naked capitalism

In case you had any doubts about what the mortgage settlement was really about and why banks that were so keenly opposed to it are now willing to go ahead, the news of the last two days should settle any doubts.

As we had indicated earlier, one of the many leaks about the settlement showed that there had been a major shift its parameters. Of the $25 billion that has been bandied about as a settlement total for the biggest banks, comparatively little (less than $5 billion) is in cash. The rest comes in the form of credits for principal modifications of mortgages.

Let me stress: this is a huge bailout for the banks. The settlement amounts to a transfer from retirement accounts (pension funds, 401 (k)s) and insurers to the banks. And without this subsidy, the biggest banks would be in serious trouble

Gretchen Morgenson of the New York Times reports on an ugly bit of mortgage market history: that Fannie Mae was told in 2006 to address the derelict behavior of its servicers and foreclosure mills yet chose to do pretty much nothing about it.

Yves here. As much as the overall thrust of this guest post has merit, I’m always leery of forecasts that amount to “trees grow to the sky.”

Above my pay grade. The problem has been solved by splitting the site across two servers.

Here is the brief version:

New York filed a lawsuit against various units of JP Morgan, Bank of America, Wells, MERSCORP and MERS over their use of MERS in foreclosures. This civil suit alleges that the use of MERS has “resulted in a wide range of deceptive and illegal practices,” most importantly, over 13,000 foreclosures in MERS name where MERS “often” lacked standing to foreclose. The suit claims that an undetermined number of foreclosures that were not made in the name of MERS were also deceptive by virtue of MERS “certifying officers” making improper assignments prior to the foreclosure. The suit includes the use of robosigners who failed to review the review the underlying records as required, and served to disguise gaps in the chain of title.

Investors have been remarkably passive as banks and servicers have taken advantage of them. We’ve heard numerous reports of servicer fee abuses that amount to stealing from investors (remember, if you overcharge a stressed borrower and that borrower loses his home, the money in the end comes out of pension funds and 401 (k)s when the excessive fees are deducted from the proceeds of the sale of the home). Investors can even see suspicious patterns in investor reports. We’ve also pointed out that they are guaranteed even more pain, since $175 billion of losses that have already recorded on loans in MBS pools have not yet been allocated to the related bonds.

Remember how peculiar it was that presidential candidate Mitt Romney refused to release his tax returns? That was predictably a non-starter. Most voters probably assume the reason he resisted was to avoid the controversy over his strikingly low tax rate.

Another factor appears to have played into this decision. The release of the tax returns shows Romney neglected to disclose some required financial information in his personal disclosure form filed with the Office of Government Ethics last year. His team apparently timed the release of his tax records with the hope that State of the Union hooplah would dominate news coverage and result in his finances getting less attention than they might otherwise. And that appears to been correct. His failure to divulge information about 23 investments, and more important his use of secret Swiss bank accounts, has been given a free pass. As Citizens for Responsibility and Ethics in Washington director Melanie Sloan observed, “Mr. Romney says the errors are minor, but then again he also claims earning $374,000 in speaking fees isn’t much money.”

Ed Wyatt of the New York Times has released an important story tonight on how the SEC goes easy on big banks by giving them exemptions to laws meant to stop securities fraud. This report stands in stark contrast to a Reuters story which repeats the favorite Administration mantra: it’s really hard to prosecute financial-related cases. It sure is when you don’t chose to use the powers you have.

The gist of the Times piece is that the SEC gives the biggest banks like JP Morgan and Goldman waivers so that they can continue to have ready access to the financial markets without a lot of hassle. The overview:

I’m running this video because I like it and I hope you do too. I happen to know Suresh; he’s a member of the Alternative Banking Group of Occupy Wall Street. He discusses a clever and potentially important bit of research he is conducting on slavery in the US (the brutal 1800s kind, not our modern watered down debtcropper version). This clip also separately demonstrates that economists are not necessarily beyond redemption.

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick

Fallout continues from the ProPublica/NPR story “Freddie Mac Bets Against American Homeowners,” though probably not the sort ProPublica expected.

Many in the blogsphere who work on finance and housing finance issues, including myself and Yves Smith, didn’t find the piece to be convincing. In a rebuttal Yves, who like me is anything but a cheerleader for the GSEs, explained Freddie’s practice is, in reality, only slightly more nefarious than clearing snow from the parking lot. That is, of all the awful decisions Freddie Mac makes, this isn’t one of them.

By Erica Chenoweth, Ph.D

Lambert here: Occupy’s public discussions on “diversity of tactics” has been notably lacking in historical data; discussions tend to degenerate to “Ghandi!” “No, ANC!” Now, however, Erica Chenoweth has developed a dataset and analyzed the historical record. Below the fold are slides summarizing the results of her study of 323
 non-violent and violent campaigns 
from
 1900‐2006. (There are twenty slides, so anybody with a slow connection may prefer to download a zipped file of the original PDF). Here’s one key slide:

I’m sure, readers, that like any study, Chenoweth’s work is open to challenge on any number of grounds. That said, surely looking to the historical record to see what’s worked isn’t such a bad thing?