Month: April 2011

8 April 2011, 4:38 PM

Mortgage Settlement Talks Bifurcate

The Feds and the state Attorneys General have separated their settlement talks with mortgage servicers and banks:

Iowa Attorney General Tom Miller said the reported side settlement between mortgage servicers and federal regulators will in no way affect the ongoing investigation he is leading along with 49 other state attorneys general.

Several media outlets are reporting that the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve are engaging in talks with mortgage servicers and that agreements could be signed as early as next week.

“A separate settlement by the Office of the Comptroller of the Currency will not affect our investigation,” Miller said in a statement. “The settlement neither preempts, nor impacts our efforts. State attorneys general will continue to work together unabated with a broad coalition of federal partners.”

My guess here is that, notwithstanding AG Miller’s attempt to come up with a weak deal, see Yves Smith’s coverage for more information, is that the OCC’s proposed deal is too weak for even him to follow up on.

Additionally, they may be attempting to distance themselves from the manufactured sh%$ storm about Elizabeth Warren advising them.

Of course, if you are an optimist about this, and I am not, it could be that the AGs realized that the two efforts were incompatible, since a federal settlement is primarily about looking at future behavior, while the Attorneys General are charged with investigating and pursuing prior and ongoing wrongdoing.

My guess is that there is some political heat being generated, both from the teabaggers who are crying, “leave ~~Britney~~ the big banks alone,” and people interested in property rights and the rule of law, who want criminal prosecutions of what is fraud and theft an an almost unimaginable scale.

H/t Yves Smith.

8 April 2011, 4:05 PM

Hoo Boy!

One of the things that gets turned off if there is a government shutdown is FHA loans:

I was hoping not to have to write this particular piece, but it seems I may have no choice, so here we go with housing.

What happens to today’s housing market without FHA loans?

Right now FHA loans are about 20 percent of the overall mortgage market (purchases and refis) and 40 percent of purchase applications.

Compare that to around 11 percent of the overall market during the last shutdown in 1995. For the nation’s big public home builders, it’s far more of an impact, according to analysts.

This basically means that the housing market shuts down for the duration, because if 40% of home buyers can’t buy, the remainder will be able to extract even more in the way of lower house prices.

House prices have fallen 7 straight months, but prices are sticky in the short term, so you will have the housing market freeze.

8 April 2011, 3:57 PM

If Obama Had Either the Brains or Guts……

He would use what now appears to be the inevitable government shut down to show people just what they would be missing if the federal government went away.

My guess is that he will instead choose to make sure that the brunt of any shutdown falls on the poor and minorities, because that’s how he rolls.

8 April 2011, 2:44 PM

People With Too Much Free Time…

OK…

I understand how this can be done cheaply with modern video editing software, but I don’t get why.

H/t Neo at the Stellar Parthenon BBS.

7 April 2011, 8:36 PM

Barack Obama Just Came Out Against the Separation of Church and State

In Arizona Christian School Tuition Organization v. Winn, the Supreme Court ruled that a taxpayer had no standing to sue when a state provided tax credits that were directed towards supporting religious schools.

I was appalled, but viewed this as a result of decades of ‘Phant ~~vote~~ court stacking.

What I missed was the fact that the Obama administration, despite the fact that there was no need to because there was no equivalent federal law, filed a brief in support of tearing down the wall between church and state:

The Obama administration’s brief supporting an Arizona law which creates a tax credit system which substantially benefits religious schools is inexplicable and deeply disappointing. Arizona Christian School Tuition Organization v. Winn (Nos. 09-857 and 09-991), to be argued on Wednesday, November 3, does not involve a federal law and did not require any participation by the Obama administration. Yet, the Solicitor General’s office filed a brief for the United States which argues that taxpayers lack standing to challenge a state tax program which subsidizes religious schools and that this does not violate the Establishment Clause of the First Amendment. It is exactly the brief that would have been expected from the Bush administration, but disturbing to have come from the Obama Justice Department.

A state statute allows Arizona taxpayers to receive a tax credit of up to $500 on a dollar-for-dollar basis for donating to a student tuition organization (“STO”). Arizona’s largest STOs (as measured by the amount of contributions) each limit scholarships to certain religious schools. The largest restricted scholarships are to students attending Catholic schools in the Phoenix diocese; the second largest restricts scholarships to students who attend evangelical Christian schools. Although the statute required that STOs not discriminate on the basis of race, color, handicap, familial status or national origin,” it did not specify eligibility requirements. Thus, individuals would receive a tax credit if they made a contribution to an STO and they could designate their money for an STO that supported only schools of a particular faith.

………

Since the Reagan administration, conservatives have sought to eliminate the notion of a wall separating church and state. It is sad and very troubling to see the Obama administration lending its support for this effort.

One of the things that you hear in liberal circles frequently is that Ronald Reagan would be too much of a flaming liberal for today’s Republican party.

Looking at Barack Obama, I’m beginning to think that my assessment of him as a Reagan Democrat is too charitable: He is a Reagan Republican.

The irony here is that Ronald Reagan was easily the least religious president of the past 50 years, of course.

7 April 2011, 7:25 PM

Economics Update

It’s Jobless Thursday, and initial unemployment claims fell by 10,000 to 382,000, with the 4-week moving average of initial claims, continuing claims, and emergency claims falling as well.

When juxtaposed with stronger than expected retail sales figures for March, the economic news is generally pertty good, though the fact that home prices continue to crater, falling for the 7^th straight month, indicates that real estate is not done with its correction.

7 April 2011, 7:15 PM

The Ongoing Libyan Clusterf%$#

First, it appears that since the US has dropped its lead position, NATO does not have enough attack aircraft, and now the British are talking about sending in trainers and advisers to help the rebels:

Britain is to urge Arab countries to train the disorganised Libyan rebels, and so strengthen their position on the battlefield before negotiations on a ceasefire, senior British defence sources have indicated.

The sources said they were also looking at hiring private security companies, some of which draw on former SAS members, to aid the rebels. These private soldiers could be paid by Arab countries to train the unstructured rebel army.

So, we are talking about a major escalation of involvement, one, by the way, which is not called for in the UN Security Council resolution, including the use of mercenaries.

This is not going to end well.

7 April 2011, 6:45 PM

Someone Needs to Open Up a Can of Whup Ass on the Krauts

The periphery in Europe is experience contracting GDP and a debt crisis. The most recent case is that of Portugal, which is now asking for an EU bailout.

Unfortunately the conditions of the bailout are always the same Teutonic prescription:

Austerity budgets, which hike taxes and cut spending.
Paying off the banks that lent the money to the governments at 100¢ on the dollar.

The problem that this creates is:

Social instability.
Further GDP contraction, which increases debt load relative to the GDP.
Declining tax revenues.

The prescription for these problems is:

Austerity budgets, which hike taxes and cut spending.
Paying off the banks that lent the money to the governments at 100 ¢ on the dollar.

Rinse, lather, repeat.

The problem here is two-fold, and they are both of German origin:

The Germans have never gotten over their bout with hyperinflation in the 1920s, and so feel that inflation is the only battle to fight.

This also, at German insistence, got baked into both the Euro and the European Central Bank (ECB), which has no mandate to do anything by keep inflation low. Unlike the Fed it has no mission to minimize unemployment as well.

There is a complete unwillingness by the EU and the ECB to allow for hearcuts on the bondholders, which (surprise) appear to largely be the German banks.

This is why, on the basis of spiking commodity prices, driven largely by the Libya conflict, the ECB has just raised its benchmark rate.

The thing here is that there is an awful lot of pain being inflicted to support German philosophy^*, as well as supporting the bad debts of their banks, which would be insolvent by any realistic evaluation of this debt.

When someone big enough^† finally tells the German banks to go pound sand, things should get interesting.

^*Which, according to my physicist brother, is also why quantum mechanics such a pain, the the formative texts were written by Germans, who felt an obligation to be obscure and confusing.
^†And I don’t mean Spain big. If the new government in Ireland gives a 50¢ haircut to the bond holders, the Germans will have a banking experience to rival our S&L crisis of the 1980s.

6 April 2011, 7:42 PM

Fox Fires Glen Beck

His TV show contract will not be renewed in December, and the definitive word on this comes from the Grauniad,^* “Glenn Beck will be missed after he leaves Fox News – by satirists.”

I guess cratering ratings, and fleeing sponsors mean something, even to Roger Ailes’ Fox News.

^*According to the Wiki, The Guardian, formerly the Manchester Guardian in the UK. It’s nicknamed the Grauniad because of its penchant for typographical errors, “The nickname The Grauniad for the paper originated with the satirical magazine Private Eye. It came about because of its reputation for frequent and sometimes unintentionally amusing typographical errors, hence the popular myth that the paper once misspelled its own name on the page one masthead as The Gaurdian, though many recall the more inventive The Grauniad.”

6 April 2011, 6:18 PM

Woo Hoo!!!!!

Natalie just got into the Lansdowne High School magnet program!

She was #3 on the waiting list, and now she’s in.

She’s going into Lansdowne’s “Academy of Arts & Communication,” which is a concentration in theater, vocal, and instrumental music.

6 April 2011, 6:05 PM

Great, Another Recount………

In the JoAnne Kloppenburg – David Prosser race for Wisconsin state Supreme Court Justice, Kloppenburg is ahead by around 300 votes out of the 1.5 million cast.

Prosser is clearly a horrorshow. He’s cursed at and threatened the chief justice, he’s explicitly stated that he will enable Scott Walker’s political agenda, and he was part of an all-Republican ruling on recusals and campaign contributors that flew in the face of a US Supreme Court ruling, so I really hope that Kloppenburg wins in the end.

That being said, absentee ballots, Wisconsin has fairly liberal absentee voting laws but no early voting, could swing it. Republicans tend to push absentee ballots hard.

The politically savvy thing to do right now would be to start calling for Prosser to give it up, the uncertainty is bad for the state, as is the cost of the recount, but I cannot bring myself to do this: I remember these same arguments in 2000 and Bush v. Gore, and I cannot say them.

In any case, what’s good for the state, and what’s good for the taxpayer never gets in the way of any Republican’s quest for power, so why bother asking.

5 April 2011, 9:37 PM

Alan Greenspan, STFU!

Ayn Rand’s most successful apostle^* is back at it again saying that regulations are causing all of our financial problems, and gives us this bon mot:

The problem is that regulators, and for that matter everyone else, can never get more than a glimpse at the internal workings of the simplest of modern financial systems. Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s “invisible hand” that is unredeemably opaque. With notably rare exceptions (2008, for example), the global “invisible hand” has created relatively stable exchange rates, interest rates, prices, and wage rates.

With notably rare exceptions, Abraham Lincoln enjoyed the play Our American Cousin.

As Paul Krugman observes, the level out outright cluelessness shown here is mind boggling, though the best response comes from Henry Farrell, who holds a “With notably rare exceptions,” contest that is hysterically funny.

^*No, really, he actually hung out with her and was a part of regular meetings in her apartment.

5 April 2011, 8:31 PM

Neil Barofsky Opening Up a Jar of Whup Ass on Timmy “Eddie Haskell” Geithner

Yes, it’s from a week ago, but it’s a must read:

TWO and a half years ago, Congress passed the legislation that bailed out the country’s banks. The government has declared its mission accomplished, calling the program remarkably effective “by any objective measure.” On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree. The bank bailout, more formally called the Troubled Asset Relief Program, failed to meet some of its most important goals.

From the perspective of the largest financial institutions, the glowing assessment is warranted: billions of dollars in taxpayer money allowed institutions that were on the brink of collapse not only to survive but even to flourish. These banks now enjoy record profits and the seemingly permanent competitive advantage that accompanies being deemed “too big to fail.”

Though there is no question that the country benefited by avoiding a meltdown of the financial system, this cannot be the only yardstick by which TARP’s legacy is measured. The legislation that created TARP, the Emergency Economic Stabilization Act, had far broader goals, including protecting home values and preserving homeownership.

These Main Street-oriented goals were not, as the Treasury Department is now suggesting, mere window dressing that needed only to be taken “into account.” Rather, they were a central part of the compromise with reluctant members of Congress to cast a vote that in many cases proved to be political suicide.

Just go read the it.

5 April 2011, 6:30 PM

Kaine to Run For Virginia US Senate Seat

With Senator Jim Webb retiring after one term, former governor Tim Kaine has announced that he will be running for his seat.

His most likely opponent is former governor, former senator (Jim Webb beat him), and blithering idiot George Allen, Jr.

Kaine will lose for a number of reasons:

George Allen will not engage in the self immolation, like his “Macaca moment” and the unseemly scramble at damage control.
He is not following on the coat tails of very his very popular predecessor when he ran for governor, Mark Warner.
The base is simply not excited or motivated as it was in 2006.
As head of the DNC, he was very much a water carrier for Barack Obama, who has continuously blasted, and demoralized, the base.

Notwithstanding the fact that the announcement of his candidacy pretends that Barack Obama does not exist, he cannot run away from the fact that he was Barack Obama’s man at the DNC, brought in to expunge the successes of Howard Dean (2010 worked out so well).

I’m not saying that Obama per se is an albatross around his neck, I am saying the reality is that he is a FoB (Friend of Barack), and any attempt at distancing himself will just hurt him in the campaign.

5 April 2011, 5:10 PM

Your Government Reigning In Meaningless Speculative Arbitrage

And surprise, surprise, it’s Sheila Bair’s FDIC that has put a stop to this bit of cheating.

All things considered, I think that as a rule of thumb, if Timothy “Eddie Haskell” hates a policy, like protecting consumers, or hates a person, like Sheila Bair or Elizabeth Warren,^* you can be pretty sure that it’s a good policy or person, or at least that the policies/people are better than Geithner and his policies.

Case in point,the FDIC levying a fee on a form of bank arbitrage that had banks profiting at taxpayer expense:

The introduction of a new insurance charge on overnight borrowing by banks in the US has led to the collapse of a profitable arbitrage opportunity that financial groups have used to rebuild their balance sheets after the financial crisis, traders say.

The Federal Deposit Insurance Corporation, which guarantees deposits at US banks, on Friday began levying the charge on funds borrowed by banks in the overnight money markets.

The move is part of a plan to rebuild the FDIC’s deposit insurance fund after the failure of more than 350 banks since 2007. The charge is based on the risk rating of the borrower, but is believed to be about 15 basis points for larger banks.

In response, banks are abandoning trades in which they borrowed in the overnight Fed funds market – often from government-controlled mortgage finance companies Fannie Mae and Freddie Mac – at about 10bp-15bp, then deposited the money at the Federal Reserve at an overnight rate of 25bp.

Some dealers estimated these trades could have allowed banks to lock in profits of about $200m since late 2008, when the Fed began paying overnight interest of 25bp on so-called excess reserves.

“What some banks now face is that the FDIC has just ‘taxed’ the arbitrage that they have been playing,” said William O’Donnell, strategist at RBS Securities.

Understand this: the taxpayers own Fannie and Freddie, and the Federal Reserve, so this was basically free money for the banks to be the banks.

I’m sure that Geithner is mad as hell about this, because it’s shut down another way for banks to extract money from taxpayer money to firm up their balance sheets, but our esteemed Treasury Secretary can talk to Bender.

It’s nice to know that someone in the Obama White House, even if it is someone that they would rather not have there, is actually doing things that prevent this sort of looting by the financial industry.

^*Have you ever wondered why all of Timmy’s sworn enemies always seem to be women? I wonder some times.

4 April 2011, 9:12 PM

Last Week’s Employment Data

Click for full size

Employment-Population ratio h/t Paul Krugman

So the federal unemployment numbers came out on Friday, and employment rose by 216,000 and the unemployment rate fell to 8.8%.

This is good news, employment actually rose by more than the natural growth of the workforce, about 175K, but this still means that it would take about 13 years for the 8 million people who have lost jobs to become employed again.

When one looks at the employment population ratio (see graph Pr0n) and you can see that it has the lowest that it has been done in a decade, so a lot of the falling unemployment numbers are people leaving the workforce, whether it is early retirement, going on disability, or just giving up.

It’s still basically a jobless “recovery”.

4 April 2011, 8:07 PM

The Real History of the Boston Tea Party

I love me some good history

It appears that the Boston Tea Party, i.e the dumping of tea in Boston harbor, was not about “Taxation Without Representation,” but rather about tax cuts without representation.

The issue at hand was the fact that the East India Tea Company was granted a specific exemption to the tax on tea, which allowed them to drive it’s small “Yankee Trader” competitors.

So here is a note to the Teabaggers out there, it ain’t about taxes, it’s about sweetheart deals to big business.

In your face, Dick Armey and the Koch brothers.

H/t Crooks and Liars

4 April 2011, 7:24 PM

A Party Without a Death Wish Would Beat Them to Death With Their Own Pancreas

But all we have is the Democratic Party, so now that the Republican Party has formally proposed abolishing Medicare and Replacing it with vouchers, so I expect that they, and Barack Obama in particular, will spend the next few months negotiating with themselves before capitulating.

E.J. Dionne asks a question:

And you wonder: Will President Obama welcome the responsibility of engaging the country in this big argument, or will he shrink from it? Will his political advisers remain robotically obsessed with poll results about the 2012 election, or will they embrace Obama’s historic obligation — and opportunity — to win the most important struggle over the role of government since the New Deal?

They will shrink from their responsibility, even though it fighting for Medicare is an unalloyed political winner for them.

This has been another answer of simple answers to simple questions.

4 April 2011, 6:41 PM

And He is Calling His Base C#$% Suckers

On the day that Barack Obama decides to formally announce his candidacy for President, he decided to kick his base in the teeth by dropping real trials for terrorism defendants, and going with the Guantanamo kangaroo courts:

The Obama administration, ending more than a year of indecision with a major policy reversal, will prosecute Khalid Shaikh Mohammed and four other people accused of plotting the Sept. 11 terrorist attacks before a military commission and not a civilian court, as it once planned.

Attorney General Eric H. Holder Jr. announced on Monday that he has cleared military prosecutors at Guantánamo Bay, Cuba, to file war-crimes charges against the five detainees in the Sept. 11 case.

Mr. Holder had decided in November 2009 to move the case to a federal civilian courtroom in New York City, but the White House abandoned that plan amid a political backlash.

The shift was foreshadowed by stiffening Congressional resistance to bringing Guantánamo detainees into the United States, and by other recent steps clearing the way for new tribunal trials.

Expect more of this. Barack Obama thinks that doing the wrong thing just to piss off your base and pandering to your enemies^* is somehow “grown up” behavior.

It’s going to be a long f%$#ing campaign.

^*They aren’t his opponents, they are his enemies, and his treatment of them as principles opposition is stupid.