Month: October 2010

We have been amazed that, as one financially sophisticated entity after another found widespread fraud by Countrywide in the entire gamut of its operations, the administration, the industry, and the financial media act as if this is acceptable.

Countrywide made hundreds of thousands of fraudulent loans.

• It fraudulently sold hundreds of thousands of loans through false reps and warranties.

• It fraudulently foreclosed on large numbers of loans.

• It victimized hundreds of thousands of people and hundreds of financial institutions, causing hundreds of billions of dollars of losses.

• It has defrauded more people at a greater cost than any entity in history.

70% Of All Stock Market Trades Are Held for An Average of 11 SECONDS

“We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional reforms should be developed to counter it.”

This may be the wrong era to be rational. We’re raising bullying and bigotry and paranoia against both global and local ‘other’. We wrongly blame a global financial crash on house flipping and overstretched subprime borrowers. We wrongly blame Obama for debts before he was elected. The more the person earns, the lower the tax rate. For corporations, taxes is a sex act —the game is to not pay taxes anywhere. We’re distracted by crackpot politics and fundamentalist celebrity paraded by billionaires.  Secret money pours into shadowy groups —expect as much as $250 million between now and Election Day. Lobbyists and pundits are paid more to sway opinion than  leaders to build policy.

Where’s reasonableness and diligent analysis?

Two hundred thirty-four years ago, our country’s founders concluded this country’s founding document by declaring: “We mutually pledge to each other our lives, our fortunes and our sacred honor.” How odd that the document we call the Declaration of Independence concludes as a Declaration of Inter-Dependence. Furthermore, that interdependence was not just some feel-good, wishy-washy sentiment.

Rather, it demanded that we put all toward the general good – not just money, but everything we are and ever will be.

This is not a hypothetical.

Steven Rattner, who helped restructure the automobile industry, tells the story of getting a new General Motors plant online in Michigan by bringing management and unions together. “The unions agreed to allow 40% of the new plant to operate at $14-an-hour wages,” he says, “which is half of GM’s normal wages. The management agreed to invest in this new plant.

But here’s the problem:

Workers at GM’s Mexican operations make $7 an hour, and today they are as productive as American workers. And think of this: $14 an hour translates into about $35,000 a year. That’s below the median family income. The whole experience left me frightened about the fate of the American worker.”

Service jobs now also exposed:

Since the service sector is a much larger part of the economy, 28 million to 42 million jobs will be ‘susceptible’ to being shipped offshore — jobs such as customer-service representative and stock analyst, which we tend to think of as local.

But, but, but, forget offshoring and outsourcing, forget the recession, immigration and the mortgage industry collapse — when it comes to loss of American jobs, robots are to blame.

Our workforce is splitting in two:

The number of high-skill, high-income jobs (think lawyers or research scientists or managers) is growing. So is the number of low-skill, low-income jobs (think food preparation or security guards). Those jobs in the middle? They’re disappearing.

A leading explanation for the disappearance of the middle class is “ongoing automation and off-shoring of middle-skilled ‘routine’ tasks that were formerly performed primarily by workers with moderate education (a high school diploma but less than a four-year college degree).”

Routine tasks “can be carried out successfully by either a computer executing a program or, alternatively, by a comparatively less-educated worker in a developing country.”

The culprit, in other words, is technology.

The hard truth—and you don’t see it addressed in news reports—is that the middle class is disappearing in large part because technology is rendering middle-class skills obsolete.

India is today expected to become the first country in the world to commit to publishing a new set of accounts which track the nation’s plants, animals, water and other ‘natural wealth’ to include with financial measurements such as GDP.

Guardian: value of ecosystems and their ‘services’ for humans

“Natural capital is a massive asset class, and developing nations’ biggest asset. For it to be missing from the balance sheet of the nation, or for failures not to be counted, does not make sense.”

well, double entry just won’t do it

The real situation

In truth, the U.S. banking system as a whole is probably insolvent.

By that I mean the likely future losses of loans and assets already on balance sheets at U.S. financial institutions, if incurred today, would reveal the system as a whole to lack the necessary regulatory capital to continue functioning under current guidelines.

In fact, some prognosticators believe these losses far exceed the entire capital of the U.S. financial system !

Yeh. But what’s the critical bit?

How about ‘cronyist financial sector’.

Even if the sector were more competitive it is inevitable that monetary policy focused on shoring up asset prices will benefit the primary asset-holders in the economy, which in itself is a regressive transfer of wealth to the rich.

The idea that supporting asset prices is the best way to support the wider economy is not far away from the notion of trickle-down economics (or as Will Rogers put it: “money was all appropriated for the top in hopes that it would trickle down to the needy.”).

We know some things about what happened between the start of the Iraq war and 2008 in the commodities market. We know the amount of speculative money in commodities exploded, that between 2003 and 2008 the amount of money in commodities overall went from $13 billion to $317 billion, and that because virtually all investment in commodities is long investment, that nearly twenty-five-fold increase necessarily drove oil prices up around the world

Nuts if Republicans take midterms.

One reason for our more modest outlook is that no sector of the private economy stands ready to drive a robust recovery.

As federal fiscal stimulus wanes and state and local government cutbacks accelerate, the private sector has failed to pick up the slack. With only modest gains in private economic activity, the overall pace of growth has slowed.

Sloppy, sloppy, sloppy.

Ideological theories leading voters by the nose while…

Here’s yet another diabolic cycle for ordinary Americans, engineered by the grifter class… business decline thanks to soaring oil prices that have been jacked up by a handful of banks that paid off a few politicians to hand them the right to manipulate the market,

Why stop there?

The problem from the get- go has been the lack of accountability.

The same entities responsible for inflating the bubble with shoddy underwriting are the same entities evicting citizens with the same shoddy underwriting.

Neglect and regulatory capture have become the gift to the Obama administration that keeps on giving … more and more headaches.

Wingnuts and Sarah Palin will fix it. Yeh sure.

Lowering taxes hurts the economy. That’s a slogan.

If facts matter, let’s look at the measurements, the metrics, the data, ladies and gentlemen.

Higher top tax rates don’t reduce economic growth.

Depending on how you look at it (i.e., growth over several years, growth over one year, going back to 1929, focusing only on the period since Reagan took office, etc)… higher top marginal income tax rates have not caused slower real economic growth in this country.

Not the message you’ll get from most economists, but the data says what the data says, and where economists disagree with the data, its a sign that something is seriously wrong with the profession, not the data.

1. Top marginal tax rates are simply not high enough to induce people who pay it to reduce their efforts.

2. Dissuading people from putting in certain efforts doesn’t prevent others from putting in the same efforts.

3. Rising top marginal tax rates may dissuade some people from working, but generally won’t dissuade those doing productive work.

4. A substantial percentage of people who are motivated enough by money that they might reduce their output in the face of even small changes to the top marginal rates are engaged in activities that are not good for society. Loss of their services is to be encouraged, not decried.

5. At the margin… paying as little in taxes as possible… The result, in many cases, is paying vast sums to accountants and keeping the money parked or hidden rather than in productive use.

There is a bit of a self-selection bias at play; people who care enough about money to become homo universitus of chicagus are also the kind of people willing to generate massive negative externalities with nary a thought to the victims (except perhaps to call them ‘losers’).

Should we be calm, learn a few more details… or melt down tankers of tar and pluck tons of feathers? Oh y’just gotta know this tidbit. At least read the apex of sloppy in the last paragraph.

Mortgage Electronic Registration System

As a practical matter, the incoherence of MERS’ legal position is exacerbated by a corporate structure that is so unorthodox as to arguably be considered fraudulent.

Because MERSCORP is a company of relatively modest size, it does not have the personnel to deal with legal problems created by its purported ownership of millions of home mortgages.

To accommodate the massive amount of paperwork and litigation involved with its business model, MERSCORP simply farms out the MERS, Inc. identity to employees of mortgage servicers, originators, debt collectors, and foreclosure law firms. MERS invites financial companies to enter names of their own employees into a MERS webpage which then automatically regurgitates boilerplate “corporate resolutions” that purport to name the employees of other companies as “certifying officers” of MERS.

These certifying officers also take job titles from MERS stylizing themselves as either assistant secretaries or vice presidents of MERS, rather than the company that actually employs them.

These employees of the servicers, debt collectors, and law firms sign documents pretending to be vice presidents or assistant secretaries of MERS, Inc. even though neither MERSCORP, Inc. nor MERS, Inc. pays any compensation or provides benefits to them. Astonishingly, MERS “vice presidents” are simply paralegals, customer service representatives, and foreclosure attorneys employed by other companies.

MERS even sells its corporate seal to non-employees on its internet web page for $25.00 each. Ironically, MERS, Inc.—a company that holds 60% of the nation’s residential mortgages—does not have any of its own employees but still purports to have ‘thousands’ of assistant secretaries and vice presidents.

And read John Mauldin’s Debacle: Act 2.
Sloppy Sloppy Sloppy isn’t over ’til it’s over.

Read this too. It’s mature. It’s about where modern individualism and the essential institutions of modern life meet. J. M. Bernstein on roulette with the future of the nation:

Clearly, political deal-making and the influence of Wall Street over our politicians is part of the explanation for this failure; but the failure also expressed continuing disagreement about the nature of the free market.

…the banker believes that only raw self-interest, the profit motive, ever leads to successful actions. [But finally], it is not motives but actions that matter, and how those actions hang together to make a practical world.