistance next - perhaps in January? - and then after that Spain will be scrutinised with a fine tooth comb over the coming months. In doing the work for the Outlook we've increasing come to the conclusion that whether you think the Sovereign problems stop at Greece, Ireland and perhaps Portugal depends on whether you think this is a problem with the overall Western financial system or whether you think its only a problem with individual over-leveraged entities."
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8166521/Next-Spain-Analysts-consider-country-next-in-line-for-a-bail-out.html
France seizes €36bn of pension assets
Contagion strikes Italy as Ireland bail-out fails to calm markets
The EU-IMF rescue for Ireland has failed to restore to confidence in the eurozone debt markets, leading instead to a dramatic surge in bond yields across half the currency bloc.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8169225/Contagion-strikes-Italy-as-Ireland-bail-out-fails-to-calm-markets.html
Spain could be forced to seek a bail-out within months, warns Barclays
The weight of bank debt needing refinancing next year could threaten Spain's solvency and force it to become the next European country to seek a bail-out, according to a report from the investment banking arm of Barclays.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8163705/Spain-could-be-forced-to-seek-a-bail-out-within-months-warns-Barclays.html
Pension reserve funds to be spent on Irish banks
Amid speculation last night that the rate of interest to be charged on the EU/IMF bailout could be as much as 6.7%, Fine Gael’s finance spokesman Michael Noonan said that kind of rate was "far too high" and unaffordable on any reasonable projection of growth.
The Department of Finance said the interest rate had still not been finalised, but given that much of the loan would be repayable over nine years the rate could be higher than the 5.2% charged to Greece but would not be as high as the 6.7% being quoted by some brokers.
Meanwhile, Anglo Irish Bank, which was downgraded to junk status yesterday evening, is expected to be closed swiftly, together with the Irish Nationwide Building Society, under the EU/IMF loan plan.
Officials hope to finalise the details of the €85bn package later today and have EU finance ministers approve it tomorrow.
http://www.irishexaminer.com/home/pension-reserve-funds-to-be-spent-on-banks-137796.html#ixzz16kXUGvzu
Hungary Follows Argentina in Pension-Fund Ultimatum
Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.
Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.
“This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”
http://www.bloomberg.com/news/2010-11-25/hungary-follows-argentina-in-pension-fund-ultimatum-nightmare-for-some.html
Ambrose Evans-Pritchard
Germany faces its awful choice as Spain wobbles
Desperate moments call for desperate measures. In June 1940, the British War Cabinet led by Winston Churchill offered a total national merger to a shattered France.
“All debts of Greece, Cyprus, Italy, Spain, Portugal, and Ireland will be fused immediately with German debt; a single treasury will control spending, and issue euro-bonds for all Euroland,” or some such formula.
This is the sort of game-changer that may now be required to save EMU and the Monnet dream. Germany must contemplate doing for Euroland what it has done for its own Volk in the East over the last 20 years – pay big transfers – or watch its strategic investment in the post-War order of Europe collapse with a bang, and in hideous acrimony. Tough call.
It is clear to those working in the bond markets that the debt crisis in the EMU periphery is nearing danger point, and risks spiralling out of control as quickly as the Lehman-AIG-Fannie-Freddie crisis in 2008.
Prof Willem Buiter, chief economist at Citigroup, said last week that Portugal is likely to need a rescue before the end of the year and that Spain will follow “soon after”.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8166198/Germany-faces-its-awful-choice-as-Spain-wobbles.html
Analysts consider country next in line for a bail-out
With Europe agreeing a €85bn bail-out for Ireland's banks, analysts consider who, if anyone, could be next.
"The market seems to think it's inevitable Portugal requests assistance next - perhaps in January? - and then after that Spain will be scrutinised with a fine tooth comb over the coming months. In doing the work for the Outlook we've increasing come to the conclusion that whether you think the Sovereign problems stop at Greece, Ireland and perhaps Portugal depends on whether you think this is a problem with the overall Western financial system or whether you think its only a problem with individual over-leveraged entities."
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8166521/Next-Spain-Analysts-consider-country-next-in-line-for-a-bail-out.html
France seizes €36bn of pension assets
Monday, November 29, 2010
Bankruptcy Courts: Foreclosing? Prove It . . .
By Barry Ritholtz
The foreclosure mess has now entered a new phase, courtesy of the US Bankruptcy courts. The Trustees are forcing institutions to prove “they even have the right to foreclose at all.”
This is a positive development.
In my various writings on the Fraudclosure debacle, I have not suggested we want to see foreclosures of defaulted mortgagees stopped. To the contrary, Foreclosures (done right) are a necessary part of the RE unwind. My position has been very simple; Banks must follow the law, respect property rights and due process. Oh, and not commit perjury or fraud, and if they did, they must suffer criminal prosecution like any other suspected felon.
Here’s Gretchen Morgenson on the latest twist in this pathetic sage:
“The United States Trustee Program, the unit of the Justice Department charged with overseeing the integrity of the nation’s bankruptcy courts, is taking a different view. The unit is stepping up its scrutiny of the veracity of banks’ claims against borrowers, and its approach is evident in two cases in federal bankruptcy court in Atlanta.
In both cases, Donald F. Walton, the United States trustee for the region, has intervened, filing motions contending that the banks trying to foreclose have not shown they have the right to do so.
The matters involve borrowers operating under Chapter 13 bankruptcy plans overseen by the court in the Northern District of Georgia. In both cases, the banks have filed motions with the bankruptcy court to remove the automatic foreclosure stay that results when a court confirms a debtor’s Chapter 13 repayment plan. If the stay is removed, the banks can foreclose.”
This is progress.
Now if we only can get some criminal indictments for the robo-signer/fraud/perjury lawyers, bankers, and loan servicers, we will be making progress.
The foreclosure mess has now entered a new phase, courtesy of the US Bankruptcy courts. The Trustees are forcing institutions to prove “they even have the right to foreclose at all.”
This is a positive development.
In my various writings on the Fraudclosure debacle, I have not suggested we want to see foreclosures of defaulted mortgagees stopped. To the contrary, Foreclosures (done right) are a necessary part of the RE unwind. My position has been very simple; Banks must follow the law, respect property rights and due process. Oh, and not commit perjury or fraud, and if they did, they must suffer criminal prosecution like any other suspected felon.
Here’s Gretchen Morgenson on the latest twist in this pathetic sage:
“The United States Trustee Program, the unit of the Justice Department charged with overseeing the integrity of the nation’s bankruptcy courts, is taking a different view. The unit is stepping up its scrutiny of the veracity of banks’ claims against borrowers, and its approach is evident in two cases in federal bankruptcy court in Atlanta.
In both cases, Donald F. Walton, the United States trustee for the region, has intervened, filing motions contending that the banks trying to foreclose have not shown they have the right to do so.
The matters involve borrowers operating under Chapter 13 bankruptcy plans overseen by the court in the Northern District of Georgia. In both cases, the banks have filed motions with the bankruptcy court to remove the automatic foreclosure stay that results when a court confirms a debtor’s Chapter 13 repayment plan. If the stay is removed, the banks can foreclose.”
This is progress.
Now if we only can get some criminal indictments for the robo-signer/fraud/perjury lawyers, bankers, and loan servicers, we will be making progress.
Bank of America suspends foreclosure process in Maine
Bank of America suspends foreclosure process in Maine
Distressed home loan borrowers in the state of Maine will get a reprieve during the Thanksgiving holiday weekend, due to the actions of Maine attorney general Janet Mills.
Mills announced this week that her department has negotiated a deal with both Bank of America and Ally Financial, the parent of GMAC Mortgage, to suspend current foreclosure activity in the state until Bank of America has submitted a full review of their foreclosure procedures.
GMAC followed suit, saying they would also temporarily halt foreclosures in the state until they submit their own procedures to the Attorney General.
While the action is seen as a positive step by both banks, Mills did not rule out the possibility of joining in class action lawsuits against the banks in the future.
“My office is receiving calls every day from homeowners,” Mills said. “My office will continue to insist that the banks devote more resources to loan modifications.”
Although only 100 homes may be affected by the decision, the Portland Press Herald reported that GMAC alone submitted 1,156 court foreclosure proceedings in the last five years in Maine, and that many of those could be called into question because of “robo-signing” techniques known to have been used by banks.
Last month, William Lund, Maine Bureau of Consumer Credit Protection, weighed in on the issue of state foreclosures as well, saying that his bureau had been become very concerned about the “unusually high level” of the number of foreclosure cases being filed in the state.
Bank of America officials did not officially comment on the report.
Distressed home loan borrowers in the state of Maine will get a reprieve during the Thanksgiving holiday weekend, due to the actions of Maine attorney general Janet Mills.
Mills announced this week that her department has negotiated a deal with both Bank of America and Ally Financial, the parent of GMAC Mortgage, to suspend current foreclosure activity in the state until Bank of America has submitted a full review of their foreclosure procedures.
GMAC followed suit, saying they would also temporarily halt foreclosures in the state until they submit their own procedures to the Attorney General.
While the action is seen as a positive step by both banks, Mills did not rule out the possibility of joining in class action lawsuits against the banks in the future.
“My office is receiving calls every day from homeowners,” Mills said. “My office will continue to insist that the banks devote more resources to loan modifications.”
Although only 100 homes may be affected by the decision, the Portland Press Herald reported that GMAC alone submitted 1,156 court foreclosure proceedings in the last five years in Maine, and that many of those could be called into question because of “robo-signing” techniques known to have been used by banks.
Last month, William Lund, Maine Bureau of Consumer Credit Protection, weighed in on the issue of state foreclosures as well, saying that his bureau had been become very concerned about the “unusually high level” of the number of foreclosure cases being filed in the state.
Bank of America officials did not officially comment on the report.
Incoming Senator's Insane Logic on Tax Cuts and Jobless Benefits
By Julianne Escobedo Shepherd
The day before over 2.5 million Americans stand to lose their unemployment benefits, yet another Senator-Elect proves that the Republican Party doesn't care about us. In an interview on Fox, Mark Kirk, the Illinois Republican that got Obama's seat, spewed ridiculous logic on jobless benefits and fat-cat tax cuts, saying unemployment insurance is “misguided,” while we must relieve the wealthy of their profound tax burden “no matter what.”
This is, of course, the same man who wants to outsource Congressional budget-balancing, but when actual lives are at stake, it's hard not to take his labyrinthine rhetoric seriously. As Think Progress notes, his thinking represents the Republican party line, and if tax cuts are extended, we're going to sink even deeper into the quicksand:
Kirk actually claimed that extending benefits — which costs $60 billion for one year, or $12.5 billion for a three-month extension — would lead to a Irish-style debt crisis, while glossing over the $4 trillion cost of extending the Bush tax cuts for a decade ($830 billion of which goes to only the richest two percent of Americans). Even MSNBC’s Joe Scarborough saw through Kirk’s double-talk, asking, “if [the tax cuts] are not paid for though, do we not risk going the way, as you said, of Greece and Ireland?”
As the New York Times editorial board wrote, “opponents would have you believe that the nation cannot afford to keep paying unemployment benefits: a yearlong extension would cost about $60 billion. The truth is, we cannot afford not to…Without jobs, there is inadequate spending, and that means ever fewer jobs. A wide range of private and government studies show that unemployment benefits combat that vicious cycle by ensuring that families can buy the basics.”
There are currently five unemployed people for every available job in the United
editor note: we can use this senator for the next outerspace mission to check for life in Mars
The day before over 2.5 million Americans stand to lose their unemployment benefits, yet another Senator-Elect proves that the Republican Party doesn't care about us. In an interview on Fox, Mark Kirk, the Illinois Republican that got Obama's seat, spewed ridiculous logic on jobless benefits and fat-cat tax cuts, saying unemployment insurance is “misguided,” while we must relieve the wealthy of their profound tax burden “no matter what.”
This is, of course, the same man who wants to outsource Congressional budget-balancing, but when actual lives are at stake, it's hard not to take his labyrinthine rhetoric seriously. As Think Progress notes, his thinking represents the Republican party line, and if tax cuts are extended, we're going to sink even deeper into the quicksand:
Kirk actually claimed that extending benefits — which costs $60 billion for one year, or $12.5 billion for a three-month extension — would lead to a Irish-style debt crisis, while glossing over the $4 trillion cost of extending the Bush tax cuts for a decade ($830 billion of which goes to only the richest two percent of Americans). Even MSNBC’s Joe Scarborough saw through Kirk’s double-talk, asking, “if [the tax cuts] are not paid for though, do we not risk going the way, as you said, of Greece and Ireland?”
As the New York Times editorial board wrote, “opponents would have you believe that the nation cannot afford to keep paying unemployment benefits: a yearlong extension would cost about $60 billion. The truth is, we cannot afford not to…Without jobs, there is inadequate spending, and that means ever fewer jobs. A wide range of private and government studies show that unemployment benefits combat that vicious cycle by ensuring that families can buy the basics.”
There are currently five unemployed people for every available job in the United
editor note: we can use this senator for the next outerspace mission to check for life in Mars
Bank of America Foreclosure of the Week…$6 Million Loan Reinstatement
by Foreclosureblues
Foreclosure of the Week
ShareThis
VISTA, Calif. – A couple claim they gave Bank of America a cashier’s check for $266,500 plus $5,000 in attorney’s fees to reinstate the loan on their $6 million home in Rancho Santa Fe, but the bank refused to accept it, saying it was not for the “exact amount” due – and it won’t tell them what the exact amount is.
Complaint Here….
http://www.courthousenews.com/2010/11/29/Foreclose.pdf
Reading material for :
Foreclosure of the Week
ShareThis
VISTA, Calif. – A couple claim they gave Bank of America a cashier’s check for $266,500 plus $5,000 in attorney’s fees to reinstate the loan on their $6 million home in Rancho Santa Fe, but the bank refused to accept it, saying it was not for the “exact amount” due – and it won’t tell them what the exact amount is.
Complaint Here….
http://www.courthousenews.com/2010/11/29/Foreclose.pdf
Reading material for :
The Office of the Comptroller of the Currency in accion !!!!
If you think that OCC is doing nothing about the "To big to fail Banks"
think again !!!!
OCC Enforcement Actions
http://www.occ.treas.gov/news-issuances/news-releases/2010/nr-occ-2010-133.html
they also planning to enforce some actions against :
The Lambs and sheppers National Bank of Ricketts, Iowa
think again !!!!
OCC Enforcement Actions
http://www.occ.treas.gov/news-issuances/news-releases/2010/nr-occ-2010-133.html
they also planning to enforce some actions against :
The Lambs and sheppers National Bank of Ricketts, Iowa
The Office of the Comptroller of the Currency mission explained
for further help call :
You Can Die In The Mud; We've Got Plenty Of Money Left For Killing People"
The military industrial economy is the U.S. economy.
Definition: fungool
You screwed with me and now you want my help? Va fungool!
Definition: fungool
You screwed with me and now you want my help? Va fungool!
Beware The Governmental Sector Complex
By Let them Fail
It was Eisenhower who recognized the corrupting influence of power upon the growing military industrial complex. Had he broadened his scope just a bit further, he might have warned us about the broader threat of the Governmental Sector Complex.
In recent posts, we have formerly rational people claiming that:
QE2 promotes employment by keeping the government in business. The government can then work on adding jobs.
And with that, as Daniel Amerman puts it, the FED artificially shifts 9% of America’s workforce from private sector to government sector economies.
We have an administration, and its monetary accomplice, focused on “control” of the economy, trying to create artificial demand for a structurally deficient economy, using flood after flood of funny money. They would tax the affluent, who might otherwise create demand-based jobs, and simply add more useless government jobs to fulfill the demand for paychecks.
We have heard about numerous beaurocracies, so over-staffed as to have become completely dysfunctional, their salaries bloated and pensions unfundable, and yet downsizing will only add to an already unacceptable level of unemployment. And instead of recognizing the long-term effect of this structural imbalance, politicians only seek to revitalize what seemed to work years ago, because it was such a pleasant fiction. Can they not see that growing government exclusively in a global economy is an economic death sentence?
Of all of the 10′s of thousands of jobs growing out of the 911 response, between then and now–jobs which only partly replaced manufacturing jobs lost to outsourced labor before 911 (and continuing today) … which, if any, adds direct value to the global economy? Of the more recent growth within the last 2 years, which part balances against global economic demand?
It appears that the game plan of the Governmental Sector Complex is to address the growing demand for food stamps and unemployment checks to a growing number of Americans who have forever lost the opportunity to produce something of benefit to the market demand side of this global economy. Therefore the growth of government jobs comes from the artificial demand of the vastly growing needs of the unemployed.
Job destruction begets dependence, dependence begets entitlement, and entitlement begets more government, which “administers” it all, in a self perpetuating cycle that leads to successive IMF bailouts, and ends in debt serfdom, under global governance.
Perhaps in the future, vast numbers of Americans will be employed to govern the globally unemployed in some New World Economic Regime. And here I thought the New Economic World Order was intended to enrich the intellectual elite and world bankers alone. How thoughtful of them to suddenly “share” the responsibility of neo-feudal colonialism.
Those who stand by the claim that “QE2 promotes employment by keeping the government in business” miss the point. QE2 promotes foreign investment in cheap labor emerging markets where real jobs are sustainable because they fulfill real needs on a global scale.
In America it increases unemployment in the private sector and grows government to manage handouts to the unemployed. How sustainable is that?
It was Eisenhower who recognized the corrupting influence of power upon the growing military industrial complex. Had he broadened his scope just a bit further, he might have warned us about the broader threat of the Governmental Sector Complex.
In recent posts, we have formerly rational people claiming that:
QE2 promotes employment by keeping the government in business. The government can then work on adding jobs.
And with that, as Daniel Amerman puts it, the FED artificially shifts 9% of America’s workforce from private sector to government sector economies.
We have an administration, and its monetary accomplice, focused on “control” of the economy, trying to create artificial demand for a structurally deficient economy, using flood after flood of funny money. They would tax the affluent, who might otherwise create demand-based jobs, and simply add more useless government jobs to fulfill the demand for paychecks.
We have heard about numerous beaurocracies, so over-staffed as to have become completely dysfunctional, their salaries bloated and pensions unfundable, and yet downsizing will only add to an already unacceptable level of unemployment. And instead of recognizing the long-term effect of this structural imbalance, politicians only seek to revitalize what seemed to work years ago, because it was such a pleasant fiction. Can they not see that growing government exclusively in a global economy is an economic death sentence?
Of all of the 10′s of thousands of jobs growing out of the 911 response, between then and now–jobs which only partly replaced manufacturing jobs lost to outsourced labor before 911 (and continuing today) … which, if any, adds direct value to the global economy? Of the more recent growth within the last 2 years, which part balances against global economic demand?
It appears that the game plan of the Governmental Sector Complex is to address the growing demand for food stamps and unemployment checks to a growing number of Americans who have forever lost the opportunity to produce something of benefit to the market demand side of this global economy. Therefore the growth of government jobs comes from the artificial demand of the vastly growing needs of the unemployed.
Job destruction begets dependence, dependence begets entitlement, and entitlement begets more government, which “administers” it all, in a self perpetuating cycle that leads to successive IMF bailouts, and ends in debt serfdom, under global governance.
Perhaps in the future, vast numbers of Americans will be employed to govern the globally unemployed in some New World Economic Regime. And here I thought the New Economic World Order was intended to enrich the intellectual elite and world bankers alone. How thoughtful of them to suddenly “share” the responsibility of neo-feudal colonialism.
Those who stand by the claim that “QE2 promotes employment by keeping the government in business” miss the point. QE2 promotes foreign investment in cheap labor emerging markets where real jobs are sustainable because they fulfill real needs on a global scale.
In America it increases unemployment in the private sector and grows government to manage handouts to the unemployed. How sustainable is that?
Marshall Auerback: Bankers Gone Wild in Ireland AND Germany
By Marshall Auerback, a hedge fund manager and portfolio strategist who writes for New Deal 2.0.
Despite a blame-a-thon on Ireleand, Germans banks are really at the core of the eurozone catastrophe.
Much ink has been spilled in the press over the Irish problem and the laxity of the country’s southern Mediterranean counterparts in contrast to the highly “disciplined” Germans. But perhaps we have to revisit that caricature. Not only has the Irish crisis blown apart the myth of the virtues of fiscal austerity during rapidly declining economic activity, but it has also illustrated that Germany’s bankers were every bit as culpable as their Irish counterparts in helping to stoke the credit bubble.
One of the traditional rationales for the creation of the euro was that a single currency and strict Maastricht criteria would keep the profligate Mediterraneans and their Celtic equivalents in line. Instead, critics, particularly in Germany, increasingly see the European Monetary Union as a means for freeloading nations to offload their liabilities onto fitter neighbors.
Not surprisingly, this has engendered much discussion that perhaps it would serve Germany’s interests to leave the euro, rather than booting one of the Mediterranean “scroungers” out. But as Simon Johnson has pointed out, this comforting narrative of German prudence matched up against Irish profligacy doesn’t really stack up:
German banks in particular lost their composure with regard to lending to Ireland — although British, American, French and Belgian banks were not so far behind. Hypo Real Estate — now taken over by the German government — has what is likely to be the highest exposure to Irish debt.
But look at loans outstanding relative to the size of their domestic economies (using the BIS data on what they call an “ultimate risk basis”).
German banks are owed $139 billion, which is 4.2 percent of German G.D.P. [my emphasis]
Where were the German regulators? As my colleague Bill Black has noted:
They seem to have believed that ‘What happens in Vegas (Dublin) stays in Vegas (Dublin).’ Instead, their German banks came back from their riotous holidays in the PIIGS with BTDs (bank transmitted diseases). The German banks’ regulators continue to let them hide the embarrassing losses they picked up on holiday, but that cover up will collapse if any of the PIIGS default. The PIIGS will default if the EU does not bail them out, so there will be a bail out even though the German taxpayers hate to fund bailouts.
German banks’ relatively high exposure to Ireland does pose the question as to whether there is some wild, Weimar-style hyperinflationista lurking deep in the heart of every German, only able to express itself fully when away from the prying eyes of fellow citizens.
All of the rescue plans that have been introduced in Ireland or Greece thus far rest on the assumption that, with more time, the eurozone’s problem children could get their fiscal houses in order — and Europe could somehow grow its way out of trouble. But the fiscal austerity being offered as the “medicine” is turning out to be worse than the disease. It has exacerbated the downturn and unleashed a horrible debt deflation dynamic in all of the areas where it was reluctantly implemented.
But here’s the thing: these fiscal straitjackets obscure the history of how we came to today’s horrible impasse and, more specifically, the German banks’ role in helping to fuel the credit binge. Also lost is the reason why this has metastasized into a far greater crisis: as part of the eurozone, Ireland does not have the fiscal freedom to come up with a sufficiently robust government response. The UK had a comparable real estate bubble in the late 1980s, which culminated with the Soros attack on the pound in 1992 and the ejection of sterling from Exchange Rate Mechanism (the precursor to the EMU). This was a blessing in disguise. Withdrawal from the ERM saved the UK because it allowed the country sufficient latitude to reflate. Yes, the country had a major recession (in many ways a consequence of the surrender of fiscal freedom as a result of joining the ERM in the first place), but there was never a systemic risk that posed a threat to the country’s overall solvency as is the case in Ireland today. And this is exacerbating the problem in Ireland because it persists in chasing its tail repeatedly with futile fiscal austerity measures.
The truth of the matter is this: the eurozone seems rotten to the core, literally. Germany represents that core. The Germans might occupy the penthouse suite, but it is the suite of a roach motel. And we know what happens to those who enter such “establishments.”
Yes, longer term the problems currently afflicting the eurozone could be sorted via the creation of a supranational fiscal authority — a “United States of Europe”. But with each crisis (Ireland today; Portugal and Spain tomorrow; Italy and then France next?), the political forces are coalescing in a radically different direction. The Germans are becoming increasingly resentful as they perceive their country as the bailout mechanism of last resort (even though the Irish experience suggests that their bankers are also guilty of many of the same excesses as the “Celtic Tiger”). The PIIGS themselves are seeing that the benefits of euro membership have been vastly overstated and in fact now act as a cancerous influence through the Germanic embrace of austerity. (Paradoxically, it has been the “profligate” behavior of those so-called lazy Mediterraneans that has enabled Germany to retain its export-driven model, as well as allowing it to run lower budget deficits than most other countries.)
The eurozone could ultimately end up like Yugoslavia writ large. Prior to the break up of that country, the relatively rich republics, Slovenia and Croatia, resented policies that transferred wealth to the poorer republics like Serbia, Macedonia, Montenegro, or the autonomous region of Kosovo. Once Tito’s organizing genius disappeared, the links stitching the country together became frayed and eventually snapped as old grievances manifested themselves in newer forms. The same could happen to the Europe Union if it underwent a supranational fiscal union — the beginnings of which are already in evidence. I think the Germans are beginning to recognize that, which is why there is discussion about leaving the euro.
But let’s first be clear: German Chancellor Angela Merkel has persistently argued that it is essential that private investors, notably the bond holders, begin to suffer losses so that they will have the proper incentives to provide effective “private market discipline” going forward. She has further argued that it is fair that they suffer losses, given the premium yields they received and their lack of due diligence. That’s an honorable policy. But it’s like the old Irish joke of the driver who gets lost, asks for directions, and is told, “Well, I wouldn’t be starting from here.” By the same token, Ireland clearly illustrates that German banks, as well as their Mediterranean counterparts, would be big losers under the Merkel proposal. Ironically, German financial institutions could find themselves subject to the same kinds of bailouts that Chancellor Merkel and many of her counterparts in Berlin are urging on the Irish and Greeks.
As always, leave it to the Irish to come up with the most poetic response to the crisis. True, W.B. Yeats did not live to see this disaster, but his passionate “September 1913” does evoke the tragedy of today’s Ireland and the futility of the current policy responses for their people (and beyond):
Was it for this the wild geese spread
The grey wing upon every tide;
For this that all that blood was shed,
For this Edward Fitzgerald died,
And Robert Emmet and Wolfe Tone,
All that delirium of the brave?
Romantic Ireland’s dead and gone,
It’s with O’Leary in the grave.
Graves that might soon include not only the O’Learys, but also the Garcias, Texeiras, Moreaus, and Schmidts if a more rational course of action throughout the euro zone is not adopted soon.
Despite a blame-a-thon on Ireleand, Germans banks are really at the core of the eurozone catastrophe.
Much ink has been spilled in the press over the Irish problem and the laxity of the country’s southern Mediterranean counterparts in contrast to the highly “disciplined” Germans. But perhaps we have to revisit that caricature. Not only has the Irish crisis blown apart the myth of the virtues of fiscal austerity during rapidly declining economic activity, but it has also illustrated that Germany’s bankers were every bit as culpable as their Irish counterparts in helping to stoke the credit bubble.
One of the traditional rationales for the creation of the euro was that a single currency and strict Maastricht criteria would keep the profligate Mediterraneans and their Celtic equivalents in line. Instead, critics, particularly in Germany, increasingly see the European Monetary Union as a means for freeloading nations to offload their liabilities onto fitter neighbors.
Not surprisingly, this has engendered much discussion that perhaps it would serve Germany’s interests to leave the euro, rather than booting one of the Mediterranean “scroungers” out. But as Simon Johnson has pointed out, this comforting narrative of German prudence matched up against Irish profligacy doesn’t really stack up:
German banks in particular lost their composure with regard to lending to Ireland — although British, American, French and Belgian banks were not so far behind. Hypo Real Estate — now taken over by the German government — has what is likely to be the highest exposure to Irish debt.
But look at loans outstanding relative to the size of their domestic economies (using the BIS data on what they call an “ultimate risk basis”).
German banks are owed $139 billion, which is 4.2 percent of German G.D.P. [my emphasis]
Where were the German regulators? As my colleague Bill Black has noted:
They seem to have believed that ‘What happens in Vegas (Dublin) stays in Vegas (Dublin).’ Instead, their German banks came back from their riotous holidays in the PIIGS with BTDs (bank transmitted diseases). The German banks’ regulators continue to let them hide the embarrassing losses they picked up on holiday, but that cover up will collapse if any of the PIIGS default. The PIIGS will default if the EU does not bail them out, so there will be a bail out even though the German taxpayers hate to fund bailouts.
German banks’ relatively high exposure to Ireland does pose the question as to whether there is some wild, Weimar-style hyperinflationista lurking deep in the heart of every German, only able to express itself fully when away from the prying eyes of fellow citizens.
All of the rescue plans that have been introduced in Ireland or Greece thus far rest on the assumption that, with more time, the eurozone’s problem children could get their fiscal houses in order — and Europe could somehow grow its way out of trouble. But the fiscal austerity being offered as the “medicine” is turning out to be worse than the disease. It has exacerbated the downturn and unleashed a horrible debt deflation dynamic in all of the areas where it was reluctantly implemented.
But here’s the thing: these fiscal straitjackets obscure the history of how we came to today’s horrible impasse and, more specifically, the German banks’ role in helping to fuel the credit binge. Also lost is the reason why this has metastasized into a far greater crisis: as part of the eurozone, Ireland does not have the fiscal freedom to come up with a sufficiently robust government response. The UK had a comparable real estate bubble in the late 1980s, which culminated with the Soros attack on the pound in 1992 and the ejection of sterling from Exchange Rate Mechanism (the precursor to the EMU). This was a blessing in disguise. Withdrawal from the ERM saved the UK because it allowed the country sufficient latitude to reflate. Yes, the country had a major recession (in many ways a consequence of the surrender of fiscal freedom as a result of joining the ERM in the first place), but there was never a systemic risk that posed a threat to the country’s overall solvency as is the case in Ireland today. And this is exacerbating the problem in Ireland because it persists in chasing its tail repeatedly with futile fiscal austerity measures.
The truth of the matter is this: the eurozone seems rotten to the core, literally. Germany represents that core. The Germans might occupy the penthouse suite, but it is the suite of a roach motel. And we know what happens to those who enter such “establishments.”
Yes, longer term the problems currently afflicting the eurozone could be sorted via the creation of a supranational fiscal authority — a “United States of Europe”. But with each crisis (Ireland today; Portugal and Spain tomorrow; Italy and then France next?), the political forces are coalescing in a radically different direction. The Germans are becoming increasingly resentful as they perceive their country as the bailout mechanism of last resort (even though the Irish experience suggests that their bankers are also guilty of many of the same excesses as the “Celtic Tiger”). The PIIGS themselves are seeing that the benefits of euro membership have been vastly overstated and in fact now act as a cancerous influence through the Germanic embrace of austerity. (Paradoxically, it has been the “profligate” behavior of those so-called lazy Mediterraneans that has enabled Germany to retain its export-driven model, as well as allowing it to run lower budget deficits than most other countries.)
The eurozone could ultimately end up like Yugoslavia writ large. Prior to the break up of that country, the relatively rich republics, Slovenia and Croatia, resented policies that transferred wealth to the poorer republics like Serbia, Macedonia, Montenegro, or the autonomous region of Kosovo. Once Tito’s organizing genius disappeared, the links stitching the country together became frayed and eventually snapped as old grievances manifested themselves in newer forms. The same could happen to the Europe Union if it underwent a supranational fiscal union — the beginnings of which are already in evidence. I think the Germans are beginning to recognize that, which is why there is discussion about leaving the euro.
But let’s first be clear: German Chancellor Angela Merkel has persistently argued that it is essential that private investors, notably the bond holders, begin to suffer losses so that they will have the proper incentives to provide effective “private market discipline” going forward. She has further argued that it is fair that they suffer losses, given the premium yields they received and their lack of due diligence. That’s an honorable policy. But it’s like the old Irish joke of the driver who gets lost, asks for directions, and is told, “Well, I wouldn’t be starting from here.” By the same token, Ireland clearly illustrates that German banks, as well as their Mediterranean counterparts, would be big losers under the Merkel proposal. Ironically, German financial institutions could find themselves subject to the same kinds of bailouts that Chancellor Merkel and many of her counterparts in Berlin are urging on the Irish and Greeks.
As always, leave it to the Irish to come up with the most poetic response to the crisis. True, W.B. Yeats did not live to see this disaster, but his passionate “September 1913” does evoke the tragedy of today’s Ireland and the futility of the current policy responses for their people (and beyond):
Was it for this the wild geese spread
The grey wing upon every tide;
For this that all that blood was shed,
For this Edward Fitzgerald died,
And Robert Emmet and Wolfe Tone,
All that delirium of the brave?
Romantic Ireland’s dead and gone,
It’s with O’Leary in the grave.
Graves that might soon include not only the O’Learys, but also the Garcias, Texeiras, Moreaus, and Schmidts if a more rational course of action throughout the euro zone is not adopted soon.
The Footnote On The Irish Bailout Plan
by Tyler Durden
We very much enjoy the view of Michael Cembalest (CIO, JPM Private Bank) when it comes to the sensitive topic of geopolitics, as it tends to provide that incremental perspective over and above what otherwise his and other banks would skirt around due to conflicts of interest (after all they are banks). Today, in his Eye on the Market report, Cembalest looks again at the Irish bailout. And while his summary of the 4 key dynamics (in his opinion) is certainly spot on, it is his footnote that caught our attention, as it carries in it the most pertinent information: namely, that since its bankruptcy and currency devaluation, Iceland's economy and stock market have surged, unbound by the shackles of a zombie monetary system and exponentially growing debt. Ireland, to the contrary, can only hope for at best a gradual decline in its economic output instead of an outright collapse now that European Commission council is the country's new politburo. It can also, at best, hope that its pension fund will have a few penny farthings left for the aging population once it is done rescuing Europe's banks. It is precisely this option that a formerly democratic country refused to offer its citizens, and is the reason why its entire government should be tried for treason: instead of using empirical evidence that default and devaluation is the best outcome, Ireland crumbled to the interests of a few parasite plutocrats, which have just their own interests in mind, and never those of the host nation (which ends up being abused and discarded like a used condom off the side of the road).
The key issues on the Irish bailout per Cembalest:
1. Bailouts don’t change the level of debt that countries owe, it just shifts the creditors around. The latest steps remind me of the desperate attempts by US banks to lend more money on top of prior money during the late 1980s to Latin America, when Citibank chairman Walter Wriston’s “countries cannot default” thesis was left in ruins. For everyone that said last spring that “Greece 2009 is not Argentina 2001”, they’re right; Greece’s budget/trade deficits and debt/GDP were much worse.
2. GDP figures can be misleading indicators of risk. Greece, Ireland, Spain and Portugal (GISP) are small in GDP terms relative to Germany and France. But their banking systems grew to be very large (e.g., a 20% haircut on French bank exposure to GISP countries would wipe out French bank equity). Irish Finance Minister Lehinan intimated that Ireland asked to be able to apply haircuts to senior bank debt, and was told by the EU that it would make no money available if there were any haircuts, due to fears of contagion. What does that tell you about the risk of small countries, or the European banking system?
3. This crisis is not just about sovereign debt/deficits. Ireland and Spain were model EMU citizens, with deficits inside of the 3% Maastricht level for years. The problem: total sovereign, corporate, financial and household debt, and each country’s ability to service it. Despite reductions in its budget deficit and reduced reliance on ECB funding, we’re still very nervous about Spain. Why? Its economy is still on the brink of recession. Were it not for the ongoing collapse in imports, Spain’s GDP would have declined in Q3. BBVA and Santander should be able to ride out a recession due to international diversification, but the other half of the banking system (Caja banks) is another story entirely. Risks in Spain are not just about the banks; nonfinancial private sector debt is 220% of GDP, the highest in the world.
4. The politics may get more divisive. The EU imposed a deal on Ireland’s lame duck government that consigns the country to a very painful future. The continued gutting of the Irish national pension fund is, to put it mildly, a controversial decision. Meanwhile, Eurogroup president Jean Claude Juncker said this over the weekend: “I am concerned that in Germany, the federal and local authorities are slowly losing sight of the European common good”. As per last week’s EoTM, I am not sure anyone knows what that really means right now, or if such a concept was ever properly established as it relates to the European Monetary Union.
This is all well-said and very coherent. But it is not what we want to highlight. What we do want to emphasize is the comparison of Ireland to Iceland. Aka footnote one:
The Irish “bailout” plan, with its EUR 54,800 cost per household, is by all accounts a modern-era “Long Day’s Journey Into Night”. Ireland’s future, by the way, looks a lot more bleak than Iceland’s. Iceland took a different path (debt default and a devaluation of 60%). Two years on, Iceland is rebounding: exports and manufacturing are growing by 20%, tourism is back near all-time highs, real wages are rising, unemployment is declining sharply, interest rates fell from 18% to 5.5% and the stock market rebounded 50% from its lows. In Ireland, GDP is contracting at a 9.7% rate; real wages, price levels, the money supply and exports are falling; and unemployment is stuck at 14%.
This is nothing less than yet another example that in the great collapsing game of Keynesian fundamentalist's dilemma, he who defect, defaults and devaluate first is the winner. Congratulations Iceland. To everyone else: enjoy the eventual revolutions. They are now inevitable, courtesy of your favorite neighborhood parasite banker.
We very much enjoy the view of Michael Cembalest (CIO, JPM Private Bank) when it comes to the sensitive topic of geopolitics, as it tends to provide that incremental perspective over and above what otherwise his and other banks would skirt around due to conflicts of interest (after all they are banks). Today, in his Eye on the Market report, Cembalest looks again at the Irish bailout. And while his summary of the 4 key dynamics (in his opinion) is certainly spot on, it is his footnote that caught our attention, as it carries in it the most pertinent information: namely, that since its bankruptcy and currency devaluation, Iceland's economy and stock market have surged, unbound by the shackles of a zombie monetary system and exponentially growing debt. Ireland, to the contrary, can only hope for at best a gradual decline in its economic output instead of an outright collapse now that European Commission council is the country's new politburo. It can also, at best, hope that its pension fund will have a few penny farthings left for the aging population once it is done rescuing Europe's banks. It is precisely this option that a formerly democratic country refused to offer its citizens, and is the reason why its entire government should be tried for treason: instead of using empirical evidence that default and devaluation is the best outcome, Ireland crumbled to the interests of a few parasite plutocrats, which have just their own interests in mind, and never those of the host nation (which ends up being abused and discarded like a used condom off the side of the road).
The key issues on the Irish bailout per Cembalest:
1. Bailouts don’t change the level of debt that countries owe, it just shifts the creditors around. The latest steps remind me of the desperate attempts by US banks to lend more money on top of prior money during the late 1980s to Latin America, when Citibank chairman Walter Wriston’s “countries cannot default” thesis was left in ruins. For everyone that said last spring that “Greece 2009 is not Argentina 2001”, they’re right; Greece’s budget/trade deficits and debt/GDP were much worse.
2. GDP figures can be misleading indicators of risk. Greece, Ireland, Spain and Portugal (GISP) are small in GDP terms relative to Germany and France. But their banking systems grew to be very large (e.g., a 20% haircut on French bank exposure to GISP countries would wipe out French bank equity). Irish Finance Minister Lehinan intimated that Ireland asked to be able to apply haircuts to senior bank debt, and was told by the EU that it would make no money available if there were any haircuts, due to fears of contagion. What does that tell you about the risk of small countries, or the European banking system?
3. This crisis is not just about sovereign debt/deficits. Ireland and Spain were model EMU citizens, with deficits inside of the 3% Maastricht level for years. The problem: total sovereign, corporate, financial and household debt, and each country’s ability to service it. Despite reductions in its budget deficit and reduced reliance on ECB funding, we’re still very nervous about Spain. Why? Its economy is still on the brink of recession. Were it not for the ongoing collapse in imports, Spain’s GDP would have declined in Q3. BBVA and Santander should be able to ride out a recession due to international diversification, but the other half of the banking system (Caja banks) is another story entirely. Risks in Spain are not just about the banks; nonfinancial private sector debt is 220% of GDP, the highest in the world.
4. The politics may get more divisive. The EU imposed a deal on Ireland’s lame duck government that consigns the country to a very painful future. The continued gutting of the Irish national pension fund is, to put it mildly, a controversial decision. Meanwhile, Eurogroup president Jean Claude Juncker said this over the weekend: “I am concerned that in Germany, the federal and local authorities are slowly losing sight of the European common good”. As per last week’s EoTM, I am not sure anyone knows what that really means right now, or if such a concept was ever properly established as it relates to the European Monetary Union.
This is all well-said and very coherent. But it is not what we want to highlight. What we do want to emphasize is the comparison of Ireland to Iceland. Aka footnote one:
The Irish “bailout” plan, with its EUR 54,800 cost per household, is by all accounts a modern-era “Long Day’s Journey Into Night”. Ireland’s future, by the way, looks a lot more bleak than Iceland’s. Iceland took a different path (debt default and a devaluation of 60%). Two years on, Iceland is rebounding: exports and manufacturing are growing by 20%, tourism is back near all-time highs, real wages are rising, unemployment is declining sharply, interest rates fell from 18% to 5.5% and the stock market rebounded 50% from its lows. In Ireland, GDP is contracting at a 9.7% rate; real wages, price levels, the money supply and exports are falling; and unemployment is stuck at 14%.
This is nothing less than yet another example that in the great collapsing game of Keynesian fundamentalist's dilemma, he who defect, defaults and devaluate first is the winner. Congratulations Iceland. To everyone else: enjoy the eventual revolutions. They are now inevitable, courtesy of your favorite neighborhood parasite banker.
Simon Black Advocates Leaving America As The "Most Effective" Way To Fight The Battle With "The Mob-Installed Government Beast"
by Tyler Durden
And now for some very provocative, "out of the box" views: Simon Black, better known as Sovereign Man, presents some disturbing thoughts which are sure to get the broader spirits elevated. Instead of continuing to fight what some see as a losing ideological battle with a government which no longer even remotely represents the broader population's interests, Black says simply to walk away: "When you think about it, what we call a 'country' is nothing more than a large concentration of people who share common values. Over time, those values adjust and evolve. Today, cultures in many countries value things like fake security, subordination, and ignorance over freedom, independence, and awareness. When it appears more and more each day that those common values diverge from your own, all that's left of a country are irrelevant, invisible lines on a map. I don't find these worth fighting for...The government beast in your home country feeds on debt and taxes, and the best way to win is for bright, productive people to move away with their ideas, labor, and assets. This effectively starves the beast and accelerates its collapse. Then, when the smoke clears, you can move back and help rebuild a free society." Perhaps Black is right and this is the best, and possibly only, non-violent way to fight the political-financial plutocracy?
From Sovereign Man
Tell me if you think it's worth fighting for
Date: November 29, 2010
Reporting From: Katoomba, New South Wales, Australia
In 43 BC, over 2,000 years ago, warring consuls Antony, Lepidus, and Octavian were duking it out with each other over control of Rome following Julius Caesar's assassination the prior March.
Each had legions at his disposal, and Rome's terrified Senate sat on its hands waiting for the outcome.
Ultimately, the three men chose to unite their powers and rule Rome together in what became known as the Second Triumvirate. This body was established by a law named lex Titia on this date (give or take depending on how you convert the Roman calendar) in 43 BC.
The foundation of the Second Triumvirate is of tremendous historical importance: as the group wielded dictatorial powers, it represents the final nail in the coffin in Rome's transition from republic to malignant autocracy.
The Second Triumvirate expired after 10-years, upon which Octavian waged war on his partners once again, resulting in Mark Antony's famed suicide with Cleopatra in 31 BC. Octavian was eventually rewarded with rich title and nearly supreme power, and he is generally regarded as Rome's first emperor.
Things only got worse from there. Tiberius, Octavian's successor, was a paranoid deviant with a lust for executions. He spent the last decade of his reign completely detached from Rome, living in Capri.
Following Tiberius was Caligula, infamous for his moral depravity and insanity. According to Roman historians Suetonius and Cassius Dio, Tiberius would send his legions on pointless marches and turned his palace into a bordello of such repute that it inspired the 1979 porno film named for him.
Caligula was followed by Claudius, a stammering, slobbering, confused man as described by his contemporaries. Then there was Nero, who not only managed to burn down his city but was also the first emperor to debase the value of Rome's currency.
You know the rest of the story-- Romans watched their leadership and country get worse and worse.
All along the way, there were two types of people: the first group were folks that figured, "This has GOT to be the bottom, it can only get better from here." Their patriotism was rewarded with reduced civil liberties, higher taxes, insane despots, and a polluted currency.
The other group consisted of people who looked at the warning signs and thought, "I have to get out of here." They followed their instincts and moved on to other places where they could build their lives, survive, and prosper.
I'm raising this point because I'd like to open a debate. Some consider the latter idea of expatriating to be akin to 'running away.' I recall a rather impassioned comment from a reader last week who suggested that "leaving, i.e. running away, is certainly not the proper response."
I find this logic to be flawed.
While the notion of staying and 'fighting' is a noble idea, bear in mind that there is no real enemy or force to fight. The government is a faceless bureaucracy that's impossible attack. People who try only discredit their argument because they become marginalized as fringe lunatics.
Remember John Stack? He's the guy who flew his airplane into the IRS building in Austin, Texas earlier this year because he had a serious philosophical disagreement over tax issues.
While his ideas may have had intellectual merit, they were immediately dismissed due to his murderous tactics. Violence is rarely the answer, and it often has the opposite effect as intended, frequently serving to bolster support for the government instead of raising awareness of its shortcomings.
Unless/until government paramilitaries start duking it out with citizen militia groups in the streets, this is an ideological battle... and it's an uphill battle at best.
Government controlled educational systems institutionalize us from childhood that governments are just, and that we should all subordinate ourselves to authority and to the greater good that they dictate in their sole discretion.
You're dealing with a mob mentality, plain and simple. Do you want to waste limited resources (time, money, energy) trying to convince your neighbor that s/he should no not expect free money from the government?
You could spend a lifetime trying to change ideology and not make a dent; people have to choose for themselves to wake up, it cannot be forced upon them. And until that happens, they're going to keep asking for more security and more control because it's the way their values have been programmed.
When you think about it, what we call a 'country' is nothing more than a large concentration of people who share common values. Over time, those values adjust and evolve. Today, cultures in many countries value things like fake security, subordination, and ignorance over freedom, independence, and awareness.
When it appears more and more each day that those common values diverge from your own, all that's left of a country are irrelevant, invisible lines on a map. I don't find these worth fighting for.
Nobody is born with a mandatory obligation to invisible lines on a map. Our fundamental obligation is to ourselves, our families, and the people that we choose to let into our circles... not to a piece of dirt that's controlled by mob-installed bureaucrats.
Moving away, i.e. making a calculated decision to seek greener pastures elsewhere, is not the same as 'running away'... and I would argue that if you really want to affect change in your home country, moving away is the most effective course of action.
The government beast in your home country feeds on debt and taxes, and the best way to win is for bright, productive people to move away with their ideas, labor, and assets. This effectively starves the beast and accelerates its collapse. Then, when the smoke clears, you can move back and help rebuild a free society.
I'd really like to know what you think-- which is the right thing to do, stay or leave? What are you planning to do?
And now for some very provocative, "out of the box" views: Simon Black, better known as Sovereign Man, presents some disturbing thoughts which are sure to get the broader spirits elevated. Instead of continuing to fight what some see as a losing ideological battle with a government which no longer even remotely represents the broader population's interests, Black says simply to walk away: "When you think about it, what we call a 'country' is nothing more than a large concentration of people who share common values. Over time, those values adjust and evolve. Today, cultures in many countries value things like fake security, subordination, and ignorance over freedom, independence, and awareness. When it appears more and more each day that those common values diverge from your own, all that's left of a country are irrelevant, invisible lines on a map. I don't find these worth fighting for...The government beast in your home country feeds on debt and taxes, and the best way to win is for bright, productive people to move away with their ideas, labor, and assets. This effectively starves the beast and accelerates its collapse. Then, when the smoke clears, you can move back and help rebuild a free society." Perhaps Black is right and this is the best, and possibly only, non-violent way to fight the political-financial plutocracy?
From Sovereign Man
Tell me if you think it's worth fighting for
Date: November 29, 2010
Reporting From: Katoomba, New South Wales, Australia
In 43 BC, over 2,000 years ago, warring consuls Antony, Lepidus, and Octavian were duking it out with each other over control of Rome following Julius Caesar's assassination the prior March.
Each had legions at his disposal, and Rome's terrified Senate sat on its hands waiting for the outcome.
Ultimately, the three men chose to unite their powers and rule Rome together in what became known as the Second Triumvirate. This body was established by a law named lex Titia on this date (give or take depending on how you convert the Roman calendar) in 43 BC.
The foundation of the Second Triumvirate is of tremendous historical importance: as the group wielded dictatorial powers, it represents the final nail in the coffin in Rome's transition from republic to malignant autocracy.
The Second Triumvirate expired after 10-years, upon which Octavian waged war on his partners once again, resulting in Mark Antony's famed suicide with Cleopatra in 31 BC. Octavian was eventually rewarded with rich title and nearly supreme power, and he is generally regarded as Rome's first emperor.
Things only got worse from there. Tiberius, Octavian's successor, was a paranoid deviant with a lust for executions. He spent the last decade of his reign completely detached from Rome, living in Capri.
Following Tiberius was Caligula, infamous for his moral depravity and insanity. According to Roman historians Suetonius and Cassius Dio, Tiberius would send his legions on pointless marches and turned his palace into a bordello of such repute that it inspired the 1979 porno film named for him.
Caligula was followed by Claudius, a stammering, slobbering, confused man as described by his contemporaries. Then there was Nero, who not only managed to burn down his city but was also the first emperor to debase the value of Rome's currency.
You know the rest of the story-- Romans watched their leadership and country get worse and worse.
All along the way, there were two types of people: the first group were folks that figured, "This has GOT to be the bottom, it can only get better from here." Their patriotism was rewarded with reduced civil liberties, higher taxes, insane despots, and a polluted currency.
The other group consisted of people who looked at the warning signs and thought, "I have to get out of here." They followed their instincts and moved on to other places where they could build their lives, survive, and prosper.
I'm raising this point because I'd like to open a debate. Some consider the latter idea of expatriating to be akin to 'running away.' I recall a rather impassioned comment from a reader last week who suggested that "leaving, i.e. running away, is certainly not the proper response."
I find this logic to be flawed.
While the notion of staying and 'fighting' is a noble idea, bear in mind that there is no real enemy or force to fight. The government is a faceless bureaucracy that's impossible attack. People who try only discredit their argument because they become marginalized as fringe lunatics.
Remember John Stack? He's the guy who flew his airplane into the IRS building in Austin, Texas earlier this year because he had a serious philosophical disagreement over tax issues.
While his ideas may have had intellectual merit, they were immediately dismissed due to his murderous tactics. Violence is rarely the answer, and it often has the opposite effect as intended, frequently serving to bolster support for the government instead of raising awareness of its shortcomings.
Unless/until government paramilitaries start duking it out with citizen militia groups in the streets, this is an ideological battle... and it's an uphill battle at best.
Government controlled educational systems institutionalize us from childhood that governments are just, and that we should all subordinate ourselves to authority and to the greater good that they dictate in their sole discretion.
You're dealing with a mob mentality, plain and simple. Do you want to waste limited resources (time, money, energy) trying to convince your neighbor that s/he should no not expect free money from the government?
You could spend a lifetime trying to change ideology and not make a dent; people have to choose for themselves to wake up, it cannot be forced upon them. And until that happens, they're going to keep asking for more security and more control because it's the way their values have been programmed.
When you think about it, what we call a 'country' is nothing more than a large concentration of people who share common values. Over time, those values adjust and evolve. Today, cultures in many countries value things like fake security, subordination, and ignorance over freedom, independence, and awareness.
When it appears more and more each day that those common values diverge from your own, all that's left of a country are irrelevant, invisible lines on a map. I don't find these worth fighting for.
Nobody is born with a mandatory obligation to invisible lines on a map. Our fundamental obligation is to ourselves, our families, and the people that we choose to let into our circles... not to a piece of dirt that's controlled by mob-installed bureaucrats.
Moving away, i.e. making a calculated decision to seek greener pastures elsewhere, is not the same as 'running away'... and I would argue that if you really want to affect change in your home country, moving away is the most effective course of action.
The government beast in your home country feeds on debt and taxes, and the best way to win is for bright, productive people to move away with their ideas, labor, and assets. This effectively starves the beast and accelerates its collapse. Then, when the smoke clears, you can move back and help rebuild a free society.
I'd really like to know what you think-- which is the right thing to do, stay or leave? What are you planning to do?
The Big Lie: Governments Have to Save the Big Banks
By Washington’s Blog
Many of the world’s top economists and financial experts have said that the too big to fail banks are destroying the world economy, that they must be broken up in order to restore stability, and that small banks can easily pick up the slack and make all of the loans which are needed needs. See this, this and this.
And yet many people still believe the myth that the giant banks have to be saved at all costs.
How could that be?
Well, as Adolph Hitler wrote in Mein Kampf:
All this was inspired by the principle–which is quite true in itself–that in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying.
Similarly, Hitler’s propaganda minister, Joseph Goebbels, wrote:
That is of course rather painful for those involved. One should not as a rule reveal one’s secrets, since one does not know if and when one may need them again. The essential English leadership secret does not depend on particular intelligence. Rather, it depends on a remarkably stupid thick-headedness. The English follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous.
Science has now helped to explain why the big lie is effective.
As I’ve previously pointed out in another context:
Psychologists and sociologists show us that people will rationalize what their leaders are doing, even when it makes no sense ….
Sociologists from four major research institutions investigated why so many Americans believed that Saddam Hussein was behind 9/11, years after it became obvious that Iraq had nothing to do with 9/11 :
The researchers found, as described in an article in the journal Sociological Inquiry (and re-printed by Newsweek):
Many Americans felt an urgent need to seek justification for a war already in progress
Rather than search rationally for information that either confirms or disconfirms a particular belief, people actually seek out information that confirms what they already believe.
“For the most part people completely ignore contrary information.”
“The study demonstrates voters’ ability to develop elaborate rationalizations based on faulty information”
People get deeply attached to their beliefs, and form emotional attachments that get wrapped up in their personal identity and sense of morality, irrespective of the facts of the matter.
“We refer to this as ‘inferred justification, because for these voters, the sheer fact that we were engaged in war led to a post-hoc search for a justification for that war.
“People were basically making up justifications for the fact that we were at war”
“They wanted to believe in the link [between 9/11 and Iraq] because it helped them make sense of a current reality. So voters’ ability to develop elaborate rationalizations based on faulty information, whether we think that is good or bad for democratic practice, does at least demonstrate an impressive form of creativity.
An article yesterday in Alternet discussing the Sociological Inquiry article helps us to understand that the key to people’s active participation in searching for excuses for actions by the big boys is fear
Subjects were presented during one-on-one interviews with a newspaper clip of this Bush quote: “This administration never said that the 9/11 attacks were orchestrated between Saddam and al-Qaeda.”The Sept. 11 Commission, too, found no such link, the subjects were told.
“Well, I bet they say that the commission didn’t have any proof of it,” one subject responded, “but I guess we still can have our opinions and feel that way even though they say that.”
Reasoned another: “Saddam, I can’t judge if he did what he’s being accused of, but if Bush thinks he did it, then he did it.”
Others declined to engage the information at all. Most curious to the researchers were the respondents who reasoned that Saddam must have been connected to Sept. 11, because why else would the Bush Administration have gone to war in Iraq?
The desire to believe this was more powerful, according to the researchers, than any active campaign to plant the idea.
Such a campaign did exist in the run-up to the war…
He won’t credit [politicians spouting misinformation] alone for the phenomenon, though.
“That kind of puts the idea out there, but what people then do with the idea … ” he said. “Our argument is that people aren’t just empty vessels. You don’t just sort of open up their brains and dump false information in and they regurgitate it. They’re actually active processing cognitive agents”…
The alternate explanation raises queasy questions for the rest of society.
“I think we’d all like to believe that when people come across disconfirming evidence, what they tend to do is to update their opinions,” said Andrew Perrin, an associate professor at UNC and another author of the study…
“The implications for how democracy works are quite profound, there’s no question in my mind about that,” Perrin said. “What it means is that we have to think about the emotional states in which citizens find themselves that then lead them to reason and deliberate in particular ways.”
Evidence suggests people are more likely to pay attention to facts within certain emotional states and social situations. Some may never change their minds. For others, policy-makers could better identify those states, for example minimizing the fear that often clouds a person’s ability to assess facts …
The Alternet article links to a must-read interview with psychology professor Sheldon Solomon, who explains:
A large body of evidence shows that momentarily [raising fear of death], typically by asking people to think about themselves dying, intensifies people’s strivings to protect and bolster aspects of their worldviews, and to bolster their self-esteem. The most common finding is that [fear of death] increases positive reactions to those who share cherished aspects of one’s cultural worldview, and negative reactions toward those who violate cherished cultural values or are merely different.
I would arguably that the fact that the governments of the world have given trillions to the giant banks has invoked the same mental process – and susceptibility to propaganda – as the war in Iraq.
Specifically, many people assume that because the government has launched a war to prop up the giant banks, it must have a good reason for doing so.
Why else would trillions in taxpayer dollars be thrown at the giant banks? Why else would the government say that saving the big boys is vital?
And I would argue that the fear of another Great Depression (an economic death, if you will) is analogous to the fear of death triggered in many Americans by 9/11.
This creates a regression towards old-fashioned thinking about such things as banks and the financial system, even though the giant banks actually do very little traditional banking these days.
In other words, the big lie appears to be as effective in financial as in military warfare.
Many of the world’s top economists and financial experts have said that the too big to fail banks are destroying the world economy, that they must be broken up in order to restore stability, and that small banks can easily pick up the slack and make all of the loans which are needed needs. See this, this and this.
And yet many people still believe the myth that the giant banks have to be saved at all costs.
How could that be?
Well, as Adolph Hitler wrote in Mein Kampf:
All this was inspired by the principle–which is quite true in itself–that in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying.
Similarly, Hitler’s propaganda minister, Joseph Goebbels, wrote:
That is of course rather painful for those involved. One should not as a rule reveal one’s secrets, since one does not know if and when one may need them again. The essential English leadership secret does not depend on particular intelligence. Rather, it depends on a remarkably stupid thick-headedness. The English follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous.
Science has now helped to explain why the big lie is effective.
As I’ve previously pointed out in another context:
Psychologists and sociologists show us that people will rationalize what their leaders are doing, even when it makes no sense ….
Sociologists from four major research institutions investigated why so many Americans believed that Saddam Hussein was behind 9/11, years after it became obvious that Iraq had nothing to do with 9/11 :
The researchers found, as described in an article in the journal Sociological Inquiry (and re-printed by Newsweek):
Many Americans felt an urgent need to seek justification for a war already in progress
Rather than search rationally for information that either confirms or disconfirms a particular belief, people actually seek out information that confirms what they already believe.
“For the most part people completely ignore contrary information.”
“The study demonstrates voters’ ability to develop elaborate rationalizations based on faulty information”
People get deeply attached to their beliefs, and form emotional attachments that get wrapped up in their personal identity and sense of morality, irrespective of the facts of the matter.
“We refer to this as ‘inferred justification, because for these voters, the sheer fact that we were engaged in war led to a post-hoc search for a justification for that war.
“People were basically making up justifications for the fact that we were at war”
“They wanted to believe in the link [between 9/11 and Iraq] because it helped them make sense of a current reality. So voters’ ability to develop elaborate rationalizations based on faulty information, whether we think that is good or bad for democratic practice, does at least demonstrate an impressive form of creativity.
An article yesterday in Alternet discussing the Sociological Inquiry article helps us to understand that the key to people’s active participation in searching for excuses for actions by the big boys is fear
Subjects were presented during one-on-one interviews with a newspaper clip of this Bush quote: “This administration never said that the 9/11 attacks were orchestrated between Saddam and al-Qaeda.”The Sept. 11 Commission, too, found no such link, the subjects were told.
“Well, I bet they say that the commission didn’t have any proof of it,” one subject responded, “but I guess we still can have our opinions and feel that way even though they say that.”
Reasoned another: “Saddam, I can’t judge if he did what he’s being accused of, but if Bush thinks he did it, then he did it.”
Others declined to engage the information at all. Most curious to the researchers were the respondents who reasoned that Saddam must have been connected to Sept. 11, because why else would the Bush Administration have gone to war in Iraq?
The desire to believe this was more powerful, according to the researchers, than any active campaign to plant the idea.
Such a campaign did exist in the run-up to the war…
He won’t credit [politicians spouting misinformation] alone for the phenomenon, though.
“That kind of puts the idea out there, but what people then do with the idea … ” he said. “Our argument is that people aren’t just empty vessels. You don’t just sort of open up their brains and dump false information in and they regurgitate it. They’re actually active processing cognitive agents”…
The alternate explanation raises queasy questions for the rest of society.
“I think we’d all like to believe that when people come across disconfirming evidence, what they tend to do is to update their opinions,” said Andrew Perrin, an associate professor at UNC and another author of the study…
“The implications for how democracy works are quite profound, there’s no question in my mind about that,” Perrin said. “What it means is that we have to think about the emotional states in which citizens find themselves that then lead them to reason and deliberate in particular ways.”
Evidence suggests people are more likely to pay attention to facts within certain emotional states and social situations. Some may never change their minds. For others, policy-makers could better identify those states, for example minimizing the fear that often clouds a person’s ability to assess facts …
The Alternet article links to a must-read interview with psychology professor Sheldon Solomon, who explains:
A large body of evidence shows that momentarily [raising fear of death], typically by asking people to think about themselves dying, intensifies people’s strivings to protect and bolster aspects of their worldviews, and to bolster their self-esteem. The most common finding is that [fear of death] increases positive reactions to those who share cherished aspects of one’s cultural worldview, and negative reactions toward those who violate cherished cultural values or are merely different.
I would arguably that the fact that the governments of the world have given trillions to the giant banks has invoked the same mental process – and susceptibility to propaganda – as the war in Iraq.
Specifically, many people assume that because the government has launched a war to prop up the giant banks, it must have a good reason for doing so.
Why else would trillions in taxpayer dollars be thrown at the giant banks? Why else would the government say that saving the big boys is vital?
And I would argue that the fear of another Great Depression (an economic death, if you will) is analogous to the fear of death triggered in many Americans by 9/11.
This creates a regression towards old-fashioned thinking about such things as banks and the financial system, even though the giant banks actually do very little traditional banking these days.
In other words, the big lie appears to be as effective in financial as in military warfare.
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