November 2011 archive

If you are an economist you should be more, not less, outraged by the corruption and fraud of our financial elites.  As Matt Stoller points out, they represent market inefficiencies and introduce far greater uncertainty than mere regulation.

Matt Stoller: Nevada Attorney General Catherine Cortez Masto Cracks Open the Financial Crisis

Matt Stoller, Naked Capitalism

Thursday, November 17, 2011

Our essential economic problem is that our economy allocates resources through a mediating system of banks that are broken and/or corrupt. If you look at a chart of the recession, and then the recovery, you’ll notice that business investment perked up, but residential investment did not. The Fed lowered rates, bought Treasury bonds, and bought mortgage backed securities to lower rates for homeowners. But it’s not really working, because the monetary channel is corrupt. This indictment gets to that problem, it alleges tens of thousands of forged documents (or as a friend told me sarcastically, an afternoon’s worth of work for LPS). These documents represent foreclosures, economic loss, and clouded title. The indictments handed down, and the ones to come, show that corrupting our property laws and the basis of our economy is a crime.

…

First President Bush, and then President Obama, tried to reconstruct an economic system based on a corrupted transmission mechanism from the Fed to the real economy. This was the financial crisis, it’s why abstract derivatives based on subprime mortgages knocked trillions of productive output off of the economy. Corruption is really inefficient.

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I think it’s important to begin considering criminal justice as a core element of economic policy. I’d like to hear from Suskind, Klein, Krugman, and others just where they think allowing massive systemic fraud fits into the analysis of what went wrong. After all, Eric Holder had ample prosecutorial discretion, so none of the usual arguments about political constraints apply. Allowing the corrupt monetary channel to continue was simply a policy choice. If the under-resourced Nevada Attorney General could make such a different policy choice, then a powerful by comparison White House and Justice Department could make it as well. And this sort of show of power does not operate in a vacuum. Taking on, and taking down, corrupt members of the elite would also have exposed all sorts of fracture lines, and would likely have change the Congressional dynamics that people argue is immutable. Bank executives would have had a strong personal incentive to fix housing problems and excessive debt loads, and politicians react differently when an act is officially deemed a crime.

The demand for justice, for a society to place certain activities outside of the bounds of socially acceptable, is not just about satisfaction of the public for wrongs committed. I get the sense that fraud for most economists is considered something of a side issue, a kind of aesthetic political problem to be ignored in favor of more significant questions of stimulus and regulatory policies. This is a baffling attitude. One of my favorite financial legal bloggers, Carolyn Sissiko, has pointed out that fraud actually can have significant macro-economic impacts by distorting bank balance sheets.

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The felony indictments from the Nevada AG’s office are the first sign that the law enforcement community can take financial crimes seriously, that blowing up the economy through financial mismanagement can carry costs. There’s a lot of research to be done on the costs of fraud, and the costs of foreclosures. We don’t know that much about these costs, because there haven’t been investigations and there isn’t a lot of good public data. After all, we mostly just take our property rights system for granted, the notion that clouded titles or a broken $10 trillion mortgage market could inhibit growth simply was not imaginable a few years ago. What is clear is that there is a deep public hunger for justice. And I suspect, that if that hunger had been satiated a few years ago and if Holder had begun handing down indictments, mortgage servicer executives would have begun a serious loan workout program.

And our economy would probably be in much better shape. When you throw your capital into the hands of people who have no incentive to use it wisely, the economy suffers. When you enforce the rule of law, sound business models prevail and ordinary citizens have more confidence in the system and spend and invest accordingly. As an economic policy, justice works.

Unfortunately many economists are not scholars or scientists or even technicians, but merely enthusiastic members of the choir of Mammon, faith based believers who ignore evidence and logic.

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.

November 18 is the 322nd day of the year (323rd in leap years) in the Gregorian calendar. There are 43 days remaining until the end of the year.

On this day in 1883, the Railraods create the first time zones At exactly noon on this day, American and Canadian railroads begin using four continental time zones to end the confusion of dealing with thousands of local times. The bold move was emblematic of the power shared by the railroad companies.

The need for continental time zones stemmed directly from the problems of moving passengers and freight over the thousands of miles of rail line that covered North America by the 1880s. Since human beings had first begun keeping track of time, they set their clocks to the local movement of the sun. Even as late as the 1880s, most towns in the U.S. had their own local time, generally based on “high noon,” or the time when the sun was at its highest point in the sky. As railroads began to shrink the travel time between cities from days or months to mere hours, however, these local times became a scheduling nightmare. Railroad timetables in major cities listed dozens of different arrival and departure times for the same train, each linked to a different local time zone.

Timekeeping on the American railroads in the mid 19th century was somewhat confused. Each railroad used its own standard time, usually based on the local time of its headquarters or most important terminus, and the railroad’s train schedules were published using its own time. Some major railroad junctions served by several different railroads had a separate clock for each railroad, each showing a different time; the main station in Pittsburgh, Pennsylvania, for example, kept six different times.

Charles F. Dowd proposed a system of one-hour standard time zones for American railroads about 1863, although he published nothing on the matter at that time and did not consult railroad officials until 1869. In 1870, he proposed four ideal time zones (having north-south borders), the first centered on Washington, D.C., but by 1872 the first was centered 75 W of Greenwich, with geographic borders (for example, sections of the Appalachian Mountains). Dowd’s system was never accepted by American railroads. Instead, U.S. and Canadian railroads implemented a version proposed by William F. Allen, the editor of the Traveler’s Official Railway Guide. The borders of its time zones ran through railroad stations, often in major cities. For example, the border between its Eastern and Central time zones ran through Detroit, Buffalo, Pittsburgh, Atlanta, and Charleston. It was inaugurated on Sunday, November 18, 1883, also called “The Day of Two Noons”, when each railroad station clock was reset as standard-time noon was reached within each time zone. The zones were named Intercolonial, Eastern, Central, Mountain, and Pacific. Within one year, 85% of all cities with populations over 10,000, about 200 cities, were using standard time. A notable exception was Detroit (which is about half-way between the meridians of eastern time and central time), which kept local time until 1900, then tried Central Standard Time, local mean time, and Eastern Standard Time before a May 1915 ordinance settled on EST and was ratified by popular vote in August 1916. The confusion of times came to an end when Standard zone time was formally adopted by the U.S. Congress on March 19, 1918, in the Standard Time Act.

Republished from November 20, 2010 for obvious timely reasons.

I never went to cooking school or took home economics in high school, I was too busy blowing up the attic with my chemistry set. I did like to eat and eat stuff that tasted good and looked pretty, plus my mother couldn’t cook to save her life let alone mine and Pop’s, that was her mother’s venue. So I watched learned and innovated. I also read cook books and found that cooking and baking where like chemistry and physics. I know, this is Translator’s territory, but I do have a degree in biochemistry.

Cooking a turkey is not as easy as the directions on the Butterball wrapping looks. My daughter, who is the other cook in the house (makes the greatest breads, soups and stews) is in charge of the Turkey for the big day. Since we have a house full of family and friends, there are four, yeah that many, 13 to 15 pound gobblers that get cooked in the one of the two ovens of the Viking in the kitchen and outside on the covered grill that doubles as an oven on these occasions. Her guru is Alton Brown, he of Good Eats on the Food Network. This is the method she has used with rave reviews. Alton’s Roast Turkey recipe follows below the fold. You don’t have to brine, the daughter doesn’t and you can vary the herbs, the results are the same, perfection. My daughter rubs very soft butter under the skin and places whole sage leaves under the skin in a decorative pattern, wraps the other herbs in cheese cloth and tucks it in the cavity. If you prefer, or are kosher, canola oil works, too.

Bon Appetite and Happy Thanksgiving

Republished from November 23, 2010 for obvious timely reasons.

By now you should have defrosted that frozen turkey and it should be resting comfortably in the back of you refrigerator. If you haven’t, getteth your butt to the grocery store and buy a fresh one because even if you start defrosting today, your bird might not be defrosted in time. I discussed the how to cook your bird to perfection in a conventional oven, now for a method that’s a little daring, deep frying.

Alton Brown, is one of my favorite TV cooks. Good Eats funny and informative, plus, his recipes are easy and edible. I’ve done fried turkey and while I don’t recommend it for health reasons, once a year probably wont hurt. Alton’s “how to” videos are a must watch on safety tips, how to choose a turkey fryer, equipment and, finally, cooking directions. If you decide to try this, please follow all directions carefully and take all the safety precautions.

Below the fold are recipes and more safety tips.

Nevada Attorney General Catherine Cotez Masto has filed a 606 count criminal indictment against two title company employees for for supervising the filing of tens of thousands of fraudulent documents in a robo-signing scheme. This is the statement from Masto’s office (pdf):

   The Office of the Nevada Attorney General announced today that the Clark County grand jury has returned a 606 count indictment against two title officers, Gary Trafford and Gerri Sheppard, who directed and supervised a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008.

   According to the indictment, defendant Gary Trafford, a California resident, is charged with 102 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor). The indictment charges d efendant Gerri Sheppard, also a California resident, with 100 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor).

   “The grand jury found probable cause that there was a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008,”said Chief Deputy Attorney General John Kelleher.

   The indictment alleges that both defendants directed the fraudulent notarization and filing of documents which were used to initiate foreclosure on local homeowners.

   The State alleges that these documents, referred to as Notices of Default, or “NODs”, were prepared locally. The State alleges that the defendants directed employees under their supervision, to forge their names on foreclosure documents, then notarize the signatures they just forged, thereby fraudulently attesting that the defendants actually signed the documents, which was untrue and in violation of State law. The defendants then allegedly directed the employees under their supervision to file the fraudulent documents with the Clark County Recorder’s office, to be used to start foreclosures on homes throughout the County.

   The indictment alleges that these crimes were done in secret in order to avoid detection. The fraudulent NODs were allegedly forged locally to allow them to be filed at the Clark County Recorder’s office on the same day they were prepared.

Although the two Lender Processing Services employees, Gary Trafford and Gerri Sheppard, are deemed to be little fish there is speculation the Ms. Masto is using this as a hook to an go after the whales. Yves Smith at naked capitalism:

   That strongly suggests that Masto is, as we suggested earlier, using these indictments as a wedge to go after much broader abuses in the servicing industry. LPS’s biggest business is its Default Services Group, which both managed the operations of foreclosure mills (people with knowledge of LPS charge that the firm even kicks out certain standard form documents for foreclosure mill attorneys to file) and also often acted as the arms and legs of servicers in other arenas (for instance, managing, or more accurately, mismanaging property seized in foreclosure).

   LPS has always taken the position that anything it did was at the direction of and with the full knowledge of the servicers. If Masto is shrewd, her objective will be to audit LPSs’ software, since that will demonstrate pattern and practice, and it will be impossible for servicers to deny that processes embodied in ongoing, routinized activities were unknown to them.

David Dayen at FDL agrees that this may well be the first step in getting the higher ups who made, and are still, making a fortune on foreclosures:

LPS hasn’t been indicted, but you can see where this is going. We know enough now to know that this casual forgery and document fraud was official policy for the company. Indictments of Trafford and Sheppard will almost certainly not end there. Everyone who worked for LPS in Nevada will be culpable. [..]

The fact that they are LPS employees also suggests this is just a first step. This could be a way to get at the software that LPS uses to create documents, which would prove pattern and practice. LPS was central to the entire robo-signing scheme across foreclosure mill law firms and mortgage servicers. And they consistently maintain that they worked at the direction of the servicers and with their full knowledge. So that ropes in the servicers as well.

This is a very important indictment, and it shows how methodical Masto has been about going after widespread industry abuse. It’s only just beginning, but bravo for her.

As has been reported, despite the meager attempts at an agreement to settle this and exonerate the banks of any wrong doing by several other Attorney Generals, the robo-signing continues:

   Reuters reviewed records of individual county clerk offices in five states — Florida, Massachusetts, New York, and North and South Carolina — with searchable online databases. Reuters also examined hundreds of documents from court case files, some obtained online and others provided by attorneys.

   The searches found more than 1,000 mortgage assignments that for multiple reasons appear questionable: promissory notes missing required endorsements or bearing faulty ones; and “complaints” (the legal documents that launch foreclosure suits) that appear to contain multiple incorrect facts.

   These are practices that the 14 banks and other loan servicers said had occurred only on a small scale and were halted more than six months ago. [..]

   Reuters reviewed records of individual county clerk offices in five states — Florida, Massachusetts, New York, and North and South Carolina — with searchable online databases. Reuters also examined hundreds of documents from court case files, some obtained online and others provided by attorneys.

   The searches found more than 1,000 mortgage assignments that for multiple reasons appear questionable: promissory notes missing required endorsements or bearing faulty ones; and “complaints” (the legal documents that launch foreclosure suits) that appear to contain multiple incorrect facts.

   These are practices that the 14 banks and other loan servicers said had occurred only on a small scale and were halted more than six months ago.

Meanwhile, as Yves Smith pointed out this Summer, the bankers continue to lie to congress that they have stopped the practice:

We’ve heard numerous bank executives swear piously before Congressional hearings that those “paperwork problems” that led major servicers to halt or slow foreclosures on a widespread basis last year were “mistakes”. That was already a really big lies, since “mistake” means the practice was not deliberate and was presumably isolated, when in fact robosigning was a widespread, institutionalized practice.

14 major servicers then swore in consent orders earlier this year that they’d stop doing all that bad stuff. But with compliance weak (the banks get to hire the overseers!), they appear to have decided they don’t need to change their ways all that much. Indeed, the record of consent orders is underwhelming; for instance, both Nevada and Arizona are suing Countrywide for violations of past agreements.

Meanwhile the Obama Justice Department continues to try to sweep this massive fraud under the rug.

Yes, bravo, Ms. Masto.

Nevada Robosigning Indicment 11-16-11

You see, it’s all about easing dependence on “foreign” (brown people) oil-

Canada pipeline firms sprint to end U.S. oil glut

By Anna Driver and Scott Haggett, Reuters

22 hrs ago

The companies are racing to unlock a glut of crude in the U.S. Midwest, which has built up over the year due to rising supplies from Canada and North Dakota. They aim to ship it to the Gulf Coast where it will fetch a hefty premium.

It may end a period of dramatic upheaval in the U.S. oil market that handed Midwest refiners an unexpected windfall of cheap feedstock, robbed northern producers of richer profits, revived an era of rail-oil freight, roiled airline efforts to hedge fuel costs and threatened to erode the U.S. futures contract’s preeminence as the world’s most-traded benchmark.

Lies.  It’s all about extracting more money from the pockets of the middle class.

“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”.

Chris Hedges: This Is What Revolution Looks Like

Welcome to the revolution. Our elites have exposed their hand. They have nothing to offer. They can destroy but they cannot build. They can repress but they cannot lead. They can steal but they cannot share. They can talk but they cannot speak. They are as dead and useless to us as the water-soaked books, tents, sleeping bags, suitcases, food boxes and clothes that were tossed by sanitation workers Tuesday morning into garbage trucks in New York City. They have no ideas, no plans and no vision for the future.

Our decaying corporate regime has strutted in Portland, Oakland and New York with their baton-wielding cops into a fool’s paradise. They think they can clean up “the mess”-always employing the language of personal hygiene and public security-by making us disappear. They think we will all go home and accept their corporate nation, a nation where crime and government policy have become indistinguishable, where nothing in America, including the ordinary citizen, is deemed by those in power worth protecting or preserving, where corporate oligarchs awash in hundreds of millions of dollars are permitted to loot and pillage the last shreds of collective wealth, human capital and natural resources, a nation where the poor do not eat and workers do not work, a nation where the sick die and children go hungry, a nation where the consent of the governed and the voice of the people is a cruel joke.

New York Times Editorial: Europe’s Contagion

Two years of gross mismanagement of the euro-zone debt crisis have all too predictably produced a wider crisis of market confidence that now threatens the entire 17-nation euro zone. This week’s formation of new technocrat-led governments in Greece and Italy has not calmed fears. Practically every euro zone country is paying the price in higher interest costs and ebbing economic growth.

The only country that isn’t suffering – yet – is Germany, whose competitive export-driven economy feeds on foreign demand and an exchange rate held down by its neighbors’ troubles. But all European countries cannot be Germany and run net surpluses, especially if Berlin insists on policies that keep factories shuttered and workers unemployed.

And German leaders are wrong if they think their country will remain unscathed as its major trading partners and neighbors unravel.

Occupy Wall Street NYC now has a web site for its General Assembly  with up dates and information. Very informative and user friendly. It has information about events, a bulletin board, groups and minutes of the GA meetings.

Call To Action!| Facebook Event | Twitter #N17 | Direct Action Resources

On Thursday November 17th, the two month anniversary of the Occupy Wall Street movement, we call upon the 99% to participate in a national day of direct action and celebration!

The former U.S. labor secretary vigorously defends OWS during a speech at Berkeley

A judge issued a temporary restraining order early this afternoon in favor of Occupy Boston. The order prevents the city from having the police raid the camp in the dark of night, as has happened in Oakland, Portland, New York, and other cities. It does, however, allow the city to evict the camp if there is an emergency (for example, if violence breaks out, if there is a fire, if there is a health/medical/sanitary issue, etc).

Judge Frances McIntyre entertained arguments from the ACLU of Massachusetts and the National Lawyers Guild and the city from 10 am to just before noon. There was a recess and then the court reconvened for another forty-five minutes at 12:30 pm.

During the hearing, McIntyre encouraged the city and occupiers to engage in mediation to come to some sort of agreement about when it would be appropriate and inappropriate to evict the occupation. She asked Howard Cooper (who represented Occupy on behalf of the ACLU of Massachusetts and the NLG) if he thought Occupy Boston would disperse from Dewey Square, the site of the occupation, if there were an emergency. She said, “You might point out to them that there are certain advantages to structure,” because Cooper could not answer definitively on behalf of the General Assembly as they had not discussed this yet.

You can follow Kevin Gosztola Live Blog for #Occupy Movement: Massive Day of Action to Shut Down Wall Street at FDL

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.

November 17 is the 321st day of the year (322nd in leap years) in the Gregorian calendar. There are 44 days remaining until the end of the year.

On this day in 1558, Queen Mary I, the monarch of England and Ireland since 1553, dies and is succeeded by her 25-year-old half-sister, Elizabeth.

Elizabeth became queen at the age of 25, and upon hearing of her accession to the throne, she is reputed to have quoted the 118th Psalm’s twenty-third line, in Latin: “A Dominum factum est illud, et est mirabile in oculis notris” – “It is the Lord’s doing, and it is marvellous in our eyes.”

On 20 November 1558, Elizabeth declared her intentions to her Council and other peers who had come to Hatfield to swear allegiance. The speech contains the first record of her adoption of the mediaeval political theology of the sovereign’s “two bodies”: the body natural and the body politic:

My lords, the law of nature moves me to sorrow for my sister; the burden that is fallen upon me makes me amazed, and yet, considering I am God’s creature, ordained to obey His appointment, I will thereto yield, desiring from the bottom of my heart that I may have assistance of His grace to be the minister of His heavenly will in this office now committed to me. And as I am but one body naturally considered, though by His permission a body politic to govern, so shall I desire you all…to be assistant to me, that I with my ruling and you with your service may make a good account to Almighty God and leave some comfort to our posterity on earth. I mean to direct all my actions by good advice and counsel.

As her triumphal progress wound through the city on the eve of the coronation ceremony, she was welcomed wholeheartedly by the citizens and greeted by orations and pageants, most with a strong Protestant flavour. Elizabeth’s open and gracious responses endeared her to the spectators, who were “wonderfully ravished”. The following day, 15 January 1559, Elizabeth was crowned at Westminster Abbey and anointed by the Catholic bishop of Carlisle. She was then presented for the people’s acceptance, amidst a deafening noise of organs, fifes, trumpets, drums, and bells.

The Elizabethan era was a time associated with Queen Elizabeth I’s reign (1558-1603) and is often considered to be the golden age in English history. It was the height of the English Renaissance and saw the flowering of English poetry, music and literature. This was also the time during which Elizabethan theatre flourished, and William Shakespeare and many others composed plays that broke free of England’s past style of plays and theatre. It was an age of exploration and expansion abroad, while back at home, the Protestant Reformation became more acceptable to the people, most certainly after the Spanish Armada was repulsed. It was also the end of the period when England was a separate realm before its royal union with Scotland.

The Elizabethan Age is viewed so highly because of the periods before and after. It was a brief period of largely internal peace between the English Reformation and the battles between Protestants and Catholics and the battles between parliament and the monarchy that engulfed the seventeenth century. The Protestant/Catholic divide was settled, for a time, by the Elizabethan Religious Settlement, and parliament was not yet strong enough to challenge royal absolutism. England was also well-off compared to the other nations of Europe. The Italian Renaissance had come to an end under the weight of foreign domination of the peninsula. France was embroiled in its own religious battles that would only be settled in 1598 with the Edict of Nantes. In part because of this, but also because the English had been expelled from their last outposts on the continent, the centuries long conflict between France and England was largely suspended for most of Elizabeth’s reign.

The one great rival was Spain, with which England clashed both in Europe and the Americas in skirmishes that exploded into the Anglo-Spanish War of 1585-1604. An attempt by Philip II of Spain to invade England with the Spanish Armada in 1588 was famously defeated, but the tide of war turned against England with an unsuccessful expedition to Portugal and the Azores, the Drake-Norris Expedition of 1589. Thereafter Spain provided some support for Irish Catholics in a debilitating rebellion against English rule, and Spanish naval and land forces inflicted a series of reversals against English offensives. This drained both the English Exchequer and economy that had been so carefully restored under Elizabeth’s prudent guidance. English commercial and territorial expansion would be limited until the signing of the Treaty of London the year following Elizabeth’s death.

England during this period had a centralised, well-organised, and effective government, largely a result of the reforms of Henry VII and Henry VIII. Economically, the country began to benefit greatly from the new era of trans-Atlantic trade.

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.

Except for three years between 1961 and 1964 I lived in a house in Hackett.  For the three years we lived in a house in North Little Rock because my dad got transferred.  He took a new job in 1964 with Dana Corporation, manufacturer of Perfect Circle piston rings, Spicer power transmission products, Victor gaskets, and other OEM and aftermarket automotive parts.  Since the regional office was in Fort Smith, moving back to Hackett made sense.

My mum and dad did not plan to stay in the metro Little Rock area when he was transferred there by McQuay-Norris, another automotive part manufacturer.  They were both hardcore racists and the black population in western Arkansas was a fraction of the population in central Arkansas.