naked capitalism Sun 2010-10-10 12:54 EDT

FUBAR Mortgage Behavior: Florida Banks Destroyed Notes; Others Never Transferred Them

...But to give readers the latest report of modern FUBAR, mortgage edition, let us continue with the sorry saga of ``Where's My Note?'' For the benefit of newbies, what everyone calls a mortgage actually has two components: the note, which is the borrower IOU, and the mortgage (in some states, it's called a deed of trust) which is the lien on the property. In 45 states, the mortgage is a mere accessory to the note; you must be the real party of interest in the note in order to foreclose. The pooling and servicing agreement, which governs who does what when in a mortgage securitization, requires the note to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title...The endorsements also have to be wet ink; no electronic signatures permitted. I've had a lot of anecdotal evidence to support the idea that these procedures, which were created in the early days of mortgage securitizations, were simply not observed on a widespread, if not a universal basis...

Florida Banks Destroyed Notes; FUBAR Mortgage Behavior; naked capitalism; transfer.

Fri 2010-10-08 21:11 EDT

4ClosureFraud Posts Lender Processing Services Mortgage Document Fabrication Price Sheet >> naked capitalism

Yves Smith

...document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere ``accessory'' to the note). The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title...Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem...We finally have concrete proof of how widespread document fabrication was...This revelation touches every major servicer and RMBS trustee in the US...The story that banks have been trying to sell has been that document problems like improper affidavits are mere technicalities. We've said from the get go that they were the tip of the iceberg of widespread document forgeries and fraud...

4ClosureFraud Posts Lender Processing Services Mortgage Document Fabrication Price Sheet; naked capitalism.

billy blog Wed 2010-09-29 10:15 EDT

Budget deficits do not cause higher interest rates

Bill Mitchell

...An often-cited paper outlining the ways in which budget deficits allegedly push up interest rates is -- Government Debt -- by Elmendorf and Mankiw (1998 -- subsequently published in a book in 1999). This paper was somewhat influential in perpetuating the mainstream myths about government debt and interest rates...Their depiction of...Ricardian equivalence...alleges that: ``the choice between debt and tax finance of government expenditure is irrelevant...[because]...a budget deficit today...[requires]...higher taxes in the future...'' ...I have dealt with this view extensively...Ignoring the fact that the description of a government raising taxes to pay back a deficit is nonsensical when applied to a fiat currency issuing government, the Ricardian Equivalence models rest [on] several key and extreme assumptions about behaviour and knowledge. Should any of these assumptions fail to hold (at any point in time), then the predictions of the models are meaningless. The other point is that the models have failed badly to predict or explain key policy changes in the past. That is no surprise given the assumptions they make about human behaviour. There are no Ricardian economies. It was always an intellectual ploy without any credibility to bolster the anti-government case that was being fought then (late 1970s, early 1980s) just as hard as it is being fought now...So where do the mainstream economists go wrong? At the heart of this conception is the [pre-Keynesian] theory of loanable funds...where perfectly flexible prices delivered self-adjusting, market-clearing aggregate markets at all times...Mankiw claims that this ``market works much like other markets in the economy''...[assuming] that savings are finite and the government spending is financially constrained which means it has to seek ``funding'' in order to progress their fiscal plans. The result competition for the ``finite'' saving pool drives interest rates up and damages private spending. This is what is taught under the heading ``financial crowding out''...Virtually none of the assumptions that underpin the key mainstream models relating to the conduct of government and the monetary system hold in the real world...When confronted with increasing empirical failures, the mainstream economists introduce these ad hoc amendments to the specifications to make them more realistic...The Australian Treasury Paper [used advanced econometric analysis to find that] domestic budget deficits do not drive up interest rates. The long-run effect...is virtually zero. The short-run effect is zero!...toss out your Mankiw textbooks...

Billy Blog; budgets deficit; caused higher Interest rate.

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.

Mon 2010-08-16 12:51 EDT

Nathan Lewis: Where's The Gold?

Nathan Lewis

...there are indications that the seller side of futures contracts (such as Deutsche Bank in April) are having a difficult time making good on their commitments. Second, the information reported by the Comex regarding physical inflows and outflows is looking more and more like a convenient fiction. Third, there is some doubt as to whether there is gold in inventory -- as there absolutely should be -- to match existing warehouse receipts. Fourth, the Comex warehouse is one of the most secure forms of gold investment in the world. If they can't be trusted, what does that say about ETFs, pooled accounts, futures, forwards, options, and all the other forms of "paper gold" out there? Fifth, if it becomes clearer that there is no physical supply to meet physical demand, the dollar price of gold could go much higher.

gold; Nathan Lewis; s.

naked capitalism Thu 2010-08-05 20:07 EDT

Andy Xie on China's Empty Apartments

...Recent articles in media have illustrated how out of line prices are with incomes and rental yields...Chinese officialdom is worried about the social implications of overpriced housing...[Andy Xie reports] that the number of vacant apartments in China, the result of speculative warehousing (purchased as an investment but kept vacant) plus new construction languishing unsold is much greater than commonly realized...Justin Weleski: ``the Chinese housing market is incredibly nuanced. Many/most Western analyses, however, are extremely superficial and do not take into account the very unique circumstances and customs of Chinese society.'' ...a lot of these vacant apartments are owned by overseas Chinese planning their retirement, and not for speculation. If you add up the 50 million plus overseas Chinese, you have a pretty sizable pool of money and influence...China is not a renter friendly society...many people are forced to buy apartments, at riduculously price, just for the hope that their child can go to a good school...

Andy Xie; China's Empty Apartments; naked capitalism.

Tue 2010-08-03 15:02 EDT

Economics of Contempt: Anatomy of Lehman's Failure, and the Importance of Liquidity Requirements

Remember the Lehman Examiner's Report? The 4000+ page report by the court-appointed examiner was lauded for a couple of weeks after it was released, and then largely forgotten. The media and blogosphere quickly moved on to the next outrage-du-jour...Well, I did not forget about it, and thanks to the uptick in flights -- and thus reading time -- in the last few months, I can now credibly claim to have read....well, not every single word in the Examiner's Report (some appendices are just pages of CUSIPs), but all of the substantive sections...Anton Valukas and the lawyers at Jenner & Block who wrote the Examiner's Report did a masterful job. I was, and continue to be, in awe of the quality and comprehensiveness of the report...think I have a pretty good handle on what went wrong at Lehman, and why it failed...they were misrepresenting their liquidity pool. In a huge way...the brazenness of their misrepresentation was shocking...Including the clearing-bank collateral in its liquidity pool was not only inappropriate, but also aggressively deceptive...Lehman was also including in its liquidity pool non-central bank eligible CLOs and CDOs. And they had the audacity to mark these CLOs and CDOs at 100 (par) for purposes of the liquidity pool, even though JPMorgan's third-party pricing vendor marked them at 50--60...

Anatomy; contempt; economic; important; Lehman's failure; liquidity requirements.

Mish's Global Economic Trend Analysis Thu 2010-07-22 15:46 EDT

Ponzi "Shark Loans" Fuel China's Housing Bubble; Home Sales Plunge 44% in Xiamen; Bubble Busts in Tianjin

Michael Shedlock

China's property bubble is now on the verge of collapse. Transaction volumes are significantly down and declining volume is how property bubbles always burst. In simple terms, the pool of greater fools eventually runs out. In China's case, the pool of fools is heavily involved in "loan shark" schemes where speculators hope property values rise fast enough to cover the interest.

Bubble bust; Fuel China's Housing Bubble; Home Sales Plunge 44; Mish's Global Economic Trend Analysis; Ponzi; Shark Loans; Tianjin; Xiamen.

The Wall Street Examiner Sat 2010-05-22 19:56 EDT

Imagine There's No Credit Market: Another Look At German Controls

...Thus, when people speak of "rescuing the credit markets" they really mean to say rescuing the liquidity providers who failed to assess lending risks so profoundly they can't make required payments. When people talk of German restrictions killing the credit markets, they really mean killing the middle-men (which may or may not have a deleterious effect on government borrowing). German restrictions on certain types of equity and credit transactions are not aimed at reduced government borrowing. They are aimed at reducing the amount (and means of capture) of profit "earned" by middle-men in the transaction- profits, mind you, as per our model, in the case of government borrowing, come either as a result of the money's original owner getting less interest than a direct deal would generate, the government paying more interest (which only comes from higher tax revenues) than a direct deal would generate, or some combination thereof. ...liquidity providing actions of "credit market" middle-men has run amok. As per J.S. Mill, that credit markets are exerting a distinct and independent influence of their own means they are out of order. With increasing frequency, credit is mispriced or unwisely extended and liquidity, the raison d'être of these people, dries up when it is needed most. Yet the middle-men who fail in their tasks expect to be rescued from their failures, and given even more ways to profit from lending other people's money, while the pool of available savings shrinks. ...In one sense I'm quite happy about all of the financial sector bail-outs governments have provided these credit-market middle-men. Before the bail-outs, one had to argue that finance was like a tax on monetary exchange, now this point is clear, finance is, in fact, a tax- and a growing one at that.

credit markets; German-Controlled; imagine; looking; s; Wall Street Examiner.

Fri 2009-10-23 08:30 EDT

How Moody's sold its ratings - and sold out investors | McClatchy

Kevin G. Hall

As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression. A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings. Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."

Investors; McClatchy; Moody's Sold; rate; SOLD.

Calculated Risk Fri 2009-10-23 08:29 EDT

McClatchy: "How Moody's sold its ratings"

CalculatedRisk

Kevin Hall at McClatchy Newspapers writes: How Moody's sold its ratings -- and sold out investors (ht Atrios) A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings. Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk.

Calculated Risk; McClatchy; Moody's Sold; rate.

Blog entry Tue 2009-10-13 20:30 EDT

Movement To Block Bernanke Gathers Steam

Isaiah J. Poole

The renomination of Ben Bernanke as chairman of the Federal Reserve should not be rubber-stamped by the Senate until Bernanke and the Fed are more transparent and accountable to the public, says a growing coalition of activists roused by Reps. Alan Grayson and Ron Paul, who have asked the Senate to put a hold on Bernanke's nomination...all it takes is for one member of the Senate to object to moving Bernanke's nomination to the floor of the Senate. The tactic of placing a hold on a Senate nomination has been frequently used by Republicans against Obama administration appointees for for less consequential reasons than what is happening with trillions of taxpayer dollars in the name of staving off the next Great Depression. What's unclear is whether a member of Congress will be bold enough to stand up to Wall Street and to what William Greider calls "the temple."

Block Bernanke Gathers Steam; blog entry; movement.

zero hedge Mon 2009-10-12 10:13 EDT

Overview Of Goldman Sachs Electronic Trading: Part 1

Zero Hedge is starting a multi-part overview of Goldman Sachs' Electronic Trading client-focused product suite, to demonstrate just how extensively embedded in modern market architecture are Goldman's various DMA and "liquidity" facilitation schemes, and the depths of dark pool domination via Goldman's global order router, and other specific topical offerings.

Goldman Sachs Electronic Trading; overview; Part 1; Zero Hedge.

Mish's Global Economic Trend Analysis Wed 2009-08-26 16:00 EDT

Critically Under-Capitalized Banks Direct Result Of "Wonderful Chain of Stupidity"

Michael Shedlock

Last week the Wall Street Journal ran an article about how trust securities sank Guaranty Financial Group and six family-controlled Illinois banks in early July. Please consider In New Phase of Crisis, Securities Sink Banks. Federal officials on Thursday were poised to seize Guaranty Financial Group Inc., in what would be the 10th-largest bank failure in U.S. history. Guaranty's woes were caused by its investment portfolio, stuffed with deteriorating securities created from pools of mortgages originated by some of the nation's worst lenders. Delinquency rates on the holdings have soared as high as 40%, forcing write-downs last month that consumed all of the bank's capital. Guaranty is one of thousands of banks that invested in such securities, which were often highly rated but ultimately hinged on the health of... Security losses are a non-operating item and are listed after pre-tax operating income on the call report. This is very unusual and possibly reveals another cancer hiding on many banks balance sheets. those garbage trust-preferred securities problems are on top of the widely expected fallout from commercial real estate problems affecting small to medium-sized regional banks. Thus, banking woes are much deeper in many areas than either the FDIC or Fed is admitting.

Capitalized Banks Direct Result; Criticizes; Mish's Global Economic Trend Analysis; Stupid; Wonderful Chain.

Fri 2009-01-16 00:00 EST

Jesse's Café Américain: Bill Poole: The Fed is Now Expanding Its Balance Sheet by Printing Money

Jesse's Café Américain: Bill Poole: The Fed is Now Expanding Its Balance Sheet by Printing Money

balance sheet; Bill Poole; expanded; Fed; Jesse's Café Américain; print money.

Wed 2008-08-13 00:00 EDT

naked capitalism: Project Turquoise: Priming the pump for the next bailout

enable private placements of large lots of stock without the need for public disclosure; dark pools

Bailout; naked capitalism; Prime; Project Turquoise; pump.

Thu 2008-07-10 00:00 EDT

Mish's Global Economic Trend Analysis: Former Fed Governor Says "Fannie, Freddie Insolvent"

former St. Louis Federal Reserve President William Poole: "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer"

Fannie; Fed Governor Says; Freddie Insolvent; Mish's Global Economic Trend Analysis.

Thu 2008-07-10 00:00 EDT

naked capitalism: Former St. Louis President Poole Calls Freddie, Fannie "Insolvent"

Richard Poole

Fannie; insolvent; Louis President Poole Calls Freddie; naked capitalism; St.

Wed 2008-05-21 00:00 EDT

Jesse's Café Américain: The Shadow Exchanges Gather Their Forces

Jesse's Café Américain: The Shadow Exchanges Gather Their Forces; Goldman, UBS and Morgan Stanley agree on dark pools; secret market for big players

forced; Jesse's Café Américain; Shadow Exchanges Gather.

Tue 2008-04-01 00:00 EDT

Mish's Global Economic Trend Analysis: WaMu Alt-A Pool Deteriorates Further

May 2007 liar-loan pool originally rated 93% AAA, now 25% 60-day delinquent or worse

Mish's Global Economic Trend Analysis; Pool Deteriorates Further; WaMu Alt.

Fri 2008-03-21 00:00 EDT

Mish's Global Economic Trend Analysis: Evidence of "Walking Away" In WaMu Mortgage Pool

2008-02-23

evidence; Mish's Global Economic Trend Analysis; Walking Away; WaMu Mortgage Pool.

Fri 2007-09-07 00:00 EDT

Bogeymen of Financial Capitalism(The Korea Times)

Bogeymen of Financial Capitalism, by Nouriel Roubini (The Korea Times); Sovereign Wealth Funds (SWF); vast pool of state-controlled funds emerging

Bogeymen; Financial Capitalism; Korea Times.