Category Archives: Banking industry

Matt Taibbi Follows the Money in Iowa AG Tom Miller’s Faux Tough Posture in 50 State Mortgage Settlement Negotiations

We’ve taken aim repeatedly at Tom Miller’s obvious soft touch toward banks in his role as lead negotiator in the 50 state attorney generals negotiation over foreclosure abuses. Some of his questionable actions:

Promising to put people in jail, then quickly reversing himself

Working closely with the bank-friendly Treasury Department when the state and Federal legal issues are very different, rendering the rationale for cooperation suspect…..

Semi-Nude Parliamentary Candidate Protests Against Banker Pay At RBS AGM

I missed this extraordinary scene. When the aspiring politician Kit Fraser stripped to his boxer shorts outside RBS’s annual shareholder meeting last Tuesday, I was already inside the meeting, listening to chairman Sir Philip Hampton defend the bank from shareholder allegations that he had lost the plot on pay.

S&P Negative Watch for US Flagged Financial Sector as Major Risk

Yes, I know I dissed the S&P report as fundamentally wrongheaded, but as we will discuss shortly, it contained some interesting commentary on the US financial sector that has gotten perilously little notice.

But I’d first like to address the way the media and some blogosphere commentators have hopelessly muddied the issues on the downgrade scaremongering. One is the “we depend on foreigners to fund our budget deficit” hogwash. As Michael Pettis pointed out, the idea that the US is funding its federal deficit from foreigners is a widespread misconstruction.

Jim Boyce: Tax Havens or Financial Sinkholes?

By James K. Boyce, who teaches economics at the University of Massachusetts, Amherst. He is co-author, with Léonce Ndikumana, of Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent, to be published this year by Zed Books.

Tax havens have got a lot of press lately. In Britain, the UK Uncut movement has mounted demonstrations across the country against tax dodging by large corporations and wealthy individuals – making the connection between profits parked abroad and deficits and budget cuts at home.

The FDIC’s Rosy, Theoretical, Misleading Lehman Resolution Counterfactual (or Why TBTF is Still TBTF)

The FDIC has released a document that purports to show how it could have successfully resolved Lehman Brothers using its new Title II resolution authority granted under Dodd Frank.

All I can say is that this is an interesting piece of creative writing. The Lehman counterfactual rests on a series of assumptions, which as I will discuss shortly, look pretty questionable. The most charitable assessment one can make comes from a famous exchange between two technologists. Trygve Reenskaug says: “In theory, practice is simple.” Alexandre Boily asks: “But, is it simple to practice theory?”.

But some longstanding Administration cheerleaders have jumped on the bandwagon, arguing that “pundits” have asserted “without evidence or analysis” that the resolution authority can’t work. That’s pretty amusing, given that Shiela Bair herself concedes, per the Financial Times, that the resolution authority will not work on a major international bank with retail and investment banking operations:

Doug Smith: A Stiletto In The Back Of Sane Housing Markets

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

The recent federal budget deal eliminated $88 million of HUD funding for non-profit housing counselors. According to this report, these groups use roughly half the funds for foreclosure counseling and half for homebuyer education and qualification. The report says a separate foreclosure counseling effort is also being reduced by $65 million.

Historically, non-profit housing groups focused on low-income folks. But, for many years, people with moderate incomes – nurses, police, teachers and others in what used to pass for the middle class – have also sought help. The core purpose of the non-profits is simple: help people achieve affordable home ownership. This entails educating them on the realities of ownership, helping them shift credit, consumption and savings behavior, advising on how to avoid the worst practices of real estate and mortgage brokers — even at times doing lending. All of which together means, in effect, doing the real work of underwriting that has long since been abandoned by the too big to fail banks who, in their eagerness to increase volumes and squeeze out costs through technology and ‘modeled’ strategies, eliminated the capacity for this careful work.

Most non-profit groups are quite good at what they do. Yet, Obama, Boehner and others have now taken resources away from these groups. These cuts are cruel. They are also mind-numbingly stupid.

More Shots Across MERS’s Bow

Admittedly, this act of rebellion against MERS, the electronic mortgage registry by a Pennsylvania county is comparatively minor, but nevertheless illustrates the efforts various local bodies are taking to assert their authority against a system imposed without regard to state and local real estate laws.

Montgomery County estimates that it has lost $15 million in recording fees due to MERS, which its Recorder of Deeds, Nancy Becker, says has also made a mess of title records. She is working to get the county to cease doing business with banks that make use of MERS, and has launched an effort to get other counties in the state to follow suit.

Bill Black: Fiat Justitia Ruat Caelum (Let Justice be Done, Though the Heavens Fall)

Yves here. This post by Bill Black is important because it presents and dissects an ugly example of failure of morality and common sense within what passes for the elite in the US.

Earlier this week, Matthew Yglesias defended the Administration’s distaste for pursuing fraud investigations against financial players:

….the Obama administration felt it was important to restabilize the global financial system. That meant, at the margin, shying away from anxiety-producing fraud prosecutions. And faced with a logistically difficult task, that kind of pressure at the margin seems to have made a huge difference. There simply was no appetite for the kind of intensive work that would have been necessary.

I’m not as persuaded as, say, Jamie Galbraith is that the failure to do this is a key causal element in our economic problems. Indeed, I’d say that if you look at the situation literally, Tim Geithner’s judgment was probably correct.

This line of thinking is a favorite of authoritarians. Democracy, justice, and capitalism are messy affairs. All sort of repressive measures can be justified in the name of stability and safety. And the irony here is that the firms directly responsible for the most disruptive economic event of the last eighty years are to be shielded from the long arm of the law….in the name of stability, the one output they have clearly failed to provide.

Will German Push for Greece Restructuring Tank the Greek Banking System?

Funny what a difference a few months makes. Whenever this blog would suggest that Greece, and potentially other eurozone members, might have to restructure their debts, the idea was treated by some readers as a nefarious euroskeptic plot, particularly since badmouthing embattled governments could worsen their conditions by raising their funding costs.

It might now be accurate to upgrade discussion of a Greek default to being an Anglo-Saxon plot.