Category Archives: Credit markets

Orwell Watch: Banks Put a Happy Face on Demolishing Foreclosed Homes

n the through the looking glass world of reality according to banks, tearing down foreclosed houses is a good thing. Really.

The spin that Bank of America is using to justify the notion of bulldozing buildings is that the houses in question are worth bupkis, say $10,000 or less. There’s a wee omission in their discussion. Many if not most of the houses in question have fallen in value because the bank failed to maintain them on behalf of investors

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Has S&P Become Our Rupert Murdoch?

Until recently, no one in the UK dared cross Rupert Murdoch thanks to his influence on the political process.And although Murdoch is going down the same path in the US, of using political power to increase his economic power, the rating agencies seem to have easily trumped him on this one.

Jane Hamsher chronicles the brazen way in which Standard & Poor’s is throwing its weight around in the budget negotiations:

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Efforts to Pretend “50 State” Attorney General Deal Moving Forward Looking More Desperate

For months, it has looked as if Iowa state attorney general Tom Miller and the Department of Justice has been effectively negotiating on behalf of the banks to try to secure a broad settlement to give the banks a talking point and create the perception that the mortgage mess is on the mend. In fact, it would not stop the train wreck in local courts, since a deal would not restrict the rights of borrowers. However, getting the AGs out of the equation would still be of benefit to the banks, since their investigations typically unearth information that assist private litigants.

But we have long thought that the settlement talks have been a weird PR exercise, in that if the talks were perceived to be getting momentum, they’d actually get momentum.

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Quelle Surprise! Banks Don’t Want to be in IRA Business if They Can’t Treat Customers as Stuffees

If you doubt the public need to be protected from their local mob bosses banks, their latest hissy fit is an admission that they can’t make what they deem to be enough profits unless they take advantage of their customers.

This object lesson is IRAs. Bloomberg reports that if brokerage firms who manage IRAs were required to act as a fiduciary, as in put their customers’ interests first, many would exit the business.

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Michael Hudson: Mr. Obama’s Scare Tactics to Get Democrats to Vote for His Republican Wall Street Plan

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

You know that the debt kerfuffle is as staged as melodramatically as a World Wrestling Federation exhibition when Mr. Obama makes the blatantly empty threat that if Congress does not “tackle the tough challenges of entitlement and tax reform,” there won’t be money to pay Social Security checks next month. In his debt speech last night (July 25), he threatened that if “we default, we would not have enough money to pay all of our bills – bills that include monthly Social Security checks, veterans’ benefits, and the government contracts we’ve signed with thousands of businesses.”

This is not remotely true. But it has become the scare theme for over a week now.

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Massachusetts Attorney General Signals Likelihood of Nixing “50 State” Mortgage Settlement

The market-moving stories, namely the US debt ceiling drama and the rolling Greek/Eurozone mess, are crowding out anything other than tragedies (the Norway bombing, Chinese train wrecks) and good old fashioned high profile prurient interest (DSK and the Murdochs).

Let’s briefly cover an important development in the US mortgage saga. I’m told that the Department of Justice is putting the thumbscrews on state attorneys general to sign a mortgage settlement deal this week.

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Marshall Auerback: Worse Than Hoover

By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives.

It’s actually a bit over the top and unfair to compare Barack Obama with Herbert Hoover – unfair that is, to the memory of Herbert Hoover. The received image of the latter is the dour, technocrat who looked on with indifference while the country went to pieces. This is actually an exaggeration. As Kevin Baker convincingly argued in his Harper’s Magazine piece, “Barack Hoover Obama”, President Hoover did try to organize national, voluntary efforts to hire the unemployed, provide charity, and sought to create a private banking pool. When these efforts collapsed or fell short, he started a dozen Home Loan Discount Banks to help individuals refinance their mortgages and save their homes. Indeed, the Reconstruction Finance Corporation, which became famous for its exploits under FDR and Jesse Jones, was actually created by Hoover. Often tarred with the liquidationist philosophy of his Treasury Secretary, the establishment of the RFC was, as Baker suggested, “a direct rebuttal to Andrew Mellon’s prescription of creative destruction. Rather than liquidating banks, railroads, and agricultural cooperatives, the RFC would lend them money to stay afloat.”

Hoover’s tragedy lay in the fact that whilst he recognized the deficiencies of the prevailing neo-classical laissez-faire nostrums of his day, he could not ultimately break with them and accept that the economic tenets which he had grown up with were deficient in terms of dealing with the huge unemployment challenges posed by the Great Depression.

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Canary in the Treasury Coal Mine: Chicago Merc Increases Collateral Haircuts for Treasuries and Foreign Sovereign Debt

We had thought the authorities and the banks (no doubt with winks and nods from the Fed) would work to make sure that haircuts on collateral were maintained while the Washington game of debt ceiling chicken played itself out.

Either the Merc (more formally, the Chicago Mercantile Exchange) wasn’t on the distribution list or it decided not to play ball. <

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Moody’s Downgrades Greece Three Notches More

Oh, this is beginning to feel like the crisis all over again in at least two respects: news events taking place on the weekend (well at least from the US perspective) and multiple wobblies happening at the same time.

Frankly, Greece should have been rated junk long before it was relegated to that terrain (note this Moody’s downgrade just takes Greece further into speculative territory, from Caa1 to Ca, which is a degree of refinement that many might deem to be irrelevant). And I’m told by a former ratings agency employee that the agencies have absolutely no methodology for rating countries (although given how well their methodologies worked in structured credit, this shortcoming probably means less than it ought to).

But at least the narrative is pretty realistic. From the Wall Street Journal:

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Alexander Gloy: Greece – Two Bail-outs and a Funeral

Yves here. Quite a few readers in comments expressed confusion over the announcement of the latest Greek bailout, and some of the details were admittedly a bit murky. This piece will hopefully help clear matters up.

By Alexander Gloy of Lighthouse Investment Management

Here we go again. Another bail-out. [Sigh.]

I’ll try to make this as entertaining and easily readable as possible – but first the details of the bail-out agreed on July 21st:

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More Shades of TARP: Latest Deficit Ceiling Plan to Establish Extra-Constitutional Legislative Process

We commented last night on the parallels between the pressure tactics used to railroad the passage of the TARP and our current contrived debt ceiling crisis. The similarities have increased in a predictably bad way. Even worse than the economic toll radical budget cutting will impose on ordinary Americans is the continued undermining of basic democratic processes.

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Get Ready for TARP 2.0

Washington DC appears to be readying itself for a repeat of the TARP, namely, the passage of unpopular legislation to appease the Market Gods (and transfer even more income from ordinary Americans to the Masters of the Universe). It isn’t yet clear whether this drama will be played out via generating bona fide financial market upheaval or mere threat-mongering (the Treasury market seems pretty confident that well-trained Congresscritters will fall into line). But unlike the TARP, which was a classic example of well-placed interests finding opportunity in the midst of upheaval, this reprise is a far more calculated affair.

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Should You Get Only $7000 if Wells Stole Your House?

If you are a too big to fail bank like Wells Fargo, the wages of crime look awfully good. RIp off as many as 10,000 people to the point where they lose their homes and your good friend the Fed will let you off the hook for somewhere between $1000 and $20,000 per house. And as we’ll discuss in due course, this deal isn’t just bad for the abused homeowners, it’s also bad for investors and sets a terrible precedent, which means its impact extends well beyond the perhaps 10,000 immediate casualties.

Oh, and how much does the Fed think you should be paid if you were foreclosed upon thanks to Wells?

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