The latest SIGTARP (Special Inspector General of the Troubled Asset Relief Program) report is, if such a thing is possible, even more damning than its previous quarterly reports. It slams the Treasury for abject failure to meet the program’s own objectives, its lack of proper control and metrics, its “Mission Accomplished” declarations, its phony accounting, particularly with regard to AIG, and its abject failure on loan modifications (note one of TARP goals was to preserve homeownership. The Economic Populist has a good summary of the report.
It’s distressing to see that this account, which is unusually forthright in its criticism because the performance of the TARP is so terrible, get short shrift in the MSM and even in the blogosphere. Unfortunately, this suggests that Team Obama is proving Jospeh Goebbels to have been correct: tell a big enough lie and keep repeating it, and the public will eventually come to believe it. And the lie is the one the Administration has been hawking for some time, that TARP was a success. The big reason is that they’ve sold the canard that the TARP was profitable. First, that is counting chickens long before they are hatched; in particular, as SIGTARP points out, the Treasury claims on AIG are a whooper, and there is also $80 billion in funds committed that might still be deployed.
The Administration has also gotten awfully creative in its accounting for AIG. In its last report, it anticipated losses of $45 billion, which have miraculously shrunken to $5 billion. How did such a happy turn of evens come about? Due to a change in methodology. Keep in mind that other official bodies tasked to estimate losses on AIG come up figures much more in line with the Treasury’s old figure. And the Treasury has included a $2 billion credit line as part of its proposed AIG resturcturing, which seems a bizarrely small amount. One time insurance analyst (and successful AIG short) John Hempton says the $2 billion really is a statement that AIG is being supported. [Update: Hempton was short, but in comments says he made “next to no money” but friends of his did better].
But the biggest reason to be skeptical of TARP touting is that it is utterly meaningless to look at TARP in isolation. It was merely one of a long list of “rescue the banks” initiatives, including the ongoing program of super low interest rates from the Treasury, which imposes costs on all savers (via negative real interest rates) to the benefit of financiers.
While the foregoing is only a partial list of why one should view the TARP with considerable skepticism, let’s focus on one aspect, the HAMP modification program, that is even more of a disaster than is widely acknowledged (and it wasn’t all that well regarded to begin with).
When the Treasury had a small meeting with bloggers last August, even then it could not pretend that HAMP was anything other than a failure. Huffington Post had done a series detailing how few borrowers were getting permanent mods (and even they were misnamed, those mods were five year payment reduction plans). The stories also described how servicers were keeping borrowers far longer in the so-called trial mods, which looked like a cynical effort to milk them. Why? Because when they were not approved for a permanent mod, as happened in a considerable majority of cases (and remember, borrowers were often given false hope by the servicer), they were hit not only for the difference between the trial mod payment and their normal amount due, but also, I kid you not, penalties and late fees! Even if a borrower had been conservative and banked the payment reduction, consider the impact of, say, seven months of late fees. That’s enough to put stressed borrowers over the edge (particularly since the late fees continue to compound until the account is brought current).
From Steve Waldman’s write-up of the Treasury meeting:
On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.
I disagree with the “not cruel people” assessment. Ignoring the plight of someone who is being harmed, particularly when you are playing an active part in the process, is a form of cruelty. The senior staff at Treasury project the impression of having arranged their lives so as to convince themselves that they are powerless, that they have no influence over the systems of which they are a critical part. It’s no doubt the same logic process used by the conductors of trains that took Jews to concentration camps. They must have noticed that they shuttled passengers only one way, and that the number they were bringing in over time was disproportionate to the size of the camps, but they weren’t about to think about that too hard.
For instance, Geithner more or less said that the servicer gaming of HAMP was disturbing, and he said Treasury needed to get to the bottom of it. But he immediately tried to shed responsibility by saying Treasury didn’t have much power over servicers. I said that Treasury had quite a few ways to make life uncomfortable for the banks in which the servicers lived, Treasury was not lacking in influence. Geithner pointedly avoided acknowledging the particular devices I mentioned.
The SIGTARP report takes the criticism of the Treasury’s performance on HAMP up a notch or two:
Treasury’s decision to declare such uniform success for so many failures disregards the harm and suffering that often accompany failed trial modifications…..SIGTARP has provided examples of the harms these failed trail modifications have inflicted…They all paint a similar picture of many HAMP borrowers, already contending with other hardships, who end of often unnecessarily depleting their dwindling savings in an ultimately futile effort to obtain the sustainable relief promised…..Others, who may have somehow found ways to continue to make their mortgage payments, have been drawn into failed trial modifications that have left them with more principal outstanding on their loans, less home equity (or a position further “underwater”) and worse credit scores. Perhaps worse of all, even in circumstances where they never missed a payment, they may face back payments, penalties, and even late fees that suddenly become due on their “modified” mortgages and that they are unable to pay, thus resulting in the loss of their homes that HAMP is meant to prevent.
In its section on Servicing (starting on p. 163), SIGTARP describes the economics of servicing and the possible outcomes of a HAMP program from both the borrower and the servicer persepctive (ie, the type of fees they would earn).
SIGTARP set up a Hotline to take borrower complaints about HAMP, and many reported violations of HAMP rules and guidelines. For instance (from p. 172):
“I entered into an agreement with [my servicer] through the Making Home Affordable program in April 2009. I have made every payment on time; that, they said, would result in the modification becoming permanent after six months. They have had us…submit the same paperwork seven times in the last two year. Now they have, in their words, ‘decided not to go forward’ and put a notice on the house of a sheriff’s sale….a negotiator (who has never contacted me) made the decision to stop the modification with no reason as to why. I have not been late or missed a payment in 13 months.”
From page 174:
“I called to try to get an update and to try to get a payment processed by phone. I gave [the servicer employee] my bank information for payment and then asked if there was any update she could give me. She responded by telling me that [the servicer] had sent me to the attorney for foreclosure! How do you tell me not to pay, tell me for months I am not allowed to send in payments, tell me to pay down other bills with the money, and then two weeks later try and foreclose on my home Your moratorium is why I stopped sending in the money.”
There are quite a few more examples, some of which appear to have been provided by attorneys.
There are two points to recognize here. One is that the servicers clearly gamed HAMP. Treasury said as much in the blogger meeting; the servicers took advantage of the HAMP fees ($1000 at the outset of the mod program plus and extra $500 in the case of borrowers who are current) and delivered very little in the way of “permanent” mods. But the hotline examples also make it clear that the banks took advantage of the borrowers by keeping them in the trial mods longer, presumably so they could charge larger penalties when they kicked them out and to extract more cash from borrowers who were terminal.
Now consider: if servicers abused a program when Treasury, and now SIGTARP, is in a position to look at their handiwork, why would you assume they behave any better on an ongoing basis with homeowners when there is no oversight? Mike Konczal, in a recent post, pointed to a widespread pattern of servicer abuses:
Let’s get some quotes from bankruptcy judges in here:
“Fairbanks, in a shocking display of corporate irresponsibility, repeatedly fabricated the amount of the Debtor’s obligation to it out of thin air.” 53 Maxwell v. Fairbanks Capital Corp. (In re Maxwell), 281 B.R. 101, 114 (Bankr. D. Mass. 2002).
“[t]he poor quality of papers filed by Fleet to support its claim is a sad commentary on the record keeping of a large financial institution. Unfortunately, it is typical of record-keeping products generated by lenders and loan servicers in court proceedings.” In re Wines, 239 B.R. 703, 709 (Bankr. D.N.J. 1999).
“Is it too much to ask a consumer mortgage lender to provide the debtor with a clear and unambiguous statement of the debtor’s default prior to foreclosing on the debtor’s house?” In re Thompson, 350 B.R. 842, 844–45 (Bankr. E.D. Wis. 2006).
(Source.) Notice that consumer rights groups were flagging this as a major problem back in 1999 and 2002 because judges were noticing it was a major problem in their bankruptcy courts. If the late 1990s to 2006 period is a Renaissance period of servicer fraud then we can contrast it with the period we live in now, the Baroque period of servicer fraud. Whatever unity there used to be between the forms and functions of the sloppy documentation and outright fraud in the art of servicing have become detached.
Yves here. While the media has suddenly started to recognize servicer abuses in the foreclosure process, the examples above, both from SIGTARP and indirectly from Konczal (the inability or refusal of the servicer to provide the correct principal balance is a stunner), point to a pattern and practice of extractive practices as a part of ongoing servicing. I’ve heard quite a few accounts of predatory servicing from attorneys, including one where a single, disputed $75 late fee compounded into a foreclosure action that was halted only by an 11th hour bankruptcy filing (and yes, Virginia. the borrower could prove he had made every single monthly payment from the beginning of his mortgage).
So if you assume that every person facing foreclosure is a deadbeat, you need to think twice. Many people who fight foreclosures think they are victims of servicing errors and abuses. And the evidence on the ground suggests that some, perhaps most, are correct in their beliefs.
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I was short AIG for a very short time. I made next to no money.
The whole time I was wondering when I would buy the stock (seeing nasty stuff coming) and the answer was always at half to two thirds the current price.
Never bought it. But describing me as a successful AIG short is wrong.
I have friends who shorted the stock. They are smarter than me.
J
Have no fear, the NYT’s on the case:
http://www.nytimes.com/2010/10/26/opinion/26tue1.html?ref=opinion
They’re calling for a mod program and for serious this time, darn it!
So if you assume that every person facing foreclosure is a deadbeat, you need to think twice. Many people who fight foreclosures think they are victims of servicing errors and abuses. And the evidence on the ground suggests that some, perhaps most, are correct in their beliefs.
Another rational antidote to the debtor-bashing emotion. Let’s hope reason can eventually make headway.
Placing servicers in charge of the HAMP signifies at least two things:
1. It’s yet another smoking gun proving that the government in general sees its duty as serving the banks. Nobody who actually wanted to achieve mortgage mods, or indeed who wanted anything other than to help the banksters, would’ve gone about things this way.
2. It’s indicative of Obama’s congenital corporatism. I’ve previously challenged Obama supporters to provide a single example of an initiative which wasn’t conceived so as to erect a corporate toll booth. No one even tried. And they sure won’t be able to cite the HAMP, where the first assumption was, “We have to have the banks run this”, and the first question was, “How can it be set up so that in itself it’ll be profitable for the banks?” (Those are clearly true even if someone wanted to waste his time trying to claim Obama ever did want to achieve mods.)
Has any president prior to this one presided over the looting of so large a sum by his cronies? I think Mr. Harding’s buddies would be in awe. The Bushies may have thrown bales of cash out of aircraft in Iraq, but I think that totaled in the 10’s of billions. What are we looking at here, hundreds of billions or even trillions?
The majority of the looting, the evisceration of the rule of law, letting banks just outright steal from people, actually took place during the originations — i.e. under Bush. And then there’s his changes to the tax law so that his buddies didn’t have to pay any tax when their kids inherited their fortunes, and paid a maximum rate of 15% on their investment income.
And then there’s TARP, which was a Bush/Paulson program even though Obama adopted it.
And I can think of yet more from Bush.
So yeah. I think the looting in 2000-2008 was really the biggest. This is just the continuation.
I’ve heard quite a few accounts of predatory servicing from attorneys, including one where a single, disputed $75 late fee compounded into a foreclosure action that was halted only by an 11th hour bankruptcy filing
not to be outdone, a bank in Cleveland foreclosed on a family over one mistaken underpayment by 14 CENTS.
http://www.cleveland.com/business/index.ssf/2010/10/mortgage_foreclosure_uproar_sw.html
or this family who has been put through foreclosure THREE TIMES and has never missed a payment.
http://blog.cleveland.com/pdextra/2010/10/willoughby_couple_foreclosed_u.html
Deadbeats!
All we have to do is trust the banks… who cares about their tiny procedural difficulties. We can’t go around giving people who pay their bills free houses. And obviously if your house payment is $595.14 and you pay $595.00 you deserve to lose your house.
“the inability or refusal of the servicer to provide the correct principal balance is a stunner”
You should try Citibank’s the student loan corporation where the only payoff number you get is one valid 30 days in the future, and where and how to make that payoff is a darkly held secret.
Or get a bill from BofA after escrow asking for another 5 dollars.
Obummer has a choice: us, or the banks.
His answer will make him a two terms, or a one term President.
Next?
Obummer (I like that) has already stated that he would prefer to do the right thing and be a one-termer than do (whatever) and be assured re-election. I’m guessing the right thing for him is to be assured a very comfortable retirement after one term. Shall we start a pool on where he ends up after the Presidency? Of course a mass insurrection renders the pool moot.
This is not going to be cured by the next election, or the one after that, or even the one after that. I’m resigned to the long slog, realizing the I, as a mid-late boomer, will probably not see the eventual success. The best I can do is work with and encourage the grass-roots organizations that can grow into the needed political force.
“It’s distressing to see that this account, which is unusually forthright in its criticism because the performance of the TARP is so terrible, get short shrift in the MSM…”
Yves,
The very last thing the MSM wants is to lose access to those in power. Editors do not give a shit about why the journalist has a problem finishing a piece. There is a deadline and the facts be damned! Hence, journalists tow the line and regurgitate the party line, like Marketplace morning edition yesterday on NPR: A 4 minutes piece on BofA and foreclosures and not ONCE was the word “fraud” uttered. But the expression “paperwork problems” and “technicalities”, a lot. These REMFs at NPR let the PR dept at B of A write the whole enchilada.
Moreover, the big guns in the MSM see themselves as part of the elites, and despise the average American with a barely disguised passion.
In these conditions, expecting the truth to be aired is bound to lead to serial disappointments.
Moreover, the big guns in the MSM see themselves as part of the elites, and despise the average American with a barely disguised passion. Francois T
Cognitive dissonance dictates that one must hate or despise those one harms.
But I think a more probable answer is that so many people have a vested interest in keeping the corrupt system going till they can cash out of it.
Steve Waldman said:
Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.
What Waldman regurgitates is the manifesto of the free market utopia. The sacrifice of the homeowners is a small price to pay for the ultimate end: the secular salvation of the world. Any means, any amount of human suffering, is justified in achieving this end. Robert H. Nelson, writing in Economics as Religion, explains:
The intellectual history of Western thought since the Enlightenment is characterized by one utopian vision after another, each finding fault with its predecessors, but then holding out the prospect of yet another, truer—-more scientific—-path to heaven on earth.
[….]
Almost without thinking about it, virtually all economists automatically distinguish between what might be described as “valid” social costs and “invalid” social costs. In making this distinction, economists automatically communicate a powerful set of social values, implicitly endorsing those values.
For example, in considering the economic burdens of transition from one state of economic equilibrium to another, a valid cost of dynamic adjustment for a current economist would include such things as the expense of hiring moving vans for furniture and other household items. The process of economic transition means that some workers have to move their place of residence from one city to another to find a new job. These represent real commitments of social resources. An invalid cost—-or at least a cost that economists of Samuelson’s time, or of today, almost never incorporate into economic thinking—-would be any “psychic pain” experienced by that same worker in the process of making the same move.
[….]
Instead of being in the realm of science, the normal exclusion by economists of feelings of psychic transitional loss and gain—-and many other such “soft” considerations—-thus really represents a fundamental value choice made by the members of the economics profession. It reflects a belief, not that these costs do not exist, or do not affect the perceptions of well-being of many people (economists are not that unaware), but that these particular costs should not be—-do not deserve to be—-counted. In deciding to incorporate some costs into their thinking while excluding others, economists have quietly and with little explicit recognition introduced a powerful set of value distinctions.
In economic practice, a “valid” cost is one that consumes resources that could be devoted to the advance of material progress on earth. In order to maximize the rate of economic progress, resources must be allocated with maximal efficiency, requiring that the “cost” of every such valid item be carefully measured, helping to ensure that a greater “opportunity cost” is not thereby lost. With “invalid” costs, they are defined by the fact that they have just the opposite character. To give any weight to the psychic pain or other stresses of transitional dislocation, as the economy moves from lover to higher stages of productivity, is to stand in the way of economic progress. Legitimate costs for economists, in short, are those that consume actual resources that can be devoted to advancing the material productivity of society; illegitimate costs are those whose introduction into the economic calculus would stand in the way of economic progress.
I suppose a few of them sincerely believe the ideology. But the vast majority are conscious criminals who have a purely instrumental view of ideology, seeing it as a political fig leaf and “character” embellishment.
I don’t recall if you got to Origins of Totalitarianism yet, but Arendt discusses extensively how it was only the “philistines” who really cared about the ideology, while the real totalitarians saw it as a tool and weapon to be used and abused. For them power was the primary objective. For today’s corporate totalitarians, wealth extraction is the objective. (Of course wealth and power must always be sought together, at least within elite-driven frameworks, but there’s different proportions of emphasis. One is for the sake of the other, but either can be primary.)
No, I haven’t got to Origins of Totalitarianism yet, but it’s sitting on the bookshelf with about 20 other books. It’s definitely in the queue.
What the kleptocrats disturbingly fail to understand is that their wealth and power is entirely underpinned by the rule of law; if the peasants conclude that they can’t get justice, suddenly that wealth and power starts to be on very, very shaky foundations, prone to vanish overnight. 1789 France and all that.
I would guess Banks are assuming their “marks” will not seek counsel, will not even have the means to file for bankruptcy and so on. When the borrower doesn’t even put up any resistance, affadavits can land in Circuit Court that are no better then lies. In judicial states, the wayward borrower may not even show for the foreclosure docket pushed by the debt collecting law firm. Consider criminal justice, there is a vast highway where the accused are simply brought along for the procedural ride – no adequate defense, no tools, nothing but processing to their detriment.
Yves,
I am grateful to you for trying so valiantly to reframe the debate and move the onus away from “deadbeat” borrowers to the system that is screwing them (lenders, servicers, and “overseers” with more important things on their minds). But when you posit a clear distinction between those borrowers who are 100% blameless, on the one hand, and “deadbeats,” on the other, you leave out 99.9% of borrowers, including the millions who honestly believed in HAMP and are losing their houses anyway. Because it is a sham.
The fact of the matter is that the only borrowers who are “winning” these days are the “deadbeats,” because you have to literally go to the wall before anyone will modify your loan. And that is true because the lenders have CDOs which they can cash in if there is a foreclosure, but nothing that pays out so handsomely if they let the borrower stay.
And that fact will take months to sink in with this dumber than dirt MSM, by which time millions more borrowers will have passed over to the other side.
So let’s not castigate people for being “deadbeats” when not paying your mortgage is literally the only way to get these shysters to come to the table.
Full disclosure: I could not convince my boy scout spouse to go the distance, partly because he could never have declared bankruptcy for professional reasons, partly because he had no stomach for “negotiating” with a gun to his head. So we did a deed-in-lieu. With BofA. And “deadbeat” friends who were willing to go the distance (had little to lose)? They are getting a big fat mod.
Deadbeats will win. The rest of us are suckers.
Just one correction, you mean CDSes, not CDOs.
“So if you assume that every person facing foreclosure is a deadbeat, you need to think twice.” Yves
Amen!
And while one is in thinking mode, one might consider that the business model of banks is to charge usury for temporary (hence the boom-bust cycle) money (credit) created from thin-air in exchange for a promise to repay that temporary money backed by real collateral in the case of mortgages. And the interest for those loans probably does not even exist in aggregate! Even at best, fractional reserve bankers are thieves of purchasing power and pushers of probably impossible contracts in aggregate.
Nice post, Yves; it set my blood to boiling. May you win a Pulitzer some day.
The *original* business model for banks was to borrow short-term and lend long-term… carefully. Unfortunately the banksters have gone very, very far from that model.
Yves
They denied something like 650000 mods initially without a single permanent mod being made and as you pointed out received $1000 on each denial.
With that in mind, here’s my offer….
Find the HAMP ROBOSIGNERS and win a Cupidity Doll!
Was the HAMP paperwork also Robosigned because if it were that might tend to indicate rapacious hornswoggling on the banks part.
Not that they would ever do that mind you, I’m sure they acted in good faith.
Won’t re-tell my foreclosure nightmare but the fight continues… while house has returned to bank… I’m still living in the little Granny Unit… (I built it so I could work on my project while renting out the house) and will fight eviction. I believe multiple players have acted in my case both in violation of the law… but perhaps more importantly to some… even against the interests of their own shareholders.
The TBTF’s simply are incapable of handling their responsibilities in the interests of anyone other than their own management’s.
I fell two months behind when tenants in the house failed to pay and then bank wouldn’t accept partial payment to catch up… there’s a lot more to it but I’m tired of telling it.
The little good news I wanted to share is that the core mechanism required for my project which started the whole Granny Unit plan in the first place:
The Commons-dedicated Account*
*A self-supporting , Commons-owned neutral network of accounts for both political and charitable monetary contribution… which for fundamental reasons of scale must allow a viable micro-transaction (think x-box points for action in the Commons). The resultant network catalyzes additional functionality for co-ordination of other ‘social energy’ utilization. (If desired, It’s also the most neutral and ultimately politically viable method for the public finance of elections.)
Has been GRANTED A PATENT by USPTO for its groundbreaking mechanism for political/charitable contribution!!!
(The political micro-contribution, even where only occasionally useful, drives the creation of a vitally important and stable universally distributed network of primary importance for scaled association and decision.)
Why Politics MUST be Localized
http://culturalengineer.blogspot.com/2010/10/why-politics-must-be-localized.html
Empowering the Commons: The Dedicated Account (Part I)
http://culturalengineer.blogspot.com/2010/08/empowering-commons-dedicated-account.html
LinkedIn http://www.linkedin.com/in/culturalengineer
Demo & FAQ http://www.Chagora.com
P.S. It can make great return for founding investors but this is predicated on terms for predetermined buy-out by User-base at appropriate stage… (this is actually a model for how certain other ‘businesses’ that ultimately become established ‘landscapes’ may find as a worthwhile model I’m hoping. I think its a necessary adjustment to Capitalism.)
Hopefully USEFUL financial innovation will eventually find some support.
Congrats, Tom. One day I hope we can all look back and say we bore witness to the birth of a truly transformative event.
Good luck, too, on the foreclosure fight; you may get traction from strength in numbers. Did you ever see the note?
Good work, Tom. Is it also geared for investment in relocalization-oriented businesses?
Good luck with the bastids.
(sort of the wrong place for this, but)
WashPost has an interesting article today focusing on the foreclosure processing business. The most interesting part are the FL AG comments, which sound a little different than the comments he made for the WSJ article last week. Are these just different media frames?
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/25/AR2010102505731_pf.html
from washpost article:
Florida’s attorney general, Bill McCollum, said in an interview that “we know there are problems of great significance” at LPS. He added that one of the most important questions being asked is, “Does this involve the CEO” of a major bank?
“It’s way too early to tell whether the bigger financial institution had officers committing criminal fraud,” McCollum said. “It may be something that shows up, but it’s too early to say right now.”
How do the banks maintain their millions of REOs? Why not make them pay the people who they’ve evicted, to live in their former homes as house-sitters, to maintain them until future sale (and with right of first refusal)?
“I disagree with the “not cruel people” assessment. Ignoring the plight of someone who is being harmed, particularly when you are playing an active part in the process, is a form of cruelty. The senior staff at Treasury project the impression of having arranged their lives so as to convince themselves that they are powerless, that they have no influence over the systems of which they are a critical part. It’s no doubt the same logic process used by the conductors of trains that took Jews to concentration camps.”
Yves Smith will be accused of being Very Very Shrill, I’m afraid.
But she is sill my Hero for coverage of this issue and honest assessment of what’s really going on.
Yves Smith will be accused of being Very Very Shrill, I’m afraid. PQS
Ironic perhaps, but not shrill.
Compared to someone like Jim Cramer or Larry Kudlow, she seems like a happy little Buddha.
..sorry, “still!”
And no, I’m not in FC. Just another Middle Class American about 110% tired of seeing our Overlords get away with wanton recklessness and destruction, aided and abetted time and again by our Electeds.
Shorter Treasury Foreclosure Assessment:
“We had to destroy the village to save it.”
There once was a very large and very old Savings Bank in Philadelphia. It was known as PSFS. It’s name is still emblazoned on the skyline atop its landmark architecture HQ. It disappeared as a bank. But the shareholders still fight on, winning in the courts. It was done in by the FDIC on behalf of its competitor. But, don’t take my word for it. See how property is taken from a large scale player by an even larger one. This is an object lesson in foreclosure for homeowners. See how appearances and reality are two distinct things.
http://www.meritorpsfs.com/
Here is a letter to the the head of the FDIC at the time. It is very instructive about banking liquidity crises and the people who create them.
http://www.meritorpsfs.com/HTMLobj-277/Dec0492.pdf
“a single, disputed $75 late fee compounded into a foreclosure ”
i work at a commercial bank payment processing center, and it is not unusual for mistakes to be made processing paper payments, including mortgage payments. not ordinary, but it happens. there are a certain amount of errors allowed per 10,000 items.. and this is not ‘continuous improvement’ like at toyota, this is ‘we are happy if we meet standard’. there are no ‘quality meetings’ (unless we screw up really bad) and no technology innovation to improve error rates. it is all about cost control and the status quo and keeping vendors fat and happy.
we are under tight deadlines, no overtime, people get fired for being slow, etc. at one point employee turnover was like 90% for the year. its ‘go go go’ all day, but mail sometimes still sits unopened for 2-3 days anyways because there is no budget to hire more people to get it done faster, or to allow slack in the labor pool for when there is a surge of mail. we do a pretty decent job anyways, we have some feedback mechanisms to correct mistakes and prevent errors. the mortgages we deal with are simple bank originated, no securitization. if we make a mistake people just call the bank and sort it out.
but if we screw up once in a while, i cant imagine what these fly by night servicers are doing.
For routine payments take the people out of the loop do it direct debit or electronic payment, it will only be the non-routine payments that require humans.
Your employer is irresponsible — the correct thing to do would be to *hire some more people* — short-term profits and CEO bonuses are not as important as getting the job done right, but clearly your employer disagrees.
But if your employer is irresponsible, then the fly-by-nights are *criminally* irresponsible.
No, Kudlow and Kramer are “opinionated”, “strong”, sometimes “aggressive”. Smith is “shrill”.
Check the pants to understand the difference. And who gets a last name and who gets a first name.
Dunno about the last name/first name bit, Felix and Barry are often referenced by first name only. But that’s an Internet thing, where you also have bloggers with one word handles like Atrios.
Re gender stereotyping, true, but I am also a member of the Ancient and Hermetic Order of the Shrill:
http://shrillblog.blogspot.com/
http://krugman.blogs.nytimes.com/2009/02/04/shock-and-oy/
I never thought of Shrill in terms of gender….my understanding of it is in terms of varnished/unvarnished.
Those who dare to tell the unvarnished truth are typically branded in the mainstream press and cocktail party circuit of DC as “Shrill.”
See also “DFH” “not living in the real world…”
As far as I can see, the bust phase of the boom-bust cycle wrecks near everyone:
1) The borrowers can’t pay their debts.
2) The balance sheets of banks are wrecked.
3) State and local government can’t meet tax revenues.
4) And even savers if they are not lucky enough to keep their jobs may not profit from the deflation.
Since near everyone is a victim, then why can’t we agree on a bailout of the whole population? And don’t ask where the money will come from; it will come from thin-air as it always does.
That would work, but the actual functions of the banks (checking accounts, savings accounts, small business loans) would need to be performed by someone, and that can’t happen until the kleptocratic megabanks are shut down and their executives imprisoned.
Schulden Macht Frei is the refrain of the day. The law, propriety or sustainable profits and a stable economy matter not.
Might I suggest a look at the WaMu/JPM reno action regarding sub-prime ARM’s issued between ’04-’08 and the speculated change in servicing points from 25-50 to 500 or more. I wonder how many of the HAMP trial mods got rolled into this juicer?
Great read Yves. Thanks. Best –
(and I offer my apology for my previous adolescent rashness)
Schulden Macht Frei is the refrain of the day
One of these days, the money-for-debt racket will be finished. Governments will create debt and interest free money for government debts and the private sector will find it has to back its monies with real value for people to accept them. Corporations will find they have to share wealth rather than loot it.
It is not possible to go like before the crash and life will get harder for corporations and the times of easy credit are over – at least for the foreseeable future.