Friday, March 30, 2012
Infographic: Costs and Disbursements of TARP
By econintersect.com
Want a report card on TARP (Troubled Asset Relief Program) that is easy to understand. The infographic below lays out what the Congressional Budget Office thinks are the losses and gains, the monies disbursed, written off, and how much has been repaid.
Follow up:
If you need some help going to sleep tonight - you can read the whole statutory report here.
( click here to enlarge)
Want a report card on TARP (Troubled Asset Relief Program) that is easy to understand. The infographic below lays out what the Congressional Budget Office thinks are the losses and gains, the monies disbursed, written off, and how much has been repaid.
Follow up:
If you need some help going to sleep tonight - you can read the whole statutory report here.
( click here to enlarge)
The Foreclosure Landscape in 2012: Recent Court Ruling to Have Dramatic Impact Throughout the Year
By Christopher G. Brown
nationalmortgageprofessional.com
What trends will shape the mortgage foreclosure landscape in 2012? As I look towards the next 12 months, I’m expecting that the most influential trend will be a recent Connecticut Supreme Court ruling that could have a significant impact on who can sue to foreclose. As the foreclosure defense attorney who represented the borrower in this case, I had a front row seat on Connecticut’s recent Supreme Court decision, and I’m expecting it to be something that will give lenders pause. Only a few months into 2012, I’m already seeing how it’s been rocking business as usual when it comes to who has the right to foreclose. Before this decision, lenders claimed that being a holder (the legal term for possessing the note) meant that they had the right to foreclose. The court’s decision confirms that only the owner of the debt has a right to foreclose. Holder status is not enough. I would expect lenders to be slow to change their procedures to account for this decision, which could very likely mean more dismissed foreclosures in 2012.
I also foresee a number of other important developments in the foreclosure arena in 2012:
Lenders will continue to have problems proving they are holders
Even though mere holder status is still beneficial for lenders, establishing that they are holders of the note will continue to be difficult for lenders. I recently had a case dismissed for a client because the party that started the foreclosure suit failed to prove that it was the holder—had possession of the note—on the date the action started.
Borrowers will be more proactive in their defense
By recognizing that only the owner of the debt can foreclose, the Supreme Court decision gives borrowers a 10-pound sledgehammer to fight a foreclosure. Before it, borrowers had only a three-pound hammer because they were effectively limited to challenging holder status. But no hammer is any good unless it’s swung. Borrowers should not expect the decision to mean that the courts are going to “swing for them” in the upcoming year. They will need to take part in the foreclosure and make sure they—and their lawyers—push institutions to prove ownership of the note. It will continue to be up to the borrowers and their legal counsel to make sure that happens in the coming 12 months.
Continued low interest rates to have limited effect
The Federal Reserve’s promise to keep their rates low in 2011 and 2012 won’t necessarily have a dramatic impact on the number of people falling behind on their mortgages. These rates do have an impact on adjustable-rate mortgages (ARMs), but it won’t be significant. A lot of the problems that would have been associated with ARMs have been ameliorated by keeping interest rates low. That’s good news, because the rates aren’t going to explode next year. But, a lot of those ARMs were fixed rates for five years or less and many of them were interest-only for the fixed period. The bulk of these loans are past the five year period, and it’s time for those borrowers to pay back principal. Even though the interest portion of the payment might decrease because of the low interest rates, the overall payment may increase because it now includes a principal payment.
Longer mediations with little impact on loan modifications
A number of state and federal programs were aimed at getting banks to work with borrowers on loan modifications. Many arrived with a lot of fanfare, but they haven’t really impacted the number of loan modifications the way they were intended. This is why President Barack Obama made it part of his recent State of the Union speech, but I don’t think even that will have much of an impact on the foreclosure scene. The fundamental problem that no one has been able to fix is that lenders don’t seem capable of processing modification requests promptly. They frequently claim that packages are incomplete and request documents or information that the borrowers have already provided. When the same information is re-submitted, they often claim that other documentation has become outdated and needs to be resubmitted. This cycle can be repeated multiple times. There was a lot talk that the banks were striving to make modifications, but there has been extreme criticism that these plans have done nothing and that few loans are getting modified. But, I do see something of a silver lining on this cloud. The foreclosure process generally does not move forward while mediation is ongoing and the mediation generally continues until the bank says “No.” Borrowers who may not ultimately qualify for a modification benefit from being able to stay in their homes.
Government Report Cards could impact the modification process
In 2011, the Federal government began monitoring loan mods and began issuing Report Cards on lenders. These Report Cards suggest areas in which the lenders need to improve. I’m going to be an optimist here and suggest that the lenders are going to take these suggestions to heart in 2012 and actually try to meet the standards they advocate. I don’t expect the government to go away on that front. I think they’ll put pressure on lenders to get their acts together. We recently had a case where the bank agreed to modify, told us what the new payment would look like and promised to send a written modification agreement. We had to send the written agreement back twice to be corrected because the numbers didn’t match what they told us. I don’t think it was intentional. It was the kind of bungling that has become part of the loan mod process. It’s not uncommon for these modifications to take over a year. I’m hoping that these Government Report Cards will show lenders just how often these kinds of things occur and encourage them to change their processes.
Courts to order lenders to send representatives with real authority to mediation sessions
The law requires borrowers to be physically present for mediation, but permits lenders to send only their lawyers. These lawyers are supposed to have the authority to agree to a resolution. In addition, there’s supposed to be a lender representative available by telephone. In practice, that almost never happens. The lenders’ lawyers often do not have authority, and rarely does the telephone representative. Without someone at the table with real decision-making ability, it’s tough to get things done. It also makes it easier for the lenders get away without making a decision or to ask for the same information repeatedly. When lenders do not have to take the time to be there in person, it’s easy for them not to take mediation seriously. Lately, borrowers have been asking the courts to direct someone with real bargaining power to attend mediation and the courts have been granting those requests. I expect that trend to increase. I am cautiously optimistic about banks changing their ways. The more they are ordered to come to mediation sessions in person, the more likely they will be to rethink how they are doing things.
Commercial borrowers to benefit from changes on the residential level
I believe that the Connecticut Supreme Court’s decision will also help commercial borrowers. Commercial loans were bought and sold on the secondary market just like residential loans. Plus, the loan documents for commercial loans can often be exotic when compared with residential loans. I would expect to see ownership of the debt issues applied to commercial loans, forcing commercial lenders to re-think their procedures and assumptions here as well. I know that I am doing just that in a number of commercial foreclosures I am defending.
In general, I expect the foreclosure environment in 2012 to look very much like 2011 with a few glimmers of hope for borrowers. The economy is still not on the upswing, as joblessness is still a significant issue. Nevertheless, I am hoping that the influence of the courts and an understanding of the need to change will bring banks to the understanding that they have to make adjustments to the ways they deal with mortgage holders.
nationalmortgageprofessional.com
What trends will shape the mortgage foreclosure landscape in 2012? As I look towards the next 12 months, I’m expecting that the most influential trend will be a recent Connecticut Supreme Court ruling that could have a significant impact on who can sue to foreclose. As the foreclosure defense attorney who represented the borrower in this case, I had a front row seat on Connecticut’s recent Supreme Court decision, and I’m expecting it to be something that will give lenders pause. Only a few months into 2012, I’m already seeing how it’s been rocking business as usual when it comes to who has the right to foreclose. Before this decision, lenders claimed that being a holder (the legal term for possessing the note) meant that they had the right to foreclose. The court’s decision confirms that only the owner of the debt has a right to foreclose. Holder status is not enough. I would expect lenders to be slow to change their procedures to account for this decision, which could very likely mean more dismissed foreclosures in 2012.
I also foresee a number of other important developments in the foreclosure arena in 2012:
Lenders will continue to have problems proving they are holders
Even though mere holder status is still beneficial for lenders, establishing that they are holders of the note will continue to be difficult for lenders. I recently had a case dismissed for a client because the party that started the foreclosure suit failed to prove that it was the holder—had possession of the note—on the date the action started.
Borrowers will be more proactive in their defense
By recognizing that only the owner of the debt can foreclose, the Supreme Court decision gives borrowers a 10-pound sledgehammer to fight a foreclosure. Before it, borrowers had only a three-pound hammer because they were effectively limited to challenging holder status. But no hammer is any good unless it’s swung. Borrowers should not expect the decision to mean that the courts are going to “swing for them” in the upcoming year. They will need to take part in the foreclosure and make sure they—and their lawyers—push institutions to prove ownership of the note. It will continue to be up to the borrowers and their legal counsel to make sure that happens in the coming 12 months.
Continued low interest rates to have limited effect
The Federal Reserve’s promise to keep their rates low in 2011 and 2012 won’t necessarily have a dramatic impact on the number of people falling behind on their mortgages. These rates do have an impact on adjustable-rate mortgages (ARMs), but it won’t be significant. A lot of the problems that would have been associated with ARMs have been ameliorated by keeping interest rates low. That’s good news, because the rates aren’t going to explode next year. But, a lot of those ARMs were fixed rates for five years or less and many of them were interest-only for the fixed period. The bulk of these loans are past the five year period, and it’s time for those borrowers to pay back principal. Even though the interest portion of the payment might decrease because of the low interest rates, the overall payment may increase because it now includes a principal payment.
Longer mediations with little impact on loan modifications
A number of state and federal programs were aimed at getting banks to work with borrowers on loan modifications. Many arrived with a lot of fanfare, but they haven’t really impacted the number of loan modifications the way they were intended. This is why President Barack Obama made it part of his recent State of the Union speech, but I don’t think even that will have much of an impact on the foreclosure scene. The fundamental problem that no one has been able to fix is that lenders don’t seem capable of processing modification requests promptly. They frequently claim that packages are incomplete and request documents or information that the borrowers have already provided. When the same information is re-submitted, they often claim that other documentation has become outdated and needs to be resubmitted. This cycle can be repeated multiple times. There was a lot talk that the banks were striving to make modifications, but there has been extreme criticism that these plans have done nothing and that few loans are getting modified. But, I do see something of a silver lining on this cloud. The foreclosure process generally does not move forward while mediation is ongoing and the mediation generally continues until the bank says “No.” Borrowers who may not ultimately qualify for a modification benefit from being able to stay in their homes.
Government Report Cards could impact the modification process
In 2011, the Federal government began monitoring loan mods and began issuing Report Cards on lenders. These Report Cards suggest areas in which the lenders need to improve. I’m going to be an optimist here and suggest that the lenders are going to take these suggestions to heart in 2012 and actually try to meet the standards they advocate. I don’t expect the government to go away on that front. I think they’ll put pressure on lenders to get their acts together. We recently had a case where the bank agreed to modify, told us what the new payment would look like and promised to send a written modification agreement. We had to send the written agreement back twice to be corrected because the numbers didn’t match what they told us. I don’t think it was intentional. It was the kind of bungling that has become part of the loan mod process. It’s not uncommon for these modifications to take over a year. I’m hoping that these Government Report Cards will show lenders just how often these kinds of things occur and encourage them to change their processes.
Courts to order lenders to send representatives with real authority to mediation sessions
The law requires borrowers to be physically present for mediation, but permits lenders to send only their lawyers. These lawyers are supposed to have the authority to agree to a resolution. In addition, there’s supposed to be a lender representative available by telephone. In practice, that almost never happens. The lenders’ lawyers often do not have authority, and rarely does the telephone representative. Without someone at the table with real decision-making ability, it’s tough to get things done. It also makes it easier for the lenders get away without making a decision or to ask for the same information repeatedly. When lenders do not have to take the time to be there in person, it’s easy for them not to take mediation seriously. Lately, borrowers have been asking the courts to direct someone with real bargaining power to attend mediation and the courts have been granting those requests. I expect that trend to increase. I am cautiously optimistic about banks changing their ways. The more they are ordered to come to mediation sessions in person, the more likely they will be to rethink how they are doing things.
Commercial borrowers to benefit from changes on the residential level
I believe that the Connecticut Supreme Court’s decision will also help commercial borrowers. Commercial loans were bought and sold on the secondary market just like residential loans. Plus, the loan documents for commercial loans can often be exotic when compared with residential loans. I would expect to see ownership of the debt issues applied to commercial loans, forcing commercial lenders to re-think their procedures and assumptions here as well. I know that I am doing just that in a number of commercial foreclosures I am defending.
In general, I expect the foreclosure environment in 2012 to look very much like 2011 with a few glimmers of hope for borrowers. The economy is still not on the upswing, as joblessness is still a significant issue. Nevertheless, I am hoping that the influence of the courts and an understanding of the need to change will bring banks to the understanding that they have to make adjustments to the ways they deal with mortgage holders.
Personal Income And Spending - Feb 2012
by Karl Denninger
market-ticker.org
The Stupid, it burns!
Personal income increased $28.2 billion, or 0.2 percent, and disposable personal income (DPI) increased $18.9 billion, or 0.2 percent, in February, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $86.0 billion, or 0.8 percent. In January, personal income increased $26.5 billion, or 0.2 percent, DPI increased $5.0 billion, or less than 0.1 percent, and PCE increased $40.9 billion, or 0.4 percent, based on revised estimates.
Real disposable income decreased 0.1 percent in February, compared with a decrease of 0.2 percent in January. Real PCE increased 0.5 percent, compared with an increase of 0.2 percent.
Got it?
Real disposable income went down as the cost of living (necessities) went up faster than incomes. But spending increased faster, which means we're spending more than we make -- again.
We are again into the space where people are clawing at the edge of the cliff trying to avoid disaster. It's not going to work any better than it has in the past.
The result was a drop in the "savings" rate to 3.7% from 4.3% last month, both well below the "reasonable" 5% rate. And this is not actual savings (capital formation) either since debt pay-downs are included in "savings." In point of fact we have not de-levered to a material degree at all and now it appears that the consumer is getting dangerously close to the "drowning, actively and now" zone, likely driven to a large degree by gas prices.
It is never good when spending is rising faster than earnings folks.
market-ticker.org
The Stupid, it burns!
Personal income increased $28.2 billion, or 0.2 percent, and disposable personal income (DPI) increased $18.9 billion, or 0.2 percent, in February, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $86.0 billion, or 0.8 percent. In January, personal income increased $26.5 billion, or 0.2 percent, DPI increased $5.0 billion, or less than 0.1 percent, and PCE increased $40.9 billion, or 0.4 percent, based on revised estimates.
Real disposable income decreased 0.1 percent in February, compared with a decrease of 0.2 percent in January. Real PCE increased 0.5 percent, compared with an increase of 0.2 percent.
Got it?
Real disposable income went down as the cost of living (necessities) went up faster than incomes. But spending increased faster, which means we're spending more than we make -- again.
We are again into the space where people are clawing at the edge of the cliff trying to avoid disaster. It's not going to work any better than it has in the past.
The result was a drop in the "savings" rate to 3.7% from 4.3% last month, both well below the "reasonable" 5% rate. And this is not actual savings (capital formation) either since debt pay-downs are included in "savings." In point of fact we have not de-levered to a material degree at all and now it appears that the consumer is getting dangerously close to the "drowning, actively and now" zone, likely driven to a large degree by gas prices.
It is never good when spending is rising faster than earnings folks.
Bank of America Sold Card Debts to Collectors Despite Faulty Records
Another one from the Decent Bank of America
By americanbanker.com
Bank of America has sold collections agencies rights to sue over credit card debts that it has privately noted were potentially inaccurate or already repaid.
In a series of 2009 and 2010 transactions, Bank of America sold credit card receivables to an outfit called CACH LLC, based in Denver. Co. Each month CACH bought debts with a face value of as much as $65 million for 1.8 cents on the dollar. At least a portion of the debts were legacy accounts acquired from MBNA, which Bank of America purchased in 2006.
The pricing reflected the accounts' questionable quality, but what is notable is that the bank could get anything at all for them. B of A was not making "any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever" about the accuracy or completeness of the debts' records, according to a 2010 credit card sales agreement submitted to a California state court in a civil suit involving debt that B of A had sold to CACH.
In the "as is" documents Bank of America has drawn up for such sales, it warned that it would initially provide no records to support the amounts it said are owed and might be unable to produce them. It also stated that some of the claims it sold might already have been extinguished in bankruptcy court. B of A has additionally cautioned that it might be selling loans whose balances are "approximate" or that consumers have already paid back in full. Maryland resident Karen Stevens was the victim of one such sale, which resulted in a three-year legal battle (see related story).
Bank of America declined requests to comment for this story, other than to say through spokeswoman Betty Riess that it works with credit card customers to try to resolve delinquent debt issues. CACH did not respond to several phone and email messages seeking comment on the terms of its purchases.
Some industry observers said that the language in Bank of America's sales documents should be regarded as standard legalese intended to protect it against a disgruntled buyer's legal claims. And even though Bank of America refused to stand behind the accuracy of the records it sold, debt buyers are the ones who make the call to sue.
"The buyer has the primary responsibility to test the … quality of what they're buying," says Samuel Golden, a former OCC ombudsman who is a managing director at consulting firm Alvarez & Marsal in Houston, Texas.
Collectors' responsibilities aside, other banks' sales agreements suggest Bank of America's standards are emblematic of wider industry practice that raises risk management concerns. For less than $1.2 million a month — a rounding error on B of A's income statement — the company sold CACH accounts that raise regulatory and reputational questions about the accuracy of its records and its disclosures to courts.
Industry Practice
As the originators of credit card loans, banks are at the headwaters of the rivers of bad debt that flow into the collections industry. Over the last two years, Bank of America has charged off $20 billion in delinquent card debt. The bank settles or collects a portion of that itself and retires other accounts when borrowers go bankrupt or die. An undisclosed portion of the delinquent debt gets passed along to collectors. Once sold, rights to such accounts are often resold within the industry multiple times over several years.
Bank of America's caution that its card records may be incomplete or inaccurate suggests that documentation and accuracy problems may originate at the debt's source. Other banks' debt sale contracts acknowledge potentially large holes in their records as well.
One such example involves a 2009 U.S. Bancorp forward flow agreement, which outlines plans to sell a certain volume of delinquent accounts in the future. U.S. Bancorp's agreement states that it may have failed to credit borrowers for some payments and only guarantees the accuracy of account balances within a 10% margin of error.
Teri Charest, a spokeswoman for the bank, noted that the contract had expired and said that, regardless of such past contractual language, the bank scrubs its card data and that the claims it sells are accurate.
JPMorgan Chase, meanwhile, drafted an agreement to sell $200 million of credit card debt to Palisades Collection in 2008, even though records proving the debt might be unavailable for close to half the claims. "Seller represents and warrants that documentation is available for no less than 50% of the Charged-off Accounts," JPMorgan Chase's sales agreement stated.
bank declined to comment. Palisades' chief counsel Seth Berman says the company has not bought Chase card debt in several years, but that its standards were always high.
The U.S. Office of the Comptroller of the Currency is already investigating JPMorgan Chase's handling of credit card debt records, as reported by American Banker earlier this month. A group of current and former employees described at the time how the bank had sold card accounts previously deemed "toxic waste" and which suffered from errors in the amounts being claimed.
CACHing In
At Bank of America, records declared unreliable yet sold to CACH were used to file thousands of lawsuits against consumers, according to a review of hundreds of cases in the state courts where collection suits are typically filed. The overwhelming majority of cases end in default judgments, which are awarded to creditors when borrowers don't show up to contest the claims made against them.
In cases where debtors do challenge collections demands in court, the original bank-creditor must testify about the documentation supporting the claims. In several such instances, people identified as Bank of America employees have submitted affidavits attesting to the validity of debts sold by the bank to collections firms.
Even though Bank of America previously disavowed "the accuracy of the sums shown as the current balance," the sworn statements vouch for the borrowers' debts down to the penny and declare that the bank's "computerized and hard copy records" back the claims. There are other possible discrepancies, as well: the affidavits state that B of A "has no further interest in this account for any purpose," while the sales contracts reference a "revenue sharing plan."
The prospect that B of A was selling unreliable credit card debts did not deter CACH from buying them. A subsidiary of SquareTwo Financial, CACH does not collect debts itself. Instead, it operates like a restaurant franchiser, acquiring rights to the delinquent debts that are the raw materials of the collections business. It then works with law firms around the country that do the actual collections work, providing them with debt files, court witnesses and other services.
In thousands of cases in state courts, CACH has appended a single page from its purchase agreements with Bank of America attesting to its ownership of delinquent credit card debt. CACH has omitted from many such filings the more than 30 additional pages where Bank of America disclaims the accuracy of its debt records. Even so, attorneys affiliated with CACH have cited the reliability of Bank of America's records as the foundation for their collections lawsuits.
In the case involving CACH in Duval County, Florida, a person described as B of A "Bank Officer" Michelle Samse swore in an affidavit that "There is due and payable from WENDY CODY as of 9/18/2009 the sum of $12266.83." The Samse affidavit, typical of many others, went on to say "The statements made in this affidavit are based on the computerized and hard copy books and records of Bank of America, which are maintained in the ordinary course of business." Attempts to contact Samse and Cody through Bank of America switchboards and public records searches were unsuccessful.
Trust Us
The degree of precision attested to regarding Cody's debt is curious, considering that Bank of America declared it was unable to produce records to back it up. "[T]he original contract in this matter has been destroyed, or is no longer accessible," Samse's affidavit states. "This affidavit is to be treated as the original document for all purposes."
The affiliate representing CACH in the Cody case was Collect $outheast, which uses the phrase "Let us show you the MONEY!" in company promotions. Collect $outheast and Florida attorneys representing CACH in other cases did not respond to requests for comment.
Taras Rudnitsky, a consumer defense attorney in Lake Mary, Florida has regularly defended consumers against lawsuits filed by CACH affiliates in Duval County. He says he regularly demands that debt buyers file banks' sales agreements with the court and invariably runs into stiff opposition.
"In every single case I have involving a debt buyer, they refuse to produce a forward flow agreement," he says, referring to the term for sales contracts under which banks agree to sell a specific number of delinquent accounts in the future. "When push comes to shove, the case disappears."
Weak Link
For individual clients, dismissal of such a case is a victory, but such outcomes are the exception. In the vast majority of collections suits, consumers fail to respond to card payment demands and become liable for default judgments, says Peter Holland, who runs the University of Maryland Law School's Consumer Defense clinic and has collected some of the forward flow agreements. As a result, the questionable reliability of second-hand debt claims is failing to receive the attention it deserves, he says.
"The [terms of] forward flows are being hidden from the public and from the courts," says Holland. "When the banks say explicitly that they don't have the documentation, that's something courts need to know. When a bank says a balance is 'approximate,' that's something courts and consumers need to know."
To date, it is debt collectors who have been the main focus of complaints and lawsuits alleging wrongdoing. In the past year alone, collections firms have paid out a number of multi-million dollar settlements over allegations they robo-signed affidavits, failed to produce evidence to support payment demands and sued consumers over debts that were no longer owed.
According to a trade organization for the collections industry, much of the criticism of collectors' records stems from banks' failure to provide adequate documentation of debts.
"We're not getting what we need from the seller," says Mark Schiffman, a spokesman for the American Collections Association, which wants to see better recordkeeping and more documentation included in debt sales. "Consumer groups want to see original contracts and original documentation. That would make a lot of these debts disappear because a lot of that documentation may not exist."
Regulatory Interest
Washington regulators are beginning to look at what responsibility banks have for wrongful collections activity. But questions about jurisdiction and whether banks will get roped in remain open.
"Not enough information [is] flowing through to debt collectors," says Tom Pahl, an assistant director in the Federal Trade Commission's division of financial practices. Despite its concern, the FTC lacks the authority to regulate financial institutions
"We can't reach the banks to say 'Thou shalt file the following pieces of information with the loans,'" Pahl says. "We're trying to do most of this through either law enforcement, which is case-by-case, or by jawboning the industry."
The Consumer Financial Protection Bureau has jurisdiction over credit cards and last month announced plans to take a close look at the collections industry. The bureau's interest has been heightened by revelations of abuses by mortgage servicers, including robosigning of affidavits, according to spokeswomen Jennifer Howard.
The CFPB is "very concerned that the same shortcuts and violations may be occurring with other kinds of debt collection," she says.
The OCC, which likewise oversees banks, declined to comment on specific institutions' sales of credit card receivables. However, it expects banks to adhere to high standards regarding account records, especially in cases where institutions attest under oath to their accuracy, according to OCC spokesman Bryan Hubbard.
"There may be reasons it's hard to do. Large portfolios being bought. Systems integration. But banks are still accountable for maintaining accurate records," says Hubbard.
By americanbanker.com
Bank of America has sold collections agencies rights to sue over credit card debts that it has privately noted were potentially inaccurate or already repaid.
In a series of 2009 and 2010 transactions, Bank of America sold credit card receivables to an outfit called CACH LLC, based in Denver. Co. Each month CACH bought debts with a face value of as much as $65 million for 1.8 cents on the dollar. At least a portion of the debts were legacy accounts acquired from MBNA, which Bank of America purchased in 2006.
The pricing reflected the accounts' questionable quality, but what is notable is that the bank could get anything at all for them. B of A was not making "any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever" about the accuracy or completeness of the debts' records, according to a 2010 credit card sales agreement submitted to a California state court in a civil suit involving debt that B of A had sold to CACH.
In the "as is" documents Bank of America has drawn up for such sales, it warned that it would initially provide no records to support the amounts it said are owed and might be unable to produce them. It also stated that some of the claims it sold might already have been extinguished in bankruptcy court. B of A has additionally cautioned that it might be selling loans whose balances are "approximate" or that consumers have already paid back in full. Maryland resident Karen Stevens was the victim of one such sale, which resulted in a three-year legal battle (see related story).
Bank of America declined requests to comment for this story, other than to say through spokeswoman Betty Riess that it works with credit card customers to try to resolve delinquent debt issues. CACH did not respond to several phone and email messages seeking comment on the terms of its purchases.
Some industry observers said that the language in Bank of America's sales documents should be regarded as standard legalese intended to protect it against a disgruntled buyer's legal claims. And even though Bank of America refused to stand behind the accuracy of the records it sold, debt buyers are the ones who make the call to sue.
"The buyer has the primary responsibility to test the … quality of what they're buying," says Samuel Golden, a former OCC ombudsman who is a managing director at consulting firm Alvarez & Marsal in Houston, Texas.
Collectors' responsibilities aside, other banks' sales agreements suggest Bank of America's standards are emblematic of wider industry practice that raises risk management concerns. For less than $1.2 million a month — a rounding error on B of A's income statement — the company sold CACH accounts that raise regulatory and reputational questions about the accuracy of its records and its disclosures to courts.
Industry Practice
As the originators of credit card loans, banks are at the headwaters of the rivers of bad debt that flow into the collections industry. Over the last two years, Bank of America has charged off $20 billion in delinquent card debt. The bank settles or collects a portion of that itself and retires other accounts when borrowers go bankrupt or die. An undisclosed portion of the delinquent debt gets passed along to collectors. Once sold, rights to such accounts are often resold within the industry multiple times over several years.
Bank of America's caution that its card records may be incomplete or inaccurate suggests that documentation and accuracy problems may originate at the debt's source. Other banks' debt sale contracts acknowledge potentially large holes in their records as well.
One such example involves a 2009 U.S. Bancorp forward flow agreement, which outlines plans to sell a certain volume of delinquent accounts in the future. U.S. Bancorp's agreement states that it may have failed to credit borrowers for some payments and only guarantees the accuracy of account balances within a 10% margin of error.
Teri Charest, a spokeswoman for the bank, noted that the contract had expired and said that, regardless of such past contractual language, the bank scrubs its card data and that the claims it sells are accurate.
JPMorgan Chase, meanwhile, drafted an agreement to sell $200 million of credit card debt to Palisades Collection in 2008, even though records proving the debt might be unavailable for close to half the claims. "Seller represents and warrants that documentation is available for no less than 50% of the Charged-off Accounts," JPMorgan Chase's sales agreement stated.
bank declined to comment. Palisades' chief counsel Seth Berman says the company has not bought Chase card debt in several years, but that its standards were always high.
The U.S. Office of the Comptroller of the Currency is already investigating JPMorgan Chase's handling of credit card debt records, as reported by American Banker earlier this month. A group of current and former employees described at the time how the bank had sold card accounts previously deemed "toxic waste" and which suffered from errors in the amounts being claimed.
CACHing In
At Bank of America, records declared unreliable yet sold to CACH were used to file thousands of lawsuits against consumers, according to a review of hundreds of cases in the state courts where collection suits are typically filed. The overwhelming majority of cases end in default judgments, which are awarded to creditors when borrowers don't show up to contest the claims made against them.
In cases where debtors do challenge collections demands in court, the original bank-creditor must testify about the documentation supporting the claims. In several such instances, people identified as Bank of America employees have submitted affidavits attesting to the validity of debts sold by the bank to collections firms.
Even though Bank of America previously disavowed "the accuracy of the sums shown as the current balance," the sworn statements vouch for the borrowers' debts down to the penny and declare that the bank's "computerized and hard copy records" back the claims. There are other possible discrepancies, as well: the affidavits state that B of A "has no further interest in this account for any purpose," while the sales contracts reference a "revenue sharing plan."
The prospect that B of A was selling unreliable credit card debts did not deter CACH from buying them. A subsidiary of SquareTwo Financial, CACH does not collect debts itself. Instead, it operates like a restaurant franchiser, acquiring rights to the delinquent debts that are the raw materials of the collections business. It then works with law firms around the country that do the actual collections work, providing them with debt files, court witnesses and other services.
In thousands of cases in state courts, CACH has appended a single page from its purchase agreements with Bank of America attesting to its ownership of delinquent credit card debt. CACH has omitted from many such filings the more than 30 additional pages where Bank of America disclaims the accuracy of its debt records. Even so, attorneys affiliated with CACH have cited the reliability of Bank of America's records as the foundation for their collections lawsuits.
In the case involving CACH in Duval County, Florida, a person described as B of A "Bank Officer" Michelle Samse swore in an affidavit that "There is due and payable from WENDY CODY as of 9/18/2009 the sum of $12266.83." The Samse affidavit, typical of many others, went on to say "The statements made in this affidavit are based on the computerized and hard copy books and records of Bank of America, which are maintained in the ordinary course of business." Attempts to contact Samse and Cody through Bank of America switchboards and public records searches were unsuccessful.
Trust Us
The degree of precision attested to regarding Cody's debt is curious, considering that Bank of America declared it was unable to produce records to back it up. "[T]he original contract in this matter has been destroyed, or is no longer accessible," Samse's affidavit states. "This affidavit is to be treated as the original document for all purposes."
The affiliate representing CACH in the Cody case was Collect $outheast, which uses the phrase "Let us show you the MONEY!" in company promotions. Collect $outheast and Florida attorneys representing CACH in other cases did not respond to requests for comment.
Taras Rudnitsky, a consumer defense attorney in Lake Mary, Florida has regularly defended consumers against lawsuits filed by CACH affiliates in Duval County. He says he regularly demands that debt buyers file banks' sales agreements with the court and invariably runs into stiff opposition.
"In every single case I have involving a debt buyer, they refuse to produce a forward flow agreement," he says, referring to the term for sales contracts under which banks agree to sell a specific number of delinquent accounts in the future. "When push comes to shove, the case disappears."
Weak Link
For individual clients, dismissal of such a case is a victory, but such outcomes are the exception. In the vast majority of collections suits, consumers fail to respond to card payment demands and become liable for default judgments, says Peter Holland, who runs the University of Maryland Law School's Consumer Defense clinic and has collected some of the forward flow agreements. As a result, the questionable reliability of second-hand debt claims is failing to receive the attention it deserves, he says.
"The [terms of] forward flows are being hidden from the public and from the courts," says Holland. "When the banks say explicitly that they don't have the documentation, that's something courts need to know. When a bank says a balance is 'approximate,' that's something courts and consumers need to know."
To date, it is debt collectors who have been the main focus of complaints and lawsuits alleging wrongdoing. In the past year alone, collections firms have paid out a number of multi-million dollar settlements over allegations they robo-signed affidavits, failed to produce evidence to support payment demands and sued consumers over debts that were no longer owed.
According to a trade organization for the collections industry, much of the criticism of collectors' records stems from banks' failure to provide adequate documentation of debts.
"We're not getting what we need from the seller," says Mark Schiffman, a spokesman for the American Collections Association, which wants to see better recordkeeping and more documentation included in debt sales. "Consumer groups want to see original contracts and original documentation. That would make a lot of these debts disappear because a lot of that documentation may not exist."
Regulatory Interest
Washington regulators are beginning to look at what responsibility banks have for wrongful collections activity. But questions about jurisdiction and whether banks will get roped in remain open.
"Not enough information [is] flowing through to debt collectors," says Tom Pahl, an assistant director in the Federal Trade Commission's division of financial practices. Despite its concern, the FTC lacks the authority to regulate financial institutions
"We can't reach the banks to say 'Thou shalt file the following pieces of information with the loans,'" Pahl says. "We're trying to do most of this through either law enforcement, which is case-by-case, or by jawboning the industry."
The Consumer Financial Protection Bureau has jurisdiction over credit cards and last month announced plans to take a close look at the collections industry. The bureau's interest has been heightened by revelations of abuses by mortgage servicers, including robosigning of affidavits, according to spokeswomen Jennifer Howard.
The CFPB is "very concerned that the same shortcuts and violations may be occurring with other kinds of debt collection," she says.
The OCC, which likewise oversees banks, declined to comment on specific institutions' sales of credit card receivables. However, it expects banks to adhere to high standards regarding account records, especially in cases where institutions attest under oath to their accuracy, according to OCC spokesman Bryan Hubbard.
"There may be reasons it's hard to do. Large portfolios being bought. Systems integration. But banks are still accountable for maintaining accurate records," says Hubbard.
Thomas Frank: How Americans Have Gotten Played -- Over and Over and Over Again
The Baffler / By Thomas Frank
In the 12 hapless years of this millennium, we have looked on as 3 great bubbles have inflated and burst, each with consequences more dire than the last.
March 28, 2012 |
The following article is an excerpt of a piece that first appeared in The Baffler. Click here to subscribe to The Baffler and read articles by David Graeber, Barbara Ehrenreich, Chris Lehmann, Jim Newell, Maureen Tkacik, and James K. Galbraith in the current issue.
"The “sound” banker, alas! is not one who sees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows so that no one can really blame him." —John Maynard Keynes
In the twelve hapless years of the present millennium, we have looked on as three great bubbles of consensus vanity have inflated and burst, each with consequences more dire than the last.
First there was the “New Economy,” a millennial fever dream predicated on the twin ideas of a people’s stock market and an eternal silicon prosperity; it collapsed eventually under the weight of its own fatuousness.
Second was the war in Iraq, an endeavor whose launch depended for its success on the turpitude of virtually every class of elite in Washington, particularly the tough-minded men of the media; an enterprise that destroyed the country it aimed to save and that helped to bankrupt our nation as well.
And then, Wall Street blew up the global economy. Empowered by bank deregulation and regulatory capture, Wall Street enlisted those tough-minded men of the media again to sell the world on the idea that financial innovations were making the global economy more stable by the minute. Central banks puffed an asset bubble like the world had never seen before, even if every journalist worth his byline was obliged to deny its existence until it was too late.
These episodes were costly and even disastrous, and after each one had run its course and duly exploded, I expected some sort of day of reckoning for their promoters. And, indeed, the last two disasters combined to force the Republican Party from its stranglehold on American government—for a time.
But what rankles now is our failure, after each of these disasters, to come to terms with how we were played. Each separate catastrophe should have been followed by a wave of apologies and resignations. Taken together— and given that a good percentage of the pundit corps signed on to two or even three of these idiotic storylines—they mandated mass firings in the newsrooms and op-ed pages of the nation. Quicker than you could say “Ahmed Chalabi,” an entire generation of newsroom fools should have lost their jobs.
But that’s not what happened. Plenty of journalists have been pushed out of late, but the ones responsible for deluding the public are not among them. Standard & Poor’s first leads the parade of folly (triple-A’s for everyone!), then decides to downgrade U.S. government debt, and is taken seriously in both endeavors. And the prospect of Fox News or CNBC apologizing for their role in puffing war bubbles and financial bubbles is no better than a punch line: what they do is the opposite, launching new movements that stamp their crumbled fables “true” by popular demand.
The real mistake was my own. I believed that our public intelligentsia had succumbed to an amazing series of cognitive failures; that time after time they had gotten the facts wrong, ignored the clanging bullshit detector, made the sort of mistakes that would disqualify them from publishing in The Baffler, let alone the Washington Post.
What I didn’t understand was that these weren’t cognitive failures at all; they were moral failures, mistakes that were hard-wired into the belief systems of the organizations and professions and social classes in question. As such they were mistakes that— from the point of view of those organizations or professions or classes—shed no discredit on the individual chowderheads who made them. Holding them accountable was out of the question, and it remains off the table today. These people ignored every flashing red signal, refused to listen to the whistleblowers, blew off the obvious screaming indicators that something was going wrong in the boardrooms of the nation, even talked us into an unnecessary war, for chrissake, and the bailout apparatus still stands ready should they fuck things up again.
Keep on Dancing Till the World Ends
My aim here isn’t to take some kind of victory lap or to get in the granite faces of our eternal pundit corps one more time. Nor is it to blame Republicans for our problems. It is true that, from the scandal of CEO pay to the scandal of lobotomized regulators, each of the really monumental mistakes of our time arose from the trademark doctrines of the political right. And, yes, it was the Bush administration that muzzled government scientists and declared war on organized intelligence in a hundred other ways.
But the problem goes far beyond politics. We have become a society that can’t self-correct, that can’t address its obvious problems, thatcan’t pull out of its nosedive. And so to our list of disasters let us add this fourth entry: we have entered an age of folly that—for all our Facebooking and the twittling tweedle-dee-tweets of the twitterati—we can’t wake up from.
Besides, the reign of corruption has taken plenty of right-wing scalps, too. In fact, one of the most interesting comments on the machinery that is making us stupid came from the libertarian Doug Bandow of the Cato Institute, after he had temporarily lost his job (he got it back a little while later, don’t worry) for puffing clients of Jack Abramoff in exchange for the lobbyist’s largesse. But what was the big deal? fumed Bandow in a 2006 cri de coeur called “The Lesson Jack Abramoff Taught Me.” Living in Washington was expensive; and besides, everyone was basically on the take:
Many supposedly “objective” thinkers and “independent” scholar/experts these days have blogs or consulting gigs, or they are starting nonprofit Centers for the Study of... Who funds their books, speeches or other endeavors? Often it’s those with an interest in the outcome of a related debate. The number of folks underwriting the pursuit of pure knowledge can be counted on one hand, if not one finger.
Bandow had been caught, yes, but he wasn’t the only culprit, he insisted—with some accuracy. All opinions are paid for. Everything written in this city—everything in this land that is thought and tweeted and toasted with a hip hip hooray . . . is Abramoffed. We are all slaves to the market; there is no way to stand outside that condition.
I can remember the contempt I felt when I read Bandow’s essay, back in 2006. Of course there was a place where ideas weren’t simply for sale, I thought: the professions. Ethical standards kept professionals independent of their clients’ gross pecuniary interests.
These days, though, I’m not so sure. Money has transformed every watchdog, every independent authority. Medical doctors are increasingly gulled by the lobbying of pharmaceutical salesmen. Accountants were no match for Enron. Corporate boards are rubber stamps. Hospitals break unions, and, with an eye toward future donations, electronically single out rich patients for more luxurious treatment.
And consider the university, the mothership of the professions. For-profit higher education is today a booming industry, feeding on the student loans handed out to the desperate. Even the traditional academy, where free inquiry nominally lives, has become a profit center, a place where exorbitant tuition somehow bypasses the adjuncts who do the teaching but makes for lavish executive salaries; where economists pull in fantastic sums for “consulting”; and where the prospect of launching the next hot Internet startup is a gamble that it is worth bending any rule to take.
Another thing Doug Bandow got right was one of the basic reasons for all this: for most Americans, the building blocks of middle-class life—four years at a good college, for example—are growing ever more expensive and out of reach. For other people and other entities, though, they grow relatively cheaper; they are baubles to be handed out as necessity requires. The result is exactly what our nineteenth-century ancestors would have expected. Think of Jack Grubman, the superstar stock analyst of the nineties, who famously upgraded AT&T’s shares in exchange for getting his children into a ferociously competitive preschool. Or the congressional aides on Capitol Hill, surrounded by the inaccessible luxuries of Washington, D.C., who would do nearly anything for a lobbyist in exchange for a shot at a future job on said lobbyist’s staff. Or the actual members of Congress who sold their votes in exchange for little bits of sushi or a blowout party in Hawaii or good seats at sporting events.
And as we serve money, we find that money wants the same thing from us: to push everyone it beguiles in the same direction. Money never seems to be interested in strengthening regulatory agencies, for example, but always in subverting them, in making them miss the danger signs in coal mines and in derivatives trading and in deep-sea oil wells. You can have a shot at being part of the 1 percent, money tells us, only if you are first committed to making the 1 percent stronger, to defending their piles in some new and imaginative way, to rationalizing and burnishing their glory, to exempting them from regulation or taxation, to bowing down as they pass, and to believing in your heart that their touch will heal scrofula.
So money gives us not only the bond-rating scandal of 2008, in which trash investments were labeled super-wholesome so that the rating agency in question could win more business from the manufacturers of said trash; and not only the Enron scandal of 2001, in which head-spinning conflicts of interest were over- looked by Enron’s accountants in order to preserve the nice ka-ching those conflicts delivered to everyone involved; but also the analyst scandal of 2002, in which Wall Street insiders pushed certain corporate securities on their sappy middle-American clients in order to win those corporations’ business—and then while it is corrupting all the watchmen, money also dashes off an enormous body of literature assuring those sappy middle Americans that they are in fact financial geniuses who can outsmart any possible combination of Wall Street insiders, because together the saps reflect the wisdom of markets or some other such reassuring bullshit. And all of it— the airy populism of the market and its simultaneous complete negation by reality—is as determined by the current distribution of wealth as gravity is by the mass of the planet. Both of them will continue indefinitely regardless of the constant violence the one does to the other simply because that’s the way money wants it, and every dollar in the nation will strain at its leash to ensure that financial naïveté persists on into infinity in complete ignorance of financial fraud.
In the 12 hapless years of this millennium, we have looked on as 3 great bubbles have inflated and burst, each with consequences more dire than the last.
March 28, 2012 |
The following article is an excerpt of a piece that first appeared in The Baffler. Click here to subscribe to The Baffler and read articles by David Graeber, Barbara Ehrenreich, Chris Lehmann, Jim Newell, Maureen Tkacik, and James K. Galbraith in the current issue.
"The “sound” banker, alas! is not one who sees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows so that no one can really blame him." —John Maynard Keynes
In the twelve hapless years of the present millennium, we have looked on as three great bubbles of consensus vanity have inflated and burst, each with consequences more dire than the last.
First there was the “New Economy,” a millennial fever dream predicated on the twin ideas of a people’s stock market and an eternal silicon prosperity; it collapsed eventually under the weight of its own fatuousness.
Second was the war in Iraq, an endeavor whose launch depended for its success on the turpitude of virtually every class of elite in Washington, particularly the tough-minded men of the media; an enterprise that destroyed the country it aimed to save and that helped to bankrupt our nation as well.
And then, Wall Street blew up the global economy. Empowered by bank deregulation and regulatory capture, Wall Street enlisted those tough-minded men of the media again to sell the world on the idea that financial innovations were making the global economy more stable by the minute. Central banks puffed an asset bubble like the world had never seen before, even if every journalist worth his byline was obliged to deny its existence until it was too late.
These episodes were costly and even disastrous, and after each one had run its course and duly exploded, I expected some sort of day of reckoning for their promoters. And, indeed, the last two disasters combined to force the Republican Party from its stranglehold on American government—for a time.
But what rankles now is our failure, after each of these disasters, to come to terms with how we were played. Each separate catastrophe should have been followed by a wave of apologies and resignations. Taken together— and given that a good percentage of the pundit corps signed on to two or even three of these idiotic storylines—they mandated mass firings in the newsrooms and op-ed pages of the nation. Quicker than you could say “Ahmed Chalabi,” an entire generation of newsroom fools should have lost their jobs.
But that’s not what happened. Plenty of journalists have been pushed out of late, but the ones responsible for deluding the public are not among them. Standard & Poor’s first leads the parade of folly (triple-A’s for everyone!), then decides to downgrade U.S. government debt, and is taken seriously in both endeavors. And the prospect of Fox News or CNBC apologizing for their role in puffing war bubbles and financial bubbles is no better than a punch line: what they do is the opposite, launching new movements that stamp their crumbled fables “true” by popular demand.
The real mistake was my own. I believed that our public intelligentsia had succumbed to an amazing series of cognitive failures; that time after time they had gotten the facts wrong, ignored the clanging bullshit detector, made the sort of mistakes that would disqualify them from publishing in The Baffler, let alone the Washington Post.
What I didn’t understand was that these weren’t cognitive failures at all; they were moral failures, mistakes that were hard-wired into the belief systems of the organizations and professions and social classes in question. As such they were mistakes that— from the point of view of those organizations or professions or classes—shed no discredit on the individual chowderheads who made them. Holding them accountable was out of the question, and it remains off the table today. These people ignored every flashing red signal, refused to listen to the whistleblowers, blew off the obvious screaming indicators that something was going wrong in the boardrooms of the nation, even talked us into an unnecessary war, for chrissake, and the bailout apparatus still stands ready should they fuck things up again.
Keep on Dancing Till the World Ends
My aim here isn’t to take some kind of victory lap or to get in the granite faces of our eternal pundit corps one more time. Nor is it to blame Republicans for our problems. It is true that, from the scandal of CEO pay to the scandal of lobotomized regulators, each of the really monumental mistakes of our time arose from the trademark doctrines of the political right. And, yes, it was the Bush administration that muzzled government scientists and declared war on organized intelligence in a hundred other ways.
But the problem goes far beyond politics. We have become a society that can’t self-correct, that can’t address its obvious problems, thatcan’t pull out of its nosedive. And so to our list of disasters let us add this fourth entry: we have entered an age of folly that—for all our Facebooking and the twittling tweedle-dee-tweets of the twitterati—we can’t wake up from.
Besides, the reign of corruption has taken plenty of right-wing scalps, too. In fact, one of the most interesting comments on the machinery that is making us stupid came from the libertarian Doug Bandow of the Cato Institute, after he had temporarily lost his job (he got it back a little while later, don’t worry) for puffing clients of Jack Abramoff in exchange for the lobbyist’s largesse. But what was the big deal? fumed Bandow in a 2006 cri de coeur called “The Lesson Jack Abramoff Taught Me.” Living in Washington was expensive; and besides, everyone was basically on the take:
Many supposedly “objective” thinkers and “independent” scholar/experts these days have blogs or consulting gigs, or they are starting nonprofit Centers for the Study of... Who funds their books, speeches or other endeavors? Often it’s those with an interest in the outcome of a related debate. The number of folks underwriting the pursuit of pure knowledge can be counted on one hand, if not one finger.
Bandow had been caught, yes, but he wasn’t the only culprit, he insisted—with some accuracy. All opinions are paid for. Everything written in this city—everything in this land that is thought and tweeted and toasted with a hip hip hooray . . . is Abramoffed. We are all slaves to the market; there is no way to stand outside that condition.
I can remember the contempt I felt when I read Bandow’s essay, back in 2006. Of course there was a place where ideas weren’t simply for sale, I thought: the professions. Ethical standards kept professionals independent of their clients’ gross pecuniary interests.
These days, though, I’m not so sure. Money has transformed every watchdog, every independent authority. Medical doctors are increasingly gulled by the lobbying of pharmaceutical salesmen. Accountants were no match for Enron. Corporate boards are rubber stamps. Hospitals break unions, and, with an eye toward future donations, electronically single out rich patients for more luxurious treatment.
And consider the university, the mothership of the professions. For-profit higher education is today a booming industry, feeding on the student loans handed out to the desperate. Even the traditional academy, where free inquiry nominally lives, has become a profit center, a place where exorbitant tuition somehow bypasses the adjuncts who do the teaching but makes for lavish executive salaries; where economists pull in fantastic sums for “consulting”; and where the prospect of launching the next hot Internet startup is a gamble that it is worth bending any rule to take.
Another thing Doug Bandow got right was one of the basic reasons for all this: for most Americans, the building blocks of middle-class life—four years at a good college, for example—are growing ever more expensive and out of reach. For other people and other entities, though, they grow relatively cheaper; they are baubles to be handed out as necessity requires. The result is exactly what our nineteenth-century ancestors would have expected. Think of Jack Grubman, the superstar stock analyst of the nineties, who famously upgraded AT&T’s shares in exchange for getting his children into a ferociously competitive preschool. Or the congressional aides on Capitol Hill, surrounded by the inaccessible luxuries of Washington, D.C., who would do nearly anything for a lobbyist in exchange for a shot at a future job on said lobbyist’s staff. Or the actual members of Congress who sold their votes in exchange for little bits of sushi or a blowout party in Hawaii or good seats at sporting events.
And as we serve money, we find that money wants the same thing from us: to push everyone it beguiles in the same direction. Money never seems to be interested in strengthening regulatory agencies, for example, but always in subverting them, in making them miss the danger signs in coal mines and in derivatives trading and in deep-sea oil wells. You can have a shot at being part of the 1 percent, money tells us, only if you are first committed to making the 1 percent stronger, to defending their piles in some new and imaginative way, to rationalizing and burnishing their glory, to exempting them from regulation or taxation, to bowing down as they pass, and to believing in your heart that their touch will heal scrofula.
So money gives us not only the bond-rating scandal of 2008, in which trash investments were labeled super-wholesome so that the rating agency in question could win more business from the manufacturers of said trash; and not only the Enron scandal of 2001, in which head-spinning conflicts of interest were over- looked by Enron’s accountants in order to preserve the nice ka-ching those conflicts delivered to everyone involved; but also the analyst scandal of 2002, in which Wall Street insiders pushed certain corporate securities on their sappy middle-American clients in order to win those corporations’ business—and then while it is corrupting all the watchmen, money also dashes off an enormous body of literature assuring those sappy middle Americans that they are in fact financial geniuses who can outsmart any possible combination of Wall Street insiders, because together the saps reflect the wisdom of markets or some other such reassuring bullshit. And all of it— the airy populism of the market and its simultaneous complete negation by reality—is as determined by the current distribution of wealth as gravity is by the mass of the planet. Both of them will continue indefinitely regardless of the constant violence the one does to the other simply because that’s the way money wants it, and every dollar in the nation will strain at its leash to ensure that financial naïveté persists on into infinity in complete ignorance of financial fraud.
MF Global: Forbes Sums It Up Well, And My Take, 'Abandon All Hope, Ye Who Enter Here'
by jessescrossroadscafe.blogspot.com
Forbes has been head and shoulders above the rest of the mainstream media in reporting on MF Global.
Francine McKenna provides an excellent summation of the entire three part scandal.
Part one. There was the conscious transferring of customer assets to meet a margin call by JP Morgan in London in what was intended to be an 'over the weekend' transaction with the funds replaced on Monday. Edith O'Brien is at the center of this, although it is almost inconceivable that she acted alone.
Part two. In part the failure of MF Global was caused by the refusal of certain parties to honor requests for wire transfers of legitimate funds. These parties almost certainly had insider knowledge of MF Global's finances, and may have even had a financial interest in MF Global's failure.
Part three. In hiding funds seized at the last hour from MF Global, and using influence to steer the bankruptcy to Chapter 11 versus the much more appropriate Chapter 7, certain parties, which may include some regulators most likely at the SEC and CFTC, and the hiding of the funds from investigators and the customers, it is quite possible that there was a conspiracy to obstruct justice.
And as in all scandals such as this, it is the obstruction of justice that can become the real giant killer in covering up 'a third rate burglary.'
Obviously neither Francine McKenna or I have all the facts. The way in which the bankruptcy was handled helps to insure that. And of course in the US people have the right to plead the Fifth Amendment, and are 'innocent and proven guilty.'
Plausible deniability and the 'CEO defense' are very much en vogue these days, which is ironic because as in the case of Enron, the defense if invoked by exceptionally well-compensated 'professionals' who were being paid for their performance and expertise. Until something goes wrong that is, and then no one knows anything. And this is why corporate America hates Sarbanes-Oxley, because it strikes to the heart of that plausible deniability, and says, 'you should know.'
From my perspective, MF Global is a symptom of what is wrong with the system in addition to being a shocking injustice. It has all the elements of a system gone wrong. White collar criminality, privileged elites, the double standard of law, secretive proceedings, craven media, posturing Congressmen, non-involved Justice Department, seizure of private property, compromised regulators, and a culture of fraud and deceit that serves the monied interests above all else, above oaths and honor. The sign on the entrance to the Anglo-American financial system should read, 'Abandon all hope. ye who enter here.'
There will be no sustainable recovery until the banks are restrained and the system is reformed.
Forbes
The Story Behind Today's MF Global Congressional Testimony
By Francine McKenna
3/28/2012 @ 5:15PM
If the only stories you read about MF Global come from the major daily media reports and congressional testimony, you’ll miss most of the truth and quickly become confused about who knew what and when. The Wall Street Journal, New York Times, and Reuters, in particular, have gone back and forth on the story many times, flip-flopping around with every new leak, every new published document, every supposed scoop. I’d have whiplash by now if I’d jerked my head one way and then the other and back again as often as their reporters have when telling you, today, who done it.
What you should really wonder is why none of these reporters are doing any real investigative work. Why aren’t the reporters cultivating sources other than those who have a strong motivation for steering the story in one direction and then another, perpetuating misdirection and buying time until they they figure out the political and practical ramifications of what really went on? Why aren’t they reporting the corrections and contradictions to the versions they’ve been repeating?
I’m sticking to the same theory I’ve had since I published it here on November 9th: MF Global and its executives ran out of time and legitimate sources of funding for the growing amount of collateral demands on the sovereign debt repo-to-maturity transactions and customer redemption requests. By Wednesday October 26, 2011 they were out of options. They had no plan to file bankruptcy until they were forced to at least plan for the contingency and, according to the first day filings with the bankruptcy judge, hired Skadden on Friday the 28th.
Corzine and Co.’s goal was to sell the company or, at least, the broker dealer. To do that required keeping it all viable until that deal could be sealed. To do that, I believe, senior executives illegally pledged customer assets – Treasuries and Bunds – as collateral for a short-term loan over the weekend of the 28th. The plan was to put those assets back in the accounts when the buyer paid. Unfortunately for everyone, MF Global was forced to file Chapter 11 on Monday October 31. General Counsel Laurie Ferber did not admit until later that day that executives had “discovered a significant shortfall in its segregated funds account”.
Unlike similar bankruptcies before that – Lehman and Refco – the broker dealer was not sold cleanly. There was eveidence of potential fraud on day 1, October 31. The regulators never should have allowed the holding company to be put in Chapter 11 – debtor in possession – versus Chapter 7. By doing so, Judge Glenn allowed the pirates – the executives who caused the shortfall – to continue to control the ship until Freeh was appointed Trustee for the holding company a month later.
The customer assets that had been illegally pledged were seized by the “lender of last resort” as soon as bankruptcy occurred. I have evidence someone was worried almost immediately about a clawback. That party took the excess collateral for the loan as well as the value of what they lent. They will have to be forced to give it back.
And with that you explain the huge hole in the balance sheet.
Everything we’ve heard since then – revelations, testimony, secret emails and admissions – supports my theory. They only thing left is to identify the “lender of last resort”...
Read the rest here.
"It is no use trying to escape their arrogance by submissiveness and good behaviour. They pillage the world. When the land has nothing left to ravage, they scour the sea. If an enemy is rich, they are greedy, if he is poor, they lust for dominion; neither the east nor the west has been able to satiate them.
Among mankind they alone covet with the same greed both the poor and the rich. To plunder, to massacre, to steal, this they call Empire; and where they make a desert, they call it peace."
Tacitus, Agricola
Forbes has been head and shoulders above the rest of the mainstream media in reporting on MF Global.
Francine McKenna provides an excellent summation of the entire three part scandal.
Part one. There was the conscious transferring of customer assets to meet a margin call by JP Morgan in London in what was intended to be an 'over the weekend' transaction with the funds replaced on Monday. Edith O'Brien is at the center of this, although it is almost inconceivable that she acted alone.
Part two. In part the failure of MF Global was caused by the refusal of certain parties to honor requests for wire transfers of legitimate funds. These parties almost certainly had insider knowledge of MF Global's finances, and may have even had a financial interest in MF Global's failure.
Part three. In hiding funds seized at the last hour from MF Global, and using influence to steer the bankruptcy to Chapter 11 versus the much more appropriate Chapter 7, certain parties, which may include some regulators most likely at the SEC and CFTC, and the hiding of the funds from investigators and the customers, it is quite possible that there was a conspiracy to obstruct justice.
And as in all scandals such as this, it is the obstruction of justice that can become the real giant killer in covering up 'a third rate burglary.'
Obviously neither Francine McKenna or I have all the facts. The way in which the bankruptcy was handled helps to insure that. And of course in the US people have the right to plead the Fifth Amendment, and are 'innocent and proven guilty.'
Plausible deniability and the 'CEO defense' are very much en vogue these days, which is ironic because as in the case of Enron, the defense if invoked by exceptionally well-compensated 'professionals' who were being paid for their performance and expertise. Until something goes wrong that is, and then no one knows anything. And this is why corporate America hates Sarbanes-Oxley, because it strikes to the heart of that plausible deniability, and says, 'you should know.'
From my perspective, MF Global is a symptom of what is wrong with the system in addition to being a shocking injustice. It has all the elements of a system gone wrong. White collar criminality, privileged elites, the double standard of law, secretive proceedings, craven media, posturing Congressmen, non-involved Justice Department, seizure of private property, compromised regulators, and a culture of fraud and deceit that serves the monied interests above all else, above oaths and honor. The sign on the entrance to the Anglo-American financial system should read, 'Abandon all hope. ye who enter here.'
There will be no sustainable recovery until the banks are restrained and the system is reformed.
Forbes
The Story Behind Today's MF Global Congressional Testimony
By Francine McKenna
3/28/2012 @ 5:15PM
If the only stories you read about MF Global come from the major daily media reports and congressional testimony, you’ll miss most of the truth and quickly become confused about who knew what and when. The Wall Street Journal, New York Times, and Reuters, in particular, have gone back and forth on the story many times, flip-flopping around with every new leak, every new published document, every supposed scoop. I’d have whiplash by now if I’d jerked my head one way and then the other and back again as often as their reporters have when telling you, today, who done it.
What you should really wonder is why none of these reporters are doing any real investigative work. Why aren’t the reporters cultivating sources other than those who have a strong motivation for steering the story in one direction and then another, perpetuating misdirection and buying time until they they figure out the political and practical ramifications of what really went on? Why aren’t they reporting the corrections and contradictions to the versions they’ve been repeating?
I’m sticking to the same theory I’ve had since I published it here on November 9th: MF Global and its executives ran out of time and legitimate sources of funding for the growing amount of collateral demands on the sovereign debt repo-to-maturity transactions and customer redemption requests. By Wednesday October 26, 2011 they were out of options. They had no plan to file bankruptcy until they were forced to at least plan for the contingency and, according to the first day filings with the bankruptcy judge, hired Skadden on Friday the 28th.
Corzine and Co.’s goal was to sell the company or, at least, the broker dealer. To do that required keeping it all viable until that deal could be sealed. To do that, I believe, senior executives illegally pledged customer assets – Treasuries and Bunds – as collateral for a short-term loan over the weekend of the 28th. The plan was to put those assets back in the accounts when the buyer paid. Unfortunately for everyone, MF Global was forced to file Chapter 11 on Monday October 31. General Counsel Laurie Ferber did not admit until later that day that executives had “discovered a significant shortfall in its segregated funds account”.
Unlike similar bankruptcies before that – Lehman and Refco – the broker dealer was not sold cleanly. There was eveidence of potential fraud on day 1, October 31. The regulators never should have allowed the holding company to be put in Chapter 11 – debtor in possession – versus Chapter 7. By doing so, Judge Glenn allowed the pirates – the executives who caused the shortfall – to continue to control the ship until Freeh was appointed Trustee for the holding company a month later.
The customer assets that had been illegally pledged were seized by the “lender of last resort” as soon as bankruptcy occurred. I have evidence someone was worried almost immediately about a clawback. That party took the excess collateral for the loan as well as the value of what they lent. They will have to be forced to give it back.
And with that you explain the huge hole in the balance sheet.
Everything we’ve heard since then – revelations, testimony, secret emails and admissions – supports my theory. They only thing left is to identify the “lender of last resort”...
Read the rest here.
"It is no use trying to escape their arrogance by submissiveness and good behaviour. They pillage the world. When the land has nothing left to ravage, they scour the sea. If an enemy is rich, they are greedy, if he is poor, they lust for dominion; neither the east nor the west has been able to satiate them.
Among mankind they alone covet with the same greed both the poor and the rich. To plunder, to massacre, to steal, this they call Empire; and where they make a desert, they call it peace."
Tacitus, Agricola
Bank Of America Sanctioned For Discharge Violation
Another one from the decent Bank of America
by Carmen Dellutri, Southwest Florida Bankruptcy Attorney
Bankruptcy Judge Arthur B. Briskman recently smacked Bank of America to the tune of $12,500.00 for violating a debtor’s discharge. The award included $2,500.00 in attorney’s fees. Shockingly, Bank of America did not attend the evidentiary hearing set by the Court. However, even if they did attend, I doubt there was much they could have done to prevent Judge Briskman from imposing the same sanction. Doing a little research, this is obviously not the first time getting smacked for the bank.
Based upon the pleadings in the record and the evidence presented at the hearing, it was obvious that Bank of America was well aware that the debtors not only filed for bankruptcy protection, but that they had received a copy of the discharge as well. Post-Discharge, the debtors received approximately thirty-eight (38) phone calls. The testimony at trial was that agents of Bank of America stated that they didn’t really care about the bankruptcy and that they would keep calling until the computer system was updated.
Debtor’s attorney sent several letters demanding that the calls stop; however, these letters fell on deaf ears. The Debtors moved to re-open the case and requested sanctions. During the hearing, Judge Briskman took evidence on the debtor’s damages and the amount of attorney’s fees involved in bringing these actions. The best part of the opinion for me was how the Judge stated that each phone call was a violation of the discharge injunction. It was like music to my ears.
Judge Briskman found that Bank of America wilfully and intentionally violated the discharge injunction of 11 U.S.C. 524. He went even further to find that it’s conduct was vexatious, wanton and oppressive. Along those lines, the Judge cited a 9th Circuit Court of Appeals case to state that medical evidence is not required to prove emotional distress when the emotional distress is caused by conduct which is extreme or egregious.
Thank You to Judge Briskman for outlining the proper steps to bringing a discharge violation in your courtroom. Thank you for protecting debtors from unscrupulous creditors.
by Carmen Dellutri, Southwest Florida Bankruptcy Attorney
Bankruptcy Judge Arthur B. Briskman recently smacked Bank of America to the tune of $12,500.00 for violating a debtor’s discharge. The award included $2,500.00 in attorney’s fees. Shockingly, Bank of America did not attend the evidentiary hearing set by the Court. However, even if they did attend, I doubt there was much they could have done to prevent Judge Briskman from imposing the same sanction. Doing a little research, this is obviously not the first time getting smacked for the bank.
Based upon the pleadings in the record and the evidence presented at the hearing, it was obvious that Bank of America was well aware that the debtors not only filed for bankruptcy protection, but that they had received a copy of the discharge as well. Post-Discharge, the debtors received approximately thirty-eight (38) phone calls. The testimony at trial was that agents of Bank of America stated that they didn’t really care about the bankruptcy and that they would keep calling until the computer system was updated.
Debtor’s attorney sent several letters demanding that the calls stop; however, these letters fell on deaf ears. The Debtors moved to re-open the case and requested sanctions. During the hearing, Judge Briskman took evidence on the debtor’s damages and the amount of attorney’s fees involved in bringing these actions. The best part of the opinion for me was how the Judge stated that each phone call was a violation of the discharge injunction. It was like music to my ears.
Judge Briskman found that Bank of America wilfully and intentionally violated the discharge injunction of 11 U.S.C. 524. He went even further to find that it’s conduct was vexatious, wanton and oppressive. Along those lines, the Judge cited a 9th Circuit Court of Appeals case to state that medical evidence is not required to prove emotional distress when the emotional distress is caused by conduct which is extreme or egregious.
Thank You to Judge Briskman for outlining the proper steps to bringing a discharge violation in your courtroom. Thank you for protecting debtors from unscrupulous creditors.
Housing Pundit Thomas Lawler and the Genesis of Lawlessness
By Michael Olenick, creator of FindtheFraud
While researching a HUD database for clues on Thomas Lawler, the frequently-cited foreclosure and heavy-metal loving “housing economist” often cited by the business media, and a favorite of Calculated Risk, I came across background information that raises more questions than it answers.
In the spirit of CR’s former housing writer, Doris “Tanta” Dungey, who did not seem to hesitate to present puzzling information and ask her readers what they thought it meant, I thought I’d do the same. Tanta passed away of cancer at the age of 47 in late 2008 and it’s a shame CR has discontinued the practice.
Starting in 1998 Thomas Lawler held the job of SVP Portfolio Management, SVP Financial Strategy, and SVP of Risk Strategy at Fannie Mae until he unceremoniously left in January, 2006, following an $8 billion financial fraud that occurred under his watch. Lawler, along with the rest of Fannie’s executive team, cooked the books spectacularly. That was back in the early 2000s, when a billion dollars was still real money.
Lawler’s Project Libra
It’d be impossible to summarize Lawler’s ethical mosh-pit better than OFHEO, Fannie’s former regulator which morphed into the FHFA, already did so I’ll just cut-and-paste from their 2006 “Report of the Special Examination of Fannie Mae” (emphasis mine):
According to Thomas Lawler, Senior Vice President for Portfolio Management, when Fannie Mae entered the income-shifting REMIC transactions, the Enterprise was concerned that the steep decline in interest rates in 2001 would cause higher near-term and lower long-term recognition of income under GAAP. Mr. Lawler explained that in the context of developing strategies to address that concern, Peter Niculescu, Senior Vice President for Portfolio Strategy, may have suggested the income-shifting REMIC idea. He was not aware of anyone senior to Mr. Niculescu playing a role in initiating the transactions.
Andrew McCormick, Senior Vice President for Portfolio Management (then reporting to Mr. Lawler), indicated he believed Goldman Sachs (Mr. Niculescu’s former employer and the underwriter of the transactions) was the source of the idea.209 In fact Goldman Sachs described the proposed transaction in a November 19, 2001, presentation to Fannie Mae. David Rosenblum, a Goldman Sachs managing director, attached PowerPoint slides for the presentation to a December 3, 2001, e-mail to Mr. Niculescu. Mr. Rosenblum referred to the project as ‘Project Libra.’
Mr. Lawler acknowledged that a motive for creating the REMICs was to effect ‘a change in the expected [pattern of] recognition [of income].’ He also emphasized that without the income-shifting REMICs he did not believe the GAAP earnings that the company would have realized would have accurately reflected the underlying economics. Although he referred to economics, Mr. Lawler was actually talking about the GAAP accounting mismatch Goldman Sachs cited. In an e-mail to a colleague, Jeff Juliane, who, as a member of the Office of the Controller had operational responsibilities for accounting for premiums and discounts on the tranches Fannie Mae retained, ‘these (REMICs) were structured to transfer income from 2002 to out-years.’
Is it just me or, in much the same way every fairy tale starts with “Once upon a time,” every government report on a major scam seems to include the line “Goldman Sachs described the proposed transaction.”
Back to the point, the report makes it clear that Thomas Lawler’s Fannie Mae didn’t play well with Patrick Lawler’s (no relation) OFHEO. At one point when OFHEO provided Congress with Fannie executive compensation Fannie “suggest[ed] that members of Congress might face criminal sanctions if they made the information public,” according to the OFHEO report.
A few months before that scathing report was released Thomas Lawler unsurprisingly left Fannie Mae, moving to a rural farm and into semi-retirement. But Thomas Lawler’s version of “retirement” was to join the Board of Directors of one of John Paulson’s hedge funds as Paulson was famously buying CDS short positions.
Unsurprisingly once Lawler jumped to Paulson he quickly became bearish on real-estate prices. “Poison Said It All in 1990 in a Song Reportedly Inspired by a Mortgage Lender After Housing Crashed that Year, and Low/No Doc (“Liar”) Loan Defaults Skyrocketed,” Lawler wrote in his presentation, going on to spell out the lyrics. That presentation ends with a cute graphic of “Franklin, the Fair Housing Fox,” a likely reference to Lawler’s former boss Fannie Mae CEO Franklin Raines.
Somehow between the heavy-metal lyrics and kitschy graphic I can’t find a disclosure anywhere that Lawler’s new boss was massively shorting the housing market. An oversight, I’m sure, as Lawler was focused on remaking himself from an executive at the center of a massive scam to a “housing economist” in the public image.
Soon after it became clear that the payout to Paulson looked inevitable Lawler switched his position again, arguing the now well-known Big Lie that increased foreclosures also increases home prices. As early as June 13, 2008, while Bear Stearns was barely dead and Lehman Brothers still barely alive, the Wall Street Journal quotes Lawler opining about the economic benefits of “bargain hunters scooping up foreclosed homes from banks,” no matter that these same “bargain hunters,” likely ended up massively upside-down soon after.
Lawler also went after the jugular of real economists who disagreed with him, most notably Yale University economist Robert Shiller, co-inventor of the famous Case-Shiller home price index, which Lawler called “bogus,” in an April 24, 2009 WSJ article announcing that Thomas Lawler has created his own index: “Mr. Lawler has created an adjusted version of the Shiller chart, backing up [Thomas Lawler's] view that house prices already are nearing a bottom in much of the country.” Shiller responded in the article that Lawler was making “wild allegations.”
I suppose “wild allegations” is a toned down version of what most people would have said, which would be something along the lines of “WTF – Lawler’s a known housing fraudster who cooked the books in an $8 billion scam: why are you listening to him?” though academics rarely talk like that, unfortunately.
Needless to say, Lawler’s 2008 housing bottom didn’t quite work out that way, nor did his view that Shiller’s index was incorrect, but most pundits pass over those small issues the same way that prosecutors passed over indictments in the Fannie accounting fiasco.
The Surprise In the Desert
Back to that primary research based on the HUD data during and after the time that Lawler was managing Fannie’s portfolio, financials, and risk. It turns out that Fannie had an appetite for financing homes in some ZIP codes at rates wildly higher than others. I compiled about 26 million loan-level records that Fannie and Freddie acquired between 2004-2007. Fannie and Freddie don’t lend directly — they buy loans from banks — so this data-set would be from the time Lawler was at the height of influence setting policy there.
Fannie and Freddie’s loans use MSA rather than ZIP codes but I cross-referenced them to ZIP codes using tables provided by the Census Bureau. MSA codes sometimes span a small number of ZIP codes, so when there were multiple ZIP code possibilities I’d choose the ZIP code with the highest proportion of residential properties. This could result in slight overconcentration, though the error rate doesn’t matter given the extremes I found in the data.
Certain communities were much more likely to receive loans from the GSE’s than others. Surprise, AZ, in ZIP code 85374, is #1 with 24,788 loans, a 14.7 standard-deviations above the other 20,821 ZIP codes which have a mean loan volume of 532 loans each. The Census Bureau reports Surprise, AZ grew 281% from 2000 to 2010, to the current population of 117,517. As Yves would say, Quelle Surprise, though this time literally.
There are 52,586 housing units in Surprise so it’s safe to say the town is akin to some sort of modern Hoover Dam project, a large scale building project, in the middle of nowhere, built with government money. Except the spending occurred during an economic boom, and is now curtailed thanks to a corresponding economic bust. Actually, the government didn’t really mean to spend the money — during that time Fannie and Freddie were private — so it was GSE executives, especially Lawler, who decided to build a town in the middle of nowhere.
One statistic that comes through clearly is Lawler’s preference for fast foreclosures. All top ten ZIP codes by loan volume are in non-judicial foreclosure states: five in CA, two in AZ, and one each in NV, NC, and TX. We have to drill down to the seventeenth position until we find a judicial ZIP code.
It isn’t clear how Fannie and Freddie decided to hyper-concentrate their loans in a few distinct areas since majority of ZIP codes received less than 1,000 loans. Almost all the high volume ZIP codes are exurban construction boom-towns: environmentally irresponsible far-flung bedroom communities that externalize the cost of construction to everybody except the builders who disappear even faster than the demand for shiny new properties to flip.
Other stats also pop out. For example, the average age of the primary borrower in this large sample is 44 1/2, so they’ll pay off their 30-year mortgages when they’re a spry 74.5 years-old. That obviously doesn’t bother Fannie and Freddie who wrote at least 9,821 loans to people 90 years and older. Fifteen loans went to people one hundred years and older. I understand that age discrimination is illegal but given all the other exemptions Fannie and Freddie received — which includes virtually everything — you’d think they’d lobby for the ability to question the ability of centenarians to repay their 30-year loans.
Many people question the role Fannie and Freddie played in the subprime meltdown. Gretchen Morgenson and Josh Rosner convincingly argue in their book on the subject, Reckless Endangerment, that the GSE’s created an anything-goes culture which private lenders picked up to compete. This data supports that theory: Fannie and Freddie led the way while private money followed.
It’s not clear why CR and so many mainstream media outlets blindly quote Fannie Mae’s former economist, allowing him to “move on” from some spectacularly poor decisions that led to painful costs borne by everybody else. We continue watching the bailout money quietly flow and I wonder when “personal responsibility” for one’s prior decisions became an exclusive obligation only for those neither wealthy nor well connected.
While researching a HUD database for clues on Thomas Lawler, the frequently-cited foreclosure and heavy-metal loving “housing economist” often cited by the business media, and a favorite of Calculated Risk, I came across background information that raises more questions than it answers.
In the spirit of CR’s former housing writer, Doris “Tanta” Dungey, who did not seem to hesitate to present puzzling information and ask her readers what they thought it meant, I thought I’d do the same. Tanta passed away of cancer at the age of 47 in late 2008 and it’s a shame CR has discontinued the practice.
Starting in 1998 Thomas Lawler held the job of SVP Portfolio Management, SVP Financial Strategy, and SVP of Risk Strategy at Fannie Mae until he unceremoniously left in January, 2006, following an $8 billion financial fraud that occurred under his watch. Lawler, along with the rest of Fannie’s executive team, cooked the books spectacularly. That was back in the early 2000s, when a billion dollars was still real money.
Lawler’s Project Libra
It’d be impossible to summarize Lawler’s ethical mosh-pit better than OFHEO, Fannie’s former regulator which morphed into the FHFA, already did so I’ll just cut-and-paste from their 2006 “Report of the Special Examination of Fannie Mae” (emphasis mine):
According to Thomas Lawler, Senior Vice President for Portfolio Management, when Fannie Mae entered the income-shifting REMIC transactions, the Enterprise was concerned that the steep decline in interest rates in 2001 would cause higher near-term and lower long-term recognition of income under GAAP. Mr. Lawler explained that in the context of developing strategies to address that concern, Peter Niculescu, Senior Vice President for Portfolio Strategy, may have suggested the income-shifting REMIC idea. He was not aware of anyone senior to Mr. Niculescu playing a role in initiating the transactions.
Andrew McCormick, Senior Vice President for Portfolio Management (then reporting to Mr. Lawler), indicated he believed Goldman Sachs (Mr. Niculescu’s former employer and the underwriter of the transactions) was the source of the idea.209 In fact Goldman Sachs described the proposed transaction in a November 19, 2001, presentation to Fannie Mae. David Rosenblum, a Goldman Sachs managing director, attached PowerPoint slides for the presentation to a December 3, 2001, e-mail to Mr. Niculescu. Mr. Rosenblum referred to the project as ‘Project Libra.’
Mr. Lawler acknowledged that a motive for creating the REMICs was to effect ‘a change in the expected [pattern of] recognition [of income].’ He also emphasized that without the income-shifting REMICs he did not believe the GAAP earnings that the company would have realized would have accurately reflected the underlying economics. Although he referred to economics, Mr. Lawler was actually talking about the GAAP accounting mismatch Goldman Sachs cited. In an e-mail to a colleague, Jeff Juliane, who, as a member of the Office of the Controller had operational responsibilities for accounting for premiums and discounts on the tranches Fannie Mae retained, ‘these (REMICs) were structured to transfer income from 2002 to out-years.’
Is it just me or, in much the same way every fairy tale starts with “Once upon a time,” every government report on a major scam seems to include the line “Goldman Sachs described the proposed transaction.”
Back to the point, the report makes it clear that Thomas Lawler’s Fannie Mae didn’t play well with Patrick Lawler’s (no relation) OFHEO. At one point when OFHEO provided Congress with Fannie executive compensation Fannie “suggest[ed] that members of Congress might face criminal sanctions if they made the information public,” according to the OFHEO report.
A few months before that scathing report was released Thomas Lawler unsurprisingly left Fannie Mae, moving to a rural farm and into semi-retirement. But Thomas Lawler’s version of “retirement” was to join the Board of Directors of one of John Paulson’s hedge funds as Paulson was famously buying CDS short positions.
Unsurprisingly once Lawler jumped to Paulson he quickly became bearish on real-estate prices. “Poison Said It All in 1990 in a Song Reportedly Inspired by a Mortgage Lender After Housing Crashed that Year, and Low/No Doc (“Liar”) Loan Defaults Skyrocketed,” Lawler wrote in his presentation, going on to spell out the lyrics. That presentation ends with a cute graphic of “Franklin, the Fair Housing Fox,” a likely reference to Lawler’s former boss Fannie Mae CEO Franklin Raines.
Somehow between the heavy-metal lyrics and kitschy graphic I can’t find a disclosure anywhere that Lawler’s new boss was massively shorting the housing market. An oversight, I’m sure, as Lawler was focused on remaking himself from an executive at the center of a massive scam to a “housing economist” in the public image.
Soon after it became clear that the payout to Paulson looked inevitable Lawler switched his position again, arguing the now well-known Big Lie that increased foreclosures also increases home prices. As early as June 13, 2008, while Bear Stearns was barely dead and Lehman Brothers still barely alive, the Wall Street Journal quotes Lawler opining about the economic benefits of “bargain hunters scooping up foreclosed homes from banks,” no matter that these same “bargain hunters,” likely ended up massively upside-down soon after.
Lawler also went after the jugular of real economists who disagreed with him, most notably Yale University economist Robert Shiller, co-inventor of the famous Case-Shiller home price index, which Lawler called “bogus,” in an April 24, 2009 WSJ article announcing that Thomas Lawler has created his own index: “Mr. Lawler has created an adjusted version of the Shiller chart, backing up [Thomas Lawler's] view that house prices already are nearing a bottom in much of the country.” Shiller responded in the article that Lawler was making “wild allegations.”
I suppose “wild allegations” is a toned down version of what most people would have said, which would be something along the lines of “WTF – Lawler’s a known housing fraudster who cooked the books in an $8 billion scam: why are you listening to him?” though academics rarely talk like that, unfortunately.
Needless to say, Lawler’s 2008 housing bottom didn’t quite work out that way, nor did his view that Shiller’s index was incorrect, but most pundits pass over those small issues the same way that prosecutors passed over indictments in the Fannie accounting fiasco.
The Surprise In the Desert
Back to that primary research based on the HUD data during and after the time that Lawler was managing Fannie’s portfolio, financials, and risk. It turns out that Fannie had an appetite for financing homes in some ZIP codes at rates wildly higher than others. I compiled about 26 million loan-level records that Fannie and Freddie acquired between 2004-2007. Fannie and Freddie don’t lend directly — they buy loans from banks — so this data-set would be from the time Lawler was at the height of influence setting policy there.
Fannie and Freddie’s loans use MSA rather than ZIP codes but I cross-referenced them to ZIP codes using tables provided by the Census Bureau. MSA codes sometimes span a small number of ZIP codes, so when there were multiple ZIP code possibilities I’d choose the ZIP code with the highest proportion of residential properties. This could result in slight overconcentration, though the error rate doesn’t matter given the extremes I found in the data.
Certain communities were much more likely to receive loans from the GSE’s than others. Surprise, AZ, in ZIP code 85374, is #1 with 24,788 loans, a 14.7 standard-deviations above the other 20,821 ZIP codes which have a mean loan volume of 532 loans each. The Census Bureau reports Surprise, AZ grew 281% from 2000 to 2010, to the current population of 117,517. As Yves would say, Quelle Surprise, though this time literally.
There are 52,586 housing units in Surprise so it’s safe to say the town is akin to some sort of modern Hoover Dam project, a large scale building project, in the middle of nowhere, built with government money. Except the spending occurred during an economic boom, and is now curtailed thanks to a corresponding economic bust. Actually, the government didn’t really mean to spend the money — during that time Fannie and Freddie were private — so it was GSE executives, especially Lawler, who decided to build a town in the middle of nowhere.
One statistic that comes through clearly is Lawler’s preference for fast foreclosures. All top ten ZIP codes by loan volume are in non-judicial foreclosure states: five in CA, two in AZ, and one each in NV, NC, and TX. We have to drill down to the seventeenth position until we find a judicial ZIP code.
It isn’t clear how Fannie and Freddie decided to hyper-concentrate their loans in a few distinct areas since majority of ZIP codes received less than 1,000 loans. Almost all the high volume ZIP codes are exurban construction boom-towns: environmentally irresponsible far-flung bedroom communities that externalize the cost of construction to everybody except the builders who disappear even faster than the demand for shiny new properties to flip.
Other stats also pop out. For example, the average age of the primary borrower in this large sample is 44 1/2, so they’ll pay off their 30-year mortgages when they’re a spry 74.5 years-old. That obviously doesn’t bother Fannie and Freddie who wrote at least 9,821 loans to people 90 years and older. Fifteen loans went to people one hundred years and older. I understand that age discrimination is illegal but given all the other exemptions Fannie and Freddie received — which includes virtually everything — you’d think they’d lobby for the ability to question the ability of centenarians to repay their 30-year loans.
Many people question the role Fannie and Freddie played in the subprime meltdown. Gretchen Morgenson and Josh Rosner convincingly argue in their book on the subject, Reckless Endangerment, that the GSE’s created an anything-goes culture which private lenders picked up to compete. This data supports that theory: Fannie and Freddie led the way while private money followed.
It’s not clear why CR and so many mainstream media outlets blindly quote Fannie Mae’s former economist, allowing him to “move on” from some spectacularly poor decisions that led to painful costs borne by everybody else. We continue watching the bailout money quietly flow and I wonder when “personal responsibility” for one’s prior decisions became an exclusive obligation only for those neither wealthy nor well connected.
Thursday, March 29, 2012
WA State Supreme Court Hears Arguments in Case Against MERS
Oral arguments: Bain v. Mortgage Electronic Registration Sys, et al and Selkowitz v. Little Loan Servicing, LP, et al. (May a party be a lawful beneficiary under WA's Deed of Trust Act if it never held the promissory note secured by the deed of trust?)
Must watch:
http://www.tvw.org/index.php?option=com_tvwplayer&eventID=2012030003A
Must watch:
http://www.tvw.org/index.php?option=com_tvwplayer&eventID=2012030003A
Welcome to the United States of Orwell, Part 4: "Consumer Protection" Just Another Federal Reserve Power Grab
by Charles Hugh Smith from Of Two Minds
How to mask yet another Federal Reserve power grab? Call it "consumer protection."
This is truly Orwellian: the latest and greatest Executive Branch/Federal Reserve power grab is labeled "consumer protection." I am indebted to correspondent Jim S. who seems to be one of the few Americans to have actually sorted through this monstronsity and gleaned its true nature: an unprecedented extension of Executive (i.e. Imperial Presidency) and Federal Reserve power.
Let's start by recalling that the Federal Reserve is a consortium of private banks. Calling a private consortium of banks the "Federal Reserve" is the original Orwellian misdirection, for there is nothing "Federal" about the Federal Reserve. It is not a government agency.
Now guess who will fund and control this vast new bureaucracy of "consumer protection"? Yes, the private consortium known as the Federal Reserve. "The Consumer Financial Protection Bureau (CFPB) will be an independent unit located inside and funded by the United States Federal Reserve. It will write and enforce bank rules, conduct bank examinations, monitor and report on markets, as well as collect and track consumer complaints."
Since managing the money supply and interest rates is the ultimate "consumer protection," we can ask how well the Fed managed those tasks in the past 15 years: alas, their management has been catastrophic for the nation and the middle class, which has been gutted by their policies of serial bubble blowing, leveraged speculation and bank predation.
The very last private consortium any sane person would select to run a Consumer Financial Protection Bureau would be the privately owned parasites of the Federal Reserve. Doesn't the vast, sprawling bureaucracy of the Federal government already have agencies experienced in regulating consumer protection? Why do we "need" to consolidate all financial consumer data and regulation under the control of a non-government consortium that has amply proven itself to be the enabler and enforcer of institutionalized bank predation, embezzlement and fraud?
This is beyond bizarre. If we had to assign the task of protecting consumers to a privately owned consortium, then we'd be better off giving the task to IBM. But the bank-owned toadies in Congress handed all this power to the Federal Reserve. One wonders how it is legal that a private consortium now has power over all financial data in the U.S.
Here is Jim's summary:
You are more than familiar with the Shadow Banking System running parallel, black-box-like to the Federal Reserve System...no regulation, no accounting, notional hypothecation upon notional re-hypothecations accounting for leverages to the Moon, and in the end, essentially infinite debt.
The CFPB represents to me a complete, contained Shadow US Government System established by the Dems and the Fed right under our very noses. One of the profound things I have not completely conveyed is what I see as the invisibility cloak and impenetrable shield the CFPB has for total immunity from evaluation, oversight, attack, etc.
The CFPB is funded by the FED with any amount of money it asks for and is completely unaccountable as to how it uses it...unlimited funding. The CFPB is answerable to no entity regarding its deliberations, decisions with the full force of law, disclosure of agendas.
It will link through its fully unaccountable Director through established Executive Branch inter-agency councils and sub-councils to every agency and sub-agency it desires or any agency wishing to associate/link with the CFPB (e.g.IRS requests Director to have instant nanosecond access for behaviorial data collection on consumers via their formerly private credit card, bank, credit union, stock market and forex market and commodity market accounts....and, Director Cordray says in nanoseconds,....OK!)
Under the opaque umbrella of the CFPB, all Executive Agencies, formerly accountable to the Congress in some way, will become opaque to the Congress insofar as they are associated with the CFPB. Congress can request info from the CFPB, none has to be given at all.
The CFPB is an autonomous creature of the Federal Reserve, completely cloaking itself with total immunity from any Congressional controlling authority.
The establishment of a Shadow Government Executive Branch "coup" is a direct follow-up to Paulson's "gun to the head" of Congress in 2008 when the world was only hours from a Federal Reserve derivative originated financial crash. Congress capitulated with the initial $700B. and in the meanwhile the Fed has printed debt loans to the tune of $16T to fund the interest liabilities of short term derivative rollover and refinancing demands.
Jim also noted the dearth of mainstream media coverage of the CFPB, and suggested this story: Obama Creates Unconstitutional Monster.
“The CFPB director will have vast rulemaking, supervisory, investigative and enforcement powers and the authority to regulate any person or business that offers or sells a ‘financial product or service,” the Senate Republicans told Obama. “This authority will directly affect every American household by limiting their choices when purchasing financial products, restricting the availability of credit to consumers, and increasing the cost of goods or services purchased using credit.”
“Despite the vast power vested in the hands of the director, there are no effective checks on the director’s authority,” said Sen. Richard Shelby, the ranking Republican on Banking Committee.
“When you set up something that is outside the control of the elected branches, when you set up something that doesn’t require the appropriations by Congress to make sure they can continue their work only on the basis of their complying with the constitutional requirements, then you have essentially set up the potential for a rogue agency which does not have any controls and therefore you’re affecting the liberty of the people.”
The Dodd-Frank bill, like Obamacare, is tyranny by complexity. Who can plow through thousands of pages of these bills except those gaming the legislative process to their own advantage?
Consider the Glass-Steagall Act, at 37 pages in length, and the 2,319-page monstrosity of the “Dodd-Frank Wall Street Reform and Consumer Protection Act:" (Source)
Back in December, Nick Schulz helped put the size of the 2,074-page healthcare bill into some historical context by comparing its length to some previous bills that rank among the most consequential in U.S. history, like the 82-page Social Security Act of 1935 and the 74-page Civil Rights Act of 1964.
Now that Congress has passed the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” it might be a good time to compare the 2,319-page financial reform bill (245 pages longer than the healthcare bill) to the previous bills listed below (and see graph) that are considered among the most consequential legislative acts for banking and finance.
1. Federal Reserve Act (1913) – 31 pages.
2. Glass-Steagall Act (1933) – 37 pages.
Like everything else, this issue has been put through the partisan meat grinder. Everybody knows the banking sector owns Congress, but how it is even legal to grant extraordinary powers over the entire financial system to a private consortium without congressional oversight? It simply doesn't pass the most basic constitutional "sniff test."
The entire Dodd–Frank Wall Street Reform and Consumer Protection Act should be nullified as an unconstitional power grab. The asleep-at-the-wheel lackeys on the Supreme Court better wake up soon or democracy and "the will of the people" will be mere memories.
Thanks to Dodd-Frank, it boils down to this: whatever the Federal Reserve does with the data it collects from Federal government agencies is private and none of your business. Whatever financial actions you take that create a digital record is the now the Fed's business.
In case you have any doubts about where our "leadership" is taking us, please review these Assorted quotes by Fascists or about Fascism.
How to mask yet another Federal Reserve power grab? Call it "consumer protection."
This is truly Orwellian: the latest and greatest Executive Branch/Federal Reserve power grab is labeled "consumer protection." I am indebted to correspondent Jim S. who seems to be one of the few Americans to have actually sorted through this monstronsity and gleaned its true nature: an unprecedented extension of Executive (i.e. Imperial Presidency) and Federal Reserve power.
Let's start by recalling that the Federal Reserve is a consortium of private banks. Calling a private consortium of banks the "Federal Reserve" is the original Orwellian misdirection, for there is nothing "Federal" about the Federal Reserve. It is not a government agency.
Now guess who will fund and control this vast new bureaucracy of "consumer protection"? Yes, the private consortium known as the Federal Reserve. "The Consumer Financial Protection Bureau (CFPB) will be an independent unit located inside and funded by the United States Federal Reserve. It will write and enforce bank rules, conduct bank examinations, monitor and report on markets, as well as collect and track consumer complaints."
Since managing the money supply and interest rates is the ultimate "consumer protection," we can ask how well the Fed managed those tasks in the past 15 years: alas, their management has been catastrophic for the nation and the middle class, which has been gutted by their policies of serial bubble blowing, leveraged speculation and bank predation.
The very last private consortium any sane person would select to run a Consumer Financial Protection Bureau would be the privately owned parasites of the Federal Reserve. Doesn't the vast, sprawling bureaucracy of the Federal government already have agencies experienced in regulating consumer protection? Why do we "need" to consolidate all financial consumer data and regulation under the control of a non-government consortium that has amply proven itself to be the enabler and enforcer of institutionalized bank predation, embezzlement and fraud?
This is beyond bizarre. If we had to assign the task of protecting consumers to a privately owned consortium, then we'd be better off giving the task to IBM. But the bank-owned toadies in Congress handed all this power to the Federal Reserve. One wonders how it is legal that a private consortium now has power over all financial data in the U.S.
Here is Jim's summary:
You are more than familiar with the Shadow Banking System running parallel, black-box-like to the Federal Reserve System...no regulation, no accounting, notional hypothecation upon notional re-hypothecations accounting for leverages to the Moon, and in the end, essentially infinite debt.
The CFPB represents to me a complete, contained Shadow US Government System established by the Dems and the Fed right under our very noses. One of the profound things I have not completely conveyed is what I see as the invisibility cloak and impenetrable shield the CFPB has for total immunity from evaluation, oversight, attack, etc.
The CFPB is funded by the FED with any amount of money it asks for and is completely unaccountable as to how it uses it...unlimited funding. The CFPB is answerable to no entity regarding its deliberations, decisions with the full force of law, disclosure of agendas.
It will link through its fully unaccountable Director through established Executive Branch inter-agency councils and sub-councils to every agency and sub-agency it desires or any agency wishing to associate/link with the CFPB (e.g.IRS requests Director to have instant nanosecond access for behaviorial data collection on consumers via their formerly private credit card, bank, credit union, stock market and forex market and commodity market accounts....and, Director Cordray says in nanoseconds,....OK!)
Under the opaque umbrella of the CFPB, all Executive Agencies, formerly accountable to the Congress in some way, will become opaque to the Congress insofar as they are associated with the CFPB. Congress can request info from the CFPB, none has to be given at all.
The CFPB is an autonomous creature of the Federal Reserve, completely cloaking itself with total immunity from any Congressional controlling authority.
The establishment of a Shadow Government Executive Branch "coup" is a direct follow-up to Paulson's "gun to the head" of Congress in 2008 when the world was only hours from a Federal Reserve derivative originated financial crash. Congress capitulated with the initial $700B. and in the meanwhile the Fed has printed debt loans to the tune of $16T to fund the interest liabilities of short term derivative rollover and refinancing demands.
Jim also noted the dearth of mainstream media coverage of the CFPB, and suggested this story: Obama Creates Unconstitutional Monster.
“The CFPB director will have vast rulemaking, supervisory, investigative and enforcement powers and the authority to regulate any person or business that offers or sells a ‘financial product or service,” the Senate Republicans told Obama. “This authority will directly affect every American household by limiting their choices when purchasing financial products, restricting the availability of credit to consumers, and increasing the cost of goods or services purchased using credit.”
“Despite the vast power vested in the hands of the director, there are no effective checks on the director’s authority,” said Sen. Richard Shelby, the ranking Republican on Banking Committee.
“When you set up something that is outside the control of the elected branches, when you set up something that doesn’t require the appropriations by Congress to make sure they can continue their work only on the basis of their complying with the constitutional requirements, then you have essentially set up the potential for a rogue agency which does not have any controls and therefore you’re affecting the liberty of the people.”
The Dodd-Frank bill, like Obamacare, is tyranny by complexity. Who can plow through thousands of pages of these bills except those gaming the legislative process to their own advantage?
Consider the Glass-Steagall Act, at 37 pages in length, and the 2,319-page monstrosity of the “Dodd-Frank Wall Street Reform and Consumer Protection Act:" (Source)
Back in December, Nick Schulz helped put the size of the 2,074-page healthcare bill into some historical context by comparing its length to some previous bills that rank among the most consequential in U.S. history, like the 82-page Social Security Act of 1935 and the 74-page Civil Rights Act of 1964.
Now that Congress has passed the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” it might be a good time to compare the 2,319-page financial reform bill (245 pages longer than the healthcare bill) to the previous bills listed below (and see graph) that are considered among the most consequential legislative acts for banking and finance.
1. Federal Reserve Act (1913) – 31 pages.
2. Glass-Steagall Act (1933) – 37 pages.
Like everything else, this issue has been put through the partisan meat grinder. Everybody knows the banking sector owns Congress, but how it is even legal to grant extraordinary powers over the entire financial system to a private consortium without congressional oversight? It simply doesn't pass the most basic constitutional "sniff test."
The entire Dodd–Frank Wall Street Reform and Consumer Protection Act should be nullified as an unconstitional power grab. The asleep-at-the-wheel lackeys on the Supreme Court better wake up soon or democracy and "the will of the people" will be mere memories.
Thanks to Dodd-Frank, it boils down to this: whatever the Federal Reserve does with the data it collects from Federal government agencies is private and none of your business. Whatever financial actions you take that create a digital record is the now the Fed's business.
In case you have any doubts about where our "leadership" is taking us, please review these Assorted quotes by Fascists or about Fascism.
Mortgage Settlement Institutionalizes Foreclosure Fraud
By Abigail Caplovitz Field, a freelance writer and attorney who blogs at Reality Check
Updated at end
The mortgage settlement signed by 49 states and every Federal law enforcer allows the rampant foreclosure fraud currently choking our courts to continue unabated. Yes, I realize the pretty servicing standards language of Exhibit A promises the banks will completely overhaul their standard operating procedures and totally clean up their acts. But promises are empty if they’re not honored, and worthless if not enforceable.
We know Bailed-Out Bankers’ promises are empty, so what matters is if the agreement is enforceable. And when it comes to all things foreclosure fraud, the enforcement provisions are laughable. But before I detail why, let’s be clear: I’m not being hyperbolic. The bankers running and profiting most from our bailed-out banks are totally dishonest when dealing with the public, and their promises are meaningless.
To see their dishonesty in the mortgage context, read the complaint filed in the mortgage deal, or my take on it here. But the bankers don’t limit their lying, cheating and stealing to homeowners. They abuse their clients the same way. Most broadly damaging, the bankers steal from taxpayers on a federal, state and local level and practically everybody else too. Fraud is just how they do business. When dealing with bankers, you can’t do business on a handshake.
I’ve already written about how banker-sympathetic, consumer-destructive the mortgage settlement’s “Servicing Standards Quarterly Compliance Metrics” are. But I didn’t address the rule-of-law metrics. So here goes.
The Empty Promises
You’d think the top law enforcers in 49 states, the Department of Justice, (including its defenders of the integrity of the Bankruptcy System), and regulatory agencies would be concerned with defending the rule of law. Boy, does it need defending. Consider how transparently foreclosing lawyers are fabricating evidence against whistleblower Lynn Syzmoniak.
And if you looked at Exhibit A to the settlement, focusing on the anti-foreclosure fraud provisions of part I, you’d think that law enforcement had done an excellent job. The rule of law looks vindicated. Consider how the Exhibit begins:
“Unless otherwise specified, these provisions shall apply to bankruptcy and foreclosures [everywhere] and regardless of [which type of sworn document we're talking about]
“A. Standards for Documents Used in Foreclosure and Bankruptcy Proceedings.
“1. Servicer shall ensure that factual assertions made in [in any kind of court-filed or otherwise important foreclosure document] are accurate and complete and are supported by [solid] evidence….”
This kind of ‘bankers won’t lie, cheat and steal anymore’ language is surely helped persuade consumer allies like the Center for Responsible Lending to praise the settlement. Check out the Center’s press release, the day the deal was announced, titled “AG SETTLEMENT ENDS ROBO-SIGNING AND PROVIDES A MODEL FOR PREVENTING FORECLOSURES”. Notice the Center’s tagline: “Protecting Homeownership and Family Wealth.”
Just meeting the “thou shalt not lie when taking thy neighbor’s house” language I quoted would require fundamental process overhauls at all major mortgage servicers. And yet it’s just the start of 11 pages aimed at ending document fraud (42 pages of detailed provisions overall). Given how much bankers lie, driving those process overhauls requires a mighty big incentive, i.e., penalties for non-compliance.
The pathway to penalties runs through the metrics. The big ticket $1 million and $5 million penalties only kick in if the bankers failed a metric two quarters in a row. So what are the metrics for foreclosure fraud?
Measuring the “End” of Foreclosure Fraud
The first “end”-foreclosure-fraud metric is on page E-1-2 of Exhibit E. Inauspiciously, the section is called “Integrity of Critical Sworn Documents.” I say inauspiciously because the “mandated” banker truth-telling in Exhibit A wasn’t limited to “critical sworn documents.”
The first “Metric” (that’s the column header) is “Integrity of AOI” [Affidavits of Indebtedness.] The first “Measurement” is “Based upon personal knowledge, properly notarized, [and the amount owed is kinda close to right.]” The real measurements are the “Test Questions.” Question 1 relates to the knowledge and notarization requirements:
“1. Taken as a whole and accounting for contrary evidence provided by the Servicer, does the sample indicate systemic issues with either affiants lacking personal knowledge or improper notarization?” (bold mine.)
See how that works? If enough garbage documents (not verified, not executed in compliance with the law) get plowed into the system that the enforcement structure suspects there’s still systemic problems, the bankers get to say why they think no problem exists, and the monitor is supposed to take them seriously. The monitor is supposed to weigh the bankers’ defense considering everything, not the narrow concept that the so-called “Measurement” touted–”Based upon personal knowledge, properly notarized, [and the amount owed is kinda close to right.] I mean, that measurement reads like it’s a simple yes or no, on a per-document basis, right?
Bottom line: it’s up to the monitor to decide how much foreclosure fraud he’s willing to tolerate before he insists systemic issues exist, and the bankers will be lobbying him hard. How do you feel about that Exhibit A ‘Bankers shall tell the truth when taking your home’ language now?
The next two “Metrics” within the “Integrity of Critical Sworn Documents” section (Proofs of Claim and Motions for Relief from Stay Affidavits) don’t even pretend to care about process at all; they only look at the accuracy of the amounts owed. The Test Questions are, respectively,
“Are the correct amounts set forth in the form, with respect to pre-petition missed payments, fees, expenses charges, and escrow shortages or deficiencies?” [and yes, the error rate and error threshold mean not every incorrect amount counts]
and
Verify against the system of record, within tolerance if overstated:
a. the post-petition default amount;
b. the amount of fees or charges applied to such pre-petition default amount or postpetition amount since the later of the date of the petition or the preceding statement; and
c. escrow shortages or deficiencies.” (See E-1-3 for both quotes.)
So much for the rule of law.
But wait, there’s more; skip ahead to page E-1-9. In a section called “Policy/Process Implementation” we find “E. Affidavit of Indebtedness Integrity”. Here’s what the metric supposedly measures:
“Affidavits of Indebtedness are signed by affiants who have personal knowledge of relevant facts and properly review the affidavit before signing it.”
Sounds like the end of “robosigning“, right? Well, here’s the test question:
“1. Is there evidence of documented policies and procedures sufficient to provide reasonable assurance that affiants have personal knowledge of the matters covered by affidavits of indebtedness and have reviewed affidavit before signing it?”
This metric says: look at what we say–what our handbooks say–not what anyone actually does. Think I’m reading too much into it? Here’s the “Test Loan Population and Error Definition”, which is what the people measuring compliance are supposed to look at when asking the “Test Question”: “Annual Review of Policy.”
Through the magic of the metrics, ‘Affidavits are done correctly’ dissolves to ‘look at our policy once a year and be reasonably confident we’re doing things right.’
And those four metrics are it. So much for “AG SETTLEMENT ENDS ROBO-SIGNING AND PROVIDES A MODEL FOR PREVENTING FORECLOSURES”
I can’t imagine that the Center read the metrics. I’ll bet pre-press release they were never even shown it. Surely the pre-deal promotional tour just pushed the “strong” Exhibit A language.
Prosecute or the Release Becomes Immunity
The liability releases let the bankers off all sorts of foreclosure fraud hooks (see details in “Covered Servicing Conduct” in the Federal release.) But the release only covers conduct up through February 8, 2012. In theory, the bankers could be sued for all the fraud they’re committing now and will in the future. In theory, unless these metrics are treated like a back door ongoing liability release. In which case it’s not a release at all: it’s foreclosure fraud immunity.
Update: Isaac Gradman points out that the Enforcement provisions in Exhibit E include at J. the right to enforce the banks’ obligations in court. However, the only remedies are a court order telling the banks to obey or other “non-monetary” relief, and monetary penalties for metrics-based violations. See J.3. Unless the banks are litigated into contempt of court, or unless an injunction forces the banks to overhaul their standard operating procedures, it’s not obvious the servicing standards have any teeth outside the metrics. Moreover, violations of the terms of Exhibit A that aren’t included in the metrics are unlikely to be systematically assessed, and thus are unlikely to be the basis for an enforcement action. Finally, it’s not clear when the anti-foreclosure fraud servicing standards take effect. You can’t violate what you don’t yet have to do. In short, given the deal’s expiration date, it’s hard to imagine change we can believe in happening.
http://abigailcfield.com/?p=1116
Updated at end
The mortgage settlement signed by 49 states and every Federal law enforcer allows the rampant foreclosure fraud currently choking our courts to continue unabated. Yes, I realize the pretty servicing standards language of Exhibit A promises the banks will completely overhaul their standard operating procedures and totally clean up their acts. But promises are empty if they’re not honored, and worthless if not enforceable.
We know Bailed-Out Bankers’ promises are empty, so what matters is if the agreement is enforceable. And when it comes to all things foreclosure fraud, the enforcement provisions are laughable. But before I detail why, let’s be clear: I’m not being hyperbolic. The bankers running and profiting most from our bailed-out banks are totally dishonest when dealing with the public, and their promises are meaningless.
To see their dishonesty in the mortgage context, read the complaint filed in the mortgage deal, or my take on it here. But the bankers don’t limit their lying, cheating and stealing to homeowners. They abuse their clients the same way. Most broadly damaging, the bankers steal from taxpayers on a federal, state and local level and practically everybody else too. Fraud is just how they do business. When dealing with bankers, you can’t do business on a handshake.
I’ve already written about how banker-sympathetic, consumer-destructive the mortgage settlement’s “Servicing Standards Quarterly Compliance Metrics” are. But I didn’t address the rule-of-law metrics. So here goes.
The Empty Promises
You’d think the top law enforcers in 49 states, the Department of Justice, (including its defenders of the integrity of the Bankruptcy System), and regulatory agencies would be concerned with defending the rule of law. Boy, does it need defending. Consider how transparently foreclosing lawyers are fabricating evidence against whistleblower Lynn Syzmoniak.
And if you looked at Exhibit A to the settlement, focusing on the anti-foreclosure fraud provisions of part I, you’d think that law enforcement had done an excellent job. The rule of law looks vindicated. Consider how the Exhibit begins:
“Unless otherwise specified, these provisions shall apply to bankruptcy and foreclosures [everywhere] and regardless of [which type of sworn document we're talking about]
“A. Standards for Documents Used in Foreclosure and Bankruptcy Proceedings.
“1. Servicer shall ensure that factual assertions made in [in any kind of court-filed or otherwise important foreclosure document] are accurate and complete and are supported by [solid] evidence….”
This kind of ‘bankers won’t lie, cheat and steal anymore’ language is surely helped persuade consumer allies like the Center for Responsible Lending to praise the settlement. Check out the Center’s press release, the day the deal was announced, titled “AG SETTLEMENT ENDS ROBO-SIGNING AND PROVIDES A MODEL FOR PREVENTING FORECLOSURES”. Notice the Center’s tagline: “Protecting Homeownership and Family Wealth.”
Just meeting the “thou shalt not lie when taking thy neighbor’s house” language I quoted would require fundamental process overhauls at all major mortgage servicers. And yet it’s just the start of 11 pages aimed at ending document fraud (42 pages of detailed provisions overall). Given how much bankers lie, driving those process overhauls requires a mighty big incentive, i.e., penalties for non-compliance.
The pathway to penalties runs through the metrics. The big ticket $1 million and $5 million penalties only kick in if the bankers failed a metric two quarters in a row. So what are the metrics for foreclosure fraud?
Measuring the “End” of Foreclosure Fraud
The first “end”-foreclosure-fraud metric is on page E-1-2 of Exhibit E. Inauspiciously, the section is called “Integrity of Critical Sworn Documents.” I say inauspiciously because the “mandated” banker truth-telling in Exhibit A wasn’t limited to “critical sworn documents.”
The first “Metric” (that’s the column header) is “Integrity of AOI” [Affidavits of Indebtedness.] The first “Measurement” is “Based upon personal knowledge, properly notarized, [and the amount owed is kinda close to right.]” The real measurements are the “Test Questions.” Question 1 relates to the knowledge and notarization requirements:
“1. Taken as a whole and accounting for contrary evidence provided by the Servicer, does the sample indicate systemic issues with either affiants lacking personal knowledge or improper notarization?” (bold mine.)
See how that works? If enough garbage documents (not verified, not executed in compliance with the law) get plowed into the system that the enforcement structure suspects there’s still systemic problems, the bankers get to say why they think no problem exists, and the monitor is supposed to take them seriously. The monitor is supposed to weigh the bankers’ defense considering everything, not the narrow concept that the so-called “Measurement” touted–”Based upon personal knowledge, properly notarized, [and the amount owed is kinda close to right.] I mean, that measurement reads like it’s a simple yes or no, on a per-document basis, right?
Bottom line: it’s up to the monitor to decide how much foreclosure fraud he’s willing to tolerate before he insists systemic issues exist, and the bankers will be lobbying him hard. How do you feel about that Exhibit A ‘Bankers shall tell the truth when taking your home’ language now?
The next two “Metrics” within the “Integrity of Critical Sworn Documents” section (Proofs of Claim and Motions for Relief from Stay Affidavits) don’t even pretend to care about process at all; they only look at the accuracy of the amounts owed. The Test Questions are, respectively,
“Are the correct amounts set forth in the form, with respect to pre-petition missed payments, fees, expenses charges, and escrow shortages or deficiencies?” [and yes, the error rate and error threshold mean not every incorrect amount counts]
and
Verify against the system of record, within tolerance if overstated:
a. the post-petition default amount;
b. the amount of fees or charges applied to such pre-petition default amount or postpetition amount since the later of the date of the petition or the preceding statement; and
c. escrow shortages or deficiencies.” (See E-1-3 for both quotes.)
So much for the rule of law.
But wait, there’s more; skip ahead to page E-1-9. In a section called “Policy/Process Implementation” we find “E. Affidavit of Indebtedness Integrity”. Here’s what the metric supposedly measures:
“Affidavits of Indebtedness are signed by affiants who have personal knowledge of relevant facts and properly review the affidavit before signing it.”
Sounds like the end of “robosigning“, right? Well, here’s the test question:
“1. Is there evidence of documented policies and procedures sufficient to provide reasonable assurance that affiants have personal knowledge of the matters covered by affidavits of indebtedness and have reviewed affidavit before signing it?”
This metric says: look at what we say–what our handbooks say–not what anyone actually does. Think I’m reading too much into it? Here’s the “Test Loan Population and Error Definition”, which is what the people measuring compliance are supposed to look at when asking the “Test Question”: “Annual Review of Policy.”
Through the magic of the metrics, ‘Affidavits are done correctly’ dissolves to ‘look at our policy once a year and be reasonably confident we’re doing things right.’
And those four metrics are it. So much for “AG SETTLEMENT ENDS ROBO-SIGNING AND PROVIDES A MODEL FOR PREVENTING FORECLOSURES”
I can’t imagine that the Center read the metrics. I’ll bet pre-press release they were never even shown it. Surely the pre-deal promotional tour just pushed the “strong” Exhibit A language.
Prosecute or the Release Becomes Immunity
The liability releases let the bankers off all sorts of foreclosure fraud hooks (see details in “Covered Servicing Conduct” in the Federal release.) But the release only covers conduct up through February 8, 2012. In theory, the bankers could be sued for all the fraud they’re committing now and will in the future. In theory, unless these metrics are treated like a back door ongoing liability release. In which case it’s not a release at all: it’s foreclosure fraud immunity.
Update: Isaac Gradman points out that the Enforcement provisions in Exhibit E include at J. the right to enforce the banks’ obligations in court. However, the only remedies are a court order telling the banks to obey or other “non-monetary” relief, and monetary penalties for metrics-based violations. See J.3. Unless the banks are litigated into contempt of court, or unless an injunction forces the banks to overhaul their standard operating procedures, it’s not obvious the servicing standards have any teeth outside the metrics. Moreover, violations of the terms of Exhibit A that aren’t included in the metrics are unlikely to be systematically assessed, and thus are unlikely to be the basis for an enforcement action. Finally, it’s not clear when the anti-foreclosure fraud servicing standards take effect. You can’t violate what you don’t yet have to do. In short, given the deal’s expiration date, it’s hard to imagine change we can believe in happening.
http://abigailcfield.com/?p=1116
Tuesday, March 27, 2012
Central Bankers Gather in Fearful DC Huddle
By thedailybell.com
Fed Hosts Global Gathering on Easy Money ... The world's leading central bankers have spent much of the past few months putting out financial fires and launching measures aimed at recharging the global economy. On Friday, they will gather here to gauge the impact of their easy-money policies—including whether the controversial bond-buying strategy known as "quantitative easing" is a good weapon to keep in their monetary arsenals. A number of researchers say it is, despite nagging doubts. Quantitative-easing programs "stimulate the economy by reducing credit costs," concludes Mark Gertler, a New York University professor, in a paper he will give Friday. The conference is sponsored by the Federal ... – Wall Street Journal
Dominant Social Theme: We wish to discuss ways to make it clear that our methodologies are sufficient and our mentalities are superior.
Free-Market Analysis: It is all falling down about their heads and now they are meeting in Washington DC, fearfully, to try to decide what to do next. Nothing the money printers have done has stemmed the growing, global depression. But they have to do something. The system itself seems in jeopardy.
These meetings are reported as if they are pleasant business get-togethers, but they are more like evidences of a criminal conspiracy. The reason they fly in from far and wide is probably because they don't want to use electronic communications for fear of being overhead or tapped.
This is not how it is presented in the mainstream media, of course. The bought-and-paid-for media will position today's meeting as a convocation of great minds, technocrats dedicated to the highest ideals – administering private funds for the greater public good.
It's a kind of power elite dominant social theme, that the good, gray bankers are selflessly carving out careers that aim their talents at providing systemic financial stability. Billions around the world profit from their calming hands at the tiller of the financial system.
In fact, this perspective is nothing but a fear-based elite promotion. The idea is that if these good, gray men were NOT available, the world would crash and burn as surely as if it had been smashed by a large comet.
Nothing could be further from the truth. Monopoly fiat central banking is ITSELF the main source of instability in the world today and has been a growing problem ever since it was invented some 500 years ago.
Today, central bankers wrap themselves in the flag of the state. Most central banks – and there are some 150 around the world – are carefully mercantilist, relying on state mandates to provide their chicanery with legitimacy.
The Federal Reserve is one such bank, legitimized by the US Congress in 1913 and supervised by Congressional hearings and presidential appointments ever since. The proper word to describe this sort of hybrid public-private arrangement is mercantilist.
Central bankers derive their legitimacy from the governments they serve and try at all times to give the impression that their services are rigorously high-minded and focused on the public good.
This public/private formulation has served the great central banking families rather well in the past century, during which time central banking has swelled from a handful of countries to some 150, run by the Bank for International Settlements out of Switzerland.
As there are now 150 or so central banks around the world, it is impossible to continue to maintain that this monetary priesthood is constructed of a single ethnic or cultural component. In fact, what central banking may most remind a skeptical observer of is a criminal syndicate or crime family.
Lately, thanks to what we call the Internet Reformation, the power of central banking is beginning to wane. Their manipulations are increasingly exposed and the negative effect of their "policies" is increasingly a matter for public debate.
The exposure of the manipulations of central banking has proceeded apace on the Internet. It has resulted, generally, in calls for transparency and even for turning central banks into entirely public entities.
Of course, this would solve nothing as politicians are ALREADY involved with central banking around the world. And if central banks retain their monopoly fiat power, then the generation of monetary inflation is simply transferred from a public/private monopoly to an entirely public one.
The top banking families, in fact, don't care if government administers monopoly fiat or if it is done by quasi-private entities. Via mercantilism, pulling the levers of government behind the scenes, the top elites can control society either way.
What they DO fear, however, is that central banking may be done away with entirely. Monetary competition is likely what they fear most of all – the idea that society be free to create a variety of monies all used together and without central supervision.
This formulation would do away with the current monetary monopoly that is so destructive. Central bankers would lose the ability to stimulate and re-stimulate economies by printing more and more money.
Of course, the REAL reason for all this money printing is, over the long term, to crash and debase the financial vitality of the Western world generally. The power elite that wants to create global government believes that economic chaos must be implemented before a new, universal government and its money can emerge. This is apparently the plan in place now.
But it is one that is increasingly exposed. And the more the Internet's alternative media exposes it, the more uncomfortable the plotters become. When they meet now, it's probably to discuss damage control.
That's what we figure they'll be doing in Washington today. Damage control. No, they won't be talking about the "impact of easy-money policies," or not in so many words. What they WILL be doing is trying to figure out how they can stay in charge and continue to conceal the large-scale financial manipulations they've undertaken.
The choice for the power elite is stark: Either control the transition or the transition controls YOU. Of course, the great dynastic families that control central banking around the world have precipitated this crisis, in our humble view, so it is no surprise that they should seek to steer it.
People in government around the world use the force of the state to gain wealth and power. They then cover up their misdeeds by claiming that revelations would jeopardize people's safety and security.
But by now the system itself is simply so rotten that it attracts criticism on a regular basis. The basic inequality that people have noticed – thanks to electronic communications – is that while they lose their jobs and houses, central bankers continually print trillions to support each other's bankrupt enterprises.
This comes across as a basically immoral procedure – as indeed it is – and the longer the current recession/depression continues the angrier people get.
Lately the Western mainstream media – controlled by the same elites that control central banking – have taken to proclaiming that Western financial difficulties are coming under control and that unemployment is diminishing.
But this is only making people angrier, because they can sense this is not so. And on the Internet they can read entirely different interpretations of reality.
For this reason, the power elite is facing a conundrum. The powers-that-be have worked diligently over the past century to put in place a system that regularly destroys economies through monetary inflation, depression and further centralization.
This system is supposed to result, inevitably, in world government and a single world currency along with a single, mighty central bank, judicial system, military, etc.
The problem the elites face now is that central banks – and banking – has been exposed. Thus, they are in a position where they must actually find ways to use this destructive system to promote the health of the system that they are seeking to destroy.
This is no doubt why they are meeting in Washington DC. Since every central banking facility including quantitative easing is ultimately destructive it is very hard to try to reposition the system in ways that are ameliorative.
Central bankers talk about "sterilization" and other forms of removing paper money from the system. But ultimately, there really are none. Central banks are large money printing machines. That's what they are set up to do. A crack dealer doesn't walk around confiscating drugs. Neither do central banks, when "push comes to shove."
This is the big problem that central bankers are meeting about in Washington DC today. They are trying to figure out how they can reposition their banking efforts so that they continue to appear to be helpful even as they shred what's left of the world's economy.
Only a decade ago, the plan to rule the world was succeeding wonderfully. People simply didn't understand their sovereignty, wealth and power was eroding thanks to endless amounts of monetary inflation, recessions and subsequent centralization. Today, thanks to the Internet, they do.
Monopoly, fiat central banking is a fairly brutal and simple process. People are tricked into feeling wealthy, capital is misapplied during the subsequent boom and eventually a bust comes along and the central bankers and their enablers and associates rush in to pick up the pieces.
Conclusion: But the trouble is that the Internet has exposed this process for all the world to see. And that's a pretty brutal and simple process as well.
Fed Hosts Global Gathering on Easy Money ... The world's leading central bankers have spent much of the past few months putting out financial fires and launching measures aimed at recharging the global economy. On Friday, they will gather here to gauge the impact of their easy-money policies—including whether the controversial bond-buying strategy known as "quantitative easing" is a good weapon to keep in their monetary arsenals. A number of researchers say it is, despite nagging doubts. Quantitative-easing programs "stimulate the economy by reducing credit costs," concludes Mark Gertler, a New York University professor, in a paper he will give Friday. The conference is sponsored by the Federal ... – Wall Street Journal
Dominant Social Theme: We wish to discuss ways to make it clear that our methodologies are sufficient and our mentalities are superior.
Free-Market Analysis: It is all falling down about their heads and now they are meeting in Washington DC, fearfully, to try to decide what to do next. Nothing the money printers have done has stemmed the growing, global depression. But they have to do something. The system itself seems in jeopardy.
These meetings are reported as if they are pleasant business get-togethers, but they are more like evidences of a criminal conspiracy. The reason they fly in from far and wide is probably because they don't want to use electronic communications for fear of being overhead or tapped.
This is not how it is presented in the mainstream media, of course. The bought-and-paid-for media will position today's meeting as a convocation of great minds, technocrats dedicated to the highest ideals – administering private funds for the greater public good.
It's a kind of power elite dominant social theme, that the good, gray bankers are selflessly carving out careers that aim their talents at providing systemic financial stability. Billions around the world profit from their calming hands at the tiller of the financial system.
In fact, this perspective is nothing but a fear-based elite promotion. The idea is that if these good, gray men were NOT available, the world would crash and burn as surely as if it had been smashed by a large comet.
Nothing could be further from the truth. Monopoly fiat central banking is ITSELF the main source of instability in the world today and has been a growing problem ever since it was invented some 500 years ago.
Today, central bankers wrap themselves in the flag of the state. Most central banks – and there are some 150 around the world – are carefully mercantilist, relying on state mandates to provide their chicanery with legitimacy.
The Federal Reserve is one such bank, legitimized by the US Congress in 1913 and supervised by Congressional hearings and presidential appointments ever since. The proper word to describe this sort of hybrid public-private arrangement is mercantilist.
Central bankers derive their legitimacy from the governments they serve and try at all times to give the impression that their services are rigorously high-minded and focused on the public good.
This public/private formulation has served the great central banking families rather well in the past century, during which time central banking has swelled from a handful of countries to some 150, run by the Bank for International Settlements out of Switzerland.
As there are now 150 or so central banks around the world, it is impossible to continue to maintain that this monetary priesthood is constructed of a single ethnic or cultural component. In fact, what central banking may most remind a skeptical observer of is a criminal syndicate or crime family.
Lately, thanks to what we call the Internet Reformation, the power of central banking is beginning to wane. Their manipulations are increasingly exposed and the negative effect of their "policies" is increasingly a matter for public debate.
The exposure of the manipulations of central banking has proceeded apace on the Internet. It has resulted, generally, in calls for transparency and even for turning central banks into entirely public entities.
Of course, this would solve nothing as politicians are ALREADY involved with central banking around the world. And if central banks retain their monopoly fiat power, then the generation of monetary inflation is simply transferred from a public/private monopoly to an entirely public one.
The top banking families, in fact, don't care if government administers monopoly fiat or if it is done by quasi-private entities. Via mercantilism, pulling the levers of government behind the scenes, the top elites can control society either way.
What they DO fear, however, is that central banking may be done away with entirely. Monetary competition is likely what they fear most of all – the idea that society be free to create a variety of monies all used together and without central supervision.
This formulation would do away with the current monetary monopoly that is so destructive. Central bankers would lose the ability to stimulate and re-stimulate economies by printing more and more money.
Of course, the REAL reason for all this money printing is, over the long term, to crash and debase the financial vitality of the Western world generally. The power elite that wants to create global government believes that economic chaos must be implemented before a new, universal government and its money can emerge. This is apparently the plan in place now.
But it is one that is increasingly exposed. And the more the Internet's alternative media exposes it, the more uncomfortable the plotters become. When they meet now, it's probably to discuss damage control.
That's what we figure they'll be doing in Washington today. Damage control. No, they won't be talking about the "impact of easy-money policies," or not in so many words. What they WILL be doing is trying to figure out how they can stay in charge and continue to conceal the large-scale financial manipulations they've undertaken.
The choice for the power elite is stark: Either control the transition or the transition controls YOU. Of course, the great dynastic families that control central banking around the world have precipitated this crisis, in our humble view, so it is no surprise that they should seek to steer it.
People in government around the world use the force of the state to gain wealth and power. They then cover up their misdeeds by claiming that revelations would jeopardize people's safety and security.
But by now the system itself is simply so rotten that it attracts criticism on a regular basis. The basic inequality that people have noticed – thanks to electronic communications – is that while they lose their jobs and houses, central bankers continually print trillions to support each other's bankrupt enterprises.
This comes across as a basically immoral procedure – as indeed it is – and the longer the current recession/depression continues the angrier people get.
Lately the Western mainstream media – controlled by the same elites that control central banking – have taken to proclaiming that Western financial difficulties are coming under control and that unemployment is diminishing.
But this is only making people angrier, because they can sense this is not so. And on the Internet they can read entirely different interpretations of reality.
For this reason, the power elite is facing a conundrum. The powers-that-be have worked diligently over the past century to put in place a system that regularly destroys economies through monetary inflation, depression and further centralization.
This system is supposed to result, inevitably, in world government and a single world currency along with a single, mighty central bank, judicial system, military, etc.
The problem the elites face now is that central banks – and banking – has been exposed. Thus, they are in a position where they must actually find ways to use this destructive system to promote the health of the system that they are seeking to destroy.
This is no doubt why they are meeting in Washington DC. Since every central banking facility including quantitative easing is ultimately destructive it is very hard to try to reposition the system in ways that are ameliorative.
Central bankers talk about "sterilization" and other forms of removing paper money from the system. But ultimately, there really are none. Central banks are large money printing machines. That's what they are set up to do. A crack dealer doesn't walk around confiscating drugs. Neither do central banks, when "push comes to shove."
This is the big problem that central bankers are meeting about in Washington DC today. They are trying to figure out how they can reposition their banking efforts so that they continue to appear to be helpful even as they shred what's left of the world's economy.
Only a decade ago, the plan to rule the world was succeeding wonderfully. People simply didn't understand their sovereignty, wealth and power was eroding thanks to endless amounts of monetary inflation, recessions and subsequent centralization. Today, thanks to the Internet, they do.
Monopoly, fiat central banking is a fairly brutal and simple process. People are tricked into feeling wealthy, capital is misapplied during the subsequent boom and eventually a bust comes along and the central bankers and their enablers and associates rush in to pick up the pieces.
Conclusion: But the trouble is that the Internet has exposed this process for all the world to see. And that's a pretty brutal and simple process as well.
SB 469 Would Make Civil Disobedience a Felony in Georgia
By: GLORIA TATUM
(APN) ATLANTA -- SB 469, an anti-union and anti-protest bill, would turn nonviolent civil disobedience into a felony punishable by imprisonment for one year and a fine of ten thousand dollars for organizations and one thousand dollars for individuals. It also has provisions intended to weaken unions.
The bill was introduced by State Reps. Don Balfour (R-Snellville), Bill Hamrick (R-Carrollton), Bill Cowsert (R-Athens), and Ross Tolleson (R-Perry). All four Senators are members of an organization called the American Legislative Exchange Counsel (ALEC). ALEC bring corporations and lawmakers together to draft template legislation that is introduced in other states to change policy. ALEC claims to be nonpartisan but is funded by several right-wing thing tanks.
"In a state which lays credible claim to being the cradle of the Civil Rights Movement, State Senators Don Balfour, Ross Tolleson, Bill Hamrick, and Bill Cowsert have just demonstrated palpable disrespect for Georgia’s rich history of protest and activism. They are the sponsors of Senate Bill 469 which, had it been law in 1960, would have made Dr. Martin Luther King, Jr., Rev. Dr. Joseph Lowery, John Lewis, Joe Beasley, Minnie Ruffin, and many other luminaries of the Civil Rights Movement into felons," Sara Amis of Occupy Atlanta, wrote in a blog post.
"The way they are handling these extreme bills like SB 469 prohibiting protest which they know is unconstitutional, but they want to send a message and try to throw everyone off track,” Larry Pellegrini of the Georgia Rural Urban Summit, told Atlanta Progressive News.
“In addition, they have from the beginning of the Session been looking like they want to find Constitutional challenges and actually pass bills that they know are unconstitutional but to use them as a way to overturn federal law,” Pellegrini said.
Many people believe the legislation, which was introduced on February 21, 2012, is a reaction to the February 13 sit-in at AT&T's midtown headquarters, where twelve people were arrested for criminal trespass, which is a misdemeanor. Since the arrests, Occupy Atlanta and various unions have maintained about twenty tents in front of AT&T.
The bill was assigned to the Insurance and Labor committee which held a hearing on February 28. The hearing room was filled to capacity with overflow in the hall. Ninety percent of the attendees were union members and the rest from different organizations.
"SB 469, I believe, would have the effect of trying to intimidate working families, especial those involved in labor protest activities such as picketing and sit-ins. I think this is part of a much broader effort to weaken our middle class. It is part of a model piece of legislation that comes from ALEC. SB 469 could grant preemptive injunctions preventing working families from protesting against unfair labor practices. Georgians have the right to peacefully demonstrate on public property about unfair corporate practices like when corporations use their profits to send local jobs overseas," Charlie Flemming, President of Georgia AFL-CIO told the committee.
"Governor Deal wants to reduce the number of folks incarcerated around nonviolent crimes and drugs, but on the other hand we are saying we want to lock people up and make them felons if they protest or picket," Flemming said.
Elizabeth Appleby is an attorney in Georgia who has practiced law for 34 years with a large part of her practice in constitutional law and represents the AFL-CIO in Georgia with 170,000 members in unions throughout Georgia. They oppose SB 469 in its entirety.
"My evaluation of SB 469 is that it interferes with the constitutional right of free speech, the First Amendment, and right to peacefully assemble. It seems to impermissibly place the free speech rights of some individuals in the hands of other private citizens and corporations, giving them a sword with an over-broad criminal statute, elevated fines and punishment, and injunctive tools unique to this bill that will have the effect unconstitutionally of stifling people's right to speak out," Appleby testified.
"It violates the first amendment and the right to protest. It actually makes it illegal for groups or organizations to protest it stifles freedom of speech and expression. This bill is just un-American," Calvine Rollins, President of the Georgia Association of Educator, said.
"People I know voted for you folks because they thought you were for less government, but this is big government run amok for a few. I will be in every church I can in south Rockdale County telling them what somebody is trying to do to Christians. Christians in here [on the committee] not letting us exercise what we all hear about on right-wing radio every day, let’s go back to the Constitution," Chuck Styles, International Brotherhood of Teamsters, said.
"If this bill had been in effect one hundred years ago, the only people who would be free today would be White adult males. Blacks and women would not have the right to vote; children would still be working themselves to death; we would not have the forty hour work week, the eight hour work day, and other benefits. Many of the organizations I work with demonstrate and picket, and if this bill had been in operations four or five years ago, I would already be in prison for life," Minnie Ruffin said.
Many other people spoke in opposition to the bill and the Georgia Chamber of Commerce spoke in support of the bill.
The entire room chanted "Kill the bill."
The Committee amended the bill by striking felony on page 129 through imprisonment on age 131 and inserting high and aggravated misdemeanor. State Sen. Chip Rogers missed all the testimony but returned to vote against the bill. The bill passed as amended.
Two occupy folks were detained and one arrested as they "mike checked" the room as people were leaving.
"They have not fixed the bill, it is still very flawed and a violation of Georgia law,” Debbie Seagraves, Executive Director of American Civil Liberties Union (ACLU) of Georgia, told APN.
“The bill creates a conflict in Georgia criminal code. You can be charged now with criminal trespass or you can be charged with conspiracy to criminal trespass but you can't be charged with both. In the current Georgia criminal code, if you are charged with conspiracy to commit criminal trespass or any other misdemeanor you can't be charged with more than the sentence of the crime. Conspiracy to commit a crime can not be charged at a higher rate than the actual commission of the crime. SB 469 will allow you to be charged with both and it sets a higher penalty than the current law does. It is adding higher punishment for exercising first amendment rights," Seagraves said.
"It requires the Court to grant an injunction against someone for demonstrating, picketing, or protesting, and it does not require the compliant to show harm. This is a major change in law," Seagraves said.
"While this bill appears to be an anti-labor bill, the restrictions, the enhanced penalties, and infringement of First Amendment rights will apply to everyone in Georgia. This can lend anyone open to enhanced penalties, large fines, and potentially imprisonment for exercising their First Amendment rights," Seagraves said.
(APN) ATLANTA -- SB 469, an anti-union and anti-protest bill, would turn nonviolent civil disobedience into a felony punishable by imprisonment for one year and a fine of ten thousand dollars for organizations and one thousand dollars for individuals. It also has provisions intended to weaken unions.
The bill was introduced by State Reps. Don Balfour (R-Snellville), Bill Hamrick (R-Carrollton), Bill Cowsert (R-Athens), and Ross Tolleson (R-Perry). All four Senators are members of an organization called the American Legislative Exchange Counsel (ALEC). ALEC bring corporations and lawmakers together to draft template legislation that is introduced in other states to change policy. ALEC claims to be nonpartisan but is funded by several right-wing thing tanks.
"In a state which lays credible claim to being the cradle of the Civil Rights Movement, State Senators Don Balfour, Ross Tolleson, Bill Hamrick, and Bill Cowsert have just demonstrated palpable disrespect for Georgia’s rich history of protest and activism. They are the sponsors of Senate Bill 469 which, had it been law in 1960, would have made Dr. Martin Luther King, Jr., Rev. Dr. Joseph Lowery, John Lewis, Joe Beasley, Minnie Ruffin, and many other luminaries of the Civil Rights Movement into felons," Sara Amis of Occupy Atlanta, wrote in a blog post.
"The way they are handling these extreme bills like SB 469 prohibiting protest which they know is unconstitutional, but they want to send a message and try to throw everyone off track,” Larry Pellegrini of the Georgia Rural Urban Summit, told Atlanta Progressive News.
“In addition, they have from the beginning of the Session been looking like they want to find Constitutional challenges and actually pass bills that they know are unconstitutional but to use them as a way to overturn federal law,” Pellegrini said.
Many people believe the legislation, which was introduced on February 21, 2012, is a reaction to the February 13 sit-in at AT&T's midtown headquarters, where twelve people were arrested for criminal trespass, which is a misdemeanor. Since the arrests, Occupy Atlanta and various unions have maintained about twenty tents in front of AT&T.
The bill was assigned to the Insurance and Labor committee which held a hearing on February 28. The hearing room was filled to capacity with overflow in the hall. Ninety percent of the attendees were union members and the rest from different organizations.
"SB 469, I believe, would have the effect of trying to intimidate working families, especial those involved in labor protest activities such as picketing and sit-ins. I think this is part of a much broader effort to weaken our middle class. It is part of a model piece of legislation that comes from ALEC. SB 469 could grant preemptive injunctions preventing working families from protesting against unfair labor practices. Georgians have the right to peacefully demonstrate on public property about unfair corporate practices like when corporations use their profits to send local jobs overseas," Charlie Flemming, President of Georgia AFL-CIO told the committee.
"Governor Deal wants to reduce the number of folks incarcerated around nonviolent crimes and drugs, but on the other hand we are saying we want to lock people up and make them felons if they protest or picket," Flemming said.
Elizabeth Appleby is an attorney in Georgia who has practiced law for 34 years with a large part of her practice in constitutional law and represents the AFL-CIO in Georgia with 170,000 members in unions throughout Georgia. They oppose SB 469 in its entirety.
"My evaluation of SB 469 is that it interferes with the constitutional right of free speech, the First Amendment, and right to peacefully assemble. It seems to impermissibly place the free speech rights of some individuals in the hands of other private citizens and corporations, giving them a sword with an over-broad criminal statute, elevated fines and punishment, and injunctive tools unique to this bill that will have the effect unconstitutionally of stifling people's right to speak out," Appleby testified.
"It violates the first amendment and the right to protest. It actually makes it illegal for groups or organizations to protest it stifles freedom of speech and expression. This bill is just un-American," Calvine Rollins, President of the Georgia Association of Educator, said.
"People I know voted for you folks because they thought you were for less government, but this is big government run amok for a few. I will be in every church I can in south Rockdale County telling them what somebody is trying to do to Christians. Christians in here [on the committee] not letting us exercise what we all hear about on right-wing radio every day, let’s go back to the Constitution," Chuck Styles, International Brotherhood of Teamsters, said.
"If this bill had been in effect one hundred years ago, the only people who would be free today would be White adult males. Blacks and women would not have the right to vote; children would still be working themselves to death; we would not have the forty hour work week, the eight hour work day, and other benefits. Many of the organizations I work with demonstrate and picket, and if this bill had been in operations four or five years ago, I would already be in prison for life," Minnie Ruffin said.
Many other people spoke in opposition to the bill and the Georgia Chamber of Commerce spoke in support of the bill.
The entire room chanted "Kill the bill."
The Committee amended the bill by striking felony on page 129 through imprisonment on age 131 and inserting high and aggravated misdemeanor. State Sen. Chip Rogers missed all the testimony but returned to vote against the bill. The bill passed as amended.
Two occupy folks were detained and one arrested as they "mike checked" the room as people were leaving.
"They have not fixed the bill, it is still very flawed and a violation of Georgia law,” Debbie Seagraves, Executive Director of American Civil Liberties Union (ACLU) of Georgia, told APN.
“The bill creates a conflict in Georgia criminal code. You can be charged now with criminal trespass or you can be charged with conspiracy to criminal trespass but you can't be charged with both. In the current Georgia criminal code, if you are charged with conspiracy to commit criminal trespass or any other misdemeanor you can't be charged with more than the sentence of the crime. Conspiracy to commit a crime can not be charged at a higher rate than the actual commission of the crime. SB 469 will allow you to be charged with both and it sets a higher penalty than the current law does. It is adding higher punishment for exercising first amendment rights," Seagraves said.
"It requires the Court to grant an injunction against someone for demonstrating, picketing, or protesting, and it does not require the compliant to show harm. This is a major change in law," Seagraves said.
"While this bill appears to be an anti-labor bill, the restrictions, the enhanced penalties, and infringement of First Amendment rights will apply to everyone in Georgia. This can lend anyone open to enhanced penalties, large fines, and potentially imprisonment for exercising their First Amendment rights," Seagraves said.
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