February 2012 archive

Too little, too late.

Why the Foreclosure Deal May Not Be So Hot After All

Matt Taibbi, Rolling Stone

POSTED: February 9, 12:58 PM ET

A few weeks back, I was optimistic about it – I had been worried that it was going to contain broad liability waivers for all sorts of activities, and I was pleasantly surprised when I heard that its scope had essentially been narrowed to robosigning offenses.

However, now that the settlement is finalized, and I’ve had time to think about it and talk to people who know far more than I do about this, I’m feeling pretty queasy.

…

So they settled the case in a way that reads in headlines like it’s a bite out of the banks, but in fact is barely even that. There will be little in the way of real compensation for stuggling homeowners, and there are serious issues in the area of the deal’s enforceability. In fact, about the only part of the deal we can be absolutely sure will be honored in full is the liability waiver for the robosigning offenses.

With the rest of it — collecting on the settlement, enforcement of the decrees, all the stuff put in there to balance the deal in the consumer’s direction — there will be an uphill battle from this point forward to get the banks to comply. The banks meanwhile have no such uphill battle. They will get the full benefit of the deal (a release from costly litigation) from the moment the ink is dry.

Really this looks like America’s public prosecutors just wilted before the prospect of a long, drawn-out conflict with an army of highly-paid, determined white-shoe banker lawyers. The message this sends is that if you commit crimes on a large enough scale, and have enough high-priced legal talent sitting at the negotiating table after you get caught, the government will ultimately back down, conceding the inferiority of its resources.

…

My mistake in looking at this deal a few weeks ago, when details of it first leaked out, was in focusing on how much worse it could have been, instead of thinking about how bad it still is. The only acceptable foreclosure deal had to bring about a complete end to robosigning and the other similar corrupt practices that grew up around it (like for instance gutter service, the practice of process servers simply signing affidavits saying they delivered summonses, instead of really doing it).

But this deal not only doesn’t end robosigning, it officially makes getting caught for it inexpensive. Shame on me for ever thinking that might be a good thing.

Alexander Hamilton

Obama’s Guiding Principle: Leave No One Accountable

By: Scarecrow, Firedog Lake

Thursday February 9, 2012 8:35 am

(W)hatever you thought or feared was going on in America, and whoever you believed had caused the collapse of America’s economy, caused millions to lose their jobs, their homes and their retirements and continued to loot the country, it’s time to look forward. Because everyone who matters – and that’s not you – now agrees, they say, to function in the public interest, even though it’s a bald face lie, since nothing has changed and the looters and their complicit overseers are still in charge.

Obama’s people have performed this function for America’s looters over and over again. They did it for Wall Street, the banks, the rich tax evaders, the insurance companies, the oil companies, the gas companies, the coal companies, the CIA, the DoD, and numerous torturers and their legal/policy enablers and associated war criminals in the previous administration.

Consistent with this strategy, Obama’s team must silence, neutralize or punish anyone who protests or blows the whistle on the massive criminality and corruption involved.  It must also emasculate the left and what’s left of the liberal wing of the Dem Party, using the argument that the Administration is not nearly as awful as the other Party’s people, who openly glorify looting and killing and vilifying the victims.

But of course, when we were ruled by the latter, everyone with any humanity was repulsed by the open looting and killing and indifference and was willing to say so.  When the Administration sanctions it, however, we are supposed to bite out tongues, because it could be worse.

Well, it’s worse, and it’s more insidious and corrupting of our souls than where we were four years ago.  It is evil.

This is a state by state breakdown of the foreclosure settlement (h/t Yves Smith):

An astute observation from Lambert Strether:

OMFG, look at the weasel wording in the press release:

   “This agreement is very significant in how it addresses the fraud that these banks committed against many homeowners across our state,” said ___.” This agreement not only provides much needed relief to (STATE) [Ha ha, fill in the blank!!!] borrowers, but it also puts a stop to many of the bad [criminal] behaviors that contributed to the mortgage mess in our state and across the country.”

And then there’s “fraud that these banks committed.” So if it’s fraud (against whom?!) then why is nobody going to jail?

UPDATE Oh, I’m sorry. I forgot. Banksters never go to jail. A banana republic like ours has a two-tier system of justice, and banksters have impunity for all crimes. Unlike you, peasants. My bad, seriously.

And is definitely a top comment:

Google tells it like it is. I google the first phrase as a complete string, a la “This agreement is very significant in how it addresses the fraud“, and the first thing that comes up is indeed Tom Miller’s press release, from 9 minutes ago (10:44AM EST), and two or three down after that, links to Nigerian 419 scams, triggered by the similarities between the Miller’s wording, and the scripts of scam artists. Shocker!

(all emphasis mine)

Some of the propaganda (again h/t Yves Smith):

Settlement Graphic and Settlement Graphic

Click the links but first put all heavy and sharp objects out of reach.

“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 Sheer: Elections Are for Suckers

Let’s just dip our fingers in purple ink and pose for photos now that voting has the same significance for us as it had for those Iraqis who got conned into thinking they were participating in some grand democratic experiment.

Our own elections, the ones our government has modeled for the world, are a hoax. What other word should we use to describe this year’s presidential election, whose outcome will turn on which party’s super PACs gets the most generous bribes from billionaires? The Republicans, enabled by decisions of a Supreme Court they still control, were the first out of the gate and are far more culpable in destroying our system of popular governance. But the Democrats, no less committed to winning at any cost to political principle, have now jumped in.

Gail Collins: Tales From the Kitchen Table

This is a really old story, but let me tell you anyway.

When I was first married, my mother-in-law sat down at her kitchen table and told me about the day she went to confession and told the priest that she and her husband were using birth control. She had several young children, times were difficult – really, she could have produced a list of reasons longer than your arm.

“You’re no better than a whore on the street,” said the priest. [..]

Organized religion thrives in this country, so the system we’ve worked out seems to be serving it pretty well. Religions don’t get to force their particular dogma on the larger public. The government, in return, protects the right of every religion to make its case heard.

The bishops should have at it. I wouldn’t try the argument that the priest used on my mother-in-law, but there’s always a billboard on the front lawn.

The biggest banks involved in mortgage fraud have agreed to a $26 billion settlement along with 49 states attorneys general. Oklahoma is the only hold out because the state’s Attorney General, Scott Pruitt, did not believe that the banks should face any penalty. The agreement will “help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. The aid is to be distributed over three years.”

Yves Smith at naked capitalism notes that while the final terms of the agreement have not been released but some of the details have been leaked:

   1. The total for the top five servicers is now touted as $26 billion (annoyingly, the FT is calling it “nearly $40 billion”), but of that, roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1500 to $2000 per borrower foreclosed on between September 2008 and December 2011.

   Banks will be required to modify second liens that sit behind firsts “at least” pari passu, which in practice will mean at most pari passu. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages. Per the Journal:

      “It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets.

   The Times is also subdued:

       Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.

   2. Schneiderman’s MERS suit survives, and he can add more banks as defendants. It isn’t clear what became of the Biden and Coakley MERS suits, but Biden sounded pretty adamant in past media presentations on preserving that.

   3. Nevada’s and Arizona’s suits against Countrywide for violating its past consent decree on mortgage servicing has, in a new Orwellianism, been “folded into” the settlement.

   4. The five big players in the settlement have already set aside reserves sufficient for this deal.

Yves goes on to enumerate the top 12 reasons why this settlement really stinks. These are her top 5:

1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.

3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.

She goes on to explain how there are no constraints on servicers cheating to reduce their losses and will face no consequences when caught as in the past. With the law suits against Countrywide somehow “folded into the deal”, Bank of America, who is by far the worst offender in the chain of title disaster, gets a “special gift”: “that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced”. As David Dayen at FDL News Desk explains:

As far as the release goes, AG offices that signed onto the lawsuit claimed it was narrowly crafted to only affected foreclosure fraud, robo-signing and servicing (which I don’t feel is all that narrow, but I’m trying to just-the-facts this – ed). The lawsuit that New York AG Eric Schneiderman filed last Friday, suing MERS and three banks for their use of MERS, was preserved fully. There was a last-minute request by the banks to dissolve that lawsuit, but it was not successful. In addition, Schneiderman reserves the right to sue other servicers for their use of MERS along the same lines as the current lawsuit. [..]

Other lawsuits, like Delaware AG Beau Biden’s lawsuit against MERS, Missouri AG Chris Koster’s criminal indictments against DocX, and Nevada AG Catherine Cortez Masto’s suit against LPS and its employees would be able to go forward as well because the banks are not a party to them. However, it’s unclear whether any of those AGs will be able to work their way up the chain to indict bank officers for the same conduct; the likely answer, I assume, would be no. In California, Kamala Harris preserved the right for state officials and large pension funds to sue under the state’s False Claims Act over mortgage backed securities that later fell in value.

The status of Massachusetts AG Martha Coakley’s suit against five banks for foreclosure fraud is unknown. In all likelihood, the Nevada/Arizona suit against Bank of America for failing to follow their responsibilities in the Countrywide settlement will be folded into the deal.

In that settlement, BofA promised to deliver $8.5 billion in relief for Countrywide borrowers who fell victim to deceptive practices in the mortgage process. In reality, only $236 million was ever spent. Weak settlement terms allowed BofA to take credit merely for offering loan modifications to borrowers. And the Nevada suit alleged that BofA immediately started abusing borrowers who tried to get relief under the deal. But that suit is now gone.

As to the role of new Federal task force, if it were to be taken seriously this settlement should have not been completes until the task force’s investigation was finished. A good investigation takes charges that are easy to prove to help get the more evidence for the more difficult ones. By letting the banks walk. As Yves sees it, and she is correct, the investigations in Nevada and Missouri led to criminal charges and arrests that might have led to deals to catch the criminals “higher up the food chain.” There is plenty of evidence of bankruptcy-related filings, such as inflated and bogus fees, and even substantial, completely made up charges that has been ignored that could have led to a bigger settlement and prosecutions. By cutting a deal on robosigning the deeper chain of title problem has now been covered up making it even more difficult to address the on going fraud at high levels, the banks themselves.

So the bottom line is the banks have three years to hand out $5 billion in cash to about one million homeowners that will amount to about $2000 each for the loss of their homes through fraud. They will suffer no other consequences and there will be no further means to prosecute them, even if there is clear evidence of complicity in fraud related to robosigning. There is still the issue of 10 million underwater homeowners with $700 billion in negative equity that will continue to drag on the housing market and the economy for years to come. It would seem the Obama administration has once again screwed the vast majority of Americans to protect the Banks and Wall St. and his supporters are cheering this as another reason to reelect him. I see no reason for the Republicans to worry about another four years of Obama.

Up Date: If you’re one of the victims of the banking ghouls, you might not want to visit the new website for “The National Mortgage Settlement” The picture alone might make you want to do something you’d regret. The site details the agreement. David Dayen gives a brief synopsis of some of the gorier detail:

$750 million in a payment to the federal government;

$4.5 billion in direct payments to the states, of which $1.5 billion will go to those $2,000 checks to borrowers, and $2.75 billion to state foreclosure prevention services like legal aid, mandatory mediation and other programs. So the hard money comes to $5.25 billion.

$20 billion in “direct consumer relief”;

$3 billion to help current underwater borrowers refinance, and $17 billion in “credits” for principal reductions. HUD estimates that the dollar value of this will come to $32.3 billion in the end, as we’ve discussed. HUD Secretary Donovan has alternately said that a “substantial” amount of this money will come from MBS investor loans, and also that the large majority would come out of bank-owned loans. Also second liens have to be reduced along with firsts at least pari passu (on equal terms).

In addition, officials are touting the nationwide servicing standards that will be ushered in with this deal. Left out of this is the fact that the CFPB now has control over the servicing market, and can regulate national standards all by themselves.

The site mentions what the settlement doesn’t cover:

Release any criminal liability or grant any criminal immunity.

Release any private claims by individuals or any class action claims.

Release claims related to the securitization of mortgage backed securities that were at the heart of the financial crisis.

Release claims against Mortgage Electronic Registration Systems or MERSCORP.

Release any claims by a state that chooses not to sign the settlement.

End state attorneys general investigations of Wall Street related to financial fraud or the financial crisis.

We still don’t have any specific answers to the letter that Nevada AG Masto sent to the settlement negotiators. What Davyen finds really annoying is that the specific details haven’t been released to the  public who really deserves to know how badly they are being screwed.

I may have a separate article later as more specifics trickle down

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.

February 9 is the 40th day of the year in the Gregorian calendar. There are 325 days remaining until the end of the year (326 in leap years).

On this day in 1950, Joseph Raymond McCarthy, a relatively obscure Republican senator from Wisconsin, accuses State Department of being infiltrated by communists. McCarthy announces during a speech in Wheeling, West Virginia, that he has in his hand a list of 205 communists who have infiltrated the U.S. State Department. The unsubstantiated declaration, which was little more than a publicity stunt, suddenly thrust Senator McCarthy into the national spotlight.

Asked to reveal the names on the list, the reckless and opportunistic senator named officials he determined guilty by association, such as Owen Lattimore, an expert on Chinese culture and affairs who had advised the State Department. McCarthy described Lattimore as the “top Russian spy” in America.

These and other equally shocking accusations prompted the Senate to form a special committee, headed by Senator Millard Tydings of Maryland, to investigate the matter. The committee found little to substantiate McCarthy’s charges, but McCarthy nevertheless touched a nerve in the American public, and during the next two years he made increasingly sensational charges, even attacking President Harry S. Truman’s respected former secretary of state, George C. Marshall.

Wheeling speech

McCarthy experienced a meteoric rise in national profile on February 9, 1950, when he gave a Lincoln Day speech to the Republican Women’s Club of Wheeling, West Virginia. His words in the speech are a matter of some debate, as no audio recording was saved. However, it is generally agreed that he produced a piece of paper that he claimed contained a list of known Communists working for the State Department. McCarthy is usually quoted to have said: “The State Department is infested with communists. I have here in my hand a list of 205-a list of names that were made known to the Secretary of State as being members of the Communist Party and who nevertheless are still working and shaping policy in the State Department.”

There is some dispute about whether or not McCarthy actually gave the number of people on the list as being “205” or “57”. In a later telegram to President Truman, and when entering the speech into the Congressional Record, he used the number 57. The origin of the number 205 can be traced: In later debates on the Senate floor, McCarthy referred to a 1946 letter that then-Secretary of State James Byrnes sent to Congressman Adolph J. Sabath. In that letter, Byrnes said State Department security investigations had resulted in “recommendation against permanent employment” for 284 persons, and that 79 of these had been removed from their jobs; this left 205 still on the State Department’s payroll. In fact, by the time of McCarthy’s speech only about 65 of the employees mentioned in the Byrnes letter were still with the State Department, and all of these had undergone further security checks.

At the time of McCarthy’s speech, communism was a growing concern in the United States. This concern was exacerbated by the actions of the Soviet Union in Eastern Europe, the fall of China to the communists, the Soviets’ development of the atomic bomb the year before, and by the contemporary controversy surrounding Alger Hiss and the confession of Soviet spy Klaus Fuchs. With this background and due to the sensational nature of McCarthy’s charge against the State Department, the Wheeling speech soon attracted a flood of press interest in McCarthy.

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.

I was not sure that I would be able to post tonight because I crashed my system doing something stupid night before last, but I finally got it going again.  I had to take the radical step of completely wiping my hard drive, reloading Windows, and then restoring all of the files that I had archived onto a USB hard drive.  I NEVER will make the mistake of trying to tweak my OS again!  I really like that external hard drive and will make backups of my critical files monthly.  I think that I will take it to my neighbors’ house when not using it in case of fire or somesuch.

In any event, I am here and tonight we shall discuss the railroad tracks that ran just south of my house.  It was operated by Midland Valley Lines, out of Muskogee, Oklahoma.  Mostly the branch by my house hauled coal, because Hackett coal was in high demand for making coke for the steel mills when I was a lad.

That’s what you’ll hear one cop say on the video at 2:33 after the cops violently grab a man from his car, throw him on the ground, one puts his knee in the man’s ribs, another kicks his face.   Except the driver was not in any medical condition to hurt anyone.

Of course, there is always the possibility that one cop could have sprained his ankle or pulled a hamstring when he kicked a defenseless man.  Or perhaps the other cop could have twisted his knee while planting it into a defenseless man’s ribs.  It could happen, ya know.

Adam Greene is on his stomach as a pack of police officers pile on him, driving their knees into his back and wrenching his arms and legs. One officer knees him in the ribs; another kicks him in the face.

“Stop resisting,” officers on the video yell, but Greene, his face pushed into the pavement, hasn’t resisted. He doesn’t even move — maybe can’t move — because he’s gone into diabetic shock caused by low blood sugar.

Do not move

Stop resisting, motherfucker

Video shows officers beating motorist in diabetic shock

You’ll have to forgive me if I’m not over excited by Matt Taibbi’s latest which I think entirely misses the point.

After all, this is a man who celebrated Schniederman’s appointment as a  victory instead of just another sell out which we are seeing right now in Obama’s cave on birth control is the only mode this administration knows.

Sophisticated snark?  Never bought that for an instant Matt.

He does make several points that I’ll repeat to save you the agony of plowing through the source–

Goldman’s numbers, to me, offer a hilarious counterpoint to Sherman’s piece. The bank’s earnings in total for last year were $4.4 billion, down some 65% off of last year’s numbers. Its revenues for the year were down 26%. Despite these bummerific numbers, Goldman reduced bonuses and compensation by only 21%, down to $12.2 billion, certainly a number to weep over. If the era of outsized bonuses is over, how come the biggest banks aren’t even cutting them to match revenues, much less profits? One could even interpret Goldman’s numbers as a major increase in the size of the bonus pool, relative to earnings.

But what about other banks? Well, Citigroup also saw a drop in revenues for the year (although its net income actually went up, from $10.6 billion to $11.3 billion). But what was most concerning was the bank’s crappy fourth quarter, when it suffered an 11% drop in earnings.

…

(N)ow Wall Street is being threatened with a return to those “quaint” days of loaning money and supervising bond issues and such.

…

Look, the financial services industry should be boring. It should be quaint. Let’s take the municipal debt business. For ages, it was a simple, dull, low-margin sort of industry, in which banks arranged municipal bond issues and made small but dependable profits as cities and towns financed improvements and construction projects.

That system worked seamlessly for decades, until people like Sherman’s interview subjects suddenly decided to make the business exciting. You know what happens when you make municipal debt exciting? Jefferson County Alabama happens. Or, on a macro level, Greece happens.

When making a few points on mere bond issues stops being enough, and you have to cook up crazy swap schemes and indices to bet against those schemes, ingenious scams allowing politicians to borrow billions of dollars that they will never in a million years be able to pay back, you might end up getting a few parks, schools, and subways in New York.

But what you get everywhere else is a giant clusterfuck that costs the rest of us years and even more billions of tax dollars to remedy.

This is what the protests are all about – it’s anger that Wall Street has been profiting from an imaginary economy that leaves bankers overpaid, but creates damage everywhere else. Sherman doesn’t get this.

Matt doesn’t seem to get it either.

Why are we supporting Republican policies again?  You’ll have to speak a little louder, I’m a mite deaf in that ear.

“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”.

Wednesday is Ladies’ Day

Katrina vanden Heuvel: What We Learned From Planned Parenthood: Fighting Back Works

In 2010, when the right-wing echo chamber succeeded in destroying ACORN-a group Bill Moyers described as “more devoted to helping poor people become their own best champions” than any group he’d ever covered as a journalist-Senator Bernie Sanders offered this warning:

“These same forces drummed Van Jones out of the White House. The rightwing echo chamber is now two-for-two, and no one should have any illusions that it won’t be back.”

Sanders’ words proved prescient. Since 2010 Planned Parenthood-along with organized labor-has been a prime target of a well-funded and relentless effort by Republicans to dismantle and destroy progressive institutions. While the right might employ different tactics depending on the target, the goal is the same: take down progressive groups that have institutional strength.

Nancy Goldstein: Proposition 8 Is Unconstitutional. What’s Next for the Anti-Gay Law?

Today’s decision overruling Proposition 8 is deeply satisfying. The randomly assigned three-judge panel for the U.S. Court of Appeals for the 9th Circuit Court went beyond finding, 2-1, that Prop 8’s amendment of California’s state constitution failed the rational basis test and violated the Equal Protection Clause of the 14th Amendment of the United States Constitution. Judge Reinhardt’s 128-page decision also skewers the claims of Prop 8’s proponents to be protecting marriage, revealing their alleged concerns as nothing more than sheer mean-spirited prejudice tricked out as paternalism. To wit, “Proposition 8 served no purpose, and had no effect, other than to lessen the status and human dignity of gays and lesbians in California.”

This is rousing stuff and one of the biggest losses that anti-equality supporters have ever suffered. “Even though this is a narrow decision that applies only to California, it will return us to same-sex marriage in an important state – one that has 40 million people and a disproportionate influence on the politics and culture of the country,” says Dale Carpenter, law professor at the University of Minnesota.