Fri 2010-10-08 21:53 EDT

MERS 101

MERS - Mortgage Electronic Registration Inc. - holds approximately 60 million American mortgages and is a Delaware corporation whose sole shareholder is Mers Corp. MersCorp and its specified members have agreed to include the MERS corporate name on any mortgage that was executed in conjunction with any mortgage loan made by any member of MersCorp...Thus in place of the original lender being named as the mortgagee on the mortgage that is supposed to secure their loan, MERS is named as the ``nominee'' for the lender who actually loaned the money to the borrower. In other words MERS is really nothing more than a name that is used on the mortgage instrument in place of the actual lender. MERS' primary function, therefore, is to act as a document custodian. MERS was created solely to simplify the process of transferring mortgages by avoiding the need to re-record liens -- and pay county recorder filing fees -- each time a loan is assigned. Instead, servicer's record loans only once and MERS' electronic system monitors transfers and facilitates the trading of notes...MersCorp was created in the early 1990's by the former C.E.O.'s of Fannie Mae, Freddie Mac, Indy Mac, Countrywide, Stewart Title Insurance and the American Land Title Association... MERS, as has clearly been proven in many civil cases, does not hold any promissory notes of any kind. A party must have possession of a promissory note in order to have standing to enforce and/or otherwise collect a debt that is owed to another party. Given this clear-cut legal definition, MERS does not have legal standing to enforce or collect on the over 60 million mortgages it controls and no member of MERS has any standing in an American civil court. MERS has been taken to civil courts across the country and charged with a lack of standing in reposession issues. When the mortgage debacle initially, and inevitably, began, MERS always routinely brought actions against defaulting mortgage holders purporting to represent the owners of the defaulted mortgages but once the courts discovered that MERS was only a front organization that did not hold any deed nor was aware of who or what agencies might hold a deed, they have routinely been denied in their attempts to force foreclosure. In the past, persons alleging they were officials of MERS in foreclosure motions, purported to be the holders of the mortgage, when, in fact, they not only were not the holder of the mortgage but, under a court order, could not produce the identity of the actual holder. These so-called MERS officers have usually been just employees of entities who are servicing the loan for the actual lender. MERS, it is now widely acknowledged by the courts, has no legal right to foreclose or otherwise collect debt which are evidenced by promissory notes held by someone else...

MERS 101.

The Economic Populist Mon 2010-09-20 19:16 EDT

"There Is No Economic Justification for Deficit Reduction" Galbraith to Deficit Commission

James K. Galbraith

...Your proceedings are clouded by illegitimacy. In this respect, there are four major issues. First, most of your meetings are secret, apart from two open sessions before this one, which were plainly for show. There is no justification for secret meetings on deficit reduction... Second, there is a question of leadership. A bipartisan commission should approach its task in a judicious, open-minded and dispassionate way...Senator Simpson has plainly shown that he lacks the temperament to do a fair and impartial job on this commission...Third, most members of the Commission are political leaders, not economists. With all respect for Alice Rivlin, with just one economist on board you are denied access to the professional arguments surrounding this highly controversial issue...Conflicts of interest constitute the fourth major problem. The fact that the Commission has accepted support from Peter G. Peterson, a man who has for decades conducted a relentless campaign to cut Social Security and Medicare, raises the most serious questions...You are plainly not equipped by disposition or resources to take on the true cause of deficits now and in the future: the financial crisis. Recommendations based on CBO's unrealistic budget and economic outlooks are destined to collapse in failure. Specifically, if cuts are proposed and enacted in Social Security and Medicare, they will hurt millions, weaken the economy, and the deficits will not decline. It's a lose-lose proposition, with no gainers except a few predatory funds, insurance companies, and such who would profit, for some time, from a chaotic private marketplace...

deficit Commission; deficit reduction; economic justification; economic populist; Galbraith.

Fri 2010-09-17 19:54 EDT

Obama's Thatcherite Gift to the Banks

Michael Hudson

I can smell the newest giveaway looming a mile off. The Wall Street bailout, health-insurance giveaway and support of real estate prices rather than mortgage-debt write-downs were bad enough, not to mention the Oil War's Afghan extension. But now comes a topper: the $50 billion transportation infrastructure plan that Obama proposed in Milwaukee -- cynically enough, on Labor Day. It looks like the Thatcherite Public-Private Partnership, Britain's notorious giveaway to the City of London underwriters. The financial giveaway had the effect of increasing prices for basic infrastructure services by building in heavy financial fees -- guaranteed for the banks, who lent the money that banks and property owners used to pay in taxes in more progressive times...This threatens to be the kind of tollbooth program that the World Bank and IMF have been foisting on hapless Third World populations for the past half-century. The ``infrastructure bank,'' reports The New York Times, ``would be run by the government but would pool tax dollars with private investment.'' It would be a test balloon for financing ``a broader range of projects, including water and clean-energy projects,'' for which Democrats already are drawing up a blueprint...

bank; Obama's Thatcherite Gift.

Thu 2010-08-19 16:04 EDT

The AIG Bailout Scandal

William Greider

The government's $182 billion bailout of insurance giant AIG should be seen as the Rosetta Stone for understanding the financial crisis and its costly aftermath. The story of American International Group explains the larger catastrophe not because this was the biggest corporate bailout in history but because AIG's collapse and subsequent rescue involved nearly all the critical elements, including delusion and deception. These financial dealings are monstrously complicated, but this account focuses on something mere mortals can understand--moral confusion in high places, and the failure of governing institutions to fulfill their obligations to the public. Three governmental investigative bodies have now pored through the AIG wreckage and turned up disturbing facts--the House Committee on Oversight and Reform; the Financial Crisis Inquiry Commission, which will make its report at year's end; and the Congressional Oversight Panel (COP), which issued its report on AIG in June. The five-member COP, chaired by Harvard professor Elizabeth Warren, has produced the most devastating and comprehensive account so far. Unanimously adopted by its bipartisan members, it provides alarming insights that should be fodder for the larger debate many citizens long to hear--why Washington rushed to forgive the very interests that produced this mess, while innocent others were made to suffer the consequences. The Congressional panel's critique helps explain why bankers and their Washington allies do not want Elizabeth Warren to chair the new Consumer Financial Protection Bureau...

AIG bailout scandal.

Sat 2010-08-07 20:57 EDT

Medicare Trustees: Fund Now Viable till 2029 >> naked capitalism

Yves Smith

Don't expect this updated assessment, that Medicare now is expected to be viable till 2029, to stem the expected push to gut Social Security and Medicare...the stresses on Medicare are due...almost solely [to] the rising health care cost projections...the US has grotesquely costly health care which produces no better results than that of other advanced economies. And the differences, in terms of rationing and queuing, are exaggerated. What are insurer denials of coverage for costly treatments if not rationing?...Obama, as with the banking industry, blew his opportunity to have a real impact on the underlying problems of health care that lead to high costs, including its fee for service model and perverse incentives.

2029; funds; Medicare trustees; naked capitalism; viable.

Wed 2010-08-04 20:48 EDT

Janet Tavakoli: Stranguflation: Deflation and Inflation Where it Hurts America Most

Janet Tavakoli

The U.S. is suffering from high unemployment combined with too much consumer debt in a weak economy...our bloated financial sector has been sucking the life-blood out of the U.S. economy for years, and recent decisions insure it will continue to feed off taxpayers, while the host economy struggles for life...The bailouts were a perversion of capitalism and the principles upon which The Republic was founded. This was the result of influential interested parties reaching into the U.S. Treasury with no accountability. Capitalism doesn't call for bailouts, instead investors take losses. Shareholders in failed financial institutions should have been wiped out, debt holders would have had to accept discounts combined with debt for equity swaps, and financial institutions would have then been recapitalized without taxpayers footing the bill. Instead banks lobbied for relaxed accounting and ineffective "financial reform." No one, including bank managers, can tell how much capital is truly needed, and taxpayers' ongoing heavy subsidies give these financial institutions the appearance of stability.

deflation; hurting America; Inflation; Janet Tavakoli; Stranguflation.

Sat 2010-07-24 16:13 EDT

Disequilibria: A Constant State Of Instability >> The Shadow Banking System

RueTheDay

What we saw from mid-2007 through early-2009 was a run on the shadow banking system. There were two primary channels by which the shadow banking system operated: the Money Market/Commercial Paper Channel and the Repo Channel...we have largely unregulated [money market funds (MMMFs)] taking deposits (largely withdrawable on demand and usually checkable) and making the equivalent of loans, in other words, acting as banks. Except that the MMMFs were not subject to much in the way of prudential regulation beyond some broad parameters that dictated what investments they could buy, did not have access to FDIC deposit insurance, and did not have lender of last resort access to the Fed's discount window. They were a disaster waiting to happen...Repos also became a very popular mechanism for raising funds in the pre-crisis days, with MMMFs becoming large buyers of repos (lenders) and the broker dealers becoming both buyers and sellers (borrowers and lenders)...during the crisis...the classic maturity mismatch situation...concerns about the quality of commercial paper...triggered by the collapse of Lehman...Without the traditional protection of deposit insurance and lender of last resort financing by the Fed, it turned into a full blown panic...Any meaningful financial reform must bring the shadow banking system out of the shadows. It must be treated as banking, and its institutions regulated as banks...

constant state; Disequilibria; instability; Shadow banks Systems.

Sat 2010-07-24 15:55 EDT

The Path of Unemployment

Dean Baker

...The US, unlike most western European countries, is not set up to sustain long periods of high unemployment. Its system of social welfare is very much centered on work. This is most evident with health care. The vast majority of non-elderly people get their health care through employer provided health insurance. Individual policies tend to be very expensive, especially for people with any history of medical problems. When people lose their jobs, they generally lose their health care coverage as well...While the downturn has led to high and prolonged unemployment in the US, it has not had quite the same effect in Europe...several European countries, most notably Germany and the Netherlands, have adopted a policy of work sharing to limit unemployment...Under work-sharing schemes, instead of just paying workers for being completely unemployed, the government pays workers for being partly unemployed...Germany has been able to use this system to keep its unemployment rate from rising at all in the recession...In the US workers are seeing near double-digit unemployment with the implied loss of income and benefits, as well as the loss of self-esteem and social status that is associated with long-term unemployment. By contrast, workers in Germany and the Netherlands are adjusting to the falloff in demand with shorter workweeks and longer vacations...

path; unemployment.

naked capitalism Thu 2010-07-22 16:19 EDT

Decoding the NY Fed on Shadow Banking

Richard Smith

NY Fed: We document that the shadow banking system became severely strained during the financial crisis because, like traditional banks, shadow banks conduct credit, maturity, and liquidity transformation, but unlike traditional financial intermediaries, they lack access to public sources of liquidity, such as the Federal Reserve's discount window, or public sources of insurance, such as federal deposit insurance.

decoding; naked capitalism; NY Fed; Shadow banks.

Social Democracy for the 21st Century: A Post Keynesian Perspective Thu 2010-07-22 16:00 EDT

Fractional Reserve Banking: An Evil?

Lord Keynes

Hostility to fractional reserve banking is ubiquitous. The Austrians hate it and regard it as a type of fraud. There are even a good many people on the left who despise fractional reserve banking as an evil institution. However, a careful look at fractional reserve banking suggests that it is not necessarily a problem with modern fiat money, a well-regulated financial system, deposit insurance and a central bank ready as the lender of last resort. Fractional reserve banking without these safeguards can be extremely destabilizing and has often led to disastrous bank collapses and depressions...

21st century; evil; fractional reserve banking; Post Keynesian Perspective; social democracy.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-07-16 14:41 EDT

Guest Post: Why Goldman Could Pull It Off

David Fiderer

The weaknesses in the S.E.C.'s case against Goldman were always obvious. At the end of the day, an investor who bought Abacus 2007 AC-1 was buying a static portfolio of risks....If you were a sophisticated investor who had done his due diligence, you didn't need to be told that the deal was designed to fail...If you actually reviewed the performance of mortgage backed securities held by the CDO, and understood how cash flow waterfalls and delinquency triggers worked, then you could see that subordinate tranches being insured for the benefit of Goldman were already worthless when the CDO closed. You could also figure out that the rating agencies had deliberately delayed announcing downgrades of the RMBS within the CDO, in order to keep the markets and the deal flow moving...The risk to Goldman was that more of its dirty laundry would be exposed...[but] the S.E.C. shows little appetite for digging deeper, especially since its new COO of the Enforcement Division is a 30-year-old kid from Goldman.

dropped; Goldman; Guest Post; long; pull; survival rate; Timeline; zero; Zero Hedge.

naked capitalism Wed 2010-07-07 14:29 EDT

Face to Face With Polished Wall Street Psychopathy (SEC Says that ICP Stole from My Old Company Edition)

Tom Adams, an attorney and former monoline executive

When the financial crisis hit, I was in the direct line of fire. My company blew up very early in the crisis, giving me the dubious opportunity to see how bad things were going to get long before most of the rest of the world, including other banks, insurers, investors, administration officials or Federal Reserve members, were able to perceive the trajectory of the crisis...much of what I thought I knew was based on things that weren't really true...While many of the failings of the structured credit market were due to unsound reliance on historical data, some were not mistakes in judgment but were the result of bad actors, misinformation and wrongdoing...

Faces; ICP Stole; naked capitalism; Old Company Edition; Polished Wall Street Psychopathy; SEC says.

Wed 2010-06-09 18:45 EDT

London business figures embroiled in Kaupthing fraud investigation: Serious Fraud Office team thought to be to be scrutinising Deutsche Bank's role in alleged suspect trades| Business | The Guardian

Simon Bowers| The Guardian

A Serious Fraud Office investigation into Kaupthing, the failed Icelandic bank, is understood to be pursuing a number of allegations of market manipulation involving investment vehicles controlled by some of the bank's largest clients, including several high profile UK business leaders. It is alleged that in the weeks and months before Iceland's financial system went into meltdown, certain trades improperly used at least €500m (£413m) of Kaupthing funds in an effort to manipulate credit derivatives. Bank bosses hoped this would restore crumbling confidence in Kaupthing's solvency in the months before the bank collapsed in October 2008...The effect was for investment vehicles -- financed by Kaupthing loans, and at least nominally controlled by some of the bank's largest clients -- to take on risk associated with the bank going bust. Kaupthing loans were being use to write insurance against Kaupthing bonds defaulting...Iceland's Truth Commission obtained details of emails sent by Deutsche Bank staff to Kaupthing which, according to its report, demonstrated that the German bank had been offering advice on how to influence the CDS price on Kaupthing bonds from early 2008...

alleged suspect trades; business; Guardian; Kaupthing fraud investigation; London business figures embroiled; scrutinising Deutsche Bank's role; Serious Fraud Office team thought.

Mish's Global Economic Trend Analysis Sat 2010-05-22 13:55 EDT

Richard Koo On Why This Recession Is Different; Mish On What To Do About It

Michael Shedlock

The Business Insider has a very interesting presentation by Richard Koo on The Real Reason Why This Recession Is Completely Different...The reason the recession is different is this is credit bubble busting depression not a recession. The effects are masked because of food stamps, unemployment insurance, and because of foreclosure policy...Koo blames cutbacks in fiscal stimulus in 1999 and 2001 as the reason Japan remains mired in deflation. I do not buy it...The real lesson is no matter how much money you throw around, economies cannot recover until noncollectable debts are written off...The moment fiscal stimulus stops economies are virtually guaranteed to relapse until the core problem is resolved. The problem is Asset Bubbles, Malinvestments, and debts that cannot possibly be collected...

different; Mish; Mish's Global Economic Trend Analysis; Recession; Richard Koo.

Tue 2010-05-11 09:02 EDT

Barofsky Says Criminal Charges Possible in Alleged AIG Coverup - Bloomberg.com

Richard Teitelbaum

...The TARP watchdog [Neil Barofsy] has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York. The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges. In Senate Finance Committee testimony on April 20, Barofsky said SIGTARP would investigate seven AIG-linked mortgage-related securities similar to Abacus 2007-AC1, the instrument underwritten by Goldman Sachs Group Inc. that is at the center of a U.S. Securities and Exchange Commission lawsuit filed against the investment bank on April 16...

Alleged AIG Coverup; Barofsky Says Criminal Charges Possible; Bloomberg; com.

naked capitalism Thu 2010-04-22 18:21 EDT

Guest Post: Are Interest Rate Derivatives a Ticking Time Bomb?

Washington's Blog

...Most economists and financial institutions assume that interest rate derivatives help to stabilize the economy. But cumulatively, they can actually increase risky behavior, just as portfolio insurance previously did. As Nassim Taleb has shown, behavior which appears to decrease risk can actually mask long-term risks and lead to huge blow ups. Moreover, there is a real danger of too many people using the same strategy at once... Given that the market for interest rate derivatives is orders of magnitude larger than credit default swap market -- let alone portfolio insurance -- the risks of a ``black swan'' event based on interest rate derivatives should be taken seriously...

Guest Post; Interest Rate Derivatives; naked capitalism; ticking time bomb.