Big Shitpile
mikethemadbiologist | August 8, 2011There's been a lot of excellent posts debunking Standard & Poor's recent downgrade of U.S. debt on the merits--it is poor assessment of risk. Yes, there are substantive economic arguments against S&P's evaluation. But S&P is also fundamentally corrupt. The Coalition of the Sane must point this out too--there is an ethical dimension here, not just an economic one.
The critical point is this: during the last year, every negative statement by S&P has followed action by the federal government to investigate possible fraud by S&P (and other ratings agencies) during the…
mikethemadbiologist | August 6, 2011Not that either the SEC or the Holder-led Justice Department would do anything about it. This happened July 21:
Jack Barnes writes : Someone dropped a bomb on the bond market Thursday - a $1 billion Armageddon trade betting the United States will lose its AAA credit rating.
In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world.
The massive trade wasn't placed in bonds themselves; it was placed in the futures market.
The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures…
mikethemadbiologist | July 23, 2011Mike Konczal is disappointed in the behavior of one of the members of the Financial Crisis Inquiry Commission ('FCIC'), Peter Wallison, movement conservative and member of the rightwing faith tank, the American Enterprise Institute. Like many conservatives, Wallison blames the housing crisis on efforts to provide African-Americans with loans, even though, as Konczal explains, that's simply not true. Here's what the FCIC was charged to do:
First off, let's remember what this document is. The FCIC report was designed to be our age's Pecora Commission, a collection and investigation of…
mikethemadbiologist | July 15, 2011One of the most frustrating things about Obama's playing the role of The Great Conciliator is his belief that we should 'look forward, not back', that there should be no accountability for those who have failed or committed fraud. Leaving aside notions of justice (which these days is best for one's sanity), this idiotic belief allows the incompetent and the malfeasant to continue their harmful activities. Case in point: the financial rating agencies. These are the bozos who went along with Wall Street's alchemy wherein shitty loans were magically turned into AAA securities (the highest…
mikethemadbiologist | July 2, 2011I haven't talked about Big Shitpile (the housing-initiated economic collapse in a while), but this report from the Essex County Register of Deeds (Massachusetts) describes nothing less than the breakdown of the property title system in the U.S.:
Yesterday at the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O'Brien revealed the results of an independent audit of his registry. The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage…
mikethemadbiologist | April 15, 2011The NY Times has a good article about how few prosecutions have even been attempted in the aftermath of Big Shitpile (the housing crisis and the following good times). One of the key players was Countrywide, led by CEO Chris Mozilo, which initiated so many bad loans (that were then, through financial alchemy, turned into AAA securities).
Enough background, here's a nut (italics mine):
Historically, Countrywide's bank subsidiary was overseen by the comptroller, while the Federal Reserve supervised its home loans unit. But in March 2007, Countrywide switched oversight of both units to the…
mikethemadbiologist | March 27, 2011The whole CDO binge (aka Big Shitpile) led to a whole slew of perverse incentives to not help a borrower who is having difficultly paying the mortgage, even though, in the era before mortgages were treated as commodities to be sold, banks routinely went out of their way to avoid foreclosure--usually the costs were too great to make foreclosure a routine act. I've argued that if banks aren't willing to work with homeowners due to financial reasons, then homeowners should also act in their best interests: if that means walking away ('strategic default'), so be it.
Nicholas Carroll runs the…
mikethemadbiologist | January 21, 2011Note: I wrote this before stumbling across this post which provides pretty good evidence that President Obama's recent sale of his house was also signed by a robosigner. Brazen doesn't even begin to describe the situation....
It's beyond trite to state that the foreclosure crisis has had a huge effect on the economy. But I don't think most people realize how much of the crisis--and the response by banks to the crisis--involves flat-out law-breaking. A small anecdote related to if banks will refile foreclosure applications in Florida from Yves Smith (italics mine):
To be blunt, whether…
mikethemadbiologist | December 20, 2010So can the banks. A key impediments to economic recovery is underwater mortgages: people repay housing loans for more than the underlying property is worth. Many Dirty Fucking Hippies sane people have recommended that banks be forced to 'cramdown' these mortgages*. This would make the banks' books more transparent (and probably cause some 'zombie' banks to go under), but it would also mean that many households would be spending some of the money that used to go to the overpriced mortgage.
Banks, as you might expect, don't like cramdown. They claim it's too expensive, and they simply can'…
mikethemadbiologist | December 11, 2010I like this guy because he makes me sound calm:
Seriously, I still think our economic, media, and political betters have no idea how angry many people are about this. If a mob were to lynch a couple of these guys (note: this is evil), I think many juries would be hung.
mikethemadbiologist | December 2, 2010I've written before about how the housing fiasco required fraud and perjury. Well, there's no end in sight for the damage done by Big Shitpile. The latest chapter involves foreclosing on homeowners who not only are able to make their payments, but have actually done so. How does this Kafkaesque nightmare happen? Yves Smith explains:
It's called servicing errors and fraud. And whether by mistake or design, when a borrower gets caught in the servicer hall of mirrors of compounding fees and charges, there is no way to appeal and pretty much no way out.
Let's look at how this begins. A…
mikethemadbiologist | November 20, 2010Keep in mind that this GE plant primarily makes parts for defense contracts--these jobs are provided by a guaranteed contract:
General Electric Co. has made an unusual offer to the state: Give us $25 million in tax credits, and we won't cut any more than 150 positions at our aircraft engine plant in Lynn.
The conglomerate has already cut the Lynn plant's workforce by 600 jobs and could cut 150 more. But General Electric said that if it receives the state aid to help fund a $75 million retooling of the plant, it would maintain the remaining 3,000 jobs for six years.
If you're thinking this…
mikethemadbiologist | October 27, 2010They're almost there. The NY Times' Joe Nocera on Foreclosuregate:
The lawsuit uncovered a raft of similar examples -- case after case where the loan officers not only knew that fraud was being committed, but were actively engaged in committing it. "By about 2006," says the lawsuit, "Countrywide's internal risk assessors knew that in a substantial number of its stated-income loans -- fully a third -- borrowers overstated income by more than 50 percent." And that is just one small subset of what went on at Countrywide. The truth is, any rock you turn over in the Countrywide subprime portfolio…
mikethemadbiologist | October 22, 2010Once again, Obama has decided to inflict post-partisan depression on us. Here's our latest installment in "Looking Forward, Not Back" (italics mine):
"Where any homeowner has been defrauded or denied the basic protections or rights they have under law, we will take actions to make sure the banks make them whole, and their rights will be protected and defended," Donovan said at a Washington press briefing. "First and foremost, we are committed to accountability, so that everyone in the mortgage process -- banks, mortgage servicers and other institutions -- is following the law. If they have…
mikethemadbiologist | October 13, 2010Have no doubt, despite the claims of propagandists, the foreclosure documentation crisis is not nitpicking. Providing the court with affidavits with unverified information is fraud: were you or I to do this, we would go to jail. One of Yves Smith's commenters describes this in more detail:
An affidavit is a legal document which can substitute for live witness testimony in court. All testimony in court is governed by the rules of evidence or by statute. All testimony requires that the witness swears to tell the truth, is competent and has personal knowledge of the facts they are testifying…
mikethemadbiologist | October 10, 2010So it turns out that Obama isn't completely tone deaf. To his credit, he has essentially* vetoed a bill that would have forced courts to recognize out of state foreclosure-related documents. Given the wide-scale fraud in forclosure-related documentation--to the point where it's not clear who actually holds the title or liens for millions of homes--this is a great move, since it will allow courts to hold the lenders and foreclosures accountable.
Of course, if policy makers had adopted cramdown legislation, this issue probably wouldn't have arisen in the first place.
But what I want to know…
mikethemadbiologist | October 5, 2010When I'm writing about politics, I've been regularly discussing the legal problems related to the collapse of Big Shitpile (the foreclosure crisis). At Naked Capitalism, Yves Smith lays out why this matters (so I don't have to stumble my way through this):
Make no mistake about it: the nature and scale of these frauds cut at the very heart of our judicial process. We didn't call the Florida courts "kangaroo courts" lightly. A home is most people's most important asset; shelter is a bedrock of personal security. Both the Fifth and the Fourteenth amendments enshrine the notion of due process…
mikethemadbiologist | October 2, 2010I remember, back in the 1980s, there was a conservative school of thought that believed many of our problems could be blamed on poor, single, often non-white mothers who refused to 'take personal responsibility' (e.g., welfare queens, Murphy Brown! ZOMG!). I never quite understand how anyone could believe that the most powerless Americans would be able to destroy us. I thought that societal breakdown would be triggered by the failure of political and economic elites.
Well, guess what? We're approaching breakdown:
Let's look at one example of banana republic faux justice in the US, via a…
mikethemadbiologist | September 30, 2010Why, yes, I did. For a while now, I've been writing about how improper paperwork could completely screw up the foreclosure process. While I've never thought foreclosure was the way to go (I wanted subsidized cramdowns), we can't even get foreclosure to happen, which is a huge drain on the economy:
Lawyers for distressed homeowners and law enforcement officials in several states on Friday seized on revelations by GMAC Mortgage, the country's fourth-largest home loan lender, that it had violated legal rules in its rush to file many foreclosures as quickly as possible.
Attorneys general in…
mikethemadbiologist | September 29, 2010Paul Krugman is absolutely correct about deleveraging:
In the end, I'd argue, what must happen is an effective default on a significant part of debt, one way or another. The default could be implicit, via a period of moderate inflation that reduces the real burden of debt; that's how World War II cured the depression. Or, if not, we could see a gradual, painful process of individual defaults and bankruptcies, which ends up reducing overall debt.
And that's what is happening now: as this story in today's Times points out, the main force behind the gratifying decline in consumer debt appears to…