Category Archives: Credit markets

More on Greece Restructuring and Eurozone Worries

While the Euro recovered from its stumble last week and the EU officialdom put out a round of denials of a story on Friday that Greece was considering an exit from the eurozone, the Euro tea leaf readers are still chewing over the significance of a not at all secret secret meeting over the weekend. The trigger is the fact that Greece is already on the verge of breaking the terms of its loans last year. This is hardly a surprise; austerity does not work and the Greek debt burden was clearly unsustainable. Per the Guardian:

North Carolina Appellate Decision Raises New Chain of Title Issue

A potentially important North Carolina appeals court case, In re Gilbert, has not gotten the attention it warrants.

In very short form, the borrowers, who were unable to obtain a loan modification, tried to halt a foreclosure by arguing that the lenders had failed to make required disclosures under the Truth in Lending Act (which they hoped would allow for recission of the loan, and that the party seeking to foreclose had not proved that it was the holder of the Note with the right to foreclose under the instrument. The judges nixed the TILA argument, affirming lower court decisions, but reversed the superior court on the question of the standing of the petitioner.

A New Zombie Lumbers On: The Mortgage Settlement Negotiations

The kindest thing that can be said about the 50 state attorneys’ general negotiations over foreclosure abuses is that it is increasingly obvious that there will not be a deal. The leader of the effort, Iowa’s Tom Miller, has completely botched the effort. There was no way to have any negotiating leverage with intransigent banks in the absence of investigations. Miller has changed his story enough times on this and other fronts so as to have no credibility left. But whether there were no investigations (as other AGs maintain) or whether they did some (as Miller, contrary to a staffer’s remarks, now insists), they were clearly inadequate.

We’ve found the rumor, that Miller was angling to head the Consumer Financial Protection Bureau, credible. It would explain his unduly cozy relationship with Federal banking regulators, as well as his efforts to wrap up negotiations quickly, which reduced what little bargaining power he had (time pressure means a party that drags its feet can extract concessions).

But like so many zombies that inhabit the financial landscape, the mortgage settlement negotiations refuse to die.

Guest Post: Overruled

Cross posted from MacroBusiness

Ok, we all know that anyone who says “this time it is different” is to be treated at best as misinformed, at worst as a fool. “They are the five most dangerous words in the English language” etc. etc. But, to repeat my question: “Are things always the same?” Mostly, yes. Modern housing bubbles are not unlike 17th century Holland’s Tulipmania, government debt crises have not changed all that much since Henry VIII reduced the gold in coinage, greed, profligacy, irresponsible plutocracies are always with us.

But in global finance there are some things happening that are genuinely different. Dangerously so.

Euro Whacked by Reports that Greece May Leave the Eurozone?

The Euro has fallen from roughly 1.49 to the dollar to 1.43 in a mere two days, which is a huge move. Many pundits have argued that the ECB’s newly accommodative stance is the trigger, but there may be additional forces at work. Most experts have deemed the idea that any eurozone member would exit the currency to be simply inconceivable, that it would be too costly and disruptive. But with the hair shirt that Greece is being asked to wear, all bets may be off.

As of this juncture, this reports in Der Spiegel does not appear to have gotten traction among the Usual Suspects in the MSM. Headline: “Greece Considers Exit from Euro Zone” (hat tip readers John M and Illya F).

GAO Report Confirms Our Criticism of “Foreclosure Task Force” Review

We’ve taken a dim view of the “worse than stress tests” review by Federal regulators of foreclosure practices late last fall. This was an obvious effort to alleviate concerns in the wake of the robosigning scandal. When the bank-friendly OCC released the results of the review, the guts of which was a look at 2800 seriously delinquent loans from all the major servicers, it confirmed our reservations:

Los Angeles Accuses Deutsche Bank of Being a Slumlord

This week seems to be open season on Deutsche Bank. The Department of Justice suit on them over FHA loans was singling them out when a lot of US banks are every bit as guilty. Now we have a Los Angeles prosecution over Deutsche acting as a slumlord, with the city attorney looking to launch cases against other major securitization trustees, namely HSBC, US Bank, and Bank of New York.

We have pointed out, that banks (more accurately, securitization trustees and servicers) are awful property managers, as anyone who lives in a neighborhood with foreclosed properties will attest. This inattention becomes disastrous in densely populated areas. The story in the Los Angeles Times is about as gripping as real estate gets:

Will “False Claims” Lawsuit Against AIG, Goldman, Deutsche, BofA, SocGen on Fed Funding Lead to New Round of Embarrassing Revelations?

Litigation may be slowly doing the job missed or only partially completed by various governmental investigations into the financial crisis. The Valukas report on the Lehman bankruptcy was revealing, and numerous foreclosure defense attorneys have opened cans of worms that the powers that be would rather pretend simply don’t exist.

The New York Times reports tonight that a case filed last year was unsealed last week. It plumbs a continuing sore point with the public, namely the generous terms of the AIG bailout, both to the company (which defied the government and insisted on remaining largely intact when the plan had been to sell its various units to repay the government funding) and to its credit default swap counterparties. The litigation has the potential to be revealing, particularly if it goes into discovery (various depositions are likely to become public in pre-trial jousting, um, motions). The Times gives an overview:

Jamie Dimon Says Banks Are Being Nice to You When They Take Your House

Jamie Dimon has finally managed the difficult feat of making Lloyd Blankfein look good.

When Blankfein said Goldman was “doing God’s work,” as offensive and laughable as that sounds, it’s an arguable position.

Are the Chinese Hoarding Certain Commodities to Obtain Cheap Funding?

As much as it may sound barmy to stockpile commodities to obtain better terms on financing, Michael Pettis claims that’s one of the factors behind what looks to be unduly aggressive purchases of copper by the Chinese. An excerpt from his latest newsletter, courtesy Michael Shedlock:

UBS’s Magnus Warns of Risk of Chinese Minsky Moment

UBS strategist George Magnus helped popularize economist Hyman Minsky’s thinking in the runup to the financial crisis by warning of the likelihood of a “Minsky moment.” For those not familiar with Minsky’s work, a short overview from ECONNED:

Hyman Minsky, an economist at Washington University, observed [that] periods of stability actually produce instability. Economic growth and low defaults lead to greater confidence and, with it, lax lending.

In early stages of the economic cycle, thanks to fresh memories of tough times and defaults, lenders are stringent. Most borrowers can pay interest and repay the loan balance (principal) when it comes due. But even in those times, some debtors are what Minsky calls “speculative units” who cannot repay principal. They need to borrow again when their current loan matures, which makes
them hostage to market conditions when they need to roll their obligation. Minsky created a third category, “Ponzi units,” which can’t even cover the interest, but keep things going by selling assets and/or borrowing more and using the proceeds to pay the initial lender. Minsky’s observation:
Read more...

Deutsche Bank Sued by Department of Justice for Over $1 Billion on FHA Loans: Sound and Fury Signifying Not Much

If you were to read the news headlines and the fierce-sounding lawsuit filed by the Department of Justice against DeutscheBank on it “egregious” violations of FHA lending standards, you might be persuaded that Team Obama was getting serious about mortgage abuses.

Think again.

Arizona Representative Drops Chain of Title Notification Provision After Apparent Bribe by Servicer

If you thought the Friends of Angelo program, via which Countrywide gave very favorable mortgage terms to assorted Congresscritters, was pretty bald-faced, you ain’t seen nothin’ yet.

It appears the best way to get a deep principal mod in America is to represent a clear and present danger to the mortgage industrial complex.

Join Us At FireDogLake’s Book Salon on Saturday to Discuss Treasure Islands by Nicholas Shaxson

eaders may know that Nicholas Shaxson’s Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens, has created a big stir in the UK by shedding light on the scale of offshore banking and the numerous types of harm it does. We’ll be hosting a FireDogLake Book Salon tomorrow at 5 PM Eastern 2 PM Pacific.

Not only did I enjoy this book (it manages the difficult feat of being a lively and accessible discussion of banking and taxation), but it is certain to be one of the most important books of the year.

From the FDL overview of the book:

The Booger Rule of Antitrust in the Debit Card Fight

Although we were big fans of the HuffPo piece yesterday on the DC war over debit card regulation, Adam Levitin was a bit less happy since the article focused on the politics and was on why the card fees were burdensome to merchants.

Although a few readers tried arguing the bank position and did not get a terribly enthusiastic reception, Levitin explains the real problem: the actions of the Visa/MasterCard duopoly are pretty clear antitrust violations, but as he pointed out via e-mail, the US pretty much does not do antitrust any more. The Chicago school of economics indoctrination of judges via an orchestrated “law and economics” movement (see ECONNED for an overview) has resulted in judges not seeing competitive problems anywhere. The Department of Justice has lost a slew of recent antitrust cases at the Supreme Court, so they’ve lost the appetite to pursue them.

But (to give an indication of how bad the behavior of the card networks is), the normally supine DoJ has been active in payment cards.