Why is the Normally Astute Taibbi Sounding Like a Hopey Dopey Liberal on the Mortgage Settlement?

I hate taking issue with Matt Taibbi. I’m a huge fan of his writing and think he has done more to cause the big bd banks discomfort than any single writer.

But even someone as skilled as Taibbi occasionally has the writing equivalent of a bad hair day. And his post, “A Victory for the Public on Foreclosures?” is an example. And his misreading matters precisely because he has so much cred with the public that is unhappy with Big Finance.

Taibbi has taken up cheerleading the Schneiderman involvement in a Federal investigation committee as major progress and also amplified the messaging that the current version of the release in the mortgage settlement deal (which by the way is still more of a mystery than it ought to be) is a good deal. As we will discuss in due course, even a narrow deal around robosigning is in fact NOT a good deal.

I need to get a bit granular since quite a few folks on what passes for the left have gone into hopey dopey liberal mode. This is EXACTLY what the Administration wanted. A mere gesture, appointing Schneiderman to a part time job co-chairing an under-staffed investigation, when the committee members who are likely not to be on the same page as him have the advantage of being in DC where the troops will be located and knowing their way around the relevant bureaucracies. The ONLY hope Schneiderman has of pulling this off is lots of very noisy, sustained pressure, NOT going all gooey-eyed at a blast of Administration PR.

This isn’t the first time that Taibbi has had a lapse of judgment. He bought the unadulterated Obama spin, as this this 2007 piece and this 2008 article attest. An extract from the latter:

We’ve become trained to look for the man behind the mask…

But I’m not sure there is a mask when it comes to Barack Obama…

I hear Obama tell audiences about his grandmother and her time working on a bomber assembly line during World War II. Intellectually I know it’s the same thing — but when you actually watch him in person, you get this crazy sense that these schlock ready-for-paperback patriotic tales really are a big part of his emotional makeup. You listen to him talking about his grandfather waving a little American flag on the Hawaiian beach as he watched the astronauts come in to shore, and you can almost see that these moments actually have some kind of poetic meaning for him, and that he views his own already-historic run as a continuation of that pat-but-inspirational childhood story — putting a man on the moon then, putting a black man in the White House now.

The beginning of Taibbi’s post excerpts a list in a Huffington Post story that was cribbed and somewhat edited from a post by Mike Lux on Daily Kos. But Lux regularly does messaging for the Administration. It would have been a good precaution to verify his account.

Now, alert NC readers, notice how effective this propaganda technique is from the original Lux post:

1. No release on any fair housing, fair lending, or civil rights claims.
2. No release on any Federal Housing Finance Agency or Government-Sponsored Enterprise claims.
3. No release on any Consumer Financial Protection Bureau claims (which would admittedly be modest, since the Bureau was only established in July 2011).
4. No release on tax liability claims.
5. No release on criminal liability claims.
6. No release on SEC claims.
7. No release on National Credit Union Association claims.
8. No release on FDIC claims.
9. No release on Federal Reserve claims.
10. No release on the “vast majority” of origination claims.
11. No release on the “vast majority” of securitization claims, including all claims of state pension funds.
12. No release on legal liability surrounding Mortgage Electronic Registration Systems (MERS).

Look impressive, no? You’ve been three card Monted. Nearly all of the items on the list are NOT what the worries about the release are over. Some examples: No one ever thought there would be a waiver on putbacks, which are claims being made now by the FHFA. The IRS has made it abundantly clear that that it is not going to go after REMICs (if they did, they’d cause big losses to every RMBS investor in the US, which in turn would set off an avalanche of litigation). It’s an extremely useful threat, but since no one in the Administration is interested in threatening the banks as a way to bring them to heel, there is no real need to provide a waiver. And SEC liability? Schneiderman was willing to trade that away because it is pretty meaningless on mortgage originations. The subprime party ended by June 2007, and the statute of limitations is effectively five years. The 2006 originations are fee and clear (note there IS ongoing liability, as we have stressed, for annual trustee certifications, but no one seems very interested in that). And in earlier posts I’ve discussed how I never thought MERS was on the table (as in MERS liability sits with MERS).

Put it another way, if the list has read something like:

1. No release for selling purple cows to Martians
2. No release for operating a perpetual motion machine without a license
3. No release for jaywalking in Manhattan
4. No release for going back in time and killing Shakespeare

it might have been easier to catch the ones that no one thought were germane to the negotiations.

Now, let’s play “gotcha.” I have not idea what is in or not in the release (and as we will discuss shortly, the AGs themselves seem to be not so clear on this matter). But notice how FTC claims are not on the list. They are picked up only as of when they were transferred to the CFPB. Yet the FTC was THE central actor in busting the last outbreak of servicer bad behavior, by Fairbanks in 2003. As Tom Adams wrote:

Back in 2003, Fairbanks Capital billed itself as the largest servicer of subprime mortgages. It was also a stand alone servicer, in that it was not in the business of lending.

In a high profile case within the mortgage industry, the Federal Trade Commission brought an action against Fairbanks for violating the FTC Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act (RESPA) . Fairbanks was accused of a host of improper servicing activities that will sound remarkably familiar to anyone following the foreclosure and servicing issues in today’s mortgage markets. Among the transgressions, Fairbanks was alleged to have:

-failed to post payments in a timely manner, resulting in additional late fees or interest,
-charging for forced place insurance,
-assessed improper fees, such as for attorneys, service, appraisals, FedEx,
-misrepresented the amounts owed by borrowers,
-submitted misleading or false information to credit reporting agencies,
-failed to report disputed charges to credit reporting agencies,
-failed to respond to borrowers written requests for information or investigation into charges, and
-failed to make timely payments of escrow funds for insurance and taxes.

Similarly, I see no mention on this widely-touted list of where consumer fraud claims stand. HAMP fraud was widespread and Attorney General Catherine Cortez Masto is including HAMP consumer fraud in her expanded lawsuit against Countrywide for violations of its consent decree.

I sincerely doubt that consumer fraud claims and FTC claims are being included in the proposed waiver. I’m just using that to illustrate you can’t take that list at face value.

And that’s before we get to the issue that we still don’t know what “vast majority” of origination and securitization claims mean. As anyone who has worked on contracts can tell you, seemingly innocuous language can often be very powerful.

Far more important, even if you accept this messaging at face value, the deal is NOT a good deal. Taibbi acts as if the BANKS will be paying the $25 billion bandied about as a settlement number. Earth to base, this is yet another three card Monte trick. The number to keep your eye on is the cash portion. That’s a moving target, but it is clearly under $5 billion.

In fact, what everyone keeps skipping over is that the bulk of the value of the deal is in principal mods, and the deal is set up so that mods on mortgages that the banks don’t own will count at a 50% rate. Guess what, other people’s money is ALWAYS preferable to your own money, so the only mods the banks will do on their own mortgages are ones they would have done anyhow.

So the effect of this deal is:

1. To have MBS bondholders (pensions funds, 401 (k)s, insurers) pay for liability that belongs to the banks

2. To transfer from those investors to banks as second lien holders. The big four banks still have hundreds of billions of dollars of second liens, mainly home equity loans. If you write down the first lien, it makes the second lien more valuable.

Let’s look at how this might work in practice. Say you have a borrower that has a first lien that is now worth 120% of his house at current market prices and a second lien worth and additional 15%. He gets his first lien written down to 105% of his home value. Guess what, he is still seriously underwater but he now has more cash to pay his bank-held second. How much has he been helped, really? If he can afford the hit to his credit score, he really ought to ditch the house. The mod only serves to make that a tougher call.

Now a letter by Nevada AG Masto raising questions about the deal, and it appears second liens are being addressed to a degree, but I don’t find the bits I see very encouraging. For instance, she mentions that banks get a credit for extinguishing a second lien that is over 180 days delinquent. She isn’t sure what that means. And more important, this is not as big a concession as it might sound. Banks historically have not pursued deficiency judgments on primary mortgages, let alone seconds. They have started of late, but even that probably means less than their PR would have you believe. The US has had very lax enforcement of debt collection laws, but that is being tightened up both via the CFPB starting up and some new Administration initiatives. I suspect what we will see is a year or two of efforts and scary stories (meant to deter those thinking of defaulting). It’s a good bet that the banks will go back to their former practice of rarely going after these borrowers because you seldom get much from people who are under financial stress, and it costs real money to pursue them.

In addition, the consensus view among the boosters is that robosigining is not such a big deal, so we ought to be happy to waive that in isolation. But look at how Catherine Cortez Masto is using that abuse to go in a very systematic manner up the servicing ladder, from managers of robosigners that she is prosecuting criminally to Lender Processing Services. As we have argued repeatedly, LPS served as a liability shield for the major servicers. If Masto gets to discovery on LPS, the odds are high that she will be able to establish that servicers were well aware of the abuses that LPS was engaged in as their agent and the banks were effectively colluding with LPS.

In other words, clear cut, institutionalized abuses are a great way to engage in the classic mob prosecution strategy of targeting the foot soldiers to get them to give you the dirt on the entire network. Why would you give up such a valuable chip when you don’t know the extent of the abuses? But ex Masto, there is a remarkable lack of willingness among attorneys general and regulators to dig hard into what the banks are doing and see where that leads. For instance, Richard Cordray, newly appointed head of the CFPB, said that he is not going to pursue bank violations of the Servicemembers Civil Relief Act because it looked like mistakes and the banks said they had stopped doing that. Huh? How do you know it was a mistake unless you investigate? The fact that Jamie Dimon was so eager to make this problem go away quickly suggests otherwise.

The other bizarre element of this cheerleading is that the current deal stinks for any state ex maybe California. Why should ANY state participate when they have no idea how much they will be getting, and $15 billion of $25 billion earmarked for California? The fact that Republican Pam Bondi of Florida, a state hit even worse by the aftermath of the bubble than California, is hectoring California’s Kamala Harris to sign on says clearly that Bondi is more concerned about protecting the banks than about her state’s citizens. That can be the ONLY conclusion you can reach for any state that joins this lopsided pact.

If the Administration had really changed its stance on bank misdeeds, you’d see it putting the settlement on hold until the investigations led by Schneiderman had been concluded. The fact that they mortgage settlement is proceeding on schedule says this the Administration is, as before, trying to cover up its bank-favoring actions with better propaganda.

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  1. Orson Presence

    Matt was cool at the Exile, reporting in Russia.

    After a while, he goes native.

    Worked in Russia, maybe not in the US.

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  2. Susan the other

    I got the feeling that Schneiderman joined because the new task force fit his agenda which is to investigate securitization abuses to reassure the investing public. That goal will be at odds with Obama’s plan to further steal from the pension funds to cover bank mods and writedowns. So that makes me puzzle over Schneiderman – surely he knew this was the Obama plan. And then remember Holder never uses the word “criminal” and Obama said what the banks did was immoral but not illegal. A picture emerges of banks going to civil court, eventually after several years, and maybe paying a fine. But that will only be if they are still doing business as banks and have not been downsized and liquidated already. They’re gonna offload their mortgage liabilities to some new Maiden Lane, and keep their derivatives in dark accounts. If the new Maiden Lane cannot purchase the MBS trash because the bank can’t sell it because only the investors can but they are not organized in a manner to do so … then what? Who will eventually pay the investors pennies on the dollar when they are too worn out to care? Maybe that’s why the IRS is staying out of the picture – so that at least the investors can write off the loss. It is inconceivable that this stuff could ever reassure any investor.

    1. Phil Perspective

      Also, I am sure Schneiderman hopes to further his political career. Meaning he has hopes of being Governor, Senator or even President one day. So he has to pick his battles and how far he wants to push them.

      1. different clue

        Perhaps all the disappointed and betrayed people can help every Schneiderman opponent every way they can from now till forever . . . to at least get a measure of revenge.

  3. LeonovaBalletRusse

    Did “They” finally “get to” Matt? Did they blackmail him? Did they threaten to torture him or to “kill his relatives?” Did they make him an offer he couldn’t refuse? Is Matt soft-pedalling now to save his life, or his handsome face from sulphuric acid? What?

    We KNOW how the Agents of Organized Crime operate, don’t we? Weren’t we as a *population* taught by Tony Soprano just *How It Works* in USA!USA?

    Have mercy, Yves. You can be sure that *something* has happened to Matt.

    1. psychohistorian

      I think Matt may have smoked a bit too much Hopium before writing this column.

      We all want to have FAITH that these bozos are working in our best interest but it pays to verify….in the new order verification will be built in.

    2. Monster from the Id

      I doubt it’s anything so dramatic as that.

      It’s an election year, and Taibbi loves him some Obummer, just as he did in 2008. Taibbi’s Obamalatry is the #1 reason I allowed my ROLLING STONE subscription to expire.

    3. JC

      Taibbi has his moments of weakness. He wants to be a true believer of the left and that causes him to miss a beat sometimes.

      Having grown of age politically as a Democrat in the “let’s see how we surrender on this issue” days of Tom Delay vs various Blue Dog strawmen, my instinct is to stare at all the true believers and ask them if they have a fucking memory.

      But, it’s hard not to appreciate where the left is coming from when they truly, really want to believe that we didn’t get our asses reamed entirely.

      Taibbi was gotten to the easiest way possible: through his “I want to believe” emotional response.

  4. Tim

    You should take note Yves that Obama administration through FHFA is now arguing in front of the Massachusetts Supreme Judicial Court that the federal legislation that placed Fannie and Freddie into conservatorship “trumps” Massachusetts real property law in a case where Fannie was unable to provide the “note” in a foreclosure action.

    Here are the details:


    Prof Levitin field a brief challenging Obama/Fannie’s/FHFA position here:

    And this is what FHFA(Obama) has to say here:

    1. LeonovaBalletRusse

      Tim, it seems that Obama will stop at NOTHING in order to “stand and deliver” for his Capo de’ Cap’, whoever that may be.

      1. Tim

        Basically what the FHFA brief is saying is the MA SJC to has no right to “hurt” the federal government and Fannie by giving relief to homeowners. It is actually interesting because this is first time I have actually seen FHFA(the Fannie and Freddie conservator) intervene in an individual foreclosure action. They must be pretty scared of losing. I was actually afraid for a few days that Obama and co. had gotten to Prof Levitin too and he would not file a new brief against the government(Prof. Levitin in addition to posting here at NC in the past has been heavily involved in previous MA foreclosure cases)

    2. furiouscalves

      basically the FHFA says don’t enforce the law because it is expensive. also, the rules of the game do not apply when we saw so – and now we said so. they admit that title to land in the county is so screwed that we should just forget about it.

      wow. just wow.

      because their line in the sand is drawn at retroactive enforcement of title issues, there should now be a huge push for current owners to force a foreclosure just to litigate “prospectively” They have just given the green light for that to happen – not too savvy of an opinion IMHO

  5. Z

    Taibbi only recently … in the last half or quarter of 2011 … started taking off his blinders on obama and now he’s put them back on again.

    I like Taibbi and agree that he has done some very valuable work, but I’ve long suspected that he had some sources in the obama administration that he is interested in keeping as sources so he has willfully looked the other way on most of obama’s shenanigans. This all of a sudden full court press to pump up a settlement that once again covers the banksters’ asses makes me suspect that he’s valuing his sources in the obama administration over the truth and has retreated calculatingly from criticizing obama. Fuck, if he’s citing mike lux’s work he either doesn’t know mike lux or is purposely taking the obama spin hook-line-and-sinker … or at least feeding it to his readers.


  6. LeonovaBalletRusse

    “well aware of the abuses that LPS engaged in as their AGENT…”

    YVES, stay with that AGENT thing at every level. AGENCY is at the heart of every matter lodged in “the heart of darkness” that is our “financial system.”

  7. Doug Terpstra

    Love the “hopey dopey liberal” swipe. Gullible doesn’t even begin to cover it. “Fool me several hundred times …”

    Leonova may be right: they got to Taibbi somehow, yanked him back into the veal pen, maybe sent him pictures of his house from a predator drone.

    In Taibbi’s post prior to this one, “Is Obama’s ‘Economic Populism’ for Real?”, he concludes, “The administration is clearly listening to the Occupy movement. Whether it’s now acting on their complaints, or just trying to look like it’s doing something, is another question. It’s way too early to tell.”

    Way to early to tell? After three years?

    1. beowulf

      Excellent piece at the link-through Abigail. The commenter “Rebel A. Cole” makes a great point:

      Questions 31 -34, which deal with second liens, are HUGE issue.
      These five servicers own, as portfolio loans, more than two-thirds of the $600 billion in second liens held by the banking industry, but only about 3% of these are classified as “non-performing.” (More than 11.5% of the industry’s first liens are “non-performing.”) Hence, these banks have refused to modify their “current” second liens that are behind delinquent first liens, creating a huge problem for many restructuring deals.
      It sounds (33.2a) like servicers are going to get “credit” for writing down these second liens, which have almost zero market value. Look for the big banks to jump onto this bailout provision, although $25 billion is a drop in the bucket relative to their $400 billion exposure.

  8. kravitz

    Thank you to Yves and others who have not lost their minds. This screwy settlement is only about investors on the back end. It seriously throws consumers on the front end under the bus. Schneiderman’s involvement is only about securitization. There is no behavioral correction component. And fraudulent documents, perjury, tax evasion on the front consumer end are excused for pennies on the dollar. (Some will note, the Freddie Mac story was cited as one reason the settlement was so small – as in ‘there may just be more dirt on F&F suggesting they pushed banks to foreclose any possible way,’ as rumors go.) In any case, too many liberal groups were having orgasms for what others saw as dung in a pretty package. Or it’s becoming clear people who have investments want their investments protected, and don’t care about fraud against others. And some of those with investments are liberal bloggers. Looks like Obama outed a whole lot of greedy liberals. Dude is good at chess.

  9. Crazy Horse

    Looks like our boy Matt has been hitting a long lost stash of Ibogaine his mentor Hunter Thompson left behind—.

      1. Crazy Horse

        And if Jesus Christ were born this day in Chicago and groomed his entire life to be the first olive skinned president the resulting Candidate would closely resemble the current Delusionist in Chief.

        Candidates are manufactured, selected, and paid to serve their masters. Who they are is irrelevant in our political system. Who owns them is not.

        Mr. Ed indeed— better not let your wife know how little it takes to make you scream with joy!

  10. Jill

    I read that post with real dismay. I saw it picked up and used over and over again to give Obama street cred with his upscale, “informed liberal” voters.

    I can’t excuse this article by Taibbi. Matt Stoller took on the same information and actually did reporting instead of scribbling bizarre musings about how Obama’s really changed this time, gosh Mr. T knows it in his heart.

    You just explained the situation very well. Is there some reason Mr. T couldn’t have gone to you or some other person with expertise in this area and talked about what is really going on?

    Something is horribly wrong with what passes for liberal intelligentsia. I can’t tell if they are cult members or well paid hacks. Either way, this must stop. This should not be an opinion piece. It’s a fact piece and the facts do not back up bizarre fantasies about Obama’s miraculous change of loaves and fishes proportion! Unfortunately, this fantasy was quite useful to the intended audience. They remain firmly convinced they just had Bible fish and loaves!

    1. Lambert Strether

      “I can’t tell if they are cult members or well paid hacks.”

      Does it have to be mutually exclusive? In the poltiical blogosphere, our word for Lux is “access blogger.”

    2. Fiver

      My thought exactly. Why would Taibbi NOT talk to someone he knew or would certainly be familiar with who had real credibility (Yves being an obvious choice) before penning such a pile of goop?

      And in particular, why do it when Obama cannot lose an election against ANY of the Reps running absent a MAJOR F-up of some sort (huge scandal, a serious blunder re Iran, that order of magnitude)? The idea that anyone on the “left” ought to fear Obama might lose, therefore must support him is at this point completely ridiculous. No need to fear a Rep nutbar. There already IS one in the WH.

  11. charles sereno

    I too pay my respects to Taibbi. Yves’ last summary paragraph has a punch. Schneiderman’s posse, thundering off on the scent after the bad ones (what say, with 10 FBI deputies?) carries all our hopes (away). No need to wait for their return. Bless them, they’ll find a better reward.

  12. Jane Doe

    It comes down to the Liberal pathological need to seem reasonable even when the circumstances do not warrant it.

  13. craazyman

    It’s the solar activity we’ve all been reading about messing with the noouspheric vibrations.

    Lately I’ve noticed my thoughts have lost their snap and typical quick and potent imagery. Now It’s like thinking through cardboard, dull and slow. Or wandering around a clothing store lost under flourescent lights. Mr. Taibbi’s judgment must be suffering from this malady. It takes a lot of energy to resist it.

    I suspect this is a natural phenomenon that will subside once the sun gets over its business. Probably by the end of the week.

    1. Crazy Horse

      I’ve been wondering how a 70% haircut on Greek sovereign debt that is this week’s Euromiracle solution to the world’s problems does not constitute a credit event thereby triggering CDS payouts and bankrupting The Vampire Squid. Now I understand. Sunspots have created an alternate reality and we now exist in a parallel universe.

  14. TK421

    Somewhat off-topic, but has everyone read this piece by Joan Walsh? To me, it has to be seen to be belived:


    To Walsh, we need to leave the president alone, not because he passed a health care law or a stimulus, but because…well, I’ll let her explain it herself:

    ” Has there ever been a more decent, upstanding, all-American president, with his dog and his family and his Apollo Theatre song solos, treated more shamefully by his opponents?”

    1. Jill


      Thank you for that (I think)! I do declare! That poor man! All he wants to do is imprison the innocent, kill civilians, choose which citizens he’d like to kill, help the bankers steal more money, sell weapons to Bahrain against the protesters, oh and did you see his sweet old dog? Isn’t Obama just the best president you ever did see?

      Well inadvertently, Joan exactly nails the use of Republican candidates in the Obama campaign. To keep his followers in line.

      1. charles sereno

        Assassinating US citizens WITH due process would be more “decent,” but not decent enough for me.

      1. Aquifer

        When the underwater cameras were documenting the BP oil spilling into the Gulf 24/7, i suggested they put this up on a big screen – next to the organic garden, but strangely they didn’t take the suggestion ….

        1. Klassy!

          Well, you know it all balances out.
          Hey– have you noticed a pattern? Obama talks up “clean coal”– Massey mine disaster, seeks to expand offshore oil drilling– BP spill, touts nuclear- Fukushima.

  15. JL

    Why isn’t anybody talking about how the titles of tens of millions of loans are clouded, due to the robo-signing of fraudulent assignments and affidavits, not to mention MERS?

    If they let the banks/servicers off the hook for robo-signing, guess what – 60 million or more homeowners will NEVER be able to sell or refi their homes. (Not that there are many buyers these days…but if things eventually turn around someday, many will try to sell.)

    Furthermore, all these homeowners with clouded titles are at risk of some other (unknown) “owner” of their loan showing up with the original note some time later, who tries to collect a second time. Just think about all those loans sitting in securitized trusts, possibly double or triple pledged. Yet in almost every case, it’s the SERVICER who’s on title, not the alleged “real” owner.

    Furthermore, if a homeowner pays off their loan, and they have a clouded title, what exactly is the worth of the satisfaction of mortgage? These are often robo-signed too.

    For them to release the banks/servicers of liability for the robo-signing part is not merely a “technicality”…it has clouded the vast majority of titles in this country.

    Why isn’t anyone talking about this??

      1. JL

        Thanks. William Black should be in charge of this whole investigation. He would get things done right, and the criminals would go to jail.

        A girl can dream….right?

      1. JL

        Chain of title is definitely one of the biggest elephants in this very crowded room (there are several).

        I was pondering what life might be like in 10-20 years in the housing market. Imagine realtors saying to prospective buyers, “Trust me, you don’t want that property…its title is vintage 2000-2009, which was a very bad decade for titles. Let me show you this other one…”

        Sadly, I agree that they’re just kicking this enormous can down the road. I hope at least some of the AGs pay attention to this very important point, and won’t settle without it being addressed.

    1. Fiver

      One thing that gets me is how many people in the business on both sides of the private/government line were a knowing party to this crap. Literally tens of thousands of people HAD to know they were engaged in something ranging from gross fraud to willful, knowing negligence. Cripes,everyone actually handling all of this stuff had to be asking “What about the paper?” “When did we stop..?” “Why aren’t we…?” “What if…?” “Shouldn’t we…?”

      While some obviously did attempt to raise the alarm, the overwhelming majority did nothing. It is an incredible statement re what passes for “responsibility” or “accountability” in modern society.

      And I wonder how many other business/legal or other critical processes have been completely mangled in the haste to “eliminate paper” – especially if doing so hides the tracks.

  16. Max424

    Obama is coming with the change!!!

    Better lawyer-up, Wall Street maestros, ’cause Barrack the Bold Populist is gunnin’ for ya!

    And to all you nasty skeptics, who keep asking, “What’s this worthless twit been doing for the last three years?”

    He’s been secretly preparing! To make his move on behalf of the people!

    Note: Don’t you see? It is all about timing! Strike when the iron is hot? No, no! You strike only after the iron has been cryogenically frozen!

  17. bloodnok

    the problem with hardcore cynics is they usually have a nugget of “wannabelieve” buried under all that bile. taibbi seems to have exposed his wannabelieve once again. sigh ….

    1. Maximilien

      We all of us carry in our hearts “nuggets of wannabelieve”. They are part of the human condition. They make life bearable. Unfortunately, they are also what sociopaths like Obama count on and take advantage of.

      It may turn out that Taibbi’s support of Obama is not entirely innocent. Time will tell. But in the meantime, I don’t think he should be blamed for being human.

      1. CB

        Whenever I call Obama a sociopath, whoever I’m talking to goes silent, as if someone is lurking to overhear and report. I always ask, “Well, isn’t he?” And I always get agreement. Ordinary people, who have never met him and will never meet him, are afraid of him, which is telling.

        1. noe

          Afraid of Obama? Who? When and Where?

          I wish he was the tough Chicago Pol I voted for. He’s just a lawn jockey for Wall st who made some deals with Geithner and Paulson and Gates… to be the first black president.

          He had delusions of grandeur… and no balls.

          so afraid? no ..

          He is a MLK wannabee who made deals with devils because he didn’t believe Wisconsin housewives would vote for him in droves because we thought he was what we all dreamed of for black American men. Lovely family, kids … lofty thinker… and street fighter\.’


          1. Aquifer

            He is indeed the tough Chicago pol you voted for – straight out of that corrupt political machine …

            As for having no bslls – he’s got plenty of them, continually giving the finger to the base that elected him, confident that those “f*** retards” will do it again if he gives them a lollipop (making them suckers) and waves a “scary” Rep. in their faces, believing that he has convinced them TINA …

            But there is – Jill Stein ..

            Don’t let these guys fool us again ….

  18. Z

    Anything that covers for the blatant criminality of the banksters … and hence keeping in place the completely corrupt power structure in this country that is bleeding the world dry … is unacceptable on moral and even pragmatic grounds. They need to go to jail … they need to know that the law applies to them too … that they are accountable to the people … in order for this country to begin to right itself.


  19. matt weidner

    We all cried a tear when we realized that one of ours had been kidnapped, blackmailed, extorted by the Dark Side….please Matt, break free….we’re rooting for you. The terrifying thing about all this is just how deep and how catastrophic all this is…whatever the settlment, no matter how “good” or “bad” it is, we’re still all doomed…..

  20. Because

    For economics, it is a zero sum game. Keynesianism never survived the recession of 1973-74 and has been mutated into a figure far from its original shape. The Austrian school was crushed by the events of 1931 that refuted their philosophies, setting the movement back decades.

    What does that have to do with Tabbi? The banks aren’t the issue, it is the monied powers behind the banks. If the banks go under, so does their economic systems they been building since 1980 when they ushered Ronald Reagan, then Bill Clinton, Then Dubs and finally Obama into power. They are the real masters. Tabbi is hoping the powers are going to throw a crumb to the debtors and Obama made it happen.

    Naked needs to expand beyond banking to understand who runs banking. It isn’t the banks themselves. It goes deeper than that. The banks are the financial conducters to the current paradym holders. Much like labor was to the old masters in the post-war era or capitalist were to the pre-great depression era masters. Everything revolves around it. Who are these groups and who runs them? It is like still thinking all Democrats are still the same as the post-war variety. What was the Democratic party like in 1901. Does that party still remain as well? The inability to understand this is holding back conservation.

  21. Ed

    The same stuff you guys are complaining about, normally liberal writers going soft on a not-liberal administration that was part of the blue team, happened even more so during the Clinton administration. There weren’t as many bloggers around to call them on it.

    Though granted, you would think at some point what passes for the left in this country would catch on that the Democratic Party is not a good political vehicle for them (yes, even compared to the Republican Party; Republican politicians are more sensitive to grassroots pressure).

    On the settlement itself, once the decision was made not to have some version of FDR’s bank holiday and do a serious audit of the banks, the die was pretty much cast. I’m not sure what would happen if a state AG actually prosecuted a major bank and won in court. I suspect you would see emergency retroactive legislation making whatever they were convicted of legal, if the AG hadn’t been spitzered beforehand.

  22. Paul Tioxon

    I don’t see enough information to get into any fights, much less take issues with anyone since there are only trial balloons being leaked. Matt certainly, and I certainly want to see exactly what does come out in its final form, in writing. But I don’t see what the problem is in letting a sigh of relief in seeing that the worst dump truck load of crap has been possibly whittled down to a wheel barrow load.

    If all Yves and Matt and myself are doing is complaining to no effect, what is the point? I am interesting in bending the policy of state at least a little bit in the direction I would like to see it go and absolutely restrain it from the direction Paul Ryan would like it to be as of right now. If it looks like they are relenting, if it looks like they are being restrained, even a little bit, then maybe we are having an impact. That is as important as having total victory. And total victory in politics is little like the perfect spouse in marriage. They exist in Hallmark anniversary cards, and not anywhere else.

    I believe we are in a long term political struggle that will not go any easier if we attack ourselves with as great a force as we should muster to restrain the dogs of class war and minimize the convey of crap coming out of Washington DC, now, and in the future. Robo signing will be prosecuted civilly, but that is not exactly the commanding heights of capitalism, where we want to see the criminal prosecution for the systemic damage that is done to the social order. Skipping over the recorder of deeds in counties is not the problem of eroding the rule of law that caused our world to cave in. It is the small potatoes that you so frequently dismiss. I don’t believe Jamie Dimon is aware of the guy with the Nascar t-shirt signing his name fraudulently over and over, even if Mr Dimon signs off on all of his Sarbanes Oxley paper work. I do believe the trillions in derivatives, the synthetic CDOs and the like, the engine of systemic financial disaster, MERS, the fraudulent shorting of fabricated to failed securities for the Paulsons of the world is where we need to train our greatest efforts. But most of all, I want to wait and see just what is the final deal is in black and white, not just what the trial balloons are reporting may or may not happen.

    1. different clue

      What if the dumptruck isn’t full of “crap”? What if its full of finely milled anthrax? Should we feel relieved if the AG-Obama conspiracy has whittled it down to just-a-wheelbarrow load of finely milled anthrax? Well? Should we?

    2. Fiver

      As Yves and numerous others have been at pains to document, the proposed settlement figure circa $25 billion is a complete and total JOKE. Just like “repayment” of TARP was a complete and total JOKE. There’s no chance, zero, in turning this around until people finally let the full truth, the horror really, of the situation knock them to their knees – the scale, breadth, depth of corruption has contaminated virtually the entire US elite.

      There’s no need to fear some fascist Rep thug taking office in 2013. There’s already one in the chair – and he’ll be there another 4 years.

  23. killben

    If banks are signing on the deal and administration is also in agreement you can be sure that it is in the interest of banks and not people. a GOOD LAWYER WILL BE ABLE TO PICK THE RIGHT POINTS.


  24. Hugh

    We live in a kleptocracy. We know that our elites are acting in bad faith and colluding with the banksters. It was clear the mortgage settlement talks were a steaming PR pile months and months ago. Schneiderman rattled a few cages but he has always been a good Democratic party man. It’s an election year so he’s signed on to play footsie with the Obama Administration, thus showing what we already should have known, that he is another of a great many revolving heroes we have seen, that he is a Democrat, not a progressive, and that his allegiance is to the Establishment to which he belongs and not us.

    So there really is no reason for Taibbi not to know that the fix is in on all this stuff. There is nothing complicated or difficult in any of this. It is really pretty basic and fundamental. As Doug Terpstra says, the Obama Administration has been screwing us over right and left for 3 years. This is an election year and all of a sudden we are supposed to believe that any of this is legit. Taibbi’s article is another example of the bad faith I have been talking so much about. It is not whether he believes what he wrote or not. It is that he should have known, given all his past history and reporting on politics and economics, that both the Presidential commission Schneiderman was named to and the mortgage settlement talks are and always were frauds. Yet he went ahead and wrote his article anyway.

    We live in times where events like the Iraq war, the meltdown, the healthcare debate, and this election cycle give us a real opportunity to see who is who and what is what. The battlelines have been drawn. They were drawn by the 1% years ago but it is only recently that we in the 99% are really seeing them. It is a choice each of us must make. We stand with the 1% or the 99%. We cannot stand with both. We cannot as Taibbi and various sites and groups jump back and forth between the two. I think this is what Taibbi needs to understand and learn fast. Those days are over. He plays it cute with the Administration in this election year and his cred is gone, done, toast.

  25. drugstoreblonde

    Thank you, Yves.

    I felt my blood curdle while reading the Taibbi piece (more than usual; not sure what it is about glib writing/writers that gets the bile flowing).

    I’m relieved that a few journalists are refusing the wool-over-the-eyes treatment and drawing attention to just how raw a deal this is.

    I know that Rolling Stone feels obligated to re-write A Public Burning (a genius Coover novel, btw) every four years, but falling asleep at the trigger when it matters is unforgivable.

  26. Lloyd C. Bankster

    While Andrew Ross Sorkin, Ezra Klein, Roger Lowenstein, the entire staff at the NY Times, the entire staff of NPR, the entire staff of WaPo, etc, all sold out for peanuts,
    Taibbi was another story. He was not an easy journalist to buy off.

    Taibbi has high standards, and persuading him to give up those standards set me back $50,000 plus a one-year Platinum Membership to Aphrodite Companions Escort Service:


    As a result, the others (Sorkin, Klein, Lowenstein, etc) will now have to settle for $100 gift certificates to the Babes in Toyland sex shop.

      1. Lloyd C. Bankster

        Yeah, that’s the one. Looking over their product line, I might go as high as a $150 gift certificate to reward outstanding journalism.

  27. zeev

    why is the normally astute yves smith persisting in running a website dedicated to a lost cause…’the truth’?

      1. travizm

        probably has better triceps….

        and zeev your comment leaves a stain on my mind. Thanks for that! Maybe you should do this over and over and over………….and you may find you have the most protruding forehead after an eternity.


  28. Z

    Taibbi’s last two blog entries … just as he was FINALLY starting to see through obama’s schtick … were written like they came from a man that wanted to get invited to obama’s basketball games.

    Again, I like Taibbi. He’s a good writer and he’s done some very valuable work breaking down wall street’s criminality … at government sachs in particular … and putting it into laymen’s terms. I hope he takes any criticism of that piece and engages in a bit of introspection about it. He writes a lot of stuff and this is the first time that I COMPLETELY disagreed with what he wrote. What bothers me the most is that it wreaks of something that I used to admire Taibbi for having a paucity of: compromise.


  29. John

    Any system that is this complex needs to fail. That there can be so many fingers in the pie/dike/nose/wallet is absurd. That reasonably intelligent persons can barely wade through the multi-levelled analysis presented and commented upon here is sad. So, perhaps what we are experiencing and witnessing is simply failure of a complex system. Que sera, sera.

  30. indio007

    I don’t think the running of the statute of limitations has crossed his mind.

    Surprising Cenk Uygur actually brought up this very point , whichj of course almost floored my that someone in the lame stream media has half a brain.

    IRS is the Big Dog .
    Sniederman said on MSNBC that IRS is on the case as well. Well they had 3 years to make an assessment… too late now!

  31. Bravo

    Resources to investigate were likely the big issue in Schneiderman’s move. We all hope that would lead to a laser-like focus on what would be akin to going after the head of the beast……the big bank trustees who failed to provide legal standing to foreclose (see PSA agreements) on behalf of those who now own the vast majority of residential mortgage backed securities. Which of note, seems to be Fannie, Freddie, and the Federal Reserve. That is where Schnneiderman’s real leverage will lie. We would all like to believe that Obama may have finally offered up some of that hope that we have seen so little of this past three years. Given the level of skepticism he has earned here, though, he’s got a big hill to climb. But other than continuing to apply pressure and vocally support the process and demand accountability, what else can we now do or realistically offer? With Schneiderman, we now at least seem to have a seat at the table. Schneiderman’s strategy will surely involve giving the banking industry a choice between a meaningful and costly mortgage modification program, or have them witness to indictments of big bank trustee’s who oversaw a securitization machine rife with servicer abuse, investor (now taxpayer) abuse, and all too many foreclosures without legal standing.

  32. farm manager

    The record of the neconservative effect on the general commentarait in that period that was the aftermath of the events of 9-11 up to the invasion of Iraq should be a lesson here. And it may be that Matt understands that. I, along wtih everyone else here it seems, wish that he was calling for heads with no distinction as to whose they might be. But there comes a point which is not foreseen and not even recognized when it arrives that a line crossed becomes a trap door to manufacturalbe irrelvance.

    There are hair triggered mechanism in the right wings…neocons, old Birchers, WSJ apologists of all sorts and, of course, religionist cooperators and collaborators poised to jump when they feel that some invisible line has been crossed. Teh very same people and institutions that did the hard selling on the Iraq war. The timid if not complicit response to them from the mainstream altered and some cases essentially rendered useless any number of previously effective and widely read progressive jouranlists. People you read in the pages of your local paper or the weekly news mags now relegated to narrow web readership. I’d rather not lose Matt Tiabbi over that

    The necessary care taking can and has been consistently seen in Obama. Job one has been to make sure that neither of 2 of those lines are crossed. The “socialist”, and the “angry black man”. Painful to watch if you’d like fro this black man to get angry and push a progressive economic agenda firmly. But doing so when pulls the pin on the grenade?

    My limited experience has shown me that dumb-ass middle class liberals are more likely to be worried about him doing that than principled moderate conservatives are. As we continue to pay the price for the Clintons and the DLC having been able to pass as progressives.

    BTW…this series of propossed agreements and now this task force are pure useless cow shit and I know cow shit. The panel can’t work….no soft approach measures can, as Randall Wray lays out well:


    But then, like everything that is tried, if held up to the light of:


    what does?

  33. John Regan

    “But ex Masto, there is a remarkable lack of willingness among attorneys general and regulators to dig hard into what the banks are doing and see where that leads.”

    Well, of course there is. You’re putting your “career” at risk. And not to be melodramatic, but quite possibly your life, too.

  34. John Regan

    Yves, this is great stuff, but let’s go a little deeper.

    This economy is like a game of musical chairs that depends upon the music never stopping. The mad scramble for the half-chair that sits at the bottom of it all is everyone’s nightmare, but particularly the people running the game.

    They have to keep everyone paying in, to keep the music going. “Participating”. This is their mindset. They haven’t yet grasped that for far too many people among the 99% or whatever, participating makes no sense at all because they’re locked into a losing hand.

    They can’t change that reality without making the 1% give up some power and influence, but guess what? The 1% will never do that. They are jealous of their position and won’t give an inch, and why should they?

    You’re right, the robo-signing is key, because it’s the key to more foreclosures and evictions. The 1% don’t want more foreclosures and evictions, they want the credible THREAT of foreclosures and evictions, because the threat of homelessness, they believe, will keep people “participating” even with their pathetic losing hands, on the theory that if they don’t participate they will lose even more and be out on the street.

    This is how the 1% “motivates” the 99%. It is the financial equvalent of the master’s whip, and a real investigation into robo-signing would take that whip away, or at least threaten to do that.

    We’re really at a tipping point, though. The 1%’s instinct to clamp down and oppress is finally getting some resistance. It could be that the more they push, the more they are going to experience push back.

    That’s why the Occupy thing is so interesting to me.

    1. different clue

      So . . . how do we of the 99 begin to de-participate? Those of us who can? Various forms of voluntary standard-of-living reductions? Partial spending boycotts and National Consumer Slowdowns? Refusal by some to buy houses even if they could? Etc? Etc?

      How do we shrink the economy selectively from the top down, so as to shrinkwrap the shrinking economy around the heads and faces of the engineers and beneficiaries of this fraud-regime? And choke off their financial air supply?

      If no justice will be found through legal enforcement system channels, can weakening-the-class-enemy be found through diffuse ecnonomic-combat channels and methods? Is the question worthy of some actual posts here? Soliciting whole threadloads of ideas for effective revenge? Strictly non-violent and within the letter of the law of course?

  35. Aquifer

    If you want the Dems to “reform”, challenge them at the polls, from the Left. If Reps are the only challenge they fear, they will continue to go Right to co-opt them in the money game as they have been doing for decades. If they “reform”, great, if not let them be consigned to the dust bin of history as were the Whigs.

    This challenge must be more than a threat, it must be realized in numbers at the polls and those numbers must continue to grow and not be sidelined or eroded by charges of “spoiler”, or “lesser of 2 evils” thinking as they have been. Nader started it in ’96, it grew in ’00, then got sabotaged by a Dem establishment that recognized the threat he posed – sabotaged by introducing those simple memes – and we tucked our tails between our legs and hid under the Dems skirts, where we promptly got crapped on again.

    This will not be done “overnite” in one election cycle, but it is the only way. We can march ’til our shoes wear out, e-mail our fingers down to a nubbin, call ’til our ears fall off, and blog ’til our brains melt down, but, if at the end of the day, we do not take what they prize and need the most, our votes, away from them AND give them to those who truly represent our needs and aspirations, it will be like spitting in the wind –

    At this point, politically speaking, the rock is at the bottom and Sisyphus is out to lunch …

  36. Aquifer

    As you say, it is difficult to take issue with someone whose writing you are a fan of, but sometimes you just have to, huh … :)

  37. sgt_doom

    Great blog post, Madam Smith, great post!

    There are some superior reporters out there, and certainly Taibbi is one of them, but sometimes they are as easily taken in as the rest of us.

    I dearly love Seymour Hersh and respect his great reportage, but recently I heard him remark on the Stuxnet, claiming it wasn’t really that effective as it did cause a week or so of problems with China and India, but they readily fixed it.

    Of course, that’s an opinion without examining the data!

    Stuxnet was site-specific seeking an exact configuration of SCADA and process systems from five specific companies: the German multinational Siemens, a Finnish company, a Dutch company and its subsidiary, and an Iranian company.

    Only then, was it extraordinarily dangerous.

    I fear Taibbi’s recent commentary, like Hersh, is based more on supposition and wishful thinking……

  38. Mel

    The glimmer of hope here is that Schneiderman is positioned to carry off an incandescent resignation from that federal commission, in full view, when it’s obvious that the commission isn’t working. That could happen, right?

    The other quibble is that selling purple unicorns to Martians is actually a good thing. It’s the key to the export-led recovery that everybody on earth is looking for.

    If the Martians will buy purple unicorns, I can do some business, cut some invoices, sell my receivables at a discount to a bank. The bank can make CDOs …


  39. Bravo

    Speaking to Yves’ point relating to 2nd liens, the last point of the latest “President’s Plan to Help Homeowner’s” suggests the following:

    “Offer Principal Reduction Incentives for Loans Insured or Owned by the GSEs: HAMP borrowers who have loans owned or guaranteed by Fannie Mae or Freddie Mac do not currently benefit from principal reduction loan modifications. To encourage the GSEs to offer this assistance to its underwater borrowers, Treasury has notified the GSE’s regulator, FHFA, that it will pay principal reduction incentives to Fannie Mae or Freddie Mac if they allow servicers to forgive principal in conjunction with a HAMP modification. “

    Is it too presumptuous to expect that there will be no taxpayer funded principal reductions on GES loans where bank owned second liens exist, until such liens are wiped out altogether? Otherwise, this will be yet another taxpayer bailout out of banks disguised as help for homeowners? Certainly, 2nd lien owning banks should pay before taxpayers (GSE’s). And if the taxpayer still has to take the hit in the short term in order to help revive the economy in the intermediate term, at least give the taxpayer 50% of the long term appreciation in the house via a rewritten participating mortgage (10 year term, 30 yr amortization, at the current market rate), just consideration for having made the mistake of underwriting and failing to regulate the housing finance industry.

  40. different clue

    It’s too bad that Mr. Taibbi and Mr. Ames aren’t friends anymore. Otherwise, Mr. Ames could perhaps get Mr. Taibbi to read this article.

  41. Fiver


    I’d say this is one of the best posts I’ve read since I started following NC. If Taibbi does not publicly and decisively climb down from this one there’s no option but to write him off.

    It is CRUCIAL to know whether or not someone who is widely perceived as a “standard bearer” is, in fact, the genuine article. What you’ve said here (and some others have as well) has placed a huge ? mark over Taibbi’s head.

    There can be no “cutting slack” with either the Admin or Taibbi on this – it’s way, way too late for any more stupid games.

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