August 2011 archive

Well, well, this is getting juicy. The FDIC has filed a lawsuit objecting to the $8.5 billion bail out of the Bank of America:

The FDIC, the receiver for failed banks, owns securities covered by the settlement and said it doesn’t have enough information to evaluate the accord, according to a filing yesterday in federal court in Manhattan.

Under the agreement, Bank of America would pay $8.5 billion to resolve claims from investors in Countrywide Financial Corp. mortgage bonds. The settlement was negotiated with a group of institutional investors, including BlackRock Inc. (BLK) and Pacific Investment Management Co. LLC, and would apply to investors outside that group.

Bank of New York Mellon Corp. (BK), the trustee for the mortgage-securitization trusts covered by the agreement, has asked a New York state judge to approve the settlement in November. An investor group is trying to move the case to federal court, which Bank of New York opposes.

Investors that would be bound by the settlement, including American International Group Inc., have criticized the deal and Bank of New York’s role representing investors in the mortgage bonds. New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden have sought to intervene in the case and asked the court to reject it.

The Nevada Attorney General Catherine Cortez Masto has further upped the ante:

The attorney general of Nevada is accusing Bank of America of repeatedly violating a broad loan modification agreement it struck with state officials in October 2008 and is seeking to rip up the deal so that the state can proceed with a suit against the bank over allegations of deceptive lending, marketing and loan servicing practices.

In a complaint filed Tuesday in United States District Court in Reno, Catherine Cortez Masto, the Nevada attorney general, asked a judge for permission to end Nevada’s participation in the settlement agreement. This would allow her to sue the bank over what the complaint says were dubious practices uncovered by her office in an investigation that began in 2009.

In her filing, Ms. Masto contends that Bank of America raised interest rates on troubled borrowers when modifying their loans even though the bank had promised in the settlement to lower them. The bank also failed to provide loan modifications to qualified homeowners as required under the deal, improperly proceeded with foreclosures even as borrowers’ modification requests were pending and failed to meet the settlement’s 60-day requirement on granting new loan terms, instead allowing months and in some cases more than a year to go by with no resolution, the filing says.

The complaint says such practices violated an agreement Bank of America reached in the fall of 2008 with several states and later, in 2009, with Nevada, to settle lawsuits that accused its Countrywide unit of predatory lending. As the credit crisis grew, the settlement was heralded as a victory by state offices eager to help keep troubled borrowers in their homes and reduce their costs. Bank of America set aside $8.4 billion in the deal and agreed to help 400,000 troubled borrowers with loan modifications and other financial relief, such as lowering interest rates on mortgages.

I’ll bet you this has Obama and the remaining AG’s panties in a twist, since, according to rumors they were looking to settle this by Labor Day.

Here’s the link to the FDIC’s brief:

FDIC Objection to Bank of America Mortgage Settlement

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Paul Krugman: Europe’s Crisis of Currencies

John Plender, a columnist at The Financial Times, seems mystified by something that has become obvious lately: Bond vigilantes are only going after countries that no longer have their own currencies.

In a column published on Aug. 16 he writes: “The underlying logic is that no country defaults on its domestic bonds if it retains the right to set the printing presses in motion. Yet it seems counterintuitive that bond markets, with their traditional fear of inflation, should punish a country for not being able to debase its currency.”

Oddly, he seems unaware of the pretty good explanation offered by Paul DeGrauwe, an economist and researcher at the Center for European Policy Studies, which I’ve sketched out a bit further.

New York Times Editorial: The New Resentment of the Poor

In a decade of frenzied tax-cutting for the rich, the Republican Party just happened to lower tax rates for the poor, as well. Now several of the party’s most prominent presidential candidates and lawmakers want to correct that oversight and raise taxes on the poor and the working class, while protecting the rich, of course.

These Republican leaders, who think nothing of widening tax loopholes for corporations and multimillion-dollar estates, are offended by the idea that people making less than $40,000 might benefit from the progressive tax code. They are infuriated by the earned income tax credit (the pride of Ronald Reagan), which has become the biggest and most effective antipoverty program by giving working families thousands of dollars a year in tax refunds. They scoff at continuing President Obama’s payroll tax cut, which is tilted toward low- and middle-income workers and expires in December.

Barry Ritholtz is a contributor to Seeking Alpha and is notable for his insights on the housing market and his book Bailout Nation.

Now this video is quite long, 24 minutes, but it has a lot of insight and if (like me) your cable is still out and you’re desperate for anything slightly resembling TV you might find it interesting.

lambert at Corrente (the blog that everybody hates and nobody reads) was taken by the fashion statement.  I only hope orange becomes the ‘in color’.

I must admit on my system it’s pretty cranky and I had to goose it past the second break.  Try moving the slider forward if you get lost in buffer land, don’t forget to restart the video.

Title quote @ aboot 4:09.  lambert’s fave @ 4:46ish.  Folsom Prison Blues below.

This is your morning Open Thread. Pour a cup of your favorite morning beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

August 31 is the 243rd day of the year (244th in leap years) in the Gregorian calendar. There are 122 days remaining until the end of the year.

I am very hesitant to make the death of Princess Diana the prominent story of the day but her death was a tragedy on so many levels that it is not surprising that the world nearly stood still for 6 days until her funeral. There are many things that we remember exactly where we were and what we were doing when they happened, like 9/11 and, for those of us old enough, JFK’s assassination.

I was living in Paris then not far from the site of the accident. I had been out to dinner that evening with my then ex-husband, Dr. TMC, when we heard the crash, it was that loud, and shortly after the sirens of emergency vehicles. Not unusual in Paris, so, we continued on to our destinations. It wasn’t until very early that I heard that the Princess had died and where. Paris was stunned. The site became a instant memorial.

We all sat glued to the TV for days waiting for the Queen to say something. The Queen badly underestimated the admiration that was held her former daughter-in-law.  The day of her funeral Paris froze, the only time I have ever seen the city this quiet was on 9/11.

After being criticized for failing to satisfactorily match the grief of the British people, the royal family arranged for a state funeral to be held for Diana at Westminster Abbey on September 6. Diana’s coffin was taken from Kensington Palace to the Abbey on a horse-drawn gun carriage, and an estimated one million mourners lined the route. Diana’s sons, William, 15, and Harry, 12, joined their father, Prince Charles; grandfather Prince Philip; and uncle Charles, the Earl of Spencer, to walk the final stretch of the procession with the casket. The only sound was the clatter of the horses’ hooves and the peal of a church bell.

The service, watched by an estimated two billion people worldwide, sacrificed royal pomp for a more human touch. Workers associated with Diana’s various charities represented 500 of the 2,000 people invited to attend the funeral. Elton John, a friend of Diana, lent a popular touch to the ceremony when he sang “Candle in the Wind,” accompanying himself on piano. After the service, Diana’s body was taken by hearse to her family’s ancestral estate near Althorp, north of London. In a private ceremony, she was laid to rest on a tree-shaded island in a small lake, securely beyond the reach of the camera lens.

Since the death of Princess Diana, Althorp, which has been in the Spencer family for over 500 years, is now a popular tourist attraction that offers tours to the general public.

I still light a candle in her memory on this day.

Blessed Be.

Evening Edition is an Open Thread

1 China jails more Tibetan monks, US concerned

AFP

2 hrs 40 mins ago

Find out why the Obama administration is WORSE; Roberto Arango, former leader of the governing PNP in the Puerto Rican Senate, is WORSER; and House Majority Leader Eric Cantor is the WORST PERSON IN THE WORLD for Aug. 29, 2011.

It’s a topic I’ve addressed before-

How to feel poor on $500,000 a year

Mon Sep 20, 2010 at 06:46:14 AM EDT

In Which Mr. Deling Responds to Someone Who Might Be Professor Todd Henderson

J. Bradford DeLong, Department of Economics, U.C. Berkeley

September 18, 2010

Professor Henderson’s problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot (get) you all of that. … (W)hy does he think that that is the way things should be? … (H)ere is the dirty secret: Professor Henderson thinks that that is the way things should be because he knows people for whom that is the way it is. … Of the 100 people richer than he is, fully ten have more than four times his income. And he knows of one person with 20 times his income. He knows who the really rich are, and they have ten times his income: They have not $450,000 a year. They have $4.5 million a year. And, to him, they are in a different world. And so he is sad. He and his wife deserve to be successful. And he knows people who are successful. But he is not one of them–widening income inequality over the past generation has excluded him from the rich who truly have money.

I’ll note that Mr. Deling has respectfully redacted the name of the offending asshole, but I’m free to shout it from the roof tops.

So what has changed?  Things have gotten worse of course!

"Who rules America? Breaking down the top 1%"

by Gaius Publius, Americablog

on 8/29/2011 10:55:00 AM

(T)his article breaks down the top 1% of American wealth into strata, and talks about the differences. It’s a really instructive piece, and an easy read.

The Lower Half of the Top 1% The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well. Everyone’s tax situation is, of course, a little different. On earned income in this group, we can figure somewhere around 25% to 30% of total pre-tax income will go to Federal, State, and Social Security taxes, leaving them with around $250k to $300k post tax. This group makes extensive use of 401-k’s, SEP-IRA’s, Defined Benefit Plans, and other retirement vehicles, which defer taxes until distribution during retirement. Typical would be yearly contributions in the $50k to $100k range, leaving our elite working group with yearly cash flows of $175k to $250k after taxes, or about $15k to $20k per month. Until recently, most studies just broke out the top 1% as a group. Data on net worth distributions within the top 1% indicate that one enters the top 0.5% with about $1.8M, the top 0.25% with $3.1M, the top 0.10% with $5.5M and the top 0.01% with $24.4M. Wealth distribution is highly skewed towards the top 0.01%, increasing the overall average for this group. The net worth for those in the lower half of the top 1% is usually achieved after decades of education, hard work, saving and investing as a professional or small business person. While an after-tax income of $175k to $250k and net worth in the $1.2M to $1.8M range may seem like a lot of money to most Americans, it doesn’t really buy freedom from financial worry or access to the true corridors of power and money. That doesn’t become frequent until we reach the top 0.1%.

…

(T)he people above, the “lower half of the top 1%”, still work for a living. I would put them at the top level of the “retainer class” – wealthy, but still servants.

In Roman times, these would be the very-well-off top-level administrators and professionals, many of them ex-Greek slaves, who service the real Masters (the emperor and wealthier senatorial families) and oversee the constant flow of peasant wealth upwards, from which they get a hand-me-down share.

For the author, the key American economic super-strata are:

• 99.0%-99.5%  –  The lower half of the top 1%
• 99.5%-99.9%  –  Most of the upper half of the top 1%
• The top 0.1%  –  The Big Boyz (and Girlz, but very few of those)
• The top 0.01%  –  Where most of the real wealth is concentrated

The first sub-group has a lot of retirement anxiety, as the article makes clear; and the second has some guilt. Guess where the power lies.

I like Gaius.  I like what he writes and I understand from TheMomCat who has met him that he’s a very nice guy.  He has another piece earlier that touches on the same subject-

$2 of every $3 in income growth from 2002-2007 went to the upper 1%

by Gaius Publius, Americablog

on 8/25/2011 08:21:00 PM

Not the upper 10%; the upper 1%. (2002 is the bottom of the tech crash; 2007 is just pre-the bank crash.)

Another bad stat – In 1967, 97% of prime age men with only HS diplomas were working. Today, the number is 76%. Stunning; the middle class (the real one, not the faux-middle class we see on TV) is collapsing hard from within.

All of this comes via Don Peck and his new Atlantic article, “Can the Middle Class Be Saved?“.

…

Peck makes several points that regular readers will be familiar with – in particular, the notion that the super-rich (Our Betters) have not only delinked their expenses from the U.S. economy – they’re started to delink their incomes from it as well.

…

The run-up in wealth inequality is the big story of this generation; in my view, a world-historical event that will have a world-historical outcome if we’re not careful. This wealth will be redistributed, one way or another, in this generation or a later one.

Fascinating stuff.  I encourage you to click the links.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Dean Baker: President Obama’s Job Creation Mirage

We’ve heard plenty about Obama’s post Labor Day job creation speech, but will it contain anything that might actually work?

President Obama has discovered how serious the recession is. That’s what he told an audience in Chicago last week. To be fair, he was referring to revised data from the commerce department showing that the falloff in GDP was larger than originally reported.

But ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.

This sort of ridiculous comment, and President Obama’s weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of scepticism facing his widely hyped upcoming speech on jobs after the Labor Day weekend. The list of remedies leaked ahead of time does little to inspire hope.

Glen Greenwald: The Decade’s Biggest Scam

The Los Angeles Times examines the staggering sums of money expended on patently absurd domestic “homeland security” projects: $75 billion per year for things such as a Zodiac boat with side-scan sonar to respond to a potential attack on a lake in tiny Keith County, Nebraska, and hundreds of “9-ton BearCat armored vehicles, complete with turret” to guard against things like an attack on DreamWorks in Los Angeles.  All of that — which is independent of the exponentially greater sums spent on foreign wars, occupations, bombings, and the vast array of weaponry and private contractors to support it all — is in response to this mammoth, existential, the-single-greatest-challenge-of-our-generation threat:

“The number of people worldwide who are killed by Muslim-type terrorists, Al Qaeda wannabes, is maybe a few hundred outside of war zones. It’s basically the same number of people who die drowning in the bathtub each year,” said John Mueller, an Ohio State University professor who has written extensively about the balance between threat and expenditures in fighting terrorism.

Last year, McClatchy characterized this threat in similar terms: “undoubtedly more American citizens died overseas from traffic accidents or intestinal illnesses than from terrorism.”  The March, 2011, Harper’s Index expressed the point this way: “Number of American civilians who died worldwide in terrorist attacks last year: 8 — Minimum number who died after being struck by lightning: 29.”  That’s the threat in the name of which a vast domestic Security State is constructed, wars and other attacks are and continue to be launched, and trillions of dollars are transferred to the private security and defense contracting industry at exactly the time that Americans — even as they face massive wealth inequality — are told that they must sacrifice basic economic security because of budgetary constraints.

This is your morning Open Thread. Pour a cup of your favorite morning beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

August 30 is the 242nd day of the year (243rd in leap years) in the Gregorian calendar. There are 123 days remaining until the end of the year.

On this day in 1967, Thurgood Marshall becomes the first African American to be confirmed as a Supreme Court justice. He would remain on the Supreme Court for 24 years before retiring for health reasons, leaving a legacy of upholding the rights of the individual as guaranteed by the U.S. Constitution.

Thurgood Marshall (July 2, 1908 – January 24, 1993) was an American jurist and the first African American to serve on the Supreme Court of the United States. Before becoming a judge, he was a lawyer who was best remembered for his high success rate in arguing before the Supreme Court and for the victory in Brown v. Board of Education. He was nominated to the court by President Lyndon Johnson in 1967.

Marshall was born in Baltimore, Maryland on July 2, 1908, the great-grandson of a slave who was born in modern-day Democratic Republic of the Congo.His original name was Thoroughgood, but he shortened it to Thurgood  in second grade because he disliked spelling it. His father, William Marshall, who was a railroad porter, instilled in him an appreciation for the Constitution of the United States and the rule of law.

Marshall graduated from Frederick Douglass High School in Baltimore in 1925 and from Lincoln University in Pennsylvania in 1930. Afterward, Marshall wanted to apply to his hometown law school, the University of Maryland School of Law, but the dean told him that he would not be accepted because of the school’s segregation policy. Later, as a civil rights litigator, he successfully sued the school for this policy in the case of Murray v. Pearson. As he could not attend the University of Maryland, Marshall sought admission and was accepted at Howard University School of Law.

Marshall received his law degree from the Howard University School of Law in 1933 where he graduated first in his class.

Marshall won his very first U.S. Supreme Court case, Chambers v. Florida, 309 U.S. 227 (1940), at the age of 32. That same year, he was appointed Chief Counsel for the NAACP. He argued many other cases before the Supreme Court, most of them successfully, including Smith v. Allwright, 321 U.S. 649 (1944); Shelley v. Kraemer, 334 U.S. 1 (1948); Sweatt v. Painter, 339 U.S. 629 (1950); and McLaurin v. Oklahoma State Regents, 339 U.S. 637 (1950). His most famous case as a lawyer was Brown v. Board of Education of Topeka, 347 U.S. 483 (1954), the case in which the Supreme Court ruled that “separate but equal” public education, as established by Plessy v. Ferguson, was not applicable to public education because it could never be truly equal. In total, Marshall won 29 out of the 32 cases he argued before the Supreme Court.

Marshall served on the Court for the next twenty-four years, compiling a liberal record that included strong support for Constitutional protection of individual rights, especially the rights of criminal suspects against the government. His most frequent ally on the Court (indeed, the pair rarely voted at odds) was Justice William Brennan, who consistently joined him in supporting abortion rights and opposing the death penalty. Brennan and Marshall concluded in Furman v. Georgia that the death penalty was, in all circumstances, unconstitutional, and never accepted the legitimacy of Gregg v. Georgia, which ruled four years later that the death penalty was constitutional in some circumstances. Thereafter, Brennan or Marshall dissented from every denial of certiorari in a capital case and from every decision upholding a sentence of death.[citation needed] In 1987, Marshall gave a controversial speech on the occasion of the bicentennial celebrations of the Constitution of the United States. Marshall stated,

   

“the government they devised was defective from the start, requiring several amendments, a civil war, and major social transformations to attain the system of constitutional government and its respect for the freedoms and individual rights, we hold as fundamental today.”

In conclusion Marshall stated

   

“Some may more quietly commemorate the suffering, struggle, and sacrifice that has triumphed over much of what was wrong with the original document, and observe the anniversary with hopes not realized and promises not fulfilled. I plan to celebrate the bicentennial of the Constitution as a living document, including the Bill of Rights and the other amendments protecting individual freedoms and human rights.”

He retired from the Supreme Court in 1991, and was reportedly unhappy that it would fall to President George H. W. Bush to name his replacement. Bush nominated Clarence Thomas to replace Marshall.

Marshall died of heart failure at the National Naval Medical Center in Bethesda, Maryland, at 2:58 p.m. on January 24, 1993 at the age of 84. He is buried in Arlington National Cemetery. His second wife and their two sons survived him

On November 30, 1993, Justice Marshall was posthumously awarded the Presidential Medal of Freedom by President Bill Clinton.