01/12/2012 archive

Obama Will Now Request Raise in Debt Ceiling

After having decided in December to delay raising the debt ceiling for the third time at the request of Congress until they returned from vacation in January, President Barack Obama has sent a letters to the House and Senate requesting the ceiling be raised. The debt ceiling has come within $100 billion of the current $15.194 trillion limit. The formal letters trigger a 15-day clock for Congress to consider and vote on a joint resolution disapproving of the increase. The vote a resolution of disapproval will be held in the House on January 18.

The trigger for the request actually occurred on December 30 while the President was vacationing in Hawaii and congress was “on a holiday break”. This is the third and final request to raise the ceiling that was agreed to last year when congress approved the budget. The last resolution of disapproval passed the Republican controlled House but failed in the Democratic controlled Senate. It’s expected that will again be the case, sparing President Obama the need to veto it.

This last bump will carry the government’s ability to pay its bills past the November elections when another raise will have to be discussed by the lame duck congress. Looking forward to that battle.


Should The Times Be a Truth Vigilante?

By ARTHUR S. BRISBANE, The New York Times

January 12, 2012, 10:29 am

I’m looking for reader input on whether and when New York Times news reporters should challenge “facts” that are asserted by newsmakers they write about.

This message was typical of mail from some readers who, fed up with the distortions and evasions that are common in public life, look to The Times to set the record straight. They worry less about reporters imposing their judgment on what is false and what is true.

Is that the prevailing view? And if so, how can The Times do this in a way that is objective and fair? Is it possible to be objective and fair when the reporter is choosing to correct one fact over another? Are there other problems that The Times would face that I haven’t mentioned here?

EU: Austerity Policy Making It Worse

The current policy of austerity that is being forced on the European Union by Germany and England has been called “financially futile, economically erroneous, politically puzzling and socially irresponsible” by economists and monetary experts. Author and derivatives expert, Satyajit Das, writes in the first part of his series on “The Road to Nowhere, Part 1 – Fiscal Bondage” at naked capitalism that the December 2011 European summit to resolve the euro crisis was a failure:

The proposed plan is fundamentally flawed. It made no attempt to tackle the real issues – the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there were no new funds committed to the exercise.[..]

The plan may result in a further slowdown in growth in Europe, worsening public finances and increasing pressure on credit ratings. This is precisely the experience of Greece, Ireland, Portugal and Britain as they have tried to reduce budget deficits through austerity programs. This would make the existing debt burden even harder to sustain. The rigidity of the rules also limits government policy flexibility, risking making economic downturns worse.[..]

The fiscal compact did not countenance any writedowns in existing debt. It also did not commit any new funding to support the beleaguered European periphery. Germany specifically ruled out the prospect of jointly and severally guaranteed Euro-Zone bonds. Instead, there were vague platitudes about working towards further fiscal integration.[..]

Instead of dealing with the financial problems of the central bailout mechanism (the EFSF – European Financial Stability Fund), European leaders chose the re-branding option.

Actions, or rather inactions, have consequences.

Germany is already in a recession too

by Edward Harrison

As I predicted in a message to Credit Writedowns Pro subscribers on Monday, statistics have shown that the German economy has finally succumbed to the deflationary economic policy of the euro zone.

   Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.

   Gross domestic product (GDP) grew 3.0 percent in 2011, preliminary Federal Statistics Office data showed on Wednesday, below the previous year’s growth rate of 3.7 percent – the fastest since reunification – and in line with a Reuters poll estimate.

   But GDP contracted by around 0.25 percent in the fourth quarter of 2011, an official from the Statistics Office added.

   “Germany cannot isolate itself so easily from tensions within the euro zone. In addition the export sector is facing a difficult period given the fall in global demand,” said Joerg Zeuner, chief economist at VP Bank.

Harrison wrote in November in the New York Times

that Europe is already in a double-dip recession. Already two months ago, the Markit Eurozone Manufacturing Purchasing Managers Index, which measures activity across Europe in services and manufacturing, had fallen to 50.4, the lowest since September 2009. The divider between expansion and contraction is 50, so Europe was still expanding. But last Wednesday, Markit data indicated that the situation has since deteriorated; the latest data showed a drop in private sector activity in the euro zone for the first time since July 2009. Moreover, the data are poor in the core of the euro zone as well as in the periphery, with Germany and France’s economies stalling as well. The sovereign debt crisis and the fiscal consolidation implemented to deal with it have taken their toll.[..]

Until the banks take substantially more credit write-downs and recapitalize, this crisis will continue and get worse.

The downward spiral is evident throughout Europe with even the strong German economy feeling the effects of erroneous policies

The German economy expanded faster than any other Group of 7 nation last year, official data showed Wednesday, but the stress of the euro crisis and a slowing global economy appear to be already weighing on output.

Germany expanded by 3 percent last year from 2010, the Federal Statistical Office said in Wiesbaden. It noted, however, that the growth came mostly in the first half of 2011, and estimated that the economy actually contracted by about 0.25 percent in the fourth quarter from the prior three months.

Some economists now predict another contraction for Germany in the first three months of 2012, which would meet the usual definition of a recession as two consecutive quarterly declines in output.

And austerity measures in Greece are making their budget deficits even worse:

Greece’s budget deficit widened last year as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Thursday. The central government budget gap widened 0.8 percent year-on-year to 21.64 billion euros ($27.45 billion) last year, according to figures from the finance ministry.

David Dayen at FDL News Desk thinks it is probably worse since “the EU uses a different measure to assess the Greek budget.”  He points out that even with increased taxes, the fall in tax compliance from an already lax system has reduced income. It all looks good on paper but that’s not the reality of what is actually in the treasury.

There is some hope that Europe’s leader are waking up to reality that there needs to be a growth strategy, although it may not be enough, or soon enough, to reverse the spiral.

It is a crisis in the € zone. The divergent trends in the € zone are too large. It is not an “optimum currency area”

It’s not just government, to “sovereign debt” but also excesses in the financial sector, real estate etc.

We must do everything to avoid recession. … We need a fiscal strategy that is “growth friendly”

Fiscal consolidation will not tell us to say “no” to all or which is cut everywhere. We must “prioritize”

We ask each member state to establish a “job plan”, we make commitments we can evaluate

The next meeting of the Eurozone member is the end of this month where a tax on financial transactions will be considered and, hopefully, they will discuss job creation and debt reduction.

Punting the Pundits

“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”.

Jeff Cohen: Obama, Sarkozy and Taxing Wall Street

With U.S. media obsessing on the fight here at home among conservatives vying to become president, most of them missed some big news about France, which already has a conservative president.  This week, French President Nicolas Sarkozy announced that he would take the lead – even go it alone within Europe, if need be – in introducing and pushing a Financial Transaction Tax in his country.

That’s right – the conservative president of France wants to tax the financial traders and speculators.

Referring to the tax as a “moral issue” and blaming deregulation and speculation for the global economic meltdown, Sarkozy has said that traders must “repay for the damage they have caused.”

What does it tell us about U.S. politics that the conservative president of France – on this issue and others – is way to the left of President Obama?  The U.S. president has not publicly promoted a Wall Street transaction tax (even though US financial institutions, not the French, were largely responsible for the global financial crisis).

Michael Ratner: Guantánamo at 10: The Defeat of Liberty by Fear

The unprecedented executive powers assumed by both presidents since 9/11 have crippled America’s body politic

On 11 January 2002, the United States began showing major signs of what I call “Guantánamo syndrome”, after one of the ailment’s first and most enduring symptoms. That was the day when the Bush administration transferred the first 20 detainees to Camp X-Ray at Guantánamo Bay, Cuba, after being assured by its Department of Justice that the location placed detainees outside of US legal jurisdiction.

But the first hint of our national illness appeared earlier, in the weeks following the attacks on the Pentagon and the World Trade Centers, when the Bush administration took the lid off unlimited executive power. This is the lid that nobles, who had endured centuries of rulers imprisoning anyone who ticked them off and holding them indefinitely without having to state or prove any kind of case, affixed in 1215 with the Magna Carta. It’s the lid that the original framers tightened to the specifications of the United States when they ratified the Constitution in 1790.

New York Times Editorial: Pakistan’s Besieged Government

Pakistan’s civilian governments are typically short-lived and cast aside by military coups. This disastrous pattern could be repeating itself as the current civilian government comes under increasing pressure from the army and the Supreme Court.

On Wednesday, the standoff hardened when Prime Minister Yousaf Raza Gilani fired his defense secretary, Naeem Khalid Lodhi – a retired general and confidante of the army chief, Gen. Ashfaq Parvez Kayani – and replaced him with a civilian, Nargis Sethi. Infuriated military officials said they might refuse to work with the new secretary and warned vaguely of “serious ramifications with potentially grievous consequences” after Mr. Gilani publicly criticized them in an interview.

Eugene Robinson: Two-For-Two and Game On

MANCHESTER, N.H.-It’s going to be mean and dispiriting, this campaign. We’ll be assailed with talk of “European socialism” and “vulture capitalism”-not “hope” and “change”-and the months between now and November will seem an eternity.

There’s no use trying to gainsay or belittle Mitt Romney’s victory here Tuesday. Yes, he might have hoped for a bigger turnout. Yes, he would have been happier to win with at least 40 percent of the vote, rather than 39-point-whatever. And yes, given that he’s a part-time resident of New Hampshire, he was always expected to dominate the contest.

None of this is likely to matter. Romney is the first non-incumbent Republican to open two-for-two, winning both Iowa and New Hampshire. Exit polls show him with decent support among all the GOP’s diverse constituencies-and no glaring weaknesses. It’s true that most Republicans would prefer someone else, but there’s no agreement on who that someone else might be. By the time the anti-Romney forces get organized, he’ll be giving his acceptance speech.

E. J. Dionne, Jr.: What Kind of Capitalist Was Romney?

Thanks to Mitt Romney and such well-known socialist intellectuals as Rick Perry and Newt Gingrich, the United States is about to have the big debate on the nature of modern capitalism that should have started back in 2008. The focus will be on whether some kinds of capitalism are bad for the system as a whole.

As a political matter, the discussion will be a classic test of an old Karl Rove theory that the best way to undercut an opponent is to attack him in his area of perceived strength. Romney’s central claim is that his business experience prepares him to be the nation’s great job creator. That message runs into some difficulty if he is seen instead as a job destroyer.

Ralph Nader: Iran: The Neocons Are At It Again

he same neocons who persuaded George W. Bush and crew to, in Ron Paul’s inimitable words, “lie their way into invading Iraq” in 2003, are beating the drums of war more loudly these days to attack Iran. It is remarkable how many of these war-mongers are former draft dodgers who wanted other Americans to fight the war in Vietnam.

With the exception of Ron Paul, who actually knows the history of U.S.-Iranian relations, the Republican presidential contenders have declared their belligerency toward Iranian officials who they accuse of moving toward nuclear weapons.

The Iranian regime disputes that charge, claiming they are developing the technology for nuclear power and nuclear medicine.

Dave Zweifel: High Court Opened Door to Legalized Bribery

Remember the 2010 State of the Union address when President Obama spoke directly at the Supreme Court justices sitting in the front row and “lectured” them about their Citizens United decision?

“Last week, the Supreme Court reversed a century of law to open the floodgates for special interests – including foreign corporations – to spend without limit in our elections,” Obama told the justices, as the glare of the cameras focused on them. “Well, I don’t think American elections should be bankrolled by America’s most powerful interests.”

The court, by a 5-4 vote, had just declared that corporations are, in effect, people when it comes to First Amendment rights and, therefore, their “free speech” can’t be limited by campaign spending laws.

About that 50 State Fraud Settlement

Big Banks Face Inquiry Over Home Insurance

By LOUISE STORY, The New York Times

Published: January 10, 2012

Mr. Lawsky’s office issued 31 subpoenas or other legal notices related to the case in early October, just as the state’s insurance and banking departments were merged under his new agency. His office has already turned up instances where mortgage servicing units at large banks steered distressed homeowners into insurance policies up to 10 times as costly as the homeowners’ original plans.

In some cases, those policies were offered by affiliates of the banks themselves, raising questions about conflicts of interest; in other cases, there may have been kickbacks between unrelated companies, according to the person briefed on the investigation.

The investigation is yet another legal battle for the nation’s largest banks and points to the sorts of problems they may continue to face nationwide. The banks, in separate negotiations with federal and state authorities over suspected foreclosure abuses, have been trying to negotiate a settlement with state and federal officials to avoid future investigations, but it is not clear if businesses like home insurance would be covered if a deal were reached.

These policies are called ‘forced placement’ because homeowners are forced to take them as a condition of the loan.

New York Investigates Forced-Place Insurance Scams

By: David Dayen, Firedog Lake

Wednesday January 11, 2012 7:35 am

I first wrote about forced-place insurance back in November of 2010. Basically, banks who take over the insurance for homeowners whose policies have lapsed end up getting a kickback when the insurer ramps up the price. And the homeowners pay the cost. In some cases, the policies didn’t even lapse; the bank assumed the homeowners’ insurance costs and steered the borrower into costly deals, adding the balance to principal. Sometimes the servicer just purchased redundant coverage for borrowers who were current on their policies. And this provides yet another incentive for servicers to keep borrowers delinquent: they can take over their insurance in that case, and jack up the price, getting a kickback in the process.

Dodd-Frank made this type of forced-place insurance scam illegal. Yet, despite the fact that we’ve known about this for years, it takes the New York State Department of Financial Services to run the investigation. Presumably the Consumer Financial Protection Bureau, now newly bolstered with the ability to regulate non-bank financial operations like mortgage servicers, can get involved. But Dodd-Frank makes it unclear who is supposed to regulate forced-place insurance scams at the federal level. Until then, we have to rely on the states.

It’s just another example of how most bank profits really do come from criminal enterprises. As American Banker reports today, JPMorgan Chase has recently stopped filing consumer debt collection lawsuits, because a whistleblower charged that the bank “falsely overstated the balances of thousands of delinquent accounts it sold to a third party.” And, they also found the exact same robo-signing problem we’ve seen in foreclosure fraud.

Florida AG Office Encouraged to Intervene on Behalf of Foreclosure Fraudster LPS

By: David Dayen, Firedog Lake

Wednesday January 11, 2012 8:15 am

The invaluable Abigail Field has a long piece about Pam Bondi, the Florida AG, incidentally a member of the executive committee on the foreclosure fraud settlement led by Iowa AG Tom Miller, and her ties to the foreclosure industry in Florida. These include the usual financial ties, but also the sense that the Florida AG’s office was a no-go zone for investigations against banks, servicers and the entities that pushed foreclosure fraud. And Field uncovers a long history of this.

The Economic Crimes Division of that office habitually ignored or dismissed crimes happening in the state. And in one case, they lobbied an AG in another state on behalf of the target of a national investigation.

The story concerns Lender Processing Services (LPS), the foreclosure document processor currently under indictment in Nevada for its practices. Michigan’s Republican Attorney General, Bill Schuette, issued criminal subpoenas to LPS in June of last year. And Lisa Epstein, the foreclosure fraud blogger, obtained through a public records request communications between LPS’ attorneys at Baker & McKenzie and the Florida AG’s office. In them, Baker & McKenzie asks the Florida AG to help them persuade Schuette to switch his subpoenas from criminal to civil ones.

Joan Meyer is a partner for Baker & McKenzie; Victoria Butler works in the AG’s office. She asks in the first email to “catch up” about the Michigan criminal subpoenas, and adds that “These public announcements can deeply impact LPS’s business operations and stock price and seem unnecessary if the AGs who issue them have already agreed to a meeting. Wondering if there’s anything we can do.” The meeting she refers to is part of the wider foreclosure fraud investigation.

In the second email, Meyer adds that “Sue Sanford from the Michigan AG’s Office is going to call you about the State AG meeting with LPS. She may ask about converting her investigation from criminal to civil. If you are comfortable, please encourage her to join the civil group. I would like to share information with her and get her up to date regarding the information we provided at the meeting but thus far cannot because of the criminal restrictions.”

This is a lawyer for LPS encouraging one AG office to lobby another, to get criminal subpoenas converted to civil ones. This came at a time when LPS was under active investigation by the state of Florida.

IG Report Whitewashes Firing of Foreclosure Fraud Investigators in Florida

By: David Dayen, Firedog Lake

Monday January 9, 2012 7:22 am

June Clarkson and Theresa Edwards were career lawyers in the South Florida office of the Attorney General, economic crimes division. Back during the dark days of 2010, Clarkson and Edwards were the most aggressive law enforcement officials, from the top down, in identifying and investigating the web of foreclosure fraud, particularly the stew that emerged in Florida, with bogus documents, forgeries, go-go foreclosure mills valuing speed over accuracy, and document processing companies providing menus for law firms to finish off the theft of homes from borrowers.

Much of the information Clarkson and Edwards got into the public sphere motivated the investigations and lawsuits we see today. At the end of 2010, Clarkson and Edwards prepared a Power Point Presentation, called Unfair, Deceptive and Unconscionable Acts in Foreclosure Cases. That Power Point, bringing together all the types of document fraud seen in Florida foreclosure courts, had a profound impact. I described it at the time as “a full pictorial history of the past decade in the mortgage industry, complete with actual shots of improper mortgage assignments. They show the same name of a bank officer being written four different ways, clearly forged. They show stamps from notarizations that expired before they were used to certify foreclosure documents.”

McCollum left the AGs office in January, replaced by a different Republican, Pam Bondi. At the same time, the longtime director of the economic crimes division left, and Richard Lawson, a former defense attorney for white collar criminals – mainly bank officials – came in. As Lawson acknowledges in his statement to the IG report (more on that in a minute), he received complaints from the lawyers of several of the defendants in Clarkson and Edwards’ cases, in particular Lender Processing Services (LPS), which was part of a multistate investigation at the time.

Lawson immediately went to work criticizing Clarkson and Edwards’ conduct, disputing their claims, savaging the work of their office, and micromanaging their investigations (but only the foreclosure fraud investigations, not their other work). By May they were out, fired by Lawson and Bondi. They were given 90 minutes to pack up their things and leave the office, and lost access to all their files and emails.

This looked suspiciously like a politically motivated firing. Advocates for homeowners, along with the group Progress Florida and a couple Democratic lawmakers, urged an investigation. Two days before state Rep. Darren Soto and state Sen. Eleanor Sobel asked the Justice Department to investigate, Bondi personally requested an investigation, outsourcing it to the inspector general for the state’s Chief Financial Officer, Jeff Atwater, a Republican former member of the state legislature. That report came out late Friday, and it completely exonerated the AG’s office for the Clarkson and Edwards firing. “During the course of the inquiry there was no specific allegation of wrongdoing made by any person, and no discovery of evidence of wrongdoing on the part of anyone involved in the matter,” the report concludes.

The media has accepted the narrative that this IG report cleared Bondi of any wrongdoing in the firing. But it really just raises more questions. Why were so many attorneys defending targets of investigations talking to the head of the economic crimes division? Why was he listening to their concerns over his own investigators in his office? Why was Lawson faulting Clarkson and Edwards for a failure to do “independent investigations to confirm third party complaints” when he was accepting third party complaints from the targets of the investigations?

Thomas Perrelli, DoJ Point Person on Foreclosure Fraud Settlement, Stepping Down by March

By: David Dayen, Firedog Lake

Thursday January 12, 2012 6:17 am

I keep hearing from everyone “in the know” that these foreclosure fraud settlement talks are just about wrapped up. Surely everyone’s just practicing their signatures for the big signing ceremony, right? Except that there hasn’t really been any news on the settlement for a few weeks. And now the number 3 at the Justice Department, Thomas Perrelli, the central figure running the talks from the federal government side, will step down in a couple months.

Aside from the obvious fact that there’s not going to be a number three at Justice for the next year, because Obama made four recess appointments over the holiday break and Republicans are so mad about it they’re going to retaliate as soon as they get back from vacation, Marcy Wheeler writes that this “sets a finite deadline” for the foreclosure fraud settlement. I actually think it seals its fate. No deadline has yet been responded to on the settlement. Aside from the half-dozen or so Democrats who aren’t on board, there are plenty of Republicans who don’t want to see the banks take any penalty at all. The talks haven’t even gotten around to that persuasion stage, as there remain outstanding issues with the banks in terms of the nature of the penalties and the level of release from liability.

On this Day In History January 12

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.

January 12 is the 12th day of the year  

On this day in 1932, Hattie Ophelia Wyatt Caraway (February 1, 1878 – December 21, 1950), a Democrat from Arkansas, becomes the first woman to be elected to the U.S. Senate.

Hattie Wyat was born near Bakerville, Tennessee, in Humphreys County, the daughter of William Carroll Wyatt, a farmer and shopkeeper, and Lucy Mildred Burch. At the age of four she moved with her family to Hustburg, Tennessee. After briefly attending Ebenezer College in Hustburg, she transferred to Dickson (Tenn.) Normal College, where she received her B.A. degree in 1896. She taught school for a time before marrying in 1902 Thaddeus Horatius Caraway, whom she had met in college; they had three children, Paul, Forrest, and Robert. The couple moved to Jonesboro, Arkansas where she cared for their children and home and her husband practiced law and started a political career.

The Caraways settled in Jonesboro where he established a legal practice while she cared for the children, tended the household and kitchen garden, and helped to oversee the family’s cotton farm. The family eventually established a second home Riversdale at Riverdale Park, Maryland. Her husband, Thaddeus Caraway, was elected to the United States House of Representatives in 1912, and he served in that office until 1921 when he was elected to the United States Senate where he served until he died in office in 1931. Following the precedent of appointing widows to temporarily take their husbands’ places, Arkansas governor Harvey Parnell appointed Hattie Caraway to the vacant seat, and she was sworn into office on December 9. With the Arkansas Democratic party’s backing, she easily won a special election in January 1932 for the remaining months of the term, becoming the first woman elected to the Senate. Although she took an interest in her husband’s political career, Hattie Caraway avoided the capital’s social and political life as well as the campaign for woman suffrage. She recalled that “after equal suffrage I just added voting to cooking and sewing and other household duties.”

n May 1932 Caraway surprised Arkansas politicians by announcing that she would run for a full term in the upcoming election, joining a field already crowded with prominent candidates who had assumed she would step aside. She told reporters, “The time has passed when a woman should be placed in a position and kept there only while someone else is being groomed for the job.” When she was invited by Vice President Charles Curtis to preside over the Senate she took advantage of the situation to announce that she would run for reelection. Populist Louisiana politician Huey Long travelled to Arkansas on a 9-day campaign swing to campaign for her. She was the first female Senator to preside over this body as well as the first to chair a Committee (Senate Committee on Enrolled Bills). Lacking any significant political backing, Caraway accepted the offer of help from Long, whose efforts to limit incomes and increase aid to the poor she had supported. Long was also motivated by sympathy for the widow as well as by his ambition to extend his influence into the home state of his rival, Senator Joseph Robinson. Bringing his colorful and flamboyant campaign style to Arkansas, Long stumped the state with Caraway for a week just before the Democratic primary, helping her amass nearly twice as many votes as her closest opponent. She went on to win the general election in November.


My Little Town 20120111: Harold

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 rural sort of place that did not particularly appreciate education, and just zoom onto my previous posts to understand a bit about it.

This week I am writing about a person who may be living, so no last name will be used.  Since there were more than one person around my age named Harold in Hackett at the time, it would be difficult to identify him.  Harold was a friend of mine, and lived just down the street across the Midland Valley railroad tracks.  Harold was more typical of the people my age than I was there, not being really interested in doing well in school or making something out of himself.

Everyone has had a friend like Harold.  I liked him, but he has some issues.  One of his issues was telling the truth.  He just made up stuff constantly, and from an early age.  I often though that he should have been a fiction writer because some of his stories were certainly original, if incredible.