October 2011 archive

Preferably some independent adult supervision

What was revealed in the audit was startling: $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious – the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.

In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.

Angry? Check out page 131 of the GAO Audit to see the actual amounts that each institution received.

Senator Bernie Sanders released his report on Friday and appeared with Dylan Ratigan to discuss the problems and conflicts within the Fed.

October 19, 2011

WASHINGTON, Oct. 19 – A new audit of the Federal Reserve released today detailed widespread conflicts of interest involving directors of its regional banks.

“The most powerful entity in the United States is riddled with conflicts of interest,” Sen. Bernie Sanders (I-Vt.) said after reviewing the Government Accountability Office report. The study required by a Sanders Amendment to last year’s Wall Street reform law examined Fed practices never before subjected to such independent, expert scrutiny.

The GAO detailed instance after instance of top executives of corporations and financial institutions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves.  “Clearly it is unacceptable for so few people to wield so much unchecked power,” Sanders said. “Not only do they run the banks, they run the institutions that regulate the banks.”

Sanders said he will work with leading economists to develop legislation to restructure the Fed and bar the banking industry from picking Fed directors. “This is exactly the kind of outrageous behavior by the big banks and Wall Street that is infuriating so many Americans,” Sanders said.

The corporate affiliations of Fed directors from such banking and industry giants as General Electric, JP Morgan Chase, and Lehman Brothers pose “reputational risks” to the Federal Reserve System, the report said. Giving the banking industry the power to both elect and serve as Fed directors creates “an appearance of a conflict of interest,” the report added.

The 108-page report found that at least 18 specific current and former Fed board members were affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis.

In the dry and understated language of auditors, the report noted that there are no restrictions in Fed rules on directors communicating concerns about their respective banks to the staff of the Federal Reserve. It also said many directors own stock or work directly for banks that are supervised and regulated by the Federal Reserve.  The rules, which the Fed has kept secret, let directors tied to banks participate in decisions involving how much interest to charge financial institutions and how much credit to provide healthy banks and institutions in “hazardous” condition. Even when situations arise that run afoul of Fed’s conflict rules and waivers are granted, the GAO said the waivers are kept hidden from the public.

The report by the non-partisan research arm of Congress did not name but unambiguously described several individual cases involving Fed directors that created the appearance of a conflict of interest, including:

   

Stephen Friedman In 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap Fed loans. During the same period, Friedman, chairman of the New York Fed, sat on the Goldman Sachs board of directors and owned Goldman stock, something the Fed’s rules prohibited. He received a waiver in late 2008 that was not made public. After Friedman received the waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009 unbeknownst to the Fed, according to the GAO.

   

Jeffrey Immelt The Federal Reserve Bank of New York consulted with General Electric on the creation of the Commercial Paper Funding Facility. The Fed later provided $16 billion in financing for GE under the emergency lending program while Immelt, GE’s CEO, served as a director on the board of the Federal Reserve Bank of New York.

   

Jamie Dimon The CEO of JP Morgan Chase served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and was used by the Fed as a clearing bank for the Fed’s emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns.At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank.

Lets not forget who President Obama chose to replace Rahm Emanuel, Bill Daley, son of legendary Chicago Mayor Richard J. Daley (D) and brother of the more recent Mayor Richard M. Daley (D). Oh, I forgot, Geithner is also the architect of Bill Clinton’s NAFTA Agreement that Obama promised to fix and Midwest Chairman of JPMorgan Chase.

Then there is our Treasury Secretary, Tim Geithner, a protégé of Lawrence Summers and Robert Rubin, who while president of the Federal Reserve Bank of New York, played a large role in directing the Federal Government’s spending on the late-2000s financial crisis, including allocation of $350 billion of funds from the Troubled Asset Relief Program enacted during the previous administration.

None of these people should be allowed anywhere near either the Federal Reserve or the Treasury. Most of them should be in jail.

“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”.

Robert Reich: The Austerity Death Trap

Ron Paul’s newly-unveiled economic plan — promising to cut $1 trillion from the federal budget in year one (presumably that means 2013) — is only slightly more ambitious than what we’re hearing from other Republican candidates. They’re all calling for major spending cuts starting as soon as possible.

What are they smoking?

Can we just put ideology aside for a moment and be clear about the facts? Consumer spending (70 percent of the economy) is flat or dropping because consumers are losing their jobs and wages, and don’t have the dough. And businesses aren’t hiring because they don’t have enough customers.

The only way out of this vicious cycle is for the government — the spender of last resort — to boost the economy. The regressives are all calling for the opposite.

Cenk Uygur: {How To Regain Our Democracy http://www.huffingtonpost.com/…

Our politicians are bought. Everyone knows it. Conservatives know it just as much as liberals do. And libertarians have probably known it all along. The Democrats are bought and the Republicans even more so. They don’t represent us. They represent their donors. We have taxation without representation. Our democracy is in serious trouble.

We must regain our ability to make a difference, to have our votes count. Right now, corporate interests and special interests dominate our politics because they can spend unlimited money. Unfortunately, in this current system money speaks louder than words. The pen might be mightier than the sword, but the checkbook is far mightier than the pen. In the congressional races in 2008, the candidate who had more money won more than 93% of the time. Our representatives don’t serve us; they serve the people who pay them — their corporate funders.

Click on image to enlarge

One of the key activists behind Egypt’s “Facebook Revolution” is now giving advice to a new group of protesters: the Occupy Wall Street movement.

The protesters in New York’s Zuccotti Park – and their offshoots around the country – often cite the mass demonstrations earlier this year in Cairo’s Tahrir Square as their inspiration. So maybe it shouldn’t be much of a surprise that Ahmed Maher, one of the leading figures in those Egyptian protests, has been corresponding for weeks with the Occupy Wall Streeters, whom he calls “our brothers.”

Maher is one of the founders of the April 6 Youth, which used Facebook, Twitter and YouTube to galvanize Egyptians against President Hosni Mubarak. Recently, however, his attention has turned toward America, where he’s been chatting online with Occupy activists. Those conversations center around practical advice from a successful Egyptian revolutionary. Usually, they occur through Facebook. On Tuesday, for the first time, they happened face to face.

“We talk on the internet about what happened in Egypt, about our structure, about our organization, how to organize a flash mob, how to organize a sit-in,” Maher tells Danger Room, and “how to be non-violent with police.”

The “30 Rock” star and newly minted podcaster, Baldwin has, during the protesters’ occupation of Wall Street, advocated for tighter bank regulations and more strict enforcement of those regulations. Arriving around midnight, he tweeted at 1:37, “My thanks 2 Aaron from Brooklyn and Sean from Winnipeg for this evening’s OWS tutorial. My first. A lot of dedicated people at #ZuccottiPark.”

He sent out a series of tweets following his departure, saying, “OWS needs to coalesce around some legislative policy. The ‘occupy’ strategy may be an effective one. But what can each entity agree on?” and “Campaign finance reform remains the linchpin of our democracy’s many problems.”

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The star then followed that defense of banks’ existence, saying, “We need a healthy banking system in this country. We need strong capital markets. What is missing are regulations with teeth.”

Two weeks ago we conducted an anonymous poll on this website to learn more about our visitors. We asked Héctor R. Cordero-Guzmán Ph.D, sociologist of the City University of New York to look at the data, which he analyzed to create an original academic paper titled “Mainstream Support for a Mainstream Movement” (pdf).

His analysis shows that the Occupy Wall Street movement is heavily supported by a diverse group of individuals and that “the 99% movement comes from and looks like the 99%.” Among the most telling of his findings is that 70.3% of respondents identified as politically independent.

Dr. Cordero-Guzmán’s findings strongly reinforce what we’ve known all along: Occupy Wall Street is a post-political movement representing something far greater than failed party politics. We are a movement of people empowerment, a collective realization that we ourselves have the power to create change from the bottom-up, because we don’t need Wall Street and we don’t need politicians.

Since our humble beginning a few short weeks ago, we’ve helped inspire people around the world to organize democratic assemblies in their own communities to take back public spaces, meet basic needs, make their own demands, and begin building a better world today.

Below is Dr. Cordero-Guzmán’s executive summary of his findings along with a link to his full academic paper.

Author was arrested alongside Occupy Wall Street protesters after she disputed police claims that they had to clear sidewalk

The feminist author Naomi Wolf has criticised the erosion of the right to public protest in the United States after she was arrested alongside Occupy Wall Street demonstrators in New York.

Wolf was led away in handcuffs after addressing protesters outside an awards ceremony held to honour New York’s governor, at which she was a guest.

Reports are coming in from Sirte, Libya that Muammar Gaddafi has been killed trying to flee rebel troops. This has not been confirmed by the US State Department.

Muammar Gaddafi killed in Sirte

NTC military chief says toppled leader died of wounds following capture near his hometown of Sirte

Abdul Hakim Belhaj, an NTC military chief, has confirmed that Muammar Gaddafi has died of his wounds after being captured near Sirte.

The body of the former Libyan leader was taken to a location which is being kept secret for security reasons, an NTC official said.

“Gaddafi’s body is with our unit in a car and we are taking the body to a secret place for security reasons,” Mohamed Abdel Kafi, an NTC official in the city of Misrata, told Reuters.

Earlier, Jamal abu-Shaalah, a field commander of NTC, told Al Jazeera that the toppled leader had been caught.

“He’s captured. He’s wounded in both legs … He’s been taken away by ambulance,” Abdel Majid, a senior NTC military official said.

A photograph taken on a mobile phone appeared to show Gaddafi heavily bloodied, but it was not possible to confirm the authenticity of the picture.

The news came shortly after the NTC captured Sirte, Gaddafi’s hometown, after weeks of fighting.

News Agency Al Arabiya has said [they are to be given access to his body to take pictures.

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

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

October 20 is the 293rd day of the year (294th in leap years) in the Gregorian calendar. There are 72 days remaining until the end of the year.

On this day in 1973, Solicitor General Robert Bork dismisses Watergate special prosecutor Archibald Cox; Attorney General Richardson and Deputy Attorney General Ruckelshaus resign in protest. Cox had conducted a detailed investigation of the Watergate break-in that revealed that the burglary was just one of many possible abuses of power by the Nixon White House. Nixon had ordered Richardson to fire Cox, but he refused and resigned, as did Ruckelshaus when Nixon then asked him to dismiss the special prosecutor. Bork agreed to fire Cox and an immediate uproar ensued. This series of resignations and firings became known as the Saturday Night Massacre and outraged the public and the media. Two days later, the House Judiciary Committee began to look into the possible impeachment of Nixon.

The Saturday Night Massacre was the term given by political commentators to U.S. President Richard Nixon‘s executive dismissal of independent special prosecutor Archibald Cox, and the resignations of Attorney General Elliot Richardson and Deputy Attorney General William Ruckelshaus on October 20, 1973 during the Watergate scandal

Richardson appointed Cox in May of that year, after having given assurances to the Senate Judiciary Committee that he would appoint an independent counsel to investigate the events surrounding the Watergate break-in of June 17, 1972. Cox subsequently issued a subpoena to President Nixon, asking for copies of taped conversations recorded in the Oval Office  and authorized by Nixon as evidence. The president initially refused to comply with the subpoena, but on October 19, 1973, he offered what was later known as the Stennis Compromise-asking U.S. Senator John C. Stennis to review and summarize the tapes for the special prosecutor’s office.

Mindful that Stennis was famously hard-of-hearing, Cox refused the compromise that same evening, and it was believed that there would be a short rest in the legal maneuvering while government offices were closed for the weekend. However, President Nixon acted to dismiss Cox from his office the next night-a Saturday. He contacted Attorney General Richardson and ordered him to fire the special prosecutor. Richardson refused, and instead resigned in protest. Nixon then ordered Deputy Attorney General Ruckelshaus to fire Cox; he also refused and resigned in protest.

Nixon then contacted the Solicitor General, Robert Bork, and ordered him as acting head of the Justice Department to fire Cox. Richardson and Ruckelshaus had both personally assured the congressional committee overseeing the special prosecutor investigation that they would not interfere-Bork had made no such assurance to the committee. Though Bork believed Nixon’s order to be valid and appropriate, he considered resigning to avoid being “perceived as a man who did the President’s bidding to save my job.” Never the less, Bork complied with Nixon’s order and fired Cox. Initially, the White House claimed to have fired Ruckelshaus, but as The Washington Post article written the next day pointed out, “The letter from the President to Bork also said Ruckelshaus resigned.”

Congress was infuriated by the act, which was seen as a gross abuse of presidential power. In the days that followed, numerous resolutions of impeachment against the president were introduced in Congress. Nixon defended his actions in a famous press conference on November 17, 1973, in which he stated,

“…[I]n all of my years of public life, I have never obstructed justice. And I think, too, that I can say that in my years of public life that I’ve welcomed this kind of examination, because people have got to know whether or not their President’s a crook. Well, I’m not a crook! I’ve earned everything I’ve got.“

I wrote this diary a year ago October 22. In light of the tragic event in Ohio that ended the lives of 18 Bengal Tigers, 17 Lions, 8 Bears, 1 Wolf, I am republishing it.

What digby said:

I cannot understand why anyone should be allowed to keep endangered species in a private zoo. But even assuming that property worshiping Americans won’t stand for such a ban, no one should be able to do this after having been cited over and over again for animal cruelty and abuse. What a horrible story.

h/t watertiger @ Dependable Renegade

Yaaaay . . . um, Putin?

With just 3,200 tigers thought to remain in the wild, time is growing short to save the species. Poaching and habitat destruction continue to imperil the tiger, which has undergone an estimated 40 percent drop in its wild population over the last decade and is now perched on the brink of extinction throughout much of its range.

Next month, however, officials from the remaining countries with wild tigers will gather in St. Petersburg, Russia, for a major conference on how to reverse the decline of the species. A draft declaration for the summit sets a goal of doubling the wild tiger population by 2022, and conservationists and biologists have high hopes for the gathering.

The summit conference “promises to be the most significant meeting ever held to discuss the fate of a single non-human species,” a group of tiger experts declared in September, in the preface of a major new report charting the tiger’s perilous condition.

Prime Minister Vladimir V. Putin of Russia has already agreed to attend the event and has been a critical force behind its development. His presence is expected to draw numerous heads of state and high-level delegations from the 13 “tiger range” nations.

Look at the size of these paws

The Tiger Summit, to be hosted by Prime Minister Vladimir Putin in Russia in November 2010-the Chinese Year of the Tiger and the International Year of Biodiversity-promises to be the most significant meeting ever held to discuss the fate of a single non-human species. The Summit will culminate efforts by the Global Tiger Initiative (GTI), launched in 2008 by Robert Zoellick, World Bank President. Leaders of 13 tiger range states, supported by international donors and conservationists attending the summit, are being asked to commit to substantive measures to prevent the unthinkable: extinction of the world’s last wild tiger populations.

Wild tiger numbers are at an historic low. There is no evidence of breeding populations of tigers in Cambodia, China, Vietnam, and DPR Korea. Current approaches to tiger conservation are not slowing the decline in tiger numbers, which has continued unabated over the last two decades. While the scale of the challenge is enormous, we submit that the complexity of effective implementation is not: commitments should shift to focus on protecting tigers at spatially well-defined priority sites, supported by proven best practices of law enforcement, wildlife management, and scientific monitoring. Conflict with local people needs to be mitigated. We argue that such a shift in emphasis would reverse the decline of wild tigers and do so in a rapid and cost-efficient manner.

Those of you that read this regular series know that I am from Hackett, Arkansas, just a mile or so from the Oklahoma border, and just about 10 miles south of the Arkansas River.  It was a redneck sort of place, and just zoom onto my previous posts to understand a bit about it.

In summer in that part of Arkansas it got extremely hot from the early part of June through late September.  In the early 1960s air conditioning was quite rare, at least in my part of the of the state.  Thus, we slept with the windows open.  We lived in an old two story house and slept upstairs.

With no air conditioning, fans were the only alternative.  We had an attic fan in the house, which because they are large and slow moving, make little noise.  Because of this, it was easy to hear the nighttime sounds.

They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. ~ Benjamin Franklin

The US has killed the 16 year old son of Anwar Al-Awlaki who was killed in last month in an unmanned drone attack ordered by President Obama. The teenager had run away from home to find his father. On Friday, Abdulrahman al-Awlaki was killed in unmanned drone attack in southeastern Yemen. The Al-Awlaki family is speaking out about the killings.

“To kill a teenager is just unbelievable, really, and they claim that he is an al-Qaeda militant. It’s nonsense,” said Nasser al-Awlaki, a former Yemeni agriculture minister who was Anwar al-Awlaki’s father and the boy’s grandfather, speaking in a phone interview from Sanaa on Monday. “They want to justify his killing, that’s all.”

Former Justice Department attorney and whistleblower, Jesselyn Radack discusses how the US has gone further down a very slippery slope into “Wonderland”:

In a still secret–yet described in detail in the New York Times–memo, the Justice Department justified assassinating American citizen al-Awlaki despite the myriad laws and the Constitution such a killing would violate. As New York Times journalist Charlie Savage pointed out, there exists

   an executive order banning assassinations, a federal law [that prohibits Americans from murdering other Americans abroad], protections in the Bill of Rights [the Fourth Amendment’s guarantee that a “person” cannot be seized by the government unreasonably, and the Fifth Amendment’s guarantee that the government may not deprive a person of life “without due process of law”], and various strictures of the international laws of war . . .

The Justice Department has refused to release the secret memo despite calls from major media outlets and a FOIA request from my organization (the Government Accountability Project), but has assured us that the justification for killing an American was for al-Awlaki only, and did not set a precedent.  But now we are sliding down the slippery slope.  The U.S. killed American Samir Khan–the publisher of the controversial magazine Inspire (clearly First Amendment activity) along with al-Awlaki and now, the young Awlaki was the third American killed in Yemen in as many weeks.

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But now we have taken to killing American teenagers without due process, an action the U.S. Supreme Court could not take even if al-Awlaki’s son had a full criminal trial. The Supreme Court held in Roper v. Simmons that even after a suspect receives due process in court–something al-Awlaki and his son were secretly and summarily denied–using the death penalty on juveniles is cruel and unusual punishment that violates the Constitution.

Speaking of the Supreme Court, the Court weighed in on the rights of American citizens labeled “belligerents” and has held that they must receive some measure of due process. In Hamdi v. Rumsfeld, Justice Sandra Day O-Connor eloquently explained:

   . . . a state of war is not a blank check for the President when it comes to the rights of the Nation’s citizens . . .

Many of us on the left and on the blogs were vociferously and adamantly opposed to the Bush regimes use of torture and we were truly dismayed when then House Speaker Nancy Pelosi took impeachment of both Bush and Cheney off the table. We were again disheartened when President Obama decided not to even investigate the criminality of Bush cabal. Now, one would think that there would be an outcry from the so called progressives on targeting American citizens for assassination and the use of unmanned drones which may well be a war crime but apparently not on the web site where Ms. Radack published her article. Those who were the loudest opposition to the Bush crimes and torture were out in force in comments with some of the most right wing rational for supporting Obama’s criminality:

the son was collateral damage. Get the father into a court room, and the son gets to live. Then when daddy Awlaki is locked up in a federal prison, sonny Awlaki can become a terrorist leader on his own. Then various people here can cluck over him when he finds his way into US military crosshairs for his own evil deeds. Perhaps by that time he’ll have had some little Awlakis of his own, who we can cluck over even more.  See, this can keep going for a long darn time.

Generations in fact.

This was addressed directly to Ms. Radack:

Because if there’s any right that’s sacred.. in the minds of most Americans, it’s the right to travel the back roads of Yemen as part of an organization proudly devoted to the destruction of the United States and the mass killing of its people.  After all, I’m pretty sure that’s all just idle bluster.

This is where I try to set aside my own views and offer what I think is some strategically sound advice to you, and you can take it as you will.  Why not focus on torture, rendition, and other stuff where you enjoy some greater chance of success, and then leverage that success into this toughest of nuts?

This comment was made by an African American lawyer

I’ll save my tears for things worth crying about. Some 16 year old kid winning a Darwin Award doesn’t cut it.

These are just a few of the degenerate, despicable comments that praised these killings and defended Obama. There were many responses that were horrified by such rhetoric. It makes one wonder just how far Obama cult of followers will sink before they realize their hero is not just very flawed but as evil as the last president if not worse.

It’s hardly an earthshattering insight that these 2 teams have made it into the Series with some similar strengths and a shared glaring weakness.

The strengths are offense and relief pitching, the weakness is starting pitching.  The Rangers have not had a single win from any of their starters, the Cardinals but one from Chris Carpenter who starts tonight opposed by C.J. Wilson.

There are two other slight advantages for the Red Birds.  They have 2 leftys in the Bullpen while the Rangers have but one, and they have home field advantage.

Beware the Rally Squirrel!

Now most of the Sports Media (who rival our bootlicking punditry in laziness and stupidity) are picking the Rangers to win, but I think that the above advantages give the Cardinals the edge.  A Senior League team gets marginally stronger in a Junior League park playing Designated Hitter Derby, but a Junior League team gets noticeably weaker in Senior League venues- they give up both offense (the pitcher, most of whom can’t even lay down a bunt) AND defense as they lose a glove so an aging and slow DH can play a position they haven’t practiced at all season.

I predict the Cardinals in 6 or less.

The latest proposal to come from of the State Attorney Generals investigating mortgage and foreclosure fraud is just a another band-aid on a hemorrhage that lets the banks off and does nothing to help homeowners who are underwater on their mortgage or behind in their payments. It appears that this is just a ploy to bring the California Attorney General “back into the fold.” Diana Olick, CNBC Real Estate Reporter, has tis analysis:

As first reported by the Wall Street Journal, the AG’s are proposing a refinance plan for underwater borrowers, trying to get banks to bring down interest rates on mortgages for those who owe far more than their homes are presently worth; that’s around 10.9 million borrowers, according to CoreLogic, but sources say it wouldn’t be all of them. It would, “target a finite number of borrowers who are current on their mortgages,” according to my source.

My source then went on to explain that this is a plan previously pushed by the California state attorney general, who has dropped out of the negotiations over issues surrounding banks’ release from future liability (the California AG did not comment in the WSJ article but claimed they had not seen said proposal). New York and Massachusetts have done the same. Apparently this could, “bring California back to the table,” says my source, because the California AG finds it, “intriguing.”

Ms. Olick also points out that this is the same plan that the Obama administration has proposed for Fannie Mae and Freddie Mac. The plan will only affect about 20% of homeowners with bank mortgages. While it would give some, who can afford the loans, a little extra cash, it doesn’t “change the fact that these folks still have no hope of seeing their home equity again any time soon, and it doesn’t address the greater ills of today’s housing market that are keeping true recovery at bay.”

David Dayen at FDL expounds further:

But wait! This is supposed to be a penalty on the banks. Is it a penalty on the banks when an eligible borrower with a bank-owned loan refinances? No, that’s just an option that the borrower has. Extending that option is supposed to be a penalty for committing systemic fraud on state courts? I don’t necessarily mind the Fannie/Freddie plan as a source of potential stimulus. I don’t consider it a penalty. And when you’re talking about 20% of the market, tops (and not all of those loans are underwater, so this is smaller), the benefits are miniscule (sic).

They’re just grabbing at straws to try and get a flawed settlement across the line that the remaining AGs can hold a press conference about. And economic stimulus, not accountability, is the main goal. Keep in mind that anything that leads to a round of sped-up foreclosures will not aid the housing market. It will bring prices down, just as a function of supply and demand. This will bring borrowers more underwater. So the idea that there’s a tension between the rule of law and helping people presumes that the only thing standing between America and a recovery is Kamala Harris and Eric Schneiderman. That’s just not true. There are tools at the disposal of the relevant regulators right now to foster recoery (sic), they’re just not choosing to do it.

Delaware Attorney General Beau Biden spoke with MSNBC’s Dylan Ratigan about fight to investigate the banks.

The biggest problem that is the gorilla in the room is chain of title. In a detailed article that is well worth the read, Yves Smith at naked capitalism:

And as we anticipated, the inducement that had led the Miller camp to hope it might clinch a deal is a juicy release. From Reuters:

   Originally, the states were only considering immunity for shortcuts taken during mortgage servicing and foreclosures, including the so-called “robo-signing” of documents to evict people behind on their mortgages.

   In recent days, the state attorneys general agreed to release major banks from claims that they made legal errors when first originating the loans, such as approving loans for borrowers without verifying any income, according to two people familiar with the talks.

   In exchange, banks would agree to refinance mortgages for borrowers who are current on their payments but owe more than their homes are currently worth, the sources said.

This is very troubling. Investors should be up in arms. Any release the banks get here is worth multiples of what the banks will pay for this (note that because investors are conservative creatures and have ongoing relationships with banks, having attorneys general pave the way is particularly important for them).

The failure to verify income is the tip of the iceberg of origination abuses. The most serious is chain of title, where the banks promised to investors to take a series of steps to convey the mortgages properly to the securitization trusts within a stipulated time frame. For reasons we’ve explained in gory detail in earlier posts, retroactive fixes or waivers simply won’t work. That is why the banks have resorted to widespread forgeries and document fabrication.