The level of complaints about servicer screw ups in the HAMP program and more recent horror stories from borrowers not seeking loan modifications confirms something we’ve noted on this blog: that servicers fee structures aren’t set up for them to handle the workload associated with high volumes of foreclosures. Accordingly they devised processes like robosigning, […]
Read more...Kangaroo bounce mechanics snapped BBC. The article explains why this is worth studying.
How the penis lost its spikes Nature (hat tip Richard Smith)
Recent Earthquakes in Central US (hat tip reader bob). You tell me…
Text messages to replace stamps in Sweden The Local
Dalai Lama ‘Retiring’ The Diplomat (hat tip reader furzy mouse)
Interrogator in the Assange case friend with woman accusing Wikileaks founder Expressen (hat tip Clusterstock)
The folks at ForeclosureFraud were kind enough to pass along an archival document that I thought readers would enjoy.
This Moody’s report illustrates what the prospect of higher fees for securitization-related ratings did to rating agencies’ quality of analysis.
Read more...After claiming repeatedly in the media that the fight to end public worker bargaining rights was all about the budget, Governor Walker stripped the collective bargaining provisions out of the budget (which required the participation of at least one Democrat to have a big enough quorum to satisfy Constitutional requirements for fiscal votes) and the Wisconsin legislature passed it separately.
Details from David Dayen:
If you’ve been following along in my last post, you know the news: the Wisconsin State Senate rushed through and passed a bill that strips collective bargaining rights from most public employees. The vote in the State Senate, entirely composed of Republicans, was 18-1; only moderate Dale Schultz voted no. The budget repair bill was split at the last minute, cleaving the “non-fiscal” anti-union piece from the fiscal components of the bill. The non-fiscal piece did not require a quorum, so the Senate was able to pass it.
This may not pass muster constitutionally in Wisconsin. Here is the germane language:
Read more...Richard Koo’s book The Holy Grail of Economics is the definitive work on what he calls “balance sheet recessions”. He explain, among other things, why QE2 is not likely to be successful.
Read more...Elephants know how to co-operate BBC
What Pi Sounds Like College Humor
Identifying ‘Anonymous’ Email Authors ScienceDaily (hat tip reader furzy mouse)
Sexy Ruses to Stop Forgetting to Remember Maureen Dowd, New York Times
New UN Report on How to Feed the World’s Hungry: Ditch Corporate-Controlled Agriculture AlterNet (hat tip reader furzy mouse)
Libyan central bank chief surfaces Financial Times. This is comical in a Graham Greene-ish way, and the poor FT has to play it straight. The head of the central bank has been missing in action, but he’s come up for air in Istanbul, saying it’s easier to do his job there. But he’s still really hard to reach. Must be that Turkish phone system.
In a move not noticed much three weeks ago, Bank of America announced that it was segregating its crappy mortgages into a “bad bank”. It got more attention today by virtue of being discussed long form in an investor conference call (see related stories at Bloomberg and Housing Wire).
The use of a “bad bank” is strongly associatied with failed institutions. Some of the big Texas banks that went bust in the 1980s (Texas Commerce Bank and First Interstate) used “good bank/bad bank” structures to hive off the dud assets to investors at the best attainable price, and preserve the value of the performing assets. The Resolution Trust Corporation, the workout vehicle in the savings and loan crisis, was effectively a really big bad bank. The FDIC is (and I presume was) able to sell branches and deposits pretty readily; the remaining bad loans and unsellable branch operations reached such a level that the FDIC was forced to go hat in hand to Congress and get funding while it worked out the dreck. A similar structure was used in in the wake of the banking crisis in Sweden in the early 1990s.
I am told by mortgage maven Rosner and others that this move is not meant as a legal separation, but a mere financial reporting measure, so that BofA can declare, “See, we do have this toxic waste over here, but we are chipping away at it and we’ll have that resolved in some not infinite time frame” (the current talk is 36 months) “and look at how the rest of the bank looks pretty good!.”
So I may be accused of being cynical, but I read more into it than that.
Read more...Aha, the level of financial innovation spurred by super low interest rates is starting to have that “I love the smell of napalm in the morning” feel to it.
The Financial Times reports that there is a frenzy to create synthetic junk bonds, ostensibly to satisfy the desire of yield-hungry investors. Any time you see a lot of long money flowing into synthetic assets rather than real economy uses, it’s a sign that Keynes’ casino is open for business (“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”)
The author compare this development to that of the asset backed securities CDO market, one of our betes noirs which blew up spectacularly in the crisis. There are some similarities and differences.
Read more...By Tom Adams, an attorney and former monoline executive
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.
Read more...I’ve pointed out how effective a non-negotiable posture can be, at least until the other side pulls out its ammo or threatens to walk from the deal. Most people in negotiations go on the assumption that the other side is reasonable or at least sincere (even if sincerely deluded) and will offer concessions on the assumption the other side will reciprocate.
The poster child of the usual outcome of offering concessions to a party who is non-negotiable is can be summarized in one word, as in “appeasement” circa 1939. And the ridiculous part is that the banks are being allowed to cop a ‘tude when the other side holds all the cards.
Let’s get this straight: this “settlement” should not be a negotiation. Virtually all the items in the 27 page outline of mortgage settlement terms that was leaked yesterday simply restates existing law or existing contractual obligations. If the officialdom wants to rely on mechanisms beyond the courts (since some judges are more pro-bank than others, which can produce the dreaded disease of “uncertainty”), the same results could be achieve by rulemaking without regulators or state attorneys general providing any releases from legal liability to the banks.
As banking/mortgage expert Josh Rosner said in an e-mail to clients:
Read more...Molten salts for efficient solar thermal plants PhysOrg
Scientists set NASA space priorities; can it carry them out? NetworkWorld
WikiLeaks, Internet in record Nobel Peace field Reuters (hat tip reader furzy mouse)
UK court agrees Assange extradition to Sweden Reuters (hat tip reader furzy mouse)
American Banker posted the 27 page term sheet presented by the 50 state attorneys general and Federal banking regulators to banks with major servicing operations.
Whether they recognize it or not, this deal is a suicide pact for the attorneys general in states that are suffering serious economic damage as a result of the foreclosure crisis. Tom Miller, the Iowa attorney who is serving as lead negotiator for this travesty, is in a state whose unemployment was a mere 6.2% last December. In addition he is reportedly jockeying to become the first head of the Consumer Financial Protection Bureau. So the AGs who are in the firing line and need a tough deal have a leader whose interests are not aligned with theirs.
Moreover, Miller’s refusal to discuss even general parameters of a deal goes well beyond what is necessary. He knows that well warranted public demands that a deal be tough will complicate his job, but it also does the AGs whose citizens have been most damaged a huge disservice. Pressure on the banks from the public at large is a negotiating lever they need that Miller has chosen not to use.
he argument defenders of the deal make are twofold: this really is a good deal (hello?) and it’s as far as the Obama Administration is willing to push the banks, so we have to put a lot of lipstick on this pig and resign ourselves to political necessities. And the reason the Obama camp is trying to declare victory and go home is that it is afraid that any serious effort to deal with the mortgage mess will reveal the insolvency of the banks.
Read more...By William Hogeland, the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History who blogs at http://www.williamhogeland.com. Cross posted from New Deal 2.0.
Ordinary 18th-century Americans fought for fair access to small-scale credit and usable currencies. Big finance fought back.
Calling modern banking “a widespread fraud,” Rob Burns wants to push the finance industry out of everyday lending. A candidate for Congress in the fourth district of Illinois, Burns proposes using federally insured savings as a public fund for mortgages, student loans, consumer credit, business bridge loans — the kind of borrowing engaged in by ordinary Americans, not entrepreneurs. On a different finance reform front, the technology pioneer and culture critic Douglas Rushkoff has been exploring complementary currencies. Rushkoff envisions new monetary units, exchanged via handheld devices, helping to break what he calls “the money monopoly.”
Far-reaching ideas for getting money, currency, and credit to flow more democratically through the American economy would probably draw all-purpose condemnations like “socialism!” from the rightists led by Sarah Palin and Michele Bachmann. Liberal high finance experts too might find such proposals dangerously chaotic. But regardless of practicalities and politics, it’s useful to recognize that ideas like Burns’ and Rushkoff’s have deep roots in the American founding period.
Read more...Time Magazine has developed a list of best financial blogs. Naked Capitalism is on the list, as are the other usual suspects plus some names readers might find surprising.
Each blog gets a mini-review. Ours is here; we also reviewed The Big Picture.
Read more...Coming to a state or city near you, and quite possibly the one you are in….bankers bearing promises of solving budget woes by selling public infrastructure to private investors. This is in best case scenario makes about as much sense as using your house as an ATM to pay expenses, and in a worst-case scenario, is more like burning your furniture to heat the house. But desperate times lead to desperate and often short sighted measures.
Reader May Sage pointed us to this Truthout article, which we recommend reading in full. Key extracts:
Read more...