Tag: TMC Politics

Cross posted from The Stars Hollow Gazette

The tragic murder of a 17 year old black walking home in the rain by a so-called neighborhood watchman who apparently chased him down and shot him because this young black man “looked suspicious” has dominated the news this past week. It has the media and the country enraged about the law in Florida that allowed the perpetrator to not just walk away, but walk away never having been questioned by the police about what occurred and walk away with the gun that killed an unarmed child. This man is still free, still unquestioned by authorities and still armed.

MSNBC’s Up with Chris dedicated its entire two hours to a discussion about the public call for justice, how these “Stand Your Ground” laws that allowed his assailant to walk were passed by state legislatures and the ramifications. The Up w/ Chris Hayes panel, The Atlantic‘s Ta-Nehisi Coates, The Nation‘s Liliana Segura, the Bernard Center’s Michelle Bernard, and former police officer Peter Moskos, discuss the case in detail and the national cause it has become.

Cross posted from The Stars Hollow Gazette

The Senate passed the Jumpstart Our Business Startups Act, JOBS Act, with a bipartisan vote of 73-26, with all the “no” votes coming from Democrats. The legislation will make it easier for small businesses to use the Internet to raise small investments from lots of people, a technique known as “crowdfunding.” :

The legislation combines six smaller bills that change Securities and Exchange Commission rules so small businesses can attract investors and go public with less red tape and cost. It eases rules on advertising and permits startups to use the Internet and other social media to solicit a large number of small-scale investors.

So why is this not such a good bill? Basically, as Mark Gongloff of Huffington Post explains, because it rolls back “investor-protection regulations, some of which date back to the 1930s, and some of which have been passed as recently as 2002 in the wake of Wall Street shenanigans from the 1990s tech bubble to Enron.”

The bill purports to make it much easier for small firms to raise money, either through private “crowdfunding,” essentially raising money online, or by going public. At its heart is the persistent myth, relentlessly propounded by Wall Street, that there are a million Facebooks out there waiting to thrive and create jobs if only the government would just get the heck out of the way. [..]

Investment banks can now issue research reports on the companies they take public — meaning we’ll be back to the days when analysts can pump up “POS” stocks they then dump on unwitting customers — removing a prohibition set by Sarbanes-Oxley in 2002.

Web sites can pitch new companies directly to investors, raising the specter of “boiler rooms” preying on your grandmother to pry away her retirement money.

To give Senate Majority Leader Harry Reid (D-NV) some credit, he did manage to get one amendment passed that would provide some investor protections:

required companies that use crowdfunding to provide financial statements to investors. Companies seeking between $100,000 and $500,000 in capital would have to get independent accountants to review these statements. Audited financial statements would be required for companies seeking more than $500,000 in capital.

The amendment also limits the total amount that a company can raise through crowdfunding to $1 million. The House bill would allow companies to raise up to $2 million, if they provide audited financial statements.

In addition, the amendment requires Internet intermediaries — the web sites that will offer crowdfunding investment opportunities to the public — to register with the SEC.

An amendment that would have tightened certain shareholder definitions, and prevented public companies from “going dark” if their shareholder number falls below a certain threshold, failed to pass a straight majority vote.

Dan Primack at CNN’s Fortune best describes what does and doesn’t matter about the bill and states his the reason for his opposition:

Emerging growth companies: Okay, this is where I move from ambivalence to opposition. The idea here is to make it easier for small private companies to go public, by reducing the costs associated with such an action. It does so by reducing certain existing investor protections, including one that prevents investment banking analysts from offering pre-IPO research on their firm’s own clients. Here is what I wrote on the subject, back in January:

   Going public is not supposed to be a cakewalk. We’ve already been through an IPO environment where all you needed was a clever URL and a fuzzy mascot, and the results weren’t pretty. I’m not suggesting that last year’s issuers are all future members of the Fortune 500, but shouldn’t a successful listing signal to retail investors that experienced institutions took a hard look at the issuer and considered it worthy of consideration? How can that still be true if those institutions get to see only two years of audited financial statements instead of three? Or if analysts working for a company’s underwriting bank can publish pre-IPO research (albeit with a disclaimer)?

Sen. Bernie Sanders (I-VT) gives his scathing criticism of the bill, calling it the “Con Job Bill”:

“The so-called ‘JOBS Act’ is an extremely anti-consumer, anti-investor, and anti-jobs bill.  As currently drafted, the bill is opposed by the Securities and Exchange Commission chairman (as well as past SEC chairmen appointed by both political parties); AARP; the AFL-CIO; the Consumer Federation of America; Consumers Union; and the Council of Institutional Investors, among many others.  There is good reason for the opposition.

“At best, this bill could make it easier for con artists to defraud seniors out of their entire life savings by convincing them to invest in worthless companies.  At worst, this bill has the potential to create the next Enron or Arthur Andersen scandal or an even worse financial crisis.

“Have we learned nothing?  Deregulating Wall Street led to the worst financial crisis since the 1930s.  Now the same people who caused this horrible recession are telling us that more Wall Street deregulation will create jobs.  Give me a break.  I strongly support providing small businesses with the tools they need to create jobs.  Sadly, that’s not at all what this bill will do.”

Calling this the “JOBS” Act is a misnomer because, as Yves Smith notes at naked capitalism, “In reality, the only jobs it is likely to create will be due to the resulting explosion in stock scamsters and bucket shop operators.”

And there is no worry that this bill will pass in the House. House Majority Leader Eric Cantor (R-VA) has schedule a vote for early next week.

Here come the “Penny Stocks.” Good job, Barack

Cross posted from The Stars Hollow Gazette

In a surprise announcement President Barack Obama nominated Dartmouth College President Jim Yong Kim to head up the World Bank:

Dr. Kim’s name was not among those widely bandied about since Mr. (Robert B.) Zoellick announced his plans to move on last month. Highly respected among aid experts, Dr. Kim is an anthropologist and a physician who co-founded Partners in Health, a nonprofit that provides health care for the poor, and a former director of the department of H.I.V./AIDS at the World Health Organization. [..]

Dr. Kim, who was awarded a prestigious MacArthur Fellowship in 2003, was born in Seoul, South Korea, in 1959 and moved with his family to the United States when he was 5. He graduated from Brown University in 1982, earned an M.D. from Harvard University in 1991 and received a Ph.D. in anthropology there in 1993.

He was the first Asian-American to head an Ivy League institution when he took the Dartmouth post in 2009.

While working with Partners in Health in Lima, Peru, in the mid-1990s, Dr. Kim helped to develop a treatment program for multidrug-resistant tuberculosis, the first large-scale treatment of that disease in a poor country. Treatment programs for multidrug-resistant tuberculosis are now in place in more than 40 nations, according to Dr. Kim’s biography on Dartmouth’s Web site. He Kim also spearheaded the successful effort to reduce the price of the drugs used to treat this form of tuberculosis.

The United States traditionally selects the head of the World Bank and Europe the leader of its sister institution, the International Monetary Fund, since they were founded during World War II.

Apparently, Dr. Kim was suggested by former President Bill Clinton and Secretary of State Hillary Clinton, who was present with the President and Dr. Kim at the Rose Garden press conference. Though Dr. Kim will certainly be the front runner for the position, he isn’t the only candidate:

Angola, South Africa and Nigeria put forward Ngozi Okonjo-Iweala, the Nigerian finance minister and former World Bank official.

José Antonio Ocampo, the former finance minister of Colombia and a United Nations official, is rumored to be another candidate.

Jeffrey Sachs, the development economist and director of the Earth Institute at Columbia University, has put himself forward for the position.

If there are more than three candidates, the board will announce a “short list” and the new head will be named in time for the April meeting of the World Bank and the International Monetary Fund.

Dr. Kim is an excellent choice with experience in global development and management. He is well known and well liked. We wish him luck.

Cross posted from The Stars Hollow Gazette

At least, that’s the party line according Republican Rep. Cathy McMorris Rodgers (WA) who appeared along with Democratic Lt. Gov. Sheila Simon (IL) on “Hardball with Chis Matthews.”  That was her rote answer to Matthews questions about the recent legislation that has been passed through Republican state legislatures, radically restricting a woman’s legal right to seek an abortion and health care. I’m no fan of Chris Matthews but no matter how hard he tried to get her to answer his question, she evaded him repeatedly saying that it wasn’t the main issue for women. There was feint praise in Matthew’s words at the end when he thanked her from coming on his show and said she was “brilliant”. She sure was, at evading the issue.

Cross posted from The Stars Hollow Gazette

Recently, I was driving along the Hutchinson River Parkway to pick up a friend who was in town and meet up with another friend for dinner in the area. It was a lovely warm evening and during the the drive we talked about the historic significance of the region. Dinner was fun and after dropping my friend at his hotel, I followed my usual route back to NYC that closely hugs the Hutchison River as it winds through the Bronx. As I was preparing my daily open thread, On This Day In History, I came across this Wikipedia entry for Anne Hutchinson for whom the river and parkway are named:

1638 – Anne Hutchinson is expelled from Massachusetts Bay Colony for religious dissent.

Anne Hutchinson (1591-1643) was one of the most prominent women in colonial America, noted for her strong religious convictions, and for her stand against the staunch religious orthodoxy of 17th century Massachusetts. She was a Puritan whose religious ideas were at odds with the established Puritan clergy in the Boston area, and her popularity and charisma created a schism in the Boston church which threatened to destroy the Puritans’ religious experiment in New England. Creating the most challenging situation for the ruling magistrates and ministers during her first three years in Boston, she was eventually tried and convicted, then banished from the Massachusetts Bay Colony with many of her followers. [..]

In 1634, after the birth of her 14th child, Hutchinson followed (John) Cotton to New England with her husband and 11 living children, and soon became well established in the growing settlement of Boston, in the English colonies. She was a midwife, and very helpful to those needing her assistance, as well as being very forthcoming with her personal religious opinions and understandings. Soon she was hosting women at her house once a week, providing commentary on recent sermons, and sharing her religious views, including criticism of many local ministers. These meetings became so popular, that she soon began offering meetings to men as well, to include the young governor of the colony, Harry Vane, and over 60 people a week were visiting her house to learn from her interpretations and views of religious matters. As a follower of Cotton, she espoused a “covenant of grace,” while accusing all of the local ministers (except for Cotton and her husband’s brother-in-law, John Wheelwright) of preaching a “covenant of works.” Several ministers complained about Hutchinson to John Winthrop, who served several terms as governor of the colony, and eventually the situation erupted into what is known as the Antinomian Controversy, resulting in Hutchinson’s 1637 trial, conviction, and banishment from the colony.

She was quite the activist for her day and stood trial for heresy, literally standing throughout the proceedings while, in what was believed, to be an advanced stage of pregnancy. She faced two trials, civil and church, and was expelled from Massachusetts by Gov. John Winthrop after being convicted by the church on March 22, 1638.

After her conviction, Anne. along with her husband, children and some of her followers, with the encouragement of Roger Williams, established the colony of Portsmouth “in what would become the Colony of Rhode Island and Providence Plantations:”

During Hutchinson’s imprisonment, several of her supporters prepared to leave the colony and settle elsewhere. A group of her followers, including her husband Will, met on 7 March 1638, at the home of the wealthy Boston merchant William Coddington. Ultimately 23 men signed what is known as the Portsmouth Compact, forming themselves into a “Bodie Politick” and electing Coddington as their governor, but giving him the Biblical title of “judge.” Of the signers, 19 of them initially planned to move to New Jersey or Long Island, but Roger Williams convinced them to settle in the area of his Providence Plantations settlement. Coddington purchased Aquidneck Island, in the Narragansett Bay, from the Narragansetts and the settlement of Pocasset (soon renamed Portsmouth) was founded. Anne Hutchinson followed in April, after the conclusion of her church trial.

Hutchinson, her children, and others accompanying her traveled for more than six days by foot in the April snow to get from Boston to Roger Williams’ settlement at Providence. They then took boats to get to Aquidneck Island, where many men had gone ahead of them to begin constructing houses. In the second week of April, she reunited with her husband, from whom she had been separated for nearly six months. [..]

She lived there for a few years, but after her husband’s death, threats of Massachusetts taking over Rhode Island compelled her to move totally outside the reach of Boston, into the lands of the Dutch. Sometime in 1642 she settled with her younger children in New Netherland near an ancient landmark called Split Rock in what would later become Bronx, New York City. Here she had a home built, but tensions with the native Siwanoy were high, and following inhumane treatment by the Dutch, the natives went on a series of rampages known as Kieft’s War, and in August 1643, all but one of the 16 members of Hutchinson’s household were massacred during an attack. The lone survivor, nine-year old Susanna Hutchinson, was taken captive, and held for several years before being returned to family members in Boston.

Hutchinson is a key figure in the study of the development of religious freedom in England’s American colonies and the history of women in ministry. She challenged the authority of the ministers, exposing the subordination of women in the culture of colonial Massachusetts. Although her religious ideas remain controversial, her implicit rejection of state authority to prescribe specific religious rites and interpretations, was later enshrined in the American Constitution. Massachusetts honors her with a State House monument calling her a “courageous exponent of civil liberty and religious toleration.”

The inscription on the base of the statue in front of the State House in Boston, Massachusetts that honors Anne and her daughter, Suzanna reads:

IN MEMORY OF

ANNE MARBURY HUTCHINSON

BAPTIZED AT ALFORD

LINCOLNSHIRE ENGLAND

20 JULY 1595 [sic]

KILLED BY THE INDIANS

AT EAST CHESTER NEW YORK 1643

COURAGEOUS EXPONENT

OF CIVIL LIBERTY

AND RELIGIOUS TOLERATION

Click on image to enlarge

Beside being one of the few women who have a river named for them, Anne Hutchinson is thought to be the basis for the character of Hester Prynne in Nathaniel Hawthorne‘s The Scarlet Letter. The parallel being “that Hutchinson is the heretic who metaphorically seduces the Puritan community, while in Hawthorne’s novel Hester Pyrnne literally seduces the minister of her community.”

Considering the recent debate over women’s access to health care and our First Amendment rights, remembering the early history of religion and the role that women played is a reminder that this conversation has been going on for a lont time.

Cross posted from The Stars Hollow Gazette

As per the military command, War Is Actually Going Fine

Never mind the riots, the fratricides, the burned holy books and the bloody slaughter of civilians. The commander of the Afghanistan war believes the decade-long conflict is “on track.”

That’s Gen. John Allen’s message to Congress at perhaps the most politically precarious moment in the decade-long war. Allen, in Washington for his first round of congressional testimony since taking command in July, told the House Armed Services Committee, “our troops know the difference they are making and the enemy feels it every day.”

Since Allen took charge of the war, the following has happened in Afghanistan: A U.S. special operations Chinook helicopter crashed, killing 27 troops, possibly after an insurgent attack. A different U.S. helicopter killed 24 Pakistani troops during a chaotic exchange of fire that lasted hours. Photos of Marines urinating on Afghan corpses emerged. U.S. troops burned the Koran at a giant wartime prison, prompting nationwide riots. In apparent retaliation, an Afghan employee of the Interior Ministry murdered two U.S. officers. A U.S. staff sergeant in Panjwei allegedly murdered 16 Afghan civilians, mostly women and children. The Taliban has suspended peace talks with the U.S. and Afghan President Hamid Karzai has proclaimed himself “at the end of the rope” with Washington.

“To be sure,” Allen testified, “the last couple months have been trying.”

MSNBC Political Analyst Ezra Klein sits in for Chris Hayes, and is joined by Elise Jordan, former speechwriter for Secretary of State Condoleezza Rice, CBS contributor Nancy Giles, The New York Times’ Jodi Kantor, and Wired.com’s Spencer Ackerman, for an in-depth discussion on the U.S. military presence in Afghanistan that has spanned over a decade.

Cross posted from The Stars Hollow Gazette

The more the experts and analysts look into the Foreclosure Agreement the more reasons are found to hate it and why, to Yves Smith‘s descriptive word, it “sucks”:

Not only are the banks getting away with fraud they are still going to be allowed to systemically overcharge homeowners and wrongly take their homes.

Remember that the Administration also trumpeted that enforcement would be tough, even as Abigail Field has shown that idea to be a joke. For instance, the servicing standards allow for the astonishing concept of an acceptable error rate. Banks aren’t permitted to make errors with your checking account and ding you an accidental $10,000 and get away with it. But with people’s most important asset, their homes, servicers are allowed a certain level of reportable errors, and many of them can be serious as far as borrowers are concerned.[..]

She also points out that wrongful foreclosures at a 1% rate are acceptable. Procedures around real estate are deliberate because any error of this magnitude has devastating consequences. But this new provision means that 1%, or over 33,000 erroneous foreclosures since 2008 would be perfectly OK as far as the authorities are concerned.

Field also points out in a separate post that this deal is in no way done. Key points remain to be resolved, in particular, how the Monitor will supervise the pact. That’s a huge item, and leaving it unresolved shifts the power to the banks (if you don’t believe me, I refer you to what is happening to Dodd Frank).

Field also wonders “how did all our meaningful law enforcers do this deal?:

I hate the term Too Big To Fail because it’s a loaded premise presented as fact. But looking at the weasel parentheticals, maybe we should start asking if the banks as too big to be competent. I mean, why do the banks need a ‘hey, we tried but didn’t have enough time to stop the sale’ exemption? If the B.O.Bs (bailed out bankers) want their lawyer or trustee to call off a foreclosure sale, all they need is two things: a) to contact their agent and b) have a competent agent.

What does “took appropriate steps to stop the sale” mean, anyway? Does it mean that someone at the bank left a message or two with foreclosure counsel? If the B.O.B.s made a real effort to stop the sale but their agents did it anyway, why isn’t that the B.O.B’s fault for having incompetent agents? Doesn’t giving the B.O.B. a pass remove any incentive to have competent (and thus more expensive) agents?

Wrongfully selling someone’s home should be a strict liability issue. Strict liability is, well, strict: no one cares what you were trying to do, what your intentions were, what you did or didn’t do. Did the harm happen? Then you’re responsible.

Before you give me any, hey, let’s be reasonable here, a business needs to operate and we’re so big some mistakes will happen, remember what we are talking about: homes; property rights; land records; fundamental fairness. How can the B.O.Bs be held to any standard other than strict liability when it comes to wrongfully selling a home?

Neil Barofsky, the former Special US Treasury Department Inspector General for the Troubled Asset Relief Program (TARP) and Matthew Stoller, a fellow at the Roosevelt Institute give a good overview of why this settlement really “sucks”

There is no accountability, no punishment for what has to be the largest fraud ever perpetrated in this country.  

Cross posted from The Stars Hollow Gazette

Who could have possibly thought that by giving the banks a pass on foreclosure fraud with the 49 state agreement that there would be an increase in foreclosures? That prediction came from Mark Vitner, an economist with Wells Fargo:

“The immediate results are not going to be all that pleasant,” said Mark Vitner, an economist with Wells Fargo. His bank is one of the biggest lenders in Florida as well as a participant in the settlement. “The amount of foreclosures will actually increase and there will be some additional downward pressure on home prices.”

And foreclosures are on the rise in half of the major metro areas:

February foreclosure activity in the 26 states with a judicial foreclosure process increased 2 percent from January and was up 24 percent from February 2011, while activity in the 24 states with a non-judicial foreclosure process decreased 5 percent from January and was down 23 percent from February 2011.

Half of largest metro areas post annual increases in foreclosure activity

Ten of the nation’s 20 largest metro areas by population documented year-over-year increases in foreclosure activity in February, led by the Florida cities of Tampa (64 percent increase) and Miami (53 percent increase).

The 10 metro areas with increases were all on the East Coast or in the Midwest, while most of the metro areas with year-over-year decreases in foreclosure activity were in the West, led by Seattle (59 percent decrease) and Phoenix (43 percent decrease).

The metro areas with the highest foreclosure rates among the 20 largest were Riverside-San Bernardino in California (one in 166 housing units), Atlanta (one in 244), Phoenix (one in 259), Miami (one in 264) and Chicago (one in 302).

Meanwhile robosigning has still not stopped. Matt Stoller at naked capitalism found according to the HUD Inspector General Report Well Fargo is still using it:

At the time of our review, affidavits continued to be processed by these same signers, who may not have been qualified, and these signers may not have adequately verified certain figures because they accessed a computer screen of data showing a compilation of figures instead of verifying the data against the information through review of the books and records kept in the regular course of business by the institution.

Stollers reaction deserves repeating:

I’m sorry, but WHAT THE $&*@!?!?  I’m so glad Eric Holder has cut a deal with Al Capone while Capone is still on a shooting spree.  And note, this isn’t just robosigning, this is potentially overcharging homeowners with junk fees and just generally not verifying accurate data on who owes what to whom.  There really is no lesson here except “crime pays”.

And they are still stealing homes.

Cross postedfrom The Stars Hollow Gazette

A Goldman Sachs executive resigned in a lengthly and scathing op-ed in the New York Times. Greg Smith worked at Goldman Sachs for 12 years, rising to executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa. His latter shreds Goldman Sachs policies and employees:

   To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for […]

   How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

   What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients – some of whom are sophisticated, and some of whom aren’t – to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Smith lays the blame for this climate of greed at the feet Goldman’s CRO, Lloyd Blankfein and the company’s president, Gary Cohn.:

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Matt Taibbi at Rolling Stone asks, like Forbes, should clients fire Goldman:

Banking, and finance, is a business that has to be first and foremost about trust. The reason you’re paying your broker/money manager such exorbitant sums is because that’s the value of integrity and honesty: You’re paying for the comfort of knowing he has your best interests at heart.

But what we’ve found out in the last years is that these Too-Big-To-Fail megabanks like Goldman no longer see the margin in being truly trustworthy. The game now is about getting paid as much as possible and as quickly as possible, and if your client doesn’t like the way you managed his money, well, fuck him – let him try to find someone else on the market to deal him straight.

These guys have lost the fear of going out of business, because they can’t go out of business. After all, our government won’t let them. Beyond the bailouts, they’re all subsisting daily on massive loads of free cash from the Fed. No one can touch them, and sadly, most of the biggest institutional clients see getting clipped for a few points by Goldman or Chase as the cost of doing business.

Speaking at the Atlantic Economy Summet in Washington, DC, former Federal Reserve Chairman, Paul Volker, said that Smith’s letter proves the need for the his rule

“[Trading] is a business that leads to a lot of conflicts of interest. You’re promised compensation when you’re doing well, and that’s very attractive to young people. All these firms can attract the best of American graduates, whether they’re philosophy majors or financial engineers, it didn’t make any difference,” Volcker said.

“A lot of that talent was siphoned off onto Wall Street. But now we have the question of how much of that activity is really constructive, in terms of improving productivity in the GDP,” Volcker said. “These were brilliant years for Wall Street by one perspective, but were they brilliant years for the economy? There’s no evidence of that. The rate of economic growth did not pick up, the rate of productivity did not pick up, the average household had no increase in their income over this period, or virtually no increase.”

Volcker noted that commercial banks hold the money of average Americans, and are insured by the federal government. “Should the government be subsidizing or protecting institutions that…are essentially engaged in speculative activities, often at the expense of customer relations?”

Yves Smith at naked capitalism, who also has been at the Atlantic conference weighed in that those good old days of the ’90’s weren’t as “rosy” as Smith remembers:

Earth to Greg: the old days were not quite as rosy as you suggest, but it is true that Goldman once cared about the value of its franchise, and that constrained its behavior. So it was “long term greedy,” eager to grab any profit opportunity but concerned about its reputation. I knew someone who was senior in what Goldman called human capital management, and even though, in classic old Goldman style, he was loath to say anything bad about anyone, he was clearly disgusted of Lloyd Blankfein and the crew that took over leadership after Hank Paulson, John Thain and John Thornton departed. Before the firm before had gone to some lengths to preserve its culture and was thoughtful about how to operate the firm. One head of a well respected investment bank told me in the mid 1990s: “It isn’t that Goldman has better people. All the top firms have good people. It’s that they make the effort to manage themselves better than anyone else.” That apparently went out the window when Blankfein came in. My contact said all his cohort cared about was how much money they could make in the current year.

Wall St. responded defensively calling Smith a “small timer” having a “midlife crisis“. That “crisis” so far has lost Goldman $2.5 billion in its market value:

The shares dropped 3.4 percent in New York trading yesterday, the third-biggest decline in the 81-company Standard & Poor’s 500 Financials Index, after London-based Greg Smith made the accusations in a New York Times op-ed piece.

Stephen Colbert “disapproves” of Greg Smith, after all Lloyd Blankfeid said Goldman was just doing “God’s work.”

Cross posted from The Stars Hollow Gazette

Along with the Foreclosure Settlement documents it was agreed that the Housing and Urban Development Inspector General report was also released. The New York Times review of the report noted that, contrary to the denial by the banks, top bank managers were responsible for the criminal conduct:

   Managers at major banks ignored widespread errors in the foreclosure process, in some cases instructing employees to adopt make-believe titles and speed documents through the system despite internal objections, according to a wide-ranging review by federal investigators.

   The banks have largely focused the blame for mistakes on low-level employees, attributing many of the problems to the surge in the volume of foreclosures after the housing market collapsed and the economy weakened in 2008.

   But the report concludes that managers were aware of the problems and did nothing to correct them. The shortcuts were directed by managers in some cases, according to the report, which is by the inspector general of the Department of Housing and Urban Development […]

   “I believe the reports we just released will leave the reader asking one question – how could so many people have participated in this misconduct?” David Montoya, the inspector general of the housing department, said in a statement. “The answer – simple greed.”

Ben Hallman at The Huffington Post observed that the report fell short because of stonewalling by the banks lawyers who blocked interviews with but a handful of employees:

Though the report describes a pattern of misconduct that appears widespread, it fails to quantify the damage to homeowners or, ultimately, how many home loans were affected. It also clearly reflects the frustration that investigators felt in conducting the review. Even as negotiators for the banks were fighting to win the best possible deal, their lawyers were stonewalling other government investigators trying to ascertain the scope of the “robo-signing” abuses.

Wells Fargo provided a list of 14 affidavit signers and notaries — but then stalled while the bank’s own attorneys interviewed them first. The bank then tried to restrict access to just five of those employees. The reason? “Wells Fargo told us we could not interview the others because they had reported questionable affidavit signing or notarizing practices when it interviewed them,” the report says. [..]

Bank of America only permitted its employees to be interviewed after the Department of Justice intervened and compelled the testimony through a civil investigation demand. Even so, the review was hindered, the report says.  [..]

The investigation into Citigroup’s mortgage division was “significantly hindered” by the bank’s lack of records. Citigroup simply did not have a mechanism for tracking how many foreclosure documents were signed.

Both JPMorgan Chase and Ally Financial refused to provide access to some employees or documents or otherwise impeded the investigation, according to the report.

Hallman also noted some of what was uncovered by investigators:

Wells Fargo employees testified that they signed up to 600 documents a day without attempting to verify whether any of the information was correct. [..] The bank also relied on low-paid, unskilled workers to do the reviews: a former pizza restaurant worker, department store cashier, and a daycare worker, to name a few.

A vice president at Bank of America testified that she only checked foreclosure documents for formatting and spelling errors. Employees in India supposedly verified judgment figures in foreclosure documents, but none of the U.S. employees interviewed by the inspector general could explain how that process was supposed to work. One former employee described signing 12 to 18 inch stacks of documents without review.

Employees at Wells Fargo and Bank of America testified that they complained about the pace and lack of care given to reviews, but instead of relief, were told to sign even faster. One Bank of America notary said his target was set at 75 to 80 documents an hour, and he was evaluated on whether he met that target. One notary even notarized her own signature on a few documents.

Abuses at the other banks — JPMorgan Chase, Citigroup and Ally Financial — appear just as pervasive. Citi, for example, routinely hired law firms that “robo-signed” documents. An exhibit included with the report shows eight different versions of one attorney’s signature — all apparently signed by different people.

In signing off on this 49 state agreement the banks did not have to admit to any wrongdoing despite the damning evidence of fraud that was directed by top management. No other sanctions beyond a few billion dollars and certainly no criminal prosecutions. If I were Bernie Madoff, I’d be really pissed.

Cross posted from The Stars Hollow Gazette

The Foreclosure Fraud Settlement documents were filed in federal court and released to the public. There is a lot to wade through but the intrepid David Dayen at FDL News Desk breaks them down in a series of four articles that highlight just how easy these banks are getting off and what they are getting away with. Some of it will really make your blood boil:

Foreclosure Fraud Settlement Docs (I): Ally’s Side Deal

What accounts for this? Probably this little nugget buried in a Reuters article on the settlement:

  Some banks negotiated separate requirements.

   Ally Financial, for example, negotiated a steep discount on the fine part of its settlement, based on an inability to pay it, according to people familiar with the matter.

   It was expected to pay some $250 million, but the Justice Department cut it to around $110 million, these people said.

   In exchange, it committed to solicit all borrowers in its own loan portfolios and to offer to cut principal for delinquent borrowers down to 105 percent of the home’s value. It also offered to refinance underwater borrowers who are current on their payments.

Gee, I didn’t know that federal and state civil penalties had a “pay what you can” quality to them. [..]

About those state funds: there is nothing to stop state AGs from using them in any way they see fit. Note the weasel words in this language (which I’ve bolded):

Each State Attorney General shall designate the uses of the funds set forth in the attached Exhibit B-1. To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants.

   No more than ten percent of the aggregate amount paid to the State Parties under this paragraph 1(b) may be designated as a civil penalty, fine, or similar payment. The remainder of the payments is intended to remediate the harms to the States and their communities resulting from the alleged unlawful conduct of the Defendant and to facilitate the implementation of the Borrower Payment Fund and consumer relief.

You have that strong word “shall” competing with “to the extent practicable.” And indeed, several states have already made clear that they will be diverting much of the settlement into their state budgets. More make it clear in the settlement docs, more on that later.

Foreclosure Fraud Settlement Docs (II): Giving Homes to Charity as a Penalty

Another part of the document explains that any modification under any government housing program can qualify under the settlement credits:

   Eligible modifications include any modification that is made on or after Servicer’s Start Date, including:

   i. Write-offs made to allow for refinancing under the FHA Short Refinance Program;

   ii. Modifications under the Making Home Affordable Program (including the Home Affordable Modification Program (“HAMP”) Tier 1 or Tier 2) or the Housing Finance Agency Hardest Hit Fund (“HFA Hardest Hit Fund”) (or any other federal program) where principal is forgiven, except to the extent that state or federal funds paid to Servicer in its capacity as an investor are the source of a Servicer’s credit claim.

   iii. Modifications under other proprietary or other government modification programs, provided that such modifications meet the guidelines set forth herein.

Presumably those programs weren’t all going to shut down. So banks doing what they’ve been doing, meeting the minimum requirements of those other programs, will help them complete the settlement requirements.

Foreclosure Fraud Settlement Docs (III): “Internal Review Group”

Page E-3 details the “internal review group”:

   Servicer will designate an internal quality control group that is independent from the line of business whose performance is being measured (the “Internal Review Group”) to perform compliance reviews each calendar quarter (“Quarter”) in accordance with the terms and conditions of the Work Plan (the “Compliance Reviews”) and satisfaction of the Consumer Relief Requirements after the (A) end of each calendar year (and, in the discretion of the Servicer, any Quarter) and (B) earlier of the Servicer assertion that it has satisfied its obligations thereunder and the third anniversary of the Start Date (the “Satisfaction Review”). For the purposes of this provision, a group that is independent from the line of business shall be one that does not perform operational work on mortgage servicing, and ultimately reports to a Chief Risk Officer, Chief Audit Executive, Chief Compliance Officer, or another employee or manager who has no direct operational responsibility for mortgage servicing.

So the bank can take their own employees out of another part of the bank and have them conduct a quarterly review, which then gets passed to the monitors and becomes the initial basis for enforcement. Even if you believe these will be “independent” internal reviews, we’ve seen with the OCC foreclosure reviews that those independent reviewers paid for and hired by the banks typically write bank-friendly reports. In fact, a later note indicates that “The Internal Review Group may include non-employee consultants or contractors working at Servicer’s direction.”

Foreclosure Fraud Settlement Docs (IV): Association of Mortgage Investors Planning to Challenge in Court

At any rate, if there’s one group who does not agree with HUD that investors won’t end up footing the bill for a substantial portion of the settlement, it’s… the Association of Mortgage Investors. The trade group representing investors in mortgage-backed securities fully believes they will be on the hook for losses, and so they will challenge the settlement in federal court.

   As the federal court reviews the final settlement, AMI asks that the following changes be made on behalf of all investors:

   Transparency. The NPV (net present value) model incorporated into the settlement must consider all of a borrower’s debts, be national in scope, transparent, and publicly disclosed; the NPV model must be developed by an independent third-party. An incorrect NPV model likely will lead to further re-defaults and further harm distressed homeowners.

   Monetary Cap to Protect Public Institutions. As intended, the settlement causes financial loss to the abusers (the bank servicers and their affiliates). Unfortunately, the settlement is expected to also draw billions of dollars from those not a party to the settlement, including public institutions, unions, and individual investors. It places first and second lien priority in conflict with its original construct thereby increasing future homeowner mortgage credit costs. It is unfair to settle claims against the robosigners with other people’s funds. While we request that it not be done, at a minimum we request that a meaningful cap be placed on the dollar amount of the settlement satisfied by innocent parties. Again, restitution should come from those who are settling these claims, and

   Public Reporting. We ask that the settlement Administrator be required to make reports public and available on a monthly basis, reporting progress on clearly defined benchmarks and detailing on both a dollar and percentage basis whether the mortgages modified are owned by the mortgage servicers or the general public.

Over at naked capitalism, Yves Smith points out The Legal Lie at the Heart of the $8.5 Billion Bank of America and Federal/State Mortgage Settlements

HUD Secretary Donovan, the propagandist in chief for the Federal/state mortgage pact, has claimed he has investor approval to do the mortgage modifications that are a significant portion of the value of the settlement. We’ll eventually see what is actually in the settlement, but the early PR was that “no less than $10 billion” of the $25 billion headline total was to come from principal reductions. Modifications of mortgages not owned by banks, meaning in securitized trusts, are counted only 50% and before Donovan realized he was committing a faux pas, he said he expected 85% of the mods to be from securitizations, so that means $17 billion. [..]

But what about this investor approval that Donovan says he has? He has told both journalists and mortgage investors directly that the bulk of the mods will come from Countrywide deals and he has consent via the $8.5 billion Bank of America/Bank of New York settlement. Huh? First, it seems more that a bit cheeky to rely on a major piece of a program via a deal that has not yet gone through (the Bank of America settlement was removed to Federal court and has now been sent back to state court, and there will be discovery in the state court process, so approval is not imminent).

But second and more important, investors approved nothing. Bank of New York is trying to act well outside its authority as trustee for the 530 Countrywide trusts in the settlement. It’s tantamount to having a friend that you gave a medical power of attorney claim that it gave him the authority to sell your car and write checks on your account.

The terms of Countrywide PSAs vary, but all appear to restrict mods. The prohibitions varied by credit quality of the deal. Alt-A and early vintage (2004 and earlier) deals often barred mods completely; subprime and later vintage deals generally allowed for a higher limit on mods, with 5% the top amount across these deals. The idea was that some mods were expected in the dreckier mortgage pools. Nevertheless, all of them, as well as the few that had no caps, also required Bank of America to buy the modified loans back at par. That is something the battered Charlotte bank would be very keen to avoid doing.

This comment by Synoia sums it all up pretty nicely:

The Banks won’t be held accountable

The Banks won’t fix their past behavior

The Banks won’t change their behavior

The Banks won’t stop bribing our politicians

The Banks won’t stop gouging consumers

The Banks won’t tell the truth about any facet of their business

The Banks won’t stop taking enormous risks with other people’s money

The Banks won’t stop paying their worthless executives too much money

Need one continue?

And this settlement won’t change a thing.

Thank you, President Obama

Cross posted from The Stars Hollow Gazette

Wages have not matched inflation, unemployment for those without work for more than six months is topping 40% while real unemployment (U-6) sits at 14.9%, the housing market continues to tumble. The cost of housing, food, health care, education, transportation has gone up while wages have gone in the other direction.

That is the reality of the US economy and it does not bode well for a sustainable recovery, not without a boost from the government. Nobel Economist Joseph E. Stiglitz writes that “the labor market is a shambles” and it’s not going to improve anytime soon without a boost from the government:

Let’s assume that job creation continues at the rate of 225,000 jobs a month. That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labour force. At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025. The independent Congressional Budget Office is more optimistic, forecasting the return of full employment by 2018. [..]

Before the crisis, 40 per cent of all investment was in property. We had a housing bubble that left a legacy of excess capacity. Continuing weakness in the property sector is reflected in high foreclosure rates and low home prices. [..]

Finally, US states and local governments are constrained, to a large extent, by having to balance their budgets. They depend heavily on property taxes, so both revenues and expenditures have plummeted. This is why there are a million fewer public employees than before the crisis. Government as a whole is being procyclical, not countercyclical. [..]

Unfortunately, little has been done about the underlying structural problems. Indeed, the downturn, during which wages have not kept pace with inflation, has in many ways made US inequality worse.

Today the American economy faces three big risks. First, a steeper European downturn, as a result of the excessive austerity and the euro crisis. Second, complacency that the economy will recover quickly without government support. Though every downturn comes to an end, that should not be of much comfort. Third, that we accept that an unemployment rate above 7 per cent is inevitable.

If my Cassandra forecast turns out to be wrong, stimulus can be cut. But if it turns out to be right, and we do too little, we will live to regret it.

We need Congress and the President to stop listening to “Washington Consensus” and the “main stream” economists that are preaching “austerity” that will only prolong the economic decline and increase poverty.