Author Archives: David Dayen

David Dayen: How Chase Bank Denying Services to a Condom Shop Is Really About Deregulating Payday Lending

Under the odd conventions of journalism, if someone else writes about a topic, especially if it resembles a “scoop,” nobody else can write about it. So if you go down the road for a week or so chasing a story and then you see it in your friendly neighborhood copy of The Huffington Post, you can basically stop chasing. Thanks for taking food out of my mouth, HuffPo!

But in this case, the complicated story in question warrants more attention, because it’s a really good lesson in how “lobbying” incorporates more than just paying rich people in suits to sweet-talk politicians and regulators. This is the darker side of lobbying, with the venerated “small business owners” everyone loves to deify caught in the crossfire.

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Just 83,000 Homeowners Get First-Lien Principal Reductions from National Mortgage Settlement, 90 Percent Less Than Promised

Yesterday, the National Mortgage Settlement monitor, Joseph Smith, released his final crediting reports, confirming that all five banks (Wells Fargo, Bank of America, Citi, JPMorgan Chase and Ally, now known after bankruptcy as Residential Capital, or ResCap) have now satisfied the consumer relief portion of the foreclosure fraud settlement. The banks were required to spend $20 billion in “credited” relief (some actions received less than a dollar-for-dollar credit). Smith exults that the gross relief provided totaled over $50 billion, and that “more than 600,000 families received some form of relief.”

What the mainstream media reports on this don’t tell you is that the $50 billion number is wildly inflated: for example, it includes $12 billion in deficiency waivers in non-recourse states, which the IRS confirmed have no value whatsoever. But I didn’t know just how inflated these numbers were, and how empty the promises, until I went through them.

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New Study Shows Dangers of Trade Agreements that Help Corporations Sue Governments

As the Obama administration negotiates new trade agreements with European and Pacific nations, a battle has emerged over the agreements’ egregious rules that grant giant corporations unreasonable powers to subvert democracy. These rules, dubbed “investor rights” by the corporations, allow firms to sue governments over actions—including public interest regulations—that reduce the value of their investments.

Oxfam, the Institute for Policy Studies, and four other non-profits are releasing a new study that explains why these rules are so dangerous to democracy and the environment. We are among the co-authors of this study, titled “Debunking Eight Falsehoods by Pacific Rim Mining/OceanaGold in El Salvador.” The report offers a powerful case study of everything that is wrong with this corporate assault on democracy.

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Philip Pilkington: Thinking Makes It So – The IMF Bailout of the UK in 1976 and the Rise of Monetarism

Monetarism began it’s rise to world prominence in the ever-conservative Bundesbank in 1974. But it would be the government of Margaret Thatcher in the UK, elected in 1979, that would truly launch monetarism in central banking. After Thatcher’s monetarist experiment undertaken between 1979 and 1984 every economics student would be taught to recite the various monetary aggregates by heart for at least a decade or two.

This is what accounts for the monetarist bent we see in the economists of the last generation. Basically any economist trained between roughly 1980 and 1995 would be heavily exposed to monetarist dogma. And only those that read alternative accounts of money creation — namely, the theory of endogenous money — would be fully immunised. This explains, for example, why certain economists that champion Keynesian policies — like Paul Krugman — actually speak in monetarist tones.

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Lawsuit Against California’s Robbing Homeowners of National Mortgage Settlement Funds Has Very Good Chance of Success

Late on Friday, a coalition of African-American, Latino and Asian-American groups sued California Governor Jerry Brown, demanding that he return $350 million stolen from the state’s share of the National Mortgage Settlement to plug a budget hole.

California is far from the only state to divert money given as a penalty for homeowner abuse into the General Fund; in fact, less than half of the $2.5 billion given to states in the settlement actually went to housing (and that’s a generous rendering which counts things like North Dakota spending to increase housing stock in oil country for police officers, when that has nothing to do with compensation for abuse). In fact, consumer groups in Arizona already tried to sue to force $50 million that went to their state’s General Fund back into the hands of homeowners. But a Maricopa County judge ruled that the language of the consent order was sufficiently broad to allow the diversion of funds.

Does that mean that this California lawsuit is nothing more than a show of vanity, destined to fail? Absolutely not. In fact, by a strict reading of the case law and the documents in the case, the plaintiffs should win in a walk.

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Russia Eyes Crimea’s Oil and Gas Reserves

Dave here. In case you were thinking that the Great Game was obsolete or something. Needless to say the referendum passed, this was written slightly before the release of the results. By Nick Cunningham, a Washington DC-based writer on energy and environmental issues. You can follow him on twitter at @nickcunningham1. Cross-posted at Oil Price. […]

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Why the Justice Department Inspector General Report on Mortgage Fraud Matters

Hello, folks! As Yves is off explaining the world to Washington, I’m manning the controls for a couple days.

This allows me to ensure that NC has that whole Justice Department IG report on mortgage fraud covered. I know that Yves heaved the written equivalent of a sigh at the news, and she wasn’t wrong. Nothing tangible is likely to happen for the borrowers victimized by the abusive practices that DoJ willfully neglected to prosecute. And there’s surely a seat being kept warm at Covington & Burling for Eric Holder’s post-government career; this won’t hurt him a bit.

But because I don’t feel the coverage so far has plumbed the depths of this corruption, and because it’s still happening, it’s not worth going silent just yet. It’s probably spitting into the wind, yes, but I’ve got the time and the spit, so I want to note a few things.

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Banker Farce: Spanish Bank CEO Launches Moral Crusade Against Political Corruption

“We have to fight corruption in order to build a new model of more sustainable and fairer growth.”

These laudable words came from the least likely of mouths – that of Francisco González, CEO of Spanish banking giant Banco Bilbao Vizcaya Argentaria (BBVA). González was speaking at the bank’s annual shareholder meeting, held last week in Bilbao.

BBVA is Spain’s second biggest bank with operations in more than 30 countries including the U.S., China, Argentina, Columbia and Mexico. It has about 107,000 employees, 47 million customers worldwide, a million shareholders and now, it seems, a moralizing CEO.

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Chris Mayer: How Fiat Money Works

Warren Mosler tells a good story that shows how our economy works at its most basic level.

Imagine parents create coupons they use to pay their kids for doing chores around the house. They “tax” the kids 10 coupons per week. If the kids don’t have 10 coupons, the parents punish them. “This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties,” Mosler writes.

So now our household has its own currency. This is much like the U.S. government, which issues dollars, a fiat currency. (Meaning Uncle Sam doesn’t have to give you something else for it. Say, like a certain weight in gold.) If you think through this simple analogy, all kinds of interesting insights emerge.

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David Dayen: Elizabeth Warren, Tom Coburn Introduce “Naked Capitalism Was Right About the Corruption of Financial Regulators Act” (Not Actually Called That)

I’ve been going out of my mind the past few days seeing the easily duped traditional media uncritically printing statistical analysis from JPMorgan Chase’s roundelay of get-out-of-jail-almost-free settlements. The gist of it, and this must have been in a Department of Justice release somewhere, is that JPM has “paid” $20 billion over the last calendar year to resolve a variety of disputes, the most recent being their admission that they knew the bogus nature of Bernie Madoff’s business and never generated any suspicious activity reports or raised red flags for regulators (the fact that they took their money out of Madoff feeder funds right before he was arrested being a smoking gun)… $20 billion is a FAKE NUMBER.

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David Dayen: IRS Confirms that $12 Billion in “Mortgage Relief” in National Mortgage Settlement Completely Worthless

The IRS settles something I noticed a while ago and has now been finally confirmed. In short: big banks who robbed homes from Americans got a penalty that entailed, quite literally, giving homeowners worthless allowances.

The issue concerns the Mortgage Forgiveness Debt Relief Act, which expires at the end of the year. After December 31, all mortgage relief that involves debt forgiveness of any kind will be taxable to the borrower. This affects principal reductions, of course, but also short sales, with the idea being that this involves the bank “forgiving” the difference between the total owed on the mortgage and the price of the short sale. There are hardships exemptions to this but they involve the functional equivalent of bankruptcy – you have to prove that your total liabilities exceed your total assets.

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