– 09/29/2010

Federal Reserve Board Nominations Confirmed – Brad DeLong reports: Finally…, At least one year late and many dollars short: Nominations Confirmed: September 29: These nominees were confirmed by Voice Vote: Sarah Bloom Raskin, of Maryland, to be a Member of the Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, 2002 Janet L. Yellen, of California, to be a Member of the Board of Governors of the Federal Reserve System for a term of fourteen years from February 1, 2010 Janet L. Yellen, of California, to be Vice Chairman of the Board of Governors of the Federal Reserve System for a term of four years. We need a very different senate.

For US Corporations the Whole of the Law Shall Be ‘Do What Thou Wilt’ – The US court system has discovered that ‘organizations’ are incapable of committing misdeed heninous enough to rise to the level of international crimes.  You know, like crimes against humanity.  This does fit with a disturbing trend in the US whereby more power and wealth is being concentrated in corporations who can act with increasing advantage and anonymity vis-à-vis the individual. Barry Ritholz has framed it quite well in his piece: The Left Right Paradigm Is Over.   How can the courts find that judicial constructs like corporations have the protections and privileges of the Bill of Right, but become strict constructionalistic and literal in allowing that they can engage policies and actions supporting and provoking the commission of heinous crimes such as murder and torture without any collective liability?  This was not the decision of some rogue sadist, but the cold and calculated corporate business decision in the pursuit of profit.

 Google’s Pound of Flesh – The best way to find out why Google was exhibiting at the OLA show would be to simply ask them, which one of my readers did as favor to all of us. And the answer he got from folks manning the Google booth was surprising — or at least it surprised me. He was told “the (payday loan) industry is ripe with inefficiencies, shady practices, and shady people. Coupled with overwhelming consumer demand, Google believes it can right these inefficiencies, provide better transparency, and ally with consumer protection agencies. ” If I heard correctly, that means Google is thinking of entering the payday loan business. Like a lot of big tech companies, Google is sitting on a ton of cash — $30 billion — that is just dragging-down earnings because interest rates for non-payday-type investments are close to zero. That’s 10 times the total float of the entire payday loan industry!

Satyajit Das: A CDO Cure for Europe? – Yves Smith – Increasingly attention may focus on the European Financial Stability Facility (”EFSF”), a key component of Europe’s financial contingency plan. Klaus Regling, the head of the EFSF and known informally as the CEBO (”Chief European Bailout Officer”), had a brief stint at Moore Capital, a macro-hedge fund, consistent with the fact that the EFSF is placing a historical macro-economic bet. In order to finance member countries as needed, the EFSF will need to issue debt. The major rating agencies have awarded the fund the highest possible credit rating AAA. The EFSF structure echoes the ill-fated Collateralised Debt Obligations (”CDOs”) and Structured Investment Vehicles (”SIV”). The Moody’s rating approach explicitly draws the analogy and uses CDO rating methodology in arriving at the rating.

JPMorgan Suspending Foreclosures – JPMorgan Chase said on Wednesday that it was halting 56,000 foreclosures because some of its employees might have improperly prepared the necessary documents. All of the suspensions are in the 23 states where foreclosures must be approved by a court, including New York, New Jersey, Connecticut, Florida and Illinois.  The bank, which lends through its Chase Mortgage unit, has begun to “systematically re-examine” its filings to verify that they meet legal standards, a spokesman, Tom Kelly, said. Last week, GMAC Mortgage said it was suspending an undisclosed number of foreclosures to give it time to take a closer look at its own procedures.  Chase and GMAC, in their zeal to process hundreds of thousands of foreclosures as quickly as possible and get those properties on the market, employed people who could sign documents so quickly they popularized a new term for them: “robo-signer.”

Meet GMAC’s Robo Signer Jeffrey Stephan This video is from the deposition of GMAC’s famed robo signer, Jeffrey Stephan, who estimates that he signs 10,000 documents a month. If nothing else, you need to watch from 5:00 to the end of the first segment.  Hat tip reader Barbara W, from 4closureFraud.org. I wish the sound quality were better; you can also read excerpts of key sections, some of which is contained in these clips.

Fitch Considering Downgrading Servicers Over Affidavits – Yves Smith – Boy, if Fitch thinks servicer problems are limited to affidavits, it is gonna learn a lot more in the coming weeks and months. This report comes via BusinessWeek: The agency believes that if more errors are found by other servicers, that could stall foreclosures in some states and increase losses related to residential mortgage-backed securities. That could prompt Fitch to downgrade ratings on servicers that are affected, the agency said. This looks reactive and appears to reflect an incomplete understanding of the problem. In judicial foreclosure states, certain affidavits were required as part of the documentation needed to proceed with a foreclosure. If the affidavits were improper, they are a fraud on the court. In non-judicial states, the same problem arises when a foreclosure is challenged. A non-judicial process moves into the court system. Bankruptcy filings routinely lead to a motion for relief the bankruptcy stay (legalese for the servicer asking to grab the house now rather than let what happens to the homeowner borrowings be resolved by the judge). So you have similar issues in non-judicial states. not just as prevalent.

Out Now: Proposed EC Changes to Budget Rules – I just wanted to post the legislative proposals the European Commission has come up with regarding economic governance to (hopefully) prevent the recurrence of future Greek or Irish episodes. As they are just proposals to, among other things, tweak the stability and growth pact, we have to see if there are some not-so-conscientious objectors out there who did not reveal themselves just yet. Remember, these proposals must now clear the European Council (the "upper house") and the European Parliament (the "lower house"). Aside from budgetary considerations, there’s also new stuff being proposed that deal with "macroeconomic imbalances." Without further ado, here they are:

Lawmakers urge Obama challenge China on clean energy – More than 180 U.S. lawmakers urged President Barack Obama on Tuesday to fight back against what they called China’s “unfair” tactics to dominate global production of clean energy technology. “Through a variety of predatory trade practices, China’s industrial policy seeks to give its manufacturers an unfair advantage in the green technology revolution and to capture this emerging sector,” the group of mostly Democrats and at least two Republican lawmakers said in a letter. “If left unchecked, these practices will achieve their intended effect, which is to drive American manufacturers from this critical emerging sector,” they said. The letter came on the eve of vote in the House of Representatives on a bill to give the White House a new tool to protect U.S. companies from China’s currency practices, which many lawmakers also believe are unfair.

Bio-geoengineering – Musings on a Satellite Photograph – However, staring at the aerial photos and thinking about the solar energy budget of a particular piece of property is starting to make me think about the problem rather differently. The most striking thing about the picture to me is the albedo variation across the property.  Recall, if you’ve forgotten your high school science that the albedo of an object is defined thus: The albedo of an object is a measure of how strongly it reflects light from light sources such as the Sun. It is therefore a more specific form of the term reflectivity. Albedo is defined as the ratio of total-reflected to incident electromagnetic radiation. It is a unitless measure indicative of a surface’s or body’s diffuse reflectivity.

Another graph proving Peak Oil – Those in the past who deny Peak Oil have tended to do one of two things. The first is to attack the actual science behind it, trying to disprove Hubbert’s Curve. The second is to argue that there is plenty of slack within oil productive countries to meet demand. What the graph shows is that neither of these are true. One of the basic tenets of economics – in fact the basic tenet – is that of supply and demand. If demand increases, so should price; if supply increases, prices should drop. What we see in this graph is that from about 2003 onwards, demand for oil was not met by supply. Despite the myriad sources of oil supply all over the world, not enough oil was produced to keep prices down. Between 2003 and 2008, prices essentially tripled. Yet over the same period, supply hardly moved. So if Hubbert’s Curve was wrong, and oil reservoirs can just keep pumping out as much oil as is needed, then why didn’t oil producers simply increase production between 2003 and 2008? Moreover, why hasn’t production increased since 2005?

House Fires Shot Across China’s Bow Yves Smith – A measure passed by the House tonight, which would permit the US to impose tariffs on countries that keep their currencies artificially low, is at this juncture a mere statement of intent. It is nevertheless playing into a dynamic of the hardening of stances between the US and China. Note that the bill has yet to pass the Senate, but given its wide approval margin, and more important, broad bipartisan support, a win there seems assured. But the bill does not require action, and so leaves any escalation in the hands of the executive branch. Given Obama’s tendency to talk tough and do little beyond elaborate symbolism, such as misbranded reform measures, I would not expect the Administration to suddenly change stripes and increase pressure on China in a meaningful fashion. Not surprisingly, China pointedly lowered the value of the renminbi today, clearly signaling it has no intention of cooperating.

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