Yearly Archives: 2011

More MSM Criticism of Obama “Nothing Illegal Here, Move Along” Stance on Foreclosure Fraud

While quite a few bloggers, prosecutors, economists, and other experts have taken the Administration to task on mortgage-related abuses, the mainstream media for the most part has not seriously challenged the mind-numbing Obama claim that the banksters did nothing illegal.

Reuters refreshingly opposed that ~~bullshit~~ assertion frontally yesterday. In a piece pointedly titled, “The Watchdogs That Didn’t Bark,” reporter Scot Paltrow shows that the mortgage arena is a target-rich environment:

How the Public Misses Out on How Fights Over Bank Regulations Affect Them

The public keeps losing and losing and losing to big finance because financiers have made an art form of using complexity, opacity, and leverage to cover their tracks.

The last example comes in an anodyne-seeming article in the Financial Times about collateralized loan obligations, or CLOs.

Wolf Richter: CEO of Dexia – ‘Not A Bank But A Hedge Fund’

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

Dexia SA, the Franco-Belgian mega-bank that collapsed and was bailed out in 2008 and that re-collapsed in early October, is a big deal in Belgium where it employs 10,000 people and has over 21 million bank accounts. Its assets of $715 billion dwarf Belgium’s $395 billion economy.

Links 12/22/11

Michael Olenick: The Administration Likes Foxes in Charge of Henhouses – Proof that OCC Foreclosure Reviews Are a Sham

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)

“There Goes the Neighborhood,” which ran on 60 Minutes last Sunday, is a must-see piece. Scott Pelley walks through a pillaged house in Cleveland, slated for demolition in a county neighborhood stabilization program. This abandoned house is owned by Structured Asset Investment Trust 2003-BC11. An investor reports lists the property as “in foreclosure” despite no court filing. Ohio is a judicial foreclosure state, so a foreclosure filing requires a lawsuit, but there isn’t one.

DoJ’s Christmas Present to Bank of America: $335 Million Settlement for Discriminatory Lending Charges at Countrywide

The New York Times reports faithfully that the Department of Justice has entered into the biggest fair lending settlement on record with Bank of America on charges that Countrywide had charged more 200,000 Hispanic and black borrowers higher rates and fees than white borrowers with similar credit records. It also engaged in discrimination by marital status.

Impressive, no?

Wray: Krugman has shined the headlights on the crucial currency issuer-currency user difference

Edward Harrison here. The post by Randall Wray below is an interesting one because it points out how the world has changed since the end of the gold standard and why the sovereign debt crisis is centered in the euro zone. While I have an Austrian bias overall, for me, MMT is the best way […]

Philip Mirowski: The Seekers, or How Mainstream Economists Have Defended Their Discipline Since 2008 – Part III

By Philip Mirowski, Carl Koch Professor of Economics and the History and Philosophy of Science University of Notre Dame. Professor Mirowski has written numerous books including More Heat than Light, Machine Dreams and, most recently Science-Mart

Edited and with an introduction by Philip Pilkington, a journalist and writer living in Dublin, Ireland

The previous parts of the series can be found here and here, while a bibliography can be found here

Perhaps the best defence for a failed set of ideas is to have critics that will engage in only superficial critiques. This provides the audience – in this case, the educated general public – with a spectacle by which they can console themselves that the edifice is being shaken up by brave and innovating insiders. The critiques of the Efficient Markets Hypothesis (EMH) currently pouring out of the discipline and into the mediasphere is precisely such a spectacle. (A spectacle which, I must admit, I have partaken in to some degree).

The prize-fighters that step into the public arena in this regard are none other than Paul Krugman and Joseph Stiglitz, both of whom have won the Nobel Prize in Economics – a sort of official sanction by the profession that these are people worth listening to on the state of economics. Their critiques, which attack some of the outlandish excesses of neoclassical thought, merely tiptoe around the edges of the neoclassical research program and do not take on the more fundamental issues.

The EMH is thus set up as a sort of arch-villain of the Bond film variety which, by some readings, led directly to the financial excesses and collapse that we have witnessed. Thus all it needs is a suave hero to do away with it and all will be right with the world once more.

And that is how the critics become the system’s best defenders.

Links 12/21/11

Europe Braces for Long Winter

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Well, it looks like Santa finally stuck his head out of the dark cave for a look around. It is yet to be seen if he rams it straight back in again because he doesn’t like the weather, but at least he has appeared for one night.

FHFA’s DeMarco Considering Backdoor Bankruptcy Principal Modification Program for Freddie and Freddie

Quite a few housing market experts have argued that principal modifications to viable borrowers are the best way to resolve the housing market malaise. In the stone ages when banks kept the mortgages they originated, mortgage modifications, including principal mods, were standard practice when a borrower got in financial difficulty but was still salvageable. And because these restructurings were done behind closed doors, no one but the banker and his grateful customer were the wiser. But now that servicer bad incentives have meant they don’t do mods unless cajoled or bribed by the government (and not much even then), the topic has entered the public debate.

It had appeared that any principal mod program was going to come over the dead bodies of the banks, who have been feigned compliance with various Federal programs but either dragged their feet and/or gamed the schemes. So it was surprising to read that the acting head of the FHAF, Edward DeMarco, is considering what amounts to a principal mod program implemented through bankruptcy courts.

Tom Miller Can’t Even Lie Well Anymore: Not Only No Deal By Christmas, As Promised, But Banks Upping Demands Even As Attorneys General Leave Table

We’ve commented previously on Tom Miller as the contemporary exemplar of what in the 1960s was called a credibility gap. Readers no doubt know that he is the lead negotiator on behalf of the state attorneys general in what was formerly called the 50 state attorney general [mortgage] settlement. (Notice separately how the state AGs are providing cover for several Federal banking regulators, HUD and the Department of Justice, which are also parties to this deal).

A partial recap: Miller started by promising criminal prosecutions, then reneged. He has refused to do investigations, then has the temerity to try to claim they took place). He said there would not be a big waiver on mortgage liability, when as we discussed, that was the only thing Miller & Co. could offer that would get a deal to the numbers he had unwisely committed himself to (north of $20 billion). And several state attorneys general have walked from the deal precisely because they object to the plan in motion: a big release when they have an inadequate idea of how much questionable activity is being forgiven.

But the truly absurd part is the continued pretense by Miller that a deal will get done.

Links Hanukkah

Global Savings Glut or Global Banking Glut?

Yves here. It has been striking how little commentary a BIS paper by Claudio Borio and Piti Disyatat, “Global imbalances and the financial crisis: Link or no link?” has gotten in the econoblogosphere, at least relative to its importance.

As most readers probably know, Ben Bernanke has developed and promoted the thesis that the crisis was the result of a “global savings glut,” which is shorthand for the Chinese are to blame for the US and other countries going on a primarily housing debt party. This theory has the convenient effect of exonerating the Fed. It has more than a few wee defects.