Category Archives: Politics

StopServicerScams Petition Featured on Dylan Ratigan

Reader Doug T took note of the mention of the StopServicerScams petition on the Dylan Ratigan show today (a bit after the two minute mark):

Attorney General Tom Miller Reneges on Promise to Prosecute Mortgage Fraud (Updated)

I’m not exactly surprised at the bait and switch by Iowa’s Attorney General Tom Miller, who is leading the 50 state investigation by state attorney generals into mortgage abuses. Less than a month ago promised that he would “put people in jail” Now he’s apparently decided to adopt a “move along, nothing to see here” posture. Per Bloomberg (hat tip reader Duncan B, who also sent a copy of a stinging e-mail to his state AG):

Auerback: Drinking the Austerity Kool Aid in 2011

By Marshall Auerback, a portfolio strategist and hedge fund manager; cross posted from New Deal 2.0

What’s coming in 2011? We asked thought leaders to share their perspectives on the biggest challenges for the year ahead, along with the changes they’d like to see and the hopes they cherish. Marshall Auerback explains how misguided attempts to reduce the deficit kill jobs, squeeze the working and middle classes, and inflate crude oil prices. And a corrupt political system doesn’t help.

The beginning of the year always seems a good time to lay out some broader themes which could develop throughout the year, good and bad, so here goes:

Make Yourself Heard on Mortgage Abuses

One of the most frustrating parts of the financial reform game is how powerless most of us really are, most of the time. Take this story:

Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures.

‘Summer’ Rerun: Buiter Provokes Wrath at Jackson Hole, Says Fed Too Close to Wall Street

This post first appeared on August 24, 2008

Go Willem Buiter! The London School of Economics prof and former Bank of England and European Bank for Reconstruction and Development official has been saying for some time that the Fed suffers from “cognitive regulatory capture” and has been far too responsive to the needs of Wall Street. It’s been puzzling to watch his detailed, well argued criticisms go unnoticed, particularly when they have been offered at forums where one would think they’d be impossible to ignore (for instance, a conference co-hosted by the New York Fed where Buiter presented a pretty harsh paper on what he called the North Atlantic Financial Crisis).

Well, he finally seems to have gotten through, perhaps because he is forward enough to criticize Fed officials to their face at an event they are hosting. Or maybe it’s because the pattern of conduct he decries is so patently obvious that the key actors can no longer fool themselves.

Perry Mehrling: Should Anyone Be Surprised that the Fed Was Lending to Foreign Banks in the Crisis?

Perry Mehrling is a professor of economics at Barnard College

The Financial Times devoted an entire article this week to the fact that foreign banks borrowed more than half the funds deployed under the Federal Reserve’s first emergency program, the Term Auction Facility.

Why is this a surprise?

“Summer” Rerun: Thin Gruel in Paulson Statement re Fannie, Freddie; Fed Opens Discount Window

This post first appeared on July 13, 2008

For those looking for some concrete action (which was what many market participants hoped for), Paulson issued a statement that amounts to hand waving.

Why are Irish Political Leaders so Keen to Collude with the Bank Regulator in Covering Up Blatant Regulatory Breaches at Unicredit Ireland?

By Richard Smith Dublin, by way of the proudly-named International Financial Services Centre, a sparkling new development in the old docks, is “home to more than half of the world’s top 50 financial institutions”. But as the Irish financial crisis wears on, this glitter invites unpleasing comparisons: it simply looks meretricious. What Dublin and, let’s […]

Bewildering Array of Choices for any American Voters Who Think the First Amendment might be Applicable to Wikileaks

Quote-mining by Richard Smith Conservative Republican Mitch McConnell (Googling +”Mitch McConnell” +Assange, 415,000 hits) takes a Republican conservative position: I think the man is a high-tech terrorist. Democrat Joe Biden (Googling +”Joe Biden” +Assange, 929,000 hits) initially finesses the principle question, on 18th December: I don’t think there’s any substantive damage. …but just after that […]

“Summer” Rerun: Should the Fed Be Independent?

This post was first published on June 6, 2008

An article in today’s Wall Street Journal, “Insider Joins Critics of the Fed, Faulting Credit-Crisis Programs,” discusses at some length a recent speech by Richmond Fed president Jeffrey Lacker in which he took issue with some of the Fed’s recent financial services industry rescue efforts. The article itself failed to do justice to his speech, which was more nuanced than the usual “bailing out banks creates moral hazard” argument.

In fact, as we’ll discuss, the expanded charter of the Fed calls into question the appropriateness of its independence. It is increasingly making resource allocation decisions which are political in nature and should arguably be debated and determined in that realm.

Guest Post: Eurocrisis: We knew all we needed to know…

Yves here. The alternative title for this post could be “No ‘whocouldanode’ excuses for the Eurozone crisis.”

By Geoffrey R D Underhill, Professor of International Governance, University of Amsterdam. Cross posted from VoxEU

Many policymakers have reacted to both the financial crisis and the recent Eurozone sovereign debt problems as though they were unexpected. This column argues that we knew more than enough to anticipate both problems, that the evidence was easily accessible, and that the institutional and political weaknesses of the Eurozone were hardly a mystery either.

More on the FDIC’s Fight Versus Other Bank Regulators on Servicer Abuses; Rep. Miller Backs More Aggressive Action

We’ve mentioned that the FDIC has been pushing to reform the securitization process, including imposing standards on servicers. That has put it at odds with the bank-friendly Treasury and Office of the Comptroller of the Currency (the SEC has proposed securtization reforms but of a much more modest nature than the FDIC’s). This behind the scenes battle is heating up further because Dodd Frank calls on bank regulators to draft new rules to improve the operation of the mortgage securitization market. The FDIC intends to include mortgage servicer behavior in those provisions and want the rules ready in January.

On the Gutting of Financial Services Reform

Bloomberg has a well done but disheartening account of the watering-down-to-meaninglessness of financial services industry reform, with the case example being Basel III. Basel III is the latest iteration of capital standards for banks, which is hoped to be implemented more or less true to form by various national bank regulators. Richard Smith has been ably covering the substance of this beat (see here and here for earlier posts) and the details are indeed more that a bit convoluted.

However, Basel III has been touted in the US as the fix for the shortcomings in bank reforms such as Dodd Frank. As Treasury argues, if banks have more than enough capital, you have a lot of room for error on other fronts. But Basel III preserves too many bad ideas of its predecessor, Basel II, such as risk-weightings for various types of assets that lend themselves to gaming; along with risk weighting, a preservation of the problematic role of unreformed rating agencies; allowing big banks to use their own idiosyncratic and often widely varying risk metrics; an obsession with the asset side of the balance sheet, and not enough to the way that liabilities can also blow out when asset prices are under stress.

Open Letter to Bank Regulators on Mortgage Securitization and Servicing Practices

Today, a letter urging fundamental changes in the mortgage securitization markets, signed by 50 individuals with expertise in this arena, was sent to the Chairmen of the FDIC, the Fed, and the SEC, and the Secretary of the Treasury and the Comptroller of the Currency.

Despite widespread evidence of failings, abuses, and outright fraud in the securitization process, reform measures have been halting at best.

Joseph Mason on the Myth of Good Servicers

By Thomas Adams, an attorney and former monoline executive, and Yves Smith Joseph Mason, the Hermann Moyse, Jr./Louisiana Bankers Association Professor of Finance, Louisiana State University, has a post up at Housing Wire that not only struck both of us as more than a tad off beam, but even elicited critical e-mails from real estate […]