Category: Finance

And More Christie Corruption and Cronyism Raises its Head

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As a result of “Bridgegate” Chris Christie’s deals are getting a lot more scrutiny.

Now it appears that Christie threw a $300 million dollar pension deal to a supporter in violation of state anti-corruption laws:

A PandoDaily investigation has discovered evidence that Gov. Chris Christie’s pending deal to award a $300 million pension management contract to a controversial hedge fund is in violation of state anti-corruption laws.

 New Jersey state pay-to-play statutes prohibit state contractors from directly or indirectly financially supporting the election campaigns of state officials. Those statutes also explicitly prohibit the use of outside groups or family members to circumvent that ban.

Additionally, separate Department of Treasury rules appear to prohibit public pension contracts from being awarded to investment firms whose employees have made significant financial contributions to political entities organized to operate in New Jersey state elections. Those laws also bar investment firms doing business with the state from making contributions “for the purpose of influencing any election for State office.”

 Yet, late last month, the New Jersey State Investment Council moved to award a controversial $300 million investment contract to Chatham Asset Management, despite the fact that Chatham’s principal, and a woman living at his address and sharing his surname, donated more than $50,000 to a Republican election group that oversaw major portions of Gov. Christie’s 2013 re-election operation. The proposed investment is already highly controversial given the hedge fund also reportedly owns a stake in the Atlantic City casino, Revel.

 Craig Holman of the watchdog group Public Citizen, which originally lobbied for the pay-to-play statute, said that the $300m offer “appears to be not an indirect violation, but a direct violation of the law.”

What’s more, Chatham is providing free space to a charity chaired by Mary Pat Christie, the first lady if the great state of New Jersey:

As part of that investigation we have also learned that Chatham made a large in-kind donation to the Hurricane Sandy Relief Fund, which is chaired by the governor’s wife, Mary Pat Christie. That charity has been plagued by allegations that it is a stealth conduit for corporations to buy influence and circumvent campaign finance regulations.

In an interview with Pando, a spokeswoman for the Hurricane Sandy Relief Fund acknowledged that Chatham Asset Management housed the 501(c)3 organization from November 2012 to February 2013, a total in-kind donation value of approximately $15,000.

 For his part, Gov. Christie has denied that the Hurricane Sandy Relief Fund would be used as a way to wield influence with him. At a 2013 press conference, he said donors to the charity “know, because they know me, that it will not one iota affect the way I execute my job as governor or any decisions I have to make as governor regarding the use of public money.”

Drip, Drip, Drip.

It’s Bank Failure Friday!!!!

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I missed one last week, I didn’t scroll down, and it was local, Oldham Family Alliance Federal Credit Union, of Baltimore, MD.

It is the 7th 6th failure of the year.

I had been miscounting the information from the NCUA closings page, and I have missed those credit unions “Merged with NCUA assistance.”  (see below, click for popup)

So we actually have 1 more credit union failure this year than we have bank failures, which is kind of weird.

So Not Surprised: Hedge Funds as Slumlords

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Hedge funds have gone big time into small and single family rentals, and in turn, they have illegally ignored their responsibilities as landlords:

The yawning gap between private equity landlord sales talk and what they are delivering is finally being exposed.

One of the reasons many investors have been skeptical of the way private equity firms have gone full bore into buying distressed single family homes is that property management is a hands-on business even when it’s done it the most favorable possible setting, an apartment building. Individuals who have invested in single family home rentals almost without exception report that even when they found it to be an economically attractive proposition, it was still oversight-intensive. Admittedly, there are some private equity firms who have bought rental properties who actually do seem to be targeting markets and renters in such a way that they might be able to do a decent job of property management, for instance, by buying homes where they can rehab the kitchen and bath plumbing using the same fixtures, screening tenants in person, and then inspecting the properties monthly and giving the tenants points for passing that they can convert into credits against a purchase or take in cash.

But the biggest fish in this ocean, Blackstone, is clearly taking the opposite approach, of doing as little as they can to maintain the houses and trying to fob off the responsibility onto the tenant, even when local regulations clearly prohibit it. So managing dispersed homes is no problem if you never planned to do the job in the first place.

Blackstone tries to evade this duty formally, through lease terms, and informally, by making themselves inaccessible. And because Blackstone is the largest and highest profile player in this space, they may be hoping that if enough PE landlords follow their lead, communities will accept the new finance-dictate bad standards, just as they have with foreclosure abuses.

But the difference here is while stressed borrowers were the ones that were hurt in foreclosures, and foreclosures and bankruptcies are seen as shameful event, there’s no reason for a victim of a bad landlord to be seen as unsympathetic. Moreover, deliberately negligent PE landlords like Blackstone traditionally have hurt the value of neighboring properties. If this trend continues, abused tenants and their neighbors face a common threat.

Notice that contracts that violate local law are almost certain to fail a legal challenge. In New York, which has more extensive tenant protections than other cities, landlords sometimes try to include provisions that are impermissible, like prohibiting a tenant from having a roommate. Housing court judges exhibit a bit of zeal in smacking down landlords when challenges to those leases come before them.

………

Now to the update on Blackstone’s latest escapades, via some original reporting at In These Times. The article, Game of Homes, makes for good one-stop shopping if you want to get friends and colleagues up to speed on this topic. For NC readers, the first two-thirds of the article covers familiar terrain. Here are the sections that discuss how Blackstone, which is using “Invitation Homes” as its brand for its single-family rentals, is trying to evade its duties as landlord:  ………

If you thought Wall Street was bad as a lender, just imagine how badly they can f%$# you up as a landlord.

As an FYI, I was in a dispute with a landlord and property management company in Texas, one of the less tenant friendly jurisdictions, we lawyered up and won, because even the professional property management firm did not grasp the actual rights of tenants.

Here’s hoping that we will see some major court losses for the hedge fund pukes.

Not Enough Bullets………

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The hedge fund vultures have outdone themselves, the first example are the pukes who are buying shares in the in the 1983 Marine Corpse bombing in Beirut:

Iran is still a pariah in the international community, but one hedge fund thinks it will eventually pay $1.8 billion as ordered by a U.S. court.

RD Legal Capital hopes to raise up to $100 million to buy the rights to payments from families of the 241 U.S. Marines killed in a terrorist attack in Lebanon in 1983. A federal court in 2007 found Iran liable for the truck-bomb attack, which led to the withdrawal of U.S. troops from war-torn Lebanon.

Iran, of course, is not on the best of terms with the U.S., and the two countries do not have diplomatic relations. Still, Iran’s central bank is appealing the $1.8 billion verdict against it.

Victims’ families agreed to allow RD to buy stakes in the judgment. The firm will not buy out any of the beneficiaries, instead investing only in pieces of each of the 151 claims. The Iran fund is RD’s first ever focused on a single case, The Wall Street Journal reports.

And then there are the vulture funds who are buying into the abject misery and death that the banksters (and the Germans) have caused in Greece and Portugal:

Yield-hungry investors are flocking back to Greek and Portuguese markets, shunned by international buyers for four years, as the outlook for the bailed-out countries improves and alternatives look more expensive or increasingly risky.

Portuguese and Greek shares and bonds have been the best performers in Europe in 2014, and funds invested in them are making a killing, Thomson Reuters data shows.

Investors say they are driven by economic improvement, which provides fresh impetus to an initial bounce triggered by the European Central Bank’s pledge in 2012 to save the euro.

Potential investment alternatives are also less tempting. Tensions between the West and Russia and global growth concerns cloud the outlook for similar-yielding emerging markets, while a 1-1/2 year rally has shrunk returns elsewhere in euro zone debt.

“It’s not so much an interest-rate-driven rally but much more a structural shift and a perception that the euro crisis is behind us,” said Franz Wenzel, chief strategist at AXA Investment Managers, which manages assets worth about 550 billion euros ($760 billion).

After nearly crashing out of the euro zone in 2012, Greece’s recession is easing, while the Portuguese economy is already rebounding. Lisbon is due to exit its international bailout in about two months.

As much as Timothy Geithner might disagree, there has to be well defined limits to what is a legal financial speculative instrument.

These people are F%$#ing ghouls.

Going after Induhviduals?* Be Still My Beating Heart!

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Benjamin Lawskey, head of New York’s Department of Financial Services is now saying that he will be looking at criminal filings against individuals:

Benjamin Lawsky, New York’s aggressive banking regulator who is campaigning to clean up Wall Street, is turning his sights on the individuals as well as the institutions who squeeze struggling homeowners or help banks violate US sanctions.

“Corporations are a legal fiction. You have to deter bad individual conduct within corporations,” said Mr Lawsky, superintendent of New York’s Department of Financial Services, in an interview with the Financial Times. “People who did the conduct are going to be held accountable.”

Mr Lawsky’s name-and-shame strategy taps into a wave of popular discontent in the US and Europe over the fact that few individual bankers have been personally sanctioned for the bad decisions that led to the global financial crisis. Taxpayers have been forced to stump up hundreds of billions of dollars to rescue banks brought low by reckless behaviour.

Mr Lawsky, who has ruffled the feathers of other US regulators by jumping ahead of them to accuse Standard Chartered of breaking sanctions on Iran, has already begun to take a tougher approach to individual behaviour.

As part of Royal Bank of Scotland’s settlement in December over sanctions violations, the bank was asked to let go of four RBS employees, including the head of Asia, the Middle East and Africa in the global banking unit, and claw back the bonuses of eight other employees. Mr Lawsky’s office is now investigating the rapid growth of non-bank mortgage servicing companies Ocwen and Nationstar. He is also looking into possible sanctions violations by several banks and the consultants that advise them. He recently requested information from a dozen banks over potential currency manipulation.

As the DFS does not have criminal authority all actions against individuals will have to be pursued through civil remedies such as fines.

“We think about it most in the area where there has been some sort of intentional misconduct as opposed to a systemic industry wide problem,” Mr Lawsky said. In addition to suspensions, industry bans and clawbacks, Mr Lawsky said he is also considering laying out the allegations in more detail to expose bad actors, which he hopes will deter people from getting into trouble.

The Department of Justice and other regulators have been criticised for not bringing charges against individuals and instead extracting large fines from banks to resolve allegations of misconduct.

Here’s hoping that this will eventually result in senior people (and I don’t just mean the usual non-white suspects like Raj Rajaratnam) ending up behind bars.

When former Senator and Goldman “Vampire Squid” Sachs CEO Jon Corzine and former Treasury Secretary Robert Rubin are sentenced to a few years in the hoosegow, I’ll throw a f%$#ing party.

*It’s the DNRC, man.

This Takedown is Worthy of Matt Taibbi

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On The Baffler Alex Pareene systematically demolishes New York Times Andrew Ross Sorkin’s dealings, and double dealings with, the finance industry:

The New York Times, as everybody knows, is the premier source of authoritative journalism in the world’s most powerful formal democracy. Among the paper’s storied achievements are its courageous, pathbreaking coverage of the civil rights movement in the 1960s, the release of the Pentagon Papers in defiance of a prior restraint order in 1971, and investigative coups on everything from the abuses of money in politics to the disastrous course of the war in Afghanistan. It has also, along the way, committed travesties like Judith Miller’s misreporting of WMDs allegedly in the possession of Saddam Hussein prior to the 2003 invasion of Iraq, the long run of stories plucked out of thin air by serial fabricator Jayson Blair, and the paper’s bafflingly exhaustive coverage of the consumption habits of would-be bohemians in certain East River–adjacent neighborhoods. But the Times mostly takes its self-assigned mission to be the nation’s “newspaper of record” seriously.

 How, then, to account for the Times’ reliably market-prostrate, counter-informative—and immensely profitable—online clearinghouse of financial news and commentary, DealBook? This stand-alone digital product, which launched as a branded blog in 2006, is the brainchild—and, in unprecedented ways, the meal ticket—of the paper’s longtime financial reporter Andrew Ross Sorkin.

 Sorkin is something of a prototype of how industry reporters have evolved into digital entrepreneurs. In the industrial age, robber barons leveraged their way into journalism via the mogul-vanity career path of yellow press lords. But where your William Randolph Hearsts and Colonel Robert McCormicks dragooned the mass-circulation daily press largely to ornament mythologies of their own self-made, earth-hewing genius, today’s niche-minded media entrepreneurs in the Sorkin mold are trafficking in a more tenuous and ambitious confidence game: the fiction that the superstructure of our investment sector serves any useful economic purpose.

 Given the scope of this cognitive challenge, and Sorkin’s unique role as the project’s founder, mascot, and reporter, DealBook is unusually attuned to the sensitive task of vetting the public image of Wall Street—almost certainly the most spectacularly failed complex of institutions in American life today. To observe how this demanding task plays out in DealBook’s pages, take a close look at two of Sorkin’s columns on Goldman Sachs back in 2011, when it appeared that some culpability might finally attach to the bank’s shady activities in the run-up to the mortgage meltdown.

 ………

 In 2010, DealBook expanded again, adding staff (including some well-respected reporters from competing papers), videos, and a page in the paper four days a week. A Times press release captured the excitement, and the intended audience, of the venture:

DealBook caters to a high-level audience of C-Suite executives and decision-makers and will continue its focus on key beats—M&A, private equity, hedge funds, regulation, law—delivering more scoops, insights and breaking news throughout the day and across platforms.

The use of the common PR term “caters to” in the context of an ostensibly journalistic venture was apt. The release went on to thank the people who made the expansion possible:

Barclays Capital, Goldman Sachs, Sotheby’s and Tata Consultancy Services are charter advertisers for the relaunch of DealBook.

So Sorkin is close to his sources, who are also his sponsors. His compensation is tied to the financial performance of his financial news blog empire, which is underwritten by the finance industry. This is a fine example of exactly the sort of twisted incentive structures that led Wall Street firms to produce and sell a lot of toxic debt. In this one limited sense, you might say, DealBook does shed inadvertent light on the inner workings of finance.

And then there is this delicious bit:

One great problem with financial journalism, especially in the decades leading up to the crash, has been that it’s often written in an argot understandable only to the already highly financially literate. Sorkin doesn’t usually employ such specialized language. This has led to the mistaken belief that he’s explaining the industry to regular people. In fact, he is a dutiful Wall Street court reporter, telling important people what other important people are thinking and saying. At the same time, he is Wall Street’s most valuable flack. He isn’t explaining finance to the people—you’d be better served reading John Kenneth Galbraith to understand how finance works—he’s justifying it.

This is really a thing of beauty.

Read the whole thing.

I am adding Alex Pareene to my list of, “People I Do Not Want to Piss Off.”

Yes, the Consumer Financial Protection Board is Doing Things: For Profit Colllege Edition

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The CFPB has filed suit against ITT Technical alleging that it behaves more like a payday lender than an institute of learning.

It’s not just the CFPB, 32 state Attorneys General have filed suit as well, but the CFPB’s involvement makes it far less likely that other federal agencies, most notably the Office of the Comptroller of the Currency, will attempt to preempt the investigation:

Honest, well-run for-profit colleges can be helpful to students who do not qualify for traditional schools. But the robber barons in the for-profit sector represent a menace that requires more federal oversight. They saddle students with crushing debt while furnishing them useless degrees – or no degrees at all. These schools have been known to push students who are eligible for low-cost, federal loans into ruinously priced private loans that have fewer consumer protections and that give borrowers who get in trouble little choice but to default. That in turn makes it difficult for them to find jobs, get credit or rent apartments. And because private student loans are difficult to escape through bankruptcy, the stricken borrower might never recover.

Attorneys general in 32 states are actively pursuing this problem . This week the federal Consumer Financial Protection Bureau finally got into the act. On Wednesday it filed suit against an Indiana-based for-profit chain, ITT Educational Services, Inc., which has tens of thousands of students enrolled online or at one of roughly 150 institutions in nearly 40 states. The bureau, which paints a damning portrait of the company’s policies, accuses the chain of practicing “predatory student lending.”

………

The suit makes the company look very much like a storefront payday lender that ropes borrowers into loans that they cannot repay, then hammers them with fees and interest. In this case, the bureau asserts that the company rushed students through the application process without giving them a chance to understand what was happening. In some cases “ students did not even know they had a private student loan until they started getting collection calls.” Moreover, it says: “ITT knew that most of its students would ultimately default on their private student loans; it projected a default rate for its students of 64 percent.”

I really hope that this results in meaningful change.

The for profit college industry is full of parasites and predators who make their money off of federally guaranteed loans.

Full CFPB release after break:

CFPB Sues For-Profit College Chain ITT For Predatory Lending

ITT Pushed Consumers into High-Cost Student Loans Likely to Fail

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against ITT Educational Services, Inc., accusing the for-profit college chain of predatory student lending. The CFPB alleges that ITT exploited its students and pushed them into high-cost private student loans that were very likely to end in default. The CFPB is seeking restitution for victims, a civil fine, and an injunction against the company.

“ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line,” said CFPB Director Richard Cordray. “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default. Today’s action should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics.”

Like the mortgage market in the lead-up to the financial crisis, the for-profit college industry may be experiencing misaligned incentives. These colleges benefit when students take out large amounts of loans, regardless of the students’ long-term success. The CFPB is concerned that some of these corporations may be employing practices to coax consumers into taking out more federal and private student loans. Today’s announcement is the Bureau’s first public enforcement action against a company in the for-profit college industry.

ITT Educational Services, Inc. is an Indiana-based for-profit provider of post-secondary technical education. Tens of thousands of students are enrolled online or at one of ITT’s roughly 150 institutions in nearly 40 states. ITT’s tuition costs are among the highest in the country in the for-profit industry. Earning an associate’s degree at ITT can cost more than $44,000. Bachelor’s degree programs can cost $88,000. That is significantly higher than the cost of similar degrees at a community college or a public four-year institution.

Most of ITT’s students borrow large sums to pay the high tuition costs and the majority of this money is borrowed from federal student loan programs. But private student loans also provide critical revenue for ITT. Because most ITT students’ federal aid does not cover the full cost of an ITT program, most students face a “tuition gap” requiring them to find other sources of funding.

The CFPB’s lawsuit alleges that ITT encouraged new students to enroll at ITT by providing them funding for this tuition gap with a zero-interest loan called “Temporary Credit.” This loan typically had to be paid in full at the end of the student’s first academic year. But ITT knew from the outset that many students would not be able to repay their Temporary Credit balances or fund their next year’s tuition gap.

The CFPB lawsuit alleges that between July 2011 and December 2011, ITT pushed its students into repaying their Temporary Credit and funding their second-year tuition gaps through high-cost private student loan programs. Students were left in the dark about the fact that taking out these high-cost loans would be required to continue their studies. However, ITT’s CEO revealed in investor calls that converting the temporary loans to long-term loans was the company’s “plan all along.”

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. Specifically, in today’s lawsuit, the Bureau alleges the following conduct by ITT:

  • Pressured into predatory loans: ITT used its financial aid staff to rush students through an automated application process without affording them a fair opportunity to understand the loan obligations involved. In some cases, students did not even know they had a private student loan until they started getting collection calls. The loans were high-cost. For borrowers with credit scores under 600, for example, the costs of the private student loans included 10 percent origination fees and interest rates as high as 16.25 percent.
  • Credits not transferable: ITT was accredited by a national organization that accredits many for-profit schools, but the credits that students earned typically did not transfer to local community colleges or other nonprofit schools such as public or private colleges. ITT used the prospect of expulsion and the loss of the money already spent during the student’s first year to coerce students into taking out the private loans.
  • Misleading future job prospects: The Bureau believes that ITT’s representations led students to think that when they graduated they were likely to land good jobs and enough salary to repay their private student loans. In this way, ITT exploited student expectations while it knew that a majority of students would default.
  • Loans likely to fail: ITT knew that most of its students would ultimately default on their private student loans; it projected a default rate for its students of 64 percent. Defaulting on private student loans can have grave consequences for consumers. It can make it difficult to get any kind of loan for years and even affect a borrower’s job prospects. And, because private student loans are difficult to discharge in bankruptcy, the debt can be very difficult to recover from.

The complaint against ITT can be found at: http://files.consumerfinance.gov/f/201402_cfpb_complaint_ITT.pdf

The Bureau’s complaint is not a finding or ruling that the defendant has actually violated the law.
To assist student loan borrowers who may be in delinquency or default, the CFPB recently launched an updated version of the Repay Student Debt interactive tool.

The CFPB also recently finalized a rule allowing it to supervise certain nonbank servicers of federal and private student loans. The rule takes effect on March 1.

CFPB takes complaints about student loans. To submit a complaint, consumers can:

  • Go online at consumerfinance.gov/complaint
  • Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
  • Fax the CFPB at 1-855-237-2392
  • Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244

###
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

Bitcoin Has Had a Disasterous Week

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We’ve just had 3rd Bitcoin exchange robbery in a week, the suspicious death of the CEO of another exchange, the discovery the mysterious founder of Bitcoin, Satoshi Nakamoto, is actually a guy named Satoshi Nakamoto, and Japan has decided not to regulate it as currency.

I know what you are wondering why is Japan deciding not to regulate Bitcoin a bad thing?

Well, because if it is not currency, then it is subject to the VAT (sales tax) and the capital gains tax:

The Japanese government officially said Friday that it doesn’t consider bitcoin to be a currency and has no plans at present to regulate it as a financial product.

As it tries to cope with the fallout from the bankruptcy of the Tokyo-based Mt. Gox exchange, the government said that the crypto-currency would be treated like other goods and services, with commercial sales of bitcoin itself and bitcoin-based transactions subject to sales tax. In addition, any gains on exchange rates will be taxed as well.

“Any bitcoin transactions are taxable when they fulfill requisitions stated by laws on income tax, corporate tax and consumption tax,” the government said in its statement, which came in response to questions over how bitcoins will be regulated.

At the same time, the statement ruled out treatment of bitcoin as a currency or a financial instrument.

“Bitcoin are neither Japanese nor foreign currencies and its trading is different from deals stated by Japan’s bank act as well as financial instruments and exchange act,” according to a document released by Prime Minister Shinzo Abe’s cabinet.

(emphasis mine)

I don’t know if Bitcoin is done, but I think that a stake has been driven though the heart of the Randroid libertarian dream of completely unregulated and untraceable crypto currency.

Heh.

I Called for Amputating the Financial Sector Years Ago

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See here.

JD Alt at New Economic Perspectives has just called for the same thing:

All this talk about the 99% versus the 1%? I say the easiest—and likely the most useful—thing to do is just forget the 1%. Write them off. Let them have their gated communities, their mega-yachts, their island retreats and off-shore bank accounts. What do we need them for?

 For one thing, we DON’T need their money. Even if we could get it—which we can’t because they steadfastly refuse to use it for anything other than casino gambling in their private and secretive financial networks. We wonder why we have a “jobless recovery”? Does it have anything to do with the fact that such a large percentage of our “capital” has, for all practical purposes, been removed from the economy?

 Even when the 1% decides to invest some of their Dollars to manufacture or build something, they rarely decide to manufacture or build anything we really need—only things we really don’t need. Like strip-mines in the Bristol Bay salmon fishery, or pipe-lines across Nebraska’s freshwater aquifers, or rocket-planes for space-tourism. Thanks, but we really don’t need—or want—any of it. We’d much rather have fresh wild salmon (rather than the artificially colored hatchery-stuff) than more copper and gold, fresh water instead of tar-sands oil, and the good-old week-at-the-beach is just fine for a vacation.

He then gives the example of the huge transformers that are essential to our electrical grid.

We do not, and can not, make them in the United States, because the casino finance class doesn’t care, because they can always get them from Korea, with a a 2 year lead time.

If that’s a problem, they can always move to their summer house on a Greek island.

Here is how he poresents it going:

This little tale is made even more interesting by the fact that these very-large transformers—usually situated inside a compound protected by chain-link fencing—are easily destroyed with a few rounds of fire from a semi-automatic assault rifle. Thankfully, semi-automatic assault rifles are difficult to come by in the U.S., otherwise there might be cause for concern. The seventeen transformers recently shot to death in California (we can’t explain how this actually happened, since the NRA is only marginally active on the West Coast) are a cautionary tale: If this were repeated on just a little bit larger scale, the Department of Homeland Security has determined, our entire electric grid could be down for months—or even longer. (Come on South Korea, hurry it up…. We’re waiting!)

 So my example is this: Why doesn’t President Obama propose that since the 1% have no interest in doing it, the U.S. sovereign government build a plant to manufacture very-large transformers, hire engineers to train unemployed people to do the labor, pay those unemployed trainees for making the effort to learn how to make a giant-sized transformer, then hire those newly trained workers to run the manufacturing process? We could build a backup supply of these critical electric grid components so that in the (increasingly likely) event some crazy, anti-government sociopath seizes the opportunity to turn out America’s lights, we could turn them back on in fairly short order.

It’s an interesting mental exercise, and I am not sure how serious this proposal is,it has a Jonathan Swift — A Modest Proposal snarky feel to it.

Still, breaking the lock of the “Washington Consensus” of so-called free trade and the continuing financialization of our economy is a non trivial task.

That’s why my calls for amputation involve a zero tolerance criminal prosecution policy. 

It’s Bank Failure Friday!!!! (on Thursday)

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I missed a credit union failure last week, I was busy battling the elements to get to my Eugenia’s Bat Mitzvah.

While I was battling the elements, the NCUA was closing the St. Francis Campus Credit Union of Little Falls, Minnesota (Full NCUA list), the 3rd closing of the year.

Given that there were 24 failures of banks, and 13 credit unions closed in 2013, it appears that we are slightly ahead of last year’s trend.

And the Banksters Scuttle Back into the Shadows as Their Latest Bubble Begins to Deflate

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This sounds a lot like the collapse of a pump and dump:

Rents collected on the collateral for the first U.S. rental-home securities declined by 7.6 percent from October to January, according to Morningstar Inc.

Payments declined as expiring leases and early tenant departures left residences backing the bonds of Blackstone (BX) Group LP’s Invitation Homes vacant, Becky Cao and Brian Alan, analysts at Morningstar’s credit-ratings unit, said in a report. While 8.3 percent of the properties were vacant or occupied by delinquent renters in January, renewals on 78.5 percent of leases that expired the prior month exceeded the analysts’ expected rate of 66.7 percent.

The deal’s performance is being watched as Wall Street bankers and institutional property investors seek to follow Blackstone’s $479.1 million transaction in November with additional offerings. Initial lease expirations for the 3,207 homes are scheduled to peak from January through March, Morningstar said. To woo investors and rating firms in the new market, the transaction started with all of the units leased, unlike bonds backed by apartment-building loans.

They are claiming that this is going to improve, but these protestations of improving prospects sound awfully hollow.

Understand that this is in some way even scarier than what they did with the alphabet soups like MBS and CDS, because these psychopaths are now responsible for fixing things like broken heaters, plugged drains, etc.

There are already anecdotal reports that the banksters are horrible landlords (big surprise), and one wonders what is going to happen when tenants start suing them or organizing rent strikes.

As the Punchline Says, “A Good Start”*

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In the last 8 months, there have been 12 suspicious deaths, including one suicide by nail-gun to the head & chest with 7 or 8 shots.

There is also a missing financial reporter with the WSJ.

To quote Richard Dreyfuss, “This was no boat accident.”

Some of the deaths were clearly suicides, and the intern who died of exhaustion induced seizures is merely deplorable, not suspicious, but some of them, particularly Richard Talley, the nail-gun guy, make you wonder if some of the banksters, or perhaps some of their sketchy clients *cough* Russian Mafia *cough* might be tying up some loose ends.

* This is a reference to the old joke that goes:
               Q: What do you call 5000 dead lawyers at the bottom of the ocean?
               A: A good start!”

The Consumer Financial Protection Bureau Goes to Work

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CFPB Alleges Mortgage Insurer Operated 15-Year-Long Kickback Scheme – Consumerist

The Consumer Financial Protection Bureau has begun proceedings against PHH Corporation for its involvement in a 15-year-long mortgage insurance kickback scheme that collected hundreds of millions of dollars from homeowners.

 The CFPB announced Wednesday that it is seeking a civil fine, an injunction to prevent future violations and victim restitution from PHH Corporation and its residential mortgage origination subsidiaries, PHH Mortgage Corporation and PHH Home Loans LLC, as well as it’s wholly-owned subsidiaries, Atrium Insurance Corporation and Atrium Reinsurance Corporation, for violating the Real Estate Settlements Procedures Act and harming consumers through a kickback scheme beginning as early as 1995 and continuing until at least 2009.

 ………

 An investigation by the CFPB showed that when PHH originated mortgages, it referred consumers to its mortgage insuring partners. In exchange for the referral, the insurers purchased reinsurance – a product that transfers risk to help mortgage insurers cover their own risk of unexpected losses – from PHH’s subsidiaries. As a result, consumers ended up paying more in mortgage insurance premiums.

Good, but this will not send anyone to jail.

Until we start people, not just corporations, start experiencing the direct consequences of the misdeeds, nothing will change.

5 Words that Strike Terror into My Heart

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“Wall Street’s New Housing Bonanza“

Wall Street’s latest trillion-dollar idea involves slicing and dicing debt tied to single-family homes and selling the bonds to investors around the world.

 That might sound a lot like the activities that at one point set off a global financial crisis. But there is a twist this time. Investment bankers and lawyers are now lining up to finance investors, from big private equity firms to plumbers and dentists moonlighting as landlords, who are buying up foreclosed houses and renting them out.

 The latest company to test this emerging frontier in securitization is American Homes 4 Rent. The company talked to prospective investors at a conference in Las Vegas last week about selling securities tied to $500 million of debt, according to people briefed on the matter.

 American Homes 4 Rent, which went public in August, has tapped JPMorgan Chase, Goldman Sachs and Wells Fargo as its bankers for a debt deal that is expected to be sold by the end of the first quarter, these people said.

This will not end well.

Another complex deal that will leave banksters richer, and rest of us stuck with the f%$#ing tab.

Not Enough Bullets………

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After JP Morgan had to pay billions of dollars in fines and restitution, the board of directors took decisive action, and doubled JP Morgan CEO’ Jamie Dimon’s salary.

I guess in finance, everyone gets a gold star, kind of like kindergarten, only with less accountability:

JP Morgan Chase has almost doubled chairman and CEO Jamie Dimon’s pay for 2013, rewarding the executive for settling probes against the bank.

Dimon will receive total compensation of $20m in 2013, consisting of $18.5m in stock options and a base salary of $1.5m, the bank said in a statement Friday.

That compares with total compensation of $11.5m a year earlier, down from $23m in each of the previous two years.

The bank says it took several factors into account when deciding on Dimon’s pay, including the “sustained long-term performance” of the bank, gains in market share and customer satisfaction as well as his handling of the legal issues facing the lender.

Seriously, we need to start jailing these people post haste.