Sunday, November 23, 2014
Elizabeth Warren tore into FHFA director Mel Watt over his failure to develop a program for Fannie and Freddie to provide principal modifications to underwater borrowers at risk of foreclosure. She also got in a dig for his failure to stop the agencies from pursuing deficiency judgments. That means going after former homeowners when the sale of the house they lost didn’t recoup enough to cover the mortgage balance. In the stone ages, when banks kept the mortgage loans they made, they never pursued deficiency judgements. They knew there was no point in trying to get blood from a turnip. Not surprisingly, the sadistic Fannie/Freddie policy has also proven to be spectacularly unproductive in financial terms. An FHFA inspector general study found that recoveries were less than 1/4 of 1% of the amount sought. Moreover, since those mortgage balances were often inflated by junk fees and other dubious costs, and mortgage servicers have done a poor job of maintain properties (they are too often stripped of copper and appliances, or get mold), any deficiency might be significantly or entirely the servicer’s fault.
Yves here. This is an intriguing exchange among Michael Hudson, John Weeks, professor emeritus of development economics at the University of Long and Colin Bradford of Brookings. The points of difference between Hudson and Bradford are sharp, with Bradford admitting to giving a Washington point of view that Obama scored important gains at the APEC summit, with Hudson contending that both confabs exposed America’s declining role and lack of foreign buy-in for its neoliberal economic policies.
Yves here. This post focuses on the considerable gap between rhetoric and action as far as sanctions against Russia are concerned. John Helmer describes who is exempted from sanctions against Russia and why.
Today’s Water Cooler: Immigration, USA Freedom Act dies, Keystone dies (for now), Clinton SoS map, Ferguson, Mexico, and Apple wage fixing.
Topics: Water Cooler
Posted by Lambert Strether at 1:58 pm |
Private Equity Titan Blackstone Admits New Normal of Lousy Returns, Proposes Changes to Preserve Its Profits
Private equity continues to make headlines, and not in a good way, despite industry efforts to spin otherwise. The latest shoe to drop is that private equity firms are trying to rewrite some well-established fund terms to allow them to continue to rake in egregious profits even as the returns of most funds have underperformed the stock market.
Private equity fund managers keep insisting that private equity limited partnership agreements need to remain confidential or their businesses will suffer irreparable harm. We’ve already shown that claim to be ludicrous.
We published a dozen of these supposedly sacrosanct documents at the end of May. They had been accidentally made public by the Pennsylvania Treasury, but no one seemed to have noticed. They included funds of major industry players such as KKR, TPG, and Cerberus. Yet miraculously, they sky has not fallen in on their businesses as a result of the release of this information. We have obtained ten more limited partnership agreements from a source authorized to receive them who is not bound by a confidentiality agreement. These include limited partnership agreements from Blackstone, Oak Hill, and New Mountain, as well as smaller players. You can see all these limited partnership agreements here.
In case you managed to miss it, there’s been a fair bit of hand-wringing over the fact that Japan has fallen back into a recession despite the supposedly heroic intervention called Abenomics, whose central feature was QE on steroids.
But Japan of all places should know that relying on the wealth effect to spur growth has always bombed in the long term.
I never dreamed that a class I took in college, The Politics of Popular Education, which covered the nineteenth century in France and England, would prove to be germane in America. I didn’t have any particular interest in the topic; the reason for selecting the course was that the more serious students picked their classes based on the caliber of the instructor, and this professor, Kate Auspitz, got particularly high marks. The course framed both the policy fights and the broader debate over public education in terms of class, regional, and ideological interests.
The participants in these struggles were acutely aware that the struggle over schooling was to influence the future of society: what sort of citizens would these institutions help create?
As the post below on the march of school privatization in Wisconsin demonstrates, those concerns are remarkably absent from current debates. The training of children is simply another looting opportunity, like privatizing parking meters and roads.
Today’s Water Cooler: Ready for Hillary (or Warren (or Sanders)), Mexican caravans, Ferguson prep, PPI and housing stats, rise of the robots
Topics: Water Cooler
Posted by Lambert Strether at 1:58 pm |
As someone old enough to have done finance in the
Paleolithic pre-personal computer era (yes, I did financial analysis using a calculator and green accountant’s ledger paper as a newbie associate at Goldman), investor expectations that market liquidity should ever and always be there seem bizarre, as well as ahistorical. Yet over the past month or two, there has been an unseemly amount of hand-wringing about liquidity in the bond market, both corporate bonds, and today, in a Financial Times story we’ll use as a point of departure, Treasuries.
These concerns appear to be prompted by worries about what happens if (as in when) bond investors get freaked out by the Fed finally signaling it is really, no really, now serious about tightening and many rush for the exits at once. The taper tantrum of summer 2013 was a not-pretty early warning and the central bank quickly lost nerve. The worry is that there might be other complicating events, like geopolitical concerns, that will impede the Fed’s efforts at soothing rattled nerves, or worse, that the bond market will gap down before the Fed can intercede (as if investors have a right to orderly price moves!).
Let’s provide some context to make sense of these pleas for ever-on liquidity.
Yves here. While the findings of this short paper on the merits of employers promoting their workers’ job conditions, that viewpoint is perversely unfashionable today. It is somehow seen as more beneficial to employers to keep their minions cowed and fearful. One of the most active threats is the ease of firing workers. And of course, the belief that employment is tenuous works against the notion of making any investment in employees, even ones that are actually self-serving. But notice that this article does have a specific definition as to what “wellbeing” amounts to, which is workplace satisfaction. A major element appears to be bosses not acting like jerks.
University of Southern Maine Becomes “Administration of Southern Maine” as Students Protest Faculty Firings
Earlier this year, it looked as if the University of Southern Maine might become one of the rare places where students and faculty would be able to hold the line against the yet more looting by the bureaucratic classes. The woes besetting the USM are a microcosm of how higher education expenses are escalating as a result of administration feather-bedding and vanity projects. When those prove to be too costly, it’s the faculty and students that bear the brunt of the expense-shedding. As Lambert wrote in March: