FedUpUSA

Archive for November 29th, 2009

One wonders, after this report on who is "too big to fail":

North American banks:

Goldman Sachs, JP Morgan Chase, Morgan Stanley, Bank of America-Merrill Lynch, Royal Bank of Canada

Note who’s missing: Citi and Wells.

Wells, it might be argued, has little cross-border involvement.  Ok.

Citi, on the other hand…….

One wonders if there’s a game afoot here, in that Citibank apparently isn’t considered "too big to blow chunks", while they are unquestionably involved in world markets to an incredible degree – but they also have a whole bunch of interesting "assets" (including a massive amount off balance sheet) that I can’t get my arms around.

Perhaps there’s two categories among the "massively interconnected" – too big to fail, and too screwed up to save?

Update: Apparently Reuters was wrong, and Citi is on the list.  Oh darn.

The LA Times is reporting Brent T. White, a University of Arizona law school professor, says that it’s in the homeowners’ best financial interest to stiff their lenders and that it’s not immoral to do so. I commented on this story twice before but it’s worth another recap.

Please consider Professor advises underwater homeowners to walk away from mortgages

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don’t feel guilty about it. Don’t think you’re doing something morally wrong.

That’s the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.”

“Homeowners should be walking away in droves,” White said. “But they aren’t. And it’s not because the financial costs of foreclosure outweigh the benefits.”

Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, “one can have a good credit rating again — meaning above 660 — within two years after a foreclosure.”

Better yet, homeowners can default “strategically”: Buy all the major items they’ll need for the next couple of years — a new car, even a new house — just before they pull the plug on their current mortgage lender.

“Most individuals should be able to plan in advance for a few years of limited credit,” White said, with minimal disruptions to their lifestyles.

What kind of law school professorial advice is this? Aren’t mortgages legal contracts? In so-called anti-deficiency states such as California and Arizona, mortgage lenders have limited or no legal rights to pursue defaulting homeowners’ assets beyond the house itself, White said. In other states, lenders may decide that it is not worth the legal expense to pursue walkaways, or consumers may be able to find flaws in the mortgage documents, disclosures or underwriting to challenge the original contract.

The main point, he said, is that too often people’s emotions get in the way of clear financial thinking about mortgages, turning them into what he calls “woodheads” — “individuals who choose not to act in their own self-interest.” Most owners are too worried about feelings of shame and embarrassment after a foreclosure, and ignore the powerful financial reasons for doing so.

While I generally agree with the advice, it is extremely important to Consult An Attorney Before Walking Away.

For more on this story please see “Strategic Defaults” a Mortgage Broker Comments on Fear and Shame Tactics which in turn was in response to Government and Lender Policies of Fear and Shame Help Keep Homeowners Debt Slaves.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html  to learn more about wealth management and capital preservation strategies of Sitka Pacific.

You have to give these banksters credit – they’ll lie and lie and lie some more….

More than 650,994 loan revisions had been started through the Obama administration’s Home Affordable Modification Program as of last month, from about 487,081 as of September, according to the Treasury. None of the trial modifications through October had been converted to permanent repayment plans, the Treasury data showed. That failure is getting the administration’s attention.

None?  Out of 651,000 "trial" modifications none have turned into a permanent repayment plan?

That’s all the borrower’s fault, right?  There’s no collusion here, yes?  No intent to screw the taxpayer, having taken their money?  Nothing wrong here at all… it just calls for the administration’s "attention."

Yeah, right.

“We are taking additional steps to enhance servicer transparency and accountability as part of a broader focus on maximizing conversion rates to permanent modifications,” Treasury spokeswoman Meg Reilly said in an e-mail yesterday. The Obama administration plans to announce additional steps tomorrow, including new private-public partnerships and resources for borrowers.

Bull.

What’s worse, Bank of America has only 14% of their "eligible" loans in a trial modification.  Citibank has 40% under trial, and JP Morgan/Chase 32%.

All in all, only 20% of those "eligible" have been offered, accepted, and are in a trial but zero percent – zero – have actually turned into a permanent loan modification that the homeowner can count on.

The administration program requires banks that received federal aid from the Treasury’s Troubled Asset Relief Program, or TARP, as well as mortgage-finance companies Fannie Mae and Freddie Mac to lower monthly payments for borrowers at “imminent risk” of default.

That’s some "requirement" eh?  Zero percent completion from June to October?  That’s five months, and the "trial" period is supposedly 90 days, so this means that either (1) nobody did anything for the first two months, or (2) not one borrower successfully completed a trial between June and now.

If the Obama Administration and Treasury was serious about this "help" they would be seeking indictments.

Oh wait – they can’t – there was no "or else" put into the law enabling HAMP, was there?  Just looked again – nope – no criminal or civil sanction in there for banks who are allegedly "required" to do these things.

I repeat: A law without a punishment for failure to comply is no law at all – it is nothing other than a scam and a fraud perpetrated by the government to make you "feel good" while in fact doing exactly NOTHING.

Wake me up when our government stops allowing the banks and regulators to both write laws without punishment clauses in them and violate black-letter laws with wild abandon without one person or firm in the bankster community ever going to prison, having their bonus clawed back, or having their corporate charter revoked.

Our so-called "President For Change", President Obama, in fact has changed nothing, is permitting and encouraging the banksters to rob America blind, and forgot to tell you that the "change" you’re going to get (or keep) is the couple of worn pennies wrapped up in lint at the bottom of your pocket.

Who was talking about this two years ago?

Banks had to buy back $7.1 billion in defaulted single-family loans in the third quarter to reimburse mortgage investors, up from $1.9 billion in the previous quarter. Federal Deposit Insurance Corp. Call Report information shows that most of the buyback demands fell on JPMorgan Chase and Bank of America. Chase repurchased $2.7 billion in defaulted loans and BoA repurchased $2.3 billion to satisfy investor demands.

Uh, let’s see, that’s a 270% increase in one quarter.

Oh, and this fun is just getting started. 

Any loan falsely represented to have a certain level of underwriting that really didn’t can be forced back on the originator.  When the originator (such as some bucket shop with a warehouse line funded by someone like ex-Countrywide or similar) is gone, it travels up the line until the “last man still standing” winds up holding the hot potato, where it detonates.

The ugly here is that most of these are so far underwater that the ultimate loss will typically be 50% of face value and sometimes more.

No folks, this mess isn’t over by any stretch of the imagination.  Indeed, it is just getting started.

Paul Joseph Watson
Prison Planet.com
Saturday, November 28, 2009

Appearing on The Alex Jones Show yesterday, Lord Christopher Monckton went further than ever before in his vehement opposition to the elitists running the climate change scam, calling for the UN to be shut down and for fraudulent peddlers of global warming propaganda like Al Gore to be arrested and criminally prosecuted.

Monckton said that those who are threatening to shut down economies, bankrupt nations, and deepen the problems of the third world by implementing draconian policies in the name of global warming should be indicted, prosecuted and imprisoned “for a very long time”.

“The fraudsters and racketeers from Al Gore to the people at the University of East Anglia who have been making their fortune at the expense of taxpayers and the little guy,” should be criminally charged, said Monckton, in response to the climategate scandal.

“We the people have got to rise up worldwide, found a party in every country which stands for freedom and make sure we fight this bureaucratic communistic world government monster to a standstill – they shall not pass,” he added.

Monckton said that the United Nations should be “closed down,” adding that he talked to a senior UN ambassador in Canada who told him that he no longer saw any purpose in the UN and it exists “only to enrich itself at the expense of the nations it claims to serve, it’s time it was brought to an end.”

“We would all save billions if we shut down the UN and just about all of its hideous bureaucracy,” said Monckton.

Lord Monckton emphasized how the emails released as a result of climategate prove that global warming alarmism was still prevalent in public but behind closed doors, warmist scientist are admitting that the “deniers” as they label people like Monckton are correct.

“Publicly they’re saying the science is settled, we’re all doomed unless you close down the economies of the west, whereas privately they’re saying to each other ‘we’ve got it wrong, none of this adds up and it’s a travesty that we can’t explain it’.”

Monckton also slammed Obama’s science czar John P. Holdren, who in his 1977 book Ecoscience called for draconian population measures to be enforced by a “planetary regime” in the name of saving the earth, as an “openly admitted communist”.

Monckton pointed out how Holdren had been once of the most prominent alarmists in the 70’s warning about the onset of rapid “global cooling”.

“Now with seamless mendacity he says that what we’re now facing is global warming,” said Monckton.

“How can anyone like Holdren stand up with a straight face and expect anyone to believe it,” he added.

Monckton said that the agenda behind the global warming movement was to set up a communistic world government which will be run by people who “do not care how many people they kill with their policies” and that their goal is to “do away with democracy forever by stealth using the excuse to save the planet.”

Monckton said that the people running the scam had a “deliberate desire to control population by killing people in large numbers deliberately if necessary.”

The former advisor to Margaret Thatcher said that the warmists were sounding more and more desperate and knew that they had been rumbled as a result of climategate, which would only make it more urgent for them to try and force through a binding treaty in Copenhagen.

Monckton said that the answer to combating the move towards neo-feudalism and global government was to form a worldwide “freedom party” that would operate nationally in every country in order to defend freedom, democracy and prosperity while routing out every aspect of the communistic takeover.

“Every time these people try to take it away, we in the freedom party will stop them, and I think now is the time,” said Monckton.

Watch the interview in full below.

Tom Frank’s book, The Wrecking Crew explains how the Bush administration destroyed effective government and damaged our social fabric and our economy. The Obama administration has chosen to reward two of the worst leaders of Bush’s crew — Geithner and Bernanke — with promotion and reappointment. Embracing the Wrecking Crew’s most destructive members has further damaged the economy and caused increasing political and moral injury to the administration.

Last week was a bad one for Geithner and Bernanke. Senator Dodd said that Bernanke’s confirmation was no longer a done deal. The House Financial Services Committee revolted against the administration, the Fed, and Chairman Barney Frank. It voted for a strong bill to audit the Fed. Senate Banking Chairman Schumer went to a conference at Columbia University — where a generation of students salivated at the prospects of Wall Street wealth — and was overwhelmed by an audience denouncing the continuing stranglehold of the finance industry over successive administrations and the Congress. Neither Barney’s blarney nor Schumer’s schmooze was any avail before an outraged public.

The administration promptly secured a column in the Washington Post claiming that the effort to fire Geithner “buoy[ed]” him because, as the subtitle to the article explained: “Even ex-Bush aides sympathetic, sources say.” The article didn’t note that Geithner is an “ex-Bush” senior official who, with his fellow “ex-Bush aides” (particularly Bernanke and Paulson) produced a chain of disasters: the bubble, an “epidemic of mortgage fraud” by lenders, the Great Recession, and the scandalous TARP and AIG bailouts. Of course they’re “sympathetic” to a fellow member of the Wrecking Crew that destroyed effective regulation and turned the nation over to Wall Street. The craziest part of the story is that the anonymous Obama administration flack that spread this anecdote believes that we should support Geithner because his fellow members of the Bush Wrecking Crew empathize with him because they, too, have been criticized for wrecking the economy.

The Washington Post article then offers a metaphor that serves as an apology for the Bush Wrecking Crew. The metaphor is driving over a cliff: “‘Secretary Geithner has helped steer the American economy back from the brink, and is now leading the effort on financial reform,’ White House spokeswoman Jen Psaki said.” Geithner pushed back against Republicans who questioned his performance, telling them, “you gave this president an economy falling off the cliff.”

You? How about we? Bush’s financial Wrecking Crew “gave this president an economy falling off the cliff.” Geithner was President of the Federal Reserve Bank of New York from October 23, 2003 until President Obama chose him as his Treasury Secretary. He was supposed to be the lead regulator of many of the largest bank holding companies. His failures as a regulator were a major cause of the “economy falling off the cliff.” Bernanke held prominent positions in the Bush administration from 2002 to the end of the administration and failed as a regulator an economist. Geithner and Bernanke failed to regulate even after the FBI publicly warned in September 2004 that (1) there was an “epidemic” of mortgage fraud and (2) it would lead to a financial crisis if it were not contained. Their refusal to take responsibility for the harm they inflicted on our nation as leaders of Bush’s financial Wrecking Crew adds to their unsuitability. Rewarding their perennial failures with a promotion and reappointment represents a dereliction of duty by the Obama administration.

The administration apologists praise Geithner and Bernanke for “steer[ing] the American economy back from the brink.” Greenspan, Paulson, Bernanke, and Geithner were the leaders of Bush’s financial Wrecking Crew. They were the guys blinded by their pro-Wall Street ideology that drove the car 120 mph down an icy mountain road and lost control of it. They took us to the “brink” of running “off the cliff” and creating the Second Great Depression. The bizarre claim is that we should praise them because they, and Wall Street, only wrecked the economy — they haven’t (yet) utterly destroyed it. Under their metaphor, we’re supposed to cheer Geithner and Bernanke because once they finally figured out that they were careening toward the cliff, they decided to sideswipe a row of trees in order to avoid going over the edge. They wrecked the car but they walked away from the crash without a scratch. If your teenager gets drunk, speeds, crashes into a school bus (injuring dozens of kids), and flips the Ford Focus — but walks away from the crash — you don’t praise him, give him the keys to the family minivan, and have him drive the soccer team to practices. You take all the keys away from him and ground him.

The Obama administration promoted Bush’s architects of the financial disaster and demands that we hail them as heroes. President Bush was ridiculed for saying: “Brownie, you’re doing a heck of a job.” FEMA administrator Michael Brown stood by while Hurricane Katrina reduced a single large city to ruin. Geithner and Bernanke stood by while scores of large cities were devastated.

I suggest that we will build on the momentum we’ve achieved on the Fed audit by making the following issues our near term financial priorities:

1. Can the Wrecking Crew. Fire the senior leaders of Bush’s and Clinton’s financial Wrecking Crews and stopping treating them as financial experts. President Obama should not reappoint Bernanke as Fed Chairman. He should dismiss Geithner and Summers and cease to take any advise from Rubin. Replace them with the Reconstruction Crew — people with a track record of getting things right and being effective economists, regulators, and prosecutors. Members of Bush’s financial Wrecking Crew run far too many regulatory agencies, often as “Actings.” They can, and should, be replaced promptly.
2. End “too big to fail.” These banks are “systemically dangerous institutions” (SDIs). They should not be allowed to grow. They should be shrunk to the point that they no longer pose systemic risk, and they should be subject to vigorous regulation while shrinking. They are too big to manage and too big to regulate. They are ticking time bombs that will cause recurrent global crises as long as they are SDIs.
3. More white-collar watchdogs. Adopt Representative Kaptur’s proposal to provide the FBI with at least 1000 additional white-collar specialists. Senator Durbin and (then) Senator Obama made a similar proposal several years ago.
4. No more executive compensation looting. End the perverse executive compensation systems that reward failure and fraud. The private sector has made compensation worse since the crisis. Modern executive compensation creates a virtually perfect crime — “accounting control fraud” (looting a company for personal profit). Until we fix the perverse incentives of executive compensation we will have recurrent epidemics of fraud and global financial crises.
5. Kill TARP and PPIP. Use the funds to help honest homeowners that would otherwise lose their homes because of predatory loan terms.
6. Make the Federal Reserve System public. It is a largely private structure that creates intense conflicts of interest and ensures that it is controlled by the systemically dangerous institutions. We have already decided that such a structure is inherently improper. The Federal Home Loan Bank System was set up along the same institutional lines and suffered from the same conflicts of interest. Congress ordered an end to these conflicts in the 1989 FIRREA legislation. It should end private control of the Fed.
7. Defeat any proposal to make the Fed the “Uberregulator.” The Fed, for inherent institutional reasons, is unsuited to be the “systemic risk regulator.” The Fed has never cared about regulation. The Fed cares about monetary policy and (theoclassical) economic theory and research. Regulation is, at best, a tertiary concern. Its economists wrote frequently about systemic risk — but missed the obvious, massive systemic risk of the financial bubble and the epidemic of accounting control fraud. Its policies intensified rather than restricting systemic risk. Theoclassical economists have no effective theories (or policies) to deal with bubbles or epidemics of accounting control fraud. Greenspan, Bernanke, and Geithner epitomize the Fed’s inability to recognize or reduce systemic risk. Their policies consistently increased systemic risk. Greenspan didn’t believe that the Fed should act against fraud. Geithner testified before Congress that he had never been a regulator (a true statement – but one that should have gotten him fired rather than promoted). Bernanke praised the subprime loans that caused the crisis and were so often fraudulent.
8. Ensure a robust CFPA. Sever the Consumer Financial Product Agency portion from the broader (and deeply flawed) regulatory reform bills in the House and Senate and adopt it into law. Revise the broader bill to strip out its many anti-reform provisions.
9. End the waste of long-term unemployment. Anyone able and willing to work should be employed by the government as an employer of last resort and should help repair our crumbling infrastructure. Paying people to do nothing or allowing them to become homeless (the status quo) is an insane system.
10. Adopt a250 billion revenue sharing program. American state and local governments are in economic crisis. They are slashing spending at the worst possible time when their services are most vital and when cutting spending is pro-cyclical and will delay our recovery from the Great Recession. Revenue sharing was a Republican initiative. Republicans and “Blue Dog” Democrats killed the revenue sharing provisions of the administration’s proposed Stimulus bill. That was an enormous mistake. The federal government is not like a state government (or a household). It is a sovereign government with its own currency and a central bank. It can – and should – run large deficits during deep recessions, but the states and local governments cannot. Revenue sharing is the ideal answer to the crisis and it is an answer with an impeccable conservative pedigree. State and local governments should come together and demand a program to offset the state and local cutbacks – roughly250 billion. (The Obama administration’s claim that reducing the deficit should be a priority – at a time when unemployment has reached tragic levels – is economically illiterate. It repeats the error that FDR made when he listened to conservative economic advisors and slashed the budget deficit during the Great Depression – causing a surge in unemployment and the extension of the depression. The large federal deficits of World War II reversed the policies of his conservative economic advisors and ended the Great Depression

This piece originally appeared on New Deal 2.0.