Category Archives: Banking industry

Levin Optimistic That DoJ Will Act on Goldman Disclosures

The Financial Times interviewed Senator Carl Levin, whose report contained a great deal of information pointing to what at a minimum can be called bad faith dealing by Goldman. Matt Taibbi has argued in his characteristic forceful manner that Goldman execs clearly perjured themselves in their testimony.

Keep your champagne corked. The DoJ has been missing in action for so long I can’t imagine that they will actually put in an appearance, particularly on Goldman, but I’d be delighted to be proven wrong.

Lehman, Resolution Regime Failure, and Credentialism as a Mask for Weak Arguments

It’s telling in extended blogosphere debates when one side starts resorting to cherry picking, distortions, ad hominem attacks, and projection as its main lines of attack. In his last offering on the FDIC’s paper which uses Lehman to show how it would use its new Dodd Frank resolution authority, Economics of Contempt proves only one thing: that he’s not interested in open or fair-minded discussion (see here to see what that might look like) and that he wants to put a stop to it.

So, mindful of the possibility that I might simply be feeding a modestly upmarket troll, it seems that all I can do now is illustrate how he has misrepresented my arguments; for instance, by absurdly suggesting that I missed the fact that the FDIC would be on site, in its Lehman counterfactual, when I raised a completely different issue, that their presence would become too large and too intrusive to keep secret (EoC seems blissfully unaware of the fact the word was all over the markets when the FDIC went in to kick the tires of Citi’s portfolio of loans to see-through buildings in the early 1990s).

Bank Tout Dick Bove Proves His Ignorance in Defending of His Meal Tickets

Is Dick Bove’s put-foot-in-mouth-and-chew exercise yesterday proof of the eagerness of the banking industry to push back against any and all interference in their ability to milk the public, or merely that Bove is a great negative indicator (one of his most famous calls was to buy Citi in early March 2008. You’d have lost more than 3/4 of your money if you’d followed his advice.)

News that New York attorney general Eric Schneiderman has opened an investigation into the mortgage activities of Goldman, Morgan Stanley, and Bank of America sent Bove into a tizzy

New York AG Schneiderman Investigating Goldman, Morgan Stanley, Bank of America Mortgage Operations

New York attorney general Eric Schneiderman has announced that he is investigating Goldman, Morgan Stanley, and Bank of America on their mortgage securitization activities. His office made a broad document request in recent weeks and has also asked to meet with these banks.

It is not yet clear what the focus of the probe is, but since Goldman and Morgan Stanley were not lenders, it could relate to their mortgage originations, their servicing operations (Litton for Goldman Saxon for Morgan Stanley) or their role as CDO issuers. With Bank of America, the investigation could cover additional ground.

Note that this announcement effectively blows up the 50 state attorney general settlement talks.

HUD Audits Show Five Biggest Servicers Defrauded Taxpayers

This revelation, that HUD audits of the biggest servicers over a mere two-month period, showed extensive fraud, is proof that abuses were extensive. It also establishes that the effort by Tom Miller to settle the 50 state attorneys general investigation quickly and and the recent “see no evil” Federal consent orders are a cover up. The fact that HUD found extensive misconduct over a similar time frame as the Foreclosure Task Force, which Assistant Treasury Secretary Michael Barr described as a ““11-agency, 8-week review of servicer practices, with hundreds of investigators crawling all over the banks” proves that the latter to be pure regulatory theater. And as we’ve noted, the Tom Miller-led effort has done no investigations, guaranteeing that the negotiators would have no bargaining power.

From Shahien Nasiripour at Huffington Post:

Doug Smith: Shock Therapy For Economics, Part 1

By Douglas K. Smith, author of On Value and Values: Thinking Differently About We In An Age Of Me

In “Economics In Crisis”, professor Brad DeLong notes:

The most interesting moment at a recent conference held in Bretton Woods … came when Financial Times columnist Martin Wolf (asked) Larry Summers, “[Doesn’t] what has happened in the past few years simply suggest that [academic] economists did not understand what was going on?”

DeLong agreed with Summers’ response: “the problem is that there is so much that is “distracting, confusing, and problem-denying in…the first year course in most PhD programs.” As a result, even though “economics knows a fair amount,” it “has forgotten a fair amount that is relevant, and it has been distracted by an enormous amount.” DeLong then goes on to call for serious change in what economics departments do and teach.

In Part 2 of this post, I’m going to address the realities of ‘serious change’; and, in that context, what is troubling for INET about Summers’ presence at the recent Bretton Woods gathering. I’ll do this from my experience in leading and guiding real change as well as by contrasting INET with another, smaller, and more nascent effort called Econ4.

For now, though, let’s put aside the serious lack of self-respect in paying any attention at all to a world historical failure like Summers (Why is this arrogant sophist even on anyone’s C list, let alone A list? Why isn’t Summers wearing sack cloth and rolling in ashes?). Instead, let’s respond to DeLong’s ‘fessing up to the crisis in economics:

New Homeowner Scam: Mortgage Securitization Audits

Con artists who prey on people who are already in financial hot water deserve their own circle of hell. The latest sighting comes via April Charney: “mortgage securitization audits” which charge thousands of dollars for dumping public information into binders. From Brian Canupp’s website:

The New York Fed Working to Bend Real Estate Law to Suit Needs of Banks

I suppose the fact that the New York Fed hosted a meeting last week with a group of solons is a sign that it is finally taking mortgage documentation and resulting foreclosure issues seriously. But the Fed’s spin diverges from the reading I got from attorneys who have a vantage on the process. Per Housing Wire:

But the New York Fed said solutions are on the way. The Uniform Law Commission and the American Law Institute, which facilitated the recent meetings, seek to clarify and update federal and state laws governing the securitization process.

I suppose the fact that the New York Fed hosted a meeting last week with some solons is a sign that it is finally taking mortgage documentation and resulting foreclosure issues seriously. But the Fed’s spin is diverges from the reading I got from attorneys who have a vantage on the process. Per Housing Wire:

But the New York Fed said solutions are on the way. The Uniform Law Commission and the American Law Institute, which facilitated the recent meetings, seek to clarify and update federal and state laws governing the securitization process.

I’m bothered by the dishonest presentation, which a close reading of the related NY Fed document confirms. Let’s start with its opening paragraph:

US Trustee Estimates Servicing “Errors” at 10x Level Claimed by Banks (and Parroted by Federal Regulators)

Gretchen Morgenson has an important piece tonight which describes how US Trustee Program, which is the arm of the Department of Justice which oversees bankruptcy courts, has found ongoing servicing abuses in bankruptcy courts which are an order of magnitude worse than claimed by mortgage servicers and their mouthpieces among the Federal banking regulators. And it’s funny how a real prosecutor has managed to find significant problems in a mere six months, when the 50 state attorneys general effort, which has undertaken no investigation, is rushing to get a deal done. If the leader of that effort, Tom Miller of Iowa, instead had gotten to work when the effort was formed last October rather than having tea and cookies with the Treasury Department, they might have something to show by now.

IMF Chief Strauss-Kahn in Custody for Alleged Sexual Assault (Updated)

I’m not easily astonished, but this qualifies. From the Wall Street Journal:

Wall Street Journal:

A law enforcement official said Dominique Strauss-Kahn, head of the International Monetary Fund, was taken into police custody after being removed from an airplane at Kennedy Airport.

According to the official, Mr. Strauss-Kahn allegedly forced a cleaning woman onto his bed and sodomized her at about noon Saturday inside his room at the Sofitel Hotel near Times Square.

Mr. Strauss-Kahn allegedly allowed the woman to leave then departed for the airport, the official said.

The alleged victim informed co-workers who then alerted authorities, the official said…

Feds Reviewed Only 100 Foreclosure Files in Servicer Whitewash

Not only are the authorities engaged in a coverup of servicer abuses, they aren’t even bothering to pretend that the effort is serious. A post on Housing Wire offers some choice tidbits:

Mortgage Whistleblowers Say Servicers Foreclosed Rather Than Modify, HAMP Program Designed to Help Banks, Not Borrowers

A report at the Dylan Ratigan show confirms what we’ve argued for some time is happening: that banks are not making mods to viable borrowers because servicing is more profitable. In addition, an insider on the HAMP program says that the pressure to make trial mods to make the program look good wound up hurting […]

Guest Post: Not far enough – Recommendations of the UK’s Independent Commission on Banking

By Charles A.E. Goodhart and Avinash Persaud. Cross posted from VoxEU

The UK’s Independent Commission on Banking was set up last year to consider reforms to promote financial stability and competition. This column reacts to the commission’s interim report released on 11 May 2011. It argues that the commissioners have a lot to ponder before the final report is due in September – they have not gone far enough.

FDIC’s Bair Says Millions of Mortgages May Be “Infected,” Criticizes Consent Orders

We’ve said repeatedly that findings of the multi-agency Foreclosure Task Force review late last fall, which looked at 2,800 mortgages from 14 servicers, was a worse than stress test type review, with a deliberately narrow focus designed to find very little wrong.

One of its remarkable findings was that that banks were on solid grounds in foreclosing, both in the borrower owing the money (which would inevitably be the finding given the failure to investigate servicer-driven foreclosures) and that banks were able to find the borrowers’ notes, which was taken to be tantamount to them having the legal authority to foreclose. Anyone who has been following this issue here or on specialist legal blogs knows that mere possession of the note is often a not sufficient threshold for successful action if the foreclosure is challenged.

In a gratifying show of candor and independence (or perhaps because she recognizes that the facts on the grounds make the Administration/banking industry party line untenable) Bair took exception to the “nothing to see here” stance of the officialdom and took exception to the findings of the Foreclosure Task Force in Congressional testimony earlier today.

Raghuram Rajan on Delineating the Role of Government

In this interview, Rajan, who famously told Greenspan at his last Jackson Hole conference that recent changes in financial services industry policy had increased risk, takes on the question of the role of government. He contends that economists have neglected this issue due to overspecialization.