Obama crosses John Cusack's "line of conscience"

The "Line of Conscience" phrase in the headline is mine. I wrote here, in the start of a series I will still complete:

Group 1 in the "Can't vote for Obama" crowd — no matter the other reasons for pulling that trigger — are those whose lines of conscience have been crossed.

I aim this at the people who say, "But President Santorum would take marching orders from Koch Bros Central." That's true; President Santorum would rule from Wichita (via its Wisconsin field office).

But there are those whose consciences are so offended (that's a war crimes link) that they cannot let themselves do one good thing for the perpetrator. Not one.

Unlike phony "consciences", these genuine cries of integrity must be honored, in my view, even if you tactically disagreed. You can fight a war, in other words, and still respect the Quakers.

There are other reasons for not voting for Obama, and many for voting for him as well. That's the point of the series — identify the reasons for and against that make sense, and sort out the ones that make no sense at all.

But back to this one — crossing lines of conscience. At what point does a generally good office-holder lose your support? What if they*:

• Stole from the office lotto pool?
• Had sex with a colleague in the back room?
• Had sex with an intern in the back room?
• Tortured frogs?
• Hit a spouse?
• Committed murder?

At the lesser "crimes" you overlook the bad for the good. But at some point in that list, if your candidate were guilty, you would not be able to support them*. He or she has crossed your "line of conscience."

Back to Obama. I've written many times:

Barack Obama is crossing lines of conscience, one Democrat at a time.

It's obvious, true on its face. And whether your line has been crossed or not, he seems to be testing us all, one step at a time. FISA betrayal? No? Bush tax cuts? Not yet? NDAA perhaps? No? Let's try this one then...

Nevertheless, as I've also said, the next Republican president will be a wrecking ball — he'll use the radical Republican governors as a template.

What are the Republican governors doing, if they can get away with it? Constitutional coup at the state level, with the goal of permanent one-party rule. It's almost impossible to say that any other way.

But this piece is not about your vote. It's about Barack Obama, lines of conscience, and John Cusack.

Here's Cusack writing at Shannyn Moore's site (my emphasis, paragraphing and asterisks; yes, plural):

[T]here are certain Rubicon lines, as constitutional law professor Jon Turley calls them, that Obama has crossed. ...

Three markers — the Nobel prize acceptance speech, the escalation speech at West Point, and the recent speech by Eric Holder — crossed that Rubicon line for me…

Mr. Obama, the Christian president with the Muslim-sounding name, would heed the admonitions of neither religion’s prophets about making war and do what no empire or leader, including Alexander the Great, could do: he would, he assured us “get the job done in Afghanistan.”

And so we have our democratic president receiving the Nobel Peace Prize as he sends 30,000 more troops to a ten-year-old conflict in a country that’s been war-torn for 5,000 years.

We can’t have it both ways. Hope means endless war? ... Why? We’ll never fully know. Instead, we got a speech that was stone bullsh*t and an insult to the very idea of peace. ...

To sum it up: more war. So thousands die or are maimed [but] he and his satellites get their four more years.

Cusack concludes:

One is forced to ask ... Is the President just another Ivy League Assh*le shredding civil liberties and due process and sending people to die in some sh*thole for purely political reasons?

You really should click over if this interests you. The article continues with a terrific interchange between Cusack and constitutional lawyer Jonathan Turley, of whom we've written much. It's well worth your time.

This election has turned into a Rorschach test for Dems, with clusters of answers and all of them about you, not the candidates.

Romney and the Koch-couped Republicans are a solid known. ("Power please, and no, you may not have it back.") Obama is also a known. ("Look out Lame Duck; you could be Dead Duck in December. Keystone, you're next.")

But what about you? The choices define your care-line. Is drone-killing babies a bridge too far? Or do you think Republicans are doing even worse? Do you prefer the slow death of Social Security to the fast? How much new carbon before Obama is a criminal too?

How about the genuine victory of electing the first Black president, offset by the fact that he too won't help the "undeserving" — "moochers" in Repub-speak; "not-bankers" in Obama-world. Talk about an ironic choice.

Fascinating stuff, I have to admit. If I didn't care about the outcome, this would make a lively and ghoulish family drama, an aching Long Day's Journey into Night for the American people and their unguarded dying democracy.

Obama or Romney? Really. How did average Americans get shoved into this box? (Oh that's right; their addiction to hating the "undeserving" and a last little straw called Bush v Gore, which passed by majority vote of an unprotesting people.)

But I do care, and I don't want to watch a friend choose which drug to die from. Trouble is, he's doing it in front of me. Cusack is another who's noticed, as has Turley. The piece is quite a find. (Interesting thought; I'll bet Cusack has acted in Long Day's Journey. Wonder if he's thinking of it now.)

* Grammar note for fans: "They" and "them" are slowly gaining the singular meaning "he or she" ("him or her") in addition to their plural meanings. Note that they, them and their are already both singular and plural in speech — "everyone has their book."

As a talk-around for the "he or she" problem, this has become my preferred solution, far less clunky than any of the others. (Fair warning — this is deliberate. In thirty years, no one will notice.)

GP

To follow or send links: @Gaius_Publius
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Bush-era holdover FHFA chief refuses to implement Obama homeowner mortgage forgiveness

This story comes to us via Paul Krugman.

Edward DeMarco, acting director of the FHFA (Federal Housing and Finance Agency) and a Bush-era holdover, has refused a request from the Obama administration to implement a program of debt relief for underwater mortgages.

FHFA is the controlling agency for Fannie Mae and Freddie Mac, "the government-sponsored lenders that were effectively nationalized in the waning days of the George W. Bush administration."

In other words, a Bush-appointee (and "civil servant" or non-political jobholder) is refusing to implement administration economic policy that offers debt forgiveness (a form of bailout) to someone other than banks.

As Krugman says elsewhere, "Fire Ed DeMarco. Do it now."

There are many angles to this story. Let's unpackage them, starting with why debt matters in the current crisis.

■ Personal debt (economists call it "debt overhang") is one of the main reasons our economy is not recovering. As I noted here:

[W]hen all the women who wanted jobs had gotten them ... our "prosperity" became debt-driven. That period lasted until, oh, yesterday (ok, 2008). By my count, that's 20-plus years of debt intake. Clearing that debt is a job that has to be done. Starting now is a very good thing.

How long will it take to clear 20 years of debt? If it "only" takes ten years, we'll have gotten off lightly — and it will feel like forever.

Also this, from the same piece:

We won't have a real recovery until that debt is either paid off or destroyed (via bankruptcy, forgiveness, or some other form of debt-clearing). ...

Think of household debt as a hole that has to be filled (with money) before big-screen spending can resume. The ratio of "debt relative to income" is a key metric in recovery of the consumer economy. The point at which debt-burdened people "feel" unburdened enough to start spending — that's when their personal economy recovers.

In other words, no recovery without debt reduction in some form. And the slow way — making every banker whole in a depressed jobless economy — can be slow the point of "never gonna happen." Personal debt must be cleared by some faster means.

■ The barriers to clearing personal debt are many. They include:

1. Republican desire to kill the economy in order to recapture the White House.
   
   
2. The desire of both Democratic and Republican elites (office holders and power brokers) to make sure their paymasters (sorry, our bankers) don't lose a dime.
   
   
3. The desire of the rubes (sorry, media-led American voters) to make sure no "undeserving" person gets one federal cent that a rube might otherwise pocket for himself.

About the first, need any more be said?

About the second, Krugman notes this about the Obama administration's debt-relief policy:

Unfortunately, the administration’s initial debt relief efforts were ineffectual: Officials imposed so many restrictions to avoid giving relief to “undeserving” debtors that the program went nowhere.

About the third, as soon as Lyndon Johnson–created welfare programs benefited dark people, white America rebelled. From Nixon's "southern strategy" to Reagan's "welfare queens" to Clinton's "welfare reform" — the War on Poverty quickly became a war on the poor. To thunderous bipartisan applause.

■ The Obama administration has apparently seen the light, or at least some of it. Krugman again:

More recently ... the administration has gotten a lot more serious about the [personal debt] issue. And the obvious place to provide debt relief is on mortgages owned by Fannie Mae and Freddie Mac ...

The idea of using Fannie and Freddie has bipartisan support. Indeed, Columbia’s Glenn Hubbard, a top Romney adviser, has called on Fannie and Freddie to let homeowners with little or no equity refinance their mortgages, which could sharply cut their interest payments and provide a major boost to the economy.

The Obama administration supports this idea and has also proposed a special program of relief for deeply troubled borrowers.

That administration support involves Tim Geithner and the Treasury Department. Krugman from a different source:

Treasury Department [has requested that FHFA] offer debt relief to troubled homeowners ... backed by an offer by Treasury to pay up to 63 cents to the FHFA for every dollar of debt forgiven.

But DeMarco, acting head of FHFA, has refused the offer. And that's where things stand. For Krugman, this is unacceptable.

[T]here is simply no way that it makes sense for an agency director to use his position to block implementation of the president’s economic policy, not because it would hurt his agency’s operations, but simply because he disagrees with that policy.

■ Who is Ed DeMarco and why is he acting this way?

He’s a civil servant who became acting director of the housing finance agency after the Bush-appointed director resigned in 2009. He is still there, in the fourth year of the Obama administration, because Senate Republicans have blocked attempts to install a permanent director. And he evidently just hates the idea of providing debt relief.

He's a Bush holdover (a kind of embed) who ended up acting director because of Mitch McConnell's obstructionism. If he can't be fired, he can certainly be replaced at the start of Obama's second term via a recess appointment, something Krugman strongly advocates.

As to why this refusal to act, Krugman and I differ. He puts all the blame on the aforementioned Senate Republicans, with some justification.

I put the blame on Obama, for not clearing out the embeds years ago — apparently not even wanting to.

And now that he has finally decided to offer a dollop of non-banker bailout (albeit timed for election season), his four-year indulgence of Ed DeMarco has bit him hard.

■ Will DeMarco get away with it? I'm going to guess Yes, though I could be wrong. Even though he's likely doing R-party bidding (Krugman is right about that), his defense will appeal to point three above — rube-hate of the "undeserving" — a position that Mr. Obama, I strongly suspect, fully shares.

How will we know if I'm right? See if DeMarco gets fired (that may or may not be possible). Then, after the election, see if he gets recess-appointed out. I think the odds may be in my favor.

UDPATE: David Dayen agrees that DeMarco won't be fired. Scroll down for the reason.

GP

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Citibank won't take Minneapolis mom's mortgage payments; home to be auctioned Wednesday

UPDATE: Victory.
________

Some stories just write themselves, and this is one I wish hadn't made my job easier.

The headline tells the tale. The wrinkle is that the homeowner's son is an Occupy Homes Minnesota activist. From the press release:

Colleen McKee Espinosa, a single mother of three -- including Nick Espinosa, a volunteer organizer who has helped other homeowners fight foreclosure -- hoped that negotiations with officials at Citibank would allow her to catch up on her mortgage and keep her home. But Citibank still has the home scheduled to be auctioned off at a sheriff sale at 11am on Wednesday, June 13th.

McKee Espinosa, a registered nurse, has owned her home for 16 years. Last year, she attempted to pay her Citibank mortgage to catch up on two past-due payments on the indicated due date. The bank told her the home had already been sent into foreclosure.

“I’ve come up with the money I owe them but they refuse to take it,” McKee Espinosa said.

After the Minneapolis Star Tribune, the blog Crooks and Liars, and others covered the story, Citibank officials contacted the family, assured them they were doing everything they could to resolve the case, and assigned them a contact in the "executive response unit." Despite this, the bank is moving to auction the home at a sheriff's sale this Wednesday at the Hennepin County Government Center, after which time the bank would have no legal obligation to work with the family.

They're not going easily, though I don't know what their recourses are:

"My mother has struggled her whole life to keep our family afloat and give my siblings and I a better life than she had," said Nick Espinosa, "I've dedicated the last 8 months of my life to helping families fight against unjust foreclosures and the greedy banks that would rather leave homes vacant than work to keep families in their communities even after being bailed out with our tax dollars. CitiBank won't be stealing the home I grew up in from my mom--it stops here."

The family has seen a huge outpouring of support from the community since the campaign started. McKee Espinosa's union of 20,000 nurses statewide, The Minnesota Nurses Association, St. Anthony East Neighborhood Association, and hundreds of neighbors have called for Citibank to negotiate with the family and signed an online petition asking Citibank to work out an agreement with the family. Most neighbors on the block have sent letters to Citibank and display yard signs in support of the family.

"I have decided that I'm not leaving my home until we get a good faith negotiation. I'm fighting to send the message to other people not to give up, because if you're isolated you can't fight these people,” said McKee Espinosa. "I'd tell the banks they better watch out because people are catching on to their game and a lot of people are going to fight back now."

As near as I can gather, the foreclosures are happening because mortgage banks benefit more from foreclosures than from homeowner-friendly deals that keep the mortgage checks coming in. Bad news for the investors in the mortgage-backed securities, but good for the banks.

Rats on a sinking ship. The banks — who created these mortgages en masse in order to fill the feeding maw of the Giant Pool of Money looking to invest in the then-hot securities — are basically saying "Tough to be you" to the same investors they fed. The banks get some money, while the securities approach zero in value.

Money. Brings "eye of a needle" to mind.

GP

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Digby and David Dayen explain why Obama won't unravel the Mortgage Fraud Mess

David Dayen is as on top of the bank-fraud mortgage-fraud mess as anyone in the country. And this conversation between Dayen and Digby (an able interviewer) is as good an explanation of the rule of law aspect of this problem facing Obama and the legal system (both) as I've heard.

It's cogent and very listenable, despite the technical nature of the problem. Dayen is good on this subject, and I'm glad to present his walk-through. Thanks also to Jay Ackroyd and the good people at Virtually Speaking for bringing it to us.

Note that while this is a one-hour segment, the mortgage discussion lasts only till the midway point. The rest is about the War on Women, also good, but if you came for the mortgage discussion only, feel free to stop there.

(Hint: Holding down the right and left arrow keys performs an excellent fast-forward and fast-rewind. Use them for navigation.)

Listen to internet radio with Jay Ackroyd on Blog Talk Radio

For more on this topic, see here from Rachel Maddow, and this, our own primer on the fraudulent mess.

GP

(To follow on Twitter or to send links: @Gaius_Publius)
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One in seven Americans pursued by 3rd-party debt collectors, double the percent in 2000

This is a great catch by Matt Stoller writing at Naked Capitalism. I'll keep this short and send you to the original post.

The bottom line is that the percentage of people pursued by third-party debt collectors has doubled in 10 years. Stoller (my emphasis and some reparagraphing):

I went through the Federal Reserve’s Quarterly Release on Household Debt and Credit released today, and there were two notable trends.

One is that the amount of consumer debt is declining, but that delinquency rates are stabilizing above what they were before the crisis.

And the second is in this graph, which is that the number of people subject to third party collections has doubled since 2000, from a little less than 7% to a little over 14% of consumers. Ten years ago, one in fourteen American consumers were pursued by debt collectors. Today it’s one in seven.

Here's the graph he mentioned; click to open in a new tab. When you do, note that the big jumps in the blue line — the line showing debtors — occurred during the early and mid Bush II years, well before the banking crisis.

People are simply getting poorer. Stoller calls this the "new social contract," fingers both Bush II and Obama for the change, and says it "suggests we live in a different country than we did just ten years ago." He's right; this is not your daddy's U.S. of A.

There's more at the link, including some information on the re-emergence of debtor's prisons, if you can believe. Be sure to click through on that one. It's not an overstatement.

As for you, Mr. Who Else You Gonna Vote For? — look to your legacy. Word.

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AG Schneiderman: Mortgage settlement deal "small" but "significant"

Greg Sargent interviews AG Schneiderman about the mortgage settlement. It's long, here's a snippet:

Interestingly, Schneiderman vowed that if the task force to probe mortgage practices set up by the president — which he co-chairs — stalls or drags its feet, he would speak out publicly against it. Some critics, such as David Dayen, have expressed skepticism that it would have the resources and leeway it needs to secure real accountability.

“I will speak up if I don’t feel that the rights of American homeowners are being protected and we’re not pursuing the investigation as aggressively as we should,” he said. “If things break down and things don’t work I’m prepared to speak up and take action. But the initial signs are really positive.”

Pressed on conflicting reports about whether the resources would really be there, Schneiderman said that a whole range of government agencies would be part of the probe. Importantly, he insisted this range would ensure a “full juristiction we need over all the different types of misconduct that contributed to the implosion of the economy.”

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Taibbi on Schneiderman's task force—plus a primer on mortgage fraud

Matt Taibbi has a very nice piece on Obama's brave new populism: "Is Obama's 'Economic Populism' for Real?".

The title is itself a topic, and I'll leave that for later. Further in the article Taibbi also discusses New York AG Eric Schneiderman and the bank fraud task force proposed by Obama in his State of the Union address.

The Schneiderman appointment raised a lot of questions. Is he selling out? Is he putting himself in better position to push his prosecutions? Is he being "ring-fenced" by a wily Obama? Will the fact that he's only co-chair dilute his effectiveness?

Most of these questions still aren't settled, but Taibbi does make some things clear (my emphasis throughout):

Some people have been confused about Schneiderman’s new role. The new Unit on Mortgage Origination and Securitization Abuses will not be investigating the same abuses covered in the foreclosure settlement. When the public thinks about corruption in the housing markets on the part of the big banks, what it mostly thinks of is robosigning and the other mass-perjury issues, which is the stuff targeted in the foreclosure settlement.

But in fact those problems were a tawdry little sideshow to the more serious crimes of the housing crisis.

Taibbi then quotes Schneiderman himself on this difference:

Schneiderman said Wednesday his dual roles — raising concerns about a multi-state settlement with the major banks and investigating the mortgage problem — wouldn’t be at odds.

“These are abuses in the foreclosure process. Our working group is focusing on the conduct related to the pooling and the creation of mortgage-backed securities and issues relating to the conduct that created the crash, not the abuses that happened after the crash.”

Keep in mind the mortgage business, as it evolved during the housing bubble, had two ends and a middle. Fraud related to the mortgage market crash occurred at each end.

The two ends are — (1) The consumer end. Home-buyers contracted with banks and mortgage sellers like Countrywide for loans. These are debt contracts. (2) The banking end. Banks sold "securities" using bundles of mortgages as the underlying "thing of value" to its largest (and often, most gullible) customers. There's fraud at both ends.

(The middlemen were the people buying mortgages from people like Countrywide, creating the bundles (the so-called "RBMSs"), then selling them wholesale to the banks — for a very fine fee of course. Those guys are SOL these days — that business is dead — but to my knowledge they're not being investigated for fraud.)

In simple terms, here's what happened. It actually started at the banks-selling-to-customers end, with what a brilliant This American Life documentary calls "The Global Pool of Money". (If you've never heard this documentary and its two follow-ups, you should. They are masterpieces of clarity and research.)

The "Global Pool of Money" means all of the big-boy investment money in the world — the sovereign wealth funds, pension funds, massive investment trusts, hedge funds, bank investment funds, the whole lot — all sloshing around looking for a place to park itself at a profit. After the high-tech crash, much of that investment money (a great many trillions) just sat, going nowhere, earning almost nothing.

As you can imagine, the advisers and directors of these investment funds are not strangers to each other. Far from it — they golf together; they ride in each other's jets; they date each other's wives; they hire politicians to strew roses in each other's footpaths. They use the same tailors, bribe the same corrupt officials, hire the same chauffeurs, and tell each other tall tales behind walls of houses in communities you're not even allowed to know the names of.

It doesn't take much for word to get around in this small group. One day, they discovered "securities" backed by RBMSs (mortgage bundles) — all paying tons of money in a nicely booming housing market — and the race was on. All those trillions of dollars suddenly could not buy enough slices of RBMS-backed securities as sold by the banks.

(Who was the first little bird that whispered the first little news into the first global shell-like ear? Likely a man named Greg Lippmann, a senior trader at DeutscheBank; see below.)

The Global Pool became immediately hungry for this stuff, which created a serious problem for the banks. What kind of problem? Imagine you have a hotdog stand, you buy 1000 hotdogs a day, and mostly sell out. One day, one million people line up in front of you looking for a hotdog. Needless to say, you try your best not to disappoint.

In the case of the banks, they "failed to disappoint" by telling the small-time shops (the middlemen who were creating the RBMSs for them) — "Can you speed it up? Like, Now?" The RBMS shops, who were taking a very sweet slice of the pass-through business, said, "No prob." They in turn went to mortgage lenders like Countrywide, creators of the mortgages themselves, and said, "Big prob — the Global Pool is hungry, and the banks want more mortgages than exist in the world right now."

Countrywide smiled and said, "Got you covered." Then they (not Fanny and Freddie) put anyone with a pulse into a mortgage, sold the paper to the RBMS shops, who rebirthed them into "securities" and sold them to the banks, who in their turn, bundled, tranched and sold the result to the real customer — the Global Pool of Money.

The whole thing was made of tulip bulbs, but prices kept going up, the sales and pass-through fees were huge (seriously; that's where much of the money always is), and there was an enormous side business "insuring" these monstrosities, which meant even more fees. Global "wall street" was swimming in cash and bonuses; the Global Pool thought it had found pieces of old King Midas, all by itself.

How good were the mortgages really? A great many weren't even recorded, and a great many people were lied to in the process of getting them sold. That's the consumer-side scandal (under the umbrella terms "robosigning" and "foreclosure") that the AG settlement duel is about. NY AG Schneiderman is a major thorn in the side of that wrist-slap attempt (pushed by the banks, and ultimately, the Obama administration).

Now ask yourself — How good could those "securities" be, which were sold into the frenzied maw of the Global Pool of Money? Only as good as the mortgages themselves. That gigantic hunger, and the underlying shakiness of those RBMS-backed "securities," is what the 2008 crash was all about.

Investors woke up when the housing market finally turned down, a possibility no one in that world thought ever would happen. (Proof that rich doesn't mean smart, I guess.) At that point smart investors realized the bankers (and the ratings agencies) had lied.

In the new declining housing market, most of that "AAA-rated" stuff turned out to be worth far less than the banks had said they were. The Global Pool of Money lost its global shirt, the people insuring the Global Pool lost their shirts as well (that's the AIGs of the world, plus some banks and hedge funds); and everyone who held these things in their portfolio — including lots of banks — were stuck with investments no one wanted to value because no one wanted to know how low the number was.

The party was over, and everyone who bought this stuff knew they were up a creek.

How much fraud was involved at the banking end? It looks like a lot. And that's what Obama's shiny new task force, if it performs true to its purpose, will go after.

That's the big enchilada. How big? Back to Taibbi:

My first thought, when I heard about this deal, was that Schneiderman was deciding to compromise on robosigning and other post-securitization abuses, in exchange for a mandate to go after the much bigger crimes, which took place in the origination/securitization stages.

The securitization offenses were massive criminal conspiracies, identically undertaken by all of the big banks, to defraud investors in mortgage-backed securities. If you’re looking for an appropriate target for a massive federal investigation, one that would get right to the heart of the corruption of the crisis era... well, they picked the right target here.

If they were to do a real clean sweep on securitization, the federal prisons would end up literally teeming with senior executives from the biggest banks. A lot of very big names would end up playing ping-pong and cards in Otisville and Englewood.

The question is, how real of an investigation will we get? The fact that Schneiderman’s co-chairs are Lanny Breuer and Robert Khuzami make me extremely skeptical. I’m actually not sure that both men, in an ideal world, wouldn’t be targets of their own committee’s investigation.

Taibbi goes on to talk about Khuzami and Breuer. Khuzami got on our own radar in this story. As Yves Smith wrote (quoted in that earlier story):

[Khuzami] was General Counsel for the Americas for Deutsche Bank from 2004 to 2009. That means he had oversight responsibility for the arguable patient zero of the CDO business, one Greg Lippmann, a senior trader at Deutsche, who played a major role in the growth of the CDOs, and in particular, synthetic or hybrid CDOs ...

A "CDO" (collateralized debt obligation) is just the banking term for what this whole article is about — the "security" created by the banks, using RBMSs as the underlying thing of value. (Individual mortgages got packaged into RBMSs; RBMSs got bundled, sliced and sold as CDOs.)

What Smith is saying is that Khuzami was the boss of the guy who first created the hunger for mortgage-backed "securities" in the Global Pool of Money.

And as Khuzami's apparent reward, Thank You Street has convinced Barack Obama to make him Schneiderman's co-chair in investigating this mess, where he can perhaps do still more damage.

See why people are scratching their heads over this?

Bottom line — It really is the big enchilada if the Task Force does its job. Every big bank in the country will have execs in jail, and as our Matt Browner Hamlin pointed out recently, the banking industry itself could collapse and need restructuring. Matt argues, along with others, that the restructuring should have happened already, in 2008, so it's long overdue.

This is the biggest story in the country you probably can't wrap your brain around, but we're trying to help out. Please stay tuned. We sure will.

[Update: Corrected for my bad spelling, plus some added links and cleanup.]

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Romney falsely claimed he didn’t know he profited from mortgage crisis

Romney claimed against at last night's debate that he had no idea his "blind trust" had invested in Fannie Mae and Freddie Mac, and made a tidy sum of money from the mortgage lenders as they were foreclosing on Americans across the country. In other words, Romney profited from the mortgage crisis. National Journal did the fact check, and found out Romney wasn't telling the truth.  I won't quote it because it's not very long, go read it for yourself.  Bottom line: Romney claimed the investments were in a blind trust (something he's criticized before) and they weren't. Read the rest of this post...

The President needs to push the banks to lend, and refinance mortgages

Interesting column about how banks are refusing to lend to small businesses with perfect credit ratings.

Three years ago, the federal government used tens of billions in taxpayer dollars to save the banking system. Now, at this dire economic moment, the country needs the banks to return the favor. Pushing the country’s banks to act more like Sterling Savings Bank, and less like JPMorgan Chase, is something that the president might want to put on his jobs agenda.

And how about pressuring banks to let people with stellar credit ratings refinance their mortgages to a lower rate? I contacted my lender to ask about refinancing and was told "no" because my mortgage had to be less than 75% of the total value of my house, or something like that. It didn't matter that I have a perfect credit rating, or that my place is worth a good deal more than my mortgage (in a town, DC, where property values are actually going up). No, the bank is going to insist that I pay more in my monthly mortgage payments, rather than less, because they're afraid I might not be able to pay at all.

Now think about that for a moment. They're going to make me pay MORE each month, instead of LESS, because somehow if I owed less each month that would put me at greater risk of not paying at all.

Uh, no. Kind of the contrary.  Owing less each month would put more money in my pocket, which would not only make it easier to pay the mortgage, it would give me more disposable income to spread around the rest of the economy.

It's absurd that I can't refinance. And I'm sure lots of others are in the same situation I am. These are the kind of sensible things the government can and should be addressing. And for whatever reason, they're not. Read the rest of this post...

Reminder: In 2010 Iowa AG Miller was major recipient of new out-of-state bank & finance money

There's been a lot of sniping about New York AG Eric Schneiderman's refusal to go along with Iowa AG Tom Miller in his attempt to construct a "deal" with Bank of America in the robosigning–mortgage fraud scandal. (I put "deal" in quotes because some have called it a "whitewash" instead — more here.)

For example, just this morning, Miller and others got a nice opportunity from the Washington Post to whine their hearts out (Matt's good coverage of that is here).

And the Obama administration has sided squarely with Miller & the banks against Schneiderman, perhaps because banks are where the money is, and Obama's got a brand new $1 billion ad campaign to finance.

So it's useful to be reminded of this, Matt Taibbi at his prognosticative best, writing way back in April (is it really September?) about Tom Miller and his "special relationship" with those banks he's brokering a deal with (sorry, "investigating"). Taibbi's italics, my bolding and re-paragraphing below.

Best Way to Raise Campaign Money? Investigate Banks

A hilarious report has come out courtesy of the National Institute of Money in State Politics, showing that Iowa Attorney General Tom Miller – who is coordinating the investigation into the banks’ improper mortgage dealings – increased his campaign contributions from the finance sector this year by a factor of 88!

He has raised $261,445 from finance, insurance and real estate contributors since he announced that he was going to be coordinating the investigation into improper foreclosure practices. That is 88 times as much as they gave him not over last year, but over the previous decade.

This is about as perfect an example of how American politics works as you’ll ever see. This foreclosure issue is a monstrous story that is somehow escaping national headlines [that was April; no longer]; essentially, all of the largest banks in the country have been engaged in an ongoing fraud and tax evasion scheme that among other things has resulted in many hundreds of billions in investor losses, and hundreds of thousands of improper foreclosures. ...

Put it this way. If the banks had to pay what they actually owed – from the registration taxes/fees they avoided by using the electronic registry system MERS to the money taken from investors in toxic mortgage-backed securities to the fees and payments stolen from homeowners via predatory loan practices and illegal foreclosures – they would probably all go out of business. That’s how much money is at stake here: the very future of financial giants like Bank of America and Citi and JP Morgan Chase is hanging to a very significant degree on the decisions of politicians like Miller.

Hence the sudden avalanche of money sent Miller’s way. The numbers are laughable. In 2006, out-of-state donors gave Miller’s campaign $10,508. For the 2010 cycle, that number was $497,357. Three lawyers by themselves – Al Gore’s attorney David Boies, plus Donald Flexner and Robert Silver, all partners in the firm Boies, Schiller and Flexner – gave Miller a total of $60,000.

Guess who Boies’ firm defended last year, in a suit brought by an Australian hedge fund that claims it was ripped off in a deal involving toxic mortgage-backed CDOs? That’s right: Goldman, Sachs.

And that's how it works. Tom Miller's a made man. Taibbi in April. (If you want to drill down, the underlying numbers are here.)

Schneiderman and others are working to kill that deal. And for their efforts, Obama surrogates take him on, and the Washington Post helpfully muddies the waters.

Re-read Matt's piece, then ask yourself: Isn't justice usually the goal of an Attorney General. It is on my TV.

UPDATE: And now MoveOn has taken Schneiderman's side. So much for under the radar.

GP


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Stiglitz on Dodd-Frank: "We are once again at risk of a freezing of the credit system"

Another segment of Chris' and my interview with Nobel economist Joe Stiglitz. In this segment, Stiglitz talks about the mortgage crisis in America, and about the Dodd-Frank banking bill (he's not a fan).

Stiglitz on the mortgage crisis:

"We could have avoided this, but the bankers didn't want it, and unfortunately the Obama administration gave in to the bankers.  They kept listening to the bankers in the design of the programs that would help owners, and they kept putting forth programs that many economists that looked at them said they're not going to work. They didn't listen, they didn't work, and here we are years after the bubble broke still trying to deal with this problem."

He goes on to to say that Dodd-Frank bill didn't go far enough.

"The market has no confidence in the banking sector.  There's a lot of non-transparency.  And that means when rumors go around about what is going on, everybody knows they don't know.  The consequence is that we are once again at a risk of a freezing of the credit system."

Previous interview snipets:

* Stiglitz: Probabilities of a double dip recession "certainly have increased significantly" (3:17 long)

* Stiglitz: Obama administration and the Fed have demonstrated an "inability to make economic judgements." (1:09 long)

* Stiglitz: "The Fed is very good at creating problems, not so good at resolving them.... QE3 won’t help" (6:46 long)

* Stiglitz: "The only thing that can be done (to help the economy in the near term) is fiscal stimulus, spending more money." (1:01 long)

* Stiglitz: We are bearing the consequences of Obama/Congress not pushing state/local aid in 1st stimulus. (2:05)

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Huff Post/Dylan Ratigan plan Mortgage Madness Meetups

Interesting. Apparently, a large part of the reason they're planning these meetups is because the administration's mortgage foreclosure prevention program isn't helping nearly as many people as planned.

The Garwoords' experience with their bank - the unexplained delays; the conflicting advice; the lost documents; the difficulty in finding a human being to talk to, let alone one familiar with their case; the inexplicable fees and letters of rejection - is familiar to millions of homeowners who have sought mortgage modifications either through HAMP or a bank's own program. Based on hundreds of hours of interviews with homeowners over the past two years, a strikingly clear picture emerges of the similarities between the many experiences of homeowners that are unique only in their details. A homeowner lost in the maze of a bank's phone system may feel alone but, in reality, is lost with millions of others. To connect homeowners who've had similar trouble with their banks, HuffPost is teaming with Meetup.com and MSNBC's Dylan Ratigan to launch Mortgage Madness Meetups across the country. Get a Meetup in your neighborhood going here.

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Florida judge: We don't look at the mortgage foreclosure paperwork we process

Thanks to Matt Taibbi, who's been all over the foreclosure crisis, including what's been happening in the courtroom, comes this, from the Sarasota Herald-Tribune:

Judges do not question the documents unless homeowners question them first, so they continue to rule in favor of lenders. Twelfth Circuit Chief Judge Lee Haworth said judges must remain neutral in court, and cannot raise possible defenses -- such as bad paperwork -- on behalf of homeowners who choose not to fight, or don't know how to fight, their foreclosure.

"The judges will accept, as they do in every case, pleadings that are represented by counsel as legitimate," said Haworth. "It's the defendant's case. ... If they don't want to hire an attorney, that's their business."

Before that starts to sound reasonable to you, consider this. Taibbi:

[T]he idea that it is beyond a judge to open a file and simply check to make sure the names and dates are right -- particularly given the widespread coverage of this phenomenon, when we know that virtually 100% of these securitized mortgages lack proper paperwork and will inevitably involve fraudulent or doctored filings upon foreclosure -- that is appalling.

This just gives judges a way to be complicit.

Why would they want to do that? you ask. It's the Judge Judy–Jerry Springer effect. Taibbi says it his way (my emphasis):

Judges I think are long used to the idea that individual people are deadbeats and don't pay bills -- they've seen enough lying-ass individual debtors stand in their courts with their faces unshaven and their shirts untucked, trying to sell them excuses and stories -- but they haven't quite made it to a place where they can accept the idea that the nation's top 10-20 banks could be engaged in ongoing criminal conspiracies. I think it blows their minds and they don't believe it.

My answer: Ignore the rest and look just at the bolded part above. We're carefully conditioned by Judge Judy and Cops on Parade (all politically slanted "culture" shows) to think of low-wage-earners-facing-The-Law as automatically wrong — and automatically disgusting.

Judges swim in that cultural pool as well; they drink the same tainted water you do. That thirty-year war against the poor — you could almost think it was planned by someone with something to gain, and someone to manipulate.

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The case for a foreclosure moratorium

From Ezra Klein:

EK: And you don’t worry about an intervention like this freezing the market? Insofar as we're inching back to normalcy, that’s at least partly because markets are working normally. If I understand what you’re saying correctly, it’s that a moratorium makes sense not just due to paperwork problems but as a housing policy. But if the government freezes these contracts in order to open them up, that’ll be a whole new ballgame for everyone invested in, or connected with, these industries, both now and in the future.

JT: No, I don’t. We’re not out of the woods with this economy. We’re deep in the jungle. We’re still looking at twice as many foreclosures as we’ve already experienced, and if unemployment gets worse, those numbers will go higher. Unless this situation gets managed, properly, we’re going to continue to have foreclosures dragging down our economy. Things may be going well on Wall Street, but it’s really not going well on Main Street. If people think we’ve gotten through this, they’re really misguided.

This is beyond just the robo-signing and the paperwork. This is a continuing continuum of bad practices and fraudulent lending that got us into this situation. And yes, some of those institutions that did the worst of it are gone, but other institutions have purchased them -- and that means they purchased their responsibilities, too. These homeowners were thinking that the bank wouldn’t be making them a loan if they couldn’t pay it back. They were told interest rates were going down, that they could do this, and they believed it. The responsibility began with the lenders, and it still lies with them. Dodd-Frank actually had to legislate that you can’t make a loan to anyone who doesn’t have the ability to pay. The fact that we had to legislate that tells you how far our financial-services sector fell.

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Mortgage problems could cost banks billions

It's anyone's guess how much but the consensus now is that it will not be cheap. (One industry analyst says it could be over $80 billion.) The longer it takes the banks to clean up their mess the more expensive it will be for the banks. The Obama administration is not interested in pursuing the banks or helping consumers beyond gentle requests but the state attorney generals are much more serious about this problem. Despite the "blame the buyers" approach by the banks, many see this as a serious legal issue for the banks. Time is money and there is a lot of time ahead before this is cleaned up.

Wall Street initially hoped the banks would do just that but as the political furor grew, a quick end to the crisis was looking less and less likely. On Wednesday, 50 state attorneys general announced they were investigating the practices of the mortgage servicing industry, while Florida’s attorney general subpoenaed the nation’s largest mortgage processor, L.P.S., as part of a broader investigation.

In some cases, officials at mortgage servicers signed hundreds of documents a day with barely a chance to review them — the so-called robo-signers — while doubts have arisen about the veracity of the original documents compiled as part of the foreclosure process.

“I don’t see how it can be cleared up in a short period of time,” said Richard X. Bove, an analyst with Rochdale Securities. “The moratorium won’t last that long but the problem will last at least four or five years, maybe a decade.” In the short term, he said, “it could easily cost $1.5 billion per quarter.”

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Reid calls on lenders to halt foreclosures in all states

Wash Post:

Senate Majority Leader Harry Reid (D-Nev.) called on major lenders to halt foreclosures across the country Friday following Bank of America's announcement that it will suspend all such proceedings until a review of possible paperwork problems is completed.

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Obama pocket vetoes bill that would make foreclosures easier

Very good news, and some rare quick (and good) action from the White House. Chris wrote about this topic this morning. And KagroX, aka David Waldman, has some interesting analysis of the pocket veto that borders on being over this lawyer's - see if it rises above yours. Read the rest of this post...

New round of foreclosures threatens housing market

Wash Post:

The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can't obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

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Fannie Mae's 2nd-quarter losses triple what was expected

As Chris has written many a time, tell me again how this crisis is now over? Read the rest of this post...

Extreme Home Makeover to Foreclosure in Three Short Years

I'm not entirely sure what to make of this story to be honest. From AP:

More than 1,800 people showed up to help ABC's "Extreme Makeover" team demolish a family's decrepit home and replace it with a sparkling, four-bedroom mini-mansion in 2005.

Three years later, the reality TV show's most ambitious project at the time has become the latest victim of the foreclosure crisis.

After the Harper family used the two-story home as collateral for a $450,000 loan, it's set to go to auction on the steps of the Clayton County Courthouse Aug. 5. The couple did not return phone calls Monday, but told WSB-TV they received the loan for a construction business that failed.

When you get into the details, it's really hard to understand:

Materials and labor were donated for the home, which would have cost about $450,000 to build. Beazer Homes' employees and company partners also raised $250,000 in contributions for the family, including scholarships for the couple's three children and a home maintenance fund.

So a bunch of people volunteer their time, give these folks a free house, and they go off and take a loan out for the value of a house they would never have had if people hadn't given it to them? That's unconscionable to me. They didn't receive a $450,000 cash gift, they got a home for their family.

You see signs of this everywhere - Americans don't have a clear enough understanding of the fundamentals of money. The Harper family had access to a $450,000 home that was completely paid off. Taking out a loan against a home puts the home at risk if you can't pay the bills. Instead of long term security for their family, the Harpers saw a $450,000 ATM. Most Americans would kill for the Harper's American dream - a completely paid off home.

Just because a bank will give you the money doesn't mean that you should take the loan. These people, clearly, would never have been in a $450,000 home as they didn't have the income prior to the show to support that loan. Now I'm not in the category of those who believe that everyone who is in financial trouble right now got there because of lack of understanding money - there were many examples of just plain false and illegal practices (This American Life did a great show on this). What I am saying is that fundamentals of money would suggest that one not put their primary asset, their home, into jeopardy to start a business. A portion of it? Maybe, but in this circumstance I don't think it's justified.

Do I blame the Harpers? I'm not sure. They're just following the lead of the President - borrowing without thought as to the risk to the future. Our adventure in Iraq is costing America billions of dollars - dollars that we are borrowing and now owe interest on. I don't know that most Americans fully understand the long term implications of this policy. But in simpler terms than long-bond maturity dates, it works the same way anyone who has a credit card knows - if you let the debts pile up, it can take years to work them off. For a nation, it means transferring the debts of one generation on another. The Harpers lost their home as a result of their over-extending their assets, and it's a good lesson for us not just as individuals, but a nation as well. Sometimes if you don't have the money, you can't afford it. Read the rest of this post...