Perhaps nowhere is our present day, corporate kleptocratic truth most self-evident (even moreso than the travesties upon which I've reported that are now occurring in our nation's job market, wherein the rich are getting richer while everyone else is getting poorer) than when it comes to our nation's housing and mortgage markets. But, to discuss the severity of this over-arching matter (we're talking about the primary asset of most middle class Americans) as it relates to the well-being of the unwashed masses on Main Street, one has to understand that we're talking about the following related truths, too...
1.) The primary asset of most middle class American families is their home. It's not investments in the stock market, where the top 10% of our society owns somewhere between 90% and 98.5%, depending upon which sources you quote, of all marketable securities and related investment vehicles. The housing market is in a very self-evident--and I'm being quite kind here--double-dip recession whose downward trajectory has now surpassed levels set in the Great Depression. It is all but official/conventional wisdom that things are getting worse in U.S. housing, not better. Anyone that tells you housing has "stabilized" is, IMHO, either ignorant or lying. Perhaps a far more negative (and much less publicized) truth here is that, as I covered it in great detail in THIS recent diary, assuming these projections of an even greater dive in home values continues, more than half of our nation's homeowners will be underwater (owing more than their properties are worth to our nation's insolvent -- yes, insolvent -- banks) well before the year ends.
As I reported it on February 23rd, when Barron's Magazine senior editor Alan Abelson--one of the "deans" of the U.S. financial press--tells us things are "Worse Than You Ever Dreamed," that's just a small indication of the severity of the matter.
Do the math. While the publicly-stated percentage of homeowners underwater is approximately 23%-24%, as Abelson noted (see links above) just a couple of weeks ago, the median U.S. homeowner maintains only 2.5% equity in their home. With a projected, ongoing price drop of anywhere from 5%-25% (low-end versus high-end forecasts) in residential real estate, nationally in coming months, there's really very little else that one needs to know.
2.) A quick review (see below) clearly reminds us that our government is totally owned by Wall Street. Corporate accounting trickery is now institutionalized; and, the pervasive, bipartisan mentality in Washington is to overlook Wall Street's ongoing transgressions against Main Street as far as all of this is concerned.
As I described it in detail in my diary from February 4th, "Endgame," D.C. is busy lining the pockets of our nation's status quo with taxpayer cash, as they execute a long-term gameplan which all but guarantees that bankers will never miss a meal. Meanwhile, scores of millions on Main Street break records for food stamp (i.e.: now called the "SNAP" program) use as they continue to struggle for survival.
Our elected officials' servitude to their Wall Street sponsors frequently manifests itself in beltway double-speak where, irrespective of party affiliation, the supposedly-"powerful" say one thing and do something entirely different. As Paul Krugman noted in his column concerning deficit hawkery, Friday, they might talk the talk, but they're either going nowhere fast or walking in a completely opposite direction:
...As the national debate over fiscal policy descends ever deeper into penny-pinching, future-killing absurdity, one voice is curiously muted — that of President Obama.
The president and his aides know that the G.O.P. approach to the budget is wrongheaded and destructive. But they’ve stopped making the case for an alternative approach; instead, they’ve positioned themselves as know-nothings lite, accepting the notion that spending must be slashed immediately — just not as much as Republicans want.
Mr. Obama’s political advisers clearly believe that this strategy of protective camouflage offers the president his best chance at re-election — and they may be right. But that doesn’t change the fact that the White House is aiding and abetting the dumbing down of our deficit debate.
And this dumbing down bodes ill for the nation’s future. Health care is only one of the large and difficult problems America needs to deal with, ranging from infrastructure to climate change, all of which demand that we engage in a lot of hard thinking. Yet what we have instead is a political culture in which one side sneers at knowledge and exalts ignorance, while the other side hunkers down and pretends to halfway agree.
Frankly, IMHO, I think a Matt Taibbi quote from last Summer pretty much sums up the true D.C. mentality as far as all of this institutionalized kleptocracy is concerned. From my diary on August 7th, 2010, regarding the congressional crushing of the Merkley-Levin amendment (think Volcker Rule) to the FinReg bill:
"Wall Street's Big Win
Matt Taibbi
Rolling Stone
August 6, 2010
...What happened next was a prime example of the basic con of congressional politics. Throughout the debate over finance reform, Democrats had sold the public on the idea that it was the Republicans who were killing progressive initiatives. In reality, Republican and Democratic leaders were working together with industry insiders and deep-pocketed lobbyists to prevent rogue members like Merkley and Levin from effecting real change. In public, the parties stage a show of bitter bipartisan stalemate. But when the cameras are off, they fuck like crazed weasels in heat...
3.) Nowhere is this weasel-f*cking more obvious than in the latest news, over the past few days, concerning a myriad of events within America's mortgage banking sector.
While our President talks of keeping Americans in their homes, the government's HAMP efforts, to supposedly facilitate that goal, have not just been a failure; we're talking: massive travesty. From the Pulitzer Prize-winners over at ProPublica: "By the Numbers: A Revealing Look at the Mortgage Mod Meltdown."
By the Numbers: A Revealing Look at the Mortgage Mod Meltdown
by Olga Pierce and Paul Kiel
ProPublica, March 8, 2011, 12:37 p.m.
For the past year, we've been digging into the administration's fumbling efforts [1]. We've crunched a lot of numbers along the way, and now we're sharing what we found – including loads of previously unreported data.
Using new Treasury Department figures, previously unreleased documents obtained through Freedom of Information Act requests, and new analyses of state and industry data, we have assembled the most detailed look yet at how the the mortgage industry [2] and the government's main effort, the Home Affordable Modification Program (HAMP), have failed homeowners. It provides crucial context to the ongoing government investigation into mortgage servicing practices, which might lead to reforms [3] of how banks and servicers handle homeowner requests for modifications...
...
...Here's what we learned:
•Only a fraction of struggling homeowners are getting help.… [4]
•Mortgage servicers are only reaching a small fraction of struggling homeowners.… [5]
•The largest servicers, especially Bank of America, have left most struggling homeowners in limbo without either modifying or foreclosing. [6]
•HAMP itself hasn't made much difference: It hasn't led to an increase in modifications.… [7]
•Just over one in five homeowners who applied for a HAMP mod have received a permanent modification… [8]
•And in one quarter of rejections, mortgage servicers - notorious for losing documents - have cited missing documents as the reason. [9]
•Here are your overall chances of getting a mod with each of the top servicers. [10]
•Treasury claims servicers are improving, but its own data show otherwise. [11]
•When servicers offer a mod, it's generally more affordable than mods used to be.… [12]
•But instead of mods, servicers have recently been offering more repayment plans, which actually increase struggling homeowners' payments. [13]
•In the end, most government funds set aside to help homeowners are still unused. [14]
Copyright 2011. ProPublica.org]
We're now seeing that as far as the public's best interests relating to foreclosure fraud are concerned, Wall Street's going to end up with little more than a wristslap, and not much else.
Kossack Badabing posted a great diary on much of this, just yesterday. And, if you've been following my posts, I've covered this topic extensively for a long time.
However, it's Naked Capitalism Publisher Yves Smith who's been at the forefront of this matter all along, perhaps, moreso than anyone...
(Diarist's Note: Naked Capitalism Publisher Yves Smith has provided written authorization to diarist to reproduce her blog's posts--up to and including in their entirety--for the benefit of the DKos community.)
Quelle Surprise! Fed Issues “See No Evil” Report Using Bogus Methodology to Defend Servicers
Yves Smith
Naked Capitalism
March 10, 2011
We commented earlier this week on bank defenses of their foreclosure practices:
I’ll spare you several paragraphs of the “but they were deadbeats and no one was hurt by robo-signing and all our foreclosures were warranted.” Well, if you normally operate as judge, jury, and executioner, and it’s too costly for borrowers to counteract predatory servicing, in your little self-referencing world, everything will look hunky-dory and challenges to your authority will be deemed to be improper and unwarranted.
As we have indicated repeatedly. lawyers fighting foreclosure estimate that 50% to 70% of the cases they represent are ones where the borrower is in foreclosure as a result of bank fee pyramiding and other improper fees (note there is sample bias here; contrary to bank spin, most borrower attorneys fight foreclosures when they think the case has merit). But they just about never argue in court on those grounds; the cost of hiring an expert witness and doing the forensics on full details of the banks’ overcharges is too costly.
But of course, the Fed is throwing its authority behind the banking industry spin that all foreclosures are warranted. From Shahien Nasirpour of the Huffington Post:
A months-long investigation into abusive mortgage practices by the Federal Reserve found no wrongful foreclosures, members of the Fed’s Consumer Advisory Council said Thursday.
During a public meeting attended by Fed chairman Ben Bernanke and other regulators, consumer advocates on the panel criticized federal bank regulators for narrowly defining what constitutes a “wrongful foreclosure.” At least one member of the panel voiced concerns that the public would not take the Fed’s findings of improper practices seriously, since the wide-ranging review did not find a single homeowner who was wrongfully foreclosed upon….
Kirsten Keefe, a member of the Fed consumer panel and an attorney at the Empire Justice Center in Albany, New York, said the Fed’s report defined “wrongful foreclosures” as repossessions of borrowers’ homes who were not significantly behind on their payments….
But Keefe, who represents troubled borrowers, argued that the definition should be expanded to include foreclosures in which the wrong party brought the foreclosure action or cases that involve significant errors in foreclosure documents, like an inflated past-due amount, for example. Other consumer advocates at Thursday’s public meeting appeared to agree.
FYI, the Fed apparently has not released the actual document, no doubt to save itself well warranted ridicule.
The more this sort of whitewashing of abuses goes on, the closer the US gets to its Egypt moment.
And, then there's this from Yves, from Tuesday...
Mortgage Settlement Term Sheet: Bailout as Reward for Institutionalized Fraud
Yves Smith
Naked Capitalism
Tuesday, March 8, 2011
American Banker posted the 27 page term sheet presented by the 50 state attorneys general and Federal banking regulators to banks with major servicing operations.
Whether they recognize it or not, this deal is a suicide pact for the attorneys general in states that are suffering serious economic damage as a result of the foreclosure crisis. Tom Miller, the Iowa attorney who is serving as lead negotiator for this travesty, is in a state whose unemployment was a mere 6.2% last December. In addition he is reportedly jockeying to become the first head of the Consumer Financial Protection Bureau. So the AGs who are in the firing line and need a tough deal have a leader whose interests are not aligned with theirs.
Moreover, Miller’s refusal to discuss even general parameters of a deal goes well beyond what is necessary. He knows that well warranted public demands that a deal be tough will complicate his job, but it also does the AGs whose citizens have been most damaged a huge disservice. Pressure on the banks from the public at large is a negotiating lever they need that Miller has chosen not to use.
The argument defenders of the deal make are twofold: this really is a good deal (hello?) and it’s as far as the Obama Administration is willing to push the banks, so we have to put a lot of lipstick on this pig and resign ourselves to political necessities. And the reason the Obama camp is trying to declare victory and go home is that it is afraid that any serious effort to deal with the mortgage mess will reveal the insolvency of the banks.
Team Obama has put on a full court press since March 2009 to present the banks as fundamentally sound, and to the extent they needed more dough, the stress tests and resulting capital raising took care of any remaining problems. Timothy Geithner was even doing victory laps last month in Europe. To reverse course now and expose the fact that writedowns on second mortgages held by the four biggest banks and plus the true cost of legal liabilities from the mortgage crisis (putbacks, servicer fraud, chain of title issues) would blow a big hole in the banks’ balance sheets and fatally undermine whatever credibility the officialdom still has.
But the fallacy of their thinking is that addressing and cleaning up this rot would lead to a financial crisis, therefore anything other than cosmetics and making life inconvenient for the banks around the margin is to be avoided at all costs. But these losses exist already. The fallacy lies in the authorities’ delusion that they are avoiding creating losses, when we are in fact talking about who should bear costs that already exist...
Bold type is diarist's emphasis.
Beyond that, this week here are just a few of the "newest" of the TBTF's transgressions against Main Street.
Apparently, it's now Wall Street "policy" to swindle the elderly out of their homes, too...
AARP Sues U.S. Over Effects of Reverse Mortgages
by David Streitfeld
New York Times
March 9, 2011
Reverse mortgages, which pay older homeowners a regular sum against the equity in their house, are supposed to shield borrowers from economic upheaval. But the popular loans have become tangled up in the real estate collapse. AARP, the seniors’ organization, filed suit Tuesday against the Department of Housing and Urban Development, which regulates reverse mortgages. The suit asserts that policy changes by HUD are pushing older homeowners into foreclosure.
The case was filed in Federal District Court for the District of Columbia by the AARP Foundation, the organization’s charitable arm, and the law firm of Mehri & Skalet on behalf of the surviving spouses of three homeowners who had bought reverse mortgages. All three are facing eviction, the suit says. "HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people," said Jean Constantine-Davis, a senior lawyer at the AARP Foundation.
The lawsuit focuses on reverse mortgages where only one spouse signed the loan document. It argues that HUD shifted course in late 2008, making changes in its procedures so that surviving spouses who are not named on the mortgage must pay the full loan balance to keep the home, even if the property is worth less. Owners of traditional mortgages often are liable for the difference between the value of their house after foreclosure and their original loan. Reverse mortgages were intended to be nonrecourse, which means that even if the value of the property shrinks, the most the borrower can lose is the house itself.
It is unclear how many elderly homeowners are facing foreclosure for reasons related to the lawsuit, but Ms. Constantine-Davis said that hundreds and perhaps thousands of elderly people were in positions similar to those of the three plaintiffs...
...
...The suit accuses HUD of making policy changes that allow underwater homes with reverse mortgages to be sold to strangers in arm’s-length transactions for less than the full mortgage balance, but that require spouses or heirs in some cases to pay the full amount. Finally, the suit says HUD is ignoring its own provisions against displacing a surviving spouse. A HUD spokeswoman said the agency does not comment on pending litigation...
Bold type is diarist's emphasis.
We also learn in this story, immediately above, that it was general policy among most banks to only have the
older spouse sign-on for these reverse mortgages, thus setting the stage for the story as it's now playing out.
And, then there's this in this (Saturday) morning's NY Times: "U.S. Inquiry on Military Family Foreclosures."
U.S. Inquiry on Military Family Foreclosures
DIANA B. HENRIQUES
New York Times
March 12, 2011
The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.
Court Filing Referring to Justice Dept. Investigation (pdf)
A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing...
Yes, even this past afternoon, as fellow Kossack David Mizner notes in his latest post, our nation's leaders continue to toe the quite convenient line of the status quo, as they refuse to go into any detail when it comes to the incarceration of those that attempt to bring these stories of corporate kleptocracy to the attention of the media.
It's two-and-a-half years after the market collapsed, and three of our nation's largest zombie firms are still in business, even thought they're still insolvent...
BANK OF AMERICA, is doing so "well" they're now taking $1 trillion worth of their "assets" (or just about half of their entire mortgage portfolio, which is the largest in the country), and shifting them into a "bad bank." As Yves Smith noted this week, whether it's a "good bank" or a "bad bank" it's still all Bank of America. But, BofA management is now attempting to lay the groundwork to--possibly--posit otherwise. Think about this! You have $1 trillion in crappy paper--worth cents on the dollar--on your books, and not only are you telling everyone you're in the black, you're also handing out bonuses to employees and putting forth the notion that you should be paying dividends to your stockholders, too!
BofA--the the worst major bank when it comes to modifying mortgages and the poorest performer in the HAMP program, in general--CEO Brian Moynihan has just come out in public stating: "he's against the idea of reducing home loans.
Bank Chief Rejects Idea Of Reducing Home Loans
Nelson D. Schwartz
New York Times
March 9, 2011
Showing resistance for the first time against government pressure to write off tens of billions worth of mortgage debt, Bank of America executives said on Tuesday that the idea was unworkable and warned that it would be unfair to borrowers who had managed to stay current on their loans. "There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference," said Brian T. Moynihan, the chief executive of Bank of America. "Our duty is to have a fair modification process."
Uh huh...
(See links above regarding BofA's pathetic performance in the modification effort, to date.)
Apparently, according to Jeff Madrick, CITIGROUP is "suffering" from the same problem that's afflicting Bank of America: fraud related to covering up its insolvency...
Financial Fraud: Citigroup not in a class by itself
Jeff Madrick
Triplecrisis.com
March 9, 2011
...class warfare has been carried on by those at the top, aided by politicians, regulators, unthinking media, and not a few economists with simple half-truth theories about the universal stabilizing value of speculation, the rationality of stock prices and therefore stock options to reward CEOs, and the enormous dangers of wage increases that might contribute even to mild inflation.
It’s time to recognize that TARP, the $700 billion Troubled Asset Relief Fund of the Bush Treasury, was also a classic example of class privilege at work. How is it possible that no bankers were removed from their jobs when, according to Ben Bernanke, as quoted in the valuable, recently published Report by the Financial Crisis Inquiry Commission run by Phil Angelides, that he thought 12 of the 13 major financial institutions were in danger of failure in the fall of 2008? The Federal government shelled out hundreds of billions of dollars to save these banks and—with the exception of the insurance giant AIG, which it took over—demanded no managerial changes. On incompetence alone, heads should have rolled. Given evidence of deception and possibly fraud, all the more reason for heads to roll. But mostly because deceptive and incompetent cultures run deep in firms, and will continue to distort markets, heads should have rolled...
...
...What prompts this comment right now is the revelation in the March 1 Financial Times that Citigroup has not been properly valuing the mortgage-backed securities on its books, thus it is charged with deceiving shareholders. Citigroup is still run by Vikram Pandit, whose membership in the club could never be challenged. Pandit even has a Ph.D. in finance from Columbia. An investment banker at Morgan Stanley, a firm that also went under, he was appointed in 2007 to take over from the irresponsible and foolish Charles Prince, the successor to Sandy Weill—supposedly to clean up the mess.
Improper valuation of mortgage-backed securities is at the core of Citigroup’s failure...
Of course, coverage of the recent comings and goings of our country's still-insolvent, too-big-to-fail firms would incomplete without this outrageous update from AIG...
AIG Goes For Re-Broke, Offers To Repurchase Toxic Subprime Portfolio From Fed For $15.7 Billion
Zero Hedge on 03/10/2011 18:00 -0500
When a bankrupt zombie company offers to purchase from the Fed the very instruments that put it in bankruptcy in the first place, and which the Fed was forced to put on US taxpayers in order to perpetuate the status quo farce, you know the words Banana republic don't even start to begin to express the describe the lunacy we
live in...
Zero Hedge notes, in their rephrasing of Reuters' coverage of the story that, among many other facts:
-- AIG's outstanding assistance from the U.S. government totals approximately $39 billion
-- Anticipates more than 98 percent of Maiden lane II securities will be classified as "NAIC 1" securities by regulators...
Of course, we're told that all of these deals with our nation's insolvent, too-big-to-fail firms must be "negotiated."
So, our country doesn't negotiate with terrorists, but when it comes to thieves (a/k/a economic terrorists), that's a different matter altogether?
# # #
I want to end with an addenda to an observation that I made in my diary on February 25th, "Krugman: Shock Doctrine, U.S.A."
IMHO, the truth here, however, is a bit different than that which Krugman attempts to portray in black and white terms (i.e.: Democrat vs. Republican).
Union-busting is, truly, a long-established plank of the traditional GOP platform.
However, as I've noted in posts as recently as earlier today and on February 4th, as well as in many diaries over the past few years, the privatization meme and Wall Street cronyism are as much a part of the real Democratic economic agenda, these days, as they are age-old Republican values, too.
That's bipartisanship which I will never accept.
So, today, according a report in the NY Times over the past few hours, while some Democrats may celebrate the fact that Wisconsin Governor Scott Walker was rescinding layoff notices for 1,500 state employees, citing it as a supposed victory, the truth is it's just another "victory," or "gift," that comes at a very high price.
Democratic-leaning voters appeared energized by the battle over collective bargaining on a national stage. The fight has already spurred a list of potential recall elections for state lawmakers this spring. Protesters are planning more large demonstrations this weekend.
“From a policy perspective, this is terrible,” said Mike Tate, the leader of the Democratic Party of Wisconsin.
“But from a political perspective, he could not have handed us a bigger gift,” Mr. Tate said of the governor..."
...
...On the floor of the Assembly, Jeff Fitzgerald, the Republican speaker, said the state’s finances were on a “crash course” if collective bargaining remained the status quo. “We ran on this,” Mr. Fitzgerald said. “We were going to get the fiscal place in order. This is the first piece of the puzzle. We’re broke.”
Democrats, who noted that public-sector union leaders had already agreed to pay more for their pensions and health care costs, argued that slashing collective bargaining rights was no budget-saving measure, but a way to break unions in a state with deep labor roots...
So, this is the MSM narrative on March 11th, 2011. A state that isn't broke is claiming it is. And, our nation's biggest banks are insolvent, while telling everyone they're profitable, thereby justifying the outlay of billions of dollars in taxpayer-funded and government-backstopped bonuses and dividends to themselves and their shareholders.
At the end of yet another day, as long as we ignore the fact that collective bargaining is now history in Wisconsin, we're told that state's Democratic Party may have received a temporary shot in the arm as far as their fundraising's concerned.
The rich get richer and the poor get poorer.
"From a policy perspective, this is terrible."
Yes. Perhaps the most important point about Krugman's column in Friday's New York Times is that even he is now acknowledging this is a bipartisan problem: "...we have...a political culture in which one side sneers at knowledge and exalts ignorance, while the other side hunkers down and pretends to halfway agree."
Regrettably, the truth of the matter is it's far worse than that. When it comes to our nation's mortgage crisis, without any real negotiation, whatsoever, our government has offered up the future of Main Street on a silver platter as its final sacrifice.
Then again, with cash-driven politics trumping policy every time, everyone but our nation's wealthiest lose.
You can take that to the bank. Yes. You. Can.