Category Archives: Banking industry

Quelle Surprise! Fed Sees We Have a Big Mortgage Problem

It certainly is gratifying to see the Board of Governors of the Federal Reserve, via a paper released on Wednesday, “The U.S. Housing Market: Current Conditions and Policy Considerations,” (hat tip Calculated Risk) finally acknowledge that US has a mortgage/foreclosure mess that is not going to go away by virtue of QE or other efforts to goose financial asset prices. However, just as the Fed was late to see the global housing bubble (even the Economist was on to it in June 2005), so to is it behind the curve in its take on the housing problem. This paper at best constitutes a good start, when, pace Churchill, the Fed is at the end of the beginning when it really needs to be at the beginning of the end.

However, before we get to the housing/mortgage market issues, we wanted to focus on a political element of the paper which may be more important that its analytical content. The Fed is openly crossing swords with the FHFA.

Obama to Make Recess Appointment of Richard Cordray to Head Consumer Financial Protection Bureau

I have not seen this hit the news wires, but got this via Lisa Epstein, in turn from Our Financial Security, which is part of the Center for American Progress, which is a heavyweight Democrat think tank (with of course a whole list of talking points to rebut Republican kvetching about the use of a recess appointment).

This move raises the obvious question: why didn’t Obama make a recess appointment of Elizabeth Warren?

Amar Bhide: Backstopped Banking Must Be Boring

Amar Bhide, a former McKinsey colleague, one-time proprietary trader, and now professor at the Fletcher School, takes a position in the New York Times today that goes well beyond Volcker Rule restrictions. He argues that all financial deposits need to be guaranteed, and as a result, what is done with those deposits needs to be restricted severely.

I could not have said this better myself:

Win for MBIA in Ruling Against Countrywide (Updated: Maybe Not Really)

Bloomberg reports that Countrywide took a major setback in a suit against it by bond insurer MBIA. MBIA has alleged (quelle surprise!) that Country misrepresented the quality of loans it had MBIA guarantee. From Bloomberg:

Michael Olenick: Is Shadow Housing Inventory Vastly Larger Than Widely Believed?

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)

The turn of the year is the time to make predictions and projections. I’m optimistic that the tide will finally turn for the American middle-class, suffering silently in a one-sided economic war. I don’t think this will be because of altruism, or even justice, but rather simple pragmatism. Specifically, I believe that parasitic financial institutions have pushed the boundaries so far that they’ve put their host, the middle-class itself, at risk. One new bit of information suggests the housing front is in more perilous shape than most pundits believe.

More Bank Chicanery: Double Charging on Escrow Fees

As we have reported repeatedly, based on independent reports from numerous consumer attorneys and investors, servicer engage in numerous form of petty larceny which they pass off as “mistakes” when caught out. The problem with this excuse is that servicers are set up to be highly routinized environments, so any reasonably widespread error is not a mistake, but policy. However, it is remarkably difficult for borrowers to get servicer internal records, even in litigation, and even then, borrowers need to incur considerable costs (as in hire an expert witness) to dispute the accuracy of the bank’s charges.

Despite the general “missing in action” posture of bank regulators, one office has taken a tough stance of abuses, namely, the US Bankruptcy Trustee.

Is the OCC the Most Corrupt US Bank Regulator?

As much as I’m fond of the name “Naked Capitalism,” I am beginning to wonder whether a more accurate description of this blog’s beat might be “Naked Corruption.” Our continuing discussion of the Office of the Comptroller of the Currency’s foreclosure ~~whitewash~~ reviews serves as an object lesson.

“Summer” Rerun: Why Big Capital Markets Players Are Unmanageable

This post first appeared on July 8, 2009

John Kay comes perilously close to nailing a key issue in his current Financial Times comment, “Our banks are beyond the control of mere mortal” in that he very clearly articulates the problem very well but then draws the wrong conclusion:

Why Is The Term “Financial Repression” Being Sold?

Matt Stoller is a fellow at the Roosevelt Institute. You can follow him on twitter at http://www.twitter.com/matthewstoller.

Over the past few months, the concept of “Financial Repression” has come into the lexicon and is increasingly used to describe a possible set of government strategies that constrains the financial sector. It has far more political significance than its users would have you believe.

Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part IV

By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives

I have set out a simplified model of a monetarily sovereign government. But near the end of the previous section, I began to suggest that the United States government is indeed a monetary sovereign by this kind. The reader might now suspect that I have yielded my rational mind over to a simplistic fiction of my own creation. And by this point, the reader is probably thinking that however interesting it might be to imagine this fictional entity, the so-called monetary sovereign, such fictions have nothing to do with the complexities of the real world, because actual governments maintain accounts that are indeed constrained by the amount of money in those accounts and by the external sources of funding to which they have access. After all, can’t a government default on its debt? What about the recent debt ceiling debate in the US? What about what is happening in Europe with the sovereign debt crisis? Also, if a government like the United States government was a monetary sovereign of the kind I have described, the consequences would seem to be enormous. Surely if a democratic government possessed this kind of power, we would make much more use of it than we do. In short, monetary sovereignty as described seems both too simple to be real and too good to be true.

These skeptical intuitions are reasonable, so they need to be addressed.

Morgenson on the Sham of the OCC’s Foreclosure Reviews

Given that the ~~Office of Bank Boosterism~~ Office of the Comptroller of the Currency is the clear first among the highly competitive ranks of bank-friendly regulators, the fact that the OCC launched a program for borrowers to obtain restitution for financial harm suffered due to foreclosures seemed more than a bit sus.

Gretchen Morgenson does an admirable job of exposing the multiple shortcomings of this OCC program.

More MSM Criticism of Obama “Nothing Illegal Here, Move Along” Stance on Foreclosure Fraud

While quite a few bloggers, prosecutors, economists, and other experts have taken the Administration to task on mortgage-related abuses, the mainstream media for the most part has not seriously challenged the mind-numbing Obama claim that the banksters did nothing illegal.

Reuters refreshingly opposed that ~~bullshit~~ assertion frontally yesterday. In a piece pointedly titled, “The Watchdogs That Didn’t Bark,” reporter Scot Paltrow shows that the mortgage arena is a target-rich environment:

How the Public Misses Out on How Fights Over Bank Regulations Affect Them

The public keeps losing and losing and losing to big finance because financiers have made an art form of using complexity, opacity, and leverage to cover their tracks.

The last example comes in an anodyne-seeming article in the Financial Times about collateralized loan obligations, or CLOs.

Wolf Richter: CEO of Dexia – ‘Not A Bank But A Hedge Fund’

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

Dexia SA, the Franco-Belgian mega-bank that collapsed and was bailed out in 2008 and that re-collapsed in early October, is a big deal in Belgium where it employs 10,000 people and has over 21 million bank accounts. Its assets of $715 billion dwarf Belgium’s $395 billion economy.