Month: September 2010

Senators Ask the Right Question

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And the question is, “why aren’t the people who broke banking and our economy going to jail?”

Senators pressed investigators on a lack of prosecutions of top Wall Street executives in the wake of the most severe financial crisis since the Great Depression.

“I will say right now that I’m frustrated,” Sen. Edward Kaufman, a Delaware Democrat on the Judiciary Committee, said on Wednesday.

“We have seen very little in the way of senior officer or boardroom-level prosecutions of the people on Wall Street who brought this country to the brink of financial ruin. Why is that?”

The reason that there have been no prosecutions is because the the Cossacks work for the Czar, and the Czar, Obama, does not want the prosecutions, and instead wants to “look forward.”

The technical term for this is “cowardice reinforcing rewards for moral hazard.”

This Isn’t Just Because Heath Shuler has Always Been an Over Paid Under-Performing Punk*

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But I really want every seat lost by the Dems this election cycle to come from the Blue Dog Democrats.

The Blue Dogs and other conservative are trying to prevent a vote on extending the tax breaks for people making less than $¼ million a year because they pants wetting cowards, and are afraid that Republicans will say something bad about them, and are busy on their knees to their wealthy donors.

They want their tax cuts for the rich, even though it is ruinously bad policy, and even worse politics, because they are hopeless wimps.

*He was a first round draft pick for the Washington Redskins, and turned out to be, according to ESPN, the the 4th biggest NFL Draft bust of all time, as well as being the whip for the Blue Dog Caucus in the House of Representations.

Economics (Real Estate) Update

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Click for full size

Fasten your seat belts……it’s going to be a bumpy night!

Really, it’s a real estate news update today, with home prices dropping for the 2nd straight month in July, as did Moody’s commercial property price index, and, despite historically low rates, home loan applications fell again, showing that the current housing market is weakening following the expiration of the tax credits.

Additionally, we have the American Institute of Architects’ Architecture Billings Index continuing to show contraction, which indicates that prospects in the next 6-12 months are not great either.

It’s not all bad news though, as August housing starts rose sharply over the previous month, though as the official census figures show, this is just a anemic 2% year over year gain. (PDF)

Non-Combat Role My Ass, Part XVII

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Barack Obama’s claim that combat troops are of Iraq is a lie, as is made clear by a letter from a soldier:

“The reason I’m sending this out is because I have had a few people ask if I left Iraq early because all of the combat troops are out of Iraq and I wanted to let everyone know the real deal.

Take our Brigade for example. We were originally called a HBCT (Heavy Brigade Combat Team). Well, since Obama said he would pull all of the “combat” troops out by Aug, all they did before we left was change our name from a HBCT to an AAB (Advise and Assist Brigade). We have the same personnel/equipment layout as before and are doing the same missions. The ONLY difference is that they changed our name from a HBCT to an AAB and that’s how we pulled all of the ‘combat’ troops out.

There are other Brigades just like ours that are doing the same missions that are still over here. So anyway now you know the REAL story, so that’s why I’m not coming back early.”

Obama does not realize that being commander-in-chief of the military means to command.

Unfortunately, he is dealing with a military which, like pretty much all militaries, is culturally incapable of seeing a conflict beyond the prism of “winning”, and so by compromising, we simply dig ourselves deeper.

More Federal Reserve Kremlinology

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The FOMC met and issued its report, and their policy remained unchanged, though they did say that they might engage in more quantitative easing (printing money) because they believe that the economy may be trending down.

Basically, they won’t do anything this time around, but they might later, even though, “Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.”

So, unemployment is higher than their mandate allows, and inflation is lower than their mandate allows, and so they will do ……… nothing at all for now.

As Atrios so aptly noted, “The sociopaths at the Fed have spoken.” (Emphasis mine)

It’s the only way you can describe their behavior: They are essentially saying that we are in, or entering, a recessionary spiral, but doing their job is hard.

That being said, the US dollar weakened following the fed statement.

The full Fed statement is after the break:

Press Release
Federal Reserve Press Release

Release Date: September 21, 2010
For immediate release

Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.

Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.

The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judged that the economy continues to recover at a moderate pace. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and will lead to future imbalances that undermine stable long-run growth. In addition, given economic and financial conditions, Mr. Hoenig did not believe that continuing to reinvest principal payments from its securities holdings was required to support the Committee’s policy objectives.

Larry Summers to Resign After November Elections

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It looks like Obama needed to make some change, though it looks like they will be changes for the worse, because they are looking to replace him as director of Obama’s National Economic Council with someone who is even more of a wall street insider than Summers:

Administration officials are weighing whether to put a prominent corporate executive in the NEC director’s job to counter criticism that the administration is anti-business, one person familiar with White House discussions said. White House aides are also eager to name a woman to serve in a high-level position, two people said.…

Because appeasing whining bankers is job 1 at the White House, I guess, because we are all just little people.

… They also are concerned about finding someone with Summers’ experience and stature, one person said.

Well, if they want someone who can match Summers’ record of being right, and his record of moral rectitude, I might suggest Dick Cheney, Ben Stein, or Vlad Tepes.

As I have said many times, remember, the Cossacks work for the Czar, and I think that the basic problem here is top down, not bottom up.

Cloture Fails on DADT in Senate, Thanks Barry

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So the Republicans successfully filibustered the Defense authorization bill.

It’s not surprising given the full court press that we didn’t hear coming from the White House.

When one considers the fact that the Obama Department of Justice submitted a legal brief equating homosexuality with incest, his administration defied a judges order to provide health benefits for a same sex spouse, and his campaign had an anti gay bigot front a campaign concert, one begins to wonder whether is inaction on DADT is more than cowardice, or whether he actually has a problem with “th ghay”.

To paraphrase Kanye West, I’m beginning to wonder if “Barack Obama doesn’t care about gay people,” because it’s clear that the Obama administration antipathy to being seen as pro-LGBT at this point is both bad politics, it loses votes, and bad policy.

A Sincere and Honest Takedown of Obama

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Blah, blah, blah!

The questioner, Velma Hart is asking for a reason to keep believing:

“I’m one of your middle-class Americans, and quite frankly I’m exhausted. I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are right now. I had been told that I voted for a man who said he was going to change things in a meaningful way for the middle class. I’m one of those people and I’m waiting, sir. I’m waiting. I don’t feel it yet, and I thought that — while it wouldn’t be in great measure — I would feel it in some small measure.”

Obama’s response is a laundry list of accomplishments, but this misses the bigger point, which is that people are no longer willing to believe that he is willing to fight for them, because he appears to be unwilling to fight at all.

When looking at situations where there are real malefactors involved, his solution is to find common ground, whether it is health care, Wall Street, or BP, and some times, actually a lot of the time, that is simply not enough.

Federal Courts Rule that Software Publishers Own You

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The 9th Circuit Court of Appeals reversed a lower court, and ruled that it’s not a sale, it’s a license, and so they can do whatever they want:

The US Court of Appeals for the Ninth Circuit today ruled (PDF) on a long-standing case involving used software on eBay, and it came to an important decision: if a company says you don’t have the right to resell a program, you don’t have that right. Could this mean the end of the resale market for all digital content? Yup. But the court says it had no choice.

The case is Vernor v. Autodesk, in which Timothy Vernor made his living from selling items (including software) on eBay. Vernor had picked up some old copies of AutoCAD from an architect’s office sale, complete with their serial numbers, and he put them up on eBay noting that they were not currently installed on any computer. Sounds legal, right?

But there’s a catch. Autodesk, the software’s developer, forced all users to accept an agreement before using AutoCAD. This agreement made clear that AutoCAD was merely licensed, never sold, and that one’s license was non-transferable. Further, a licensee could not rent, lease, or sell the software to anyone else; you couldn’t even physically transfer the discs out of the Western Hemisphere (!). Finally, if you upgraded to a new version, the old version had to be destroyed.

That sound that you hear is the stock price of Gamestop falling like the 54th floor of the World Trade Center on September 11, 2001.

Almost every single video game out there bans resale in the license, or as Aris Technica notes, “So, to recap: EULAs are binding, they can control just about everything you might dream up, and only Congress can change the situation.”

This means that a publisher can deactivate your software wherever, and whenever they want, so long as they have it in the license, or they have a section of the license that allows them to change their license whenever they want, like credit card companies do.

Call your congresscritter, and look hard at open source software.

I Write Letters

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So, the New York Times has an article where they bemoan the fact that Wall Street financiers could not buy 3 New York State Senate elections for “educational reformers”:

They were the candidates of riches, flush with hundreds of thousands of dollars from Wall Street investors who believed in the promise of charter schools.

But when the election results came in on Tuesday, all three State Senate candidates supporting education reform — Basil Smikle, Lynn Nunes and Mark H. Pollard — lost by huge margins, with none cracking 30 percent of the total vote in primary contests against union-backed rivals.

The three New York races amounted to some of the country’s first proxy wars between labor groups and Wall Street financiers pushing for education reform, and in the end, the time-tested union machine prevailed.

You see the message here: something is wrong with America if a bunch of rich pukes from Wall Street cannot buy elections in order to privatize an essential public service, in this through for-profit charter schools, and generate taxpayer subsidized profits.

It’s worked so well for prisons, and for military contractors, that we must feed our children to feed the Wall Street beast yet again.

In any case, it pissed me off enough to write a letter to the editor on the subject, which is almost certainly not going to get published:

I found the article one sided. While it is clear that unions played a role in the elections, you make it sound as if this was somehow unfair, while relegating those who donated, “hundreds of thousands of dollars from Wall Street investors” to these candidates who lost as somehow simply being people of good will, “who believed in the promise of charter schools.”

The promise of charter schools that attracts ” Wall Street investors” is its creation of an educational-industrial complex and its associated revenue streams.

There have been numerous studies of charter schools over decades, and they do not meaningfully outperform public schools in properly constructed studies.

There are real problems in our schools, but neither the mindless focus on test scores nor bringing Wall Street profiteers into the equation are the solution.

OK, Time to Freak Out

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A few days ago, Yves Smith noted that Wells Fargo has started to spring a last minute contract clause on its foreclosure sales that basically says if the property does not have a clear title, it’s your tough sh%$:

Yves here. Some readers may take this all to be unduly alarmist. But confirmation that this problem is real and potentially serious comes via a new “gotcha” practice by Wells Fargo on foreclosure sales. Wells is sufficiently concerned about the risks of selling properties out of foreclosure that it is springing an addendum on buyers, shortly before closing, which effectively shifts all risk for any title deficiency on to the buyer.

Now why is this a big deal? Go reread the boldfaced sentence above. [“Technically, the foreclosing bank has no recorded title rights to foreclose in the first place“] If a bank like Wells does not have the right to foreclose, it cannot have clean title to the property. So the bank could conceivably be selling something it does not own.

Let’s say you buy a vase from a store. You open the box when you get home and find out the box is empty. You’d clearly be within your rights to get your money back.

With the Wells Fargo addendum, even if the bank has sold you the equivalent of an empty box, you have no recourse to Wells. Zero. Zip. Nada.

So the banks realize that they are selling properties at auction that they do not own or hold the note on.

They want to clear their balance sheets, and they are now more than willing to engage in outright fraud to do so.

Well, it looks like it’s not just Wells Fargo who is freaking out about this, because GMAC has just suspended its foreclosures in 23 states based on similar concerns that the documentation was forged, though they claim that it will be resolved, “within the next few weeks”.

There are also rumors of a criminal investigation, while GMAC has denied any moratorium.

It appears that much of this has to do with the foreclosure mills law firms, largely based in Florida, most notably Watson, Shapiro & Fishman, and David J. Stern. (MoJo has a good tour of their business practices here)

Note also that Congressman Alan Grayson has written a letter too the Florida Supreme Court asking for an immediate suspension of foreclosures, because these firm are doing the paperwork on about 80% of the foreclosures in the state and have already been cited by a judge for blatant fraud.

There are a couple of issues here, the first is that in the mortgage mixmaster, title for a lot of properties may have been lost, and the second is that the law firms doing the paperwork are simply defrauding homeowners and the courts.

Grayson’s letter is after the break:

September 20, 2010

Chief Justice Charles T. Canady
Florida Supreme Court
500 South Duval Street
Tallahassee, FL 32399-1900

Dear Chief Justice Canady,

I am disturbed by the increasing reports of predatory ‘foreclosure mills’ in Florida. The New York Times and Mother Jones have both recently reported on the rampant and widespread practices of document fraud and forgery involved in mortgage assignments. My staff has spoken with multiple foreclosure specialists and attorneys in Florida who confirm these reports.

Three foreclosure mills – the Law Offices of Marshall C. Watson, Shapiro & Fishman, and the Law Offices of David J. Stern – constitute roughly 80% of all foreclosure proceedings in the state of Florida. All are under investigation by Attorney General Bill McCollum. If the reports I am hearing are true, the illegal foreclosures taking place represent the largest seizure of private property ever attempted by banks and government entities. This is lawlessness.

I respectfully request that you abate all foreclosures involving these firms until the Attorney General of the state of Florida has finished his investigations of those firms for document fraud.

I have included a court order, in which Chase, WAMU, and Shapiro and Fishman are excoriated by a judge for document fraud on the court. In this case, Chase attempted to foreclose on a home, when the mortgage note was actually owned by Fannie Mae.

Taking someone’s home should not be done lightly. And it should certainly be done in accordance with the law.

Thank you for your consideration of this request.

Sincerely,

Alan Grayson
Member of Congress

How Not to Bury an Effective Ad

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Robin Carnahan, who is running against, Roy “I f%$#ed a lobbyist and took money from Abramhoff” Blunt released a pretty damn effective ad with Fox News’ Chris Wallace cutting Roy Blunt a new one on his conflicts of interest.

Well, Fox sued, claiming “copyright infringement and that the ad “compromises “Fox’s integrity. (I have to clean my screen now)

Of course, now everyone wants to see the video. Smooth move, Fox.

In any case, here is the video:

So the Recession is Over?

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The National Bureau of Economic Research has declared that the recession ended in June 2009:

It’s official: The Great Recession ended 15 months ago, in June 2009. That was the word Monday from the economists at the National Bureau of Economic Research, the outfit that tracks the U.S. business cycle based on a variety of economic variables.

By their calculations, the downturn that began in December 2007 lasted 18 months, or the longest on record since the 43-month plunge of the Great Depression. On the other hand, the recession was only two months longer than the 16-month downturns of 1973-1975 and 1981-82, the two other most serious post-World War II periods of falling economic growth. The 2007-2009 downturn was painful but not extraordinary in historical context.

So, my 11 months of unemployment were in a recovery?

We have been in recovery for 15 months?

You’ll also note that this is a pretty mild recovery. The brutal 1981 recession had GDP exceeding peak about 18 months later, and this “recovery,” such as it is, even if we don’t experience a double dip, or just …… dare I say it? …… malaise, and we will be looking at something over 4 years.

Well, this recovery and $3.95 will get you a small Starbucks® latte.

Where I Wish I Could Be on October 30

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Jon Stewart’s Rally to Restore Sanity

Stephen Colbert’s March to Keep Fear Alive

At Jon Stewart’s Rally to Restore Sanity on the National Mall in Washington, DC, heckling people at Stephen Colbert’s March to Keep Fear Alive on the National Mall in Washington, DC.

Unfortunately, I have a prior appointment, I will be at the SCA event, TNT,* and my kids love that event, so I will be there instead.

Still, I think that anyone who can make there should, because if this outdraws Glen Beck and his racist psychopathic ilk, it shows what his numbers really mean.

*Yes, I know that this year, it’s technically the, “Treaty of Troyes,” but it’s TNT and has been TNT for well over a decade.

Jail, please

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Gee, the SEC has determined that Citicorp CEO Chuck Prince and Chairman of the Board, and Clinton era Secretary of the Treasury, Robert Rubin both knew that the numbers that they were feeding investors about their top tranches of mortgage backed securities were crap:

Charles O. “Chuck” Prince and Robert Rubin were among Citigroup Inc. officials who knew 2007 losses were mounting on mortgage assets that U.S. regulators have faulted the bank for not disclosing, a court filing shows.

Prince, the bank’s chief executive officer at the time, and Rubin, who was then chairman, knew the highest-rated segments of subprime mortgage-backed securities were the source of about $200 million in new losses in October 2007, the Securities and Exchange Commission said yesterday in a filing at federal court in Washington. In July, the agency accused the bank and two other executives of failing to disclose $40 billion in subprime assets before losses surged. It didn’t target Prince and Rubin.

Bob Rubin has been Gordon Gecko for a very long time, and if the Obama administration wants to show some real commitment to financial reform, ramping up criminal investigations of his behavior would be a very good idea.

If you put a former Secretary of the Treasury in jail, it goes a long way toward cleaning up the system.

Barack Obama, Go Cheney Yourself

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So while talking at a $30,000 a plate fundraiser in Connecticut, he joked that the Democratic Party base is a bunch of whiny bitches:

Democrats, just congenitally, tend to get — to see the glass as half empty. (Laughter.) If we get an historic health care bill passed — oh, well, the public option wasn’t there. If you get the financial reform bill passed — then, well, I don’t know about this particular derivatives rule, I’m not sure that I’m satisfied with that. And gosh, we haven’t yet brought about world peace and — (laughter.) I thought that was going to happen quicker. (Laughter.) You know who you are. (Laughter.) We have had the most productive, progressive legislative session in at least a generation.

Well, Glenn Greenwald (at link) nails it when he makes it clear that Obama has failed big time in many ways he has not just fallen short, but embraced failure he condemned as a candidates, whether on state secrets, the rule of law on terrorism suspects, the surveillance state, using HAMP as bunco scheme to cheat desperate home owners, state sanctioned assassinations, gay marriage, DADT, or any move at all in support of organized labor.

All this is going on, and there is not even a moment of regret about what might have been. It’s like trying to appeal to the conscience of a house cat.

I am so ready to work my butt off for anyone who is willing to run against him in 2012.

I Still Think That The Appointment of Elizabeth Warren is an Exercise in PR, Not Real Change, But …

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Both Felix Salmon and Barney Frank seem to think that this is the real deal, with Felix noting that, “she has the authority to get the Consumer Financial Protection Bureau up and running as quickly as she can,” and Representative Frank is saying that, “There’s no possibility she would take something like this unless she was fully empowered to do the job.”

Me, I’m with On the other side Yves Smith’s analysis, which says that this is all theater to create the illusion of Obama as a financial reformer:

  • While the bureau is organized under the Treasury, and before it is placed under the Federal Reserve, it has no rule making authority.
  • The organization is operating for an organization, the Federal Reserve that is not only, “subservient to the regulator that is in charge of looking out for the industry,” but is in large part owned by the industry. (look at the structure of the regional Fed banks, they are owned by the big banks)
  • This is an admission that she will not be appointed to the position, so she is already a bit of a lame duck, and will be completely one as soon as someone is nominated for the post.
  • She has admitted that she has no intention of serving as head of the CPFB, which means that she is even more of a lame duck.
  • Many of the organizational and personnel decisions will be deferred to whoever is the appointee.
  • Once a nominee is named, she becomes completely irrelevant.
  • Geithner and Summers still run the show, and are who Obama listens to.*

I’m with Ms. Smith’s last ‘graph:

Needless to say, it would be better if I were proven wrong, but it looks like Warren has made a Faustian bargain. I can only hope if that is the case that she moves quickly to cut her losses.

Simply put, how many times has the Obama administration taken the side of Main Street over Wall Street?

I’ll give you hint, it’s a non-positive integer.

She will be out in 6 months, and my guess is that she will discover that she cannot get her phone calls answered on November 3.

*But remember, the Cossacks work for the Czar.