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By David Dayen, a lapsed blogger, now a freelance writer based in Los Angeles, CA. Follow him on Twitter @ddayen
Before entering the political blogosphere, I spent my career in television post-production. I could tell you a lot about donut holes and fit-to-fill motion effects and light rays and keyframing and Frankenbites and Telecine and AniMatte and corner pinning and hundreds of other bits and pieces about the process. I probably wouldn’t have had much for you on a collateralized debt obligation or the overnight repo market.
When the financial crisis hit, I was largely concerned in my blogging with electoral politics and ideological hand-to-hand combat, sprinkled with a hint of policy. In preparing for this post I looked back at my personal blog for the first week of December 2007, the first week of the Great Recession, with the housing market meltdown in full swing. There were posts about FISA, torture, Iran intel, Iraq funding, an imminent Writer’s Guild strike, global warming, and the 2008 election. I did have one housing post – a George W. Bush hit about the fact that the “Hope Now” hotline for homeowners (the initial governmental response to rising foreclosures) was mistakenly routed to the “Freedom Christian Academy,” a faith-based education company. I noted in a postscript that the Hope Now program was only eligible to those who were current borrowers and not underwater – meaning virtually nobody in need. Call it a sign of things to come, both for the political establishment and my own writing.
Point being, when the economy collapsed, I was your garden-variety liberal blogger. I obviously recognized that the causes of the recession represented one of the central concerns of our time, and I wanted to learn more of the details. But I had to build an education on these issues largely from scratch. I’ve heard it said that a few years of blogging is worth a master’s degree in public policy. If that’s so, Naked Capitalism is the 3rd-year class everyone wants to take. It’s indispensable as a resource for anyone looking to get up to speed on the darker recesses of our financial machinery. It offers no-spin assessments of not just Wall Street, but the regulators and politicians who have thus far refused to break the oligarchy that has strangled our economy (probably because they’re members of it in good standing).
This is critically important. I wouldn’t be doing what I’m doing today without the presence of sites like Naked Capitalism to help guide the way. People don’t come to an opinion about banking fully formed. It requires not only a baseline of knowledge, but a skeptical perspective on the ever-present industry talking points, backed with specific examples and rigorous analysis. Sadly, while this should be readily available, you practically cannot get it in our current media landscape, where Bank of America sponsors policy breakfasts and reporters are often constrained by the demands of access and the editorial desires for happy advertisers and corporate solidarity. For someone operating from a position of relative ignorance, they had to turn to alternative sources of news and opinion. That’s especially true because finance is by its nature inscrutable, and those who seek to continue picking over what’s left of the middle class use that complexity to their advantage. Ultimately, what’s going to change the public consciousness and create a critical mass on these issues is a well-considered argument, well-told. That describes Naked Capitalism well.
As we’ve seen, the blogosphere isn’t in such good shape these days. Google has undercut the online advertising funding model, and writers are struggling to combine financial security with editorial independence. I can say with experience that the freelance market is, to put it mildly, hazardous. Websites are experimenting with new funding models that actually aren’t all that new; it’s mainly a distributed, populist version of the old concept of patronage. By giving a donation, you announce that this project has value, that it’s worth something to you. The alternative is akin to the patronage archetype of the Middle Ages, considering the billionaire purchases of news outlets, mergers and acquisitions, and the hollowing out of what made the new publishing tools of the Internet, for a brief period, something special. By donating, you consent to opening up the range of debate, to keeping the flickering spirit of alternative media alive, for the worthwhile cause of chipping away at the blackened heart of the banking industry, and rediscovering an economy that works for everyone.
When Yves asked me to contribute to the site from time to time, my first thought was “And what would you have me do?” I had been slotting in behind her on banking, securitization and housing issues for many years. Hopefully I’ve managed to produce something worth your time this year. To be honest, after (believe it or not) over 20,000 blog posts since 2004, I was looking forward to focusing my energies in a different fashion. There was really only one opportunity that could have changed my mind, and you’re reading the fruits of that right now.
It’s been a pleasure becoming part of this community. Naked Capitalism has become a place where thousands of us come together, some experts in finance, some experts in politics, some just having problems with foreclosures or other types of debt. We share information, scrutinize the accuracy of what the media is feeding us, and work to formulate a more accurate reading and use that to explore better approaches to public policy problems. So join the rest of us in throwing in $50, or whatever you can afford. Thank you.
US readers will probably be able to come up with localised example of the newest — and stinkyist– revolving door to open up between big finance and the MSM (a root cause of which is the problem highlighted by David above) but here is a particularly barf-inducing example from England:
One glance at this lady’s CV précised in the FT article shows how irredeemably conflicted the MSM is when it comes to covering financial issues. While freedom of the press is a good comfort blanket, there are alas too many journalists willing to sell out and shill for the banks.
When I first read this piece of tripe, I asked myself “where’s the grift?”:
I knew there was one (reliance on an appallingly constructed market research survey; a “productivity” measure in the healthcare segment where “high efficiency” means you can leave in a body bag http://www.theguardian.com/society/2013/feb/06/mid-staffs-hospital-scandal-guide)… I at the time couldn’t work out the what and the why.
Oh, now I understand.
Cut through the bullshit!
“Consider this analogy: In a hypothetical casino card game the house takes 5% of every pot. If 10% of the money at the table is on average played on each hand, then the house takes 0.5% of the money in the game on each rake. After 200 hands, 100% of the money that is on average at the table has been taken by the house. The only way the game may continue is to have new money come to it. The winners, of course, smell the new blood and even anticipate it greedily. And the biggest winner over a time is always the house. Until the free market ideologues took over, the biggest difference between a casino bank and finance was that the gaming house took a bigger cut of the handle.” from “How Does That Work.” by A G Kaiser https://www.createspace.com/3852916
We’ll never get the corruption out of finance. All usury and rents are parasitic and can only concentrate wealth. They are a threat to the survival of the human race. What we need in common we must do in common on a non-profit basis. We must eliminate the threat or it will eliminate us. It is the enemy of all.
Profit should be derived only from wealth-producing activities.
Yes. Finance as a utility, not as an economy.
Interestingly the financial sector recently passed the tech. sector as the largest component of the US GDP.
How about money as a utility?
How about regulating utilities?
How about liberty and justice for all?
Thanks to Dave Dayen for his many valuable contributions to NC.
I’m old. I don’t understand the Twitter machine. I tried to just write you an “old fashioned email” over the weekend, and could not find how to go about doing that. So, I found you here and it’s still early in the morning and you’re all mine now. (Evil laugh ensues….)
Okay. In response to your post–I was a housewife when the financial crisis hit. So, my occupation was way less germane to financial collapse than was your background in tv post-production. But I have learned a lot by hanging out with you folks here on this humble blog, which is hosted by such a fine and humble blogger. Indeed, I am eternally grateful for Yves, for this forum, and for N.C.’s truly wonderful collection of contributors.
(@Yves–I promise I will put money in the jar the second we get to the point where we’re not running out of food at the end of each month. If you lived closer–I would totally cat sit for you for free.)
Back to @David. Are you aware of the Ocwen Loan Servicing LLC / OneWest deal in which (one of the Ocwens) is set to buy a bunch of old IndyMac dreck from One West? (UPB $78 Billion for approximately $2-$3 Billion.)
Fitch is sorta rating the deal, (from the standpoint of the Securities Holders, I guess?)and has agreed to write the 150+ confirmation letters required for the deal to go through.
I spoke with a surprisingly high-level Fitch (Manager of Structured Finance) last week, and I tried to explain/question/whine about the dreck that was left in the IndyMac trusts. This Fitch person was, actually, quite awesome in that she was very generous with the time she spent on the phone with a completely random housewife. (The Moody’s analyst was, too, by the way.)
The Fitch person worked for the FDIC for long time, and seemed to be well-aware of the IndyMac “dreckage.”
But one of the things that the Fitch person said really stuck out at me. She said that, in rating the deal, Fitch is not permitted access to loan-level information–for privacy reasons.
But the weird thing is that I–a lowly housewife from Georgia–have tons of loan-level information on these old IndyMac Trusts just through publicly-available land records here in GA. The loan numbers, names of borrowers, amount borrowed, property addresses, assignments, foreclosure information–all is on the Georgia land records website.
I am particularly interested in IndyMac’s Trusts for whom Deutsche was the Trustee. Through vigilance, I have managed to get the Deutsche Securitization and Trust distribution reports for the past couple of years as they pop on and off the internetz. Those distribution reports indicate the original loan numbers and which state the home is in, once the home is sent to REO or has been liquidated. So the GA ones are easy for me to find. (And they are indeed fugly, btw!)
So–I wanted to know what you thought about:
1) The ratings agencies “not being able to access” publicly available info on the properties that supposedly underlie these trusts.
2) I also wanted to ask you if you had heard of an EAT,(Exchange Accommodating Titleholder) which is an IRS-defined term that is apparently a “Reverse 1031 Exchange” (not to be confused with a deferred or delayed 1031 exchange), and if you think this is partially what is driving the shadow REO inventory.
3) And I would also like to solicit your thoughts (and share mine)on the idea of an Ocwen entity buying the Mortgage Servicing Rights to so many home loans which, no matter the status of the loan–Ocwen now has a subsidiary to benefit from said status. (Ocwen’s subsidiaries, holding companies, VIEs, and spin-offs, such as HLSS, Altisource Asset Management Corporation (AAMC), Altisource Residential Corporation (RESI), which is a “VIE”, and NewSource (Ocwen’s new self-funded, off-shored title insurance and reinsurance company, etc.)
Ocwen has positioned itself and/or one of it’s many subsidiaries to benefit from every possible scenario of loan status–current, delinquent, rolling delinquent, default, HARP/HAMP modified, BK, foreclosure process, REO, or liquidated REO.
One of the Ocwens is still in the business of mortgage servicing, but the Ocwenites have clearly stated in various filings with the SEC that it is now also in the business of buying NPLs (non-performing loans), not just the MSRs to the NPLs.
In other words, they are now actually buying “future” NPLs when they buy the MSRs. Ya know–sort of like a few vultures all chipping in to buy a whole zoo full of really weak, sickly, chronically ill, dying, and dead animals.
From a consumer standpoint, I am not comfortable with a mortgage servicer (indirectly through a subsidiary) benefiting from a loan that ends up in delinquency, default, modification, BK, foreclosure, or REO, or liquidated REO–re-sold or rented.)
And we would be naive to think that Ocwen does not have algos that predict the most “profitable-to-Ocwen” path for each loan to ultimately go.
I doubt that any of this is illegal–but it is certainly heading in the direction that I think usually doesn’t work out well for anyone except for those very few at the very top who profit from such arrangements and inside knowledge.
But–I would like your opinions and I can forward to you little slices of SEC statements and graphics, etc. that shed light on what seems to be going on here. Like I said–doubtfully illegal–I just don’t like it, and if it’s gonna happen–it should happen in the light of day. IMHO.
Okay. Time for me to go Swiffer Wet Jet. And stuff.
Hope you folks all have a very Happy “Guy-Who-Didn’t-Actually-Discover-America” Day!
Thanks for this interesting info Pearl. “Fitch is not permitted access to loan level information for privacy reasons.” That sounds a lot like the rules imposed on the reviewers for the Foreclosure Review fiasco. The land records in GA sound typical, they contain all the info except who the beneficiary is to the deed of trust or whatever instrument of mortgage. So the thing that is being hidden is the chain of title beginning with the first allonge, it sounds like. And this is all very MERS sounding. It wouldn’t surprise me if some new regulation were imposed on this title mess that precluded ever knowing how a mortgage originated and travelled in and out of MERS “for privacy reasons.” Sounds like a job for the NSA. Except that they are probably in cahoots. And if Ocwen’s new title insurance company was offshored there must be a “privacy” connection as well. Correct me if I’m wrong, but didn’t they used to call this stuff racketeering?
Thanks, Susan The Other!
I don’t know if these SEC links will work for you, but I always find some of the waaaaay funnest stuff on the pages labeled “graphics and images.” (This particular filing is for HLSS’s graphics and images.)
Here are the graphics and images for recent Altisource Residential Corporation graphics and images:
Here are the Altisource Portfolio Solutions S.A. graphics and images:
And for sheer entertainment–the Ocwen patent that is their “proprietary” technology that investors shell out the big bucks for. (Spoiler Alert: A computer-generated script based upon a decision tree for low-level employees to read from.)
Hah! “Psyched” you out of your house! (No other mortgage servicer has a patent for THAT, Wall Street!)
Oops! Forgot to link to their patent.(Ahem. “Proprietary technology.”)
Per Google Patent search for (Ocwen/Altisource Portfolio Solutions.)
Housewife and “pearl of a girl.” (David and Lisa)
I miss you two! :-)
What a fabulous essay from David (and Pearl’s comment was pretty cool as well). I’m a Brit relatively new to this ccountry. Still a long way from even being a fluent speaker of American! Came here to Southern Oregon by way of Arizona and Mexico. (It’s OK, I’m a legal migrant!)
Anyway, started blogging in 2009 when still living in Mexico simply because I needed to vent my frustrations about a world that seemed madder by the day. The blog title arose from the observation that dogs offered mankind a true example of the ways man has to live to stand any chance of surviving as a viable species. As I was living with 16 dogs at home there was no shortage of learning opportunities! We are down to 9 here in Oregon; 3 of them asleep on the bed while I scribble away.
Can’t recall when I came across Naked Capitalism but everything you say David is spot on. What Yves is achieving with her team of authors is incredible. And I have ‘put my money where my mouth is’ by mailing a modest donation to the cause about 10 days ago.
Blogger, author, writer, or not. If you are an NK reader support the need for free expression – more vital now than ever before.
OK, time to get up!