Guest Post: Most Driven Into Debt by Medical Bills HAVE Health Insurance – Most driven into debt and bankruptcy by medical bills have health insurance. For example, Reader’s Digest notes: Between 2000 and 2003, seven in ten adults who were driven into debt by medical expenses had insurance at the time. Similarly, as of 2009: More than 2.2 million California adults report having medical debt, and two-thirds of those incurred the debt while insured, . And as the Washington Post pointed out last year: Sixty-two percent of all bankruptcies filed in 2007 were linked to medical expenses, according to a nationwide study released today by the American Journal of Medicine. That’s nearly 20 percentage points higher than that pool of respondents reported were connected to medical costs in 2001. Of those who filed for bankruptcy in 2007, nearly 80 percent had health insurance. Why is this happening? (1) People think that they are covered, and so authorize more health care than they would if they knew in advance that they would have to pay for it out of their own pocket; and (2) People are underinsured, and can’t afford to buy an adequate level of insurance for their needs.
Buiter: ‘European sovereign debt kerfuffle’ – We posted some fairly bombastic extracts from Buiter’s sovereign debt crisis essay on November 30. And at a Citi roundtable event on Wednesday, he further elucidated his avuncular apocalypticisms. Musing on the ‘European sovereign debt kerfuffle’, he repeated that ‘in all likelihood’ we’d see sovereign defaults in the eurozone, it’s only a question of when. Who’s likely to fall? The usual suspects, of course, according to Buiter — Greece, Ireland, Portugal. Spain ‘might be salvageable’ but needs to deal with its ‘deep structural problems’ and the fiscal state of its sub-autonomous regions. He added that even the cross-border Spanish banks – as opposed to the cajas that were so toxic that five of them even failed the stress tests – have ’significant domestic exposure’ to troubled housing assets, and ‘large numbers of unrecognised losses’. So it’s not quite all about the banks, but they are critical. It doesn’t stop there. Buiter argues that Italy and Belgium, too, should be covered by an expanded EFSF.
Lender Processing Services Makes False Statements About Pending Litigation in SEC Filing – Yves Smith – Shortly after Lender Processing Services became the target of class action lawsuits for alleged illegal legal fee-splititing in early October, an investor commented that he had never seen a company do such a poor job of crisis management. LPS has become the object of more class action litigation in November, this time for alleged securities law claims, namely making false and misleading statements including “deceptive and improper document execution and preparation related to foreclosure proceedings.” The latest instance occurred on December 10. Readers may recall that Reuters published a major story on LPS on December 6, which confirmed many details about the inner workings of LPS’s processes for managing foreclosure mills that had been published on this blog a full two months earlier (LPS acts as an outsourced contractor to servicers). The Florida Times-Union ran a story based on the Reuters piece. LPS claimed in a December 8 press release that the stories were inaccurate, but did not demand corrections, and Reuters said it stood by its account. On December 10, LPS wrote letters to the editor of Reuters and the Florida Times-Union and also filed them with the SEC as 8-K reports (click to enlarge): The letter to the Times-Union, which you can read on the LPS website, contains a patently untrue statement about its pending litigation:
Another Day, Another Rating Agency Fail, This Time S&P – Yves Smith – If you thought that the rating agencies had cleaned up their act in the wake of the crisis, think again. Our Richard Smith reported on a couple of black eyes by Moody’s, one a rather implausible 180 degree turn on its take on the US tax deal, the other a suspiciously flattering take on whether Countrywide had indeed transferred notes (retaining them, as an executive testified they did on a routine basis, would confirm our suspicions about widespread problems in the securitization industry. Now we have a big blooper by S&P, this one in the form of mass rerating, based on an admitted faulty analysis. That is code for “big error in the model that everyone missed.” The subject of this screwup is 129 so-called re-remics, consisting of about $85 billion of bonds which were devised by repackaging existing residential mortgage backed securities. Never heard of re-remics? There’s a good reason why. This market has been very active since early last year, but third party purchases were limited. Given the scarcity of third party buyers, which means the deals were largely retained by banks, one has to assume that the object of re-remics was to manipulate capital levels. Just like CDOs, which are now understood to have been over-rated, re-remics achieve the seemingly impossible task of increasing ratings of junky RMBS. From a Bloomberg report:
Mortgage Servicing – This Article argues that a principal-agent problem plays a critical role in the current foreclosure crisis. A traditional mortgage lender decides whether to foreclose or restructure a defaulted loan based on its evaluation of the comparative net present value of those options. Most residential mortgage loans, however, are securitized. Securitized mortgage loans are managed by third-party mortgage servicers as agents for mortgage-backed securities ("MBS") investors. Servicers‘ compensation structures create a principal-agent conflict between them and MBS investors. Servicers have no stake in the performance of mortgage loans, so they do not share investors‘ interest in maximizing the net present value of the loan. Instead, servicers‘ decision of whether to foreclose or modify a loan is based on their own cost and income structure, which is skewed toward foreclosure. The costs of this principal-agent conflict are thus externalized directly on homeowners and indirectly on communities and the housing market as a whole. This Article reviews the economics and regulation of servicing and lays out the principal-agent problem. Correcting the principal-agent problem in mortgage servicing is critical for mitigating the negative social externalities from uneconomic foreclosures and ensuring greater protection for investors and homeowners.
Germany defiant as Europe suffers – Germany has refused to give any ground on Europe’s rescue machinery despite the escalating political and economic crisis across much of the eurozone periphery, guaranteeing a bitter clash with EU partners at a crucial summit in Brussels on Thursday. Chancellor Angela Merkel pledged that no euro member would be "left on their own", but dug in her heels against the creation of eurobonds and demands to boost the EU’s €440bn (£372bn) bail-out fund. "We must not make the mistake of thinking that collectivising risk is the answer," she told a stormy session of the Bundestag. The defiant stand came as Moody’s issued a downgrade warning on Spain owing to "high refinancing needs in 2011" and the risk of further bank bail-outs. It said central and regional governments must finance €200bn next year. Spanish lenders have to roll over a further €90bn. "These needs are now rendered more challenging by the fragile confidence of international capital markets. Foreign investors have typically funded around 5pc of Spain’s funding requirements. They may be less willing to do so in the immediate future given recent speculation about the treatment of bondholders should Spain be pushed to seek support from the EU/IMF," it said.
We’re living longer… but not healthier: Children born today will suffer an extra year of disabilities than those born three decades ago – Living longer is not necessarily a bed of roses – it may mean more years spent struggling with disability, researchers say. Figures show life expectancy is rising but that in return people born now will have to cope with disability or a long-term illness for an extra year compared with those born 30 years ago. The gender gap is also closing, with women losing their traditional advantage in having better health for longer as they enjoy greater life expectancy. Researchers predict that men born in 2007 will have an average 13.7 years of disability in their life, compared with 12.8 years for those born in 1981. For women, the figures are 17.1 years and 16 years. Men born in 2007 are likely to spend an even greater proportion of their life in poor health, 8.7 years compared with 6.4 years in 1981. Women today spend 11 years in poor health compared with 10 years in 1981, according to figures from the Office of National Statistics.
Riots in Athens and Rome (videos for each) Athens. Via: Toronto Star: Protesters clashed with riot police across Athens on Wednesday, torching cars, hurling gasoline bombs and sending Christmas shoppers fleeing in panic during a general strike against the government’s latest austerity measures. Police fired tear gas and flash grenades as the violence escalated outside parliament and spread to other parts of the capital. The strike also grounded flights, closed factories, disrupted hospitals and shut down trains, ferries and buses across the country. Rome. Via: Guardian: Against an alarming background of violence inside and outside parliament, Silvio Berlusconi today scraped through confidence votes in both houses of the Italian parliament. The survival of his rightwing government was greeted by widespread disturbances in Rome where hooded and helmeted protesters set up flaming barricades, attacked police with sticks and bars, smashed the windows of shops and banks, and set alight cars, police vans and local authority vehicles. Police responded with baton charges, teargas and, in some cases reported by witnesses, indiscriminate beatings. Ninety people, including 50 police, were reported injured. According to police, there were 41 arrests.