Paul Jackson’s Largely Irrelevant Responses to Mortgage Securitization Critics’ Case – Yves Smith – When I worked for Goldman, and later McKinsey, professionals at each firm would joke about presentations that passed the weight test. That tag line referred to documents heavy enough to land on a client desk with an impressive “thunk” so as to seem intimidating even before opening them. The implication was that length could and did serve to finesse substance. Paul Jackson’s nearly 2600 word post endeavoring to address our previous critique of his analysis appears to be a similar weight test exercise. I do not mean to suggest that Jackson is seeking to deceive; rather, as I posited before, his main sources continue to be unnamed attorneys who are come from the securitization industry, given how closely his arguments hew to American Securitization Forum party line. A journalist is only as good as his sources, and it appears that Jackson has made at most only token efforts to reach out beyond his circle of usual suspects. While Jackson also claims to have invested “weeks” of research into this topic, this pales compared to the career-spanning efforts of legal authorities like New York trust law experts Professor Ira Bloom and Professor Adam Levitin, who are in complete opposition to the Jackson assertions (and remember that Jackson is not even an attorney).
More on the HAMP Train Wreck in Latest Congressional Oversight Panel Report –– Yves Smith – The Congressional Oversight Panel has issued another typically detailed report, this one focusing on the Administration’s widely criticized mortgage mod program, HAMP. HAMP is so widely recognized as being a failed program that when a group of bloggers met with Treasury officials last August, even Timothy Geithner didn’t try to pretend the program worked very well. Of course, that view conveniently omits the fact that servicers told borrowers that were current to quit paying so they could qualify for HAMP, plus the fact that the borrowers that did not get “permanent” mods also were assessed missed payments and late fees. But the focus on HAMP has been mostly about how badly the program worked operationally, and less on the crappy design of the misleadingly-labeled “permanent” mods. Only in the US could a kick the can down the road strategy be branded as “permanent”. The HAMP mods are five year payment reductions. They don’t reduce principal, HAMP leaves 95% of borrower in a worse negative equity position than before.
Production, Consumption, and Prosperity – David Boaz at the Cato Institute uncritically endorses an extremely foolish Steven Horwitz take on consumption versus production in recession-fighting: One of the most pernicious and widespread economic fallacies is the belief that consumption is the key to a healthy economy. We hear this idea all the time in the popular press and casual conversation, particularly during economic downturns. People say things like, “Well, if folks would just start buying things again, the economy would pick up” or “If we could only get more money in the hands of consumers, we’d get out of this recession.” This belief in the power of consumption is also what has guided much of economic policy in the last couple of years, with its endless stream of stimulus packages. I think people find this sort of logic compelling because it has the combination of sounding virtuous and tough-minded, but also aligns you politically with the interests of rich people and powerful business executives. It’s a hard to beat combination. But ask yourself, why does the focus on consumption become prominent during economic downturns? Well it’s because in a modern economy downturns often occur absent any kind of negative shock to our productive capacity.
“Crime Shouldn’t Pay”: Tell the State AGs You Want Mortgage Fraud Prosecuted – Yves Smith: Tomorrow, a group of homeowners is meeting with Iowa’s attorney general Tom Miller, who is leading the 50-state effort which is investigating foreclosure and mortgage lending abuses. This group is presenting a letter to Miller asking them to prosecute bank executives for mortgage fraud and wants to show broad-based support for this idea via having concerned citizens sign it. I have signed this letter and strongly encourage you to do so. Please visit the site, www.crimeshouldntpay.com to support this effort. Thanks!
Auerback/Wray: Liberals need not fear Obama’s tax deal: Why a payroll tax holiday actually helps support tomorrow’s retirees – Yves Smith – Yves here. As much as Auerback’s and Wray’s argument does describe the reality of government fiscal operations accurately, I see their political reading as wildly optimistic. Given that disproven ideas like “trickle down economics” still hold considerable sway, I think the concerns about how a payroll tax holiday will serve as a wedge to cut Social Security benefit are valid. Auerback/Wray: The commentary in the aftermath of President Obama’s announced tax deal with the GOP has been both predictable and, for the most part, misconceived. Leaving aside the issues of income inequality (which we discussed in a previous post), the more predominant critique (especially from the “deficit dove Left”) focuses on the proposed temporary payroll tax cut and the adverse implications that such a cut implies for budget deficits and for Social Security’s longer term “solvency”. Payroll tax cuts are seen by many as part of a bigger plot by Republicans to destroy Social Security’s finances or permanently fund it with general revenues rather than allowing the payroll tax to be re-imposed at the end of the tax “holiday”.
Agency decides it can’t afford to stay in S.F. – After almost 100 years, the State Compensation Insurance Fund is pulling 755 of its 830 jobs out of town, having determined that San Francisco is just too expensive – and its workforce too dumb – for the agency to continue doing most of its business here. "It’s part of a whole geographic strategy to reduce our footprint in high-cost areas like San Francisco," said agency spokeswoman Jennifer Vargen. Vargen estimated that about half the workers now live either in the city, Daly City or the South Bay. The fund, which handles workers’ compensation, is a quasi-government agency – its workers are civil servants and it is overseen by a state-appointed board of directors. Its headquarters have been in San Francisco since 1913. The move to cheaper climes is part of a statewide plan aimed at saving the fund $200 million over the next three years.