Monthly Archives: January 2014

Presidential Poll

 

This from MSNBC:

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Bartcop.com Funnies

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Naked Capitalism on the Myth of a Housing Recovery

Quelle Surprise! Bond Investors Notice that Servicers Let Houses Fall Apart

Posted on January 28, 2014 by 

Bloomberg last Friday, Gundlach Counting Rotting Homes Makes Subprime Bear:

The founder of $49 billion investment firm DoubleLine Capital LP is largely avoiding the subprime-mortgage bonds that jumped about 17 percent last year after home prices surged by the most since 2006, deterred by the lengthy process to sell foreclosed houses and the destruction that’s creating.

“These properties are rotting away,” Gundlach, 54, said last week on a conference call with investors, about homes stuck in foreclosure pipelines, adding that it could take six years to resolve defaulted loans made to the least creditworthy borrowers before the real-estate crash.

Needless to say, that’s a lot of spin in a short space. Notice that it’s the “lengthy foreclosure process” that is the cause of trouble, when in fact servicers delay foreclosures when they already have more foreclosed homes than they can offload (lawyers in Florida, for instance, report that judges all over the state complain that banks repeatedly postpone foreclosures). Oh, and someone in a home keeps it secure and maintains it to at least an adequate standard, while vacant homes are subject to being stripped and get in all sorts of other types of disrepair.

But the really funny bit is that Gundlach is giving his investors some sort of special insight in telling them that many of the properties backing the remaining balances in subprime bonds are falling apart.

Compare the Bloomberg story with this account by Dave Dayen in Salon last July, The Housing “Recovery” Is a Total Sham:

Out on the alphabet streets in this once-thriving Florida community, the houses are dotted with black mold. Some have buckled roofs. Others are hollowed out by fire, or the wiring has been stripped. Pests and critters have moved in as the people moved out. On some streets, half of the homes feature boards along the windows, and ubiquitous “No Trespassing: No Traspasar” signs in English and Spanish. “Those are to keep the drug sales out,” says my tour guide, Lynn Szymoniak of the nonprofit Housing Justice Foundation. “I’ve been stopped doing these tours, cops have told me, ‘you’re not supposed to be here.’”

At one time, these homes were exciting products sold by Option One, Ameriquest, New Century Financial, and other mortgage lenders who sprouted up during the housing bubble, and disappeared just as quickly….

The inflated sale prices present a serious problem for rehabilitating the community. Ninety percent of these properties are tied up in mortgage-backed trusts for large sums (“When you look them up, you’re just so amazed,” Szymoniak says), and the trustees don’t want to book the losses. So instead of selling off the old inventory, they hold onto it, hoping in vain for price appreciation or just wanting to avoid the reckoning. “If you have to keep investors thinking that you have a $300,000 property,” Szymoniak remarked, “and you want to carry it on the books for as long as you possibly can, then you don’t put it on the market, you just hold it back, and you let it go on forever.”

It should therefore come as no surprise to learn that Gundlach, who has allocated over 30% of his main fund to mortgage-backed securities, has underperformed other MBS-oriented hedge funds by a significant margin over the last three years.

This pattern is both common sense and well known to mortgage and real estate investors. Vacant properties deteriorate. And it has also been regularly written up in the business press that banks have done a terrible job of securing vacant properties, with squatting and homes being stripped of copper and appliances all too prevalent. Reader MBS Guy said that industry hands assume that a home that has been in foreclosure for three years is a close to 100% loss.

But the fact that the trusts are still carrying these loans at inflated value has had, and continues to have, important implications. Servicers keep advancing principal and interest until they come close to the mortgage balance. But if they can’t get the money advanced to investors back in a foreclosure (and the contracts call for the advanced to be repaid before any other disbursements are made), they get the funds from refinances or other payoffs (regular sales of other properties, short sales, etc), even though technically they aren’t allowed to take the money from a different property to make up for a shortfall on foreclosure (it is hardly novel to see banks taking liberties with securitization agreements). The net effect, as we’ve noted previously, is to steal principal to pay out more interest to investors. That might seem like a meaningless distinction until you understand how the tranching works. In simplified terms, as the trusts suffer default-related losses, the bottom tranches get successively wiped out. The bottom-most remaining tranche as that process continues is getting only interest payments. So if those risky tranches get more interest than they are entitled to, they are effectively stealing principal from the other tranche-holders, particularly the AAA tranches.

Who bought those risky tranches? Hedgies like Gundlach. And who holds the AAA tranches? Often, public pension funds, like ones for municipal employees.

So letting properties rot, even though Gundlach claims it’s bad news for investors, hasn’t been bad news for investors like him. Indeed, it’s one of the many mechanisms by which clever financiers profit as the expense of the less savvy. And it’s also typical for the winners to make pious noises even as the looting continues.

Naked Capitalism on the Automated CEO

Are the Davos Men Getting a Bit Nervous?

Posted on January 27, 2014 by

Normally I try not to pay much attention to Davos because it is meant to reinforce the idea that plutocracy is simply a manifestation of natural aristocracy. But several media outlets took note of the sudden shift from self-congratulation (as if they were the ones who navigated the ship through the crisis, as opposed to were the big beneficiaries of how the crisis was resolved) to worry as emerging markets swooned on the last day of the conference.

A confident set of aristocrats would not react this way. Richard Whitney, the epitome of 1920s American WASP-dom (tall, handsome, athletic, a bit too often visibly snooty), as head of the New York Stock Exchange did a brief heroic turn by placing a large buy order during the Great Crash and spurring a brief rally. He also had expensive tastes and a bad eye as far the technologies of his day were concerned. He resorted to embezzlement as a way of dealing with his impossibly high debts. When Whitney was caught out, as recounted in Once in Golconda, he took full responsibility for his actions and made sure his staff were not tarred by the scandal. He went to Sing Sing (no Club Feds back then) with his head up and was a model prisoner. His brother eventually repaid all the funds that were pilfered. Contrast that with the usual CEO/top financier found within hailing distance of scandal conduct: they know nothing, remember nothing.

And in a bit of synchronicity, the Wall Street Journal published this letter from Tom Perkins, founder of Kleiner Perkins in the same timeframe (hat tip Yonatan and danny):

Regarding your editorial “Censors on Campus” (Jan. 18): Writing from the epicenter of progressive thought, San Francisco, I would call attention to the parallels of fascist Nazi Germany to its war on its “one percent,” namely its Jews, to the progressive war on the American one percent, namely the “rich.”

From the Occupy movement to the demonization of the rich embedded in virtually every word of our local newspaper, the San Francisco Chronicle, I perceive a rising tide of hatred of the successful one percent. There is outraged public reaction to the Google buses carrying technology workers from the city to the peninsula high-tech companies which employ them. We have outrage over the rising real-estate prices which these “techno geeks” can pay. We have, for example, libelous and cruel attacks in the Chronicle on our number-one celebrity, the author Danielle Steel, alleging that she is a “snob” despite the millions she has spent on our city’s homeless and mentally ill over the past decades.

This is a very dangerous drift in our American thinking. Kristallnacht was unthinkable in 1930; is its descendent “progressive” radicalism unthinkable now?

As danny wrote, “Of all the backwards, ill-considered statements coming from San Francisco elites in recent months, this takes the cake.” Perkin’s firm apparently agreed and tweeted that they were “shocked by his views” and disagreed with them. But these super rich guys to have an unseemly fondness for Nazi Germany comparisons. Recall Steve Schwarzman compared a proposal to close the loophole that lets guys like him pay taxes on their labor income at capital gains rate to Hitler invading Poland.

But more telling is the editorial at the Financial Times, which tells us Davos Men are worried about the threat that automation poses to white collar workers….including them!

Now mind you, the bit about even the folks at the very top not being safe from the threat of computers is a mere aside at a couple of points. But it suggests that deep down, somewhere, a decent proportion of the Galt wanabes actually recognize that the reason they are where they are has to do with luck and timing and not some astonishing superior capabilities that they alone possess.

So why doesn’t someone in the NC commentariat do good and make some money by helping this process along? Doesn’t the world really need a digital CEO? We are moving to computerized call centers and even have computers that can simulate therapists. Surely it isn’t hard to write a program that fires people right and left (the Chainsaw Al module) or the more upscale version that hires McKinsey or some less fancy firm to “rightsize” the company. You need a program that has decision rules as to what to do with excess corporate cash flow. Since there are only two choices, buying back stock or paying dividends, it shouldn’t be that hard to work it out. It will also need to be able to detect when questions are taking a legalistic turn and automatically disconnect from the hard disk and work only off an auxiliary drive. And think of all the money you save! No possibility of sexual harassment suits or insider trading scandals. And all the big bonuses the synthetic CEOs negotiate for themselves can be split between the company and the inventors. And of course you can order personality overlays, like arrogant/pushy (the Dimon/Benmosche flavor), smooth and super corporate (Ken Chennault of Amex style), nerdy, and young digiterati.

I’m waiting with bated breath….

Common Dreams on Where the Money’s Going

Where $300 Million of Our Money Went Wednesday – Hint: Not Education – Which Was Still Way Cheaper Than Tuesday

by Abby Zimet

In the name of a questionable transparency – ie: if there’s not much you can do about something you don’t like, is it better to know about it anyway? – it seems the Defense Department publishes daily reports on the contracts it awards and their estimated costs. Thus, on Jan. 14, it authorized spending over $800 million on an array of military equipment, supplies and support services. It tightened (relatively) its belt on Jan.15 when it spent just under $300 million, perhaps feeling the pinch from the House’s passage that day of a $1.1 trillion omnibus spending bill that includes just $572 billion for defense, down considerably from what was requested. Our current military budget is said to be larger than the next largest 29 countries’ military budgets combined, so bloated that even the Washington Post calls it “staggering” and so much more than our old ally the U.K. that Robert Gates warned this week they may no longer be able to play with the big boys/guns if they keep cutting their defense budget. One must ask, again, how much is enough? Especially given that credit unions are now offering low-interest classroom supply loans to desperate teachers trying to buy erasers and paper within a school budget decimated to make way for…you get the picture. With an array of appalling facts, charts and graphs to illustrate the many other socially useful purposes to which our current blood money could be put.

Robert Greenwald YouTube: The Koch Brothers Exposed

Humor: The Borowitz Report

Putin Warns Gays Against Flamboyant Displays at Olympics

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SOCHI (The Borowitz Report)—Russian President Vladimir Putin said today that gay spectators should feel welcome at the upcoming Winter Olympics but warned them against “any flamboyant displays that draw unnecessary attention to themselves.”

“The Olympics have always been, and should always be, about the athletes,” President Putin said. “Any attempt by homosexuals to flaunt their bodies in a way that is distracting, provocative, or arousing will be frowned upon.”

“Specifically, gay spectators should remain fully clothed at all times, and resist the temptation to unveil their chiseled biceps or shredded abdominals,” he said.

“Furthermore,” he added, “under no circumstances should gays oil, grease, or otherwise lubricate their torsos in an effort to highlight their glistening, ripped pectorals.”

He closed his remarks with one final warning for gay spectators in Sochi: “Remember, this is the Olympics. It is strictly forbidden for you to expose your thighs, buttocks, or especially your nipples, erect from the frigid Russian air.”

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Photograph by Alexsey Druginyn/AFP/Getty.

Jim Hightower on the Millionaires’ Club

Millionaire lawmakers can rise above their financial handicap

Wednesday, January 22, 2014   |   Posted by Jim Hightower
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Mark Twain spoke for me when he said: “I’m opposed to millionaires, but it would be dangerous to offer me the position.”

One danger that such wealth brings is that many who have it become blinded to those who don’t. Thus, the news that more than half of our congress critters are now in the millionaire class helps explain why it has been striving ceaselessly to provide more government giveaways to Wall Street bankers and other superwealthy elites, while also striving to enact government takeaways from middle-class and poor families.

Take the richest House member, Rep. Darrell Issa, with a net worth of $464 million. A right-wing California Republican, he has used his legislative powers to try denying health coverage to poor Americans, even as he tried to unravel the new restraints to keep Wall Street bankers from wrecking our economy again. Issa and his ilk are proof that a lawmaker’s net worth is strictly a financial measure, not any indication at all of one’s actual value or “worthiness.”

I hasten to note that many millionaires in America have been able to rise above their financial handicap, serving the public interest rather than self or special interests. For example, when Rep. Chellie Pingree was elected to Congress in 2009, she was an organic farmer and innkeeper in rural Maine. Definitely not a millionaire, she was a stalwart fighter for such progressive policies as getting corporate money out of politics, enacting Medicare for all, and reigning in Wall Street greed. But in 2011, Pingree married – of all people – a Wall Street financier and was suddenly vaulted into the ranks of the 1-percenters. So, naturally, her legislative positions changed… not one whit.

See, even in Congress, being a millionaire is no excuse for becoming a narcissistic jerk. Siding with plutocrats is not an incurable condition – it’s a choice.

“Millionaires’ Club: For The First Time, Most Lawmakers are Worth $1 Million-Plus,” www.opensecrets.org, January 9, 2014.

“For first time, more than half in Congress are millionaires,” The New York Times, January 10, 2014.

The millionaires’ Congress vs. the people

Monday, January 20, 2014   |   Posted by Jim Hightower
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The rich truly are different from you and me – they tend to become congress critters.

You don’t find many plumbers, mine workers, dirt farmers, Walmart associates, beauty parlor operators, taxi drivers, or other “get-the-job-done” Americans among the 535 members of the US House and Senate. What you do find is an over-supply of lawmakers drawn from a very thin strata of America’s population: Millionaires. The Center for Responsive Politics reports that last year – for the first time in history – more than half of our senators and House members are in the Millionaires Club. Indeed, the average net worth (the value of what they own minus what they owe) for all lawmakers now totals more than $7 million.

The world in which our “representatives” live is light years from where the majority of people live, and the divide between the governors and the governees is especially stark for the 40 percent of people whose net worth is zero (or, technically, less than zero, since their income and other assets are far exceeded by their debts). This widening chasm is not just a matter of wealth, but most significantly a literal separation of the privileged few from the experiences, needs, and aspirations of the many who’re struggling to make ends meet and worried that opportunities for their children to get ahead are no longer available to them.

The harsh reality is that most Americans are no longer represented in Washington. Chances are that their own members of Congress don’t know any struggling and worried people, share nothing in common with them, and can’t relate to their real-life needs, Thus, Congress is content to play ideological games with such basics as health care, minimum wage, joblessness, food stamps, and Social Security. America’s wealth divide has become a chasm, creating a looming social and political crisis for America that undermines any pretense that ours is a democratic society.

“Millionaires’ Club: For The First Time, Most Lawmakers are Worth $1 Million-Plus,” www.opensecrets.org, January 9, 2014.

“For first time, more than half in Congress are millionaires,” The New York Times, January 10, 2014.

Humor: The Borowitz Report

Fox: Obama to Force All Americans to Buy Pot

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NEW YORK (The Borowitz Report)—President Obama is about to issue an executive order that would force all Americans to purchase a monthly supply of marijuana, the Fox News Channel reported today.

According to Fox’s Sean Hannity, who broke the story, Obama’s initiative is part of a broader plan to make weed available and affordable to every individual in the United States.

Under Obama’s plan, every American would be required to purchase a government-mandated amount of marijuana per month or face a penalty of up to two thousand dollars.

Hannity said that the President hopes to have the mandatory marijuana plan up and running by 2015, “but they’re still working on the Web site.”

Appearing on Fox, House Speaker John Boehner (R-Ohio) took issue with Obama’s recent remark that marijuana was no more dangerous than alcohol: “I saw that as an insult.”

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Photograph by Jim Watson/AFP/Getty.

Let America Be America Again

by Langston Hughes

Let it be the dream it used to be.
Let it be the pioneer on the plain
Seeking a home where he himself is free.

(America never was America to me.)

Let America be the dream the dreamers dreamed—
Let it be that great strong land of love
Where never kings connive nor tyrants scheme
That any man be crushed by one above.

(It never was America to me.)

O, let my land be a land where Liberty
Is crowned with no false patriotic wreath,
But opportunity is real, and life is free,
Equality is in the air we breathe.

(There’s never been equality for me,
Nor freedom in this “homeland of the free.”)

Say, who are you that mumbles in the dark? 
And who are you that draws your veil across the stars?

I am the poor white, fooled and pushed apart,
I am the Negro bearing slavery’s scars.
I am the red man driven from the land,
I am the immigrant clutching the hope I seek—
And finding only the same old stupid plan
Of dog eat dog, of mighty crush the weak.

I am the young man, full of strength and hope,
Tangled in that ancient endless chain
Of profit, power, gain, of grab the land!
Of grab the gold! Of grab the ways of satisfying need!
Of work the men! Of take the pay!
Of owning everything for one’s own greed!

I am the farmer, bondsman to the soil.
I am the worker sold to the machine.
I am the Negro, servant to you all.
I am the people, humble, hungry, mean—
Hungry yet today despite the dream.
Beaten yet today—O, Pioneers!
I am the man who never got ahead,
The poorest worker bartered through the years.

Yet I’m the one who dreamt our basic dream
In the Old World while still a serf of kings,
Who dreamt a dream so strong, so brave, so true,
That even yet its mighty daring sings
In every brick and stone, in every furrow turned
That’s made America the land it has become.
O, I’m the man who sailed those early seas
In search of what I meant to be my home—
For I’m the one who left dark Ireland’s shore,
And Poland’s plain, and England’s grassy lea,
And torn from Black Africa’s strand I came
To build a “homeland of the free.”

The free?

Who said the free? Not me?
Surely not me? The millions on relief today?
The millions shot down when we strike?
The millions who have nothing for our pay?
For all the dreams we’ve dreamed
And all the songs we’ve sung
And all the hopes we’ve held
And all the flags we’ve hung,
The millions who have nothing for our pay—
Except the dream that’s almost dead today.

O, let America be America again—
The land that never has been yet—
And yet must be—the land where every man is free.
The land that’s mine—the poor man’s, Indian’s, Negro’s, ME—
Who made America,
Whose sweat and blood, whose faith and pain,
Whose hand at the foundry, whose plow in the rain,
Must bring back our mighty dream again.

Sure, call me any ugly name you choose—
The steel of freedom does not stain.
From those who live like leeches on the people’s lives,
We must take back our land again,
America!