Category Archives: Regulations and regulators

Another Day, Another Rating Agency Fail, This Time S&P

f you thought that the rating agencies had cleaned up their act in the wake of the crisis, think again. Our Richard Smith reported on a couple of black eyes by Moody’s, one a rather implausible 180 degree turn on its take on the US tax deal, the other a suspiciously flattering take on whether Countrywide had indeed transferred notes (retaining them, as an executive testified they did on a routine basis, would confirm our suspicions about widespread problems in the securitization industry.

Now we have a big blooper by S&P, this one in the form of mass rerating, based on an admitted faulty analysis. That is code for “big error in the model that everyone missed.”

Lender Processing Services Makes False Statements About Pending Litigation in SEC Filing

Shortly after Lender Processing Services became the target of class action lawsuits for alleged illegal legal fee-splititing in early October, an investor commented that he had never seen a company do such a poor job of crisis management. The company halted trading at 3:45 PM for the not legitimate reason that they didn’t like how […]

Dylan Ratigan on Get America Working

Dylan Ratigan is leading town hall events in various cities to help spur the establishment of a job creation movement. The goal is to push for policies that foster higher employment than the ones we’ve seen over the last thirty years, which instead promoted financialization, the use of consumer debt to paper over lack of wage growth, asset inflation and speculation, and increasing income and wealth disparity.

Ratigan wants to create a dialogue among key political groups, including ordinary citizens, investors, small business operators, and corporate leaders. His sessions will focus on four issues, as he outlined in in the Huffington Post:

Republican Members of FCIC to Promote Crisis Urban Legends, Shift Blame From Banks

Lordie, the Big Lie is with us in force.

The New York Times reports that the Republican members of the Financial Crisis Inquiry Commission are going to pre-empt the report (due in mid-January) and issue their own 13 page screed later today focusing blame for the crisis on…Fannie and Freddie, and no doubt the CRA too.

Let’s look at a few inconvenient facts.

Iowa AG Miller Commits to Prosecution of Bank Execs, Seeking Principal Mods

We asked readers to sign a letter to Iowa attorney general Tom Miller, who is leading the 50 state probe into foreclosure and mortgage abuses. Here is the official report from National People’s Action, which was part of the group that met with Miller earlier today: Leader of 50 State Foreclosure Probe Tells Struggling Homeowners: […]

Is It Verboten to Talk About the Securitization Buyers’ Strike?

There is a perfectly fine article up at the Wall Street Journal on the current, probably weakening, state of the housing market, save that it fails to discuss the elephant in the room, that of the continuing moribund conditions in the so-called private label securitization market.

EU Permanent Bailout Mechanism Leaked to BBC – Bad Outcome for PIIGS Gov’t Bondholders?

The BBC has obtained a leaked copy of the EU draft communique on the so-called permanent bailout mechanism. Attentive readers may recall that current programs extend only to 2013, leaving a big question mark as to what would happen next, given the high odds that the countries perceived to be at risk would not be […]

Did Goldman and Other Dealers Squeeze Mortgage CDS Shorts So They Could Sell Toxic CDOs?

By Tom Adams, an attorney and former monoline executive, and Yves Smith

As reported in the Financial Times, Senator Carl Levin of the Senate permanent investigations released damaging e-mails in which Goldman traders discuss “killing” some mortgage-related CDS shorts in May 2007. Levin understood the implications, that damaging the shorts would allow Goldman to buy CDS even more cheaply, but did not tease out the logical conclusion. This move was a likely a major step that allowed Goldman (and fellow dealers not under investigation who likely pursued parallel strategies) to package its remaining mortgage dreck into CDOs, which were launched as the reported squeeze evidently took place, and unload as much toxic inventory as possible before the wheels came hopelessly off the subprime bandwagon….

Treasury Bars Use of TARP Funds to Help Borrowers Facing Foreclosure

If you had any doubts about whose side the Administration is on, this story should settle all doubts. From the Nation:

Consider this: the recent Fed audit revealed over $3.3 trillion in emergency assistance to the banks and other corporate behemoths during the financial crisis–no strings attached….
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Mirabile Dictu: The Treasury Flexes Some Muscle on the Volcker Rule?

As readers know, this blog has LOOONG been a critic of the Treasury Department’s stance towards big dealer banks, both in the Paulson era and from the very get-go of Geithner’s tenure. So on those all-too-rare occasions when Treasury seems willing to meddle in a real way with the “heads we win, tails you lose” arrangement the financial services industry has managed to devise with broader society, it’s important to applaud those efforts.

Admittedly, it is premature to declare victory, but the fact that Treasury is even taking a serious stance on the so-called Volcker rule is a surprise.

Guest Post: All together now? Arguments for a big-bang solution to Eurozone problems

By Daniel Gros, Director of the Centre for European Policy Studies, Brussels. Cross posted from VoxEU. Muddling through isn’t working. This column argues that troubled Eurozone nations should simultaneously open restructuring talks while continuing to service their debts normally. Germany, France, and other core Eurozone nations would have to stand ready to recapitalise the banks […]

Euro Bank Stress Tests Hoist on PR Petard

We’ve been critics of bank “stress tests” from the get-go, because they were a shameless misuse of regulatory credibility as a tool to prop up bank stock and bond prices. It was in some was the inevitable result of how badly financial authorities (save some lonely but prominent figures in the UK, like Mervyn King […]

Pettis on Eurozone Pathways and Endgames

Michael Pettis, like Simon Johnson a few days ago, has tried mapping out what he thinks future scenarios for the eurozone might be, and what that means in terms of possible winners and losers. One of Pettis’ strengths is that he takes the time to be explicit about his reasoning, which gives readers the opportunity […]

Servicer-Driven Foreclosures: The Perfect Crime?

As much as I’ve seen a lot of financial services industry misconduct at close range, sometimes even a cynic like me is not prepared for how bad things can be. And mortgage abuse is turning out to be one of those areas. I’ve been in contact for over the last six months with attorneys involved […]