Fri 2010-10-08 21:34 EDT

Improper GMAC Affidavits Leading to Charges of Document Fabrication to Change Title >> naked capitalism

Yves Smith

...the web emanating from the GMAC affidavit improprieties extend much further than most may realize. Although GMAC continues to maintain that having its ``robot signor'' officers like Jeffrey Stephan provide affidavits on matters they know nothing about is a mere technical problem that they can remedy. In fact, an affidavit is a statement of someone with personal knowledge of a matter. Stephan signed as many as 10,000 documents a month and clearly could not have personal knowledge of the underlying situations. Deliberately preparing and submitting inaccurate documents in a legal proceeding is a fraud on the court...So as much as GMAC and its fellow servicers no doubt hope there little document mess will fade from public view, attorneys are using it as a new weapon to fight questionable foreclosures or force servicers to negotiate principal mods...

CHANGING TITLES; charges; Document Fabrication; Improper GMAC Affidavits Leading; naked capitalism.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Sat 2010-09-25 09:47 EDT

Chris Whalen On The Upcoming "Worst Economic Contraction Since WWI (Forget WWII)"

Chris Whalen at Institutional Risk Analytics

The erosion of the profitability of the U.S. banking industry over the past two years under the glorious Summers-Geithner-Bernanke rescue scheme is the proverbial fly in the ointment for both major political parties. Democrats and republicans alike are going to be fed into the meat grinder over the next several years as the banking sector deals with literally hundreds of billions of dollars in direct and indirect expenses from the deflation of the mortgage bubble. For the economy, this slow process of muddle along championed by Summers and Geithner will ensure that Barack Obama becomes the Herbert Hoover of the Democratic Party. The economic carnage that will causes these losses, as we described in a recent post in Reuters, "Double Dip or Global Deflation?," is going to represent the worst economic contraction since WWI. Forget WWII. Think "shrinkage" to use the Gilded Age description for economic deflation. And frankly nothing that either the Fed or Treasury does in the near-term can change this basic economic fact of restructuring...the economic situation at BAC and among all of the legacy zombie banks continues to worsen. No amount of bullshit from Washington changes the fundamental economic situation inside the largest U.S. lenders.

Chris Whalen; dropped; Forget WWII; long; survival rate; Timeline; upcoming; worst economic contraction; WWI; zero; Zero Hedge.

Thu 2010-09-23 09:33 EDT

Bob Rubin Just Wants to Be Cuddled

Iris Mack

[2010-04-29]...It's October 2007. I've just finished my morning jog on beautiful, sun-drenched Miami Beach and I'm getting a smoothie and a pastry at my usual place, Epicure Market. The subprime mortgage crisis is heading into full-swing mode; Jim Cramer had just done his crazy thing on TV, and you can feel the sky starting to fall all around you -- and that's a literal thing in Miami, where the cranes stopped on a lot of half-finished skyscrapers, the type where a few years back you'd hear about people flipping condos three times before the project even broke ground. (If there's ever a time that I don't regret leaving finance, it's now.) Anyway, I'm in line for the checkout, and a very familiar looking guy gets in line behind me. It's one of those situations where I'm not sure if I eyed him or he eyed me first, but I noticed him shortly when I turned to the left to swipe my debit card. He was standing right behind me in the checkout line - only a few feet away. He looked very familiar and famous, and while that's no rarity in Miami, it is when you realize it's because the guy looks like the former Treasury Secretary -- but maybe no, he's maybe not tall enough? -- and then somehow you finally just blurt out, "Hey, you look just like Bob Rubin!"...

Bob Rubin Just Wants; cuddling.

Christopher Whalen Fri 2010-09-17 19:31 EDT

The key to the future of finance is now emerging

Christopher Whalen

Basel III is entirely irrelevant to the economic situation and even to the banks. Through things like minimum capital levels, the Basel II rules provided the illusion of intelligent design in the regulation of banking and finance. In fact, Basel II made the subprime crisis possible and the subsequent bailout inevitable [by enabling off-balance sheet finance and OTC derivatives]...Part of the reason for my undisguised contempt for the Basel III process comes from caution regarding the benefits of regulating markets...But a large portion of my criticism for Basel III and the entire Basel framework is even more basic, namely the notion that any form of a priori regulation, public or private, can prevent people from doing stupid things...The key premise of Basel III is that the use of minimum capital guidelines and other strictures will somehow enable regulators to prevent a crises before it occurs. The only trouble is that regulators have no objective measures for compliance with Basel II/III, much less predicting market breaks...As in past decades and crises right through to 2008, the regulators will be the last to know about a problem...

Christopher Whalen; Emergency; finance; future; Key.

Credit Writedowns Thu 2010-08-05 20:20 EDT

Do Deficits Matter? Foreign Lending to the Treasury

L. Randall Wray

...a US current account deficit will be reflected in foreign accumulation of US Treasuries, held mostly by foreign central banks...While this is usually presented as foreign ``lending'' to ``finance'' the US budget deficit, one could just as well see the US current account deficit as the source of foreign current account surpluses that can be accumulated as treasuries...most public discussion ignores the fact that the Chinese desire to run a trade surplus with the US is linked to its desire to accumulate dollar assets...all of the following are linked...the willingness of Chinese to produce for export, the willingness of China to accumulate dollar-denominated assets, the shortfall of Chinese domestic demand that allows China to run a trade surplus, the willingness of Americans to buy foreign products, the (relatively) high level of US aggregate demand that results in a trade deficit, and the factors that result in a US government budget deficit...I am not arguing that the current situation will go on forever, although I do believe it will persist much longer than most commentators presume...there are strong incentives against the sort of simple, abrupt, and dramatic shifts often posited as likely scenarios...I expect that the complexity as well as the linkages among balance sheets ensure that transitions will be moderate and slow...

credit writedowns; deficits matter; foreign lending; Treasury.

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.

Wed 2010-07-21 10:30 EDT

More On Deficit Limits - Paul Krugman Blog - NYTimes.com

Jamie Galbraith responded to this post in comments; what he said, and my counter-response...Galbraith: ...The so-called long-term deficit is not a real problem. And the capital markets demonstrate every day that they agree with this judgment, by buying long-term Treasury bonds for historically-low interest rates. My response: there's no question that right now there is no problem: if the Fed issues money, it will in fact just sit there...But we won't always be in this situation -- or at least I hope not!...At that point, money that the government prints won't just sit there, it will feed inflation, and the government will indeed need to persuade the private sector to make resources available for government use...

com; deficit limit; NYTimes; Paul Krugman Blog.

billy blog Thu 2010-07-15 16:35 EDT

Employment gaps -- a failure of political leadership

Overnight a kind soul (thanks M) sent me the latest Goldman Sachs US Economist Analysis (Issue 10/27, July 9, 2010) written by their chief economist Jan Hatzius...It presents a very interesting analysis of the current situation in the US economy, using the sectoral balances framework, which is often deployed in Modern Monetary Theory (MMT)...some of the top players in the financial markets have a good understanding of the essentials of MMT...he US is likely to have to endure on-going and massive employment gaps (below potential) for years because the US government is failing to exercise leadership. The paper recognises the need for an expansion of fiscal policy of at least 3 per cent of GDP but concludes that the ill-informed US public (about deficits) are allowing the deficit terrorists to bully the politicians into cutting the deficit. The costs of this folly will be enormous...

Billy Blog; employment gap; failure; political leadership.

billy blog Mon 2010-06-07 19:00 EDT

Central bank independence -- another faux agenda

There are several strands to the mainstream neo-liberal attack on government macroeconomic policy activism. They get recycled regularly. ...Today, I am looking at another faux agenda -- the demand that central banks should be independent of the political process...The agenda is also tied in with the growing demand for fiscal rules which will further undermine public purpose in policy...I find it ironical that the freedom mongers have very limited appreciation of what freedom actually is. Allowing the unemployed to be ``bullied'' by amorphous bond markets is not a path to freedom...inflation targeting countries have failed to achieve superior outcomes in terms of output growth, inflation variability and output variability; moreover there is no evidence that inflation targeting has reduced inflation persistence...Central banks operating under this charter have forced the unemployed to engage in an involuntary fight against inflation and the fiscal authorities have further worsened the situation with complementary austerity...The conclusion that I have reached from studying this specific literature for many years is that there is no robust relationship between making the central bank independent and the performance of inflation...From a MMT perspective, the concept of CBI is anathema to the goal of aggregate policy (monetary and fiscal) to advance public purpose. By obsessing about inflation control, central banking has lost sight of what the purpose of policy is about...under the CBI ideology, monetary policy is not focused on advancing public purpose. Fighting inflation with unemployment is not advancing public purpose. The costs of inflation are much lower than the costs of unemployment. The mainstream fudge this by invoking their belief in the NAIRU which assumes these real sacrifices away in the ``long-run''...

Billy Blog; Central bank independence; faux agenda.

Credit Writedowns Sat 2010-05-22 20:22 EDT

On debt monetization

...Scott Fullwiler has a post out today at the UMKC Economics Blog which answers whether `monetizing the deficit' is even more inflationary. I will present some of his ideas...There is no difference between the monetization scenario and the government bond sale scenario except in regards to the Fed Funds rate. So, in a situation in which the Fed Funds rate is essentially zero, the Federal Government does not have to issue any bonds at all. Moreover, there is no difference in terms of the inflationary impact as the two scenarios have identical impacts on base money...

credit writedowns; debt monetization.

winterspeak.com Sat 2010-05-22 14:02 EDT

Richard Koo, who is so close, is still wrong

winterspeak

...Richard Koo, who understands the situation in Japan (which is very very similar) quite well still makes suboptimal recommendations because he too does not understand how the financial system works...He's correct in saying that massive fiscal stimulus saved Japan. They really were on the brink of their Great Depression in the 80s, and have avoided it without going to War. This is good, but none of it was necessary, so really represents a massive failure. Koo thinks that the Govt is spending the money the private sector has saved. In fact, Govt spending is what is giving the private sector its savings! Government is not borrowing anything. Japan should really just massively slash taxes and fund its private sector. Let the balance sheets heal already! Koo does not talk about all the terrible malinvestment that the Governments fiscal spending did. The US should simply implement a payroll tax holiday until inflation starts to tick up. Right now, the US's savings desire is not as high as the Japanese's, but a double dip might get it closer. That just means the US will need even higher deficits. It took Japan 20 years to start getting comfortable with sufficiently large deficits. Now might be a good time to go long the Nikkei, actually.

closed; com; Richard Koo; Winterspeak; wrong.

zero hedge Thu 2010-05-20 15:41 EDT

Perspectives From Rosenberg On Hyperinflation As A Loss Of Faith In A Currency

In today's note by David Rosenberg, the economist quotes a reader letter which provides a unique perspective on how hyperinflation arises: ...Where I disagree is that you can't have inflation with such a significant slack in the economy. For those of us that lived or worked in the hyperinflationary South American zone of the seventies and eighties, inflation comes when people lose faith in the currency and see material goods as a store of value. Because commodities rise and the goods can no longer be expected to be made at the same cost structure, people assume that they will be worth more in the future creating a self fulfilling upward spiraling effect. You can anticipate that these state governments will introduce price controls as well as potentially fixing exchange rates worsening the situation...

currency; Faithful; Hyperinflation; losses; perspective; Rosenberg; Zero Hedge.

zero hedge Thu 2010-05-13 17:50 EDT

Willem Buiter Issues His Most Dire Prediction Yet: Sees "Unprecedented" Fiscal Crises, US Debt Inflation And Fed Monetization

...we were very surprised when we read Willem Buiter's latest Global Economic View (recall that he works for Citi now). In it the strategist for the firm that defines the core of the establishment could not be more bearish. In fact, at first we thought that David Rosenberg had ghost written this...Buiter presents a game theory type analysis, which concludes that the US and other sovereigns will soon be forced into fiscal austerity. Among his critical observations (we recommend a careful read of the entire 68 pages), are that the US is highly polarized, and that the Fed, which is "the least independent of leading central banks" would be willing to implement "inflationary monetisation of public debt and deficits than other central banks." The next step of course would be hyperinflation. And Buiter sees America as the one country the most likely to follow this route. Most troublingly, Buiter predicts that a massive crisis is the only thing that can break the political gridlock in the US in order to fix the broken US fiscal situation...

debt inflated; dire predictions; Fed Monetizing; fiscal crises; see; unprecedented; Willem Buiter Issues; Zero Hedge.

Tue 2010-04-27 08:22 EDT

Anecdotal Economics: A Chicken in Every VAT

...The retail consumer is back, and she* is in the mood to shop, we reliably are told. The Census Bureau reported March 2010 Advance Retail and Food Service Sales improved 7.6 percent from a year ago, and for 1Q2010 are 5.5 percent above 1Q2009...So why do state sales tax revenues tell a different, disconnected story? In the Nelson A. Rockefeller Institute of Government's April 2010 State Revenue Report, which chronicles the woeful status of state tax collections, concludes that sales tax collections fell almost 9.0 percent in 2009, a statistically significant 2.8 percent more than the reported decline in retail and food service sales made up estimated by the Census Bureau...It's a significant disconnect between theory (Census Bureau) and reality (actual sales tax collections), much as the similar, significant disconnect between the Employment Situation reported by the Bureau of Labor Statistics (theory), which appears to be masking the true extent of unemployment in America with all those marginally attached and discouraged workers, and the meaningful decline in actual payroll tax withholdings (reality), as reported by the Treasury Department in its Daily Treasury Statements...

Anecdotal Economics; chickens; VAT.

naked capitalism Fri 2010-04-23 20:44 EDT

The Greek Crisis Has Me Thinking About 1931

The news about Greece's bailout has me thinking a lot about Creditanstalt, the Austrian bank which collapsed in 1931. This account bears remembering because we should see the 1929-1933 descent as a two-part episode, with the second part starting in the Spring of 1931 with Creditanstalt. It should be noted that there were a lot of positive economic signs before the Creditanstalt ruined this. The key difference to today is the monetary liquidity and fiscal stimulus, which has buoyed both asset markets and the real economy. But, the situation in Greece makes me think a lot about Creditanstalt...

1931; Greek crisis; naked capitalism; Think.

Jesse's Café Américain Wed 2010-04-07 19:00 EDT

"How to Corner the Gold Market" By Janet Tavakoli

Jesse

Janet Tavakoli wrote an interesting essay that was just posted over at the Huffington Post called "How to Corner the Gold Market" which can be read in its entirety from her website here...What struck me as odd is that I just wrote a blog piece along similar lines on the same topic today, raising many of the same issues, but that is from the opposite perspective...there is little evidence that anyone is willing to take on the exchanges, even the big players, and try and force a corner or even a squeeze against what they perceive as mispricing, such as Soros and so many other big players did with the British Pound , and most recently other big hedge funds did with mispriced products from the latest bubble in the debt markets, and financial stocks...The piece I wrote today and reference above is about a situation in the precious metals markets which has the potential to become another serious problem for almost the same basic reasons as the debt markets in our most recent financial crisis: excessive leverage concentrated in a few TBTF institutions, lack of transparency, regulatory laxity, and a mispricing of risk...

corner; gold market; Janet Tavakoli; Jesse's Café Américain.

Debtor's prison Sun 2010-01-03 10:37 EST

Would a Single World Currency be GOOD for the world?

MAAA

...One Single World Currency (SWC) is a topic that we have discussed many times from the very early days of this blog. For months, our discussions have focused on the causes behind the eventual collapse of the current USD-backed financial system, the apparent INEVITABILITY of this collapse and the very high LIKELIHOOD that the proposed solution to this will be a global monetary system backed by a single currency unit -- perhaps a modified version of an IMF SDR as Jesse suggests, or something new altogether. While most of our energy has been spent demonstrating the high likelihood (in our opinion, inevitability) of a SWC, we have been cowards when it comes to taking a stance on a SWC either way. Our apparent neutrality thus far has been largely motivated by a desire to remain unbiased while we explored some of the Numbers/definitions first. Having set these foundations and thought about the matter for some time, the gloves finally come off and we declare ourselves to be VEHEMENTLY OPPOSED to a SWC, both technically and in principle and spirit...we argue that the significantly increased trade granularity of the past few decades diminishes the need for a SWC, and in fact, creates ideal situations for the establishment of more localized currencies, which would be infinitely more stable than a SWC...increased trade granularity (which is a fact) increases the pheasibility and stability of local, floating currencies, to the point that they might be a preferable alternative to a SWC.

Debtor s Prison; good; Single World Currency; world.

Jesse's Café Américain Mon 2009-12-28 21:07 EST

Who Is Buying All These US Treasuries (And Can They Keep It Up in 2010)?

Jesse

...according to the government, US households are absolutely piling into US sovereign and corporate debt at record levels, and at record low interest rates. And almost no one but the Fed is buying Agency Debt...this is why I think we might see quite a bloodbath in the bonds in 2010, as mom and pop get skinned by the Street for weighing in so heavily on this one sided trade in US sovereign debt. The US household sector is a slow moving convoy, presenting a traditional and tempting target for the Wall Street wolf packs...Sprott Asset Management says: "Our concern now is that this is all starting to resemble one giant Ponzi scheme. We all know that the Fed has been active in the market for T-bills...under the auspices of Quantitative Easing, they bought almost 50% of the new Treasury issues in Q2 and almost 30% in Q3...We are now in a situation, however, where the Fed is printing dollars to buy Treasuries as a means of faking the Treasury's ability to attract outside capital. If our research proves anything, it's that the regular buyers of US debt are no longer buying, and it amazes us that the US can successfully issue a record number Treasuries in this environment without the slightest hiccup in the market."

2010; buy; Jesse's Café Américain; keeping; Treasury.

naked capitalism Mon 2009-12-21 16:36 EST

The China Decoupling Myth?

One of the motherhood and apple pie items in econ-land is that the world needs global rebalancing, which is code for China has to stop being a mercantilist and currency manipulator, and the US has to quit borrowing a ton and overconsuming (or underproducing, which is another way to frame the same problem). But once everyone agrees that that's a swell idea, no one seems particularly inclined to do anything about it, except complain about the consequences.One of the things that has led to somewhat less attention to this elephant in the room is the perception that China has ``decoupled.'' If it has managed to fare reasonably well in this global upheaval, then surely it is becoming more self sufficient and therefore less dependent on US demand, so the situation is already righting itself, correct? Wrong, says Dror Poleg...

China Decoupling Myth; naked capitalism.

Willem Buiter's Maverecon Thu 2009-10-15 16:51 EDT

Kornai on Soft Budget Constraints, Bail-Outs and the Financial Crisis

Nobel Prize winning economist J��nos Kornai

...Spreading of the SBC syndrome is at once a cause and an effect of the crisis. I will not say it is the only cause: the situation that led to the crisis was brought about by a complex of factors. But I will say firmly that softening of the budget constraint is one of the main causes of the crisis. The general softening tendency has been reinforced in the United States and several other countries by successive bailouts over the last ten or twenty years. Some economists, such as Professor Chenggang Xu, have been pointing for years at a close link between the crisis in East Asia and earlier bailouts. [moral hazard generalized]

bail-outs; Financial Crisis; Kornai; Soft Budget Constraints; Willem Buiter's Maverecon.

Tue 2009-09-22 08:17 EDT

Guest Post: Sarkozy, Stiglitz & capitalism's inherent contradictions

Swedish Lex

The French Commission on the Measurement of Economic Performance and Social Progress presented its final Report written by Stiglitz and other leading economists at an event at la Sorbonne earlier today. The contents of Report is already being discussed widely but at least as relevant are the politics surrounding the Commission's Report and how France intends to use it to spearhead economic reform at home and abroad...at least in France, the financial crisis is alive and will be used to promote reform...Governments need to modify their behavior, first by changing how they account for the situation in society by including questions about the overriding purposes of society and public policy; ``our certitudes have evaporated, everything has to be put into question and re-invented''. Current methodologies fail to take externalities into account with the risk of booking developments as progress while, in reality, the opposite is true. Growth has in some regards destroyed more than it has achieved.

capitalism's inherent contradictions; Guest Post; Sarkozy; Stiglitz.

Mish's Global Economic Trend Analysis Sun 2009-09-20 11:23 EDT

Yellen Calls For "U" Shaped Recession and Another Jobless Recovery

Michael Shedlock

...excerpts from Janet Yellen's Outlook for Recovery in the U.S. Economy: ...the complex topic of inflation. In my career, I have never witnessed a situation like the one that exists now, when views about inflation risks have coalesced into two diametrically opposed camps. On the one hand, one group worries about the long-term inflationary implications of a seemingly endless procession of massive federal budget deficits. At the same time, others fear that economic slack and downward wage pressure are pushing inflation below rates that are considered consistent with price stability and even raising the specter of outright deflation... My personal belief is that the more significant threat to price stability over the next several years stems from the disinflationary forces unleashed by the enormous slack in the economy.

Jobless Recovery; Mish's Global Economic Trend Analysis; Shaped Recession; U; Yellen called.

Fri 2009-07-24 00:00 EDT

Zero Hedge: Green Shoots Or Rose-Colored Glasses

David Rosenberg evaluates dismal employment situation

Green shoot; rose-colored glasses; Zero Hedge.

Mon 2009-04-06 00:00 EDT

Bill Moyers Journal . Transcripts | PBS

ex-banking regulator William K. Black calls fraud: ``make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.''

Bill Moyers Journal; PBS; Transcript.

Thu 2008-05-15 00:00 EDT

Volcker says current economic situation resembles early 1970s UPDATE - Forbes.com

by Dennis Moore

com; Forbes; Volcker says current economic situation resembles early 1970s UPDATE.

Mon 2008-03-24 00:00 EDT

Hussman Funds - Weekly Market Comment: Why is Bear Stearns Trading at $6 Instead of $2

"unelected bureaucrats went beyond their legal mandates, delivered a windfall to a single private company at public expense, entered agreements that violate the the public trust, and created a situation where even if the bureaucratic malfeasance stands, the shareholders of Bear Stearns will either reject the deal or be deprived of their right to determine the fate of the company they own"

2; 6; Bear Stearns trade; Hussman Funds; weekly market comments.