Category Archives: Credit markets

Yet More Mortgage Settlement Lies: Release Looks Broad, Not Narrow; Other States Screwed to Bribe California to Join

A number of writers, such as Mike Lux, Bob Kuttner, Matt Taibbi, and Justin Krebs, have been willing to convey the Administration message that the current version of the mortgage settlement is a “much tougher deal” and even a pretty good deal, thanks to Schneiderman’s intervention.

It is important to note that any recent improvement in terms has come at the cost of Schneiderman moving from being decidedly against the settlement to being in the “maybe/maybe not” camp as an apparent part of his decision to join an Administration investigation on mortgage abuses. But as we have stressed, the fact that the Obama team is pushing to wrap up the settlement agreement before the probe underway is a very bad sign. How can you settle when you don’t know the full extent of the bad conduct?

In addition, the change in Schneiderman’s posture has undermined the solidarity of the dissenting attorneys general, which is no doubt what Obama hoped to achieve.

While there is every reason to believe there has been some improvement in terms due to the resistance of Schneiderman and other state attorneys general (Beau Biden of Delaware, Martha Coakley of Massachusetts, Catherine Cortez Masto of Nevada, and Kamala Harris of California), the notion that, per Mike Lux, “the settlement release is tight” appears to be patently false.

Quelle Surprise! Feds Dust off Old Rogue Traders CDO Case to Burnish “Tough on Mortgage Crime” Credentials

The powers that be are in the process of seeing how they can burnish their “tough on bank crime” credentials while not ruffling anyone really important. And the case featured in the Wall Street Journal, “U.S. Plans Charges on Bond Fraud,” illustrates the sort of enforcement theater we are likely to see over the coming months.

Wow! Charges! Better yet, criminal charges! Finally the Administration is getting tough on crime.

Right. It’s tough on crime against banks.

Why is the Normally Astute Taibbi Sounding Like a Hopey Dopey Liberal on the Mortgage Settlement?

I hate taking issue with Matt Taibbi. I’m a huge fan of his writing and think he has done more to cause the big bad banks discomfort than any single writer.

But even someone as skilled as Taibbi occasionally has the writing equivalent of a bad hair day. And his post, “A Victory for the Public on Foreclosures?” is an example. And his misreading matters precisely because he has so much cred with the public that is unhappy with Big Finance.

Taibbi has taken up cheerleading the Schneiderman involvement in a Federal investigation committee as major progress and also amplified the messaging that the current version of the release in the mortgage settlement deal (which by the way is still more of a mystery than it ought to be) is a good deal. As we will discuss in due course, even a narrow deal around robosigning is in fact NOT a good deal.

ProPublica’s Off Base Charges About Freddie Mac’s Mortgage “Bets”

A new ProPublica story, “Freddie Mac Betting Against Struggling Homeowners,” treats the fact that Freddie Mac retains the riskiest tranche of its mortgage bond offering, known as inverse floaters, as heinous and evidence of scheming against suffering borrowers.

The storyline in this piece is neat, plausible, and utterly wrong. And my e-mail traffic indicates that people who are reasonably finance savvy but don’t know the mortgage bond space have bought the uninformed and conspiratorial ProPublica thesis hook, line, and sinker.

So Why Hasn’t SEC Enforcement Chief Robert Khuzami Resigned? SEC Only Now Investigating CDOs Created on His Watch at Deutsche Bank

I’d heard from German speaking readers about the Der Spiegel report of an SEC investigation in its German edition over the weekend and they’ve now released it in their English language version.

Der Spiegel is careful about its sourcing, so readers should take this account seriously.

Michael Hudson: Banks Weren’t Meant to Be Like This

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

A shorter version of this article in German will run in the Frankfurter Algemeine Zeitung on January 28. 2012

The inherently symbiotic relationship between banks and governments recently has been reversed. In medieval times, wealthy bankers lent to kings and princes as their major customers. But now it is the banks that are needy, relying on governments for funding – capped by the post-2008 bailouts to save them from going bankrupt from their bad private-sector loans and gambles.

Yet the banks now browbeat governments – not by having ready cash but by threatening to go bust and drag the economy down with them if they are not given control of public tax policy, spending and planning. The process has gone furthest in the United States.

Philip Pilkington: Is QE/ZIRP Killing Demand?

em>By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Warren Mosler recently ran a very succinct account of why the Fed/Bank of England’s easy monetary policies – that is, the combination of Quantitative Easing and their Zero Interest Rate Programs – might actually be killing demand in the economy.

Warren Mosler recently ran a very succinct account of why the Fed/Bank of England’s easy monetary policies – that is, the combination of Quantitative Easing and their Zero Interest Rate Programs – might actually be killing demand in the economy.

Quelle Surprise! Bank of America Accused of Blocking Arizona AG Investigation

One thing NC readers may have become attuned to, either via personal experience or some of the discussions we have had here, is how often a considerable portion of the value of a deal lies in releases (waivers of liability) or other provisions that might not seem all that important to the party signing away its rights.

Bloomberg reports that the state of Arizona has told the court that Bank of American is undermining the state’s investigation of its loan modification practices. The probe comes out of a 2010 lawsuit which alleged that Countrywide misled customers about its loan modification policies. So what did Bank of America do? It apparently gave mortgage mods to some (many?) of the people who had complained to state officials and had them sign an agreement not to say anything about the deal or disparage Bank of America. Per Bloomberg:

Yes, Virginia, Servicers Lie to Investors Too: $175 Billion in Loan Losses Not Allocated to Mortgage Backed Securities (and Another $300 Billion on the Way)

he structured credit analytics/research firm R&R Consulting released a bombshell today, and it strongly suggests that prevailing prices on non-GSE (non Freddie and Fannie) residential mortgage backed securities, which are typically referred to as “private label” are considerably overvalued.

Lessons for Europe’s Fiscal Union from US Federalism

Yves here. Even though both writers are affiliated with the Peterson Institute, this post talks about the need for countercyclical mechanisms in the eurozone, which makes it less austerian than the prevailing line of thinking in the officialdom. But some readers will not be so keen about the worship of Hamilton.

By C Randall Henning, Professor of International Economic Relations, American University and Martin Kessler, Research Analyst, Peterson Institute of International Economics. Cross posted from VoxEU

In the last few months, several Vox columns have drawn parallels between Europe today and an emerging – and even less stable – United States in the eighteenth century. This column stresses that Europe’s leaders in search of a fiscal union need not seek to replicate the US experience but they should at least learn from it.

Is Schneiderman Selling Out? Joins Federal Committee That Looks Designed to Undermine AGs Against Mortgage Settlement Deal

New York Attorney General Eric Schneiderman has been celebrated as the progressive Great White Hope. But the danger of assuming leadership is that that individual becomes a target both of attacks and of seduction. And while I’d like to think better of Schneiderman, an announcement earlier this evening has strong hallmarks of Schneiderman falling prey to the combined pressures and blandishments of the Administration and its allies.

Only a sketchy bit of news has been released, with the most extensive reporting so far coming in Huffington Post which incorrectly anticipated a State of the Union announcement of the fact that Schneiderman will be co-chairing a Federal committee to investigate mortgage abuses (the story appears to have been confirmed in general terms via an announcement from Schneiderman’s office). Key details from the HuffPo story:

Paul Krugman Makes Housing Call He Will Likely Come to Regret

I’m behind on commenting on various opinion pieces, thanks to a mild case of food poisoning (ugh), but I wanted to take note of Paul Krugman’s current New York Times op ed, “Is Our Economy Healing?”

As an aside, Krugman has written a lot of good pieces lately that we’ve linked to on income inequality the disastrous austerian policies in Europe, and Republican derangement and duplicity. But he tends to cut the administration far more slack than it deserves.

His current piece voices cautious optimism on the prospects for the economy based on some strengthening in various economic indicators. But astonishingly, the core of his argument rests on the outlook for the housing market:

Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”

Obama’s latest housing market chicanery should come as no surprise. As we discuss below, he will use the State of the Union address to announce a mortgage “settlement” by Federal regulators, and at least some state attorneys general. It’s yet another gambit designed to generate a campaign talking point while making the underlying problem worse.

The president seems to labor under the misapprehension that crimes by members of the elite must be swept under the rug because prosecuting them would destablize the system. What he misses is that we are well past the point where coverups will work, and they may even blow up before the November elections. If nothing else, his settlement pact has a non-trivial Constitutional problem which the Republicans, if they are smart, will use to undermine the deal and discredit the Administration.

Greece Lines Up Portugal

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Another weekend…. and we are still waiting for an outcome on Greece. The chief negotiators from Institute of International Finance (IIF) have left the country yet we still haven’t heard anything that sounds remotely like a deal. FT reports that the brinkmanship hasn’t ended but there doesn’t appear to be too much wiggle room left:

Call Your Attorney General Today to Oppose Big Obama Push to Get Mortgage Settlement Deal Done

We put up a few more stories on the mortgage mess tonight for a reason. It isn’t that we had a sudden explosion of new information on mortgage abuses. It is instead to remind readers that we could turn this blog entirely over to covering mortgage chicanery and not even scratch the surface.

And the latest bit of corrupt behavior is that the Obama administration has a full court press on to push the heinous “multi-state” settlement deal over the line.