By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
We’ve already seen how, paraphrasing Archimedes, that financial instruments can move the world in a bad way. We have an opportunity to reverse that. Warren Mosler and I have just published a policy note at the Levy Institute that would, if implemented, bring an end to the Eurozone sovereign debt crisis.
Read more...No wonder Geithner and the other financial regulators complained about Sheila Bair not being a team player. If you want to do what is expedient and you are confronted with someone who cares about fixing the problem, then yes, they aren’t on your side. And bully for them.
Read more...We’ve written from time to time that the train wreck in foreclosure-related procedures is the direct result of widespread, possibly pervasive failure to convey borrower IOUs (notes) to securitization trusts as stipulated in the governing documents (the pooling & servicing agreement). Because key actions had to be taken by dates long past, and the contracts that governed these deals are rigid, there isn’t a permissible way to get notes that weren’t conveyed properly to trusts on time there now. So the fix has been document fabrication and forgeries. We thought we’d provide a specific example for reader edification.
John Whitehead is being proven right.
Read more...There’s been an interesting contretemps over an article by Gretchen Morgenson over the weekend, “A Bailout by Another Name.” Morgenson made the hardly-controversial observation that writing down Fannie and Freddie first mortgages without wiping out any relate second is a back door bailout. Remember, this was one of our key objections to the bank-friendly mortgage settlement, that a requirement to write down firsts and only write down related seconds to a degree is a subsidy to banks when if you were to believe the PR, the settlement is supposed to redress past abuses.
Morgenson also defends DeMarco’s refusal to do principal mods on Fannie and Freddie loans, arguing that he is subject to a requirement to preserve taxpayer assets and that the studies on this have been inconclusive. She adds that the focus is again incorrectly on Fannie and Freddie and not the banks. HAMP mods on GSE paper appear to be roughly proportional to their market share of original lending (around 40% before the crisis) when given their much lower default/delinquency rates, you’d expect them to represent a smaller share than they do relative to mods of bank owned and private label securitized loans.
The fact that this article has gotten heated responses from Felix Salmon and Dean Baker appears to be more a function of tribalism of various sorts than about the policy issues at hand.
Read more...A few counties have filed litigation against various securitization players (originators, servicers, MERS) for the underpayment of recording fees. Similarly, New York attorney general Eric Schneiderman filed a wide ranging suit against MERS and three banks that used it and settled it for $25 million (it included a mention of $2 billion in unpaid recording fees but we were skeptical of viability of his argument).
However, counties in Michigan have scored an important victory.
Read more...Alright, got your attention. But the headline above is not offered merely by way of titillation, as a former partner of mine would say—it has the added advantage of being true.
Read more...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.
Anyone who has been following my European commentary for any length of time will know that I have been running a number of risk themes on Europe due to what I consider to be misguided and one-sided policy which will ultimately be counterproductive.
Read more...The Wall Street Journal and New York Times have reports on a pilot program at Bank of America to allow homeowners who are likely to default a graceful exit. The Charlotte bank will allow 1000 borrowers in New York, Arizona, and Nevada to turn in the deeds to their houses in return for a one year lease with a two one year renewal options at or below market rates. The program will be only with borrowers invited by the bank, which will target homeowners who are at least two months behind on payments but can demonstrate that they can pay the rent. The Journal cites an example of a Phoenix home with a $250,000 mortgage with payments of $1600 a month. It estimates the rent as $900.
This is clearly a preferable alternative for homeowners to foreclosure. They escape the credit score damage, stress and indignity of the foreclosure process and save moving costs. They are also spared the difficulty of finding a landlord who will accept a tenant with a tarnished payment record. It isn’t clear how the program will handle the usual rental deposit. So what’s not to like?
Read more...Ordinarily, pointing out that long-standing critic of too big to fail banks is still unhappy about them would not count as news. But the commentary of Dick Fisher, the head of the Dallas Fed, and that of his research director, executive vice president Harvey Rosneblum, is noteworthy because it stands in contrast to the emerging conventional wisdom inside the Beltway. I was told last week that the prevailing and accurate view of last year, that Dodd Frank didn’t go far enough, is being supplanted by the Jamie Dimon view that’s it’s too intrusive. Note that those aren’t actually inconsistent: effective bank regulation IS intrusive. Banker unhappiness would ordinarily be a good sign, but the crisis perps have taken to howling at any intrusion on their imperial right to profit. And the worst is that third parties take their kvetching seriously.
Read more...There is a great post by Bethany McLean at Reuters debunking a major “what caused the crisis” urban legend. Many, including Joe Stiglitz and Alan Blinder, have claimed that an SEC 2004 rule change regarding the leverage of securities firm holding companies allowed the leverage of major investment banks to skyrocket, helping to trigger the crisis. McLean’s article demolishes this idea.
Read more...As Winston Churchill pointed out, history is written by the victors. The big end of finance, having won decisively in the global financial crisis, is in the process of rewriting history to suit its liking. The cover story in the current Atlantic by Roger Lowenstein on Ben Bernanke, titled simply, “The Hero,” is a classic example of this type of revisionist history.
Read more...Do you remember the brouhaha before the mortgage settlement was announced about the release? Recall, sports fans, as we stressed often, that this was a cash for release deal. The only motivating factor for the banks was the scope of the release. The Administration and attorneys general kept claiming the release was narrow, even as both the messaging (unintentionally) and snippets of disclosure suggested otherwise.
Read more...Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives.
While the Occupy Wall Street (OWS) movement set its sights on occupying a financial center, Germany has accomplished the vastly more impressive feat of occupying an entire nation – Greece. Germany has experience at occupying Greece having done so during World War II. The art of occupying another nation is to recruit a local puppet to do the dirty work required to repress the citizens. Germany used several puppets, most notoriously the murderous Ioannis Rallis, to (nominally) rule Greece and terrify the Greek people during World War II. (After Germany’s defeat, Rallis was executed for his treason.)
This time around, Germany has been far more successful in recruiting and using a puppet to (nominally) rule Greece and terrify the Greek people before the German occupation.
Read more...By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
About a year ago a couple of friends and I were sitting around drinking beer and talking. As so often happens today in day-to-day Irish conversation, the economic situation and the repayment of debts was raised. One of my friends said that, naturally, the debts had to be repaid. I pointed out to him that by repaying the debt we were just sending away money to be effectively destroyed.
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