by Karl Denninger
Nobody could have seen this coming, right?
“The defendants knew the loans offloaded onto Allstate were a toxic mix of loans given to borrowers that could not afford the properties, and thus were highly likely to default,” Allstate said in a complaint filed in federal court in Manhattan yesterday.
Oh gee, that's really surprising. NOT!
Now the fun will begin with discovery. I'm sure there'll be a summary motion or two filed, but I suspect those will be quickly turned back, and then we'll get to the meat of the matter.
Most-importantly, this will likely wind up exposing the loan files, and we'll see if ****rywide was as "diligent" as was Citibank during the 06-07 time frame. After all, we have sworn testimony on the "decency" (or lack thereof) of the underwriting by the latter!
So far BAC/Countrywide have been sued by a total of $375 billion worth of buyers of their trash. Of course the argument will be made that "nobody could have seen it coming." Uh huh. The problem with that argument is that there's already sworn testimony from one of their competitors that they not only saw it coming, they willfully ignored it.
Countrywide misled investors about its underwriting guidelines, the rate at which mortgaged properties were owner- occupied, the value of the mortgaged homes and the widespread use of exceptions to the underwriting process to circumvent guidelines, Allstate said in the complaint.
Note that there are allegations flying around that Wells is disputing putback "requests" where the alleged borrower said they intended to occupy the property but in point of fact were renting it out. This is trivially easy to determine in a fraud audit as the putative "owner-occupied" property will be listed as an income source (from rent) on the owner's tax returns!
"Disputing" that sort of trivially-proved misrepresentation looks to me like a big stall game. Of course if you're not being quite straight with investors about your potential exposure then you say things like you're going to fight "every single loan one at a time." Ok. Go right ahead.
When it comes to easily-proved-up situations like folks claiming they're living in a house when they're really not, you're not going to win those disputes.
At best you can slow the process down, and the dirty little secret with doing so is that a non-paying loan gathers more loss the longer it sits in a non-paying status.
"And so it begins....."
Wednesday, December 29, 2010
Let's Move Money From One Pocket To Another!
by Karl Denninger
That will make it all ok, right?
DETROIT, Dec. 27, 2010 /PRNewswire/ -- Ally Financial Inc. (Ally) today announced that its mortgage unit, Residential Capital, LLC (ResCap), and certain ResCap subsidiaries have reached an agreement with Fannie Mae to resolve potential repurchase exposure for breaches of selling representations and warranties. The agreement covers loans serviced by GMAC Mortgage on behalf of Fannie Mae prior to June 30, 2010 and all mortgaged-backed securities that Fannie Mae purchased at various times prior to the settlement, including private label securities. The settlement was for approximately $462 million and releases ResCap and its subsidiaries from liability related to approximately $292 billion of original unpaid principal balance ($84 billion of current UPB) on these loans.
"Potential" exposure?
Uh huh.
Incidentally, what's this "mortgage-backed securities that Fannie Mae purchased?"
I thought Fannie took whole loans and bundled them into securities? Are we now seeing the soft underbelly of what Fannie (and Freddie) actually did during the bubble come out into the light of day?
See, it's not common knowledge that the GSEs were buying MBS on the market, but they in fact were. They were, like a lot of people, "reaching for yield" and buying crap. And whether that crap-buying happened because they were stupid or whether they were intentionally-deceived is an open question.
$462 million dollars to "release" them from liability on something that has less than 1/4 of the original exposure outstanding?
Where'd the other 3/4 go? Was it refinanced or defaulted? This is not a trivial matter and note that it is unaddressed in the press release.
"We are very encouraged to have reached this agreement with Fannie Mae," said ResCap Chief Executive Officer Thomas Marano. "They are a key counterparty to our mortgage business and we look forward to continuing our important and productive relationship. With our de-risking initiatives largely complete, the mortgage business will focus predominantly on the origination and servicing of conforming mortgages, which is where the company holds leadership positions."
I'm sure you are. After all, passing money from one pocket to the other (the Federal Government owns about half of Rescap, and all of Fan/Fred nowdays) has to be an interesting way of claiming you "fixed" a problem. The last time I checked there was no material difference between having a $20 in one pocket or in the other.
This sounds a lot like GM claiming they "paid" the government off - by taking a loan from the government. Or the various similar claims by AIG.
The obvious secondary question is of the part of Ally that is privately owned, why are we buying off the potential liability that those private entities still had, and who authorized what is an effective disbursement of taxpayer funds to these entities?
Update: In a conversation with Jim Olecki at Ally the firm was unable to provide more color on the current unpaid principal balances (how much of the decrease is from normal run-off and prepays .vs. defaults)
That will make it all ok, right?
DETROIT, Dec. 27, 2010 /PRNewswire/ -- Ally Financial Inc. (Ally) today announced that its mortgage unit, Residential Capital, LLC (ResCap), and certain ResCap subsidiaries have reached an agreement with Fannie Mae to resolve potential repurchase exposure for breaches of selling representations and warranties. The agreement covers loans serviced by GMAC Mortgage on behalf of Fannie Mae prior to June 30, 2010 and all mortgaged-backed securities that Fannie Mae purchased at various times prior to the settlement, including private label securities. The settlement was for approximately $462 million and releases ResCap and its subsidiaries from liability related to approximately $292 billion of original unpaid principal balance ($84 billion of current UPB) on these loans.
"Potential" exposure?
Uh huh.
Incidentally, what's this "mortgage-backed securities that Fannie Mae purchased?"
I thought Fannie took whole loans and bundled them into securities? Are we now seeing the soft underbelly of what Fannie (and Freddie) actually did during the bubble come out into the light of day?
See, it's not common knowledge that the GSEs were buying MBS on the market, but they in fact were. They were, like a lot of people, "reaching for yield" and buying crap. And whether that crap-buying happened because they were stupid or whether they were intentionally-deceived is an open question.
$462 million dollars to "release" them from liability on something that has less than 1/4 of the original exposure outstanding?
Where'd the other 3/4 go? Was it refinanced or defaulted? This is not a trivial matter and note that it is unaddressed in the press release.
"We are very encouraged to have reached this agreement with Fannie Mae," said ResCap Chief Executive Officer Thomas Marano. "They are a key counterparty to our mortgage business and we look forward to continuing our important and productive relationship. With our de-risking initiatives largely complete, the mortgage business will focus predominantly on the origination and servicing of conforming mortgages, which is where the company holds leadership positions."
I'm sure you are. After all, passing money from one pocket to the other (the Federal Government owns about half of Rescap, and all of Fan/Fred nowdays) has to be an interesting way of claiming you "fixed" a problem. The last time I checked there was no material difference between having a $20 in one pocket or in the other.
This sounds a lot like GM claiming they "paid" the government off - by taking a loan from the government. Or the various similar claims by AIG.
The obvious secondary question is of the part of Ally that is privately owned, why are we buying off the potential liability that those private entities still had, and who authorized what is an effective disbursement of taxpayer funds to these entities?
Update: In a conversation with Jim Olecki at Ally the firm was unable to provide more color on the current unpaid principal balances (how much of the decrease is from normal run-off and prepays .vs. defaults)
How "Killer B" and "Deadly D" Strategies Allow Companies To Repatriate Billions And Find Higher IRR Alternatives To Hiring
by Tyler Durden
ZeroHedge
One of Zero Hedge's greater contributions to society in 2010 was finally putting the "cash on the sidelines" BS that was every emptyheaded pundit's go-to line when cornered and with nothing else to retort, in the trash bin of intellectual sophistry where it belonged. What surprised us is that it took as long as it did before someone dared to point out the flagrantly obvious. That said, today Bloomberg has released a terrific piece of investigative reporting, that may very well refute much of what we said, since it appears that contrary to legal permissions, companies have been very busy using the gray area in the tax code (the same that gets ordinary citizens in lots of trouble with the IRS but not mega corporations, never mega corporations) to repatriate tens, if not hundreds of billions in the past few years. Meet the "Killer B” and “the Deadly D" just two of the strategies that have allowed the following to happen: Merck & Co. bringing more than $9 billion from abroad without paying any U.S. tax to help finance its acquisition of Schering-Plough Corp.; Pfizer Inc. importing more than $30 billion from offshore in connection with its acquisition of Wyeth and taking steps to minimize the tax hit on its publicly reported profits; Eli Lilly & Co. carrying out many of the steps for a tax-free importation of foreign cash after its roughly $6.5 billion purchase of ImClone Systems Inc. in 2008. In other words, despite America's deplorable budget condition, where every dollar in organic revenue is matched by one dollar of debt issuance, companies are doing more than ever to avoid paying any taxes... anywhere.
From Bloomberg:
At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.
The money -- including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes -- is supposed to be taxed at up to 35 percent when it’s brought home, or “repatriated.” Executives including John T. Chambers of Cisco Systems Inc. say a tax break would return a flood of cash and boost the economy.
What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free, employing strategies with nicknames worthy of 1970s conspiracy thrillers -- including “the Killer B” and “the Deadly D.”
The explanation, in case anyone is confused:
“Sophisticated U.S. companies are routinely repatriating hundreds of billions of dollars in foreign earnings and paying trivially small U.S. taxes on those repatriations,” said Edward D. Kleinbard, a law professor at the University of Southern California in Los Angeles. “They devote enormous resources first to moving income to tax havens, and then to bringing those profits back to the U.S. at the lowest possible tax cost.”
The trade off is not big: about the size of one bond auction.
U.S. companies overall use various repatriation strategies to avoid about $25 billion a year in federal income taxes, he said.
Then again, that is about two months' worth of unemployment benefits to those who actually pay taxes. But when one has the sheep happily paying their share of corporate tax evasion, and the Fed even more happily monetizing debt, why should the IRS care?
And since it is now obvious that (tax) laws are meant to be if not broken, then certainly bent, one can now speculate just why companies such as Microsoft have to misrepresent their tax reality and claim they are issuing bonds when in fact they do have full recourse to all that lovely offshore cash:
“The fact that they have these cash hoards suggests that investment is not being constrained by lack of cash,” Slemrod said.
U.S. multinationals boost earnings by shifting income out of the country via transfer pricing, a system that allows them to allocate costs to subsidiaries in high-tax countries and profits to tax havens. Google Inc., for example, cut its taxes by $3.1 billion in the last three years by moving most of the income it attributed overseas ultimately to Bermuda, Bloomberg News reported in October.
The tax benefits from such profit shifting can have a greater impact on share price than boosting sales or cutting other expenses, since the reduced rate goes straight to the bottom line, said John P. Kennedy, a partner at Deloitte Tax LLP, speaking at the conference in Philadelphia Nov. 3.
In other words, in the biggest of paradoxes, as long as companies are allowed to use tax schemes to defraud America, they will have even less of an interest to actually hire, as the IRR to the bottom line from tax evasion is greater than that from organic growth! Please reread this sentence as it is critical, and goes to the heart of America's gradual transition to what some call a fascist corporatocracy, coupled with ever increasing unemployment. For all those wondering why the unemployment is and continues to be sky high, look no further than the corrupt tax gatherers.
And some memorable buzzwords to should allow the peasantry to grasp and recall just how big the worries of corporate treasurers are when it comes to tax avoidance (and evasion):
The “Killer B” maneuver is named for section 368(a)(1)(B) of the Internal Revenue Code, which deals with tax-free reorganizations. A U.S. company using the technique would sell its shares to an offshore subsidiary, bringing cash back to the U.S. tax-free. The offshore unit could then use the stock to make an acquisition. In 2006, the IRS issued a notice aimed at shutting down the maneuver.
The “Deadly D,” also named for a section of tax law, allows a U.S. company to attach the high tax basis in a newly acquired company to one of its existing foreign units. In some cases, doing so enables the U.S. parent to pull cash from the subsidiary up to the amount of the recent purchase price tax-free. The Obama administration has proposed changing the provision that enables the maneuver.
And since nothing is ever covert in any newly developed Banana Republic, here is how tax-deminimis status is spun at fully open and public gatherings:
Willens, the independent tax adviser, said the steps indicated a likely D reorganization, or another method “to extract earnings from overseas without tax consequences -- of course.” Lilly had no comment beyond its filings, said David P. Lewis, the company’s vice president for global taxes.
The KPMG panel discussion in Philadelphia, called “Global Cash Tax Management Plans and Repatriation Planning,” dissected other techniques, including one that took six slides to explain. It works like this:
Soon after a U.S. multinational has purchased another U.S. company, the new unit promises to pay the parent a large amount of cash pursuant to a note agreement. Since both parties are U.S. companies, there is no tax bill for the parent under current U.S. law.
Then the new acquisition converts to a foreign company. So when the payment pursuant to the note is made, it comes from overseas. That means the foreign cash is treated as a nontaxable payment under the note, instead of a taxable dividend.
Going Offshore
The newly converted foreign subsidiary could access the multinational’s existing offshore cash by borrowing from a foreign sister unit, said Glenn, the KPMG tax partner. He and Zollo were joined by colleague Frank Mattei, as well as Don Whitt, a Pfizer tax official.
“This basic transaction is something that at least a couple of taxpayers have done, and I know a number of others have evaluated,” Glenn said. The strategy’s name follows the alphabetic tradition of Bs and Ds. It’s called “the Outbound F.”
Remember: if US individuals even think of doing something as tax evasive as the abovementioned, the thought police will be knocking at your door. So unless one is a corporation, preferably a monopoly, and best of all: so massively leveraged (think GE) it needs its own propaganda station, and endless Fed and taxpayer backstops, don't even try to visualize a world in which the rules that apply to corporations can even remotely be applicable to ordinary US peasants. Perhaps this is why those who are bored and actually look at the final 2010 Treasury Direct Statement will find that the US government collected $1.3 trillion in individual incomes taxes net of refunds...and $160 billion in corporate.
ZeroHedge
One of Zero Hedge's greater contributions to society in 2010 was finally putting the "cash on the sidelines" BS that was every emptyheaded pundit's go-to line when cornered and with nothing else to retort, in the trash bin of intellectual sophistry where it belonged. What surprised us is that it took as long as it did before someone dared to point out the flagrantly obvious. That said, today Bloomberg has released a terrific piece of investigative reporting, that may very well refute much of what we said, since it appears that contrary to legal permissions, companies have been very busy using the gray area in the tax code (the same that gets ordinary citizens in lots of trouble with the IRS but not mega corporations, never mega corporations) to repatriate tens, if not hundreds of billions in the past few years. Meet the "Killer B” and “the Deadly D" just two of the strategies that have allowed the following to happen: Merck & Co. bringing more than $9 billion from abroad without paying any U.S. tax to help finance its acquisition of Schering-Plough Corp.; Pfizer Inc. importing more than $30 billion from offshore in connection with its acquisition of Wyeth and taking steps to minimize the tax hit on its publicly reported profits; Eli Lilly & Co. carrying out many of the steps for a tax-free importation of foreign cash after its roughly $6.5 billion purchase of ImClone Systems Inc. in 2008. In other words, despite America's deplorable budget condition, where every dollar in organic revenue is matched by one dollar of debt issuance, companies are doing more than ever to avoid paying any taxes... anywhere.
From Bloomberg:
At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.
The money -- including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes -- is supposed to be taxed at up to 35 percent when it’s brought home, or “repatriated.” Executives including John T. Chambers of Cisco Systems Inc. say a tax break would return a flood of cash and boost the economy.
What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free, employing strategies with nicknames worthy of 1970s conspiracy thrillers -- including “the Killer B” and “the Deadly D.”
The explanation, in case anyone is confused:
“Sophisticated U.S. companies are routinely repatriating hundreds of billions of dollars in foreign earnings and paying trivially small U.S. taxes on those repatriations,” said Edward D. Kleinbard, a law professor at the University of Southern California in Los Angeles. “They devote enormous resources first to moving income to tax havens, and then to bringing those profits back to the U.S. at the lowest possible tax cost.”
The trade off is not big: about the size of one bond auction.
U.S. companies overall use various repatriation strategies to avoid about $25 billion a year in federal income taxes, he said.
Then again, that is about two months' worth of unemployment benefits to those who actually pay taxes. But when one has the sheep happily paying their share of corporate tax evasion, and the Fed even more happily monetizing debt, why should the IRS care?
And since it is now obvious that (tax) laws are meant to be if not broken, then certainly bent, one can now speculate just why companies such as Microsoft have to misrepresent their tax reality and claim they are issuing bonds when in fact they do have full recourse to all that lovely offshore cash:
“The fact that they have these cash hoards suggests that investment is not being constrained by lack of cash,” Slemrod said.
U.S. multinationals boost earnings by shifting income out of the country via transfer pricing, a system that allows them to allocate costs to subsidiaries in high-tax countries and profits to tax havens. Google Inc., for example, cut its taxes by $3.1 billion in the last three years by moving most of the income it attributed overseas ultimately to Bermuda, Bloomberg News reported in October.
The tax benefits from such profit shifting can have a greater impact on share price than boosting sales or cutting other expenses, since the reduced rate goes straight to the bottom line, said John P. Kennedy, a partner at Deloitte Tax LLP, speaking at the conference in Philadelphia Nov. 3.
In other words, in the biggest of paradoxes, as long as companies are allowed to use tax schemes to defraud America, they will have even less of an interest to actually hire, as the IRR to the bottom line from tax evasion is greater than that from organic growth! Please reread this sentence as it is critical, and goes to the heart of America's gradual transition to what some call a fascist corporatocracy, coupled with ever increasing unemployment. For all those wondering why the unemployment is and continues to be sky high, look no further than the corrupt tax gatherers.
And some memorable buzzwords to should allow the peasantry to grasp and recall just how big the worries of corporate treasurers are when it comes to tax avoidance (and evasion):
The “Killer B” maneuver is named for section 368(a)(1)(B) of the Internal Revenue Code, which deals with tax-free reorganizations. A U.S. company using the technique would sell its shares to an offshore subsidiary, bringing cash back to the U.S. tax-free. The offshore unit could then use the stock to make an acquisition. In 2006, the IRS issued a notice aimed at shutting down the maneuver.
The “Deadly D,” also named for a section of tax law, allows a U.S. company to attach the high tax basis in a newly acquired company to one of its existing foreign units. In some cases, doing so enables the U.S. parent to pull cash from the subsidiary up to the amount of the recent purchase price tax-free. The Obama administration has proposed changing the provision that enables the maneuver.
And since nothing is ever covert in any newly developed Banana Republic, here is how tax-deminimis status is spun at fully open and public gatherings:
Willens, the independent tax adviser, said the steps indicated a likely D reorganization, or another method “to extract earnings from overseas without tax consequences -- of course.” Lilly had no comment beyond its filings, said David P. Lewis, the company’s vice president for global taxes.
The KPMG panel discussion in Philadelphia, called “Global Cash Tax Management Plans and Repatriation Planning,” dissected other techniques, including one that took six slides to explain. It works like this:
Soon after a U.S. multinational has purchased another U.S. company, the new unit promises to pay the parent a large amount of cash pursuant to a note agreement. Since both parties are U.S. companies, there is no tax bill for the parent under current U.S. law.
Then the new acquisition converts to a foreign company. So when the payment pursuant to the note is made, it comes from overseas. That means the foreign cash is treated as a nontaxable payment under the note, instead of a taxable dividend.
Going Offshore
The newly converted foreign subsidiary could access the multinational’s existing offshore cash by borrowing from a foreign sister unit, said Glenn, the KPMG tax partner. He and Zollo were joined by colleague Frank Mattei, as well as Don Whitt, a Pfizer tax official.
“This basic transaction is something that at least a couple of taxpayers have done, and I know a number of others have evaluated,” Glenn said. The strategy’s name follows the alphabetic tradition of Bs and Ds. It’s called “the Outbound F.”
Remember: if US individuals even think of doing something as tax evasive as the abovementioned, the thought police will be knocking at your door. So unless one is a corporation, preferably a monopoly, and best of all: so massively leveraged (think GE) it needs its own propaganda station, and endless Fed and taxpayer backstops, don't even try to visualize a world in which the rules that apply to corporations can even remotely be applicable to ordinary US peasants. Perhaps this is why those who are bored and actually look at the final 2010 Treasury Direct Statement will find that the US government collected $1.3 trillion in individual incomes taxes net of refunds...and $160 billion in corporate.
Stoneleigh and Max Keiser on Canadian Housing Bubble
Mike "Mish" Shedlock
globaleconomicanalysis.blogspot.com
Inquiring minds are watching a superb interview with Max Keiser and Nicole "Stoneleigh" Foss regarding the Canadian Housing Bubble. The interview starts at 13:42.
Interview Snips
•Canadian banks are not as "bulletproof" as everyone thinks.
•When the housing bubble bursts there will be tremendous consequences to Canadian banking system.
•We are in a massive bubble and there will be an enormous comeuppance.
•Canada housing bubble currently peaking.
•When you are in a bubble, the psychology is such that you cannot see it for what it is. Talking to Canadians about the housing bubble is like talking to Americans in 2006. There is a tremendous sense of denial.
•People pay 50-70% of their income for mortgage costs in places like Vancouver, but it's not just Vancouver. Such things are absolutely characteristic of a bubble.
•Canada will play catch-up to the downside in the fairly near future.
•Ireland-like dynamics absolutely coming to Canada.
•There is also a tremendous commercial real estate problem that will affect Canadian banks.
•Canadian banks have also acted as reinsurers in the derivatives market for a number of extremely risky things. So in a number of cases "the bucks stops with the Canadian banks".
•Real estate prices will fall about 90% on average. Deflationary credit collapse coming.
"Stoneleigh" lives in Canada and is author of the popular Automatic Earth Blog. Also see Stoneleigh and Max Keiser Flatten the Canadian Economy
I agree with everything "Stoneleigh" said in the above bullet point list except I do not see a price collapse of 90% on average. I think 50-60% in some areas is more like it. Even 40% would be devastating and that would be my best case scenario.
globaleconomicanalysis.blogspot.com
Inquiring minds are watching a superb interview with Max Keiser and Nicole "Stoneleigh" Foss regarding the Canadian Housing Bubble. The interview starts at 13:42.
Interview Snips
•Canadian banks are not as "bulletproof" as everyone thinks.
•When the housing bubble bursts there will be tremendous consequences to Canadian banking system.
•We are in a massive bubble and there will be an enormous comeuppance.
•Canada housing bubble currently peaking.
•When you are in a bubble, the psychology is such that you cannot see it for what it is. Talking to Canadians about the housing bubble is like talking to Americans in 2006. There is a tremendous sense of denial.
•People pay 50-70% of their income for mortgage costs in places like Vancouver, but it's not just Vancouver. Such things are absolutely characteristic of a bubble.
•Canada will play catch-up to the downside in the fairly near future.
•Ireland-like dynamics absolutely coming to Canada.
•There is also a tremendous commercial real estate problem that will affect Canadian banks.
•Canadian banks have also acted as reinsurers in the derivatives market for a number of extremely risky things. So in a number of cases "the bucks stops with the Canadian banks".
•Real estate prices will fall about 90% on average. Deflationary credit collapse coming.
"Stoneleigh" lives in Canada and is author of the popular Automatic Earth Blog. Also see Stoneleigh and Max Keiser Flatten the Canadian Economy
I agree with everything "Stoneleigh" said in the above bullet point list except I do not see a price collapse of 90% on average. I think 50-60% in some areas is more like it. Even 40% would be devastating and that would be my best case scenario.
U.S. Economy: Confidence Falls on Concern Over Jobs
By Timothy R. Homan and Bob
Bloomberg
Confidence among U.S. consumers unexpectedly fell in December, restrained by concern that jobs will remain scarce in 2011.
The Conference Board’s confidence index unexpectedly fell to 52.5, lower than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the New York-based research group showed today. Another report showed home values dropped more than economists projected.
The loss of confidence is at odds with a report from the University of Michigan that showed sentiment improved to a six- month high in December, and with data showing holiday spending posted the biggest gain in five years. Federal Reserve policy makers this month said “depressed” housing and high unemployment remained constraints on consumer spending, supporting their plans to expand record monetary stimulus.
“We should watch what consumers do and not what they say,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “If you looked at the confidence data you wouldn’t have looked for the pace of spending to accelerate as much as it has. Consumers are still very cautious and very nervous about where the labor market is headed.”
Stocks rose, led by rising shares of commodity producers as energy and metal prices climbed. The Standard & Poor’s 500 Index increased 0.1 percent to 1,258.51 at the 4 p.m. close in New York. Treasury securities fell, pushing the yield in the benchmark 10-year note up to 3.49 percent from 3.33 percent late yesterday.
Rising Sales
Retailers’ 2010 holiday sales jumped 5.5 percent for the best performance since 2005, said MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms. That compared with a 4.1 percent gain a year earlier. The numbers include Internet sales and exclude automobile purchases.
The median forecast for confidence, based on a survey of 61 economists, projected confidence would increase to 56.3. The Conference Board revised the November figure to 54.3 from a previous estimate of 54.1. Projections ranged from 53 to 60. The index averaged 96.8 during the last economic expansion that ended in December 2007.
Today’s report stands in contrast to preliminary figures from Thomson Reuters/University of Michigan which showed sentiment climbed this month as the share of Americans citing an improvement in current conditions climbed to the highest level since January 2008.
Drop ‘Surprising’
“The fact confidence moved lower is a bit surprising given the other data we have observed for the month,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Month-to-month changes in confidence are not well correlated with those in spending. Reports from retailers as well as data on spending have been upbeat. We would give those more weight.”
The S&P/Case-Shiller index of property values fell 0.8 percent in October from the same month in 2009, the biggest year-over-year decline since December of last year, the group said today. The decrease exceeded the 0.2 percent drop projected by the median forecast of economists surveyed.
“Despite the fact that housing will remain at pretty low levels through next year, economic growth in general will be fairly robust,” Maki said on Bloomberg Television’s “Market Pulse” with Pimm Fox. Maki said he expected growth in a range of 3 percent to 3.5 percent next year.
Home Values
The home-price gauge fell 1 percent in October from the prior month after adjusting for seasonal variations, matching September’s drop which was larger than previously estimated.
Eighteen of 20 cities showed a decrease in prices in October, led by a 2.1 percent drop in Atlanta, and decreases of 1.8 percent each in Chicago and Minneapolis. Denver and Washington were the only two that posted gains.
Six markets, including Atlanta, Charlotte, Miami, Seattle, Tampa and Portland, Oregon, reached their lowest levels in October since prices started to retreat in 2006.
“The double-dip is almost here,” said David Blitzer, chairman of the index committee at S&P. Sales aren’t “giving any sense of optimism.”
According to the Conference Board, the share of consumers who said jobs are hard to get increased to the highest level since February.
Those expecting more jobs to become available in the next six months reached the lowest level since July, while the proportion who expected their incomes to rise over the next six months also fell.
Jobs Gains
Employers added 951,000 workers to payrolls in the first 11 months of the year, according to figures from the Labor Department. December data are due Jan. 7.
The gains haven’t been large enough to reduce unemployment, which was at 9.8 percent last month after finishing 2009 at 10 percent.
President Barack Obama on Dec. 17 signed into law an $858 billion bill that extends for two years Bush-era tax cuts for all income levels, continues expanded jobless insurance benefits to the long-term unemployed for 13 months and reduces payroll taxes during 2011.
Some Americans are more willing to make big-ticket purchases. Car sales in November rose to a 12.26 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, industry data showed this month. Demand over the past three months is the strongest in two years.
“We have a high degree of confidence that 2011 is going to be a stronger sales year,” George Pipas, Ford Motor Co.’s sales analyst, said in a Dec. 20 briefing with reporters in Dearborn, Michigan, where the company is based. “We’re a whole lot better off than we were a year ago.”
Bloomberg
Confidence among U.S. consumers unexpectedly fell in December, restrained by concern that jobs will remain scarce in 2011.
The Conference Board’s confidence index unexpectedly fell to 52.5, lower than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the New York-based research group showed today. Another report showed home values dropped more than economists projected.
The loss of confidence is at odds with a report from the University of Michigan that showed sentiment improved to a six- month high in December, and with data showing holiday spending posted the biggest gain in five years. Federal Reserve policy makers this month said “depressed” housing and high unemployment remained constraints on consumer spending, supporting their plans to expand record monetary stimulus.
“We should watch what consumers do and not what they say,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “If you looked at the confidence data you wouldn’t have looked for the pace of spending to accelerate as much as it has. Consumers are still very cautious and very nervous about where the labor market is headed.”
Stocks rose, led by rising shares of commodity producers as energy and metal prices climbed. The Standard & Poor’s 500 Index increased 0.1 percent to 1,258.51 at the 4 p.m. close in New York. Treasury securities fell, pushing the yield in the benchmark 10-year note up to 3.49 percent from 3.33 percent late yesterday.
Rising Sales
Retailers’ 2010 holiday sales jumped 5.5 percent for the best performance since 2005, said MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms. That compared with a 4.1 percent gain a year earlier. The numbers include Internet sales and exclude automobile purchases.
The median forecast for confidence, based on a survey of 61 economists, projected confidence would increase to 56.3. The Conference Board revised the November figure to 54.3 from a previous estimate of 54.1. Projections ranged from 53 to 60. The index averaged 96.8 during the last economic expansion that ended in December 2007.
Today’s report stands in contrast to preliminary figures from Thomson Reuters/University of Michigan which showed sentiment climbed this month as the share of Americans citing an improvement in current conditions climbed to the highest level since January 2008.
Drop ‘Surprising’
“The fact confidence moved lower is a bit surprising given the other data we have observed for the month,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Month-to-month changes in confidence are not well correlated with those in spending. Reports from retailers as well as data on spending have been upbeat. We would give those more weight.”
The S&P/Case-Shiller index of property values fell 0.8 percent in October from the same month in 2009, the biggest year-over-year decline since December of last year, the group said today. The decrease exceeded the 0.2 percent drop projected by the median forecast of economists surveyed.
“Despite the fact that housing will remain at pretty low levels through next year, economic growth in general will be fairly robust,” Maki said on Bloomberg Television’s “Market Pulse” with Pimm Fox. Maki said he expected growth in a range of 3 percent to 3.5 percent next year.
Home Values
The home-price gauge fell 1 percent in October from the prior month after adjusting for seasonal variations, matching September’s drop which was larger than previously estimated.
Eighteen of 20 cities showed a decrease in prices in October, led by a 2.1 percent drop in Atlanta, and decreases of 1.8 percent each in Chicago and Minneapolis. Denver and Washington were the only two that posted gains.
Six markets, including Atlanta, Charlotte, Miami, Seattle, Tampa and Portland, Oregon, reached their lowest levels in October since prices started to retreat in 2006.
“The double-dip is almost here,” said David Blitzer, chairman of the index committee at S&P. Sales aren’t “giving any sense of optimism.”
According to the Conference Board, the share of consumers who said jobs are hard to get increased to the highest level since February.
Those expecting more jobs to become available in the next six months reached the lowest level since July, while the proportion who expected their incomes to rise over the next six months also fell.
Jobs Gains
Employers added 951,000 workers to payrolls in the first 11 months of the year, according to figures from the Labor Department. December data are due Jan. 7.
The gains haven’t been large enough to reduce unemployment, which was at 9.8 percent last month after finishing 2009 at 10 percent.
President Barack Obama on Dec. 17 signed into law an $858 billion bill that extends for two years Bush-era tax cuts for all income levels, continues expanded jobless insurance benefits to the long-term unemployed for 13 months and reduces payroll taxes during 2011.
Some Americans are more willing to make big-ticket purchases. Car sales in November rose to a 12.26 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, industry data showed this month. Demand over the past three months is the strongest in two years.
“We have a high degree of confidence that 2011 is going to be a stronger sales year,” George Pipas, Ford Motor Co.’s sales analyst, said in a Dec. 20 briefing with reporters in Dearborn, Michigan, where the company is based. “We’re a whole lot better off than we were a year ago.”
Thanks Mr. President for taking care of US !!! happy new year !!!
Thanks from the bottom of my heart to Mr. Bernanke, Mr. Poulson and of course....Mr. W.Bush for what they gave to us !!!
Goldman Sachs Helped Greece Evade Legal Debt Limits Through Currency Swaps
By Susie Madrak
Cooks & Liars
Not that Goldman Sachs is the only vampire squid bank out there pushing global governments to the brink for their own profit, but I thought this was instructive. By the way, this is only a variation on the same thing bankers have done with U.S. cities and states on their pension obligations. My advice: If you're introduced to a banker, spit on the ground at his feet. You can't be charged with assault, but it gets the message across!
Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.
Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.
But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.
This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.
In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.
At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years.
Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005 while Henry Paulson was CEO.
Editor's note: Reading Material for the always alert :
Cooks & Liars
Not that Goldman Sachs is the only vampire squid bank out there pushing global governments to the brink for their own profit, but I thought this was instructive. By the way, this is only a variation on the same thing bankers have done with U.S. cities and states on their pension obligations. My advice: If you're introduced to a banker, spit on the ground at his feet. You can't be charged with assault, but it gets the message across!
Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.
Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.
But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.
This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.
In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.
At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years.
Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005 while Henry Paulson was CEO.
Editor's note: Reading Material for the always alert :
America in Decline: Why Germans Think We're Insane
By Democrats Ramshield
AlterNet
A look at our empire in decline through the eyes of the European media.
As an American expat living in the European Union, I’ve started to see America from a different perspective.
The European Union has a larger economy and more people than America does
Though it spends less -- right around 9 percent of GNP on medical, whereas we in the U.S. spend close to between 15 to 16 percent of GNP on medical -- the EU pretty much insures 100 percent of its population.
The U.S. has 59 million people medically uninsured; 132 million without dental insurance; 60 million without paid sick leave; 40 million on food stamps. Everybody in the European Union has cradle-to-grave access to universal medical and a dental plan by law. The law also requires paid sick leave; paid annual leave; paid maternity leave. When you realize all of that, it becomes easy to understand why many Europeans think America has gone insane.
Der Spiegel has run an interesting feature called "A Superpower in Decline," which attempts to explain to a German audience such odd phenomena as the rise of the Tea Party, without the hedging or attempts at "balance" found in mainstream U.S. media. On the Tea Parties:
Full of Hatred: "The Tea Party, that group of white, older voters who claim that they want their country back, is angry. Fox News host Glenn Beck, a recovering alcoholic who likens Obama to Adolf Hitler, is angry. Beck doesn't quite know what he wants to be -- maybe a politician, maybe president, maybe a preacher -- and he doesn't know what he wants to do, either, or least he hasn't come up with any specific ideas or plans. But he is full of hatred."
The piece continues with the sobering assessment that America’s actual unemployment rate isn’t really 10 percent, but close to 20 percent when we factor in the number of people who have stopped looking for work.
Some social scientists think that making sure large-scale crime or fascism never takes root in Europe again requires a taxpayer investment in a strong social safety net. Can we learn from Europe? Isn't it better to invest in a social safety net than in a large criminal justice system? (In America over 2 million people are incarcerated.)
Unlike here, in Germany jobless benefits never run out. Not only that -- as part of their social safety net, all job seekers continue to be medically insured, as are their families.
In the German jobless benefit system, when "jobless benefit 1" runs out, "jobless benefit 2," also known as HartzIV, kicks in. That one never gets cut off. The jobless also have contributions made for their pensions. They receive other types of insurance coverage from the state. As you can imagine, the estimated 2 million unemployed Americans who almost had no benefits this Christmas seems a particular horror show to Europeans, made worse by the fact that the U.S. government does not provide any medical insurance to American unemployment recipients. Europeans routinely recoil at that in disbelief and disgust.
In another piece the Spiegel magazine steps away from statistics and tells the story of Pam Brown, who personifies what is coming to be known as the Nouveau American poor. Pam Brown was a former executive assistant on Wall Street, and her shocking decline has become part of the American story:
American society is breaking apart. Millions of people have lost their jobs and fallen into poverty. Among them, for the first time, are many middle-class families. Meet Pam Brown from New York, whose life changed overnight. The crisis caught her unprepared. "It was horrible," Pam Brown remembers. "Overnight I found myself on the wrong side of the fence. It never occurred to me that something like this could happen to me. I got very depressed." Brown sits in a cheap diner on West 14th Street in Manhattan, stirring her $1.35 coffee. That's all she orders -- it's too late for breakfast and too early for lunch. She also needs to save money. Until early 2009, Brown worked as an executive assistant on Wall Street, earning more than $80,000 a year, living in a six-bedroom house with her three sons. Today, she's long-term unemployed and has to make do with a tiny one-bedroom in the Bronx.
It's important to note that no country in the European Union uses food stamps in order to humiliate its disadvantaged citizens in the grocery checkout line. Even worse is the fact that even the humbling food stamp allotment may not provide enough food for America’s jobless families. So it is on a reoccurring basis that some of these families report eating out of garbage cans to the European media.
For Pam Brown, last winter was the worst. One day she ran out of food completely and had to go through trash cans. She fell into a deep depression ... For many, like Brown, the downfall is a Kafkaesque odyssey, a humiliation hard to comprehend. Help is not in sight: their government and their society have abandoned them.
Pam Brown and her children were disturbingly, indeed incomprehensibly, allowed to fall straight to the bottom. The richest country in the world becomes morally bankrupt when someone like Pam Brown and her children have to pick through trash to eat, abandoned with a callous disregard by the American government. People like Brown have found themselves dispossessed due to the robber baron actions of the Wall Street elite.
Hunger in the Land of the Big Mac
A shocking headline from a Swiss newspaper reads (Berner Zeitung) “Hunger in the Land of the Big Mac.” Though the article is in German, the pictures are worth 1,000 words and need no translation. Given the fact that the Swiss virtually eliminated hunger, how do we as Americans think they will view these pictures, to which the American population has apparently been desensitized.
This appears to be a picture of two mothers collecting food boxes from the charity Feed the Children.
Perhaps the only way for us to remember what we really look like in America is to see ourselves through the eyes of others. While it is true that we can all be proud Americans, surely we don't have to be proud of the broken American social safety net. Surely we can do better than that. Can a European-style social safety net rescue the American working and middle classes from GOP and Tea Party warfare?
http://www.alternet.org/story/149324/america_in_decline:_why_germans_think_we're_insane?page=entire
AlterNet
A look at our empire in decline through the eyes of the European media.
As an American expat living in the European Union, I’ve started to see America from a different perspective.
The European Union has a larger economy and more people than America does
Though it spends less -- right around 9 percent of GNP on medical, whereas we in the U.S. spend close to between 15 to 16 percent of GNP on medical -- the EU pretty much insures 100 percent of its population.
The U.S. has 59 million people medically uninsured; 132 million without dental insurance; 60 million without paid sick leave; 40 million on food stamps. Everybody in the European Union has cradle-to-grave access to universal medical and a dental plan by law. The law also requires paid sick leave; paid annual leave; paid maternity leave. When you realize all of that, it becomes easy to understand why many Europeans think America has gone insane.
Der Spiegel has run an interesting feature called "A Superpower in Decline," which attempts to explain to a German audience such odd phenomena as the rise of the Tea Party, without the hedging or attempts at "balance" found in mainstream U.S. media. On the Tea Parties:
Full of Hatred: "The Tea Party, that group of white, older voters who claim that they want their country back, is angry. Fox News host Glenn Beck, a recovering alcoholic who likens Obama to Adolf Hitler, is angry. Beck doesn't quite know what he wants to be -- maybe a politician, maybe president, maybe a preacher -- and he doesn't know what he wants to do, either, or least he hasn't come up with any specific ideas or plans. But he is full of hatred."
The piece continues with the sobering assessment that America’s actual unemployment rate isn’t really 10 percent, but close to 20 percent when we factor in the number of people who have stopped looking for work.
Some social scientists think that making sure large-scale crime or fascism never takes root in Europe again requires a taxpayer investment in a strong social safety net. Can we learn from Europe? Isn't it better to invest in a social safety net than in a large criminal justice system? (In America over 2 million people are incarcerated.)
Unlike here, in Germany jobless benefits never run out. Not only that -- as part of their social safety net, all job seekers continue to be medically insured, as are their families.
In the German jobless benefit system, when "jobless benefit 1" runs out, "jobless benefit 2," also known as HartzIV, kicks in. That one never gets cut off. The jobless also have contributions made for their pensions. They receive other types of insurance coverage from the state. As you can imagine, the estimated 2 million unemployed Americans who almost had no benefits this Christmas seems a particular horror show to Europeans, made worse by the fact that the U.S. government does not provide any medical insurance to American unemployment recipients. Europeans routinely recoil at that in disbelief and disgust.
In another piece the Spiegel magazine steps away from statistics and tells the story of Pam Brown, who personifies what is coming to be known as the Nouveau American poor. Pam Brown was a former executive assistant on Wall Street, and her shocking decline has become part of the American story:
American society is breaking apart. Millions of people have lost their jobs and fallen into poverty. Among them, for the first time, are many middle-class families. Meet Pam Brown from New York, whose life changed overnight. The crisis caught her unprepared. "It was horrible," Pam Brown remembers. "Overnight I found myself on the wrong side of the fence. It never occurred to me that something like this could happen to me. I got very depressed." Brown sits in a cheap diner on West 14th Street in Manhattan, stirring her $1.35 coffee. That's all she orders -- it's too late for breakfast and too early for lunch. She also needs to save money. Until early 2009, Brown worked as an executive assistant on Wall Street, earning more than $80,000 a year, living in a six-bedroom house with her three sons. Today, she's long-term unemployed and has to make do with a tiny one-bedroom in the Bronx.
It's important to note that no country in the European Union uses food stamps in order to humiliate its disadvantaged citizens in the grocery checkout line. Even worse is the fact that even the humbling food stamp allotment may not provide enough food for America’s jobless families. So it is on a reoccurring basis that some of these families report eating out of garbage cans to the European media.
For Pam Brown, last winter was the worst. One day she ran out of food completely and had to go through trash cans. She fell into a deep depression ... For many, like Brown, the downfall is a Kafkaesque odyssey, a humiliation hard to comprehend. Help is not in sight: their government and their society have abandoned them.
Pam Brown and her children were disturbingly, indeed incomprehensibly, allowed to fall straight to the bottom. The richest country in the world becomes morally bankrupt when someone like Pam Brown and her children have to pick through trash to eat, abandoned with a callous disregard by the American government. People like Brown have found themselves dispossessed due to the robber baron actions of the Wall Street elite.
Hunger in the Land of the Big Mac
A shocking headline from a Swiss newspaper reads (Berner Zeitung) “Hunger in the Land of the Big Mac.” Though the article is in German, the pictures are worth 1,000 words and need no translation. Given the fact that the Swiss virtually eliminated hunger, how do we as Americans think they will view these pictures, to which the American population has apparently been desensitized.
This appears to be a picture of two mothers collecting food boxes from the charity Feed the Children.
Perhaps the only way for us to remember what we really look like in America is to see ourselves through the eyes of others. While it is true that we can all be proud Americans, surely we don't have to be proud of the broken American social safety net. Surely we can do better than that. Can a European-style social safety net rescue the American working and middle classes from GOP and Tea Party warfare?
http://www.alternet.org/story/149324/america_in_decline:_why_germans_think_we're_insane?page=entire
The land of Lords and Marshals is coming...
By Ian Millhiser
Think Progress
Georgia Bill Would Force State Taxpayers To Pay Only In Gold Or Silver
Georgia state Rep. Bobby Franklin (R) loves to introduce far-right reactionary bills. Among his greatest hits are an assault of Georgia’s authority to vaccinate its citizens, an unconstitutional bill declaring Roe v. Wade a “nullity,” and, of course, a bill eliminating income taxes.
Yet Franklin may have outdone himself with his “Constitutional Tender Act,” which would require all transactions with the state of Georgia — including the payment of taxes — to be paid with U.S. minted gold or silver coins unless the state agrees to grant a special waiver for each transaction:
Pre-1965 silver coins, silver eagles, and gold eagles shall be the exclusive medium which the state shall use to make any payments whatsoever to any person or entity, whether private or governmental. Such coins shall be the exclusive medium which the state shall accept from any person or entity as payment of any obligation to the state including, without limitation, the payment of taxes; provided, however, that such coins and other forms of currency may be used in all other transactions within the state upon mutual consent of the parties of any such transaction.
Were Franklin’s bill ever to become law it would have immediate and catastrophic consequences for Georgia’s economy. Among other things, the U.S. Mint simply does not make very many gold and silver coins — the Mint has even suspended sales of precious medal coins when demand rises above very low levels — so it is unlikely that enough coins even exist to allow Georgia taxpayers to pay more than a fraction of their tax obligations if they are required to do so in U.S. minted gold or silver.
Lawmakers in other states, such as Utah, have proposed slightly modified versions of Franklin’s bill which would allow citizens to mint their own gold and silver coins, and proponents of both the Georgia and the Utah version of the bill tout it as a backdoor way to reimpose the gold and silver standard on America. This result, though unlikely, would also have disastrous consequences.
Gold or silver standards leave a nation completely powerless to control its own monetary policy, often tying inflation rates to completely arbitrary factors such as the rate that gold is mined in South Africa, rather than to the interests of a national economy. Worse, it leaves a nation without one of its most important tools to push back against economic downturns. In the 1930s, the United States was one of the last major nations to abandon the gold standard, and this failure to act was one of the principle causes of the Great Depression.
Sadly, however, the lunatic view that America should reembrace the failed economic policies of the Hoover Administration is not limited to a handful of state lawmakers. When the new Congress convenes next week, Rep. Ron Paul (R-TX) will assume the chair of the House subcommittee that oversees federal monetary policy, and Paul has been pushing for decades to crucify mankind upon a cross of gold.
http://thinkprogress.org/2010/12/29/georgia-gold/
Think Progress
Georgia Bill Would Force State Taxpayers To Pay Only In Gold Or Silver
Georgia state Rep. Bobby Franklin (R) loves to introduce far-right reactionary bills. Among his greatest hits are an assault of Georgia’s authority to vaccinate its citizens, an unconstitutional bill declaring Roe v. Wade a “nullity,” and, of course, a bill eliminating income taxes.
Yet Franklin may have outdone himself with his “Constitutional Tender Act,” which would require all transactions with the state of Georgia — including the payment of taxes — to be paid with U.S. minted gold or silver coins unless the state agrees to grant a special waiver for each transaction:
Pre-1965 silver coins, silver eagles, and gold eagles shall be the exclusive medium which the state shall use to make any payments whatsoever to any person or entity, whether private or governmental. Such coins shall be the exclusive medium which the state shall accept from any person or entity as payment of any obligation to the state including, without limitation, the payment of taxes; provided, however, that such coins and other forms of currency may be used in all other transactions within the state upon mutual consent of the parties of any such transaction.
Were Franklin’s bill ever to become law it would have immediate and catastrophic consequences for Georgia’s economy. Among other things, the U.S. Mint simply does not make very many gold and silver coins — the Mint has even suspended sales of precious medal coins when demand rises above very low levels — so it is unlikely that enough coins even exist to allow Georgia taxpayers to pay more than a fraction of their tax obligations if they are required to do so in U.S. minted gold or silver.
Lawmakers in other states, such as Utah, have proposed slightly modified versions of Franklin’s bill which would allow citizens to mint their own gold and silver coins, and proponents of both the Georgia and the Utah version of the bill tout it as a backdoor way to reimpose the gold and silver standard on America. This result, though unlikely, would also have disastrous consequences.
Gold or silver standards leave a nation completely powerless to control its own monetary policy, often tying inflation rates to completely arbitrary factors such as the rate that gold is mined in South Africa, rather than to the interests of a national economy. Worse, it leaves a nation without one of its most important tools to push back against economic downturns. In the 1930s, the United States was one of the last major nations to abandon the gold standard, and this failure to act was one of the principle causes of the Great Depression.
Sadly, however, the lunatic view that America should reembrace the failed economic policies of the Hoover Administration is not limited to a handful of state lawmakers. When the new Congress convenes next week, Rep. Ron Paul (R-TX) will assume the chair of the House subcommittee that oversees federal monetary policy, and Paul has been pushing for decades to crucify mankind upon a cross of gold.
http://thinkprogress.org/2010/12/29/georgia-gold/
Bank Of America Fired Me For Being Too Kind To Customers - Video
editor's note: another sample of Bank of America working for the fellow Americans !!!!
Reading material for the always alert OCC !!!
A young woman's story about the collection practices of Bank of America (nyse:BAC) and why she was fired from her job for helping too many customers.
Compelling tale of the outrageous abuses that are normal for the bank that received $45 billion in TARP bailout funds, a $118 billion ring-fence asset guarantee, and billions more in below market FDIC-guaranteed debt. Makes you proud of the organization Ken Lewis built.
Home foreclosures jump in 3rd quarter: regulators
Reuters
U.S. home foreclosures jumped in the third quarter and banks' efforts to keep borrowers in their homes dropped as the housing market continues to struggle, U.S. bank regulators said on Wednesday.
The regulators said one reason for the increase in foreclosures is that banks have "exhausted" options for keeping many delinquent borrowers in their homes through programs such as loan modifications.
Newly-initiated foreclosures increased to 382,000 in the third quarter, a 31.2 percent jump over the previous quarter and a 3.7 percent rise from the same quarter a year ago, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) said in a quarterly mortgage report.
The number of foreclosures in process increased to 1.2 million, a 4.5 percent increase from the second quarter and a 10.1 percent increase from a year ago, according to the regulators.
They said during a briefing that the numbers could send "mixed signals" about the health of the U.S. housing market.
Regulators also said a possible reason for the foreclosure uptick in the quarter was that a large pool of borrowers who were being considered for home retention programs but did not qualify moved through the system.
"I think you'll see more stabilization now," said Bruce Krueger, a mortgage official at the OCC.
editor's note: as always....the OCC is just a decorative Regulator Office.
Mr. Krueger doesn't have any idea what he is talking about !!!
Mark his words....will see what happens in 6 months !!!
Foreclosures have become a hot political topic and mortgage servicers have come under fire in recent months amid accusations they did not properly review documents before attempting to take borrowers' homes.
These concerns prompted the country's 50 state attorneys general to coordinate an investigation of lenders such as Bank of America, JPMorgan Chase & Co and Ally Financial's GMAC unit.
Some banks, including BofA, temporarily suspended foreclosure proceedings late in the third quarter to review procedures.
Officials from the OCC and OTS declined to say what type of impact this might have on fourth-quarter foreclosure numbers.
BANKS LOOK OUTSIDE HAMP
State attorneys general and regulators have been pushing banks to perform more loan modifications and the report shows these efforts have had mixed results.
Overall home retention actions taken by banks dropped by 17 percent compared to the second quarter, but most of that was due to decreases in the Home Affordable Modification Program (HAMP), the Obama administration's leading foreclosure prevention effort.
In the third quarter, HAMP loan modifications slid by almost 46 percent, according to the report.
Regulators said the drop in HAMP modifications is likely due to a few factors, including that a large pool of borrowers who were being considered for the program turned out not to be eligible once their qualifications were fully reviewed.
Treasury launched HAMP to try to find a way to reduce mortgage payments for struggling homeowners who wanted to keep their homes but who were at imminent risk of foreclosure.
But it is widely regarded as a flawed program, and the incoming Republican chairman of the House Oversight and Government Reform Committee, Representative Darrell Issa, has called for it to be ended.
Regulators pointed out that mortgage servicers are pursuing more modifications outside of HAMP and such efforts increased by 10 percent in the third quarter.
The report, which covers 33 million loans serviced by national banks and federally regulated thrifts, shows that the amount of borrowers making their mortgage payments on time remains steady at 87.4 percent.
The amount of seriously delinquent loans, those 60 days or more past due, dropped 6.4 percent from the second quarter. The amount of loans that were 30 to 59 days past due, however, increased 4.3 percent.
U.S. home foreclosures jumped in the third quarter and banks' efforts to keep borrowers in their homes dropped as the housing market continues to struggle, U.S. bank regulators said on Wednesday.
The regulators said one reason for the increase in foreclosures is that banks have "exhausted" options for keeping many delinquent borrowers in their homes through programs such as loan modifications.
Newly-initiated foreclosures increased to 382,000 in the third quarter, a 31.2 percent jump over the previous quarter and a 3.7 percent rise from the same quarter a year ago, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) said in a quarterly mortgage report.
The number of foreclosures in process increased to 1.2 million, a 4.5 percent increase from the second quarter and a 10.1 percent increase from a year ago, according to the regulators.
They said during a briefing that the numbers could send "mixed signals" about the health of the U.S. housing market.
Regulators also said a possible reason for the foreclosure uptick in the quarter was that a large pool of borrowers who were being considered for home retention programs but did not qualify moved through the system.
"I think you'll see more stabilization now," said Bruce Krueger, a mortgage official at the OCC.
editor's note: as always....the OCC is just a decorative Regulator Office.
Mr. Krueger doesn't have any idea what he is talking about !!!
Mark his words....will see what happens in 6 months !!!
Foreclosures have become a hot political topic and mortgage servicers have come under fire in recent months amid accusations they did not properly review documents before attempting to take borrowers' homes.
These concerns prompted the country's 50 state attorneys general to coordinate an investigation of lenders such as Bank of America, JPMorgan Chase & Co and Ally Financial's GMAC unit.
Some banks, including BofA, temporarily suspended foreclosure proceedings late in the third quarter to review procedures.
Officials from the OCC and OTS declined to say what type of impact this might have on fourth-quarter foreclosure numbers.
BANKS LOOK OUTSIDE HAMP
State attorneys general and regulators have been pushing banks to perform more loan modifications and the report shows these efforts have had mixed results.
Overall home retention actions taken by banks dropped by 17 percent compared to the second quarter, but most of that was due to decreases in the Home Affordable Modification Program (HAMP), the Obama administration's leading foreclosure prevention effort.
In the third quarter, HAMP loan modifications slid by almost 46 percent, according to the report.
Regulators said the drop in HAMP modifications is likely due to a few factors, including that a large pool of borrowers who were being considered for the program turned out not to be eligible once their qualifications were fully reviewed.
Treasury launched HAMP to try to find a way to reduce mortgage payments for struggling homeowners who wanted to keep their homes but who were at imminent risk of foreclosure.
But it is widely regarded as a flawed program, and the incoming Republican chairman of the House Oversight and Government Reform Committee, Representative Darrell Issa, has called for it to be ended.
Regulators pointed out that mortgage servicers are pursuing more modifications outside of HAMP and such efforts increased by 10 percent in the third quarter.
The report, which covers 33 million loans serviced by national banks and federally regulated thrifts, shows that the amount of borrowers making their mortgage payments on time remains steady at 87.4 percent.
The amount of seriously delinquent loans, those 60 days or more past due, dropped 6.4 percent from the second quarter. The amount of loans that were 30 to 59 days past due, however, increased 4.3 percent.
Saturday, December 25, 2010
Sacramento-area pilot punished for YouTube video
By George Warren, GWarren@news10.net
SACRAMENTO, CA - An airline pilot is being disciplined by the Transportation Security Administration (TSA) for posting video on YouTube pointing out what he believes are serious flaws in airport security.
The 50-year-old pilot, who lives outside Sacramento, asked that neither he nor his airline be identified. He has worked for the airline for more than a decade and was deputized by the TSA to carry a gun in the cockpit.
He is also a helicopter test pilot in the Army Reserve and flew missions for the United Nations in Macedonia.
Three days after he posted a series of six video clips recorded with a cell phone camera at San Francisco International Airport, four federal air marshals and two sheriff's deputies arrived at his house to confiscate his federally-issued firearm. The pilot recorded that event as well and provided all the video to News10.
At the same time as the federal marshals took the pilot's gun, a deputy sheriff asked him to surrender his state-issued permit to carry a concealed weapon.
A follow-up letter from the sheriff's department said the CCW permit would be reevaluated following the outcome of the federal investigation.
The YouTube videos, posted Nov. 28, show what the pilot calls the irony of flight crews being forced to go through TSA screening while ground crew who service the aircraft are able to access secure areas simply by swiping a card.
"As you can see, airport security is kind of a farce. It's only smoke and mirrors so you people believe there is actually something going on here," the pilot narrates.
Video shot in the cockpit shows a medieval-looking rescue ax available on the flight deck after the pilots have gone through the metal detectors. "I would say a two-foot crash ax looks a lot more formidable than a box cutter," the pilot remarked.
A letter from the TSA dated Dec. 6 informed the pilot that "an administrative review into your deputation status as a Federal Flight Deck Officer has been initiated."
According to the letter, the review was directly related to the discovery by TSA staff of the YouTube videos. "The content and subject of these videos may have violated regulations concerning disclosure of sensitive security information," the letter said.
The pilot's attorney, Don Werno of Santa Ana, said he believed the federal government sent six people to the house to send a message.
"And the message was you've angered us by telling the truth and by showing America that there are major security problems despite the fact that we've spent billions of dollars allegedly to improve airline safety," Werno said.
The pilot said he is not in trouble with his airline, but a supervisor asked him to remove public access to the YouTube videos.
He does, however, face potential civil penalties from the TSA. He said he would likely go public when it becomes clear what the government plans to do with him.
SACRAMENTO, CA - An airline pilot is being disciplined by the Transportation Security Administration (TSA) for posting video on YouTube pointing out what he believes are serious flaws in airport security.
The 50-year-old pilot, who lives outside Sacramento, asked that neither he nor his airline be identified. He has worked for the airline for more than a decade and was deputized by the TSA to carry a gun in the cockpit.
He is also a helicopter test pilot in the Army Reserve and flew missions for the United Nations in Macedonia.
Three days after he posted a series of six video clips recorded with a cell phone camera at San Francisco International Airport, four federal air marshals and two sheriff's deputies arrived at his house to confiscate his federally-issued firearm. The pilot recorded that event as well and provided all the video to News10.
At the same time as the federal marshals took the pilot's gun, a deputy sheriff asked him to surrender his state-issued permit to carry a concealed weapon.
A follow-up letter from the sheriff's department said the CCW permit would be reevaluated following the outcome of the federal investigation.
The YouTube videos, posted Nov. 28, show what the pilot calls the irony of flight crews being forced to go through TSA screening while ground crew who service the aircraft are able to access secure areas simply by swiping a card.
"As you can see, airport security is kind of a farce. It's only smoke and mirrors so you people believe there is actually something going on here," the pilot narrates.
Video shot in the cockpit shows a medieval-looking rescue ax available on the flight deck after the pilots have gone through the metal detectors. "I would say a two-foot crash ax looks a lot more formidable than a box cutter," the pilot remarked.
A letter from the TSA dated Dec. 6 informed the pilot that "an administrative review into your deputation status as a Federal Flight Deck Officer has been initiated."
According to the letter, the review was directly related to the discovery by TSA staff of the YouTube videos. "The content and subject of these videos may have violated regulations concerning disclosure of sensitive security information," the letter said.
The pilot's attorney, Don Werno of Santa Ana, said he believed the federal government sent six people to the house to send a message.
"And the message was you've angered us by telling the truth and by showing America that there are major security problems despite the fact that we've spent billions of dollars allegedly to improve airline safety," Werno said.
The pilot said he is not in trouble with his airline, but a supervisor asked him to remove public access to the YouTube videos.
He does, however, face potential civil penalties from the TSA. He said he would likely go public when it becomes clear what the government plans to do with him.
Rape victim arrested for refusing TSA pat down
Eric W. Dolan
Raw Story
A 56-year-old woman who says she is a rape victim was arrested and banned from Austin-Bergstrom International Airport Wednesday after refusing to receive a pat down from a Transportation Security Agency (TSA) officer.
Claire Hirschkind could not receive a body scan because of a pacemaker-type device in her chest and was escorted to a female TSA officer to receive an enhanced pat down.
“I told them, ‘No, I’m not going to have my breasts felt,’ and she said, ‘Yes, you are,’” Hirschkind told KVUE
After refusing to receive the enhanced pat down, she was arrested.
“The police actually pushed me to the floor, and handcuffed me,” she said. “I was crying by then. They drug me 25 yards across the floor in front of the whole security.”
Hirschkind said her constitutional rights were violated.
About 70 airports have put into use over 400 backscatter x-ray machines that can see beneath passengers’ clothing. Passengers who set off a metal detector or body scan machine or refuses to be scanned receive an invasive physical pat down.
Raw Story
A 56-year-old woman who says she is a rape victim was arrested and banned from Austin-Bergstrom International Airport Wednesday after refusing to receive a pat down from a Transportation Security Agency (TSA) officer.
Claire Hirschkind could not receive a body scan because of a pacemaker-type device in her chest and was escorted to a female TSA officer to receive an enhanced pat down.
“I told them, ‘No, I’m not going to have my breasts felt,’ and she said, ‘Yes, you are,’” Hirschkind told KVUE
After refusing to receive the enhanced pat down, she was arrested.
“The police actually pushed me to the floor, and handcuffed me,” she said. “I was crying by then. They drug me 25 yards across the floor in front of the whole security.”
Hirschkind said her constitutional rights were violated.
About 70 airports have put into use over 400 backscatter x-ray machines that can see beneath passengers’ clothing. Passengers who set off a metal detector or body scan machine or refuses to be scanned receive an invasive physical pat down.
Economics Is Simple ... The Fat Cats Just Want You to Think It's Complicated So That You Won't Demand Change
By Washington's Blog
Economics and finance seem like complicated topics, and so many people "leave it to the experts".
However, these topics are actually simple, and if people hear a clear explanation, they will be able to form an opinion about our current economy and the government's response to economic challenges.
It will be easy to understand the economy if we think of money as water. Links showing that the analogy holds true with the economy are provided for convenience.
Let's imagine that there is only a limited amount of fresh, drinkable water in the U.S. (which is true), and that a handful of say 5 big water companies control the rights to 90% of the water in the country.
Let's further imagine that the water companies - wishing to make more money - expand beyond their traditional water business, into mining for oil and gas. Indeed, the oil and gas mining business becomes so lucrative that it soon dwarfs the size of their actual water business. They keep their traditional water business, but soon also become the largest polluters in the country.
They dig for oil and gas right around where the aquifiers are where they pump water. Unfortunately, they are greedy and cut corners, and end up polluting all of the aquifiers with toxic crude petroleum compounds.
The water companies loudly tell the government that this pollution was "unexpected" and simply a temporary "water-flow" problem. They jump up and down and yell that - unless the government "bails them out" by giving them more water - the entire water distribution system in the U.S. will fail, and Americans will suffer a water shortage and severe thirst.
Advocates for the American people argue that the big water companies should be forced to clean up the aquifiers. They point out that we will have a drastic water shortage unless these water supplies - which constitute the lion's share of fresh water in the U.S. - are cleaned, and that the water companies must be forced to stop mining for oil and gas right next to the water supplies so that it won't happen again. They also demand that the government distribute the water in its emergency strategic water supply directly to the people, as that will directly address the problem of thirst and water scarcity.
They point out that drilling for oil is a wholly-separate business from pumping and selling drinking water, and demand that the water companies sell their petrol business.
They point out that if the costs of cleaning up the aquifier are honestly tallied, the water companies are bankrupt. They say this the problem is not a "temporary" water shortage, but that the big water companies are actually insolvent, and that their entire business model is flawed.
And they note that the big water companies are not as efficient at extracting water from aquifiers as smaller water companies, but that the big companies are getting so big that they re driving the smaller companies out of business.
The big water companies respond that they're "too big to fail", that they're doing fine and only experiencing a very temporary "liquidity crisis" shortage of water, that they just need a little temporary help to get the water flowing to America again, and that they'll drill safely for oil and gas and that so new rules are needed.
The White House and Congress (having received a lot of contributions from the big water companies), and the Federal Water Reserve - a quasi-governmental agency owned entirely by the big 5 water companies - decide not to crack down on the big 5 water companies. Instead, they exempt them from pollution laws by relaxing reporting requirements so that the companies don't have to report how much oil and gas pollution has really gotten into the aquifiers. Indeed, the government let's the big companies write the rules for a series of highly-publicized "stress tests" which are simply a P.R. ploy to reassure the public that the water is safe and the companies sound, even though neither is true.
The government and Federal Water Reserve also buy all of the polluted water in the aquifiers at 100% of the normal price for clean water (and used it for security for cheap loans to the big water companies), and that water is stockpiled in the bowels of the Federal Water Reserve building (even though the high petrol content makes the water highly flammable, and thus a fire hazard). So instead of the water companies having to pay for their toxic pollution problems themselves, the government takes care of it ... at the taxpayers' expense.
The government also taps into it's emergency water supply, and gives all of the water to the big 5 companies to help them through their "temporary" water shortage. Americans are starting to get thirsty, but the big 5 don't sell to average Americans. Instead, they use most of the water in their oil and gas mining operations (it takes a lot of water sprayed on the rocks being drilled to keep the dust down). The big 5 sell some of the water to fat cats who already have lots of fresh water in private ponds and storage tanks, and stockpile some of it. Somehow the water given to the big companies never trickles down to the public. The average American on "Main Street" gets thirstier and thirstier.
The government also props up the big water companies by giving them all sorts of subsidies, incentives and business opportunities which guarantee that they'll make money. The government offers none of these to smaller water companies, and actually penalizes smaller water companies by charging them extra fees to pay for the misbehavior of the big companies.
The American people become thirstier and thirstier, and without water to grow crops, put in their cars' radiators, or even wash their hands, America becomes poorer and living standards decline.
The big water companies try to make the situation seem extremely complicated, so that only the "experts" can understand it. By making things seem complex, the American people won't feel competent to demand changes. Indeed, they even promote academics who are trained to ignore the real world and instead focus on highly complex - and unrealistic - models.
But the situation is actually simple. Things haven't improved, and won't improve until:
•The government gets back to the real system - that is, actually delivering water - instead of ignoring water and stressing the artificial paper profits or oil mining operations of the big water companies
•The big water companies are broken up, so that smaller water companies focusing just on H20 can step up to find clean water and sell it to normal Americans
•The big companies are forced to clean up the polluted water, and the illegal mining operations of the big companies are prosecuted
Simple, isn't it?
http://www.washingtonsblog.com/2010/12/understanding-economy-is-simple.html
Economics and finance seem like complicated topics, and so many people "leave it to the experts".
However, these topics are actually simple, and if people hear a clear explanation, they will be able to form an opinion about our current economy and the government's response to economic challenges.
It will be easy to understand the economy if we think of money as water. Links showing that the analogy holds true with the economy are provided for convenience.
Let's imagine that there is only a limited amount of fresh, drinkable water in the U.S. (which is true), and that a handful of say 5 big water companies control the rights to 90% of the water in the country.
Let's further imagine that the water companies - wishing to make more money - expand beyond their traditional water business, into mining for oil and gas. Indeed, the oil and gas mining business becomes so lucrative that it soon dwarfs the size of their actual water business. They keep their traditional water business, but soon also become the largest polluters in the country.
They dig for oil and gas right around where the aquifiers are where they pump water. Unfortunately, they are greedy and cut corners, and end up polluting all of the aquifiers with toxic crude petroleum compounds.
The water companies loudly tell the government that this pollution was "unexpected" and simply a temporary "water-flow" problem. They jump up and down and yell that - unless the government "bails them out" by giving them more water - the entire water distribution system in the U.S. will fail, and Americans will suffer a water shortage and severe thirst.
Advocates for the American people argue that the big water companies should be forced to clean up the aquifiers. They point out that we will have a drastic water shortage unless these water supplies - which constitute the lion's share of fresh water in the U.S. - are cleaned, and that the water companies must be forced to stop mining for oil and gas right next to the water supplies so that it won't happen again. They also demand that the government distribute the water in its emergency strategic water supply directly to the people, as that will directly address the problem of thirst and water scarcity.
They point out that drilling for oil is a wholly-separate business from pumping and selling drinking water, and demand that the water companies sell their petrol business.
They point out that if the costs of cleaning up the aquifier are honestly tallied, the water companies are bankrupt. They say this the problem is not a "temporary" water shortage, but that the big water companies are actually insolvent, and that their entire business model is flawed.
And they note that the big water companies are not as efficient at extracting water from aquifiers as smaller water companies, but that the big companies are getting so big that they re driving the smaller companies out of business.
The big water companies respond that they're "too big to fail", that they're doing fine and only experiencing a very temporary "liquidity crisis" shortage of water, that they just need a little temporary help to get the water flowing to America again, and that they'll drill safely for oil and gas and that so new rules are needed.
The White House and Congress (having received a lot of contributions from the big water companies), and the Federal Water Reserve - a quasi-governmental agency owned entirely by the big 5 water companies - decide not to crack down on the big 5 water companies. Instead, they exempt them from pollution laws by relaxing reporting requirements so that the companies don't have to report how much oil and gas pollution has really gotten into the aquifiers. Indeed, the government let's the big companies write the rules for a series of highly-publicized "stress tests" which are simply a P.R. ploy to reassure the public that the water is safe and the companies sound, even though neither is true.
The government and Federal Water Reserve also buy all of the polluted water in the aquifiers at 100% of the normal price for clean water (and used it for security for cheap loans to the big water companies), and that water is stockpiled in the bowels of the Federal Water Reserve building (even though the high petrol content makes the water highly flammable, and thus a fire hazard). So instead of the water companies having to pay for their toxic pollution problems themselves, the government takes care of it ... at the taxpayers' expense.
The government also taps into it's emergency water supply, and gives all of the water to the big 5 companies to help them through their "temporary" water shortage. Americans are starting to get thirsty, but the big 5 don't sell to average Americans. Instead, they use most of the water in their oil and gas mining operations (it takes a lot of water sprayed on the rocks being drilled to keep the dust down). The big 5 sell some of the water to fat cats who already have lots of fresh water in private ponds and storage tanks, and stockpile some of it. Somehow the water given to the big companies never trickles down to the public. The average American on "Main Street" gets thirstier and thirstier.
The government also props up the big water companies by giving them all sorts of subsidies, incentives and business opportunities which guarantee that they'll make money. The government offers none of these to smaller water companies, and actually penalizes smaller water companies by charging them extra fees to pay for the misbehavior of the big companies.
The American people become thirstier and thirstier, and without water to grow crops, put in their cars' radiators, or even wash their hands, America becomes poorer and living standards decline.
The big water companies try to make the situation seem extremely complicated, so that only the "experts" can understand it. By making things seem complex, the American people won't feel competent to demand changes. Indeed, they even promote academics who are trained to ignore the real world and instead focus on highly complex - and unrealistic - models.
But the situation is actually simple. Things haven't improved, and won't improve until:
•The government gets back to the real system - that is, actually delivering water - instead of ignoring water and stressing the artificial paper profits or oil mining operations of the big water companies
•The big water companies are broken up, so that smaller water companies focusing just on H20 can step up to find clean water and sell it to normal Americans
•The big companies are forced to clean up the polluted water, and the illegal mining operations of the big companies are prosecuted
Simple, isn't it?
http://www.washingtonsblog.com/2010/12/understanding-economy-is-simple.html
Friday, December 24, 2010
Fraud Ruling Against Wells Fargo in Minnesota Points to Widespread Abuses in Securities Lending Program
By Ives Smith
ECONNED
A fraud and breach of fiduciary duty ruling against Wells Fargo in a major scandal in Minnesota may have much broader ramifications for this sanctimonious bank.
The facts are not pretty. Wells Fargo, in its investment management operation, used securities lending to boost returns. But the returns it increased appeared to be only those of the bank. Institutional investors in various programs lost money as a result of this activity. Four Minnesota plaintiffs, including two of the state’s high profile charities, sued. A jury had already awarded the plaintiffs $29.9 million for fraud. A post trial ruling by the judge has added costs, interest, and reimbursement of fees that looks set to more than $15 million to the total.
District Judge M. Michael Monahan concurred with the jury’s main findings:
Wells Fargo breached its duty of full disclosure by not adequately disclosing that it was changing the risk profile of the securities lending program, that it breached its duty of impartiality by favoring certain participants over other participants, and that it breached its duty of loyalty by advancing the interest of the borrowing brokers to the detriment of one or more of the plaintiffs.
What makes this ruling interesting is that although it set aside a minor part of the jury award, a $1.6 million issue, to be subject to a new trial, is that it was punitive as a result of the judge’s determination that the fraud was systematic. It is unusual to award the payment of the plaintiff’s attorney’s fees, or to order disgorgement of fees paid for services (the other component of the additional $15 million plus is interest on the $29.9 million). The basis for awarding attorneys’ fees? The bank is such a menace to society that having counsel root it out is a public service. From the Minneapolis Star Tribune (hat tip reader Ted L):
The judge said that the nonprofits’ lawyers, led by Minneapolis litigator Mike Ciresi, provided a “public benefit” by bringing the bank’s wrongdoing to light. Thus, Monahan said, the bank must pay the plaintiffs’ attorneys fees and costs, which Ciresi’s firm estimated at more than $15 million…
Terry Fruth, a Minneapolis attorney who has been watching the case closely on behalf of his clients, said Monahan’s post-trial order could help other investors prove similar claims against the bank.
“The judge didn’t just find that Wells Fargo acted with disregard to the rights and interests of the particular plaintiffs,” Fruth said of Monahan. “He said the way it ran the program was with disregard to the rights of the customers. … He has made a finding that is going to bind Wells Fargo in other cases.”
The judge also seems to understand full well how banking works in America:
…Wells Fargo Chairman and CEO John Stumpf and retired Chairman Richard Kovacevich… said they knew nothing about problems in the securities-lending program in 2007. Stumpf said he didn’t know the bank even had such a program.
Monahan said that he found the executives’ statements “to be almost childlike” and that he accepts “that one of the primary functions of subordinates in today’s corporate America is to shield their ultimate superiors from accumulating embarrassing information….
“Wells Fargo was fully aware of the increased risk it was injecting into the securities lending program, that its line managers were not reasonably managing that risk, and that its actions and inactions had the potential for inflicting enormous harm on plaintiffs.”
When the program got into trouble, the judge said, “Wells Fargo’s attitude and conduct … was primarily to shield itself, and its favored customers, from the consequences.”
We’ve been told that investors are afraid to sue banks, fearing that they will be cut off from information (query what value that information really has in reasonably efficient markets, particularly when the use of such information is to induce customers to make more trades). Investment management clients are in a somewhat different position, in that they are not actively managing their accounts and are not limited to going to a relatively small number of dealer banks for transaction execution (the asset management business is far less concentrated and more diverse). Nevertheless, findings like these may embolden heretofore more cautious institutional investors to seek to recoup losses when they think their bank had abused them.
http://www.nakedcapitalism.com/2010/12/fraud-ruling-against-wells-fargo-in-minnesota-points-to-widespread-abuses-in-securities-lending-program.html
editor's note: reading material for the always alert :
Is OCC going to be closed anytime soon ????
ECONNED
A fraud and breach of fiduciary duty ruling against Wells Fargo in a major scandal in Minnesota may have much broader ramifications for this sanctimonious bank.
The facts are not pretty. Wells Fargo, in its investment management operation, used securities lending to boost returns. But the returns it increased appeared to be only those of the bank. Institutional investors in various programs lost money as a result of this activity. Four Minnesota plaintiffs, including two of the state’s high profile charities, sued. A jury had already awarded the plaintiffs $29.9 million for fraud. A post trial ruling by the judge has added costs, interest, and reimbursement of fees that looks set to more than $15 million to the total.
District Judge M. Michael Monahan concurred with the jury’s main findings:
Wells Fargo breached its duty of full disclosure by not adequately disclosing that it was changing the risk profile of the securities lending program, that it breached its duty of impartiality by favoring certain participants over other participants, and that it breached its duty of loyalty by advancing the interest of the borrowing brokers to the detriment of one or more of the plaintiffs.
What makes this ruling interesting is that although it set aside a minor part of the jury award, a $1.6 million issue, to be subject to a new trial, is that it was punitive as a result of the judge’s determination that the fraud was systematic. It is unusual to award the payment of the plaintiff’s attorney’s fees, or to order disgorgement of fees paid for services (the other component of the additional $15 million plus is interest on the $29.9 million). The basis for awarding attorneys’ fees? The bank is such a menace to society that having counsel root it out is a public service. From the Minneapolis Star Tribune (hat tip reader Ted L):
The judge said that the nonprofits’ lawyers, led by Minneapolis litigator Mike Ciresi, provided a “public benefit” by bringing the bank’s wrongdoing to light. Thus, Monahan said, the bank must pay the plaintiffs’ attorneys fees and costs, which Ciresi’s firm estimated at more than $15 million…
Terry Fruth, a Minneapolis attorney who has been watching the case closely on behalf of his clients, said Monahan’s post-trial order could help other investors prove similar claims against the bank.
“The judge didn’t just find that Wells Fargo acted with disregard to the rights and interests of the particular plaintiffs,” Fruth said of Monahan. “He said the way it ran the program was with disregard to the rights of the customers. … He has made a finding that is going to bind Wells Fargo in other cases.”
The judge also seems to understand full well how banking works in America:
…Wells Fargo Chairman and CEO John Stumpf and retired Chairman Richard Kovacevich… said they knew nothing about problems in the securities-lending program in 2007. Stumpf said he didn’t know the bank even had such a program.
Monahan said that he found the executives’ statements “to be almost childlike” and that he accepts “that one of the primary functions of subordinates in today’s corporate America is to shield their ultimate superiors from accumulating embarrassing information….
“Wells Fargo was fully aware of the increased risk it was injecting into the securities lending program, that its line managers were not reasonably managing that risk, and that its actions and inactions had the potential for inflicting enormous harm on plaintiffs.”
When the program got into trouble, the judge said, “Wells Fargo’s attitude and conduct … was primarily to shield itself, and its favored customers, from the consequences.”
We’ve been told that investors are afraid to sue banks, fearing that they will be cut off from information (query what value that information really has in reasonably efficient markets, particularly when the use of such information is to induce customers to make more trades). Investment management clients are in a somewhat different position, in that they are not actively managing their accounts and are not limited to going to a relatively small number of dealer banks for transaction execution (the asset management business is far less concentrated and more diverse). Nevertheless, findings like these may embolden heretofore more cautious institutional investors to seek to recoup losses when they think their bank had abused them.
http://www.nakedcapitalism.com/2010/12/fraud-ruling-against-wells-fargo-in-minnesota-points-to-widespread-abuses-in-securities-lending-program.html
editor's note: reading material for the always alert :
Is OCC going to be closed anytime soon ????
Thursday, December 23, 2010
Amelia couple faces a refinancing gone bad
By Carol Hazard
Richmond Times-Dispatch
Terry and Donna Hunt have never missed a mortgage payment. But their original lender has tried to foreclose on their house in Amelia County three times.
The Hunts weren't involved in a loan modification, nor were they trying to take equity out of their house.
Rather, things went awry when they refinanced their $211,000 mortgage in October 2009 to lower their interest rate from 7.8 percent to 5 percent.
Now, no one knows who owns the loan, said Jason Krumbein, the couple's attorney.
The new loan servicer, a government-approved lender that took over the refinanced loan from the originator, says it owns the loan, Krumbein said.
But CitiMortgage, the original lender, claims it never received the payoff from Lend America, once one of the largest originators of mortgages backed by the Federal Housing Administration but now banned by the FHA from doing business.
"In my 15 years of practice, I have never dealt with anything this weird," Krumbein said.
Representatives contacted at CitiMortgage said they could not comment. Lend America is no longer in business. Lend America was licensed with Virginia Bureau of Financial Institutions in October 2005 and surrendered its mortgage lender broker license here in December 2009.
The loan-modification process is rife with abuse and problems, often leading to foreclosures, mortgage experts say. But refinances that go bad are unusual, they say.
Still, as strange as this case is, the Hunts are not alone. Borrowers from across the country, including a person from Powhatan County, claim Lend America failed to pay off their existing mortgages after they received new loans, according to a complaint web site.
"This has cost us dearly not only in the headaches and stress in dealing with this, but it has hurt our company," said Terry Hunt, owner of a construction firm. "As small-business owners, we personally guarantee payroll and equipment. But this has destroyed our credit and we can't make those guarantees."
Jay Speer, an attorney with the Virginia Poverty Law Center, said that since hearing a few weeks ago about the Hunts' situation, he has been alerted to a few more cases in Virginia involving Lend America not paying off previous loans.
"It's a big can of worms," Speer said.
Krumbein dug up a copy of the check that was supposedly sent to CitiMortgage by Lend America to pay off the Hunts' mortgage. He found the UPS tracking number that was reportedly used to pick up and deliver the check.
He has filed lawsuits on behalf of the Hunts to stop the foreclosures.
Meantime, the Hunts kept making their mortgage payments. They had tried to refinance their loan with CitiMortgage, but the lender kept giving them the runaround, asking for the same paperwork, Terry Hunt said.
They were enticed by a Lend America advertisement on television and closed on their loan with that lender in October 2009. But they received delinquent notices from CitiMortgage in December.
They alerted CitiMortgage that they had refinanced, but made two mortgage payments nonetheless — one to the new lender, another to the original lender — thinking the matter would be resolved and their account would be credited with the extra payments.
Perhaps a number on their account was transposed or the refinance hadn't been recorded properly. Neither proved true. Nor, as it turned out, was the UPS parcel ever paid for, so the package containing the check apparently was never picked up or delivered.
And Lend America, the couple would later learn, abruptly ceased operations within weeks after it closed on their refinance.
The U.S. Attorney for the Eastern District of New York had filed a complaint in federal court, accusing the company of fraudulent lending practices that compromised the integrity of the FHA mortgage insurance program and contributed to increases in loan defaults and foreclosures.
The case is pending.
Lend America accounts were taken over by Loancare Servicing, a Ginnie Mae-approved mortgage servicer. Terry Hunt said he contacted Loancare to discuss the situation and said he was told to make the payments or Loancare would foreclose.
"We have never seen a situation exactly like this, but we see errors in the servicing of loans, misapplied payments and foreclosures not based on proper documentation," said Connie Chamberlin, president and CEO of Housing Opportunities Made Equal of Virginia Inc., a housing advocacy group.
Homeowners in Virginia have little recourse to ensure that they don't get caught in a similar situation, Chamberlin said.
"A substitute trustee is appointed to take care of a foreclosure, but in many cases, the trustee doesn't exercise the level of due diligence there ought to be when dealing with something as important as taking someone's house."
Virginia requires no third-party review, nor does information need to be checked for accuracy, she said.
editor's note: reading material for the efficient and fast :
is OCC going to be close any time soon ??????
Richmond Times-Dispatch
Terry and Donna Hunt have never missed a mortgage payment. But their original lender has tried to foreclose on their house in Amelia County three times.
The Hunts weren't involved in a loan modification, nor were they trying to take equity out of their house.
Rather, things went awry when they refinanced their $211,000 mortgage in October 2009 to lower their interest rate from 7.8 percent to 5 percent.
Now, no one knows who owns the loan, said Jason Krumbein, the couple's attorney.
The new loan servicer, a government-approved lender that took over the refinanced loan from the originator, says it owns the loan, Krumbein said.
But CitiMortgage, the original lender, claims it never received the payoff from Lend America, once one of the largest originators of mortgages backed by the Federal Housing Administration but now banned by the FHA from doing business.
"In my 15 years of practice, I have never dealt with anything this weird," Krumbein said.
Representatives contacted at CitiMortgage said they could not comment. Lend America is no longer in business. Lend America was licensed with Virginia Bureau of Financial Institutions in October 2005 and surrendered its mortgage lender broker license here in December 2009.
The loan-modification process is rife with abuse and problems, often leading to foreclosures, mortgage experts say. But refinances that go bad are unusual, they say.
Still, as strange as this case is, the Hunts are not alone. Borrowers from across the country, including a person from Powhatan County, claim Lend America failed to pay off their existing mortgages after they received new loans, according to a complaint web site.
"This has cost us dearly not only in the headaches and stress in dealing with this, but it has hurt our company," said Terry Hunt, owner of a construction firm. "As small-business owners, we personally guarantee payroll and equipment. But this has destroyed our credit and we can't make those guarantees."
Jay Speer, an attorney with the Virginia Poverty Law Center, said that since hearing a few weeks ago about the Hunts' situation, he has been alerted to a few more cases in Virginia involving Lend America not paying off previous loans.
"It's a big can of worms," Speer said.
Krumbein dug up a copy of the check that was supposedly sent to CitiMortgage by Lend America to pay off the Hunts' mortgage. He found the UPS tracking number that was reportedly used to pick up and deliver the check.
He has filed lawsuits on behalf of the Hunts to stop the foreclosures.
Meantime, the Hunts kept making their mortgage payments. They had tried to refinance their loan with CitiMortgage, but the lender kept giving them the runaround, asking for the same paperwork, Terry Hunt said.
They were enticed by a Lend America advertisement on television and closed on their loan with that lender in October 2009. But they received delinquent notices from CitiMortgage in December.
They alerted CitiMortgage that they had refinanced, but made two mortgage payments nonetheless — one to the new lender, another to the original lender — thinking the matter would be resolved and their account would be credited with the extra payments.
Perhaps a number on their account was transposed or the refinance hadn't been recorded properly. Neither proved true. Nor, as it turned out, was the UPS parcel ever paid for, so the package containing the check apparently was never picked up or delivered.
And Lend America, the couple would later learn, abruptly ceased operations within weeks after it closed on their refinance.
The U.S. Attorney for the Eastern District of New York had filed a complaint in federal court, accusing the company of fraudulent lending practices that compromised the integrity of the FHA mortgage insurance program and contributed to increases in loan defaults and foreclosures.
The case is pending.
Lend America accounts were taken over by Loancare Servicing, a Ginnie Mae-approved mortgage servicer. Terry Hunt said he contacted Loancare to discuss the situation and said he was told to make the payments or Loancare would foreclose.
"We have never seen a situation exactly like this, but we see errors in the servicing of loans, misapplied payments and foreclosures not based on proper documentation," said Connie Chamberlin, president and CEO of Housing Opportunities Made Equal of Virginia Inc., a housing advocacy group.
Homeowners in Virginia have little recourse to ensure that they don't get caught in a similar situation, Chamberlin said.
"A substitute trustee is appointed to take care of a foreclosure, but in many cases, the trustee doesn't exercise the level of due diligence there ought to be when dealing with something as important as taking someone's house."
Virginia requires no third-party review, nor does information need to be checked for accuracy, she said.
editor's note: reading material for the efficient and fast :
Did Repo Men Foreclose Wrong House?
editor's note: where is the police now ????
Arresting protestors in riots ????
Arresting protestors in riots ????
Inside Job’s Charles Ferguson on the Corruption of Academic Economics
By Yves Smith
Naked Capitalism
Readers may have seen the movie Inside Job (if you haven’t, you really need to) or a clip from the movie that got quite a bit of attention on finance blogs, that of director Charles Ferguson grilling former Federal Reserve vice chairman Frederic Mishkin on some dubious work he did touting Iceland as a well run banking center not long before its implosion.
The film’s director Charles Ferguson speaks with Rob Johnson, director of the Institute for New Economic Thinking, and former chief economist for the Senate Banking Committee and senior economist for the Senate Budget Committee (hat tip reader Hubert). Enjoy!
http://www.nakedcapitalism.com/2010/12/inside-jobs-charles-ferguson-on-the-corruption-of-academic-economics.html
Naked Capitalism
Readers may have seen the movie Inside Job (if you haven’t, you really need to) or a clip from the movie that got quite a bit of attention on finance blogs, that of director Charles Ferguson grilling former Federal Reserve vice chairman Frederic Mishkin on some dubious work he did touting Iceland as a well run banking center not long before its implosion.
The film’s director Charles Ferguson speaks with Rob Johnson, director of the Institute for New Economic Thinking, and former chief economist for the Senate Banking Committee and senior economist for the Senate Budget Committee (hat tip reader Hubert). Enjoy!
http://www.nakedcapitalism.com/2010/12/inside-jobs-charles-ferguson-on-the-corruption-of-academic-economics.html
Rethinking Public Integrity Prosecutions
By Scott Horton
Harper's Magazine
In the last month, Texas prosecutors secured a dramatic conviction of former House Republican leader Tom DeLay, and the Justice Department announced it was not going anywhere in its long-standing inquiries into ethics violations involving Senator John Ensign, Representative Jerry Lewis, and a number of other prominent political figures (including DeLay). These developments have led to pointed criticism of the Justice Department’s public integrity section, whose nose has been badly bloodied by a number of disclosures of serious misconduct, including a criminal probe focused on its past leaders arising out of their botched handling of a case against Senator Ted Stevens.
The ever-astute Charlie Savage has recapped these developments with an assessment of the Justice Department’s woes:
The Justice Department has shut down a wave of high-profile investigations of members of Congress over the past few months, drawing criticism that the government’s premier anticorruption agency has lost its nerve after the disastrous collapse last year of its case against former Senator Ted Stevens…
“They’re gun-shy,” said J. Gerald Hebert, the executive director of the Campaign Legal Center, a nonpartisan group that seeks greater disclosure of how money influences politics. But in interviews, Jack Smith, chief of the Public Integrity Section at the Justice Department, and his supervisor, Lanny Breuer, the assistant attorney general for the Criminal Division, hotly contested the contention that prosecutors were in retreat from taking on Congressional corruption. “It’s just not the case that anyone is gun-shy,” Mr. Breuer said. “If a case cannot be brought, it’s because we’ve taken a hard look and made the determination that this case cannot be proved beyond a reasonable doubt. And with all due respect to those outside the department, they haven’t seen the evidence. They don’t know the materials, and we’ve looked at it all.”
The problems that the Department faces are deep-rooted, and the gear-shifting that is evidently underway is entirely appropriate. The issues go both to process and to policy. The Stevens case and a host of others revealed serious flaws in the public integrity process at Justice: as Judge Sullivan intimated, prosecutors had adopted a “victory at all costs” attitude that led to unethical corner-cutting and the suppression of exculpatory evidence. In cases around the country, and particularly in the South, local U.S. attorneys turned to public integrity prosecutions as a form of political score-settling—a problem that has been present in the American justice system for over two centuries, but that Main Justice has generally attempted to restrain. In the Bush era, however, this process appears to have been spurred rather than retarded by Main Justice.
The policy issues are equally tenacious. Justice pursued public corruption matters relying heavily on a theory of “theft of honest services,” stretching a statute beyond its logical breaking point, as the Supreme Court concluded in Skilling. Moreover, the great bulk of the truly dubious cases came out of the dark woods of election financing—in many cases with federal prosecutors attempting to criminalize practices that were permitted under state law. With the Supreme Court’s ruling in Citizens United, which opened the floodgates of money as political speech, the efforts to criminalize campaign funding abuses seem truly absurd. The Justice Department’s efforts have boomeranged. Rather than demonstrating that the Justice Department is a guardian of the highest standards of conduct, the Department and its prosecutors have grown ever more deeply mired in partisan political muck. The Department’s reputation now stands at a modern low, thanks to the political machinations demonstrated in the U.S. attorney’s scandal, prosecutions like those of Stevens, Siegelman, and Minor, and the validation of torture and abuse and warrantless surveillance in the service of unethical clients.
“Conduct that people think is reprehensible or immoral doesn’t mean it’s criminal,” Assistant Attorney General Lanny Breuer observes. Indeed, the solution to much of the public integrity conundrum lies in transparency of process—insuring that the public learns of the foibles and ethics lapses of political leaders and can make appropriate decisions guided by this information. This, however, is not the proper role of the Justice Department, which seems these days almost obsessed with safeguarding its own dark secrets and occasional brushes with criminality from public gaze.
The Department’s public integrity section is under new leadership—the most highly qualified it has seen in recent decades. It has seized the right moment for an internal reassessment of the approach to prosecuting public corruption. That should entail recognizing that dedication to fair process must take a center seat even if some scoundrels get off the hook as a result. This reassessment must include some introspection about mistakes and abuses of the past as well, because the most serious misjudgments in the public integrity arena relate to active cases in which the Justice Department is defending utterly indefensible positions. In the end, the Justice Department will also have to learn to operate in the harsh sunlight of public attention, disclosing its mistakes and striving to correct them. This is the essential path back to public trust after years spent straying in the wilderness.
http://harpers.org/archive/2010/12/hbc-90007870
Harper's Magazine
In the last month, Texas prosecutors secured a dramatic conviction of former House Republican leader Tom DeLay, and the Justice Department announced it was not going anywhere in its long-standing inquiries into ethics violations involving Senator John Ensign, Representative Jerry Lewis, and a number of other prominent political figures (including DeLay). These developments have led to pointed criticism of the Justice Department’s public integrity section, whose nose has been badly bloodied by a number of disclosures of serious misconduct, including a criminal probe focused on its past leaders arising out of their botched handling of a case against Senator Ted Stevens.
The ever-astute Charlie Savage has recapped these developments with an assessment of the Justice Department’s woes:
The Justice Department has shut down a wave of high-profile investigations of members of Congress over the past few months, drawing criticism that the government’s premier anticorruption agency has lost its nerve after the disastrous collapse last year of its case against former Senator Ted Stevens…
“They’re gun-shy,” said J. Gerald Hebert, the executive director of the Campaign Legal Center, a nonpartisan group that seeks greater disclosure of how money influences politics. But in interviews, Jack Smith, chief of the Public Integrity Section at the Justice Department, and his supervisor, Lanny Breuer, the assistant attorney general for the Criminal Division, hotly contested the contention that prosecutors were in retreat from taking on Congressional corruption. “It’s just not the case that anyone is gun-shy,” Mr. Breuer said. “If a case cannot be brought, it’s because we’ve taken a hard look and made the determination that this case cannot be proved beyond a reasonable doubt. And with all due respect to those outside the department, they haven’t seen the evidence. They don’t know the materials, and we’ve looked at it all.”
The problems that the Department faces are deep-rooted, and the gear-shifting that is evidently underway is entirely appropriate. The issues go both to process and to policy. The Stevens case and a host of others revealed serious flaws in the public integrity process at Justice: as Judge Sullivan intimated, prosecutors had adopted a “victory at all costs” attitude that led to unethical corner-cutting and the suppression of exculpatory evidence. In cases around the country, and particularly in the South, local U.S. attorneys turned to public integrity prosecutions as a form of political score-settling—a problem that has been present in the American justice system for over two centuries, but that Main Justice has generally attempted to restrain. In the Bush era, however, this process appears to have been spurred rather than retarded by Main Justice.
The policy issues are equally tenacious. Justice pursued public corruption matters relying heavily on a theory of “theft of honest services,” stretching a statute beyond its logical breaking point, as the Supreme Court concluded in Skilling. Moreover, the great bulk of the truly dubious cases came out of the dark woods of election financing—in many cases with federal prosecutors attempting to criminalize practices that were permitted under state law. With the Supreme Court’s ruling in Citizens United, which opened the floodgates of money as political speech, the efforts to criminalize campaign funding abuses seem truly absurd. The Justice Department’s efforts have boomeranged. Rather than demonstrating that the Justice Department is a guardian of the highest standards of conduct, the Department and its prosecutors have grown ever more deeply mired in partisan political muck. The Department’s reputation now stands at a modern low, thanks to the political machinations demonstrated in the U.S. attorney’s scandal, prosecutions like those of Stevens, Siegelman, and Minor, and the validation of torture and abuse and warrantless surveillance in the service of unethical clients.
“Conduct that people think is reprehensible or immoral doesn’t mean it’s criminal,” Assistant Attorney General Lanny Breuer observes. Indeed, the solution to much of the public integrity conundrum lies in transparency of process—insuring that the public learns of the foibles and ethics lapses of political leaders and can make appropriate decisions guided by this information. This, however, is not the proper role of the Justice Department, which seems these days almost obsessed with safeguarding its own dark secrets and occasional brushes with criminality from public gaze.
The Department’s public integrity section is under new leadership—the most highly qualified it has seen in recent decades. It has seized the right moment for an internal reassessment of the approach to prosecuting public corruption. That should entail recognizing that dedication to fair process must take a center seat even if some scoundrels get off the hook as a result. This reassessment must include some introspection about mistakes and abuses of the past as well, because the most serious misjudgments in the public integrity arena relate to active cases in which the Justice Department is defending utterly indefensible positions. In the end, the Justice Department will also have to learn to operate in the harsh sunlight of public attention, disclosing its mistakes and striving to correct them. This is the essential path back to public trust after years spent straying in the wilderness.
http://harpers.org/archive/2010/12/hbc-90007870
Fed, FDIC Fight Over Whether Bankers Should Be Allowed To Continue Improper Foreclosure Practices
By Susie Madrak
Crooksandliars
Moral hazard! Personal responsibility!
Oh, come on. It's a lot more important in the big picture to keep the banks from being pestered from the consequences of their indifference to laws that only apply to little people:
WASHINGTON -- Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures. The FDIC supports such rules, according to an FDIC official involved in the dispute.
The new regulations would rein in debt collection, loan modification and foreclosure proceedings at bank divisions called "mortgage servicers." Servicers have committed widespread fraud in the foreclosure process. While the recent robo-signing of fraudulent documents has received the most attention, consumer advocates have complained about improper fees and servicer mistakes that lead to foreclosure for years.
[...] On Tuesday, more than fifty economists, banking experts and consumer advocates sent an open letter to banking regulators demanding action on mortgage servicers. Many of the proposed rules are simple standards of banking conduct, like appropriately crediting borrower accounts when they make payments. But most mortgage servicers are effectively unregulated at the moment. The OCC, which oversees the largest servicers, has never taken any formal public regulatory action against a mortgage servicer, allowing abuses to continue without serious consequences.
"Widely reported servicer fraud, whether in the foreclosure process or in the systematic assessment of illegal fees against homeowners, is . . . a serious problem," the letter reads, noting that, "problems of this magnitude are a threat not only to the economic recovery, but to the safety and soundness of all insured depository institutions."
The Wall Street reform bill signed into law by President Barack Obama this summer requires regulators to craft new rules to ensure the securitization market functions properly. The FDIC wants those rules to include standards for mortgage servicer conduct and hopes to have rules ready by the end of next month.
Nevertheless, the Fed and the OCC are pushing back, according to a source at the FDIC. Spokespeople from both the Fed and the OCC said their agencies support new mortgage servicing standards but declined to comment on the new rules being advocated by the FDIC. A spokesman for the Treasury Department said the Treasury supports regulating mortgage servicers, but was unable to comment on the FDIC plan by press time..
Apparently the banks are arguing that just because they screw up a few foreclosures, it's no big deal considering how many they do in a month:
More common are cases like Ms. Ash’s, in which a homeowner was behind on payments, perhaps trying to work out a modification, when bank crews changed the locks.
In Florida, contractors working for Chase Bank used a screwdriver to enter Debra Fischer’s house in Punta Gorda and helped themselves to a laptop, an iPod, a cordless drill, six bottles of wine and a frosty beer, left half-empty on the counter, according to assertions in a lawsuit filed in August. Ms. Fisher was facing foreclosure, but Chase had not yet obtained a court order, her lawyer says.
Chase Bank? Would that be this Chase Bank? The one whose employee just filed a whistleblower case with the SEC, charging all kinds of nefarious illegal practices -- including shredding proofs of payment sent by creditors? The one who fired the employee for pointing these things out?
The break-in was discovered when a Canadian couple renting the house returned from the beach.
Chase officials said such behavior by its contractors, if determined to be true, would be considered unacceptable and corrective action would be taken. Banks and their contractors insist that the number of mistakes is minuscule given the hundreds of thousands of new foreclosure cases filed each month. Bank of America, for instance, says it works with third-party contractors to inspect and maintain more than one million properties each month and has enhanced its controls in the last year to prevent mistakes.
Alan Jaffa, chief executive of Safeguard Properties, which inspects and maintains foreclosed properties for mortgage servicers, acknowledged that a handful of mistakes had been made. In most instances, he said, his company provided a valuable service that protected properties and neighborhoods.
“There is a stigma that we go in, kick the door in and throw grandma out head first and board up the windows,” Mr. Jaffa said. “We are doing a lot of good out there.”
But Alan M. White, a consumer law expert at Valparaiso University in Indiana, says: “Volume is not an excuse for violating someone’s rights.”
Crooksandliars
Moral hazard! Personal responsibility!
Oh, come on. It's a lot more important in the big picture to keep the banks from being pestered from the consequences of their indifference to laws that only apply to little people:
WASHINGTON -- Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures. The FDIC supports such rules, according to an FDIC official involved in the dispute.
The new regulations would rein in debt collection, loan modification and foreclosure proceedings at bank divisions called "mortgage servicers." Servicers have committed widespread fraud in the foreclosure process. While the recent robo-signing of fraudulent documents has received the most attention, consumer advocates have complained about improper fees and servicer mistakes that lead to foreclosure for years.
[...] On Tuesday, more than fifty economists, banking experts and consumer advocates sent an open letter to banking regulators demanding action on mortgage servicers. Many of the proposed rules are simple standards of banking conduct, like appropriately crediting borrower accounts when they make payments. But most mortgage servicers are effectively unregulated at the moment. The OCC, which oversees the largest servicers, has never taken any formal public regulatory action against a mortgage servicer, allowing abuses to continue without serious consequences.
"Widely reported servicer fraud, whether in the foreclosure process or in the systematic assessment of illegal fees against homeowners, is . . . a serious problem," the letter reads, noting that, "problems of this magnitude are a threat not only to the economic recovery, but to the safety and soundness of all insured depository institutions."
The Wall Street reform bill signed into law by President Barack Obama this summer requires regulators to craft new rules to ensure the securitization market functions properly. The FDIC wants those rules to include standards for mortgage servicer conduct and hopes to have rules ready by the end of next month.
Nevertheless, the Fed and the OCC are pushing back, according to a source at the FDIC. Spokespeople from both the Fed and the OCC said their agencies support new mortgage servicing standards but declined to comment on the new rules being advocated by the FDIC. A spokesman for the Treasury Department said the Treasury supports regulating mortgage servicers, but was unable to comment on the FDIC plan by press time..
Apparently the banks are arguing that just because they screw up a few foreclosures, it's no big deal considering how many they do in a month:
More common are cases like Ms. Ash’s, in which a homeowner was behind on payments, perhaps trying to work out a modification, when bank crews changed the locks.
In Florida, contractors working for Chase Bank used a screwdriver to enter Debra Fischer’s house in Punta Gorda and helped themselves to a laptop, an iPod, a cordless drill, six bottles of wine and a frosty beer, left half-empty on the counter, according to assertions in a lawsuit filed in August. Ms. Fisher was facing foreclosure, but Chase had not yet obtained a court order, her lawyer says.
Chase Bank? Would that be this Chase Bank? The one whose employee just filed a whistleblower case with the SEC, charging all kinds of nefarious illegal practices -- including shredding proofs of payment sent by creditors? The one who fired the employee for pointing these things out?
The break-in was discovered when a Canadian couple renting the house returned from the beach.
Chase officials said such behavior by its contractors, if determined to be true, would be considered unacceptable and corrective action would be taken. Banks and their contractors insist that the number of mistakes is minuscule given the hundreds of thousands of new foreclosure cases filed each month. Bank of America, for instance, says it works with third-party contractors to inspect and maintain more than one million properties each month and has enhanced its controls in the last year to prevent mistakes.
Alan Jaffa, chief executive of Safeguard Properties, which inspects and maintains foreclosed properties for mortgage servicers, acknowledged that a handful of mistakes had been made. In most instances, he said, his company provided a valuable service that protected properties and neighborhoods.
“There is a stigma that we go in, kick the door in and throw grandma out head first and board up the windows,” Mr. Jaffa said. “We are doing a lot of good out there.”
But Alan M. White, a consumer law expert at Valparaiso University in Indiana, says: “Volume is not an excuse for violating someone’s rights.”
B of A Grabs Domain Names in Anticipation of WikiLeaks Release
By karoli
Crooksandliars
Looks like WikiLeaks has Bank of America's PR department working overtime. They're buying up negative domain names in anticipation of an unconfirmed but hotly rumored release.
According to Domain Name Wire, the US bank has been aggressively registering domain names including its board of Directors' and senior executives' names followed by "sucks" and "blows".
For example, the company registered a number of domains for CEO Brian Moynihan: BrianMoynihanBlows.com, BrianMoynihanSucks.com, BrianTMoynihanBlows.com, and BrianTMoynihanSucks.com.
The wire report counted hundreds of such domain name registrations on 17 December alone. They were acquired through an intermediary that frequently registers domain names on behalf of large companies, says the report.
Bank of America has reputedly established a 'war room' to draw up strategy and rebutt [sic] allegations likely to emerge from the publication of thousands of internal documents by WikiLeaks.
As anxious as I am to see Bank of America suffer whatever consequences may result from their internal arrogance and malfeasance, I confess that declarations like this one from Assange make me uncomfortable, too.
"We don't want the bank to suffer unless it's called for," Assange told The Times. "But if its management is operating in a responsive way there will be resignations," he said, without giving details about the material.
After all, hostage-taking is hostage-taking, whether it's Republicans or hackers
Crooksandliars
Looks like WikiLeaks has Bank of America's PR department working overtime. They're buying up negative domain names in anticipation of an unconfirmed but hotly rumored release.
According to Domain Name Wire, the US bank has been aggressively registering domain names including its board of Directors' and senior executives' names followed by "sucks" and "blows".
For example, the company registered a number of domains for CEO Brian Moynihan: BrianMoynihanBlows.com, BrianMoynihanSucks.com, BrianTMoynihanBlows.com, and BrianTMoynihanSucks.com.
The wire report counted hundreds of such domain name registrations on 17 December alone. They were acquired through an intermediary that frequently registers domain names on behalf of large companies, says the report.
Bank of America has reputedly established a 'war room' to draw up strategy and rebutt [sic] allegations likely to emerge from the publication of thousands of internal documents by WikiLeaks.
As anxious as I am to see Bank of America suffer whatever consequences may result from their internal arrogance and malfeasance, I confess that declarations like this one from Assange make me uncomfortable, too.
"We don't want the bank to suffer unless it's called for," Assange told The Times. "But if its management is operating in a responsive way there will be resignations," he said, without giving details about the material.
After all, hostage-taking is hostage-taking, whether it's Republicans or hackers
Oh Oh... Statistics Are A Bitch
by Karl Denninger
The Market-Ticker
Gee, you know, "nearly all of these loans are good!"
Or are they?
Bank of America Corp. lost a bid to prevent MBIA Inc. from using statistical sampling to pursue repurchase demands in a lawsuit claiming it was fraudulently induced to insure $21 billion in mortgage-backed securities.
MBIA asked New York State Supreme Court Judge Eileen Bransten to allow company lawyers to develop evidence using samples from 368,000 mortgages in 15 securitized pools to establish its fraud claims, rather than go through each loan.
I like it. A lot.
This is definitely NOT in the banks favor.
BAC's claim that they're going to fight "loan by loan" has suddenly turned into nothing more than puffery on their recent conference call and other pronouncements. What BAC's Moynihan should have said is that "We're going to attempt to fight loan by loan."
What Moynihan and BAC want, and what reality is going to serve up upon them, looks a bit different this morning...... and if the truth turns out to be that just as Citi's former chief underwriter testified a huge percentage of these loans were in fact trash, that could be serious trouble.
Ps: I'd like to see some statistical sampling - and reporting - on how many of those original notes have been properly endorsed and delivered into the trusts. I bet Mr. Garfield would argue the answer to that question is "statistically, zero."
The Market-Ticker
Gee, you know, "nearly all of these loans are good!"
Or are they?
Bank of America Corp. lost a bid to prevent MBIA Inc. from using statistical sampling to pursue repurchase demands in a lawsuit claiming it was fraudulently induced to insure $21 billion in mortgage-backed securities.
MBIA asked New York State Supreme Court Judge Eileen Bransten to allow company lawyers to develop evidence using samples from 368,000 mortgages in 15 securitized pools to establish its fraud claims, rather than go through each loan.
I like it. A lot.
This is definitely NOT in the banks favor.
BAC's claim that they're going to fight "loan by loan" has suddenly turned into nothing more than puffery on their recent conference call and other pronouncements. What BAC's Moynihan should have said is that "We're going to attempt to fight loan by loan."
What Moynihan and BAC want, and what reality is going to serve up upon them, looks a bit different this morning...... and if the truth turns out to be that just as Citi's former chief underwriter testified a huge percentage of these loans were in fact trash, that could be serious trouble.
Ps: I'd like to see some statistical sampling - and reporting - on how many of those original notes have been properly endorsed and delivered into the trusts. I bet Mr. Garfield would argue the answer to that question is "statistically, zero."
Pictures of Hopelessness
by Michael Panzner
Financial Armageddon
Talk about losing hope.
A new survey of unemployed Americans from Rutgers' Heldrich Center for Workforce Development, entitled "The Shattered American Dream: Unemployed Workers Lose Ground, Hope, and Faith in their Futures," documents dramatic erosion in the quality of life for millions of Americans.
According to the report's authors,
their financial reserves are exhausted, their job prospects nil, their family relations stressed and their belief in government’s ability to help them is negligible. They feel hopeless and powerless, unable to see their way out of the Great Recession that has claimed 8.5 million jobs.
Indeed, one doesn't even have to read through the entire 45 pages of the report to see just how bad things have gotten for so many individuals and families; these three charts just about say it all:
That last chart, which highlights the fact that more than half of those polled believe a recovery is at least three to five years away, is particularly depressing.
Still, the good news is that Wall Street is happy -- right?
http://www.financialarmageddon.com/2010/12/loss-of-faith.html
Financial Armageddon
Talk about losing hope.
A new survey of unemployed Americans from Rutgers' Heldrich Center for Workforce Development, entitled "The Shattered American Dream: Unemployed Workers Lose Ground, Hope, and Faith in their Futures," documents dramatic erosion in the quality of life for millions of Americans.
According to the report's authors,
their financial reserves are exhausted, their job prospects nil, their family relations stressed and their belief in government’s ability to help them is negligible. They feel hopeless and powerless, unable to see their way out of the Great Recession that has claimed 8.5 million jobs.
Indeed, one doesn't even have to read through the entire 45 pages of the report to see just how bad things have gotten for so many individuals and families; these three charts just about say it all:
Still, the good news is that Wall Street is happy -- right?
http://www.financialarmageddon.com/2010/12/loss-of-faith.html
Congressman Miller Joins Economists and Financial Experts In Demanding a Stop to Mortgage Servicer Fraud -- a Significant Cause of Foreclosures
By Washington's Blog
As Yves Smith notes:
As we have written, and as experts and foreclosure defense lawyers have reported in Congressional testimony, and as pending lawsuits by attorneys general in Arizona and Nevada allege, servicer abuses are a significant cause of foreclosures. These include including delaying and misapplying payments, using false hopes of pending mods to extract more payments from consumers, and applying compounding junk fees.
Unfortunately, the Federal Reserve and other regulators have indicated through act and deed that they will not rein in fraud by the big banks and mortgage servicers or otherwise lift a finger to help homeowners.
For example:
•The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures (and see this)
•The Fed is trying to make it harder for homeowners to fight mortgage fraud by gutting truth in lending laws
•Neither the Fed or Senate are taking any steps to stop banks from unlawfully breaking into people's homes
Indeed:
•As Yves Smith wrote recently about treasury barring use of TARP funds to help borrowers facing foreclosure:
"If you had any doubts about whose side the Administration is on, this story should settle all doubts."
•And as Professors William K. Black and L. Randall Wray note, in a slightly different context:
"The Fed cannot conduct a credible investigation. It has taken so many fraudulent nonprime loans and securities as collateral that it is the leading proponent of covering up these losses."
Fortunately, Congressman Brad Miller is sending the following letter to the financial regulators, and is currently rounding up additional signatories:
The Honorable Timothy Geithner Secretary
of the Treasury Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
The Honorable Edward DeMarco Director
(Acting) Federal Housing Finance Agency
(FHFA) 1700 G Street, N.W. 4th Floor
Washington, DC 20552
The Honorable Sheila Bair Chairman
Federal Deposit Insurance Corporation 550
17th Street N.W. Washington D.C., DC
20006
The Honorable Ben S. Bernanke Chairman
Board of Governors of the Federal Reserve
System 20th Street and Constitution Avenue
N.W. Washington, DC 20551
The Honorable Mary L. Schapiro Chairman
Securities and Exchange Commission 100 F
Street, N.E. Washington, DC 20549
The Honorable John Walsh Comptroller of
the Currency (Acting) Administrator of
National Banks 250 E Street, S.W.
Washington, DC 20219
Dear Secretary Geithner, Chairman Bair, Chairman Shapiro, Acting Director DeMarco, Chairman Bernanke and Controller Walsh:
We are writing to urge that any exception to the credit risk retention requirements of section 941 of the Dodd-Frank Act include rigorous requirements for servicing securitized residential mortgages.
The Act requires that securitizers retain five percent of the credit risk on mortgage-backed securities. The requirement is the subject of a study by Christopher M. James published by the Federal Reserve Bank of San Francisco dated December 13, 2010, and entitled “Mortgage-Backed Securities: How Important Is ‘Skin in the Game’?”, which finds that the requirement will have the intended effect of reducing “moral hazard” and significantly reducing the loss ratios on mortgage-backed securities.
The Act provides for an exception, however, for “qualified residential mortgages” and for other “exemptions, exceptions, and adjustments” to the risk-retention requirement. We strongly urge that you use great care in allowing any exception to the risk retention requirement, and that you be vigilant in assuring that any exception not defeat the purpose of the requirement. Recent experience in financial regulation has been that seemingly modest, reasonable exceptions have swallowed the rules and allowed abusive practices to continue unabated. In considering any requested exception under section 941, please remember that the advocates for rule-swallowing exceptions to other financial regulation have not been entirely candid with regulators or legislators on the likely effect of those exceptions.
The rules adopted pursuant to section 941 must, of course, require rigorous underwriting standards for “qualified residential mortgages” or any other mortgages excepted from the risk retention requirement, but underwriting requirements are not enough. The rules must also address the servicing of securitized mortgages. Much of the turmoil in the housing market, which is largely responsible for the painfully slow recovery, is the result not just of poorly underwritten mortgages, but of conduct by mortgage servicers.
We direct your attention to the “Open Letter to U.S. Regulators Regarding National Loan Servicing Standards” dated December 21, 2010, and signed by 51 people with extensive knowledge of mortgage servicing (the “Rosner-Whalen letter”). We strongly urge that you consider closely the recommendations included in that letter.
The Rosner-Whalen letter makes sensible recommendations regarding the treatment of payments by homeowners, “perverse incentives” in servicer compensation, mortgage documentation, and foreclosure forbearance during mortgage modification efforts.
We especially urge that any exception require that servicers modify mortgages pursuant to established criteria to avoid foreclosure where possible. The statute governing “Farmer Mac” mortgages provides a useful example of such criteria. See 12 U.S.C. 2202a (“Restructuring Distressed Loans”). Foreclosures are catastrophic for homeowners, holders of mortgage-backed securities, the housing market, and the economy as a whole.
The conduct of servicers is largely responsible for much unnecessary hardship. A
requirement that servicers modify mortgage according to established criteria to avoid foreclosure can avoid that hardship in the future. Neutral, established criteria will also avoid “tranche warfare” between classes of investors.
We also especially urge that any rule for securitized mortgages require that servicers not be affiliated with the securitizer. There are obvious potential conflicts of interest, and no apparent countervailing justification. At a recent hearing of the House Financial Services Committee, several witnesses from major servicers were unable to offer any advantage in being affiliated with securitizers, other than to offer “full service” to customers. That justification is entirely unpersuasive. Homeowners may select the bank with which they have a credit card or a checking account, but they have no say in who services their mortgage.
In fact, community banks and credit unions have been reluctant to sell the mortgages that they originate to “private-label securitizers” for fear that the mortgages will be serviced by an affiliate of a bank, and the servicer will use that relationship to “cross market” other banking services to the homeowner. Requiring that servicers be independent of banks, therefore, would advance the goal of increasing the availability of credit on reasonable terms to consumers.
The Dodd-Frank Actives provides you ample authority to reform servicing practices, and regulation of mortgage securitization will be ineffective without such reform.
Sincerely,
Rep. Brad Miller [and others]
Miller 941 Letter FINAL
Word on the Hill is that Miller's letter is getting traction in the House.
The Whalen-Rosner letter, co-signed by prominent economists such as Nouriel Roubini and James Galbraith, is here:
Securitization Standards Letter
Securitization Standards Letter
To help support the efforts of Congressman Miller, Chris Whalen, Josh Rosner and the others taking a laboring oar on trying to clamp down on fraud by mortgage servicers, please sign this petition.
As Yves Smith notes:
As we have written, and as experts and foreclosure defense lawyers have reported in Congressional testimony, and as pending lawsuits by attorneys general in Arizona and Nevada allege, servicer abuses are a significant cause of foreclosures. These include including delaying and misapplying payments, using false hopes of pending mods to extract more payments from consumers, and applying compounding junk fees.
Unfortunately, the Federal Reserve and other regulators have indicated through act and deed that they will not rein in fraud by the big banks and mortgage servicers or otherwise lift a finger to help homeowners.
For example:
•The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures (and see this)
•The Fed is trying to make it harder for homeowners to fight mortgage fraud by gutting truth in lending laws
•Neither the Fed or Senate are taking any steps to stop banks from unlawfully breaking into people's homes
Indeed:
•As Yves Smith wrote recently about treasury barring use of TARP funds to help borrowers facing foreclosure:
"If you had any doubts about whose side the Administration is on, this story should settle all doubts."
•And as Professors William K. Black and L. Randall Wray note, in a slightly different context:
"The Fed cannot conduct a credible investigation. It has taken so many fraudulent nonprime loans and securities as collateral that it is the leading proponent of covering up these losses."
Fortunately, Congressman Brad Miller is sending the following letter to the financial regulators, and is currently rounding up additional signatories:
The Honorable Timothy Geithner Secretary
of the Treasury Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
The Honorable Edward DeMarco Director
(Acting) Federal Housing Finance Agency
(FHFA) 1700 G Street, N.W. 4th Floor
Washington, DC 20552
The Honorable Sheila Bair Chairman
Federal Deposit Insurance Corporation 550
17th Street N.W. Washington D.C., DC
20006
The Honorable Ben S. Bernanke Chairman
Board of Governors of the Federal Reserve
System 20th Street and Constitution Avenue
N.W. Washington, DC 20551
The Honorable Mary L. Schapiro Chairman
Securities and Exchange Commission 100 F
Street, N.E. Washington, DC 20549
The Honorable John Walsh Comptroller of
the Currency (Acting) Administrator of
National Banks 250 E Street, S.W.
Washington, DC 20219
Dear Secretary Geithner, Chairman Bair, Chairman Shapiro, Acting Director DeMarco, Chairman Bernanke and Controller Walsh:
We are writing to urge that any exception to the credit risk retention requirements of section 941 of the Dodd-Frank Act include rigorous requirements for servicing securitized residential mortgages.
The Act requires that securitizers retain five percent of the credit risk on mortgage-backed securities. The requirement is the subject of a study by Christopher M. James published by the Federal Reserve Bank of San Francisco dated December 13, 2010, and entitled “Mortgage-Backed Securities: How Important Is ‘Skin in the Game’?”, which finds that the requirement will have the intended effect of reducing “moral hazard” and significantly reducing the loss ratios on mortgage-backed securities.
The Act provides for an exception, however, for “qualified residential mortgages” and for other “exemptions, exceptions, and adjustments” to the risk-retention requirement. We strongly urge that you use great care in allowing any exception to the risk retention requirement, and that you be vigilant in assuring that any exception not defeat the purpose of the requirement. Recent experience in financial regulation has been that seemingly modest, reasonable exceptions have swallowed the rules and allowed abusive practices to continue unabated. In considering any requested exception under section 941, please remember that the advocates for rule-swallowing exceptions to other financial regulation have not been entirely candid with regulators or legislators on the likely effect of those exceptions.
The rules adopted pursuant to section 941 must, of course, require rigorous underwriting standards for “qualified residential mortgages” or any other mortgages excepted from the risk retention requirement, but underwriting requirements are not enough. The rules must also address the servicing of securitized mortgages. Much of the turmoil in the housing market, which is largely responsible for the painfully slow recovery, is the result not just of poorly underwritten mortgages, but of conduct by mortgage servicers.
We direct your attention to the “Open Letter to U.S. Regulators Regarding National Loan Servicing Standards” dated December 21, 2010, and signed by 51 people with extensive knowledge of mortgage servicing (the “Rosner-Whalen letter”). We strongly urge that you consider closely the recommendations included in that letter.
The Rosner-Whalen letter makes sensible recommendations regarding the treatment of payments by homeowners, “perverse incentives” in servicer compensation, mortgage documentation, and foreclosure forbearance during mortgage modification efforts.
We especially urge that any exception require that servicers modify mortgages pursuant to established criteria to avoid foreclosure where possible. The statute governing “Farmer Mac” mortgages provides a useful example of such criteria. See 12 U.S.C. 2202a (“Restructuring Distressed Loans”). Foreclosures are catastrophic for homeowners, holders of mortgage-backed securities, the housing market, and the economy as a whole.
The conduct of servicers is largely responsible for much unnecessary hardship. A
requirement that servicers modify mortgage according to established criteria to avoid foreclosure can avoid that hardship in the future. Neutral, established criteria will also avoid “tranche warfare” between classes of investors.
We also especially urge that any rule for securitized mortgages require that servicers not be affiliated with the securitizer. There are obvious potential conflicts of interest, and no apparent countervailing justification. At a recent hearing of the House Financial Services Committee, several witnesses from major servicers were unable to offer any advantage in being affiliated with securitizers, other than to offer “full service” to customers. That justification is entirely unpersuasive. Homeowners may select the bank with which they have a credit card or a checking account, but they have no say in who services their mortgage.
In fact, community banks and credit unions have been reluctant to sell the mortgages that they originate to “private-label securitizers” for fear that the mortgages will be serviced by an affiliate of a bank, and the servicer will use that relationship to “cross market” other banking services to the homeowner. Requiring that servicers be independent of banks, therefore, would advance the goal of increasing the availability of credit on reasonable terms to consumers.
The Dodd-Frank Actives provides you ample authority to reform servicing practices, and regulation of mortgage securitization will be ineffective without such reform.
Sincerely,
Rep. Brad Miller [and others]
Miller 941 Letter FINAL
Word on the Hill is that Miller's letter is getting traction in the House.
The Whalen-Rosner letter, co-signed by prominent economists such as Nouriel Roubini and James Galbraith, is here:
Securitization Standards Letter
Securitization Standards Letter
To help support the efforts of Congressman Miller, Chris Whalen, Josh Rosner and the others taking a laboring oar on trying to clamp down on fraud by mortgage servicers, please sign this petition.
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