Tag: ek Politics

Researcher: Obama Budget ‘End Of The Mars Program’

CBS DC

February 27, 2012 7:57 AM

If Obama’s budget sails through as outlined, “in essence, it is the end of the Mars program,” said Phil Christensen, a Mars researcher at Arizona State University. It’s like “we’ve just flown Apollo 10 and now we’re going to cancel the Apollo program when we’re one step from landing,” he said.

…

(R)obotic Mars missions slated for 2016 and 2018 were cut from the president’s new budget proposal, even though NASA has spent $64 million on early designs with the European Space Agency for the two missions. The most ambitious Mars flight yet and one the National Academy of Sciences endorsed as the No. 1 solar system priority – a plan to grab Martian rocks and soil and bring them back to Earth – is on indefinite hold.

…

If NASA ignores Mars for a decade, it runs the risk of a brain drain, said Ed Weiler, who resigned last year as NASA’s sciences chief because of budget battles over Mars.

“Landing on Mars is a uniquely American talent and there aren’t too many things that are uniquely American,” Weiler said.

Which is Pravda and which is Isvestia again?

Obama’s Deficit Dilemma

Obama’s unacknowledged debt to Bowles/Simpson plan

By JACKIE CALMES, The New York Times

Published: February 27, 2012

Mr. Obama has come to adopt most of the major tenets supported by a majority of the commission’s members, though his proposals do not go as far. He has called for cutting deficits more than $4 trillion over 10 years by shaving all spending, including for the military, Medicare and Social Security; overhauling the tax code to raise revenues and lower rates; and writing rules to lock in savings.

…

Three weeks ago Mr. Obama met with Erskine B. Bowles, a former chief of staff to Mr. Clinton who was a co-chairman of the commission along with former Senator Alan K. Simpson, a Republican. In speeches nationwide, the chairmen have expressed disappointment that the president – and Republicans – did not take up their plan.

…

“The president wanted to make sure that we understood that he had had a strategy to take the framework of what we’d negotiated” on the commission, Mr. Bowles said, “and to use that as a vehicle to negotiate a deal.”

Target

W(h)eat Thins

I don’t know what else you can call an 87% haircut.

Greece’s bond exchange: it’s official

Felix Salmon, Reuters

Feb 24, 2012 13:32 EST

Firstly, they’re going to receive new Greek bonds, maturing in 2042. It doesn’t matter whether the bonds you’re holding mature on March 20, or whether they mature in 30 years’ time – everybody gets the same new long-dated bonds, according to the face value of what they now own. In other words, the value of Greek bonds right now is wholly a function of what their face value is, and has nothing to do with their coupon or their maturity date.

The new Greek bonds have a step-up coupon: 2% through 2015, then 3% through 2020, then 3.65% in 2021, and then 4.3% from 2022 through 2042. Bondholders will receive new bonds with a face value of €315 for every €1,000 of old bonds they hold. (Again, remember that it’s face value which matters here, not market price.) What’s the market price of the new bonds going to be? Not very much; my guess is that they’ll trade at roughly 40% of face value. Which means that the “NPV haircut”, as far as the new Greek obligations are concerned, is somewhere on the order of 87%.

Mark to market baby.

Sunday the Washington Post put up a piece by Dylan Matthews that gives relatively serious treatment to Modern Monetary Theory.

You know the deficit hawks. Now meet the deficit owls.

Posted by Dylan Matthews, Washington Post

10:10 AM ET, 02/19/2012

In contrast to “deficit hawks” who want spending cuts and revenue increases now in order to temper the deficit, and “deficit doves” who want to hold off on austerity measures until the economy has recovered, Galbraith is a deficit owl. Owls certainly don’t think we need to balance the budget soon. Indeed, they don’t concede we need to balance it at all. Owls see government spending that leads to deficits as integral to economic growth, even in good times.

The term isn’t Galbraith’s. It was coined by Stephanie Kelton, a professor at the University of Missouri at Kansas City, who with Galbraith is part of a small group of economists who have concluded that everyone – members of Congress, think tank denizens, the entire mainstream of the economics profession – has misunderstood how the government interacts with the economy. If their theory – dubbed “Modern Monetary Theory” or MMT – is right, then everything we thought we knew about the budget, taxes and the Federal Reserve is wrong.

‘Relatively’ is the key word and there are some serious flaws in Matthew’s piece that letsgetitdone discusses in a 6 part, 4 part series over at Corrente.

WaPo Covers MMT, But Does Its Usual Bad Job: Part One, Some Basics and Solvency

letsgetitdone, Corrente

Tue, 02/21/2012 – 5:48pm

Deficit owls, believe that there is no structural deficit, and that most of the present US deficit will go away when full employment is reached, but probably not all of it, unless the private savings levels in the economy are balanced by an equal or greater foreign sector deficit (trade surplus). They also believe that in times of unused productive capacity like these, Government deficits are caused by the state of the economic system, and that explicitly managing them by taxing more or spending less will not improve its condition, but only result in a downward economic spiral making conditions still worse.

On the other hand, if real economic problems like unemployment, alternative energy capacity and production, infrastructure renewal, education, and industrial innovations are addressed through Government deficit spending, then aggregate demand spurring private sector business activity and ending U6 unemployment will result. In addition, deficit owls believe that in a fiat money system, where there is no debt in foreign currencies, and no “peg” to such currencies, solvency is never a problem for the Government, and that while inflation partly caused by Government deficit spending can become a problem in such a system, this can only happen when full employment is achieved.

…

(N)ecessary for currency sovereignty is to have a non-convertible currency, a floating exchange rate, and no debt in a currency not your own. These qualifications are very important because examples (e.g. Weimar, Zimbabwe) that are often given contradicting the claim that there’s no solvency problem for Governments like the US don’t fulfill these conditions.

WaPo Covers MMT, But Does Its Usual Bad Job: Part Two, Inflation/Hyperinflation

letsgetitdone, Corrente

Wed, 02/22/2012 – 1:00am

(I)t’s easy to wave off MMT by saying there is a risk of inflation in using deficit spending to create full employment, but it is entirely another matter to say what the level of risk is, and to provide compelling arguments about why that risk is appreciable, and more costly than the effects of chronic unemployment in a stagnating economy. This Mankiw doesn’t begin to do. I think Dylan should have pointed this out, rather than just mentioning Mankiw’s opinion. Who cares about his opinion? It’s his arguments, his theories, for expecting inflation that we care about. So, why doesn’t Dylan outline what these are and critically evaluate them?

When Mankiw tells us that default might be a better option than risking inflation by printing money, he is going way beyond his claimed area of expertise in economics. The 14th Amendment to the US constitution prohibits even questioning Government debt, much less defaulting on it. Mankiw in his capacity as an economist is unqualified to say whether a violation of the US constitution is a better option than taking the risk of triggering hyperinflation by “printing money.”

…

What MMT replies is that bond issuance isn’t an inevitability, but a result of choices made by the US Congress and the Executive Branch of Government. The Congress could place the Fed under the authority of the Treasury Secretary in the Executive Branch, and then no debt would have to be issued to deficit spend, since the Fed could just mark up the Treasury General Account (TGA) under orders from the Secretary.

MMT also points out that the Fed controls the Federal Funds Rate which, in turn, heavily influences all bond rates. If the Fed targets a near zero FFR, and the Treasury issues no bonds longer than say, three months in duration, then bond interest rates can be kept near zero no matter how much debt is issued. Japan has proved this is the case since its debt-to-GDP ratio is now in excess of 200% while its interest rates are very near zero on short-term debt instruments.

…

If the Fed buys bonds with money it prints, this will increase reserves in the private sector, but it won’t increase Net Financial Assets (NFA), because buying the bonds is just an asset swap. So with no new NFA being added to the private sector by the Government, this sort of Fed operation won’t be inflationary, as its massive QE programs have just demonstrated empirically. In fact, by removing the payment of interest on bonds from the private sector, and given that most of the Fed profits are returned to the Treasury, some MMT economists say that the end result of such operations may well be deflationary.

WaPo Covers MMT, But Does Its Usual Bad Job: Part Three, Banking, and Default vs. "Hyperinflation"

letsgetitdone, Corrente

Wed, 02/22/2012 – 4:00pm

(I)ncreasing the amount of reserves does not lead to increased borrowing, because banks don’t need more reserves to make loans. All they need are credit worthy borrowers and access to the Fed discount window to make whatever quantity of loans they want to. This is one of the main points about the banking system MMT makes. Put simply: lending is not reserve constrained! It’s constrained by bank willingness to lend to credit worthy borrowers.

…

MMT’s Sectoral Financial Balances (SFB) model is exactly right in its explanations, since they are able to run surpluses without disaster, only because, unlike the United States, the foreign sectors of their economies run deficits (that is Canada and Australia run trade surpluses) large enough to accommodate the private sector savings desires of Australians and also the Government’s desire to run a budget surplus. The US however, currently has a need to run Government deficits of 10% to support both our private sector savings desires of 6% of GDP, and our foreign sector’s desires to export 4% of US GDP to US consumers so they can accumulate US dollars in the form of electronic credits.

…

Governments can voluntarily default if they choose to. MMT economists have always said this and still say it. So why is political stupidity or perfidy counted against the truth of the MMT proposition that Governments sovereign in their currency have no fiscal solvency problems, only voluntary constraints and political problems?

On the contrary, I think the Russian case is one of the primary illustrations of a point that deficit owls have been trying to spread far and wide. Namely, that sometimes default is due to stupidity and perfidy and not to economic forces and that citizens in a democracy need to be aware of that, and of the full capabilities of currency sovereign Governments to always pay debts incurred in their fiat currency and to spend whatever is necessary to enable full employment in their nations. They are never, never, out of money except by choice. So, the real questions are:

• why are they choosing to default?
• Who will benefit from this political choice?
• And who will be asked to pay the price?

And how does the Russian case “prove” that: “Default, while technically always avoidable, is sometimes the best available option”? Is Dylan, through this quote from Gregory Mankiw suggesting that “public purpose” in Russia was better served by its voluntary default than it would have been if the Russians repaid their ruble debts in the rubles they might have created had they wished to? I’m afraid that both Dylan and Mankiw will have to prove that statement to me, since Russian citizens seem to have suffered quite a lot by taking the default choice and accepting austerity when they didn’t have to do so.

WaPo Covers MMT, But Does Its Usual Bad Job: Part Four, The Victory

letsgetitdone, Corrente

Thu, 02/23/2012 – 1:00am

For many years now, MMT economists and others who write in support of them have been trying to make a very important point to the mainstream. And that is that the claim:

The Government is running out of money,

is a myth, a fairy tale, or a deadly innocent fraud.

Dylan doesn’t say that in so many words. But he and the economists he cites, even Greg Mankiw grant this very important MMT/deficit owl point in passing.

If this post is any indication, mainstream economics, and certainly deficit doves, and hawks like Mankiw, now acknowledge that a nation like the US which is sovereign in its own fiat currency can never run out of money, or be prevented by the pure fiscal aspects of any situation from paying its debts or buying whatever goods and/or services it needs that are available for sale in its own sovereign currency.

So, that part of the great debate is now over. It will be very hard from here on, for the deficit hawks to maintain their deficit/insolvency terrorism in the face of the general recognition in economics that the Federal Government is not like a household, because it can never run out of the currency that it has the sole legitimate power to issue.

If they try, they will now be the ones facing ridicule and marginalization. And, increasingly, those politicians who try to claim we are running out of money, will also face ridicule and be viewed as ignoramuses by others.

…

Every critic of MMT cited in the post raises the objection either implicitly or explicitly that MMT policy proposals will lead to worrisome inflation, or hyperinflation. Now, that’s progress, because unlike the level of one’s national debt, or the size of one’s deficit in the abstract, or the nonsense debt-to-GDP ratio, which means nothing in itself, inflation is a real issue, not an artifact of some economist’s fevered theories.

…

In other words, let’s get real. Let’s talk about real problems of real people that can be alleviated through fiscal policy and Government programs. Let’s stop taking about fairy tales, myths, and bogeymen. And let’s get on with the job of rebuilding the United States for our children and grandchildren and using every tool we have, including our fiat currency system, to realize the blessings of liberty and equality of opportunity for everyone.

The WaPo MMT Post Explosion: Dean Baker Weighs In on MMT

letsgetitdone, Corrente

Fri, 02/24/2012 – 12:58am

(Th)ere are some differences that are very significant for policy activism between a Keynesian deficit dove approach employed by people like Paul Krugman, Brad DeLong, Robert Reich, and Dean Baker (op.cite, link added), and a Modern Monetary Theory (MMT) approach employed by people like Warren Mosler, L. Randall Wray, Bill Mitchell, Jamie Galbraith, Stephanie Kelton, Marshall Auerback, Scott Fullwiler, and Pavlina Tcherneva. So, here are some contrasts between the two approaches on seven important issues.

The WaPo MMT Post Explosion: Jared Bernstein’s Cool Up To a Point

letsgetitdone, Corrente

Thu, 02/23/2012 – 12:19pm

• Tax Cuts Hard to Unwind? Not If You Legislate Properly!
• Default vs. Hyperinflation? A False Choice for the US?
• Debt Should Grow More Slowly Than GDP? Why?
• Deficits Must Respond Dynamically To Growth? They Will If They’re the Right Deficits
• MMT Not Effective in Deficit Reduction Mode; or Congress Ineffective In Its Legislation?
• Fiscal Sustainability and the Health Care Issue or Mis-allocation of Net Financial Assets to the Health Care Industry at the Cost of Weakening Our Democracy?
• Does Jared Bernstein Really Understand MMT, Yet?

…

Finally, I also think that Jared doesn’t fully understand that MMT is not just an approach to economic policy and analysis, but primarily embodies certain Macroeconomic propositions and propositions about how modern money works, and what policies could be followed to achieve public purpose. If he did, then why would he keep making objections to MMT policy proposals based on his ideas about how Congress will act in reply to them?

In the end, it’s not MMT’s responsibility to propose policies that Congress will legislate. It is, instead, up to MMT to propose policies that will achieve full employment with price stability and other favorable social, cultural and political impacts for our democracy.

From that point on, it is up to political advocates to make these policies popular enough to get Congress and the President to pass them. And any failings in passing these policies are not failings of MMT economics, but failngs of the oligarchy which will not pass the policies it recommends.

Tom Miller, HUD Officials Laugh at Schneiderman Publicly

By: David Dayen, Firedog Lake

Wednesday February 22, 2012 8:55 am

Whether you believe in Eric Schneiderman’s ability to deliver a legitimate investigation on mortgage securitization fraud or not, you have to admit that the united front on opposition to a settlement on foreclosure fraud collapsed the moment that he agreed to helm that federal investigatory task force. He immediately separated “pre-bubble” and “post-bubble” conduct, allowing for a settlement on the latter while he joined the investigation on the former. And eventually, every other AG on the Democratic side fell in line, as they didn’t have New York as an anchor to stay out of a settlement.

That’s just what happened. And now we have HUD Secretary Shaun Donovan and Iowa AG Tom Miller, head of the executive committee that settled on foreclosure fraud, clowning Schneiderman on the record, saying that he got next to nothing in exchange for his holdout.

…

There is no guarantee that the settlement will lead to the maximum amount of $32 billion in principal reduction that Donovan hypes. In fact, the government’s own press release only guarantees “at least $10 billion” in principal reduction. Needless to say, even the high-end amount is next to nothing relative to the scale of the problem for underwater borrowers. And according to this article, Geithner was won over when he learned that the program would not be “overly punitive.” We’ve chronicled the numerous ways in which the banks make out very easy on the deal, and can even profit off it.

…

Wow. This is on the record, with Miller saying that the release only looks like it was tailored to Schneiderman’s specifications. Miller, by the way, was announced today as one of President Obama’s re-election campaign co-chairs.

Schneiderman has promised that he would walk away from the task force if he found it insufficient, with his co-chairs slow-walking the investigation. With the task force barely begun, here’s the head of the state settlement and insiders close to Donovan just out-and-out clowning him, alleging that Donovan bait-and-switched him. We’re waiting for that walk-away any time now.

HUD Continues Defense of Allowing HAMP Modifications as Part of the Foreclosure Fraud Settlement

By: David Dayen, Firedog Lake

Wednesday February 22, 2012 11:06 am

The pushback from the Administration on one particular story arising from the foreclosure fraud settlement has been pretty intense. You cannot say that Shahien Nasiripour doesn’t have the attention of HUD.

Today, they devoted an entire blog post (unsigned, from “HUD Public Affairs”) to refuting Nasiripour’s story in the Financial Times (which they don’t link, so I will) about how bank servicers can count HAMP modifications toward the “credits” in the foreclosure fraud settlement. But really they only refute the title of Nasiripour’s story.

…

HUD also leaves key questions unanswered in their post. They say that “if a servicer receives a HAMP incentive of 40 cents for every dollar of principal reduction, it can receive credit at the applicable rate on the remaining 60 cents… in no event can the servicer receive more under the settlement than it would have in the absence of HAMP incentives.” But does this include the additional HAMP incentive for the borrower staying current? Also, isn’t it the investor, not the servicer, who receives incentive payments in the principal reduction plan inside HAMP?

In addition, if this is coming on line with the settlement over the next 6-9 months, as eligible underwater borrowers are identified, why would any servicer in the short term do a principal reduction through HAMP? As HUD says in their post, “most HAMP modifications do not include principal reduction.” That, of course, is why it has such a high re-delinquency rate (up to 30% of borrowers go delinquent within 18 months), because the modifications that servicers perform in HAMP are unsustainable. The entire point of the new HAMP tweaks was to encourage more principal reduction. So why add an incentive to delay principal reduction for 6-9 months?

HUD claims that they could not have exempted HAMP from the settlement, because “it would have freed (servicers) from HAMP’s extensive compliance regime, reporting requirements, and borrower-protection features.” This is a non sequitur. You could very easily have put those compliance guidelines into the settlement. It would have been a simple copy-paste. HUD answers this by saying that “it would make it less likely that HAMP-eligible borrowers would receive principal reduction.” I’m not following the logic there at all. You could just include the evaluation and reporting requirements across all loans as part of the settlement.

And it goes without saying that, until there are terms on a sheet of paper that everyone can read, these claims by HUD just aren’t entirely credible. We don’t know what’s in the settlement yet. That’s a factual statement.

I’ll say this, the criticism appears to be getting to HUD. Some Connecticut lawmakers savaged the miniscule $2,000 check to foreclosure victims (which the Attorney General of the state, who was on the settlement’s executive committee, characterized as $1,500 – what does he know that we don’t?) that’s part of the settlement. Heck, even Pat Robertson is calling for corrupt bankers to be put in jail, citing the experience of Iceland. It must be lonely defending this settlement.

More Foreclosure Mischief: Bankruptcy Hijackings

Yves Smith, Naked Capitalism

Tuesday, February 21, 2012

One of the common complaints from banks that the concerns raised by borrowers over robosigning are mere “paperwork” problems, that everyone who is foreclosed on deserved it, and no one was really hurt. That is patently false, as there have been an embarrassing number of instances where someone with no mortgage was foreclosed on, as well all too many cases of servicer-driven foreclosures. And that’s before we get to damage to property records.

Attorney Timothy Fong called our attention to a below the radar form of chicanery that is predictable when you have nonjudicial foreclosure with no significant oversight and agents who lack incentives to do a good job.

…

So get this: the procedures are so bad that totally bogus documents can be created and slipped into the bankruptcy of an innocent victim to stop foreclosure sales. Even worse, the servicer, who OUGHT to know better, treats this person in BK who suddenly materialized out of nowhere from his perspective as a real owner and hits him with a motion for relief of stay so they can take a house from him that he never owned. And the foreclosure mill lawyers don’t question this because more motions of relief of stay means more fees.

If this example wasn’t such a serious indictment of our system, it would serve as a black comedy in bureaucratic incompetence.

Quelle Surprise! Servicers Rip Off Investors as Well as Homeowners

Yves Smith, Naked Capitalism

Tuesday, February 21, 2012

We’ve been giving examples off and on about how servicers scam borrowers. Examples include impermissibly deducting fees before applying payments to interest and principal; force placed insurance, inflated prices on and excessive frequency of broker price opinions, and in altogether too many cases, treating payments that are on time as late. What many observers fail to appreciate is that these are tantamount to scamming investors. If a borrower goes into default, any bogus charges will be deducted from the sale of the house, and hence come out of investors’ hides.

Lisa Epstein of Foreclosure Hamlet is a mortgage document maven and has been looking extensively at investor reports and compared them to court documents and has found serious discrepancies. Her research shows that servicers are not only taking advantage of borrowers but are also scamming investors.

…

Investors have told me they’ve seen signs of even more gross abuses, such as servicers treating fees as credit losses. But this sort of remark in a way shows investors suffer from the same agency problems as servicers, who have no reason to do a good job but instead are motivated to game a complex system of fees. Institutional investors are running other people’s money and therefore have no incentive to crack down on miscreant servicers (they feel it is not their job, plus if any one investor were to take this issue on, the rest of the industry would free ride on his work).

So no wonder we only have isolated and very dedicated individuals chipping away at this looting. Everyone else appears to be part of the problem.

John O’Brien: Mortgage Settlement Fails to Address Banking Criminal Enterprise

John L. O’Brien of the Southern Essex District Registry of Deeds – Salem, MA, Naked Capitalism

Wednesday, February 22, 2012

When you enter my registry you see a sign that reads “The deeds tell the story.” Before the big banks took it upon themselves to corrupt the land recordation system, the deeds used to tell a happy story, one in which people purchased a home and lived “the American Dream.” Today, however they tell a different story one of greed, fraud, and forgery. By now everyone in Massachusetts knows what I have been doing over the past two years to expose and stop the schemes by the Mortgage Electronic Recording Systems, Inc. and their shareholder banks. The accuracy and integrity of the land records in my registry are of the upmost importance to me.

Just this past week the Attorney Generals of this country said they will enter into a deal with the 5 largest banks who have agreed to stop robo-signing, provide principal reductions of between 20 to 25 thousand dollars to a million underwater homeowners. This amount will in no way solve the housing crisis that we are faced with nor even begin to turn our economy around. In addition, the settlement suggests that approximately 750,000 people who have had their homes taken by foreclosure using fraudulent documents will receive a check for $2,000. As Yves Smith has said, “that amount is the new penalty for forgery.” This is merely a slap on the wrists to these lenders. It is my opinion that this deal has been crafted for the banks and by the banks. It is not in the best interest of the consumer, the homeowner, or the taxpayer. Simply put, I do not trust these lenders who have flooded my registry with over 32,000 fraudulent documents to do the right thing. Those homeowners who now have a corrupted title are looking for answers. This deal gives them none. The illegal activity by the banks is nothing shy of a criminal enterprise, where they crossed state lines using the United States Postal Service to deliver the instruments that were fraudulent and contained forgeries.

I will continue to pursue my request for Federal and State grand juries to be impaneled to hold the CEO’s of these banks liable for the crimes that have been committed under their watch. The only thing missing in this illegal scheme that MERS and the big banks came up with was a gun and a mask. I will continue to expose this fraud and work everyday to make sure that the taxpayers are fully reimbursed for the over $44 million dollars in lost recording fees in my district alone by institutions who still believe fees are “for thee but not for me.” A message needs to be sent to these banks that they may think that you are too big to fail but they are not too big to go to jail.

Yes, Virginia, Foreclosure Is Theft

Author: L. Randall Wray, EconoMonitor

February 22nd, 2012

There’s a lot of pushback anytime someone points the finger at banks. As I’ve argued for a couple of years now, virtually all recent foreclosures really amount to theft. The banks have no legal standing to take homes. They created the MERS monster, which destroyed the chain of title and “lost” all the documents. That is why the mortgage servicers hire robo-signers to forge new ones. Yet, 4 years into the crisis, almost no one wants to admit the truth. Foreclosure in the US is theft-as practiced it is almost always illegal. Yet, the servicers are now ramping up foreclosures after they bought out the state attorneys general under pressure from the Eric Holder at the White House.

Audit Reveals 84% of San Francisco Foreclosures Violated Law

David Wallechinsky, Noel Brinkerhoff, AllGov

Tuesday, February 21, 2012

City officials requested the audit that examined 382 randomly chosen foreclosures that occurred from January 2009 through October 2011. The findings revealed that 84% of the files involved “what appear to be one or more clear violations of law.” The violations included not giving homeowners warning that they were in default on their loans (6%), not giving homeowners adequate legal warning their property was being sold (10%), backdating of documents (59%) and transfers of loans by entities that had no business doing so (45%).

Another disturbing discovery related to the Mortgage Electronic Registry System (MERS). In 1995 the bigger banks created MERS as a privately owned electronic system for registering mortgage sales that was supposed to replace local county recording. In the words of the New York Attorney General’s Office, they did so “to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages.” The San Francisco audit found that in 58% of cases, the loan beneficiary listed on the deed of sale was different from the one listed in the MERS database.

Audit Uncovers Extensive Flaws in Foreclosures

By GRETCHEN MORGENSON, The New York Times

Published: February 15, 2012

(T)he detailed and comprehensive nature of the San Francisco findings suggest how pervasive foreclosure irregularities may be across the nation.

…

The depth of the problem raises questions about whether at least some foreclosures should be considered void, Mr. Ting said. “We’re not saying that every consumer should not have been foreclosed on or every lender is a bad actor, but there are significant and troubling issues,” he said.

California has been among the states hurt the most by the mortgage crisis. Because its laws, like those of 29 other states, do not require a judge to oversee foreclosures, the conduct of banks in the process is rarely scrutinized. Mr. Ting said his report was the first rigorous analysis of foreclosure improprieties in California and that it cast doubt on the validity of almost every foreclosure it examined.

“Clearly, we need to set up a process where lenders are following every part of the law,” Mr. Ting said in the interview. “It is very apparent that the system is broken from many different vantage points.”

…

The report contradicted the contentions of many banks that foreclosure improprieties did little harm because the borrowers were behind on their mortgages and should have been evicted anyway. “We can deduce from the public evidence,” the report noted, “that there are indeed legitimate victims in the mortgage crisis. Whether these homeowners are systematically being deprived of legal safeguards and due process rights is an important question.”

Mary Martin Day

Pain Without Gain

By PAUL KRUGMAN, The New York Times

Published: February 19, 2012

(I)n early 2010 austerity economics – the insistence that governments should slash spending even in the face of high unemployment – became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.

Now the results are in – and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

Furthermore, bond markets keep refusing to cooperate. Even austerity’s star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.

Meanwhile, countries that didn’t jump on the austerity train – most notably, Japan and the United States – continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.

…

(A)s far as I can tell, austerity is still considered responsible and necessary despite its catastrophic failure in practice.

The point is that we could actually do a lot to help our economies simply by reversing the destructive austerity of the last two years. That’s true even in America, which has avoided full-fledged austerity at the federal level but has seen big spending and employment cuts at the state and local level. Remember all the fuss about whether there were enough “shovel ready” projects to make large-scale stimulus feasible? Well, never mind: all the federal government needs to do to give the economy a big boost is provide aid to lower-level governments, allowing these governments to rehire the hundreds of thousands of schoolteachers they have laid off and restart the building and maintenance projects they have canceled.

Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it’s time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.

Hoover/Brüning 2012

Paul Krugman, The New York Times

February 20, 2012, 8:12 pm

(T)hinking about today’s column, I realized that it’s even worse than that. What defines centrist heroes, as far as I can tell, is that they are people who, faced with a catastrophic slump driven by private-sector abuses, and a severe shortfall of spending, declared that our most urgent priority is … to reduce budget deficits.

That’s often described as a courageous position, but it’s actually anything but: nobody in the Beltway dinner-party circuit has ever been ostracized for demanding entitlement cuts. And aside from being totally conventional, it’s also deeply wrong-headed – and if you ask me somewhat unethical, too, because it involves exploiting a crisis to push an agenda totally unrelated to that crisis.

The Musical Chairs Economy

by Ian Welsh

2012 February 19

(T)here will be recessions and non-recessions (amidst what is an ongoing long Depression).  And in each recession those who fail to grab a chair will be cast out into the dispossessed.  Those who keep their chairs will be allowed to keep some facsimile of the “American lifestyle”.

The people who run the American economy and political system will continue along these lines so long as it continues to bring them money or power.  As noted, they do not have fellow feeling for other Americans, they believe they earned everything they have, and that if someone else isn’t prosperous, it’s because they didn’t earn it.  Such useless eaters are a drag on society.

I emphasize the thought process, which some will find polemical, because it is at the heart of the problem.  It is the most important part of the post.  There are other options, from the managed decline favored by environmental purists through to various types of smart growth.  They are not being pursued and will not be pursued because they are more work with less certainty of who will reap the profits and power than simply managing the current decline, and culling the herd from time to time, as necessary.

“The powerful do as they will, the weak suffer what they must.”

As long as you, the people, believe you are weak, you will suffer what you must.

The improbable Greece plan

By Felix Salmon, Reuters

February 21, 2012

The plan assumes that 95% of bondholders will accept this deal, which seems optimistic to me. Bondholders are by their nature a fractious and contrarian bunch, and Greece is not saying that it’s going to default on holdouts. As a result, bondholders have to guess what might happen if they fail to tender into the exchange: they might get defaulted on and receive nothing; they might get paid out in full; or they might get defaulted on while being offered, for the second time, the same exchange they’re being offered right now. Some of them, especially the ones holding English-law bonds, might well be tempted to hold on to at least some of their bonds, just to see what happens.

More to the point, the plan assumes that Greece’s politicians will stick to what they’ve agreed, and start selling off huge chunks of their country’s patrimony while at the same time imposing enormous budget cuts. Needless to say, there is no indication that Greece’s politicians are willing or able to do this, nor that Greece’s population will put up with such a thing. It could easily all fall apart within months; the chances of it gliding to success and a 120% debt-to-GDP ratio in 2020 have got to be de minimis.

Europe’s politicians know this, of course. But at the very least they’re buying time: this deal might well delay catastrophic capital flight from Greece, and give the Europeans more time to work out how to shore up Portugal if and when that happens. Will they make good use of the time that they’re buying? I hope so. Because once the Greek domino falls, it’s going to take a huge amount of money, statesmanship, and luck to prevent further dominoes from toppling.

Greek Bailout Secured, But Secret Report Shows It Won’t Work

By: David Dayen, Firedog Lake

Tuesday February 21, 2012 6:15 am

This is a recipe for endless bailouts, for more money, from the Eurozone. Greece will not have the ability to pay its debts and no other means of borrowing money. And that assumes that this deal WORKS, meaning that there’s no overthrow of the government, that a new leadership after elections in April doesn’t object to the plan, that creditors don’t revolt from the harsh terms of the haircut, etc. And this program only gets more expensive for the Eurozone over time. Even the fairly optimistic “downside scenario” from the confidential report shows that, saying that Greece will need €245 billion in aid.

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But the Germans were reluctant to agree to even this bailout, and will be more reluctant when it doesn’t work and Greece comes a-begging. This problem either gets bigger or is no longer seen as a problem. And somehow, I don’t think the richer countries in Europe will continue to accept these transfers. This buys nothing but time, and in the long run it’s fiscally stupid, if Greece will eventually leave the euro.

Satyajit Das: It’s All Greek to Me!

By Satyajit Das, Naked Capitalism

Tuesday, February 21, 2012

Everyone knows the amount of money available is insufficient to deal with the problems.

History suggests that a write-down of debt for distressed borrowers is frequently followed by others.

The entire trajectory of discussions, plans and negotiations largely ignores Greece. There is no longer any pretence of “assisting” Greece. It is about ensuring that German and French banks minimise their losses. It is probable that no funds will be released to Greece but rather placed in a special account from where it will be used to meet the country’s debt obligations.

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Subplots connect main plots in thematic terms or provide minor diversions or comic relief. The light relief in this instance come from a group of hedge funds who have threatened to take action in the European Court of Human Rights alleging that Greece has violated bondholders “rights”.

In the end, Greece may live to default another day. Other embattled European nations will be scrutinising the Athenian sub-plot extremely closely as to clues as to their future as they await the battles that lie ahead.

Nellie Forbush is a very flawed character.