Since September 2008, it seems as if there's been a never-ending stream of status quo transgressions against Main Street that have come to light. Both in the MSM and the blogosphere--these days, as far as the now-quite-institutionalized support for, behavior by, and societal control of our ruling class is concerned--we're continually reminded who's really calling the shots in our faux democracy. Yes, as today's NY Times lede du jour and Naked Capitalism's Yves Smith remind us, yet again, it's all about facilitating Wall Street's ongoing efforts to privatize their profits and socialize their losses.
In the wake of these (inconvenient, to some, even in this reality-based community) events, the news of the latest devastation of the day, the foreclosure fraud crisis, continues to hammer away at the collective psyche of the voting public. And, of course, it bodes poorly for the mid-term election results, come late November 2nd, as far as the Party theoretically in control of both arms of the legislative branch of our government is concerned. (Then again, even that last sentence is inaccurate, because it's become rather obvious to anyone with an I.Q. higher than the outdoor temperature on a cold winter day that "a party" doesn't control our government; the status quo controls
both major parties; therefore, the status quo controls our government.)
Like a stage-four cancer patient being treated only with holistic therapies, chances are that these "problems," and their related realities, aren't going away anytime soon. More than likely, save for our history of prevailing entrepreneurial spirit and our society's almost-naive optimism, as a whole, it might very well do us in, bigtime. So, we're reminded of these inconvenient truths, such as this front page lede in today's NY Times: "Across the U.S., Long Recovery Looks Like Recession." (See immediately below; and here's a rather exceptional post, complete with an extremely trenchant overview and update from Kossack gjohnsit, which faded off the diary list, a short while ago.)
And, then there's the truly ugly reality of what's about to happen as far as our nation's most recent oligarchical travesty is concerned: the foreclosure fraud crisis, "Title Insurance Woes Illustrate Liabilities of Foreclosue Mess Concentrated in TBTF Banks." Here's a hint about Yves' commentary: Whom do you really think is going to end up footing the bill for this latest "Wall Street crisis?" (See second article, below; also see Kossack Badabing's great update on this travesty, currently on the most-recent diary list, right here: "50 State AG's to Geithner: Screw You and The Banks.")
It's staring us in our face, every damn day (again, this is the lede in today's NY Times).
Across the U.S., Long Recovery Looks Like Recession
By MICHAEL POWELL and MOTOKO RICH
NY Times (Page A1)
October 13, 2010
This is not what a recovery is supposed to look like.
--SNIP--
Less than a month before November elections, the United States is mired in a grim New Normal that could last for years. That has policy makers, particularly the Federal Reserve, considering a range of ever more extreme measures, as noted in the minutes of its last meeting, released Tuesday. Call it recession or recovery, for tens of millions of Americans, there's little difference.
Today's article, at the top of the Times front page, reminds us that "...this recession has been more severe than any since the Great Depression and has left an enormous oversupply of houses and office buildings and crippling debt. The decision last week by leading mortgage lenders to freeze foreclosures, and calls for a national moratorium, could cast a long shadow of uncertainty over banks and the housing market. Put simply, the national economy has fallen so far that it could take years to climb back..."
Bullet points, supporting the story theme, continue throughout much of the article....
--given the current rate of job creation, the U.S. will have to contend with nine more years of increased unemployment, just to break even with jobs lost during the Great Recession; and this does not include the five or six million jobs required to just keep pace with our expanding population. Here's a piece by economist Dean Baker--one which received virtually no notice within this community, by the way--from just the other day: "Black Teen Employment Hits Record Low and No One Notices."
Today's NYT lede then tells us:
Even top Obama officials concede the unemployment rate could climb higher still.
--it will take 13 years (assuming an annualized inflation rate of 2%) for housing prices to reach levels achieved in 2005.
--commercial real estate (CRE) vacancies are going through the roof, and general estimates are that it'll take a decade to absorb massive CRE vacancies in many of our country's largest cities. Examples of vacancy rates are provided in the article, such as: Phoenix 21.4%, Las Vegas 19.7%, Dallas/Fort Worth 18.3% and Atlanta 17.3%. Note: If you want to read a stunning commentary on the widely-understated severity of this particular nightmare, I'd strongly suggest checking out this: "Jim Quinn: Consumer Deleveraging = Commercial Real Estate Collapse."
--consumer demand and confidence (that things will improve) is pitiful; people are afraid to spend. Scores of millions of us are still paying off debt, or strategically default on it. The piece informs us that: "Mark Zandi, chief economist of Moody's Analytics, estimates it will be the end of 2011 before the amount of income that households pay in interest recedes to levels seen before the run-up. Credit card delinquencies are rising."
All of the above being noted, the Times' articles does note the positives:
--joblessness is down from its peaks in 2009 (IMHO, I'd say that's an arguable point, since many millions have just fallen off the charts, so to speak);
--port traffic is up;
--employers have created an average of 68,111 jobs per month in 2010 (but, again, this is not just "questionable," since it'll be subject to ongoing "benchmark revisions," at a later date; and these have been substantially downward revisions in recent years); however, as noted above, this doesn't even make up for the Bureau of Labor Statistics' birth/death (of businesses) ratios, which require the creation of well in excess of 150,000 jobs per month just to remain even with the growth of the working population, etc.;
--the stock market is up; however, the article tells us the gain in equity prices is "overstated."
The article then reviews three case histories: in Phoenix, AZ, Cherry Hill, NJ and Atlanta, GA. It's well worth the read, IMHO.
Generally speaking, what's most striking about this Times' piece is the conveyed sense of a transcending theme, and/or a pervasive zeitgeist of fragility, vulnerability and uncertainty which is running rampant with regard to what lies ahead.
Few doubt the American economy remains capable of electrifying growth, but few expect that any time soon. "We still have a lot of strengths, from a culture of entrepreneurship and venture capitalism, to flexible labor markets and attracting immigrants," said Barry Eichengreen, an economist at the University of California, Berkeley. "But we're going to be living with the overhang of our financial and debt problems for a long, long time to come."
New shocks could push the nation into another recession or deflation. "We are in a situation where our vulnerability to any new problem is great," said Carmen M. Reinhart, a professor of economics at the University of Maryland.
So troubles ripple outward, as lost jobs, unsold houses and empty offices weigh down the economy and upend lives...
And, this brings me to what the Times' journalists reference near the top of their article; it's what economist Carmen Reinhart talks about, just above, as far as "new shocks" to our already-teetering economy are concerned.
Very slowly, we're -- just now -- getting wind of who's going to actually foot the bill for our country's status-quo-induced, foreclosure fraud crisis. And, Naked Capitalism spells it out for us in black and white.
IMHO, if taxpayers end up footing the bill for this too-big-to-fail ("TBTF") foreclosure nightmare--and I believe Yves is spot-on in her assessment of the matter, since news of this draconian reality is going viral as you read this--I think it just might be the straw that breaks the camel's back, as far as financial and political realities are concerned on Main Street.
# # #
(NOTE: Diarist has received written authorization from Naked Capitalism Publisher Yves Smith to reprint her blog's posts in their entirety for the benefit of the Daily Kos community.)
Title Insurance Woes Illustrate Liabilities of Foreclosue Mess Concentrated in TBTF Banks
Yves Smith
Naked Capitalism
Wednesday, October 13, 2010 4:00AM
There are so many fronts to the foreclosure crisis that it's now becoming difficult to stay on top of all of them.
One development Monday that didn't get the attention it deserved is the fact that Bank of America is now eating title insurance liability on foreclosed properties sold by its servicer. Per Bloomberg:
Bank of America's agreement with Jacksonville, Florida- based Fidelity National calls for the lender to cover the title insurer's costs in the event of an error in the company's processing of foreclosure documents, Sadowski said. The bank will notify the insurer in each case that the foreclosure complies with state laws and regulations.
Bank of America is in talks with other title insurers for similar agreements, said Richard Bramhall, the bank's chief title officer. He declined to name the other companies.
This is a big deal for several reasons:
1. The liability in case of a wrongful foreclosure is large. There is no way for the wronged borrower to get his house back, so title insurance is the only recourse. As Bob Lawless explained in Credit Slips:
...most every (or maybe even every-I'll let someone else do the 50-state survey) state provides the strongest possible finality protections for deeds obtained through foreclosure sales. We also see similar rules for other judicially supervised sales in other contexts such as sales of personal property subject to a security interest or bankruptcy sales....
Suppose Henry and Helen Homeowner lost their home in foreclosure proceeding, and it has since been purchased by Bill and Betty Buyer. Now, Henry and Helen discover the affidavits in their foreclosure proceeding had some of the very same apparently fraudulent signatures reported in the media. When Henry and Helen complain to the court, the answer should be: "Your complaint is against Deutsche Bank (or whoever foreclosed) and not against Bill and Betty. You can recover damages from Deutsche Bank but not eject Henry and Helen from possession." In turn, this will mean that that Bill and Betty (or their lender) will not have to look to the title insurer for recovery.
2. This means the large banks now effectively have direct exposure to borrowers for screw ups in foreclosures (note that they did earlier, in theory, but this move shortens the process of the money coming from the bank).
3. The liability is via the bank servicer. Note the Bank of American is now the largest servicer in the US (Wells is a close second) by virtue of having bought Countrywide.
4. Some contend that the risk of clouded title means that title insurers may come to require warranties from banks for all properties sold that has securitized mortgages. As Adam Levitin indicated in a Citigroup report, documentation lapses could "cloud title on not just foreclosed mortgages but on performing mortgages."
It isn't hard to see that other banks are likely to be required to take the same step as Bank of America, at least if they want to unload foreclosed property.
It isn't hard to see where this is going. The biggest servicers are part of TBTF banks. The biggest trustees (the folks who were supposed to make sure that the loans all got to the securitization trust properly) are part of TBTF banks. The major structurer/packagers are now all part of TBTF banks.
Isn't a concentrated financial services industry grand? Any time they screw up, they are too large to be made to pay for their crimes. The die was cast at the beginning of the Obama administration. It was a critical window of opportunity to take over and put new management in the weakest of the big banks (and probably force them to shed operations too) and they instead were coddled and sent back on their merry way.
I guarantee that the losses, between extend and pretend that will no longer be viable (in particular, the unrealistic marks on second mortgages) and the liabilities resulting from this colossal mess, at least one major bank will be insolvent. But the odds of the new special resolution authority being used? I put the odds at pretty much zero.
# # #
It's all about Wall Street's ongoing, extremely successful efforts to privatize massive, make-believe profits while the status quo continues to socialize their losses amongst the taxpayers. It has sucked much of the wind out of our Party, this cycle, and it has evaporated the lifeblood of the U.S. underclasses. This has been ongoing for quite some time. And, make no mistake about it, this is an issue which is bipartisan in nature, whether those that read this wish to admit that to themselves or not.
For the Republicans, and their traditional, open (virtually sociopathic) support of the status quo, it's business as usual. It's quite "normal." For Democrats, (at least historically) not so much. We're told it's our "new normal." And, IMHO, it is for this reason--the apparent support for the status quo by many in our own party, as the financial sector goes about their business as usual, eviscerating our middle class--that Democratic enthusiasm is "curbed" during this election cycle. Indeed, IMHO--and, yes, it is just my opinion--it has far more to do with these inconvenient truths concerning the matters I cite, above, moreso than anything else.
You see, the "new normal" isn't normal--at least for some of us Democrats--at all. In fact, this false meme--foisted upon us by a status quo interested solely in their own self-enrichment and the economists that support their efforts--has, indeed, curbed our enthusiasm.
And, the day that our party's leaders come to terms with these realities--truths which we're now reading on the front pages of some of our society's most established media outlets--is the day that we will convincingly prevail, once again (just as we did in 2008).
# # #
Virtually all of my most recent posts have covered the issues to which I refer, above....
Wall Street Spawn Still Spew Spin On TARP/Bailout ... Again! 10/1/10
Plunging Into The Abyss: "America's Deepening Moral Crisis" 10/4/10
Will The Foreclosure Fraud Crisis Undermine Our "Recovery?" 10/5/10
Will Elizabeth Warren Enter The Foreclosure Fraud Fray? 10/6/10
40+/- States' AG's May Announce Joint Foreclosure Probe 10/9/10
Krugman Nails It: Dem's Economic Policy Messaging Failure 10/11/10