Yearly Archives: 2011

Town Hall Discussion of Energy Solutions: Live Stream of Dylan Ratigan Here at 8 PM EDT

Dylan Rtigan is hosting an important conversation on energy solutions from a Town Hall panel live from Oklahoma State University at 8PM ET / 7PM CST tonight. The goal is to generate the political will to reduce our dependence on oil.

Panelists include:

· Boone Pickens, Oil Tycoon & Founder, BP Capital Management
· Ashwin Madia, VoteVets.org
· Bob Deans, Director of Federal Communications, Natural Resources Defense Council
· Former CIA Director James Woolsey

View it below:

Links 3/31/11

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Why Liberals Are Lame (Part 2)

It may seem churlish to pick on a specific, well intentioned liberal organization to illustrate a rampant pathology within what passes for the left in the US. Nevertheless, examples serve as important case studies and hopefully will help both the object of presumably unwanted attention and its broader constituency understand that many of their campaigns actually undermine the causes they purport to represent.

Let’s look at an example, an e-mail from the Progressive Change Campaign Committee to constituents of Alabama’s Spencer Bachus, the Chairman of the House Financial Services Committee and self-proclaimed Best Friend of Banks (“My view is that Washington and the regulators are there to serve the banks”):

Josh Rosner: Dodd Frank is a Farce on Too Big to Fail

Note: Josh Rosner, managing director of Graham Fisher & Co., submitted this written testimony for a March 30 panel for the House Oversight Committee that was cancelled. His testimony has been entered into the Congressional Record and will be available on the House Oversight Committee website in the near future. The text appears below..

Has Dodd-Frank Ended Too Big to Fail?

Almost three years have passed since the United States financial system shook, began to seize up, and threatened to bring the global economy crashing down. The seismic event followed a long period of neglect in bank supervision led by lobbyist-influenced legislators, “a chicken in every pot” administrations, and neutered bank examiners.

While the current cultural mythology suggests the underlying causes of the crisis were unobservable and unforeseeable, the reality is quite different. Structural changes in the mortgage finance system and the risks they posed were visible as early as 2001. Even as late as 2007 warnings of the misapplications of ratings in securitized assets such as collateralized debt obligations and the risks these errors posed to investors, to markets, and to the greater economy were either unseen or ignored by regulators who believed financial innovation meant that risk was “less concentrated in the banking system” and “made the economy less vulnerable to shocks that start in the financial system.” Borrowers, these regulators argued, had “a greater variety of credit sources and (had become) less vulnerable to the disruption of any one credit channel.”

In the wake of the crisis, and before either the Congressional Oversight Panel or the Financial Crisis Inquiry Commission delivered their final reports on the causes of the crisis, Congress passed the Dodd-Frank Act. The act claimed to end the era of “too-big-to-fail” institutions and sought to address the fundamental structural weaknesses and conflicts within the financial system. To falsely declare an end to Too Big to Fail without actually accomplishing that end is more damaging to the credibility of U.S. markets than a failure to act at all. The historic understanding that our markets were the most free to fair competition, most well regulated and transparent, has been the underlying basis of our ability to attract foreign capital. It is this view that, in turn, had supported our markets as the deepest, broadest, and most liquid.

In fact, Dodd-Frank reinforces the market perception that a small and elite group of large firms are different from the rest.

Hooray! Jamie Dimon Says New Capital Rules Will Kill Zombie Banks!

It really is a sign of how complete a victory that the banks have won over the rest of us that Jamie Dimon has the nerve to complain about banking regulations. Even worse, he is egging on a effort by Republican bank-owned Congresscritters to roll weak bank capital rules back.

His position is pure, simple, unadulterated bank propaganda: what is good for banks is good for America, when the converse is true. Simon Johnson warned in his May 2009 article “The Quiet Coup” that the financial crisis had turned American into a banana republic with a few more zeros attached, a country in the hands of oligarchs, in this instance, the financiers. And we playing out the same script he saw again and again in emerging economies:

Links 3/30/11

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Lender Processing Services Behind More Record-Keeping Botches and Foreclosure Forgeries

Lender Processing Services has played a singularly destructive role in the mortgage servicing industry. The firm not only offered document fabrication services through DocX, a company it acquired and was forced to shut down after the Department of Justice started sniffing about, but is being revealed to be involved in more abuses as far as borrower records and legal process are concerned. Readers may recall that it is also the target of two national class action suits on illegal legal fee sharing which if successful will produce multi-billion-dollar damages.

This abuses matter due to the role that LPS has come to play. It is the biggest player in default services, meaning it acts as the de facto selector and supervisor of foreclosure mills via its system, LPS Desktop, which manages and oversees the work of local law firms on behalf of its bank servicer clients. It also provides the servicing platform for more than half of the servicing industry. And as our two latest examples show, the company clearly places its profits over integrity of records and due process.

OMG, Greenspan Claims Financial Rent Seeking Promotes Prosperity!

I was already mundo unhappy with an Alan Greenspan op-ed in the Financial Times, which takes issue with Dodd Frank for ultimately one and only one disingenuous and boneheaded reason: interfering with the rent seeking of the financial sector is a Bad Idea. It might lead those wonderful financial firms to go overseas! US companies and investors might not be able to get their debt fix as regularly or in an many convenient colors and flavors as they’ve become accustomed to! But the Maestro managed to outdo himself in the category of tarting up the destructive behaviors of our new financial overlords.

What about those regulators? Never never can they keep up with those clever bankers. Greenspan airbrushes out the fact that he is the single person most responsible for the need for massive catch-up. Not only due was he actively hostile to supervision (and if you breed for incompetence, you are certain to get it), but he also gave banks a green light to go hog wild in derivatives land. And on top of that, he allowed banks to develop their own risk models and metrics, which also insured the regulators would not be able to oversee effectively (there would be a completely different attitude and level of understanding if the regulators had adopted the posture that they weren’t going to approve new products unless they understood them and could also model the exposures).

And the most important omission is that the we just had a global economic near-death experience thanks to the recklessness of the financial best and brightest.

Guest Post: Government Responds to Nuclear Accident by Trying to Raise Acceptable Radiation Levels and Pretending that Radiation is Good For Us

We’ve always been at war with Eastasia … and plutonium has always been good for us.

Are Banks Scheming to Gut the Role of the Courts in Foreclosures?

I may be overreacting but given the sorry behavior of banks throughout the crisis and its aftermath, better to be vigilant than sorry.

The Wall Street Journal provided a very sketchy summary of the counterproposal that the banks will put on the table in the foreclosure fraud settlements this week:

The 15-page bank proposal, dubbed the Draft Alternative Uniform Servicing Standards, includes time lines for processing modifications, a third-party review of foreclosures and a single point of contact for financially troubled borrowers. It also outlines a so-called “borrower portal” that would allow customers to check the status of their loan modifications online.

But the document doesn’t include any discussion of principal reductions. Nor does it include a potential amount banks could pay for borrower relief or penalties.

This seems innocuous, right?

Think twice.

The Consumer Financial Protection Bureau’s Bogus Mortgage Settlement Math

Shahien Nasiripour of Huffington Post’s new article, “Big Banks Save Billions As Homeowners Suffer, Internal Federal Report By CFPB Finds,” includes a presentation from the Consumer Financial Protection Bureau dated February 14 prepared for Tom MIller, the Iowa Attorney who is leading the 50 state attorneys general foreclosure fraud settlement negotiations.

If I were a betting person, I’d wager this document was leaked to show that the Administration and the AGs did not just make up the $20 to $30 billion settlement figure that has been bandied about ask their ask, but have a sound, reasoned basis for their demand.

Unfortunately, the document simply proves that they did make up the $20 to $30 billion figure.Not only is the analysis effectively fabricated, it’s the wrong analysis. But I have to say, having been at McKinsey, it’s impressive the use of McKinsey firm format makes a story look much more credible than it really is.

Links 3/29/11

Countdown to March 29: Prepare for a National Call-In Day to our 50-state Attorneys General CrimeShouldn’tPay. Be SURE to call your state attorney general today! They seldom get calls from voters, so this effort will have an impact.

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Illustrating How Infrastructure Deals Result in High Fees and Diminished Service

It isn’t hard to understand why infrastructure deals (the sale of government owned assets to private investors) are inherently a ripoff. We’ve had such a vogue for private contracting that a lot of services that are almost certainly more cheaply run by the government (e.g., logistical support for the military as proven by Iraq profiteering by Blackwater) that it’s a pretty safe assumption that most assets now held by government bodies are the the sort of thing that it makes sense for the government to own: high cost to build, long lived, not terribly complex to maintain assets.

Infrastructure investors like to see returns in the mid to upper teens. The deals are complicated to put together, so the fees are high. The deal needs to generate enough to pay the fees and generate the required returns. Since it is pretty much impossible to run something like a parking meters “smarter”, the usual course of action is a combination of increasing charges to the users (taxpayers who in the past used it for free or much less) and cut maintenance costs.

The Sydney-based investment bank Macquarie pioneered this business. Reader Crocodile Chuck pointed us to one of its latest capers. From the Sydney Morning Herald: