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Note: I'll be traveling this weekend and won't be publishing What's Happenin' on Saturday and Sunday.  Will be back on Monday!

After all her fuss earlier this week and talk of comprehensive reviews of surveillance programs and increased oversight, within days Dianne Feinstein was marking up the new legislation and holding a vote on it in the Intelligence committee and the legislation codifies the current bulk metadata collection done by the NSA and calls it reform.  It passed in committee 11-4. So the secret interpretaion of the PATRIOT Act would become law.  Leahy's bill and it's companion bill in the House which does to some measure of reform and repeals parts of the PATRIOT Act is also in the works.

Trick or Treat?: New FISA “Reform” Legislation Passes Senate Intelligence Committee

Essentially, then, this “reform” legislation would codify the NSA metadata program in its current form and, in the process, eliminate arguments by critics that the program exceeds the scope of Section 215.  [...]

So while Sen. Feinstein’s statement promises greater privacy protections and increased public transparency, the central part of the legislation delivers little of either, unless you consider providing a more solid statutory authority greater transparency.

To be fair, the legislation does deliver a few new privacy protections.  For example, the bill would (i) impose “criminal penalties of up to 10 years in prison for intentional unauthorized access to data acquired under the [FISA authority]” and (ii) authorize the FISC to designate amicus curiae on matters that “present a novel or significant interpretation of the law.”  But for the latter, outside groups are already, on occasion, filing amicus briefs on appeals before the FISCR.  Therefore, while the Feinstein “reform” legislation claims to deliver much, it actually offers very little substantive change from the status quo.

And it begins.  Half the sales of new homes have been cash transactions, bought by institutional investors.  I'm not sure how many of these are for the new version of mortgage backed securities.  Except this time the payments coming in aren't mortgage payments, they're rental payments.  I assume they're all bolstered with derivatives, just as the mortgage backed investments were, and that's the combo that made a lot of Wall Street crooks very wealthy and also crashed our economy.  What is the role of the ratings agencies this time around?  The article says that 60% of them are AAA, which means that pension funds can invest in them. The names of the ratings agencies are different this time, or at least the ones mentioned in this article.  

So in addition to setting up a similar scheme again, this time the people don't even own the homes.  Institutional investors buy up homes, presumably many of them are the ones that were foreclosed and are being sold at fire sale prices, and Wall Street becomes the landlord of the United States for single family homes.  David Dayen has been writing about this for a couple of years now, here and there.  It makes me feel nauseous.  I assume these are all the same players.  I have no idea how they end up getting these properties back or who took the losses.  What's going on with all the toxic mortgage backed securities that the Fed bought up?

If they can sell these rental bonds, they can get more and more money to buy up more and more homes.

Deutsche Bank Opening Rental Bond Spigot to Cerberus

Blackstone Group LP (BX)’s debut sale of bonds backed by rental homes is paving the way for Cerberus Capital Management LP and Colony Capital LLC as Wall Street creates a new market to expand funding for the industry.

Deutsche Bank AG (DBK) unveiled the $479.1 million deal, which bundles mortgages on 3,207 single-family homes acquired by Blackstone into securities of varying risk, at the Waldorf Astoria hotel in New York yesterday, after spending more than six months structuring the transaction. Almost 60 percent of the securitization received AAA, or top ratings, from Moody’s Investors Service, Kroll Bond Rating Agency and Morningstar Inc. (MORN)

Demand for rental bonds would give private-equity firms, hedge funds and other investors a new source of capital to increase buying of single-family homes after they raised more than $20 billion to acquire as many as 200,000 properties in the past two years. Issuance may eventually exceed $70 billion a year, equivalent to this year’s expected sales in the two-decade old commercial mortgage-backed securities market, said Jade Rahmani, a housing analyst with Keefe Bruyette & Woods Inc.
Renters in the U.S. occupy about 14 million single-family homes worth as much as $2.8 trillion, according to Goldman Sachs Group Inc. Demand for leased housing is increasing as fewer Americans are able to qualify for a mortgage after the financial crisis, which forced millions of homeowners into foreclosure.

Here is David Dayen, about a year ago.
The Worst Idea in the World: Securitizing Rental Revenue

The last financial crisis can be blamed in large part on runaway securitization. Wall Street giants sliced and diced mortgage loans into bonds that they sold around the world. They claimed that they diversified the mortgage pools so that even a few defaults would not undermine the value of the securities, and they offered tranches of the bonds at a decent yield. As global demand increased for the securities, Wall Street pressured originators to close more and more loans, regardless of creditworthiness. This caused a bubble in prices. Moreover, financial innovators took the lower-tranche loans and cut them up into once-removed securities, making bets on bets on the housing market that were allegedly “safe”. We all know how this ended, and how the securitization bubble took a crash in housing prices and made it exponentially worse.

So now we’re poised to do that all over again.

As I’ve been chronicling, the housing market has been boosted by two events over the past several months, both of which have brought down supply and subsequently nudged up prices. First, banks and REO (real estate owned) holders have deliberately kept their properties off the market, restricting supply. Second and more important for the purposes of this post, institutional investors, including private equity firms and hedge funds, have begun to buy up foreclosed properties in large quantities at a discount. Over 40% of the foreclosed properties in Oakland have been purchased by investors of this type. In the near term, they plan to rent them out, creating what they believe is a fool-proof profit stream of rental payments. Eventually, I believe the plan is to flip the houses once prices rise more.

Dayen again.  Expect to see new laws passed around eviction from rental properties and all kinds of new fees for late rent etc., and a burgeoning outsourced collections business, property management business.  A twenty-first century Dickensian world, with a police state and surveillance state on top of that.
Securitization, Take II: Investment Firms Seek to Securitize Rental Payments

Though this proposal to use eminent domain to buy up underwater homes and refinance them has been getting a lot of publicity in intellectual circles, the unorthodox fix for the housing market is already happening. That would be the REO-to-rental revolution, where investment firms buy up foreclosed properties in mass quantities after repossession, and flip them into the rental market. Entire firms are being built with this business model. We know that over 40% of the city of Oakland’s foreclosed homes have been purchased by investors. This isn’t prospective, it’s already happening.

Setting aside for a moment the potential problems of creating a large swath of hedge fund slumlords, as well as the possibility of razing entire neighborhoods with new development, the theory for the investors is that they can generate a steady stream of rental payments that will eventually dwarf the fire-sale price they paid for the foreclosed property. But there are all kinds of pitfalls to that model, like extended vacancies or troublesome tenants who refuse to pay. I hadn’t figured out how the investors planned to work around that model, until I saw this story in the Wall Street Journal. And then the light bulb went on.

In other words, this is just a rerun, and the first movie ended rather badly. It was already going to be a problem for the management companies of these REO-to-rental units to have no community involvement; if they can securitize the payments and get sure revenue no matter what happens at their properties, they have even more of a reason to abandon them and act as absentee slumlords. This could also lead to all sorts of strong-arm tactics to force tenants to pay their rent that we have previously never seen before, well beyond a simple eviction after a grace period. The potential for abuse is high, because now there will be massive amounts of money on the line. And who will service the rental units for the investors? Servicers for loans haven’t exactly covered themselves in glory of late.

[Emphasis added[

Send it to appeals court, smear the judge in a whisper campaign, get the case transferred to another one.  Will the new judge be magically more sympathetic to Bloomberg and Kelly?  This reeks of corruption.
Court Blocks Reform of Unconstitutional Stop-and-Frisk
Removal of judge who ruled in favor of constitutional rights 'troubling and unprecedented'

To the dismay of civil rights advocates, on Thursday a federal appeals court blocked the implementation of reforms to the New York City Police Department’s controversial "stop-and-frisk" program, which had been ordered in an earlier district court ruling.

The decision today by the 2nd U.S. Circuit Court of Appeals will delay a ruling by District Court judge Shira Scheindlin, which said the NYPD has violated the constitutional rights of tens of thousands of people by wrongly targeting black and Hispanic men in stop-and-frisk searches. Scheindlin had ordered an outside monitor to oversee major changes to the program.

The reforms will now be halted until a further appeal by the city, which has pushed hard against stop-and frisk-reform, is heard in the months to come.

In addition, without the prompt of a legal request, the court ordered Judge Scheindlin to be removed from the case claiming she "ran afoul of the code of conduct for U.S. judges" when she gave of a series of media interviews and public statements after her ruling, the Associated Press reports.

US court blocks NYPD stop-and-frisk ruling and removes judge from case
Federal court says Shira Scheindlin showed appearance of bias when she ruled that stop-and-frisk was unconstitutional

"Basically, this court is saying to the citizens of New York, who have followed this case and who were very uplifted by the fact that a federal judge stood up to protect the rights of all citizens of the city of New York … this is the panel of the second circuit saying: 'Drop dead, New York'," Moore said.

"It's embarrassing, it's unprecedented and it's a travesty of justice that this panel did this."
The court cited comments made by Scheindlin in articles in the New York Times, the New Yorker and elsewhere responding to public criticism of her by Mayor Bloomberg and police commissioner Ray Kelly.

Throughout the trial, the mayor and the police commissioner attacked Scheindlin in media interviews and speeches, but declined to testify in court.

The pair criticised Scheindlin as being "in the corner" of civil liberties activists campaigning against stop-and-frisk while an internal report by Bloomberg's office, shared with the New York Daily News in May, sought to portray the judge as biased against law enforcement.

Michael Hayden, the Voice of Terror
Michael Hayden, the former head of the NSA and the CIA, is the official mouthpiece of the American surveillance state. His blithe, unquestioning acceptance of the idea that privacy is a foolish notion is horrifying. And for that, he is valuable.

Michael Hayden believes that his experience makes him a voice of moderation and maturity in the debate that has arisen over the NSA's vast global spying program. In fact, he is the voice of extremity. He is the living embodiment of the belief that surveillance is its own justification—that appeals for privacy on the basis of morality or ethics are ridiculous. He represents the philosophy of the primacy of the surveillance state: The democratically elected government exists to serve the spies, not the other way around. Nowhere is this better revealed than in Hayden's Wall Street Journal op-ed today, a masterpiece of the "Whining to Friendly Ears" genre.


There's a real danger here. The American signals-intelligence community is being battered at home from extreme left and extreme right, and it's being battered from abroad for just being extremely good.

Beyond receiving new policy guidance, I fear that community will now take new blows and be conveniently labeled by some as "excessive" or "unconstrained" or "out of control."


Stop Watching Us.

The revelations about the National Security Agency's surveillance apparatus, if true, represent a stunning abuse of our basic rights. We demand the U.S. Congress reveal the full extent of the NSA's spying programs.

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