In which I eventually dump on Obama for appointing Bill Daley

JP Morgan Markets Its Latest Doomsday Machine (or Why Repo May Blow Up the Financial System Again) – Readers of ECONned will be very familiar with the name of Gary Gorton, author of ‘Slapped in The Face by the Invisible Hand’, which explores the relation of the so-called shadow banking system to the financial crisis. His work is pretty fundamental to understanding some of the mechanisms which made the crisis so acute. Now he’s done an interview, which I would like to have a growl at; but first, he has some basic points about shadow banking, useful later in this rather long post.The other point you need to know: we are talking about an unregulated banking system that at its height was just as big as the regulated banking system, yet coupled to it, and apparently more profitable, though, as we now know, much riskier.

US Trustee Sides With Borrowers in Foreclosures With Questionable Assignments, MERS – Yves Smith – As we’ve suggested, a not-well-recognized effect of the widespread publicity on robo-siging abuses and more recently, the widespread failure of securitization industry participants to adhere to their own agreements is more pushback in the courts. It takes a while for new information to trickle into courtroom strategies, but as the abuses get more press, it isn’t just attorneys for borrowers that are taking a new stance, but also some judges and other official watchdogs. An example today comes via the US trustee, which is a Department of Justice overseer of bankruptcy courts, in two cases in Albany, New York. In both, the US trustee has filed responses which are effectively in support of the debtor (the bankrupt borrower) and in opposition to creditors, which in this case are servicers claiming to act on behalf of securitization trusts. The issue? The parties trying to foreclose haven’t presented a document trail that the bankruptcy trustee finds persuasive.  Both cases, one with GMAC, the other with BAC as the servicer, both involve a foreclosure mill, the Baum Law Firm, which had been sanctioned and fined for submitting pleadings with documentation defects. As the first pleading, the one with BAC as plaintiff, noted “The state court judge called the Baum Firm’s actions ‘reprehensible.’”

 Mass Animal Deaths Around the World: Dead Birds Fall from Sky, Millions of Fish & Crabs Wash Ashore – As you’re likely aware, there’s been a pretty bizarre spate of mass animal deaths reported around the world. First, it was the thousands of birds that fell from the sky in Arkansas on New Year’s Eve. Some 100,000 fish also washed up on the shores of a river 100 miles away. Birds fell from the sky in Louisiana and Kentucky, too. Two million fish washed up dead in Chesapeake Bay. 50 birds fell from the sky in Sweden. 100 tons of fish washed ashore in Brazil. 40,000 crabs were found dead in England. All of this carnage has left people around the world wondering the same thing: What the hell is going on? Unfortunately, there’s no good answer. The explanations offered up so far run the gamut — from being dismissed as a series of unrelated, unfortunate coincidences to the suggestion that the deaths are a result of unusually cold weather to full-bore conspiracy theories that claim the US government is behind it all — but nothing conclusive has been determined. Here’s a closer look at the various incidents:

The End of New Deal Liberalism – Political events of the past two years have delivered a more profound and devastating message: American democracy has been conclusively conquered by American capitalism. Government has been disabled or captured by the formidable powers of private enterprise and concentrated wealth. Self-governing rights that representative democracy conferred on citizens are now usurped by the overbearing demands of corporate and financial interests. Collectively, the corporate sector has its arms around both political parties, the financing of political careers, the production of the policy agendas and propaganda of influential think tanks, and control of most major media. What the capitalist system wants is more—more wealth, more freedom to do whatever it wishes. This has always been its instinct, unless government intervened to stop it. The objective now is to destroy any remaining forms of government interference, except of course for business subsidies and protections. Many elected representatives are implicitly enlisted in the cause.

Florida’s Killer Presentation on Foreclosure Fraud –  I’ve mentioned this report from the Florida Attorney General’s office twice now, but I thought I’d highlight it again, because it makes the issues in foreclosure fraud so completely clear. The report consists of 98 slides, laying out the specific activities of mortgage servicers, foreclosure mills and the parent company banks to swindle homeowners and pursue illegal foreclosures with fraudulent documents. It’s a full pictorial history of the past decade in the mortgage industry, complete with actual shots of improper mortgage assignments. They show the same name of a bank officer being written four different ways, clearly forged. They show stamps from notarizations that expired after before they were used to certify foreclosure documents. I don’t have a copy of the script that goes along with this presentation, but the slides make it very clear. In slide 7, you see the text “The History of Mortgages in America: Banks used to take the original note and mortgage and secure it in a vault.” That simple line shows how radical a change we’ve seen in the past decade, where notes are traded like bubble-gum cards, routinely lost or not conveyed properly at all, and then mocked up and forged after the fact.


In which I eventually dump on Obama for appointing Bill Daley -You all know that Obama’s new Chief of Staff was most recently employed at JP Morgan Chase & Co. where he was, among other things, Head of Corporate Responsibility. If you read JPMC’s latest corporate responsibility report you will learn that the bank’s primary reason for existence is to foster the painting of rainbows and the raising of unicorns. What you will not learn is how this responsible corporation actually conducts its business.Today, my wife received an e-newsletter from an attorney in the Sacramento area who specializes in real estate law. It was essentially a notification to people in the business about a new tactic Chase is using to squeeze blood from its erstwhile mortgage customers. Bear with me as I attempt to explain, I’m not a professional and I hope this isn’t going too far into the weeds.


Chris Whalen on Radio Free Dylan. A 30 minute podcast of Chris Whalen and Dylan Ratigan on Bank of America. How would you like to be the most sued company in all of America?  That’s an honor most of us would hope not to achieve, but Bank of America has come in first place in that category.  Chris Whalen, co-founder of Institutional Risk Analytics, once again joins Dylan to highlight the latest problems with Bank of America.  ” There may be no better representation of sick and desperate than the state of affairs right now at Bank of America, who absorbed not only Merrill Lynch in the financial crisis, but Countrywide,” says Dylan.


William Astore, We’re Number One (in Self-Promotion) -Just as the year ended, however, the Education Trust issued a report indicating that nearly a quarter of all applicants to the Armed Forces, despite having a high-school diploma, can’t pass the necessary military entrance exam.  This isn’t Rhodes Scholarships we’re talking about, but not having “the reading, mathematics, science, and problem-solving abilities” to become a bona fide private in the U.S. Army.  We’re talking the sort of basic that, according to an Education Trust spokesperson, makes it “equally likely that the men and women who don’t pass the test are [also] unprepared for the civilian workforce." Last month, as if to emphasize the seriousness of the problem, Shanghai’s students came in number one in the Program for International Student Assessment, a well-respected test given to 15-year-old students in 65 countries in reading, science, and math skills.  U.S. students came in a glorious 17th in reading, 23rd in math, and 31st in science. 

ADP’s Strong December Jobs Report: Er, Not So Fast –According to Bloomberg, one report released yesterday more-or-less confirmed that the worst has passed as far as the U.S. economy is concerned: Private-sector payrolls expanded at a very strong pace in December, according to data released Wednesday. Private-sector jobs in the U.S. rose by 297,000 last month, according to a national employment report [NER] published by payroll giant Automatic Data Processing Inc. (ADP) and consultancy Macroeconomic Advisers. The report said the gain "suggests nonfarm private employment grew very strongly in December, at a pace well above what is usually associated with a declining unemployment rate." Er, not so fast. As it happens, the economic advisory firm that helps ADP compile the data served up a few caveats (at its blog) after the NER was released

December Employment Report: 104,000 Jobs, 9.4% Unemployment Rate – From the BLS: The unemployment rate fell by 0.4 percentage point to 9.4 percent in December, and nonfarm payroll employment increased by 103,000, the U.S. Bureau of Labor Statistics reported today.  Payroll for November was revised up 70,000 and the October payroll was revised up 38,000. The following graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate decreased to 9.4% (red line).  The Labor Force Participation Rate declined to 64.3% in December (blue line). This is the lowest level since the early ’80s. (This is the percentage of the working age population in the labor force. The participation rate is well below the 66% to 67% rate that was normal over the last 20 years.) The Employment-Population ratio increased to 58.3% in December (black line).  The second graph shows the job losses from the start of the employment recession, in percentage terms aligned at maximum job losses.
Debt Causes Bankruptcy (But Sometimes in Counter-Intuitive Ways) I like NPR’s Marketplace, but stories like this drive me nuts: "Why bankruptcy claims aren’t as high as one would think." The story repeats a premise I often hear in media calls that I receive. The conversation usually starts something like this: "Foreclosures are up, unemployment is high, the economy is a wreck: why have bankruptcies stopped climbing?" Wrong question. But fair enough. I get called because I am supposed to know something about bankruptcy filing rates, and my caller often has just picked up the assignment for the day. If that is the wrong question, what should we be taking away from trends in bankruptcy filing rates?
Republicans acknowledge debt limit should rise – (Reuters) – Republicans acknowledged on Thursday they will have to sign off on more deficit spending to avoid a debt default that would roil financial markets and bring the government to a grinding halt. Treasury Secretary Timothy Geithner pressed lawmakers to raise the nation’s $14.3 trillion debt limit to allow the United States to borrow more and avert a crisis in the coming months.House Budget Committee Chairman Paul Ryan, a Republican, said he recognized the need to allow the government to go deeper in debt. "Will the debt ceiling … have to be raised? Yes," said Ryan, who leads Republican efforts to slash deficit spending. But he called for deep spending cuts in 2012 and the Pentagon announced it would trim its budget by $78 billion as both government and opposition in Washington vied to outdo each other in promises of tighter spending.
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