By Matt Stoller, a fellow at the Roosevelt Institute. His Twitter feed is:
http://www.twitter.com/matthewstoller.
The youth in Spain are very very angry, with unemployment at Depression-levels of roughly 21%, and they are rocking the nation with protests. What is less clear is how this plays out. The echoes of Wisconsin are obvious.
Read more...In further proof that attorneys general are abandoning the 50 state attorneys general investigation, California AG Kamala Harris announced that she is establishing a 25 person mortgage fraud task to look into abuses across the spectrum, from the individual borrower level to practices, such as questionable transfers to trusts when the securitizations were formed, that hurt investors.
Note that the defection of a second Democrat (Harris follows New York’s AG Eric Schneiderman in creating her own effort) from the AG investigation is particularly significant. A number of Republicans joined at the 11th hour and were never on board with the premise of talks, so their defection is expected. By contrast, the AGs from solidly Democratic states were expected to stay the course. The fact that the AGs from two major states have effectively left the talks confirm what we have said all along: that the negotiations were not serious precisely because no investigations had been conducted.
We applaud this step forward by Harris, since it shows at least some public servants are taking mortgage abuses seriously. From the Los Angeles Times (hat tip reader Denotis):
Read more...There’s a fight afoot over who will be the next head of the IMF. Yours truly is not making odds on this one, save that Christine Lagarde is getting far and away the most attention in the media and more generally, a big push is on to have a European take the reins. The logic is that with the eurozone mess far and away the biggest priority, the new IMF chief needs to have credibility with the major actors, and that argues for a European choice.
The contrary camp is the “the countries formerly known as emerging” who point out that it is their turn to have an IMF head from one of their countries. The IMF has been led by a European since its inception. Even though votes have been rejiggered to give younger economies more weight, the mature ones still are in control of the outcome.
But what is intriguing are the arguments that follow, which reveal what the real stakes are.
Read more...By Kevin Tsui, Assistant Professor in the John E. Walker Department of Economics, Clemson University. Cross posted from VoxEU.
It has been widely argued that natural-resource wealth is a curse that leads to corrupt politicians, closed and illiberal societies, and defunct economies. This column presents new evidence on the political impacts of oil wealth. It argues that the effects depend on geology and history, shedding light on the recent uprisings in the Middle East and North Africa.
Read more...So much for the idea that the legal profession cares about integrity. While there are no doubt many upstanding attorneys, state bar associations seem vastly more concerned about trying protect the industry’s meal ticket than policing questionable conduct. It’s well known in the profession that to the extent lawyers are ever sanctioned, it’s almost without exception small firm operators. The big boys pay a lot in dues and often have partners in their firms that hold offices in the state bar organization.
One damning illustration: even though Florida has been a virtual cesspool of legal malfeasance, with its biggest foreclosure mill having shuttered its doors and impermissibly not passed open cases on to other lawyers and all of the other big players on the ropes, not a single lawyer has been sanctioned. Yet two lawyers in the state were threatened because they’ve dared to say a candid word or two about the mortgage mess.
Read more...One investor said that every time he looked at corporate misconduct, “No matter how bad you think it is, it’s always worse”. Lender Processing Services is proving to be a classic illustration.
The City of St. Clair Shores Employees’ Retirement System is the lead plaintiff in a class action lawsuit against Lender LPS that was amended and expanded yesterday. The suit is against the company and its three top officers, charing them with violations of Federal securities laws with the intent of inflating the company’s revenues and stock price.
Read more...e reported from time to time on the special foreclosure courts created in Florida to clear up its foreclosure backlog, and this horribly implemented experiment looks as if it is moving to a well deserved death.
In concept, creating a specialized court system to provide extra capacity and judges who focused only on that issue was a sound move. In practice, it was an embarrassment and a disaster for many borrowers. As we recounted last September:
Read more...These new foreclosure-only courts are special creations of the Florida legislature, funded separately from the usual court system. They are manned by retired judges, which means in many cases they are not familiar with real estate law.
But perhaps most important, the explicit objective of these courts is to clear up the backlog. And that is coming to pass not by the Legislature having thrown enough resources at the problem (that is, having greatly enlarged court capacity to process more cases in parallel) but by pushing for faster resolution. The problem is that an accelerated process runs roughshod over due process and allows banks to foreclose when they may not be the right party, or worse, when the foreclosure is the result of servicing error.
As regular readers no doubt know, the reason for creating the electronic mortgage registry service MERS was to save on recording fees when notes (the borrower IOUs) were transferred through multiple parties when mortgage securitizations were set up. As MERS legal status has come under questions, a few local registrars of deeds (the officers in charge of local recording offices) have made estimates of the losses to their county and have come up with significant numbers.
As more and more information about mortgage abuses have gotten media coverage, some registrars of deeds have dug further into their records to document their extent.
Read more...By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Deal 2.0.
It doesn’t matter who leads the IMF when the institution is governed by ideology.
Greece and Ireland appear to have lost an important political ally with the sidelining of Dominique Strauss-Kahn as both plead for more financial assistance from European partners to avoid an early restructuring of debt. The key word is “appears,” as in truth, arsenic remains arsenic, even if it is coated in sugar by an ostensible champagne socialist like Mr. Strauss-Kahn.
Read more...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.
Read more...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
Read more...By David Apgar, the founder of ApgarPartners LLC, a firm that helps companies and development organizations learn by treating goals as assumptions to be tested by performance results. He blogs at www.relevancegap.blogspot.com.
The best hope for the euro zone may be to find a few bank stocks rattling around in European Central Bank (ECB) Governor Trichet’s brokerage account. There’s no chance that the long-time French civil servant would compromise his policy views to benefit himself, but it’s the kind of made-for-muddled-media factoid that, if found, could put a quick end to the farce he and the ECB perpetuate in pretending Greece is not bankrupt. Europeans tolerate this farce and the crisis it prolongs only because it will suppress the euro and block export-led recovery in the US. And if there’s one thing more attractive to the Euro-policy crowd than ending a crisis of the euro, it’s blocking US recovery.
A leader in this week’s Economist lays out the dimensions of the problem.
Read more...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:
Read more...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:
Read more...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.
Read more...