Friday, September 30, 2011
Kenneth O'Donnell - Red Coat NYPD Thug Identified
The NYPD officer caught on video committing acts of brutality against Occupy Wall Street protestors has been identified through social media crowd-sourcing as Kenneth O’Donnell.
PHOTO - Comparing 2012 Campaign Contributions For Obama, Ron Paul, Mitt Romney - Goldman Sachs Dominates
by dailybail.com
Notice Goldman Sachs prominence for Obama and Mitt Romney - Are they actually the same candidate, as some have suggested? Click the link below and then click once on the photo to see a larger image.
■Click HERE to see full size
Notice Goldman Sachs prominence for Obama and Mitt Romney - Are they actually the same candidate, as some have suggested? Click the link below and then click once on the photo to see a larger image.
■Click HERE to see full size
When a Paradigm Falls and Nobody Hears It
BY Chris Lehmann
a former managing editor of In These Times, is co-editor of BookForum and senior editor of CQ Weekly magazine. He has written for The Atlantic Monthly, The Baffler, Slate.com and the Washington Post.
The neoliberal status quo is indefensible—yet the public silently accepts its supposed legitimacy.
Future historians will be hard-pressed to know what to make of the giddy reveries of the 1990s. It was not merely the age when sage interpreters of the world system declared the end of history, ideology and other assorted curdled leavings of the modern age; it was also the moment when the global economic order was supposed to be reaching its own great moment of singularity under the placid technocratic rubric of “neoliberalism.”
The neoliberal dream was basically the economic version of what utopian-minded tech prophets call the singularity: the coming near-mystical convergence of forces that would sort out the channels of information and production and knowledge work into a seamless, world-conquering whole.
As social paradigms go, that is plenty ambitious. But as Marxist theorist David Harvey notes, the neoliberal market consensus was also devised to shore up the far more brutish goal of restoring “power to economic elites”—a project that ultimately entails punitive top-down measures that tend to give the lie to the “liberal” side of this market-utopian formulation. Neoliberal societies are marked, he writes, by “a strong preference for government by executive order and by judicial decision rather than by democratic … decision-making.”
When we see the squeeze put on the institutions that shore up neoliberal economies, the results can look like a parody of the sort of popular sovereignty that defines plain-old liberal polities. Witness the disastrous agon that Washington conducted this past summer over the elevation of the debt ceiling: The leaders of our most popular branch of government, the House of Representatives, spun well beyond reach of anything like sane deliberation, hewing instead to a brand of market fundamentalism so extreme that it sent the markets themselves shuddering, once Standard and Poor’s downgraded the United States’ credit rating to AA+.
The S&P report on the downgrade insisted on the need to contain the country’s debt by raising taxes—a measure that the report’s authors rightly divined was a third rail in the present American neoliberal consensus. This point, of course, received virtually no serious attention from the major-domos of economic policy.
Meanwhile, in the eurozone—the sprawling economic bloc lovingly fashioned by the free-trade planners of continental neoliberalism—the specter of unstable debt produced a series of legitimation crises. Greek citizens rose up to protest government cuts that shred the social safety net to bolster the bottom lines of global banks. As the conservative government of Silvio Berlusconi in Italy likewise faced an austerity reckoning, the Italian prime minister-cum-media-mogul did the unthinkable and actually approved an increase in capital gains taxes, while enacting a tax surcharge on the nation’s high-income earners.
In England, meanwhile, working-class youth rioted, which led to draconian police crackdowns after the fact—since neoliberalism also thrives on punitive social control aimed at the lower orders. Because the English uprisings were far more generalized than the unrest on the continent, they betokened something profoundly unsettling to the traditional guardians of neoliberal verities. As Nouriel Roubini, the market savant who divined the onset of the global mortgage meltdown, noted in an eye-opening commentary, the summer’s popular uprisings “are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.”
Roubini stopped short of calling for the workers of the world to throw off their chains—but just barely. He raised an urgent cry for tighter regulation of “a financial system run amok” and even raised the specter of true neoliberal blasphemy: “more progressive taxation.”
When market-seers such as Roubini sound faintly like the reincarnation of Joe Hill, it seems a cause for real hope. But neoliberalism is adept at depoliticizing public discussion of economic policy. So his cri de coeur is likely to meet the same fate that has greeted neoliberalism’s critics on the left for the past three decades: deafening public silence.
a former managing editor of In These Times, is co-editor of BookForum and senior editor of CQ Weekly magazine. He has written for The Atlantic Monthly, The Baffler, Slate.com and the Washington Post.
The neoliberal status quo is indefensible—yet the public silently accepts its supposed legitimacy.
Future historians will be hard-pressed to know what to make of the giddy reveries of the 1990s. It was not merely the age when sage interpreters of the world system declared the end of history, ideology and other assorted curdled leavings of the modern age; it was also the moment when the global economic order was supposed to be reaching its own great moment of singularity under the placid technocratic rubric of “neoliberalism.”
The neoliberal dream was basically the economic version of what utopian-minded tech prophets call the singularity: the coming near-mystical convergence of forces that would sort out the channels of information and production and knowledge work into a seamless, world-conquering whole.
As social paradigms go, that is plenty ambitious. But as Marxist theorist David Harvey notes, the neoliberal market consensus was also devised to shore up the far more brutish goal of restoring “power to economic elites”—a project that ultimately entails punitive top-down measures that tend to give the lie to the “liberal” side of this market-utopian formulation. Neoliberal societies are marked, he writes, by “a strong preference for government by executive order and by judicial decision rather than by democratic … decision-making.”
When we see the squeeze put on the institutions that shore up neoliberal economies, the results can look like a parody of the sort of popular sovereignty that defines plain-old liberal polities. Witness the disastrous agon that Washington conducted this past summer over the elevation of the debt ceiling: The leaders of our most popular branch of government, the House of Representatives, spun well beyond reach of anything like sane deliberation, hewing instead to a brand of market fundamentalism so extreme that it sent the markets themselves shuddering, once Standard and Poor’s downgraded the United States’ credit rating to AA+.
The S&P report on the downgrade insisted on the need to contain the country’s debt by raising taxes—a measure that the report’s authors rightly divined was a third rail in the present American neoliberal consensus. This point, of course, received virtually no serious attention from the major-domos of economic policy.
Meanwhile, in the eurozone—the sprawling economic bloc lovingly fashioned by the free-trade planners of continental neoliberalism—the specter of unstable debt produced a series of legitimation crises. Greek citizens rose up to protest government cuts that shred the social safety net to bolster the bottom lines of global banks. As the conservative government of Silvio Berlusconi in Italy likewise faced an austerity reckoning, the Italian prime minister-cum-media-mogul did the unthinkable and actually approved an increase in capital gains taxes, while enacting a tax surcharge on the nation’s high-income earners.
In England, meanwhile, working-class youth rioted, which led to draconian police crackdowns after the fact—since neoliberalism also thrives on punitive social control aimed at the lower orders. Because the English uprisings were far more generalized than the unrest on the continent, they betokened something profoundly unsettling to the traditional guardians of neoliberal verities. As Nouriel Roubini, the market savant who divined the onset of the global mortgage meltdown, noted in an eye-opening commentary, the summer’s popular uprisings “are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.”
Roubini stopped short of calling for the workers of the world to throw off their chains—but just barely. He raised an urgent cry for tighter regulation of “a financial system run amok” and even raised the specter of true neoliberal blasphemy: “more progressive taxation.”
When market-seers such as Roubini sound faintly like the reincarnation of Joe Hill, it seems a cause for real hope. But neoliberalism is adept at depoliticizing public discussion of economic policy. So his cri de coeur is likely to meet the same fate that has greeted neoliberalism’s critics on the left for the past three decades: deafening public silence.
Occupy Wall Street
theatlantic.com
In New York City's Financial District, hundreds of activists have been converging on Lower Manhattan over the past two weeks, protesting as part of an "Occupy Wall Street" movement. The protests are largely rallies against the influence of corporate money in politics, but participants' grievances also include frustrations with corporate greed, anger at financial and social inequality, and several other issues. Nearly 80 people were arrested last weekend in a series of incidents with the New York police as the protesters attempted to march uptown. Most are now camped out in nearby Zucotti Park. Demonstrations also took place yesterday in San Francisco, and an "Occupy Boston" protest is planned for tonight, September 30. Collected here are a handful of images of the protesters occupying Wall Street from the past two weeks. [35 photos]
In New York City's Financial District, hundreds of activists have been converging on Lower Manhattan over the past two weeks, protesting as part of an "Occupy Wall Street" movement. The protests are largely rallies against the influence of corporate money in politics, but participants' grievances also include frustrations with corporate greed, anger at financial and social inequality, and several other issues. Nearly 80 people were arrested last weekend in a series of incidents with the New York police as the protesters attempted to march uptown. Most are now camped out in nearby Zucotti Park. Demonstrations also took place yesterday in San Francisco, and an "Occupy Boston" protest is planned for tonight, September 30. Collected here are a handful of images of the protesters occupying Wall Street from the past two weeks. [35 photos]
Bank of America Boldly Informs Florida Law Offices “BofA Will No Longer Follow Florida Laws”
4closurefraud.org
BoA Boldly Informs Florida Law Offices “BoA Will Not Follow Florida Laws”
Posted by L
This just in from my friend H:
Get a load of this. BoA is telling law offices in the State of Florida, that our laws for service of process no longer apply to it. Under Florida law, if a foreign corporation does business in Florida, it must designate a Resident Agent, so that there is someone in this state who will accept service of lawsuits on its behalf. BoA is trying to say: “Forget your stupid laws. They don’t apply to us. Want to sue us? Send your lawsuit to our office in New York.” (and send your money there too. Leave the home in Florida. We’ll be back for it soon.)
Read the law on Service of Process for Corporations, then prepare to be OUTRAGED at yet another example of the banksters making their own rules:
48.081 Service on corporation.—
(1) Process against any private corporation, domestic or foreign, may be served:
(a) On the president or vice president, or other head of the corporation;
(b) In the absence of any person described in paragraph (a), on the cashier, treasurer, secretary, or general manager;
(c) In the absence of any person described in paragraph (a) or paragraph (b), on any director; or
(d) In the absence of any person described in paragraph (a), paragraph (b), or paragraph (c), on any officer or business agent residing in the state.
(2) If a foreign corporation has none of the foregoing officers or agents in this state, service may be made on any agent transacting business for it in this state.
(3)(a) As an alternative to all of the foregoing, process may be served on the agent designated by the corporation under s. 48.091. However, if service cannot be made on a registered agent because of failure to comply with s. 48.091, service of process shall be permitted on any employee at the corporation’s principal place of business or on any employee of the registered agent. A person attempting to serve process pursuant to this paragraph may serve the process on any employee of the registered agent during the first attempt at service even if the registered agent is temporarily absent from his or her office.
(b) If the address provided for the registered agent, officer, director, or principal place of business is a residence or private mailbox, service on the corporation may be made by serving the registered agent, officer, or director in accordance with s. 48.031.
(4) This section does not apply to service of process on insurance companies.
(5) When a corporation engages in substantial and not isolated activities within this state, or has a business office within the state and is actually engaged in the transaction of business therefrom, service upon any officer or business agent while on corporate business within this state may personally be made, pursuant to this section, and it is not necessary in such case that the action, suit, or proceeding against the corporation shall have arisen out of any transaction or operation connected with or incidental to the business being transacted within the state.
BofA’s notice below…
They want to be served by certified mail…
Bank of America – Notice of Address Change for Legal Order Processing
Bank of America - Notice of Address Change for Legal Order Processing
BoA Boldly Informs Florida Law Offices “BoA Will Not Follow Florida Laws”
Posted by L
This just in from my friend H:
Get a load of this. BoA is telling law offices in the State of Florida, that our laws for service of process no longer apply to it. Under Florida law, if a foreign corporation does business in Florida, it must designate a Resident Agent, so that there is someone in this state who will accept service of lawsuits on its behalf. BoA is trying to say: “Forget your stupid laws. They don’t apply to us. Want to sue us? Send your lawsuit to our office in New York.” (and send your money there too. Leave the home in Florida. We’ll be back for it soon.)
Read the law on Service of Process for Corporations, then prepare to be OUTRAGED at yet another example of the banksters making their own rules:
48.081 Service on corporation.—
(1) Process against any private corporation, domestic or foreign, may be served:
(a) On the president or vice president, or other head of the corporation;
(b) In the absence of any person described in paragraph (a), on the cashier, treasurer, secretary, or general manager;
(c) In the absence of any person described in paragraph (a) or paragraph (b), on any director; or
(d) In the absence of any person described in paragraph (a), paragraph (b), or paragraph (c), on any officer or business agent residing in the state.
(2) If a foreign corporation has none of the foregoing officers or agents in this state, service may be made on any agent transacting business for it in this state.
(3)(a) As an alternative to all of the foregoing, process may be served on the agent designated by the corporation under s. 48.091. However, if service cannot be made on a registered agent because of failure to comply with s. 48.091, service of process shall be permitted on any employee at the corporation’s principal place of business or on any employee of the registered agent. A person attempting to serve process pursuant to this paragraph may serve the process on any employee of the registered agent during the first attempt at service even if the registered agent is temporarily absent from his or her office.
(b) If the address provided for the registered agent, officer, director, or principal place of business is a residence or private mailbox, service on the corporation may be made by serving the registered agent, officer, or director in accordance with s. 48.031.
(4) This section does not apply to service of process on insurance companies.
(5) When a corporation engages in substantial and not isolated activities within this state, or has a business office within the state and is actually engaged in the transaction of business therefrom, service upon any officer or business agent while on corporate business within this state may personally be made, pursuant to this section, and it is not necessary in such case that the action, suit, or proceeding against the corporation shall have arisen out of any transaction or operation connected with or incidental to the business being transacted within the state.
BofA’s notice below…
They want to be served by certified mail…
Bank of America – Notice of Address Change for Legal Order Processing
Bank of America - Notice of Address Change for Legal Order Processing
Quelle Surprise! SIGTARP Report Finds Citi, Bank of America Allowed to Leave TARP Prematurely
by Yves Smith
We said at the time it was inexcusable for the Treasury to allow banks to repay the TARP as early as they did (US banks are still below the capital levels many experts consider to be desirable; Andrew Haldane of the Bank of England has made a well-substantiated case that higher capital levels cannot remedy the problem, since the social costs of a major bank blow up are so great, and you therefore need very tough restrictions on their activities).
And why were the bank so eager slip the TARP leash? To escape some pretty minor restrictions on executive compensation. This had NOTHING to do with the health of the enterprise and everything to do with executive greed. And not surprisingly, Treasury indulged it.
Due to the late (for me) hour, I’m relying on the report by Shahien Nasiripour of the Financial Times, who seems to be releasing the story before the actual SIGTARP report is out. My big reservation is why the line was drawn at Citi and Bank of America. Yes, they were clearly the weakest banks, but I don’t buy the implicit endorsement of the ability of all the rest of the TARP recipients to weather another financial crisis with no government support.
SIGTARP is upset that the Treasury went through the stress tests, which among other things, determined how much capital the banks would need to raise, then ignored its own findings. The SIGTARP discusses that Treasury effectively made up on the fly how much more capital the banks would need to scrounge up, with the required number being lower than the stress test number.
Let’s put aside the fact that this blog and quite a few financial services experts not in the pay of the banks or dependent on their good will (like equity analysts needing access) called the stress tests a sham. We’re surprised that SIGTARP finds this Treasury shell game (of allowing the banks to get away with raising less dough than the stress tests indicated) to be a surprise. We reported that this was Treasury’s plan back in May 2009:
This is the legacy of regulators who are so subject to what Willem Buiter’s “cognitive regulatory capture” that the believe the Wall Street party line, that they are the best and the brightest, and therefore are better judges of how to manage their affairs than any outsider. Despite ample evidence to the contrary, plus the danger of giving hungry organizations a taxpayer backstop, the Treasury has shown a predictable lack of resolve, completely in keeping with its industry-favoring posture.
The most disturbing revelation comes via the Financial Times:
US banks have been given government assurances they will be allowed to raise less than the $74.6bn in equity mandated by stress tests if earnings over the next six months outstrip regulators’ forecasts, bankers said.
The agreement, which was not mentioned when the government revealed the results on Thursday, means some banks may not have to raise as much equity through share issues and asset sales as the market is expecting. It could also increase the incentive for banks to book profits in the next two quarters.
So get this: the official releases on the stress test results and process weren’t honest and complete. We basically have the real deal, which is the unwritten understanding between the Treasury and the banks, versus the phony version presented to the public. And if we can’t even believe the headline number in the tests (the amount of money they are supposed to raise), is there any other aspect we can trust? How many other winks and nods were there between the Treasury and banks that weren’t leaked to the press?
Admittedly, there is normally some give and take with a regulator, but the public has been led to believe that this process would be transparent. It has wound up being somewhat so by virtue of leaks rather than by living up to its promise.
And in case you missed it, the phrase in the FT, “increase the incentive for banks to book profits in the next two quarters” is code for “fabricate earnings”. Per below, there were quite a few instances of permissive accounting this quarter. The powers that be are inviting more of the same. And this is all in the name of boosting confidence.
Key extracts from the Financial Times report today:
US regulators moved too quickly to allow Bank of America and Citigroup to repay their troubled asset relief programme bail-outs, according to a new government audit…
Policymakers at the Treasury department also sought to allow the banks a rapid exit, at one point approving a BofA proposal that ultimately was rejected because it allowed the company to leave the assistance programme by issuing $4.8bn less common equity capital than was required.
Shortly after so-called “stress tests” in 2009 revealed capital shortfalls in the largest US banks, regulators developed a benchmark designed to guide Tarp exit procedures. For every $2 in Tarp aid reimbursed, banks were to raise $1 in new common equity. The assessment was based in part on banks’ capital needs.
Just a few weeks later, that benchmark was tossed aside, resulting in an “ad hoc” and “inconsistent” process, Sigtarp said…
After submitting 11 proposals, BofA was finally allowed to repay taxpayers their $45bn by issuing $18.8bn in common equity, $1.7bn in stock to employees and shedding $4bn in assets.
At one point, the bank requested it be allowed to repay the part of its rescue package that would have ended restrictions on executive pay, an indication it was principally concerned with the issue, Ms Romero said. Regulators balked.
The Federal Deposit Insurance Corp, then led by Sheila Bair, insisted that the bank had to raise more common equity to meet benchmarks, as opposed to meeting capital levels through “gimmicks” such as employee stock issuances and asset sales. Treasury approved BofA’s seventh proposal, which called for reduced common equity and greater asset sales…
BofA exited Tarp on December 9 2009, when its share price closed at $15.39. It has since plunged about 60 per cent. It closed at $6.35 on Thursday.
Unfortunately, we are likely to see all too soon how well Treasury’s secret pact with the banks worked. And unfortunately, if they are proven to have gambled and lost, no one in the officialdom or at the banks will suffer all that much while the rest of us suffer considerable costs.
We said at the time it was inexcusable for the Treasury to allow banks to repay the TARP as early as they did (US banks are still below the capital levels many experts consider to be desirable; Andrew Haldane of the Bank of England has made a well-substantiated case that higher capital levels cannot remedy the problem, since the social costs of a major bank blow up are so great, and you therefore need very tough restrictions on their activities).
And why were the bank so eager slip the TARP leash? To escape some pretty minor restrictions on executive compensation. This had NOTHING to do with the health of the enterprise and everything to do with executive greed. And not surprisingly, Treasury indulged it.
Due to the late (for me) hour, I’m relying on the report by Shahien Nasiripour of the Financial Times, who seems to be releasing the story before the actual SIGTARP report is out. My big reservation is why the line was drawn at Citi and Bank of America. Yes, they were clearly the weakest banks, but I don’t buy the implicit endorsement of the ability of all the rest of the TARP recipients to weather another financial crisis with no government support.
SIGTARP is upset that the Treasury went through the stress tests, which among other things, determined how much capital the banks would need to raise, then ignored its own findings. The SIGTARP discusses that Treasury effectively made up on the fly how much more capital the banks would need to scrounge up, with the required number being lower than the stress test number.
Let’s put aside the fact that this blog and quite a few financial services experts not in the pay of the banks or dependent on their good will (like equity analysts needing access) called the stress tests a sham. We’re surprised that SIGTARP finds this Treasury shell game (of allowing the banks to get away with raising less dough than the stress tests indicated) to be a surprise. We reported that this was Treasury’s plan back in May 2009:
This is the legacy of regulators who are so subject to what Willem Buiter’s “cognitive regulatory capture” that the believe the Wall Street party line, that they are the best and the brightest, and therefore are better judges of how to manage their affairs than any outsider. Despite ample evidence to the contrary, plus the danger of giving hungry organizations a taxpayer backstop, the Treasury has shown a predictable lack of resolve, completely in keeping with its industry-favoring posture.
The most disturbing revelation comes via the Financial Times:
US banks have been given government assurances they will be allowed to raise less than the $74.6bn in equity mandated by stress tests if earnings over the next six months outstrip regulators’ forecasts, bankers said.
The agreement, which was not mentioned when the government revealed the results on Thursday, means some banks may not have to raise as much equity through share issues and asset sales as the market is expecting. It could also increase the incentive for banks to book profits in the next two quarters.
So get this: the official releases on the stress test results and process weren’t honest and complete. We basically have the real deal, which is the unwritten understanding between the Treasury and the banks, versus the phony version presented to the public. And if we can’t even believe the headline number in the tests (the amount of money they are supposed to raise), is there any other aspect we can trust? How many other winks and nods were there between the Treasury and banks that weren’t leaked to the press?
Admittedly, there is normally some give and take with a regulator, but the public has been led to believe that this process would be transparent. It has wound up being somewhat so by virtue of leaks rather than by living up to its promise.
And in case you missed it, the phrase in the FT, “increase the incentive for banks to book profits in the next two quarters” is code for “fabricate earnings”. Per below, there were quite a few instances of permissive accounting this quarter. The powers that be are inviting more of the same. And this is all in the name of boosting confidence.
Key extracts from the Financial Times report today:
US regulators moved too quickly to allow Bank of America and Citigroup to repay their troubled asset relief programme bail-outs, according to a new government audit…
Policymakers at the Treasury department also sought to allow the banks a rapid exit, at one point approving a BofA proposal that ultimately was rejected because it allowed the company to leave the assistance programme by issuing $4.8bn less common equity capital than was required.
Shortly after so-called “stress tests” in 2009 revealed capital shortfalls in the largest US banks, regulators developed a benchmark designed to guide Tarp exit procedures. For every $2 in Tarp aid reimbursed, banks were to raise $1 in new common equity. The assessment was based in part on banks’ capital needs.
Just a few weeks later, that benchmark was tossed aside, resulting in an “ad hoc” and “inconsistent” process, Sigtarp said…
After submitting 11 proposals, BofA was finally allowed to repay taxpayers their $45bn by issuing $18.8bn in common equity, $1.7bn in stock to employees and shedding $4bn in assets.
At one point, the bank requested it be allowed to repay the part of its rescue package that would have ended restrictions on executive pay, an indication it was principally concerned with the issue, Ms Romero said. Regulators balked.
The Federal Deposit Insurance Corp, then led by Sheila Bair, insisted that the bank had to raise more common equity to meet benchmarks, as opposed to meeting capital levels through “gimmicks” such as employee stock issuances and asset sales. Treasury approved BofA’s seventh proposal, which called for reduced common equity and greater asset sales…
BofA exited Tarp on December 9 2009, when its share price closed at $15.39. It has since plunged about 60 per cent. It closed at $6.35 on Thursday.
Unfortunately, we are likely to see all too soon how well Treasury’s secret pact with the banks worked. And unfortunately, if they are proven to have gambled and lost, no one in the officialdom or at the banks will suffer all that much while the rest of us suffer considerable costs.
Game Over: California Attorney General Breaks From “50 State” Mortgage Settlement
by Yves Smith
Econned
We’ve been saying for months that the 50 state attorney general settlement was not going to happen. Despite the vigorous efforts by people on the side of the Federal regulators involved in the negotiations and Tom Miller’s (the AG leading the negotiations’) office to make it seem as if the deal was moving forward, the content of the reports showed otherwise. There was a huge gap between the positions of the banks and even the bank friendly position of the state AGs at the table and the banking regulators. Like the Vietnam War, where negotiations of two fundamentally opposed dragged on till one side capitulated, there was not going to be a settlement that was anything other than an abject sellout with a 11 figure payoff to mask that fact. And there were too many attorneys general who were already troubled by the terms of the deal that Miller had put forward for that to happen.
Now that Kamala Harris, the California state attorney general, has officially abandoned the talks, they don’t mean much, at least from the state side. The departure of such a big state, in population, foreclosure exposure, and Electoral college terms, along with other states (New York, Delaware, Nevada, Massachusetts, Kentucky, Minnesota, likely Arizona) means any settlement has limited practical meaning from the state side and even less credibility. It also considerably raises the odds of other states bolting. And needless to say, this is a major repudiation of the Obama Adminstration “let’s sweep foreclosure fraud under the rug” strategy.
It’s also worth noting that Credo led a major campaign in California to pressure Harris to seek better terms or else abandon the talks. We’ve been generally critical of the left in the US, but it’s important to distinguish that our criticism is of what is probably best thought of at the “establishment left” or the “Rubin/Hamilton Project/Blue Dog/Third Way” let, which is pro corporate but less aggressively so than the right so as to maintain some credibility with the traditional Democratic base. There are some groups like Credo which stand for a just society and are effective operationally which are gaining traction as more people recognize that the Democratic party only occasionally stands up for their economic interests.
From the Los Angeles Times (hat tip Marcy Wheeler):
California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation’s biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.
Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation’s five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, a person familiar with the matter said.
The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street’s role in the mortgage meltdown, the person said.
The removal of California from the discussions is a major blow to fraying efforts by the 50-state coalition that has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.
For California homeowners, the move means that gone is the chance for quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed, affecting hundreds of thousands of Californians facing the loss of their homes…
Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.
In rejecting the 50-state talks, California also widens the riff among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.
The Wall Street Journal points out that the issue that led Harris to leave the talks was the one that we highlighted, that the Federal/state effort had offered an unduly broad release of claims (draft language would, among other things, waive the Federal and State regulatory ability to prosecute chain of title abuses):
Some state and federal officials had been seeking as much as $25 billion in penalties that would be used, in part, to write down loan balances for underwater borrowers. But it will be difficult to come close to that amount without the participation of California. California has more underwater borrowers than any other state and has more borrowers that are behind on their mortgages or in foreclosure than any other state but Florida.
The move by Ms. Harris comes after eleven months of often frustrating negotiations between big banks such as Bank of America Corp. and J.P. Morgan Chase & Co.
One key point of contention has been the extent to which banks should be released from additional legal claims in exchange for signing on to an agreement. In recent months, attorneys general in New York, Massachusetts, Delaware, Massachusetts, Nevada, Minnesota and Kentucky have also expressed concerns about a potential settlement.
In a letter sent Friday to Associate U.S. Attorney General Thomas Perrelli and Iowa Attorney General Tom Miller, who have been leading the negotiations, Ms. Harris said her decision to break off from the group was driven by two key concerns. “It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated,” she said.
Congratulations to the state attorneys general who were courageous enough to stand up to this whitewash early, particularly Eric Schneiderman, Beau Biden, and Martha Coakley.
Update 6:15 PM: Reader Deontos alerted us to a post by Matt Browner-Hamlin which adds to the list of the groups and elected officials that pushed Harris (who I’d heard early was the sort who blows with the wind rather than take tough stand) to abandon the mortgage negotiations cum coverup:
It looks like labor and community groups are starting a strong push to get California Attorney General Kamala Harris to have her reject a settlement with the nation’s five largest banks around their wrongful foreclosure and robosigning practices. The pressure is coming from the California Federation of Teachers, California Nurses Association, SEIU 721, and Alliance of Californians for Community Empowerment. The group also has high-profile Democratic elected officials like Rep. Maxine Waters and Lt. Governor Gavin Newsom.
Lt. Gov. Gavin Newsom has joined a group of California union leaders, activists and politicians in calling the direction of negotiations “a deeply flawed settlement proposal with the banks at the heart of the nation’s mortgage crisis.”
The coalition is called Californians for a Fair Settlement and it’s hard to imagine it not having a major impact on Harris. These groups are huge in the Democratic power landscape in California; Waters and Newsom are two of the highest profile Democratic elected officials in the state.
If you are in California, it would be nice to send the Harris, Waters, and Newsom a note thanking them for standing up for California homeowners. Dave Dayen, who has been a fellow persistent critic of the talks, tells me via e-mail that Credo led the push against the talks and was joined later by Courage Campaign, MoveOn and PCCC. He also points out that Gavin Newsom joined an informal effort yesterday opposing the settlement. Harris has her eyes on the governor’s office and Newsom is her most serious opponent.
Note it is important to keep pressure on Harris. Even though her repudiation of the Federal/state mortgage coverup effort is progress, she is the only AG not to align herself with the Schneiderman/Biden effort. Given her past stance (of going after mortgage abuses in a way that would generate headlines but not ruffle the banks), the odds remain high that she will try to craft a deal that is bank friendly but with better optics than the Federal/state effort.
Econned
We’ve been saying for months that the 50 state attorney general settlement was not going to happen. Despite the vigorous efforts by people on the side of the Federal regulators involved in the negotiations and Tom Miller’s (the AG leading the negotiations’) office to make it seem as if the deal was moving forward, the content of the reports showed otherwise. There was a huge gap between the positions of the banks and even the bank friendly position of the state AGs at the table and the banking regulators. Like the Vietnam War, where negotiations of two fundamentally opposed dragged on till one side capitulated, there was not going to be a settlement that was anything other than an abject sellout with a 11 figure payoff to mask that fact. And there were too many attorneys general who were already troubled by the terms of the deal that Miller had put forward for that to happen.
Now that Kamala Harris, the California state attorney general, has officially abandoned the talks, they don’t mean much, at least from the state side. The departure of such a big state, in population, foreclosure exposure, and Electoral college terms, along with other states (New York, Delaware, Nevada, Massachusetts, Kentucky, Minnesota, likely Arizona) means any settlement has limited practical meaning from the state side and even less credibility. It also considerably raises the odds of other states bolting. And needless to say, this is a major repudiation of the Obama Adminstration “let’s sweep foreclosure fraud under the rug” strategy.
It’s also worth noting that Credo led a major campaign in California to pressure Harris to seek better terms or else abandon the talks. We’ve been generally critical of the left in the US, but it’s important to distinguish that our criticism is of what is probably best thought of at the “establishment left” or the “Rubin/Hamilton Project/Blue Dog/Third Way” let, which is pro corporate but less aggressively so than the right so as to maintain some credibility with the traditional Democratic base. There are some groups like Credo which stand for a just society and are effective operationally which are gaining traction as more people recognize that the Democratic party only occasionally stands up for their economic interests.
From the Los Angeles Times (hat tip Marcy Wheeler):
California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation’s biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.
Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation’s five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, a person familiar with the matter said.
The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street’s role in the mortgage meltdown, the person said.
The removal of California from the discussions is a major blow to fraying efforts by the 50-state coalition that has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.
For California homeowners, the move means that gone is the chance for quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed, affecting hundreds of thousands of Californians facing the loss of their homes…
Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.
In rejecting the 50-state talks, California also widens the riff among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.
The Wall Street Journal points out that the issue that led Harris to leave the talks was the one that we highlighted, that the Federal/state effort had offered an unduly broad release of claims (draft language would, among other things, waive the Federal and State regulatory ability to prosecute chain of title abuses):
Some state and federal officials had been seeking as much as $25 billion in penalties that would be used, in part, to write down loan balances for underwater borrowers. But it will be difficult to come close to that amount without the participation of California. California has more underwater borrowers than any other state and has more borrowers that are behind on their mortgages or in foreclosure than any other state but Florida.
The move by Ms. Harris comes after eleven months of often frustrating negotiations between big banks such as Bank of America Corp. and J.P. Morgan Chase & Co.
One key point of contention has been the extent to which banks should be released from additional legal claims in exchange for signing on to an agreement. In recent months, attorneys general in New York, Massachusetts, Delaware, Massachusetts, Nevada, Minnesota and Kentucky have also expressed concerns about a potential settlement.
In a letter sent Friday to Associate U.S. Attorney General Thomas Perrelli and Iowa Attorney General Tom Miller, who have been leading the negotiations, Ms. Harris said her decision to break off from the group was driven by two key concerns. “It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated,” she said.
Congratulations to the state attorneys general who were courageous enough to stand up to this whitewash early, particularly Eric Schneiderman, Beau Biden, and Martha Coakley.
Update 6:15 PM: Reader Deontos alerted us to a post by Matt Browner-Hamlin which adds to the list of the groups and elected officials that pushed Harris (who I’d heard early was the sort who blows with the wind rather than take tough stand) to abandon the mortgage negotiations cum coverup:
It looks like labor and community groups are starting a strong push to get California Attorney General Kamala Harris to have her reject a settlement with the nation’s five largest banks around their wrongful foreclosure and robosigning practices. The pressure is coming from the California Federation of Teachers, California Nurses Association, SEIU 721, and Alliance of Californians for Community Empowerment. The group also has high-profile Democratic elected officials like Rep. Maxine Waters and Lt. Governor Gavin Newsom.
Lt. Gov. Gavin Newsom has joined a group of California union leaders, activists and politicians in calling the direction of negotiations “a deeply flawed settlement proposal with the banks at the heart of the nation’s mortgage crisis.”
The coalition is called Californians for a Fair Settlement and it’s hard to imagine it not having a major impact on Harris. These groups are huge in the Democratic power landscape in California; Waters and Newsom are two of the highest profile Democratic elected officials in the state.
If you are in California, it would be nice to send the Harris, Waters, and Newsom a note thanking them for standing up for California homeowners. Dave Dayen, who has been a fellow persistent critic of the talks, tells me via e-mail that Credo led the push against the talks and was joined later by Courage Campaign, MoveOn and PCCC. He also points out that Gavin Newsom joined an informal effort yesterday opposing the settlement. Harris has her eyes on the governor’s office and Newsom is her most serious opponent.
Note it is important to keep pressure on Harris. Even though her repudiation of the Federal/state mortgage coverup effort is progress, she is the only AG not to align herself with the Schneiderman/Biden effort. Given her past stance (of going after mortgage abuses in a way that would generate headlines but not ruffle the banks), the odds remain high that she will try to craft a deal that is bank friendly but with better optics than the Federal/state effort.
Wednesday, September 28, 2011
HUD cuts to devastate mortgage counseling agencies across nation
By Ben Hallman
iwatchnews.org
Housing counselors at Western Tennessee Legal Services were plenty busy, even before one of the region’s largest employers, a Goodyear tire factory in tiny Union City, shut its doors in July.
The plant closing, which put nearly 2,000 employees out of work in a rural part of the state, meant more work for counselors like Emma Covington. Covington said she already takes 18 to 20 calls a day and meets in person with people who need counseling on foreclosures and other housing issues.
Now, like many of its clients, the legal nonprofit will have to make do with less.
Earlier this year, Congress defunded the $88 million grant program administered by the U.S. Department of Housing and Urban Development that helped support more than 7,500 housing counselors across the country, including those at Western Tennessee. Funds run out Sept. 30.
The cuts come at a terrible time, say counseling advocates.
In the second quarter of 2011, more than 3.4 million home mortgages nationwide were 90 or more days delinquent or in the foreclosure process. More than one in five mortgage borrowers owe more on their mortgages than their homes are worth, according to government data.
The counseling money may not be coming back. The House Appropriations Committee recently approved a budget for 2012 that also doesn’t include any HUD housing counseling dollars. A group of senators is trying to restore funding, but even if successful, it is unlikely that funds will reach counselors before next spring, at the earliest.
The looming gap in funding and continued uncertainty about the program’s future means layoffs and reduced hours for counselors at nonprofits across the country at a time when demand for their services is greater than ever.
“These are rough times for our clients and our staff,” said Steven Xanthopoulos, the executive director at Western Tennessee Legal Services. “We are faced with some hard decisions.”
Western Tennessee may lay off as many as four employees when its $1.2 million HUD grant runs out at the end of this month, Xanthopoulos said. Many more counselors could lose their jobs at the 25 rural legal aid groups throughout Appalachia and the Mississippi River delta that the nonprofit supports with its share of the grant money, he said.
The National Council of La Raza supports 50 housing counseling agencies that helped 65,000 families last year with about $1.2 million from HUD. Thirty of those agencies will close their doors if Congress does not restore the HUD housing counseling funding, said Graciela Aponte, a legislative analyst.
“We are in the middle of foreclosure crisis,” Aponte said. “This is devastating for our families.”
HUD grants also support one of the nation’s biggest housing counseling training programs. NeighborWorks America used a $3 million HUD grant to fund 1,200 housing counseling training scholarships to its mobile nonprofit training university last year. When the HUD money goes away, so will those scholarships, a spokesman said.
The program – whose cost is modest, by Washington standards – is being suspended at least in part because HUD is a full year behind distributing the grant money to housing groups.
“HUD has been slow to distribute the money and Congress zeroed in on that,” said Candace Mason, senior director of housing and national grants at the National Foundation for Credit Counseling.
In recent testimony , a HUD official said that the agency has a plan to reduce the distribution timeframe to 180 days.
Some have questioned the effectiveness of the programs but the Government Accountability Office cited several studies that show counseling helps struggling homeowners avoid foreclosure and prevent them from lapsing back into default – especially if the counseling occurs early in the foreclosure process.
One study cited by the GAO found that clients who received counseling were 1.7 times as likely to be removed from the foreclosure process by their mortgage servicer as borrowers who did not. Clients who got loan modifications paid an average of $267 a month less than they would have otherwise, according to the study.
Counseling advocates say there appears to be general antipathy toward HUD, an oft-criticized federal agency, from some members of Congress related to the agencies past failings.
Congress also hasn’t yet provided $45 million mandated by the Dodd-Frank financial regulation law for HUD to set up a new Office of Housing Counseling, which will set counseling standards and dole out grants to agencies.
Here, too, HUD has been slow to act. According to the GAO, a working group at HUD is “in the process of developing a plan” for how to organize that new office, but is unable to say when it will submit it.
HUD already has an office that seems to have a similar function: the Office of Single-Family Housing. HUD officials say the primary change needed to create the new office is the reassignment of staffers who work on housing counseling activities, but also have other responsibilities.
Staffers at the House committees responsible for the funding did not comment for this story.
Foreclosure prevention made up the single-biggest slice of any housing counselor’s workload in 2009 and 2010, according to HUD, with nearly half of all queries coming from homeowners in trouble. What makes the HUD grants so valuable, housing counselors say, is that the money can be spent to help people resolve a variety of housing woes, in addition to foreclosure.
For example, the Federal Housing Administration requires seniors who want a Home Equity Conversion, or reverse mortgage to first receive counseling. Since 2005, more than 486,000 seniors received one of those loans, about 3.6 percent of all counseling activity, according to HUD .
Many of these seniors, especially in rural areas, have nowhere else to turn, said Covington, the Tennessee housing counselor. “People can’t afford to travel to our office much less to Memphis and Nashville,” she said.
Homes on the Hill, a Columbus, Ohio, counseling service, is already operating on a razor-thin margin in terms of both budget and staffing, said executive director Stephen Torsell. Counselors have
had their hours cut and clients have faced long waits for an appointment – several weeks in many cases.
The nonprofit receives HUD money through La Raza. The annual grant is quite small—about $75,000 per year—but like other housing nonprofits, Homes on the Hill uses the HUD money to solicit matching funds from private donors.
There is still a chance that Congress will at least partially fund the housing counseling program for 2012. A Senate subcommittee recently signed off on $60 million in funding for 2012, but whether the funding makes it into law is uncertain.
iwatchnews.org
Housing counselors at Western Tennessee Legal Services were plenty busy, even before one of the region’s largest employers, a Goodyear tire factory in tiny Union City, shut its doors in July.
The plant closing, which put nearly 2,000 employees out of work in a rural part of the state, meant more work for counselors like Emma Covington. Covington said she already takes 18 to 20 calls a day and meets in person with people who need counseling on foreclosures and other housing issues.
Now, like many of its clients, the legal nonprofit will have to make do with less.
Earlier this year, Congress defunded the $88 million grant program administered by the U.S. Department of Housing and Urban Development that helped support more than 7,500 housing counselors across the country, including those at Western Tennessee. Funds run out Sept. 30.
The cuts come at a terrible time, say counseling advocates.
In the second quarter of 2011, more than 3.4 million home mortgages nationwide were 90 or more days delinquent or in the foreclosure process. More than one in five mortgage borrowers owe more on their mortgages than their homes are worth, according to government data.
The counseling money may not be coming back. The House Appropriations Committee recently approved a budget for 2012 that also doesn’t include any HUD housing counseling dollars. A group of senators is trying to restore funding, but even if successful, it is unlikely that funds will reach counselors before next spring, at the earliest.
The looming gap in funding and continued uncertainty about the program’s future means layoffs and reduced hours for counselors at nonprofits across the country at a time when demand for their services is greater than ever.
“These are rough times for our clients and our staff,” said Steven Xanthopoulos, the executive director at Western Tennessee Legal Services. “We are faced with some hard decisions.”
Western Tennessee may lay off as many as four employees when its $1.2 million HUD grant runs out at the end of this month, Xanthopoulos said. Many more counselors could lose their jobs at the 25 rural legal aid groups throughout Appalachia and the Mississippi River delta that the nonprofit supports with its share of the grant money, he said.
The National Council of La Raza supports 50 housing counseling agencies that helped 65,000 families last year with about $1.2 million from HUD. Thirty of those agencies will close their doors if Congress does not restore the HUD housing counseling funding, said Graciela Aponte, a legislative analyst.
“We are in the middle of foreclosure crisis,” Aponte said. “This is devastating for our families.”
HUD grants also support one of the nation’s biggest housing counseling training programs. NeighborWorks America used a $3 million HUD grant to fund 1,200 housing counseling training scholarships to its mobile nonprofit training university last year. When the HUD money goes away, so will those scholarships, a spokesman said.
The program – whose cost is modest, by Washington standards – is being suspended at least in part because HUD is a full year behind distributing the grant money to housing groups.
“HUD has been slow to distribute the money and Congress zeroed in on that,” said Candace Mason, senior director of housing and national grants at the National Foundation for Credit Counseling.
In recent testimony , a HUD official said that the agency has a plan to reduce the distribution timeframe to 180 days.
Some have questioned the effectiveness of the programs but the Government Accountability Office cited several studies that show counseling helps struggling homeowners avoid foreclosure and prevent them from lapsing back into default – especially if the counseling occurs early in the foreclosure process.
One study cited by the GAO found that clients who received counseling were 1.7 times as likely to be removed from the foreclosure process by their mortgage servicer as borrowers who did not. Clients who got loan modifications paid an average of $267 a month less than they would have otherwise, according to the study.
Counseling advocates say there appears to be general antipathy toward HUD, an oft-criticized federal agency, from some members of Congress related to the agencies past failings.
Congress also hasn’t yet provided $45 million mandated by the Dodd-Frank financial regulation law for HUD to set up a new Office of Housing Counseling, which will set counseling standards and dole out grants to agencies.
Here, too, HUD has been slow to act. According to the GAO, a working group at HUD is “in the process of developing a plan” for how to organize that new office, but is unable to say when it will submit it.
HUD already has an office that seems to have a similar function: the Office of Single-Family Housing. HUD officials say the primary change needed to create the new office is the reassignment of staffers who work on housing counseling activities, but also have other responsibilities.
Staffers at the House committees responsible for the funding did not comment for this story.
Foreclosure prevention made up the single-biggest slice of any housing counselor’s workload in 2009 and 2010, according to HUD, with nearly half of all queries coming from homeowners in trouble. What makes the HUD grants so valuable, housing counselors say, is that the money can be spent to help people resolve a variety of housing woes, in addition to foreclosure.
For example, the Federal Housing Administration requires seniors who want a Home Equity Conversion, or reverse mortgage to first receive counseling. Since 2005, more than 486,000 seniors received one of those loans, about 3.6 percent of all counseling activity, according to HUD .
Many of these seniors, especially in rural areas, have nowhere else to turn, said Covington, the Tennessee housing counselor. “People can’t afford to travel to our office much less to Memphis and Nashville,” she said.
Homes on the Hill, a Columbus, Ohio, counseling service, is already operating on a razor-thin margin in terms of both budget and staffing, said executive director Stephen Torsell. Counselors have
had their hours cut and clients have faced long waits for an appointment – several weeks in many cases.
The nonprofit receives HUD money through La Raza. The annual grant is quite small—about $75,000 per year—but like other housing nonprofits, Homes on the Hill uses the HUD money to solicit matching funds from private donors.
There is still a chance that Congress will at least partially fund the housing counseling program for 2012. A Senate subcommittee recently signed off on $60 million in funding for 2012, but whether the funding makes it into law is uncertain.
The Secret Government Bank That's Financing More Solyndras
By Elizabeth MacDonald
foxbusiness.com
Sitting at the center of the Solyndra scandal is an off-balance-sheet bank at the Treasury Department that dates back to 1973.
This little-known government bank, the Federal Financing Bank [FFB], had a zero balance in 2008 for green energy projects, but now, with little Congressional oversight, it is giving out billions of dollars in loans to White House pet projects often at dirt-cheap interest rates below 1%.
In July alone, the government bank, which had $61 billion in assets, lent nearly three quarters of a billion dollars in taxpayer funds with no Congressional checks and balances.
Plus the bank is funding the insolvent U.S. Post Office; the White House’s expensive green car projects at Ford Motor, Nissan and Tesla Motors; a $485 million loan to an expensive solar project that’s lost $160 million over the last three years that’s backed by Google, BP and Chevron; plus the FFB is funding the teetering HOPE housing bailout program, which gives delinquent mortgage borrowers breaks on their loans.
And according to KPMG’s audit report of the bank, the FFB is losing billions of dollars in taxpayer money because it is forgoing collecting interest costs on already inexpensive loans that are financing projects at agencies like the Agriculture Dept.
What’s scary for taxpayers is this: The FFB can borrow unlimited amounts of taxpayer money from the Treasury for these kinds of political pet projects. Under the 1973 “FFB Act, the bank may, with the approval of the Secretary, borrow without limit from the Treasury,” says the bank’s audited statements from KPMG.
The Treasury Department’s inspector general is now investigating the bank over its $528 million loan to Solyndra. FFB’s chairman of the board is Treasury Secretary Tim Geithner, and the bank’s board executives are Treasury officials.
Who is getting the FFB’s green energy money? As the White House and Democrats in Congress rail against tax breaks for oil companies, the FFB gave taxpayer loans to green companies with high cash burn that were spilling red ink.
For instance, Solyndra was still getting loans from the FFB up until it filed for bankruptcy. It got $3 million in loans at a 0.89% rate just a month and a half before it filed for bankruptcy protection.
The FFB is also giving loans to risky solar companies as well as to a money-losing solar energy outfit backed by companies such as Google, Morgan Stanley, Chevron and BP that has spilled $160 million in red ink for the last three years.
In the month of July alone, the FFB gave a $12.5 million loan to Abound Solar; 60% of Abound's balance sheet will come from federal taxpayers, or $400 million in guaranteed federal loans.
FFB also gave a $117,330 loan to the struggling Kahuku Wind Power and more than $77 million to the Solar Partners companies, whose parent company is due $485 million in White House approved loans.
The Solar Partners companies are units of BrightSource Energy, which is building a massive solar-powered energy plant near the Mojave Desert in San Bernardino, California.
BrightSource lost $45 million in 2008, $44 million in 2009, and $72 million in 2010, even though it has rich backers that include Google, Chevron, Morgan Stanley and BP, among others, says FOX News analyst James Farrell.
Besides the green energy projects, the FFB provides a backdoor government bailout of the US Post Office, which has been spilling red ink. The FFB has lent the US Post Office so far $12.6 billion. The Post Office faces an estimated $10 billion shortfall this year, as the Internet, companies like FedEx and UPS, and high retiree health-benefit costs slice into its bottom line.
And the government bank gave loans to car and car parts manufacturers to retrofit their plants to make green cars. The FFB lent Ford Motor $163 million for its green car programs. The FFB is now financing projects at Fisker Automotive, Nissan North America and Tesla Motors, with $528.6 million, $1.4 billion and $465 million in federal loans, respectively.
However, the FFB’s balance sheet is backed by U.S. taxpayers, “except for loans to the U.S. Postal Service,” says KPMG’s audited statements for the bank. Because you, U.S. taxpayers, are the cushion for the bank, unlike other banks, the FFB “does not maintain a reserve for loan losses,” says the KPMG report.
Not booking loan loss reserves would get any other bank in trouble with federal bank regulators such as the Federal Deposit Insurance Corp., the Federal Reserve and the Securities and Exchange Commission.
Why can the FFB get away with this?
Because the KPMG report says the bank told it in true Pollyannish fashion that “no future credit-related losses are expected,” even though Solyndra clearly disputes that optimistic bureaucratic resolve. (The bank did earn $449.5 million for the fiscal year ended September 30, 2010, up slightly from $444.2 million in fiscal 2009.)
Why was this federal government bank created in the first place? Congress launched the FFB in 1973 to “reduce the costs of Federal and federally assisted borrowings,” smoothing the way for the government’s fiscal policies -- fiscal policies which at the time were wading into the private credit markets like never before.
At the time, the federal government first began to see an avalanche of Congressionally approved off-budget financing for Fannie Mae, Freddie Mac and Sallie Mae. These quasi-government operations began to help grease loans for housing and for students by aiding loans securitized as bonds in the secondary markets. Banks packaged these loans as securities and sold them on to Fannie, Freddie and Sallie Mae.
These bonds though began to compete with Treasury securities, and Congress at the time feared Treasury would have to offer higher yields to attract investors away from those securities. The Vietnam war was still going, and the government was struggling to pay for the war and at the same time was battling a deep recession that had hit the U.S. economy, along with an oil shock exacerbated when OPEC plus Egypt, Syria and Tunisia hit the U.S. with an oil embargo due to its support of Israel in the Yom Kippur War with Egypt and Syria.
So to keep the government’s borrowing costs low, Congress launched the FFB and gave it broad statutory authority to purchase any “bonds issued, sold, or guaranteed by federal agencies,” says KPMG’s audit report. The bank then became a vehicle through which all sorts of federal agencies could finance their programs.
Since then, the FFB has helped finance a broad range of government operations, from agricultural to military programs, to now green energy projects.
Congress almost got the FFB in hot water beginning in 2006 when lawmakers pressured then Treasury Secretary Henry Paulson to open the window at the FFB to help finance student loans.
At the time, Sallie Mae was posting losses as students in droves began defaulting on their high-priced college loans.
A slew of lenders, about a seventh of the student loan market at the time, had stopped giving federally guaranteed student loans. Sallie Mae then pressured lawmakers such as Senator Christopher Dodd (D-CT) to give student lenders a bailout via the Federal Financing Bank, but President George W. Bush frowned on that, and the effort went nowhere.
And now it’s the White House’s use of the FFB for green energy projects that will likely raise eyebrows.
The FFB lent no money to green companies backed by Department of Energy guarantees from 2007 to 2008, even though it could have done so starting in 2007 under the Energy Policy Act of 2005, signed into law under President George W. Bush.
That act authorized $42 billion in federal green energy loans, notes FOX News analyst Farrell.
Under the 2005 law, the government could make federal loans for companies battling greenhouse gas emissions, energy efficiency and renewable energy, as well as nuclear power projects.
The FFB then began giving green loans backed by the Dept. of Energy after the Obama Administration’s stimulus bill of 2009 was enacted. After stimulus was signed into law by President Barack Obama, the FFB then began funding clean energy programs, backed by $2.4 billion appropriated by Congress. Under this program, Solyndra got $528 million.
The FFB doesn’t just fund green energy projects. It also funds the Home Ownership Preservation Entity (HOPE) Fund, enacted under the Bush Administration to help distressed borrowers avoid foreclosure by reducing their mortgage payments.
The bank is going full bore in helping to fund the White House’s foreclosure bailouts via buying HOPE bonds, a program that could hit $300 billion in federal costs.
The bonds essentially give investors a stake in government housing bailouts. But what should give taxpayers pause is this: the Treasury Secretary can issue HOPE bonds “without any limitations as to the purchaser of the issuance,” KPMG’s audited statements note.
Translation: The Treasury can willy nilly issue these bonds, and the FFB then buys the HOPE bonds that investors don’t’ want.
“Due to the cost of issuing special purpose bonds to the public, the Secretary of the Treasury has decided to issue the HOPE bonds to the bank,” KPMG notes in its report.
That means those bonds now sit on FFB’s balance sheet, more than $492 million worth. “The bank (FFB) borrowed funds from Treasury,” says KPMG’s audit, “to purchase the HOPE bonds.”
The amounts involved can rise to $300 billion, because the Hope for Homeowners Act authorizes Treasury to issue up to $300 billion in HOPE bonds. “FFB does not have the money to buy the bonds, so it has to borrow money from Treasury to buy the bonds,” notes FOX News analyst Farrell.
However, KPMG notes in its report that “the purchase of HOPE bonds is consistent with the core mission of the Bank.”
The FFB also acts as essentially a slush bank for federal loans, an operation that helps clean up the balance sheets of other federal agencies. KPMG notes that the “lending policy of the bank is flexible enough to preclude the need for any accumulation of pools of funds by agencies.”
But the FFB also lets federal agencies slide on interest costs they owe the bank on loans, even though their interest rates are dirt cheap.
For instance, the FFB has been hit with losses on loans to the U.S. Department of Agriculture, loans the Agriculture Dept. received to service rural utilities. The Agriculture Dept. is stiffing the FBB on interest it owes on these loans, a cumulative $1.7 billion in losses here.
The bank also lets the General Services Administration [GSA], as well as “Historically Black Colleges and Universities,” and the Veteran Administration slide on interest costs on their loans, too. The bank lets them defer interest costs “on their loans until future periods,” the KMPG report says.
foxbusiness.com
Sitting at the center of the Solyndra scandal is an off-balance-sheet bank at the Treasury Department that dates back to 1973.
This little-known government bank, the Federal Financing Bank [FFB], had a zero balance in 2008 for green energy projects, but now, with little Congressional oversight, it is giving out billions of dollars in loans to White House pet projects often at dirt-cheap interest rates below 1%.
In July alone, the government bank, which had $61 billion in assets, lent nearly three quarters of a billion dollars in taxpayer funds with no Congressional checks and balances.
Plus the bank is funding the insolvent U.S. Post Office; the White House’s expensive green car projects at Ford Motor, Nissan and Tesla Motors; a $485 million loan to an expensive solar project that’s lost $160 million over the last three years that’s backed by Google, BP and Chevron; plus the FFB is funding the teetering HOPE housing bailout program, which gives delinquent mortgage borrowers breaks on their loans.
And according to KPMG’s audit report of the bank, the FFB is losing billions of dollars in taxpayer money because it is forgoing collecting interest costs on already inexpensive loans that are financing projects at agencies like the Agriculture Dept.
What’s scary for taxpayers is this: The FFB can borrow unlimited amounts of taxpayer money from the Treasury for these kinds of political pet projects. Under the 1973 “FFB Act, the bank may, with the approval of the Secretary, borrow without limit from the Treasury,” says the bank’s audited statements from KPMG.
The Treasury Department’s inspector general is now investigating the bank over its $528 million loan to Solyndra. FFB’s chairman of the board is Treasury Secretary Tim Geithner, and the bank’s board executives are Treasury officials.
Who is getting the FFB’s green energy money? As the White House and Democrats in Congress rail against tax breaks for oil companies, the FFB gave taxpayer loans to green companies with high cash burn that were spilling red ink.
For instance, Solyndra was still getting loans from the FFB up until it filed for bankruptcy. It got $3 million in loans at a 0.89% rate just a month and a half before it filed for bankruptcy protection.
The FFB is also giving loans to risky solar companies as well as to a money-losing solar energy outfit backed by companies such as Google, Morgan Stanley, Chevron and BP that has spilled $160 million in red ink for the last three years.
In the month of July alone, the FFB gave a $12.5 million loan to Abound Solar; 60% of Abound's balance sheet will come from federal taxpayers, or $400 million in guaranteed federal loans.
FFB also gave a $117,330 loan to the struggling Kahuku Wind Power and more than $77 million to the Solar Partners companies, whose parent company is due $485 million in White House approved loans.
The Solar Partners companies are units of BrightSource Energy, which is building a massive solar-powered energy plant near the Mojave Desert in San Bernardino, California.
BrightSource lost $45 million in 2008, $44 million in 2009, and $72 million in 2010, even though it has rich backers that include Google, Chevron, Morgan Stanley and BP, among others, says FOX News analyst James Farrell.
Besides the green energy projects, the FFB provides a backdoor government bailout of the US Post Office, which has been spilling red ink. The FFB has lent the US Post Office so far $12.6 billion. The Post Office faces an estimated $10 billion shortfall this year, as the Internet, companies like FedEx and UPS, and high retiree health-benefit costs slice into its bottom line.
And the government bank gave loans to car and car parts manufacturers to retrofit their plants to make green cars. The FFB lent Ford Motor $163 million for its green car programs. The FFB is now financing projects at Fisker Automotive, Nissan North America and Tesla Motors, with $528.6 million, $1.4 billion and $465 million in federal loans, respectively.
However, the FFB’s balance sheet is backed by U.S. taxpayers, “except for loans to the U.S. Postal Service,” says KPMG’s audited statements for the bank. Because you, U.S. taxpayers, are the cushion for the bank, unlike other banks, the FFB “does not maintain a reserve for loan losses,” says the KPMG report.
Not booking loan loss reserves would get any other bank in trouble with federal bank regulators such as the Federal Deposit Insurance Corp., the Federal Reserve and the Securities and Exchange Commission.
Why can the FFB get away with this?
Because the KPMG report says the bank told it in true Pollyannish fashion that “no future credit-related losses are expected,” even though Solyndra clearly disputes that optimistic bureaucratic resolve. (The bank did earn $449.5 million for the fiscal year ended September 30, 2010, up slightly from $444.2 million in fiscal 2009.)
Why was this federal government bank created in the first place? Congress launched the FFB in 1973 to “reduce the costs of Federal and federally assisted borrowings,” smoothing the way for the government’s fiscal policies -- fiscal policies which at the time were wading into the private credit markets like never before.
At the time, the federal government first began to see an avalanche of Congressionally approved off-budget financing for Fannie Mae, Freddie Mac and Sallie Mae. These quasi-government operations began to help grease loans for housing and for students by aiding loans securitized as bonds in the secondary markets. Banks packaged these loans as securities and sold them on to Fannie, Freddie and Sallie Mae.
These bonds though began to compete with Treasury securities, and Congress at the time feared Treasury would have to offer higher yields to attract investors away from those securities. The Vietnam war was still going, and the government was struggling to pay for the war and at the same time was battling a deep recession that had hit the U.S. economy, along with an oil shock exacerbated when OPEC plus Egypt, Syria and Tunisia hit the U.S. with an oil embargo due to its support of Israel in the Yom Kippur War with Egypt and Syria.
So to keep the government’s borrowing costs low, Congress launched the FFB and gave it broad statutory authority to purchase any “bonds issued, sold, or guaranteed by federal agencies,” says KPMG’s audit report. The bank then became a vehicle through which all sorts of federal agencies could finance their programs.
Since then, the FFB has helped finance a broad range of government operations, from agricultural to military programs, to now green energy projects.
Congress almost got the FFB in hot water beginning in 2006 when lawmakers pressured then Treasury Secretary Henry Paulson to open the window at the FFB to help finance student loans.
At the time, Sallie Mae was posting losses as students in droves began defaulting on their high-priced college loans.
A slew of lenders, about a seventh of the student loan market at the time, had stopped giving federally guaranteed student loans. Sallie Mae then pressured lawmakers such as Senator Christopher Dodd (D-CT) to give student lenders a bailout via the Federal Financing Bank, but President George W. Bush frowned on that, and the effort went nowhere.
And now it’s the White House’s use of the FFB for green energy projects that will likely raise eyebrows.
The FFB lent no money to green companies backed by Department of Energy guarantees from 2007 to 2008, even though it could have done so starting in 2007 under the Energy Policy Act of 2005, signed into law under President George W. Bush.
That act authorized $42 billion in federal green energy loans, notes FOX News analyst Farrell.
Under the 2005 law, the government could make federal loans for companies battling greenhouse gas emissions, energy efficiency and renewable energy, as well as nuclear power projects.
The FFB then began giving green loans backed by the Dept. of Energy after the Obama Administration’s stimulus bill of 2009 was enacted. After stimulus was signed into law by President Barack Obama, the FFB then began funding clean energy programs, backed by $2.4 billion appropriated by Congress. Under this program, Solyndra got $528 million.
The FFB doesn’t just fund green energy projects. It also funds the Home Ownership Preservation Entity (HOPE) Fund, enacted under the Bush Administration to help distressed borrowers avoid foreclosure by reducing their mortgage payments.
The bank is going full bore in helping to fund the White House’s foreclosure bailouts via buying HOPE bonds, a program that could hit $300 billion in federal costs.
The bonds essentially give investors a stake in government housing bailouts. But what should give taxpayers pause is this: the Treasury Secretary can issue HOPE bonds “without any limitations as to the purchaser of the issuance,” KPMG’s audited statements note.
Translation: The Treasury can willy nilly issue these bonds, and the FFB then buys the HOPE bonds that investors don’t’ want.
“Due to the cost of issuing special purpose bonds to the public, the Secretary of the Treasury has decided to issue the HOPE bonds to the bank,” KPMG notes in its report.
That means those bonds now sit on FFB’s balance sheet, more than $492 million worth. “The bank (FFB) borrowed funds from Treasury,” says KPMG’s audit, “to purchase the HOPE bonds.”
The amounts involved can rise to $300 billion, because the Hope for Homeowners Act authorizes Treasury to issue up to $300 billion in HOPE bonds. “FFB does not have the money to buy the bonds, so it has to borrow money from Treasury to buy the bonds,” notes FOX News analyst Farrell.
However, KPMG notes in its report that “the purchase of HOPE bonds is consistent with the core mission of the Bank.”
The FFB also acts as essentially a slush bank for federal loans, an operation that helps clean up the balance sheets of other federal agencies. KPMG notes that the “lending policy of the bank is flexible enough to preclude the need for any accumulation of pools of funds by agencies.”
But the FFB also lets federal agencies slide on interest costs they owe the bank on loans, even though their interest rates are dirt cheap.
For instance, the FFB has been hit with losses on loans to the U.S. Department of Agriculture, loans the Agriculture Dept. received to service rural utilities. The Agriculture Dept. is stiffing the FBB on interest it owes on these loans, a cumulative $1.7 billion in losses here.
The bank also lets the General Services Administration [GSA], as well as “Historically Black Colleges and Universities,” and the Veteran Administration slide on interest costs on their loans, too. The bank lets them defer interest costs “on their loans until future periods,” the KMPG report says.
So Housing Is "Stabilizing"?
by Karl Denninger
Then perhaps you can explain this:
Prime delinquencies of 60+ days were up a little to 12%.....those are suppose to be the best borrowers.
These are non-agency loans - Jumbos mostly. Otherwise known as "rich people" property. These are places with mortgages well north of a half-million smackers.
What we're now getting out of the objective data is what I've asserted for a good long while: A huge percentage of these so-called "rich" are really not rich at all; they're "paper rich" but in fact damn near dead-flat broke.
This puts the lie to those who claim this was (mostly) a "subprime" problem. Oh no; as I have repeatedly asserted the real problem is that "cheap money" has literally destroyed the American financial system and we're still covering it up.
Note that once a loan goes 60+ delinquent it almost never cures, because the person who is underwater has to come up with three payments to cure: The two delinquent ones and the current chunk. The odds of this happening are so far removed from reality that for all intents and purposes once a loan misses two payments you may as well foreclose and swallow the loss.
Then perhaps you can explain this:
Prime delinquencies of 60+ days were up a little to 12%.....those are suppose to be the best borrowers.
These are non-agency loans - Jumbos mostly. Otherwise known as "rich people" property. These are places with mortgages well north of a half-million smackers.
What we're now getting out of the objective data is what I've asserted for a good long while: A huge percentage of these so-called "rich" are really not rich at all; they're "paper rich" but in fact damn near dead-flat broke.
This puts the lie to those who claim this was (mostly) a "subprime" problem. Oh no; as I have repeatedly asserted the real problem is that "cheap money" has literally destroyed the American financial system and we're still covering it up.
Note that once a loan goes 60+ delinquent it almost never cures, because the person who is underwater has to come up with three payments to cure: The two delinquent ones and the current chunk. The odds of this happening are so far removed from reality that for all intents and purposes once a loan misses two payments you may as well foreclose and swallow the loss.
Freddie Mac Low-Balled BofA MBS Settlement
By: David Dayen
FDL
The Federal Housing Finance Agency (FHFA) has often functioned with a single-minded purpose: it wants to limit taxpayer losses on risky housing loans purchased by Fannie Mae and Freddie Mac from banks and other mortgage lenders. That’s it.
Sometimes that works to the benefit of taxpayers and homeowners, as when they pressure banks to repurchase mortgage-backed securities from Fannie/Freddie where the banks made bad representations and warranties. This reveals the essential fraud in the system and could go a long way to reforming it. But when FHFA refuses to promote principal modifications or refinancing on underwater homes, it acts against the interests of the homeowner (and the taxpayers, since principal modifications would help heal the housing market). It’s short-term thinking.
FHFA’s single-minded focus can also go awry even when FHFA appears to be playing a good role. For instance, earlier this year, Freddie Mac inked a $1.35 billion settlement with Bank of America over mortgage backed securities. But the FHFA’s inspector general found in a report that Freddie Mac used a faulty analysis in accepting a deal that lowballed potential losses the agency could incur if the loans it purchased from banks turned out to perform worse than expected.
The faulty methodology significantly increased the probable losses in Freddie Mac’s portfolio of loans, according to the report, prepared by the inspector general of the Federal Housing Finance Agency, which oversees the company. Freddie Mac and Fannie Mae were taken over by the government in 2008 so additional losses would be shouldered by taxpayers.
The report also noted that the settlement with Bank of America in December was completed over the objections of a senior examiner at the agency. Freddie Mac officials did not want to jeopardize the company’s relationship with Bank of America, from which it continues to buy loans, the report concluded.
The agency official who questioned the loan review methodology contended that Freddie Mac’s analysis greatly underestimated the number of dubious loans bought from the Countrywide unit of Bank of America from 2005 to 2007. The deal between Freddie Mac and the bank resolved claims associated with 787,000 loans, some of which were repurchased by the bank, and cannot be rescinded.
“An effective mortgage repurchase process is critical in limiting the enterprises’, and ultimately, the taxpayers’ exposure to credit losses resulting from the financial crisis,” said Steve A. Linick, the inspector general who oversaw the report. “F.H.F.A. and Freddie Mac must do more to ensure that high-dollar settlements of repurchase claims are accurately estimated and in the best interests of taxpayers.”
This really does not bode well for the FHFA’s lawsuit against BofA and 16 other banks over similar claims. While there have been estimates, we haven’t really seen a definitive figure on how much FHFA seeks in those suits. The FHFA report gives me no confidence that they will adjudicate that fairly, or that FHFA would even want to. We’re talking about billions in losses on this settlement, and that was just Freddie Mac and BofA. Who knows how some of the other repurchase deals are going. It seems that FHFA wants a sweet spot in between limiting taxpayer losses and playing nice with the banks, with whom they still partner on mortgage trading.
Once again, we see how a lack of investigation works in the favor of the banks. Freddie Mac just didn’t analyze over 300,000 foreclosed loans they owned and that could have been part of this claim. Much like the state AG investigation, they did a token review and went right to settlement.
The feds have proven time and again they just can’t be trusted to oversee this in a way that protects taxpayers and helps homeowners. A deeper analysis and investigation would have taken a bit longer, but it also would have paid off. It could be that Freddie Mac is learning from this:
Last June, Freddie Mac’s internal auditors advised the company that its controls regarding the loan review process were “unsatisfactory” and said that “opportunities for increasing the repurchase benefit justify an expansion of our sampling approach” after the second year of the loan, the report said. A company official told the Freddie Mac directors that a more in-depth loan review could generate as much as $1 billion in additional revenue.
Two months ago, Freddie Mac began a more rigorous review of foreclosed, interest-only loans. In late August, it told the housing finance agency staff that the study showed 15 percent of the sampled loans — a higher figure than that in the Bank of America settlement — contained defects that might result in buybacks among originators.
But how much more can you expect from an organization that still partners with the banks on which they are trying to force repurchases? This is the real scandal here.
NOTE: Just to be clear, the FHFA is Freddie Mac’s overseer. While Freddie Mac shouldn’t have miscalculated the BofA settlement, FHFA should have provided strong oversight. The IG report is titled “Evaluation of the Federal Housing Finance Agency’s Oversight of Freddie Mac’s Repurchase Settlement with Bank of America,” and it doesn’t evaluate the agency well.
The full inspector general’s report is here. More from Brady Dennis.
UPDATE: Rep. Brad Miller (D-NC) reacted strongly to the IG report: “The officials at Freddie Mac who decided to settle these claims for billions less than taxpayers had coming should obviously lose their jobs immediately.” I also liked this:
The most infuriating finding is that Freddie Mac knowingly settled too cheaply to remain on good terms with Bank of America and others in the financial industry. That is exactly the kind of secretive, sweetheart deal that undermines the faith of the American people in their own government
FDL
The Federal Housing Finance Agency (FHFA) has often functioned with a single-minded purpose: it wants to limit taxpayer losses on risky housing loans purchased by Fannie Mae and Freddie Mac from banks and other mortgage lenders. That’s it.
Sometimes that works to the benefit of taxpayers and homeowners, as when they pressure banks to repurchase mortgage-backed securities from Fannie/Freddie where the banks made bad representations and warranties. This reveals the essential fraud in the system and could go a long way to reforming it. But when FHFA refuses to promote principal modifications or refinancing on underwater homes, it acts against the interests of the homeowner (and the taxpayers, since principal modifications would help heal the housing market). It’s short-term thinking.
FHFA’s single-minded focus can also go awry even when FHFA appears to be playing a good role. For instance, earlier this year, Freddie Mac inked a $1.35 billion settlement with Bank of America over mortgage backed securities. But the FHFA’s inspector general found in a report that Freddie Mac used a faulty analysis in accepting a deal that lowballed potential losses the agency could incur if the loans it purchased from banks turned out to perform worse than expected.
The faulty methodology significantly increased the probable losses in Freddie Mac’s portfolio of loans, according to the report, prepared by the inspector general of the Federal Housing Finance Agency, which oversees the company. Freddie Mac and Fannie Mae were taken over by the government in 2008 so additional losses would be shouldered by taxpayers.
The report also noted that the settlement with Bank of America in December was completed over the objections of a senior examiner at the agency. Freddie Mac officials did not want to jeopardize the company’s relationship with Bank of America, from which it continues to buy loans, the report concluded.
The agency official who questioned the loan review methodology contended that Freddie Mac’s analysis greatly underestimated the number of dubious loans bought from the Countrywide unit of Bank of America from 2005 to 2007. The deal between Freddie Mac and the bank resolved claims associated with 787,000 loans, some of which were repurchased by the bank, and cannot be rescinded.
“An effective mortgage repurchase process is critical in limiting the enterprises’, and ultimately, the taxpayers’ exposure to credit losses resulting from the financial crisis,” said Steve A. Linick, the inspector general who oversaw the report. “F.H.F.A. and Freddie Mac must do more to ensure that high-dollar settlements of repurchase claims are accurately estimated and in the best interests of taxpayers.”
This really does not bode well for the FHFA’s lawsuit against BofA and 16 other banks over similar claims. While there have been estimates, we haven’t really seen a definitive figure on how much FHFA seeks in those suits. The FHFA report gives me no confidence that they will adjudicate that fairly, or that FHFA would even want to. We’re talking about billions in losses on this settlement, and that was just Freddie Mac and BofA. Who knows how some of the other repurchase deals are going. It seems that FHFA wants a sweet spot in between limiting taxpayer losses and playing nice with the banks, with whom they still partner on mortgage trading.
Once again, we see how a lack of investigation works in the favor of the banks. Freddie Mac just didn’t analyze over 300,000 foreclosed loans they owned and that could have been part of this claim. Much like the state AG investigation, they did a token review and went right to settlement.
The feds have proven time and again they just can’t be trusted to oversee this in a way that protects taxpayers and helps homeowners. A deeper analysis and investigation would have taken a bit longer, but it also would have paid off. It could be that Freddie Mac is learning from this:
Last June, Freddie Mac’s internal auditors advised the company that its controls regarding the loan review process were “unsatisfactory” and said that “opportunities for increasing the repurchase benefit justify an expansion of our sampling approach” after the second year of the loan, the report said. A company official told the Freddie Mac directors that a more in-depth loan review could generate as much as $1 billion in additional revenue.
Two months ago, Freddie Mac began a more rigorous review of foreclosed, interest-only loans. In late August, it told the housing finance agency staff that the study showed 15 percent of the sampled loans — a higher figure than that in the Bank of America settlement — contained defects that might result in buybacks among originators.
But how much more can you expect from an organization that still partners with the banks on which they are trying to force repurchases? This is the real scandal here.
NOTE: Just to be clear, the FHFA is Freddie Mac’s overseer. While Freddie Mac shouldn’t have miscalculated the BofA settlement, FHFA should have provided strong oversight. The IG report is titled “Evaluation of the Federal Housing Finance Agency’s Oversight of Freddie Mac’s Repurchase Settlement with Bank of America,” and it doesn’t evaluate the agency well.
The full inspector general’s report is here. More from Brady Dennis.
UPDATE: Rep. Brad Miller (D-NC) reacted strongly to the IG report: “The officials at Freddie Mac who decided to settle these claims for billions less than taxpayers had coming should obviously lose their jobs immediately.” I also liked this:
The most infuriating finding is that Freddie Mac knowingly settled too cheaply to remain on good terms with Bank of America and others in the financial industry. That is exactly the kind of secretive, sweetheart deal that undermines the faith of the American people in their own government
Bank of America Deathwatch: $50 Billion Securities Fraud Suit Over Merrill Acquisition
By Yves Smith
Econned
If mortgage litigation and losses on second mortgages aren’t enough to put Bank of America in a terminally impaired state, the $50 billion private lawsuit filed earlier today represents another major blow.
In short form: when Bank of American bought Merrill, the suit claims failed to disclose $15.31 billion loss around the time of the acquisition. It further alleges that this loss was deliberately hidden to assure the deal would be approved by shareholders. The suit charges that senior executives, including the former CFO, Joseph Price, didn’t tell the general counsel, Timothy J. Mayopoulos, about the full extent of the losses. Mayopoulos had been told the losses were roughly $5 billion. He had initially wanted them to be presented, but later decided against it (one has to assume due to pressure from CEO Ken Lewis and others) because it was within the range of recent Merrill quarterly losses. He was told two days before the shareholder vote the losses would be $7 billion, but that was still in a range that investors would arguably expect. They were actually $11 billion the day of the vote. Four days later, at a board meeting, Mayopoulos found out about the larger loss figures and tried to meet with Price. Mayopoulos was fired the next day.
Note that that the SEC sued the Charlotte bank over the very same issue. Judge Jed Rakoff rejected the initial $33 million settlement as inadequate, and reluctantly approved the sweetened $150 million deal, noting it didn’t impose enough costs on the executives involved.
This is a particularly clear-cut case. Steven Davidoff, a former deal lawyer turned law professor who writes regularly for the New York Times’ Dealbook, and tends to be conservative in his assessment of litigation, says that if certain facts alleged in the lawsuit prove to be accurate, “…this is a prima facie case of securities fraud.” And he continues:
Plaintiffs in this private case have the additional benefit that this claim is related to a shareholder vote. It is easier to prove securities fraud related to a shareholder vote than more typical securities fraud claims like accounting fraud. Shareholder vote claims do not require that the plaintiffs prove that the person committing securities fraud did so with awareness that the statement was wrong or otherwise recklessly made. You only need to show that the person should have acted with care.
This case is not only easier to establish, but the potential damages could also be enormous. Damages in a claim like this are calculated by looking at the amount lost as a result of the securities fraud. A court will most likely calculate this by referencing the amount that Bank of America stock dropped after the loss was announced; this is as much as $50 billion. It is a plaintiff’s lawyer’s dream.
Bank of America is facing a huge liability from this claim. It is also facing even more liability for those who bought and sold stock during this period up until Jan. 15. In a ruling on July 29, the judge in this case allowed these claims to proceed against Bank of America, Mr. Price and Mr. Lewis. The judge had already ruled that the disclosure claim related to the proxy vote could proceed.
This case is on a relatively fast track, with an October 2012 trial date.
Bank of America is expected to argue that the losses were consistent with what shareholders expected, given that a good will write off of $2 billion was already disclosed, and they didn’t know the full extent of the damage at the time of the vote. My guess is that if that is the best defense they can mount, they are going to have to write a very large check.
Econned
If mortgage litigation and losses on second mortgages aren’t enough to put Bank of America in a terminally impaired state, the $50 billion private lawsuit filed earlier today represents another major blow.
In short form: when Bank of American bought Merrill, the suit claims failed to disclose $15.31 billion loss around the time of the acquisition. It further alleges that this loss was deliberately hidden to assure the deal would be approved by shareholders. The suit charges that senior executives, including the former CFO, Joseph Price, didn’t tell the general counsel, Timothy J. Mayopoulos, about the full extent of the losses. Mayopoulos had been told the losses were roughly $5 billion. He had initially wanted them to be presented, but later decided against it (one has to assume due to pressure from CEO Ken Lewis and others) because it was within the range of recent Merrill quarterly losses. He was told two days before the shareholder vote the losses would be $7 billion, but that was still in a range that investors would arguably expect. They were actually $11 billion the day of the vote. Four days later, at a board meeting, Mayopoulos found out about the larger loss figures and tried to meet with Price. Mayopoulos was fired the next day.
Note that that the SEC sued the Charlotte bank over the very same issue. Judge Jed Rakoff rejected the initial $33 million settlement as inadequate, and reluctantly approved the sweetened $150 million deal, noting it didn’t impose enough costs on the executives involved.
This is a particularly clear-cut case. Steven Davidoff, a former deal lawyer turned law professor who writes regularly for the New York Times’ Dealbook, and tends to be conservative in his assessment of litigation, says that if certain facts alleged in the lawsuit prove to be accurate, “…this is a prima facie case of securities fraud.” And he continues:
Plaintiffs in this private case have the additional benefit that this claim is related to a shareholder vote. It is easier to prove securities fraud related to a shareholder vote than more typical securities fraud claims like accounting fraud. Shareholder vote claims do not require that the plaintiffs prove that the person committing securities fraud did so with awareness that the statement was wrong or otherwise recklessly made. You only need to show that the person should have acted with care.
This case is not only easier to establish, but the potential damages could also be enormous. Damages in a claim like this are calculated by looking at the amount lost as a result of the securities fraud. A court will most likely calculate this by referencing the amount that Bank of America stock dropped after the loss was announced; this is as much as $50 billion. It is a plaintiff’s lawyer’s dream.
Bank of America is facing a huge liability from this claim. It is also facing even more liability for those who bought and sold stock during this period up until Jan. 15. In a ruling on July 29, the judge in this case allowed these claims to proceed against Bank of America, Mr. Price and Mr. Lewis. The judge had already ruled that the disclosure claim related to the proxy vote could proceed.
This case is on a relatively fast track, with an October 2012 trial date.
Bank of America is expected to argue that the losses were consistent with what shareholders expected, given that a good will write off of $2 billion was already disclosed, and they didn’t know the full extent of the damage at the time of the vote. My guess is that if that is the best defense they can mount, they are going to have to write a very large check.
Protestors Disrupting Foreclosure Auctions in California
By Timothy Y. Fong, an attorney in the San Francisco Bay Area who practices in the field of foreclosure defense litigation.
On Monday afternoon at 12:00 p.m., a group of protesters organized under the umbrella of the “Make Banks Pay California” campaign picketed a foreclosure sale at the Alameda County Courthouse located at 1225 Fallon Street, Oakland California.
I had heard about the protest from a contact in the real estate industry, and so I resolved to go down and see what it was about. I went specifically as an observer and not as a protester.
When I arrived around noon, I saw a group of roughly 10 to 15 people protesting. Some had yellow shirts marked “ACCE” picketing on the courthouse steps. Many of them had signs, like “Stop Foreclosures/End Bankster Fraud” and pictures of various Wall Street Executives tagged as “Wall Street Robber Banker.” One woman held up a sign that said “Chase and LPS Crime Scene.” After chatting with a few of the protesters I found out that some of them were part of the Alliance of Californians for Community Empowerment, and others were part of the local teachers union, SEIU Local 21. This being Alameda County, both the bystanders, protesters, auctioneers and bidders were a broad spectrum of ages and ethnicities.
Over the next 2 weeks, the Make Banks Pay California group plans to have a variety of actions in the San Francisco Bay Area and Los Angeles to “make Wall Street banks pay for destroying jobs and neighborhoods with their greedy, irresponsible and predatory business practices.” Several of the protesters I spoke with on Monday indicated their belief that because banks “don’t pay” it impoverishes local governments and causes school, library and government service cutbacks.
There were already a few auctioneers standing there with clipboards in hand, ready to start their auctions. The protestors started to chant, with at least one person blowing a whistle. Some of the chants were “they got bailed out, we get tossed out” and “vultures.” I spoke with a well dressed gentleman who said he was there with his client to place a bid. When asked for his thoughts, he said he thought it was a “joke” and that people should “go home” and “pay their bills.”
The bidders and auctioneers at first seemed somewhat confused or even amused by the situation. However once the protest started to get going, the protesters would circle up around an auctioneer and start chanting so loudly that it was difficult for the auctioneer to be heard. In response, the auctioneers distributed themselves around the steps so that the protesters couldn’t stop all of them. The protesters broke up into a couple of groups, with each group attempting (and succeeding in some cases) in surrounding an auctioneer with chanting people. Electronic media devices were everywhere– people were pulling out phones and digital cameras and taking pictures. I even saw one of the bidders do a self-video with what looked like an Android phone– he showed the crowd then turned the phone on himself and gave a quick narration of the scene. The protesters were able to disrupt the sales enough that one person I took to be an auctioneer (due to his clip board and demeanor– I have been to more than a few courthouse step auctions) got on the phone and said that it was “getting rough” and he “need[ed] everyone here.” Thankfully he didn’t pull a Gary Oldman and demand EVERYONE.
There was no law enforcement presence on the steps, although I know for a fact that a sheriff’s security station was within 150 yards of the steps inside the courthouse. I did see one law enforcement officer ride by on a bicycle. A picketer waved to him and he waved back.
I spoke with one of the protesters, Shirley Burnell, an older African-American woman using a walker. She said that she was there because banks are selling homes out from under people. When I asked her whether she had been personally affected by the situation, she related her story to me. Shirley had taken out a loan on her home to make some repairs. She had been given two years of fixed payments, and then told that she could refinance after that into a 30 year fixed loan. That did not happen for her, so she has been seeking a loan modification since 2007, to no avail. I did notice more than a few older people with gray hair in the crowd of protesters. It was more than just college students.
In an effort to understand both sides of the story, I also attempted to speak with one of the auctioneers. No one I talked with would go on the record with me. I did talk to one younger man, with a pair of earbuds around his neck. His name was Connor, and he related that he worked for a company that buys foreclosure. Connor said that he would be willing to listen to the protesters if they had some kind of alternative plan. In fact he asked me, “what’s your alternative” and I told him that I was there to write a blog post about it and as a journalist, and not as a protester. Connor also related that he had asked some of the protesters not to yell in his ear, and that they continued yelling.
After about half an hour of protesting, I saw some tempers start to flare as a few frustrated bidders yelled at the protesters. One man in particular stood out to me. He was dressed in a white suit with a pair of bug-eyed Gucci sunglasses. In the middle of a crowd of chanting protesters he yelled out “make your payments” and a few taunts. After a little bit of that he seemed to think the better of it and walk away. It was one of those totally stereotypical, Marie-Antoinette moments that I would not have believed had I not seen it with my own eyes.
Although the bidders yelled about “pay your bills” and “make your payments,” in my experience as an attorney, many of my clients and prospective clients have fallen into foreclosure when banks told them that they had to stop making payments in order to qualify for a loan modification. When the modification does not happen, they find themselves foreclosed upon, with the bank demanding not only the back payments but interest as well. Very few people are able to become current at that point. This practice is known as dual tracking.
In speaking with my colleagues who also practice foreclosure defense, Shirley’s experience is distressingly common. Litigating a dual tracking case is difficult because of litigation costs. Costs are driven in part by the procedural requirements put in place to eliminate “frivolous” lawsuits– effectively this places justice out of the financial reach of many.
I have also seen more than a few people who were put into loans where they had a low payment for the first few years, and then it ramped up afterwards. Like Shirley, they were told that they would be able to refinance into a 30 year fixed, and like Shirley they were unable to do so after the economy crashed in 2007. Even people who are not in a loan with escalating payments still seek principle reductions, since the value of their real estate has dropped from the bubble years.
My experience has been that there is a deep reluctance in the financial industry to make principle reductions on loans. Even relatively well off professionals in the bottom half of the top 1% category have a difficult time getting their bank to negotiate with them. I spoke recently with a mid-senior level finance professional at a major bank who indicated to me that his preferred solution would be to make the banks take their medicine; do the write downs and sell the existing inventories of foreclosed homes. This would , in his opinion push some of the banks involved into FDIC resolution. Clearly balance-sheet concerns are the source of the reluctance by management to make the principle reductions.
However, the job of our political leadership is not fealty to bank balance- sheets, but to the well-being of the American people. I had hoped that President Obama and the Democratic Party leadership would make bailouts conditional on principle modifications but that has not been the case. I suspect this comes from a reluctance to push major banks into FDIC resolution. Also, there seems to be a certain institutional and personal blindness among our elite, as exemplified by the Gucci-sunglasses-wearing man I saw yelling at the demonstrators. Even though he was surrounded by chanting protesters he thought it might be a good idea to taunt them. Thankfully the crowd was non-violent and nothing happened other than some shouting.
I am positive that the financial and political elite fail to understand the level of anger out there in today’s America. Probably the most disturbing thing I heard at the protest came from a conversation between a couple of bystanders. An older man was commenting that he’d tried to seek justice against his bank through the legal system but that it was “bullshit” [his exact word] and that the system was stacked against normal people. It’s a sentiment that, as an attorney, I have been hearing altogether too often lately from all kinds of people. I am disturbed by it because our government, indeed all governments, depend on public faith in institutions. When public trust in government institutions fails, the result is chaos and violence. As seen when the Soviet Union collapsed, organized crime steps in to fill in the void.
Our elite leadership is a lot like the man with the Gucci sunglasses– flaunting their wealth and positions while taunting a crowd of angry people. I can only hope that the recent upsurge of protests across America can succeed in convincing our elites to effectively respond to the concerns of ordinary Americans before we step over the precipice.
On Monday afternoon at 12:00 p.m., a group of protesters organized under the umbrella of the “Make Banks Pay California” campaign picketed a foreclosure sale at the Alameda County Courthouse located at 1225 Fallon Street, Oakland California.
I had heard about the protest from a contact in the real estate industry, and so I resolved to go down and see what it was about. I went specifically as an observer and not as a protester.
When I arrived around noon, I saw a group of roughly 10 to 15 people protesting. Some had yellow shirts marked “ACCE” picketing on the courthouse steps. Many of them had signs, like “Stop Foreclosures/End Bankster Fraud” and pictures of various Wall Street Executives tagged as “Wall Street Robber Banker.” One woman held up a sign that said “Chase and LPS Crime Scene.” After chatting with a few of the protesters I found out that some of them were part of the Alliance of Californians for Community Empowerment, and others were part of the local teachers union, SEIU Local 21. This being Alameda County, both the bystanders, protesters, auctioneers and bidders were a broad spectrum of ages and ethnicities.
Over the next 2 weeks, the Make Banks Pay California group plans to have a variety of actions in the San Francisco Bay Area and Los Angeles to “make Wall Street banks pay for destroying jobs and neighborhoods with their greedy, irresponsible and predatory business practices.” Several of the protesters I spoke with on Monday indicated their belief that because banks “don’t pay” it impoverishes local governments and causes school, library and government service cutbacks.
There were already a few auctioneers standing there with clipboards in hand, ready to start their auctions. The protestors started to chant, with at least one person blowing a whistle. Some of the chants were “they got bailed out, we get tossed out” and “vultures.” I spoke with a well dressed gentleman who said he was there with his client to place a bid. When asked for his thoughts, he said he thought it was a “joke” and that people should “go home” and “pay their bills.”
The bidders and auctioneers at first seemed somewhat confused or even amused by the situation. However once the protest started to get going, the protesters would circle up around an auctioneer and start chanting so loudly that it was difficult for the auctioneer to be heard. In response, the auctioneers distributed themselves around the steps so that the protesters couldn’t stop all of them. The protesters broke up into a couple of groups, with each group attempting (and succeeding in some cases) in surrounding an auctioneer with chanting people. Electronic media devices were everywhere– people were pulling out phones and digital cameras and taking pictures. I even saw one of the bidders do a self-video with what looked like an Android phone– he showed the crowd then turned the phone on himself and gave a quick narration of the scene. The protesters were able to disrupt the sales enough that one person I took to be an auctioneer (due to his clip board and demeanor– I have been to more than a few courthouse step auctions) got on the phone and said that it was “getting rough” and he “need[ed] everyone here.” Thankfully he didn’t pull a Gary Oldman and demand EVERYONE.
There was no law enforcement presence on the steps, although I know for a fact that a sheriff’s security station was within 150 yards of the steps inside the courthouse. I did see one law enforcement officer ride by on a bicycle. A picketer waved to him and he waved back.
I spoke with one of the protesters, Shirley Burnell, an older African-American woman using a walker. She said that she was there because banks are selling homes out from under people. When I asked her whether she had been personally affected by the situation, she related her story to me. Shirley had taken out a loan on her home to make some repairs. She had been given two years of fixed payments, and then told that she could refinance after that into a 30 year fixed loan. That did not happen for her, so she has been seeking a loan modification since 2007, to no avail. I did notice more than a few older people with gray hair in the crowd of protesters. It was more than just college students.
In an effort to understand both sides of the story, I also attempted to speak with one of the auctioneers. No one I talked with would go on the record with me. I did talk to one younger man, with a pair of earbuds around his neck. His name was Connor, and he related that he worked for a company that buys foreclosure. Connor said that he would be willing to listen to the protesters if they had some kind of alternative plan. In fact he asked me, “what’s your alternative” and I told him that I was there to write a blog post about it and as a journalist, and not as a protester. Connor also related that he had asked some of the protesters not to yell in his ear, and that they continued yelling.
After about half an hour of protesting, I saw some tempers start to flare as a few frustrated bidders yelled at the protesters. One man in particular stood out to me. He was dressed in a white suit with a pair of bug-eyed Gucci sunglasses. In the middle of a crowd of chanting protesters he yelled out “make your payments” and a few taunts. After a little bit of that he seemed to think the better of it and walk away. It was one of those totally stereotypical, Marie-Antoinette moments that I would not have believed had I not seen it with my own eyes.
Although the bidders yelled about “pay your bills” and “make your payments,” in my experience as an attorney, many of my clients and prospective clients have fallen into foreclosure when banks told them that they had to stop making payments in order to qualify for a loan modification. When the modification does not happen, they find themselves foreclosed upon, with the bank demanding not only the back payments but interest as well. Very few people are able to become current at that point. This practice is known as dual tracking.
In speaking with my colleagues who also practice foreclosure defense, Shirley’s experience is distressingly common. Litigating a dual tracking case is difficult because of litigation costs. Costs are driven in part by the procedural requirements put in place to eliminate “frivolous” lawsuits– effectively this places justice out of the financial reach of many.
I have also seen more than a few people who were put into loans where they had a low payment for the first few years, and then it ramped up afterwards. Like Shirley, they were told that they would be able to refinance into a 30 year fixed, and like Shirley they were unable to do so after the economy crashed in 2007. Even people who are not in a loan with escalating payments still seek principle reductions, since the value of their real estate has dropped from the bubble years.
My experience has been that there is a deep reluctance in the financial industry to make principle reductions on loans. Even relatively well off professionals in the bottom half of the top 1% category have a difficult time getting their bank to negotiate with them. I spoke recently with a mid-senior level finance professional at a major bank who indicated to me that his preferred solution would be to make the banks take their medicine; do the write downs and sell the existing inventories of foreclosed homes. This would , in his opinion push some of the banks involved into FDIC resolution. Clearly balance-sheet concerns are the source of the reluctance by management to make the principle reductions.
However, the job of our political leadership is not fealty to bank balance- sheets, but to the well-being of the American people. I had hoped that President Obama and the Democratic Party leadership would make bailouts conditional on principle modifications but that has not been the case. I suspect this comes from a reluctance to push major banks into FDIC resolution. Also, there seems to be a certain institutional and personal blindness among our elite, as exemplified by the Gucci-sunglasses-wearing man I saw yelling at the demonstrators. Even though he was surrounded by chanting protesters he thought it might be a good idea to taunt them. Thankfully the crowd was non-violent and nothing happened other than some shouting.
I am positive that the financial and political elite fail to understand the level of anger out there in today’s America. Probably the most disturbing thing I heard at the protest came from a conversation between a couple of bystanders. An older man was commenting that he’d tried to seek justice against his bank through the legal system but that it was “bullshit” [his exact word] and that the system was stacked against normal people. It’s a sentiment that, as an attorney, I have been hearing altogether too often lately from all kinds of people. I am disturbed by it because our government, indeed all governments, depend on public faith in institutions. When public trust in government institutions fails, the result is chaos and violence. As seen when the Soviet Union collapsed, organized crime steps in to fill in the void.
Our elite leadership is a lot like the man with the Gucci sunglasses– flaunting their wealth and positions while taunting a crowd of angry people. I can only hope that the recent upsurge of protests across America can succeed in convincing our elites to effectively respond to the concerns of ordinary Americans before we step over the precipice.
Step Aside BBC "Trader": Head Of UniCredit Securities Predicts Imminent End Of The Eurozone And A Global Financial Apocalypse
by Tyler Durden
ZeroHedge
Either the YesMen have infiltrated Italy's biggest, and most undercapitalied, bank, or the stress of constant, repeated lying and prevarication has finally gotten to the very people who know their livelihoods hang by a thread, and the second the great ponzi is unwound their jobs, careers, and entire way of life will be gone. Such as the head of UniCredit global securities Attila Szalay-Berzeviczy, and former Chairman of the Hungarian stock exchange, who has written an unbelievable oped in the Hungarian portal Index.hu which, frankly, make Alessio "BBC Trader" Rastani's provocative speech seem like a bedtime story. Only this time one can't scapegoat Szalay-Berzeviczy "naivete" on inexperience or the desire to gain public prominence. If someone knows the truth, it is the guy at the top of UniCredit, which we expect to promptly trade limit down once we hit print. Among the stunning allegations (stunning in that an atual banker dares to tell the truth) are the following: "the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"... “The euro is beyond rescue”... “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”...."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."..."Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse...
But wait, there's more. From Bloomberg:
The impact of a Greek default may “rapidly” spread across the continent, possibly prompting a run on the “weaker” banks of “weaker” countries, he said.
“The panic escalating this way may sweep across Europe in a self-fulfilling fashion, leading to the breakup of the euro area,” Szalay-Berzeviczy added.
Szalay-Berzeviczy has just arrived in Hungary from a trip abroad and can’t be reached until later today, a UniCredit official, who asked not to be identified because she isn’t authorized to speak to the press, said when Bloomberg called Szalay-Berzeviczy’s Budapest office to seek further comment.
And now, for our European readers (first) and everyone else (next), it is really time to panic.
Full op-ed from Index.hu, google translated from Hungarian. Some of the nuances may be lost, but the message is bolded. If any one our Hungarian-speaking readers have a better translation, please forward it to us asap.
Europe's common currency is virtually dead. The euro's doomed situation. The only open question now is, that European governments and the European Central Bank's desperate rearguard action even number of days to keep the spirit in Greece. For the moment, when Athens is declared bankrupt, a "10 magnitude" earthquake will shake Europe, which will be the overture to a whole new era in the life of the old continent.
Indeed, Greece is not only bankruptcy will mean that the Greek government securities holders did not get back their money invested, but also to the interior of the state will not be able to meet its debts.
From the moment only Greek teachers, doctors, police, army, ministry and local government employees will not receive a salary, just as the seniors did not expect nyugdÃjukra good time. The ATM is emptied in minutes. The local banks are stuck holding government securities, an immediate liquidity crisis, devaluation of the Greek banking system in total collapse. Thus the savings of depositors is totally wasted because the Greek government deposit insurance or guarantee was now living. Bankkártyájukról since then, not only at home will not be able to withdraw some money, but the world's only automatájából not. The benzinkutakból run out of fuel, as well as food from the grocery store. Greece is practically a full stop at least a decade of life and dramatic drop in poverty in the country as a whole.
The problem is that in this case, the disaster can not stop at the Greek border, but great speed and momentum tovagy?r?z?dik then the entire euro zone, Europe, and finally shake the world. Channel for the spread of infection, of course, such a scenario would also back the banking system. Indeed, the international banks in Greece suffered hundreds of billions of euros t?kevesztésükön too soon be forced to lock hitelkereteit other banks, which will have to do with a country where - according to investors' expectations - the Greek thunderbolt strike again.
And when the banks no longer trust each other, not to lend to each other, the international financial markets stop. This in turn means that all financial institutions left alone with clients.
Poor countries with weak banks start to panic withdrawals of retail funds. But since the retail and corporate deposits and loans are allocated in the form of inter-bank market, these banks can not borrow bridging purposes, may be an immediate liquidity crisis. This is, to all financial institutions can be put into bankruptcy, which is stable and there is no capital behind strong, creditworthy countries. European countries are now, of course, guarantee the safety of their deposits, but the collapse of the banking system would be in financial straits due to the governments of the countries whose banking systems should extend under his arm. Thus, the escalating self-fulfilling panic söpörhet way through Europe, the euro zone which then leads to disintegration.
Of course, Angela Merkel, Nicolas Sarkozy and Jose Manuel Barroso repeated daily unos-untalan to disintegration of the euro zone there is no question of the euro remains in any case, as an alternative to this would be a huge cost to all Member States. But the currency union dissolution is probably one of the main features will be managed from Brussels, it is not a process but an uninvited guest arriving as a result of financial apocalypse. The euro area break-up, timing, strength of the human factors as well as money and capital market forces and trends will define the politicians was only with us panic watching the developments as three years ago was when Lehman Brothers collapsed.
The now four-year, and is constantly raging crisis in the greedy, selfish human nature too is certainly not the banks, not brokers, not the weather and no natural disasters, but above all, and especially at any price with economic growth, power libertine policy responsible for the global elite. Namely, those legislators, the majority of whom have never been able to see through the international financial developments, therefore, the corresponding pre-crisis legislation will only have been available, when in 2008 the world has collapsed.
However, the banks should be regulated, not criminalized or stigmatized.
The American politicians, at least it has always been understood that the money and capital markets are efficient economic policy allies of the investor for the company are responsible for. In contrast, their counterparts in Europe, unfortunately, still do not understand the nature of markets, most of them think that the financial system, the ancient enemy, because it does not work the way it is dictated by their own political interests.
Was a huge mistake and irresponsibility on the part of the political elite of the international crisis in 2009, the easing of its own negligence and error concealment of public passion in order to make a scapegoat of feltüzelésével from financial institutions. When everyone knows exactly that the taxpayers 'money to government banks are not rescued, but the corporate, retail and municipal depositors' money. This was not a political decision - like, say, airlines or car manufacturers for - but a serious system troubleshooting.
The two reasons people moved their money to the bank: I want to know it is safe and hope the interest on their savings. The bank has to create the security, interests, it must produce. It will only be able to do so, it assigns to the deposits in the form of credit to where money is needed for the operation, growth and job creation. It is sufficient interest to be collected by then to be able to pay interest to depositors.
Banks are so important to the economy, fuel carriers, which in times of crisis in the economies most vulnerable points, which therefore must be protected and safeguarded at all costs. Eventually, this belátva "after the rain the rain jacket," the way Europe was born in the EU capital adequacy directive, the United Kingdom, Vickers Commission's recommendation, the United States, the Dodd-Frank Act, while at the global level, the Basel Committee (Basel Committee on Banking Services) III. package. These are all one and all of the banking capital and liquidity position on increasing. The regulations, restrictions - which is no small effect on the Hungarian banking capital and liquidity position as well - but the price that banks in lending rates to curb forced a diminishing impact on economic growth and increase unemployment.
There is a country ...
However, there is still a country in Europe where the political elite in recent years not learning from the crisis of economic policy impasse will continue its adventures. A place where politicians continue to irresponsibly mantrázzák that banks are the source of every problem and an imaginary part of the economic Patriotic War must convince them, instead of strengthening their capital rohannának the upcoming Euro final before the onset of disaster. And is still seriously they think the country will benefit if long-term processes in the international market against marching.
This, unfortunately, no other country like Hungary, where governments, businesses and a significant proportion of the population indebted up to the neck, near the Swiss franc will spend his days. By now almost everyone's favorite topic of "what the devizahiteleseinkkel start" in the story, which is again due to the political elite of our society began to polarize. Despite the disagreement is not really suffering, and lack of solidarity between runs, but the solution and a further deterioration of the situation. Finally, the Government of a sudden, shocking everyone with lightning speed by dragging points in the debate. For many, the record speed in the parliament adopted legislation relevant music for the ears. I, however, the minority that the government of the country for the wrong, dangerous and immensely unjust solution.
Who is responsible for the credibility of the currency situation that has evolved?
To determine if this is not necessary to set up committees of inquiry. The situation that has evolved over the past decade, the whole Hungarian political elite is responsible for short-sighted and self-serving politizálásával the following four steps as a result of our country to benefit vulnerable position.
1) The spectacular public debt in 2000, started by the then Urban's government overspending as part of a drastic cut in home loan into a generous budget kamattámogatásába. This was the hope that in the 2002 elections will help the start-up in domestic demand growth path to make the country an international crisis in the middle. Eventually won the elections, Socialist Party of Free Democrats coalition that he is "hundred-day program," observed head (which was then in opposition Fidesz is automatically voted on) that some further policy steps complete with an amazing total indebtedness of the country. Both political side hoped that the expansion of domestic demand BOOST artificial, accelerated through the distributing political economy, that will then automatically produces a cover to hide the resulting deficits. However, this hypothesis was wrong, the more so because the supercharged domestic demand stimulated imports only, and this is only exploited by the country's trade balance. The resulting fiscal imbalance is a false illusion of wealth, causing catalyzed by the growing demand for consumer credit.
2) The Hungarian population is not the currency of their own band, not to loans after the country's deteriorating economic condition of the forint faced having to pay the interest rate premium. In the nine years of failed economic policy (unsustainable pension, health and housing subsidy system, beyond the minimum 50 percent increase for public servants carried out under 50 percent wage increase, a 19 thousand forints single pension supplement, the 13th month pension, the introduction of the minimum wage, tax exemptions make the reckless áfaváltoztatások, the state and the private sector, real or imagined, a partnership of PPP investments proliferation, unrealistically expensive highway construction), an abnormally low taxpayer morale, coupled with a growing hole in the state household, and this is the country's indebtedness resulted. A short well-being of our economy and substance of political change in direction instead of the current Hungarian Government to finance its foreign investors, who do all this, of course, the increased risks due to a high interest rate premium they would do next.
3) The current Hungarian government's fault that 21 years after the regime change in the financial and economic fundamentals are still not subject to the compulsory part of secondary school education and the maturity of. The reason people can not just lending a little, but have no idea what's the difference between the interest rate and the APR, there is no sufficient information about themselves on the bank, a financial trader. For this reason, then vulnerable, defenseless, non-savers are active, spend more strength above. What megtakarÃtanak yet, I want to keep it under his pillow, and averse from the Stock Exchange do not understand the fundamental economic relationships are not. So, of course, are highly susceptible to demagogic politicians banking and capital market, anti-rhetoric, when the situation rather than solutions themselves instead of trying to find those responsible.
4) The adóforintjainkból reserved for government and the financial market supervisory bodies to be surprised at the deepest crisis in his sleep in 2008. They were not able to perform a task, and therefore unprepared for the crisis in Hungary, it was more severe effect. The current government, parliament, central bank supervision and the responsibility to monitor, if necessary, regulate the market trends and anomalies if large or dangerous trends are seen, it is time to take action early - applying for the relevant law must drive everyone back on track. (For example, if a bank responsible wanted to act and therefore does not give franc loan to the customer, the customer response passed from another bank, which serve them.) Therefore, the Socialist-Free Democrats government enormous mistake when unleashed in Hungary in foreign currency lending, instead of restrictive legislation would have created that all banks are equally strong against the standards of the franc would have corroborated related lending. This of course does not dealt with the then opposition in parliament.
The government in the role of Don Quixote
The Hungarian government, the fiscal position to deal with a simple but populist solution. The problem with all of its declared banks began systematically stamping: the crisis in the banking system, taxes were imposed, a moratorium on the enforcement of mortgages, a three-year rate lock maximizing debtors' monthly repayments. These measures, of course, painful lives of all financial institutions, but also understandable and tolerable in view of the crisis. The government's latest idea, a stream of foreign exchange price fixed mortgage repayments, however, is beyond all the existing boundary of sanity.
The banks seem to be borne by the strokes well, because they are the eyes of external sources of unrestricted funds (but not their own money to the banks, the depositors and shareholders should have). But the reality is that domestic banks in these lépéssekkel lose their profit and a significant part of their capital, which puts a dangerous situation in the Hungarian banking system just when the world, the banks' capital and liquidity, strengthening the position of working with governments. The current situation at home, in response to the banks to curb lending further forced the mostly foreign-owned banks are a part of our opt for the departure. Of course, this last step we can say that this is who cares: just because it will improve under the leadership of the Hungarian financial institutions, market-making opportunity.
But the situation is far more complex. Firstly, the total size of Hungarian banks are not enough large to be financed only from domestic sources themselves the entire Hungarian economy. Second, any taxpayer suicide in terms of budget, job-creating companies elüldözni, especially when it leads to the purchase of Hungarian government securities. And last but not least, a shrinking national economy and increasingly risky financial institution operating in a responsible one is not increasing market shares. If it is the country where the bank is also home country, this means increase in the risk of increasingly sidelined in international financial markets and is also much more expensive than the current one, or none at all will not be able to involve funds from abroad.
Therefore, higher interest rates and forint dramatically in need of corporate and household lending in Hungary can be expected that we all have bad news. Especially when considering the lawfulness that each percentage point of economic growth should grow in the order of four percent each year, the bank's loan portfolio. Failing this, the road remains a continuing recession and rising unemployment direction. Same point in the past three years has shown that the unlimited and unregulated credit expansion is what can lead to trouble. But that is a credit to the economy in which the living body of water: an essential and irreplaceable. It is not to mention that the lack of competition in supply and rising bank costs, and declining service quality leads.
Long live the social implications
A favorable exchange rate for foreign currency loans, repayment options and money market of the real economic problems are a very important set of issues it raises: the action is extremely unfair to socially as well.
1) Take yourself, who adósodott not it?
We turn to a bank loan, because we decided against that and not because of this gun to force bank. A man with a credit consumer, who is living beyond its capabilities with real, or better living conditions than that you can afford. But this is not a problem per se, but only in private. Especially if the forint borrowing rather than foreign currency. The foreign debt is nothing more than speculation in the currency weakening. The borrower to receive foreign currency, the forint strengthened or will increase, so the repayments are lower, or even weaken, the depreciation rate will never exceed the forint and Swiss franc relative kamatkülönbözetb?l from profits. The customer decides the bank to credit the HUF will be required over 10 per cent interest or more on selected franc loan 6 percent. One man's debt burden is higher, but there is no exchange rate risk, while the other smaller interest burden, coupled with exchange rate risk. So the possibility of the borrower, risk tolerance in relation to the choice. Responsibility for the judgments of others do not sew the neck, once it did not work for what we expected. However, the government decided that the losses for the banks to take over. This means that if a crisis of financial institutions to the edge of collapse because of their capital szétporladó are, the Hungarian government, the taxpayers will have to set their feet so as not to lose there money to depositors, since they guarantee. That is simplistic: while the forint was strong, the currency authentic nyer?ben were, and when the partially self-constructed position weakened forint due to losses incurred when the government that tries them be required to pay, who did not want a loan, but instead saved a and deposit bankjuknál form affixed. Those who are indebted in HUF, are now beyond their own pain authentic solidarity even in the foreign exchange burden themselves may assume, therefore, double-pay. This is extremely unfair to those who lives without borrowing to the extent possible is held responsible, thinking the more expensive or forint loans was recorded, compared to a profit for many years a relatively foreign credit insurance.
The exchange of authentic reference that no one told them to such an extent, the forint weakened and discredited simply unacceptable. In addition, point in a country with a population over many decades, they were socialized to be the best foreign currency savings, as the forint has already been countless times leértékelve. Not to mention that the man, after long and careful consideration in choosing real estate. It is difficult to imagine that a funding condition can not inquire about the system thoroughly.
2) Support those who took the rose hill francs their apartment?
The saving on foreign exchange authentic parliamentary decision that the existing foreign currency loan will only be able to repay, whose savings are adequate or sufficiently stable income and good relations among the living, that this new fund is now forint-based loans. The decisions of the government due to the weakening forint started to plunge even more difficult situation is really in need credible currency, even though at the expense of others throws lifeline to those who hitelükb?l luxury apartments and holiday homes at Lake Balaton meeting.
3) Trash the sanctity of property rights
The government has just sent a message to voters: the sense of responsibility to the community and handle finances, because if it goes wrong, you will help the paternalistic state. The parliament's decision on Monday, however, has virtually legislated that Hungary should rob banks.
The banks do not stuff themselves with money bags, where they can and can extract any number of free money. They are companies whose owners are its shareholders. Who had invested money in this industry because earnings are expected. The income is derived from those customers who have placed their savings to the bank as security in exchange and interest rate are expected. The bank will need to generate the operation, the cost of the depositors and the interest rate on dividends to shareholders. If this process the government all sorts of sober reflection, without prior consultation and say, you have the savings of depositors and the shareholders' investment risk. This would not only lead to bankcs?dhöz worse, but the extent undermines the confidence towards Hungary to deter those who have money want to invest Hungary economy.
A reliable and well-functioning market economy, democratic country built on two main criteria: the sanctity of private property, and the megkérd?jelezhetetlensége FAKTUM to repaying the debt is still all right. And these two factors can not only political power and does not want megpiszkálni. Because everyone knows that the country where the prime minister during breakfast work out the same day regardless of which operator will be something to take away, which was then a parliamentary lunch already constitution also to the President on the same day before dinner underneath write and publish the investors to avoid the sight of a banana republic.
What is medicine?
The people, companies, municipalities and the state foreign debt of the current level of real macroeconomic risks, which need to be addressed. The pékt?l doctors and bankers to bus drivers is the same for all of us an equal interest in the more tolerable rate of repayment. But it does not matter what method is achieved. The parliament adopted the Law on foreign credit repayments in the short term as to help affluent debtors, but it is extremely unfair and harmful to the greater part of the country. This is a money market and real activity leads to start had to sooner rather than later to 300 forint euro exchange rate over the direction of take. There are some steps that might sound good now, but in fact points to a fast-track court sent the country after the Greeks. While other ideas are not sound popular, but in the medium term, stable and reasonable solution to the problem of genuine currency.
The latter are the authentic economic policy decisions that the government reduce the size of the pension and health and public administration reform will help improve competitiveness. Measures to attract investors and investment, increase tax revenues are put into place to increase - making it finally fall in unemployment - may be less public debt and, last but not least, appreciation can start the forint to finally fall to start a foreign currency mortgage payments.
ZeroHedge
Either the YesMen have infiltrated Italy's biggest, and most undercapitalied, bank, or the stress of constant, repeated lying and prevarication has finally gotten to the very people who know their livelihoods hang by a thread, and the second the great ponzi is unwound their jobs, careers, and entire way of life will be gone. Such as the head of UniCredit global securities Attila Szalay-Berzeviczy, and former Chairman of the Hungarian stock exchange, who has written an unbelievable oped in the Hungarian portal Index.hu which, frankly, make Alessio "BBC Trader" Rastani's provocative speech seem like a bedtime story. Only this time one can't scapegoat Szalay-Berzeviczy "naivete" on inexperience or the desire to gain public prominence. If someone knows the truth, it is the guy at the top of UniCredit, which we expect to promptly trade limit down once we hit print. Among the stunning allegations (stunning in that an atual banker dares to tell the truth) are the following: "the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"... “The euro is beyond rescue”... “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”...."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."..."Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse...
But wait, there's more. From Bloomberg:
The impact of a Greek default may “rapidly” spread across the continent, possibly prompting a run on the “weaker” banks of “weaker” countries, he said.
“The panic escalating this way may sweep across Europe in a self-fulfilling fashion, leading to the breakup of the euro area,” Szalay-Berzeviczy added.
Szalay-Berzeviczy has just arrived in Hungary from a trip abroad and can’t be reached until later today, a UniCredit official, who asked not to be identified because she isn’t authorized to speak to the press, said when Bloomberg called Szalay-Berzeviczy’s Budapest office to seek further comment.
And now, for our European readers (first) and everyone else (next), it is really time to panic.
Full op-ed from Index.hu, google translated from Hungarian. Some of the nuances may be lost, but the message is bolded. If any one our Hungarian-speaking readers have a better translation, please forward it to us asap.
Europe's common currency is virtually dead. The euro's doomed situation. The only open question now is, that European governments and the European Central Bank's desperate rearguard action even number of days to keep the spirit in Greece. For the moment, when Athens is declared bankrupt, a "10 magnitude" earthquake will shake Europe, which will be the overture to a whole new era in the life of the old continent.
Indeed, Greece is not only bankruptcy will mean that the Greek government securities holders did not get back their money invested, but also to the interior of the state will not be able to meet its debts.
From the moment only Greek teachers, doctors, police, army, ministry and local government employees will not receive a salary, just as the seniors did not expect nyugdÃjukra good time. The ATM is emptied in minutes. The local banks are stuck holding government securities, an immediate liquidity crisis, devaluation of the Greek banking system in total collapse. Thus the savings of depositors is totally wasted because the Greek government deposit insurance or guarantee was now living. Bankkártyájukról since then, not only at home will not be able to withdraw some money, but the world's only automatájából not. The benzinkutakból run out of fuel, as well as food from the grocery store. Greece is practically a full stop at least a decade of life and dramatic drop in poverty in the country as a whole.
The problem is that in this case, the disaster can not stop at the Greek border, but great speed and momentum tovagy?r?z?dik then the entire euro zone, Europe, and finally shake the world. Channel for the spread of infection, of course, such a scenario would also back the banking system. Indeed, the international banks in Greece suffered hundreds of billions of euros t?kevesztésükön too soon be forced to lock hitelkereteit other banks, which will have to do with a country where - according to investors' expectations - the Greek thunderbolt strike again.
And when the banks no longer trust each other, not to lend to each other, the international financial markets stop. This in turn means that all financial institutions left alone with clients.
Poor countries with weak banks start to panic withdrawals of retail funds. But since the retail and corporate deposits and loans are allocated in the form of inter-bank market, these banks can not borrow bridging purposes, may be an immediate liquidity crisis. This is, to all financial institutions can be put into bankruptcy, which is stable and there is no capital behind strong, creditworthy countries. European countries are now, of course, guarantee the safety of their deposits, but the collapse of the banking system would be in financial straits due to the governments of the countries whose banking systems should extend under his arm. Thus, the escalating self-fulfilling panic söpörhet way through Europe, the euro zone which then leads to disintegration.
Of course, Angela Merkel, Nicolas Sarkozy and Jose Manuel Barroso repeated daily unos-untalan to disintegration of the euro zone there is no question of the euro remains in any case, as an alternative to this would be a huge cost to all Member States. But the currency union dissolution is probably one of the main features will be managed from Brussels, it is not a process but an uninvited guest arriving as a result of financial apocalypse. The euro area break-up, timing, strength of the human factors as well as money and capital market forces and trends will define the politicians was only with us panic watching the developments as three years ago was when Lehman Brothers collapsed.
The now four-year, and is constantly raging crisis in the greedy, selfish human nature too is certainly not the banks, not brokers, not the weather and no natural disasters, but above all, and especially at any price with economic growth, power libertine policy responsible for the global elite. Namely, those legislators, the majority of whom have never been able to see through the international financial developments, therefore, the corresponding pre-crisis legislation will only have been available, when in 2008 the world has collapsed.
However, the banks should be regulated, not criminalized or stigmatized.
The American politicians, at least it has always been understood that the money and capital markets are efficient economic policy allies of the investor for the company are responsible for. In contrast, their counterparts in Europe, unfortunately, still do not understand the nature of markets, most of them think that the financial system, the ancient enemy, because it does not work the way it is dictated by their own political interests.
Was a huge mistake and irresponsibility on the part of the political elite of the international crisis in 2009, the easing of its own negligence and error concealment of public passion in order to make a scapegoat of feltüzelésével from financial institutions. When everyone knows exactly that the taxpayers 'money to government banks are not rescued, but the corporate, retail and municipal depositors' money. This was not a political decision - like, say, airlines or car manufacturers for - but a serious system troubleshooting.
The two reasons people moved their money to the bank: I want to know it is safe and hope the interest on their savings. The bank has to create the security, interests, it must produce. It will only be able to do so, it assigns to the deposits in the form of credit to where money is needed for the operation, growth and job creation. It is sufficient interest to be collected by then to be able to pay interest to depositors.
Banks are so important to the economy, fuel carriers, which in times of crisis in the economies most vulnerable points, which therefore must be protected and safeguarded at all costs. Eventually, this belátva "after the rain the rain jacket," the way Europe was born in the EU capital adequacy directive, the United Kingdom, Vickers Commission's recommendation, the United States, the Dodd-Frank Act, while at the global level, the Basel Committee (Basel Committee on Banking Services) III. package. These are all one and all of the banking capital and liquidity position on increasing. The regulations, restrictions - which is no small effect on the Hungarian banking capital and liquidity position as well - but the price that banks in lending rates to curb forced a diminishing impact on economic growth and increase unemployment.
There is a country ...
However, there is still a country in Europe where the political elite in recent years not learning from the crisis of economic policy impasse will continue its adventures. A place where politicians continue to irresponsibly mantrázzák that banks are the source of every problem and an imaginary part of the economic Patriotic War must convince them, instead of strengthening their capital rohannának the upcoming Euro final before the onset of disaster. And is still seriously they think the country will benefit if long-term processes in the international market against marching.
This, unfortunately, no other country like Hungary, where governments, businesses and a significant proportion of the population indebted up to the neck, near the Swiss franc will spend his days. By now almost everyone's favorite topic of "what the devizahiteleseinkkel start" in the story, which is again due to the political elite of our society began to polarize. Despite the disagreement is not really suffering, and lack of solidarity between runs, but the solution and a further deterioration of the situation. Finally, the Government of a sudden, shocking everyone with lightning speed by dragging points in the debate. For many, the record speed in the parliament adopted legislation relevant music for the ears. I, however, the minority that the government of the country for the wrong, dangerous and immensely unjust solution.
Who is responsible for the credibility of the currency situation that has evolved?
To determine if this is not necessary to set up committees of inquiry. The situation that has evolved over the past decade, the whole Hungarian political elite is responsible for short-sighted and self-serving politizálásával the following four steps as a result of our country to benefit vulnerable position.
1) The spectacular public debt in 2000, started by the then Urban's government overspending as part of a drastic cut in home loan into a generous budget kamattámogatásába. This was the hope that in the 2002 elections will help the start-up in domestic demand growth path to make the country an international crisis in the middle. Eventually won the elections, Socialist Party of Free Democrats coalition that he is "hundred-day program," observed head (which was then in opposition Fidesz is automatically voted on) that some further policy steps complete with an amazing total indebtedness of the country. Both political side hoped that the expansion of domestic demand BOOST artificial, accelerated through the distributing political economy, that will then automatically produces a cover to hide the resulting deficits. However, this hypothesis was wrong, the more so because the supercharged domestic demand stimulated imports only, and this is only exploited by the country's trade balance. The resulting fiscal imbalance is a false illusion of wealth, causing catalyzed by the growing demand for consumer credit.
2) The Hungarian population is not the currency of their own band, not to loans after the country's deteriorating economic condition of the forint faced having to pay the interest rate premium. In the nine years of failed economic policy (unsustainable pension, health and housing subsidy system, beyond the minimum 50 percent increase for public servants carried out under 50 percent wage increase, a 19 thousand forints single pension supplement, the 13th month pension, the introduction of the minimum wage, tax exemptions make the reckless áfaváltoztatások, the state and the private sector, real or imagined, a partnership of PPP investments proliferation, unrealistically expensive highway construction), an abnormally low taxpayer morale, coupled with a growing hole in the state household, and this is the country's indebtedness resulted. A short well-being of our economy and substance of political change in direction instead of the current Hungarian Government to finance its foreign investors, who do all this, of course, the increased risks due to a high interest rate premium they would do next.
3) The current Hungarian government's fault that 21 years after the regime change in the financial and economic fundamentals are still not subject to the compulsory part of secondary school education and the maturity of. The reason people can not just lending a little, but have no idea what's the difference between the interest rate and the APR, there is no sufficient information about themselves on the bank, a financial trader. For this reason, then vulnerable, defenseless, non-savers are active, spend more strength above. What megtakarÃtanak yet, I want to keep it under his pillow, and averse from the Stock Exchange do not understand the fundamental economic relationships are not. So, of course, are highly susceptible to demagogic politicians banking and capital market, anti-rhetoric, when the situation rather than solutions themselves instead of trying to find those responsible.
4) The adóforintjainkból reserved for government and the financial market supervisory bodies to be surprised at the deepest crisis in his sleep in 2008. They were not able to perform a task, and therefore unprepared for the crisis in Hungary, it was more severe effect. The current government, parliament, central bank supervision and the responsibility to monitor, if necessary, regulate the market trends and anomalies if large or dangerous trends are seen, it is time to take action early - applying for the relevant law must drive everyone back on track. (For example, if a bank responsible wanted to act and therefore does not give franc loan to the customer, the customer response passed from another bank, which serve them.) Therefore, the Socialist-Free Democrats government enormous mistake when unleashed in Hungary in foreign currency lending, instead of restrictive legislation would have created that all banks are equally strong against the standards of the franc would have corroborated related lending. This of course does not dealt with the then opposition in parliament.
The government in the role of Don Quixote
The Hungarian government, the fiscal position to deal with a simple but populist solution. The problem with all of its declared banks began systematically stamping: the crisis in the banking system, taxes were imposed, a moratorium on the enforcement of mortgages, a three-year rate lock maximizing debtors' monthly repayments. These measures, of course, painful lives of all financial institutions, but also understandable and tolerable in view of the crisis. The government's latest idea, a stream of foreign exchange price fixed mortgage repayments, however, is beyond all the existing boundary of sanity.
The banks seem to be borne by the strokes well, because they are the eyes of external sources of unrestricted funds (but not their own money to the banks, the depositors and shareholders should have). But the reality is that domestic banks in these lépéssekkel lose their profit and a significant part of their capital, which puts a dangerous situation in the Hungarian banking system just when the world, the banks' capital and liquidity, strengthening the position of working with governments. The current situation at home, in response to the banks to curb lending further forced the mostly foreign-owned banks are a part of our opt for the departure. Of course, this last step we can say that this is who cares: just because it will improve under the leadership of the Hungarian financial institutions, market-making opportunity.
But the situation is far more complex. Firstly, the total size of Hungarian banks are not enough large to be financed only from domestic sources themselves the entire Hungarian economy. Second, any taxpayer suicide in terms of budget, job-creating companies elüldözni, especially when it leads to the purchase of Hungarian government securities. And last but not least, a shrinking national economy and increasingly risky financial institution operating in a responsible one is not increasing market shares. If it is the country where the bank is also home country, this means increase in the risk of increasingly sidelined in international financial markets and is also much more expensive than the current one, or none at all will not be able to involve funds from abroad.
Therefore, higher interest rates and forint dramatically in need of corporate and household lending in Hungary can be expected that we all have bad news. Especially when considering the lawfulness that each percentage point of economic growth should grow in the order of four percent each year, the bank's loan portfolio. Failing this, the road remains a continuing recession and rising unemployment direction. Same point in the past three years has shown that the unlimited and unregulated credit expansion is what can lead to trouble. But that is a credit to the economy in which the living body of water: an essential and irreplaceable. It is not to mention that the lack of competition in supply and rising bank costs, and declining service quality leads.
Long live the social implications
A favorable exchange rate for foreign currency loans, repayment options and money market of the real economic problems are a very important set of issues it raises: the action is extremely unfair to socially as well.
1) Take yourself, who adósodott not it?
We turn to a bank loan, because we decided against that and not because of this gun to force bank. A man with a credit consumer, who is living beyond its capabilities with real, or better living conditions than that you can afford. But this is not a problem per se, but only in private. Especially if the forint borrowing rather than foreign currency. The foreign debt is nothing more than speculation in the currency weakening. The borrower to receive foreign currency, the forint strengthened or will increase, so the repayments are lower, or even weaken, the depreciation rate will never exceed the forint and Swiss franc relative kamatkülönbözetb?l from profits. The customer decides the bank to credit the HUF will be required over 10 per cent interest or more on selected franc loan 6 percent. One man's debt burden is higher, but there is no exchange rate risk, while the other smaller interest burden, coupled with exchange rate risk. So the possibility of the borrower, risk tolerance in relation to the choice. Responsibility for the judgments of others do not sew the neck, once it did not work for what we expected. However, the government decided that the losses for the banks to take over. This means that if a crisis of financial institutions to the edge of collapse because of their capital szétporladó are, the Hungarian government, the taxpayers will have to set their feet so as not to lose there money to depositors, since they guarantee. That is simplistic: while the forint was strong, the currency authentic nyer?ben were, and when the partially self-constructed position weakened forint due to losses incurred when the government that tries them be required to pay, who did not want a loan, but instead saved a and deposit bankjuknál form affixed. Those who are indebted in HUF, are now beyond their own pain authentic solidarity even in the foreign exchange burden themselves may assume, therefore, double-pay. This is extremely unfair to those who lives without borrowing to the extent possible is held responsible, thinking the more expensive or forint loans was recorded, compared to a profit for many years a relatively foreign credit insurance.
The exchange of authentic reference that no one told them to such an extent, the forint weakened and discredited simply unacceptable. In addition, point in a country with a population over many decades, they were socialized to be the best foreign currency savings, as the forint has already been countless times leértékelve. Not to mention that the man, after long and careful consideration in choosing real estate. It is difficult to imagine that a funding condition can not inquire about the system thoroughly.
2) Support those who took the rose hill francs their apartment?
The saving on foreign exchange authentic parliamentary decision that the existing foreign currency loan will only be able to repay, whose savings are adequate or sufficiently stable income and good relations among the living, that this new fund is now forint-based loans. The decisions of the government due to the weakening forint started to plunge even more difficult situation is really in need credible currency, even though at the expense of others throws lifeline to those who hitelükb?l luxury apartments and holiday homes at Lake Balaton meeting.
3) Trash the sanctity of property rights
The government has just sent a message to voters: the sense of responsibility to the community and handle finances, because if it goes wrong, you will help the paternalistic state. The parliament's decision on Monday, however, has virtually legislated that Hungary should rob banks.
The banks do not stuff themselves with money bags, where they can and can extract any number of free money. They are companies whose owners are its shareholders. Who had invested money in this industry because earnings are expected. The income is derived from those customers who have placed their savings to the bank as security in exchange and interest rate are expected. The bank will need to generate the operation, the cost of the depositors and the interest rate on dividends to shareholders. If this process the government all sorts of sober reflection, without prior consultation and say, you have the savings of depositors and the shareholders' investment risk. This would not only lead to bankcs?dhöz worse, but the extent undermines the confidence towards Hungary to deter those who have money want to invest Hungary economy.
A reliable and well-functioning market economy, democratic country built on two main criteria: the sanctity of private property, and the megkérd?jelezhetetlensége FAKTUM to repaying the debt is still all right. And these two factors can not only political power and does not want megpiszkálni. Because everyone knows that the country where the prime minister during breakfast work out the same day regardless of which operator will be something to take away, which was then a parliamentary lunch already constitution also to the President on the same day before dinner underneath write and publish the investors to avoid the sight of a banana republic.
What is medicine?
The people, companies, municipalities and the state foreign debt of the current level of real macroeconomic risks, which need to be addressed. The pékt?l doctors and bankers to bus drivers is the same for all of us an equal interest in the more tolerable rate of repayment. But it does not matter what method is achieved. The parliament adopted the Law on foreign credit repayments in the short term as to help affluent debtors, but it is extremely unfair and harmful to the greater part of the country. This is a money market and real activity leads to start had to sooner rather than later to 300 forint euro exchange rate over the direction of take. There are some steps that might sound good now, but in fact points to a fast-track court sent the country after the Greeks. While other ideas are not sound popular, but in the medium term, stable and reasonable solution to the problem of genuine currency.
The latter are the authentic economic policy decisions that the government reduce the size of the pension and health and public administration reform will help improve competitiveness. Measures to attract investors and investment, increase tax revenues are put into place to increase - making it finally fall in unemployment - may be less public debt and, last but not least, appreciation can start the forint to finally fall to start a foreign currency mortgage payments.
Polls: Americans Want Our Liberties Restored, Our Troops Brought Home and the Federal Reserve Reined In
by George Washington
Americans Hate the Federal Reserve
CNN notes:
“We are seeing a level of enthusiasm for Ron Paul that
can be compared with President Obama in 2008?, said Eric Brakey, Media
Coordinator for NYC Liberty HQ, the grassroots organization hosting the
rally for the candidate. “Congressman Paul’s youth support is different
now than it was during his last presidential campaign. It’s more
organized and it’s picking up steam and continues to grow”.
As the longtime congressman from Texas stepped onto the stage, the crowd screamed with enthusiasm. The audience’s biggest reaction came when he spoke about ending the Federal Reserve.
“The country has changed in the last four years, but my message hasn’t
changed” Paul said. “The country is ripe for a true revolution”.
At least 75% of the American people want a full audit of the Fed, and most were against reconfirming Bernanke.
Indeed, as Bloomberg noted last December:
A majority of Americans
are dissatisfied with the nation’s independent central bank, saying the
U.S. Federal Reserve should either be brought under tighter political
control or abolished outright, a poll shows.
***
Americans across the political spectrum say the Fed shouldn’t retain
its current structure of independence. Asked if the central bank should
be more accountable to Congress, left independent or abolished entirely,
39 percent said it should be held more accountable and 16 percent that
it should be abolished. Only 37 percent favor the status quo.
As I have extensively documented, the Fed is largely responsible for the economic crisis, and has failed to meet a single one of its stated mandates (and its implied ones as well).
Americans Are Sick and Tired of Never-Ending War
Ron Paul is also gaining popularity because he is against the
never-ending War On Terror, and wants to bring the troops home.
Americans are sick of the never-ending, ever-creeping war. See this, this and this.
Americans Want Our Liberties Back
Americans are also becoming less tolerant of the wholesale
destruction of our constitutional liberties in the name of fighting
terrorism. As Talking Points Memo writes:
On the eve of the ten year anniversary of 9/11, the Pew Research Center has released new data
on Americans’ reaction to the attacks, and the foreign and national
security policies pursued in the post 9/11 era. They show a country with
views that have evolved on the relationship between civil liberties
and the tools given to government to fight terrorism, and a disbelief
that the continuing wars in Iraq and Afghanistan helped to lessen the
chance there will be another terrorist attack on the United States.
The Pew survey showed a large shift in the number of Americans who
are willing to see some of their civil liberties go out the window in
the name of fighting terrorism. Directly after 9/11, Americans were
willing to make the deal, as 55 percent thought it was necessary,
against 35 percent who felt the opposite. Now, only 40 percent felt that giving up some civil liberties is necessary to curb terrorism, with 54 percent against.
***
“…only about a quarter say the wars in Iraq (26%) and Afghanistan
(25%) have lessened the chances of terrorist attacks in the United
States,” the Pew report reads. “In both cases majorities say the wars
either have increased the risk of terrorism in this country or made no
difference.”
Top American military leaders agree, saying that the war on terror has weakened our national security.
Hundreds of Millions of Americans Can’t Be Stopped
Of course, criticizing the Fed, wanting to end the wars, liking Ron Paul, or “taking
a cynical stance toward politics, mistrusting authority, endorsing
democratic practices, … and displaying an inquisitive, imaginative
outlook” can bring on heightened scrutiny or displeasure from the powers-that-be.
But given that the overwhelming majority of Americans fall in one or
more of these categories, they can’t harass hundreds of million of us.
Note: Instead of labeling the opinions described above as “conservative” or “liberal, please read this.
Americans Hate the Federal Reserve
CNN notes:
“We are seeing a level of enthusiasm for Ron Paul that
can be compared with President Obama in 2008?, said Eric Brakey, Media
Coordinator for NYC Liberty HQ, the grassroots organization hosting the
rally for the candidate. “Congressman Paul’s youth support is different
now than it was during his last presidential campaign. It’s more
organized and it’s picking up steam and continues to grow”.
As the longtime congressman from Texas stepped onto the stage, the crowd screamed with enthusiasm. The audience’s biggest reaction came when he spoke about ending the Federal Reserve.
“The country has changed in the last four years, but my message hasn’t
changed” Paul said. “The country is ripe for a true revolution”.
At least 75% of the American people want a full audit of the Fed, and most were against reconfirming Bernanke.
Indeed, as Bloomberg noted last December:
A majority of Americans
are dissatisfied with the nation’s independent central bank, saying the
U.S. Federal Reserve should either be brought under tighter political
control or abolished outright, a poll shows.
***
Americans across the political spectrum say the Fed shouldn’t retain
its current structure of independence. Asked if the central bank should
be more accountable to Congress, left independent or abolished entirely,
39 percent said it should be held more accountable and 16 percent that
it should be abolished. Only 37 percent favor the status quo.
As I have extensively documented, the Fed is largely responsible for the economic crisis, and has failed to meet a single one of its stated mandates (and its implied ones as well).
Americans Are Sick and Tired of Never-Ending War
Ron Paul is also gaining popularity because he is against the
never-ending War On Terror, and wants to bring the troops home.
Americans are sick of the never-ending, ever-creeping war. See this, this and this.
Americans Want Our Liberties Back
Americans are also becoming less tolerant of the wholesale
destruction of our constitutional liberties in the name of fighting
terrorism. As Talking Points Memo writes:
On the eve of the ten year anniversary of 9/11, the Pew Research Center has released new data
on Americans’ reaction to the attacks, and the foreign and national
security policies pursued in the post 9/11 era. They show a country with
views that have evolved on the relationship between civil liberties
and the tools given to government to fight terrorism, and a disbelief
that the continuing wars in Iraq and Afghanistan helped to lessen the
chance there will be another terrorist attack on the United States.
The Pew survey showed a large shift in the number of Americans who
are willing to see some of their civil liberties go out the window in
the name of fighting terrorism. Directly after 9/11, Americans were
willing to make the deal, as 55 percent thought it was necessary,
against 35 percent who felt the opposite. Now, only 40 percent felt that giving up some civil liberties is necessary to curb terrorism, with 54 percent against.
***
“…only about a quarter say the wars in Iraq (26%) and Afghanistan
(25%) have lessened the chances of terrorist attacks in the United
States,” the Pew report reads. “In both cases majorities say the wars
either have increased the risk of terrorism in this country or made no
difference.”
Top American military leaders agree, saying that the war on terror has weakened our national security.
Hundreds of Millions of Americans Can’t Be Stopped
Of course, criticizing the Fed, wanting to end the wars, liking Ron Paul, or “taking
a cynical stance toward politics, mistrusting authority, endorsing
democratic practices, … and displaying an inquisitive, imaginative
outlook” can bring on heightened scrutiny or displeasure from the powers-that-be.
But given that the overwhelming majority of Americans fall in one or
more of these categories, they can’t harass hundreds of million of us.
Note: Instead of labeling the opinions described above as “conservative” or “liberal, please read this.
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