Sponsor uniforms for Congresscritters

once again, i bow to yves smith, naked capitalism and, in this particular case, the wisdom of reprinting an incredibly astute post from gaius publius, reviewing gary hart's The Republic of Conscience, which contains this thoroughly delightful suggestion...

Submit To Propeller
Tweet

[Permalink] 0 comments

The increasingly corrupt banking industry and the multiple ways the U.S. Government continues to prop it up [UPDATE]

glenn highly recommends the following moyers & company youtube clip and, after watching it, i strongly concur...

If you can find 25 minutes or so this weekend, I can’t recommend highly enough this segment from this week’s Bill Moyers program, with Yves Smith and Matt Taibbi, discussing the increasingly corrupt banking industry and the multiple ways the U.S. Government continues to prop it up.

[UPDATE]

here's a link and a few paragraphs from matt taibbi's rolling stone article from 21 June...

[T]his just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What's more, in the manner of old mob trials, Wall Street's secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves' cant, or Italian mobsters who talked about "getting a button man to clip the capo," on tape after tape these Wall Street crooks coughed up phrases like "pull a nickel out" or "get to the right level" or "you're hanging out there" – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.

the scale of corruption is breathtaking...

Submit To Propeller
Tweet

[Permalink] 0 comments

Yves Smith: The word “predatory” is not adequate to describe Wells’ conduct

yves smith, writing in naked capitalism, is commenting on a louisiana bankruptcy judge's ruling awarding $3.1M in punitive damages for one loan...

The word “predatory” is not adequate to describe Wells’ conduct. The bank is not simply willing to steal from consumers, via blatant, institutionalized violations of its own agreements on mortgages and later on bankruptcy plans. It has absolutely no respect for the law, whether it be contracts or court procedures. It’s a band of marauders that our society treats as legitimate because the perpetrators wear suits and can afford to hire lobbyists. And the Federal government and state attorneys general are certain to have emboldened Wells and its brethren by rewarding them rather than treating them like the criminals they are.

despite an occasional and well-deserved ruling like this one, the banksters are such to regard it as a mere slap on the wrist and will continue to rule our lives...

Submit To Propeller
Tweet

[Permalink] 0 comments

Yves Smith: top 12 reasons why the mortgage deal stinks

jumping to the closing line, "...this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me"... we knew that, though, didn't we...?

yves smith writing in naked capitalism...

1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.

3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.

6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. As Tom Adams has pointed out in earlier posts, servicer behavior is predictable when their portfolios are hit with a high level of delinquencies and defaults: they cheat in all sorts of ways to reduce their losses.

7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster (since, according to sworn testimony of its own employee in Kemp v. Countrywide, Countrywide failed to comply with trust delivery requirements). This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. These cases also alleged HAMP violations as consumer fraud violations and could have gotten costly and emboldened other states to file similar suits not just against Countrywide but other servicers, so it was useful to the other banks as well.

8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. You use the stuff that is easy to prove to gather information and secure cooperation on the stuff that is harder to prove. In Missouri and Nevada, the robosigning investigation led to criminal charges against agents of the servicers. But even though these companies were acting at the express direction and approval of the services, no individuals or entities higher up the food chain will face any sort of meaningful charges.

9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed’s pathetically small sample). Similarly, the US Trustee’s office found widespread evidence of significant servicer errors in bankruptcy-related filings, such as inflated and bogus fees, and even substantial, completely made up charges. Yet the services and banks will suffer no real consequences for these abuses.

10. A deal on robosigning serves to cover up the much deeper chain of title problem. And don’t get too excited about the New York, Massachusetts, and Delaware MERS suits. They put pressure on banks to clean up this monstrous mess only if the AGs go through to trial and get tough penalties. The banks will want to settle their way out of that too. And even if these cases do go to trial and produce significant victories for the AGs, they still do not address the problem of failures to transfer notes correctly.

11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.

12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won’t ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.

As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.

repeating myself from the previous post, it's sad, so very sad...

Submit To Propeller
Tweet

[Permalink] 0 comments

Yves Smith in Naked Capitalism: the mortgage "settlement" is a stealth bank bailout

and why would we be surprised...?

Schneiderman MERS Suit and HUD’s Donovan Remarks Confirm That Mortgage “Settlement” is a Stealth Bank Bailout

In case you had any doubts about what the mortgage settlement was really about and why banks that were so keenly opposed to it are now willing to go ahead, the news of the last two days should settle any doubts.

As we had indicated earlier, one of the many leaks about the settlement showed that there had been a major shift its parameters. Of the $25 billion that has been bandied about as a settlement total for the biggest banks, comparatively little (less than $5 billion) is in cash. The rest comes in the form of credits for principal modifications of mortgages.

Originally, that was to come only from mortgages held by banks, meaning they would bear the costs. The fact that this meant that whether a homeowner might benefit would be random (were you one of the lucky ones whose mortgage had not been securitized?) was apparently used as an excuse to morph the deal into a huge win for them: allowing the banks to get credit for modifying mortgages that they don’t own.

The first rule of finance (well, maybe second, “fees are not negotiable” might be number one) is always use other people’s money before your own. So giving the banks permission to modify loans they don’t own guarantees that that is where the overwhelming majority of mortgage modifications will take place, ex those the banks would have done anyhow on their own loans. And the design of the program, that securitized loans will be given only half the credit towards the total, versus 100% for loans the banks own, merely assures that even more damage will be done to investors to pay for the servicers’ misdeeds.

Let me stress: this is a huge bailout for the banks. The settlement amounts to a transfer from retirement accounts (pension funds, 401 (k)s) and insurers to the banks. And without this subsidy, the biggest banks would be in serious trouble

Why? As leading mortgage analyst Laurie Goodman pointed out in a late 2010 presentation, just over half of the private label (non Fannie/Freddie) securitizations have second liens behind them (overwhelmingly home equity lines of credit). Moreover, homes with first liens only have far lower delinquency rates than homes with both first and second liens. Separately, various studies have found that defaults are also correlated with how far underwater a borrower is. If a borrower is too far in negative equity territory, it makes less sense for them to struggle to stay current, no matter how much they love their home.

[...]

The Obama Administration may have decided that investors have acted enough like patsies, given how they have failed to react to rampant servicer abuses, that they judge the risk of investor litigation and a related PR embarrassment to be small. But this battle is not yet over. The rumblings I am hearing from investor-land remind of the sections of the Lord of the Rings when the Ents were finally roused. It isn’t yet clear that investors will act, but if they do, the Administration will be unprepared for the vehemence of their response.

great... let's throw even MORE money at the criminal banksters...

Submit To Propeller
Tweet

[Permalink] 0 comments

Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage "Settlement" [UPDATE]

yves smith posting at naked capitalism...

[UPDATE]

Protesters Demonstrate in Front of Foreclosure Fraud Settlement Meeting in Chicago

Submit To Propeller
Tweet

[Permalink] 0 comments

The BP defense vs. the huge and still-evolving massive scope of the disaster

posting in justmeans, a site that focuses on corporate social responsibility, madeline ravich, a justmeans staff writer who has an interest in corporate social responsibility rating and ranking systems, offers her takeaway from the following graphic below...


(click on graphic for larger version)

The graphic touches on environmental risks, economic costs, impacts on local industries, the financial costs of cleanup, and expected government spending. Fine print at the bottom cites the references used for the graphic as including the U.S. Coast Guard, NOAA, The Gulf of Mexico Alliance, BP, Washington Post, American Bird Conservancy, Louisiana Department of Natural Resources, National Marine Fisheries Service, EPA, CNN, CBS, Reuters, Wall Street Journal, Washington Post, and regional newspapers. Below is a summary of what I learned about impacts:

Wildlife: Animals are dying. The Gulf Coast contains 5 million acres of habitat, and is home to 45,000 bottlenose dolphins and 34,000 birds. 75%of the waterfowl that traverse the U.S. migrate through the Gulf, as do 5 sea turtle species.

Food Prices: The spill will make seafood less available and/or more expensive. As a result of the spill, you can expect to pay more for shrimp and oysters until the Gulf recovers. As of 2008, the Gulf was home to 73% of all U.S. shrimp fishing and 59% of all U.S. oyster fishing. The initial cost estimate to the fishing industry was $2.5 billion.

Tourism: The spill is threatening livelihoods. At risk are the $9 million dollars in wages paid each year to tourism and recreation workers in the Gulf region, 620,000 jobs in the Gulf region provided by tourism and recreation, and 7,700 jobs generated in Louisiana by saltwater sport fishing.

Companies: The companies responsible for the spill will foot some or all of the $300+ billion estimated cost of the spill in a worst-case scenario. The license where the well was drilled is owned 65% by BP, 25% by Anadarka, and 10% by Mitsui & Co. and responsibility will be shared in those proportions. Less clear is the responsibility to be borne by operators and contractors Transocean, Cameron, and Halliburton. These companies have lost $20 billion in market value due to the spill and BP is already spending $6 million per day.

Americans: Today, 46% of Americans favor offshore drilling (down from 64% in July of 2008) and 41% think the risks are too great (up from 28% in July of 2008). Those who still favor it may be part of the 51% who view the spill as an isolated incident and those who don't may include the 14% who know little to nothing about the Gulf.

Oil supply: The spill has underscored how detrimental a spill in the Gulf region is to the U.S. oil supply. 52% of U.S. total crude oil comes from the Gulf region, and in a worst-case scenario, 6.8 million gallons could begin gushing out of the well each day (the U.S. consumes 819 million gallons of crude oil each day.)

and yet, here is what an individual from a corporate social responsibility rating and ranking organization has to say in defense of the high marks it awards bp...

Our rating system is broad and balanced. It is backward-looking--but incorporates enough data points to be a good estimate of recent reality. Much of our evaluation is comparative--a company is judged against the performance of others in its industry. We measure twelve subcategories of performance--plus more than a dozen special issues. So, a company that performs poorly in one area can redeem itself in the others.

If you look at BP, it has remarkably good scores for a major oil company. I've attached a screen shot of the data you'd see if you were a subscriber. You'll see several subcategory ratings above 70. It is pretty hard to get this good a score. We are tough enough that we don't hand out any "As" and very few "Bs!" The average score is in the mid 40s.

For instance, BP has excellent governance scores. Take a look at the attached report from Governance Metrics (the best source IMHO of governance info). BP has excellent scores for its handling of board and transparency issues--especially when you compare it to other oil industry companies. Regardless of how BP did with the oil spill disaster, it probably is a pretty well governed company, with a balanced and responsible board.

Similarly, if you look at our custom report from Asset4, you'll see that BP garnered 20 awards for its community service (one of the top numbers in our system). The organizations that granted their favor to BP were not all stupid, fooled, or swayed only by PR. They did real work to investigate and check on BP's performance. Of course, many may regret the honors they bestowed on BP and renounce them after the fact. We are certain to see a drop in BP's community scores, as we move forward.

Look at the other sources on our list. The Accountability list contains only 100 companies. It is hard to get on it. Universum says BP is great to black people. This is not what you'd expect from a bunch of red neck oil people! The Human Rights Council only has 100 companies on their list--and they check each carefully. BP joined BSR, UN Global Compact, and Carbon Disclosure Project. Joining these groups does not prove BP is good. But, it does say they care about transparency and communication--one valid component of social responsibility.

Someone using our system could knock BP for their involvement in military contracting or for their pollution problems. Some people will want to be anti any company that pumps oil or that does any kind of resource extraction. That is OK, because we are not saying there is a "right" overall number for BP or that they should always be a top company. However, looking at them broadly and fairly, they are not that bad--and they are certainly as good or better than most of the rest of the oil industry.

And based on that, he concluded: I don't think the mistakes they've made changed their intentions or erased the reality of the hundreds of positive programs and initiatives they put in place over the last twenty years.

(above courtesy of yves smith in naked capitalism...)

here's what robert reich has to say about bp and csr (corporate social responsibility)...

BP has been making public statements about its supposed corporate social responsibility for as many years as it’s behaved irresponsibly. It’s the poster child for PR masquerading as CSR.

[…]

Ad campaigns about corporate social responsibility are cheap. So are public scoldings by politicians about a corporation’s irresponsibility. Watch not what they say but what they do.

and bp, amazingly enough, still cannot seem to accept responsibility for its actions... even worse, the economist, that perennial ass-kisser of the super-rich elites, has the nerve to say this...

America’s justifiable fury with BP is degenerating into a broader attack on business.

[...]

Vilifying BP also gets in the way of identifying other culprits, one of which is the government. BP operates in one of the most regulated industries on earth with some of the most perverse rules, subsidies and incentives. Shoddy oversight clearly contributed to the spill, and an energy policy which reduced the demand for oil would do more to avert future environmental horrors than fierce retribution.

[...]

If [Mr. Obama] he sees any impropriety in politicians ordering executives about, upstaging the courts and threatening confiscation, he has not said so. The collapse in BP’s share price suggests that he has convinced the markets that he is an American version of Vladimir Putin, willing to harry firms into doing his bidding.

the following from the columbia journalism review is contained in a daily kos diary (which, btw, excerpts the full yves smith post referenced above)... i don't think any summary of the still-unfolding disaster could do a better job than this does...

So, it's in one of the most regulated industries, but at the same time, regulators are responsible for its actions because they didn't regulate? Huh?

[...]

You have a few drinks and are driving home at about 100 mph, when it starts to rain. You lose control, crash, taking out a bunch of other drivers and starting a fire which burns down a lot of the surrounding neighborhood. Your defense -- there were laws in place that should have prevented the accident. The fault lies with the cops who failed to stop you before the unfortunate accident which was triggered by an act of God (the rain).

kinda says it all, doesn't it...?

Submit To Propeller
Tweet

[Permalink] 0 comments