Monthly Archives: July 2012

Why “Firing Ed DeMarco” is No Solution to FHFA Refusal to Engage in Principal Modifications (Updated)

Today, Acting FHFA Director Ed DeMarco wrote to Congress, after due consideration, reaffirming his position that he will not permit Fannie and Freddie to lower principal balances of mortgages of borrowers that are delinquent. This is despite the fact that the top analyst in this space, Laurie Goodman, has determined that principal modifications are the most effective form of mortgage modification, resulting in much lower refault rates than interest rate mods or capitalization mods. And that makes sense. Why should a borrower struggle to hang on to a home when even if they make all the payments, when they sell they they are stuck with a big tax bill? And as we’ve stressed, private label investors are overwhelmingly in favor of deep principal mods for viable borrowers, and that’s because foreclosure is costly and leaves them worse off.

As much as this blogger is firmly of the view that this is a poor economic decision (deep principal mods are a sound idea, as long as you have a decent approach for vetting borrower income and other debt payments to see if they are viable with a mod), I have to hand it to DeMarco as a bureaucratic infighter.

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Mirabile Dictu! ECB Chief Draghi Being Investigated for Membership in the Group of Thirty

It’s easy for Americans to labor under the delusion that other parts of the the world have less obvious forms of corruption or its milder form, conflict of interest, than our revolving door system (one of my favorites was when the NY Fed staffer tasked to overseeing AIG left….to AIG).

And ex banking, that actually is true in most advanced economies. But as a reminder of how backs get scratched in Europe, we have Mario Draghi.

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The Obama Enabler’s Big Lie: “We Never Had the Votes”

One man quote machine Drew Westen had an Op-Ed in Pravda the other day that included the following passage:

Obama’s administration made three crucial errors that enabled the Republican obstructionism that has tied his hands for the past two years, with GOP leaders shooting down any idea — even if it’s one of their own — that might have helped the president strengthen the economy.

Got the D talking point? “R obstructionism.”

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Germans Getting Even More Opposed to Being in the Eurozone

Over the weekend, the newspaper Bild released the results of a new poll on German sentiment on the Euro. It found that 51% thought Germany would do better by leaving the Eurozone with 29% saying Germany would fare worse. In addition, 71% of the respondents said Greece should be expelled from the Eurozone if it could not live up to its austerity commitments.

These results aren’t particularly novel; a large cohort of Germans have been vocally opposed to Eurorescues for some time. What is new about this poll is how low the percentage is that sees being in the Euro as good for Germany.

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Money is power

By Sell on News, a global macro equities analyst. Originally published at Macrobusiness.

Lambert here. Note the use of the phrase “market state,” invented if not exactly defined by Phillip Bobbit in his The Shield of Achilles, and portrayed as a historical inevitability.

For the last couple of years, in the wake of the financial crisis, the banking and finance community has darkly warned about the dangers of over regulating the sector. “We mustn’t impede the free flow of capital”, it is claimed, “otherwise efficiency and productivity will be lost and the real economy will not recover.” The other camp claims that the finance sector must be reined in, re-regulated, otherwise crises will continue to happen. The dichotomy is entirely false. Finance is rules. You cannot increase or decrease the amount of rules in rules. You can only change their character. And you can decide who will set them.

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Obama’s Second Term Agenda: Cutting Social Security, Medicare, and/or Medicaid

By Matt Stoller, a political analyst on Brand X with Russell Brand, and a fellow at the Roosevelt Institute. You can follow him at http://www.twitter.com/matthewstoller

This is probably the least important Presidential election since the 1950s. As an experienced political hand told me, the two candidates are speaking not to the voters, but to the big money. They hold the same views, pursue the same policies, and are backed by similar interests. Mitt Romney implemented Obamacare in Massachusetts, or Obama implemented Romneycare nationally. Both are pro-choice or anti-choice as political needs change, both tend to be hawkish on foreign policy, both favor tax cuts for businesses, and both believe deeply in a corrupt technocratic establishment.

So while the election lumbers on like the death rattles of the wounded animal known American democracy, no one on either side is asking what the plan is for the next term.

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