Twin River plans to add 600 jobs

 

LINCOLN, R.I. (WPRI) - More job seekers than expected could hit the jackpot when Twin River expands.  The Lincoln gambling hall announced Wednesday it plans to add 600 full and part time jobs by the time it begins running table games in July, nearly double the original estimate of 350.

 

http://www.wpri.com/dpp/news/local_news/blackstone/twin-river-adding-jobs

TARP: The bailout success story that wasn’t

Commentary: Wall Street’s bailout sinkhole keeps sinking

 

"Remember the Troubled Asset Relief Program, better known as TARP? When we last heard from the Treasury Department, on Jan. 23, TARP was being wound down. It was, in the estimation of Timothy Geithner & Co., a success: 93% of the $418 billion disbursed had been collected including $70 billion last year.

But hold the Champagne. It ain’t over till it’s over."

"The idea that TARP is somehow a wash because a few banks repaid the bailouts with interest is misleading. The reality is that bailed-out firms essentially wrote off their losses on taxes. As of Dec. 30, TARP was still owed $67.3 billion, including $27 billion in realized losses — which is to say, that money is gone and is never coming back."

"A new report by SNL Financial shows the Treasury Department is taking a beating in auctions of the Capital Purchase Program, one of the pipelines through which bailout money flowed.

The auctions essentially sell off TARP debt and equity to private investors. Unfortunately, investors aren’t really interested in zombie-bank debt. It’s been selling at an 8% to 20% discount. The last auction, on Jan. 25, met with a 35% discount. In all, the latest CPP auction cost taxpayers $104.5 million."

http://www.marketwatch.com/story/losses-mounting-in-bank-bailouts-2013-02-12?dist=countdown

Sherrod Brown and George Will vs. Big Banks

 

George Will: The bank buster

GEORGE WILL

 

With his chronically gravelly voice and relentlessly liberal agenda, Sherrod Brown seems to have stepped out of "Les Miserables," hoarse from singing revolutionary anthems at the barricades. Today, Ohio's senior senator has a project worthy of Victor Hugo - and of conservatives' support. He wants to break up the biggest banks.

 

He would advocate this even if he thought such banks would never have a crisis sufficient to threaten the financial system. He believes they are unhealthy for the financial system even when they are healthy. This is because there is a silent subsidy - an unfair competitive advantage relative to community banks - inherent in being deemed by the government, implicitly but clearly, too big to fail.

 

The Senate has unanimously passed a bill offered by Brown and Sen. David Vitter, a Louisiana Republican, directing the Government Accountability Office to study whether banks with more than $500 billion in assets acquire an "economic benefit" because of their dangerous scale. Is their debt priced favorably because, being TBTF, they are considered especially creditworthy? Brown believes the 20 largest banks pay less - 50 to 80 basis points less - when borrowing than community banks must pay...

 

http://www.unionleader.com/article/20130209/OPINION02/130219970&source=RSS

Sherrod Brown and George Will vs. Big Banks

 

George Will: The bank buster

GEORGE WILL

 

With his chronically gravelly voice and relentlessly liberal agenda, Sherrod Brown seems to have stepped out of "Les Miserables," hoarse from singing revolutionary anthems at the barricades. Today, Ohio's senior senator has a project worthy of Victor Hugo - and of conservatives' support. He wants to break up the biggest banks.

 

He would advocate this even if he thought such banks would never have a crisis sufficient to threaten the financial system. He believes they are unhealthy for the financial system even when they are healthy. This is because there is a silent subsidy - an unfair competitive advantage relative to community banks - inherent in being deemed by the government, implicitly but clearly, too big to fail.

 

The Senate has unanimously passed a bill offered by Brown and Sen. David Vitter, a Louisiana Republican, directing the Government Accountability Office to study whether banks with more than $500 billion in assets acquire an "economic benefit" because of their dangerous scale. Is their debt priced favorably because, being TBTF, they are considered especially creditworthy? Brown believes the 20 largest banks pay less - 50 to 80 basis points less - when borrowing than community banks must pay...

 

http://www.unionleader.com/article/20130209/OPINION02/130219970&source=RSS

 

Good luck to him.

He will even have to fight some other states - including Ohio's Attorney General. Between the loop holes already being used by banks, lawsuites, lack of funds and now this the Dodd-Frank Act is just getting weaker and weaker.

 

Eight states join lawsuit challenging Dodd-Frank

Lawsuit: System to dismantle a big failing bank is unconstitutional

"WASHINGTON (MarketWatch) — Attorneys-general from eight states have joined a lawsuit challenging the constitutionality of regulations setting up a system to dismantle a big failing bank so its collapse doesn’t cause collateral Lehman-like damage to the economy.

The attorneys-general are joining onto a lawsuit filed in federal court in June 2012 by the State National Bank of Big Spring, Texas and two conservative action groups that are challenging key parts of the Dodd-Frank Act."

http://www.marketwatch.com/story/eight-states-join-lawsuit-challenging-dodd-frank-2013-02-13?dist=afterbell

 

Meijer to add 1,500 jobs in 2013 with $160 million investment in stores

 

WALKER, MI -- Meijer will invest more than $160 million to build or remodel 11 stores that will create 1,500 new jobs, the Walker-based retailer announced Wednesday, Feb. 13.  The investment includes the construction of six new Meijer supercenters and major remodel projects for an additional five stores.

 

http://www.mlive.com/business/west-michigan/index.ssf/2013/02/meijer_will_create_1500_jobs_i.html

 

Duluth company plans to add 85 jobs, nearly doubling payroll

 

DULUTH — St. Louis County commissioners on Tuesday approved applying for a state Department of Employment and Economic Development loan for Altec HiLine LLC, the Duluth company that makes long-boom lift trucks. The Birmingham, Ala.-based company now has about 90 employees at the Duluth facility and plans to add 85 with the current expansion, county officials said. The state requires the county to be a partner in the application.

 

http://www.sctimes.com/article/20130213/BUSINESS/302130031/Duluth-company-plans-add-85-jobs-nearly-doubling-payroll

Foreclosure filings fall to lowest level since 2007

 

Foreclosure filings in January plunged to their lowest level since April 2007. Notices of default, scheduled auctions, bank repossessions and other filings fell to 150,864 last month, a 7% decline from the previous month and a 28% drop from January 2012, according to RealtyTrac. New foreclosure filings fell to the lowest level since June 2006.

 

http://money.cnn.com/2013/02/14/real_estate/foreclosures/index.html?hpt=hp_t2

 

401(k) balances at record high

 

401(k) balances reached record highs in 2012, as a strong stock market and increased contributions helped retirement savers continue to recover from recession losses.  Fidelity Investment's average 401(k) balance hit $77,300 at the end of 2012 -- up nearly 12% from $69,100 in 2011, according to a report released Thursday by Fidelity, the country's largest provider representing 12 million U.S. workers.

 

http://money.cnn.com/2013/02/14/retirement/401k-balances/index.html?hpt=hp_t2

Just thought I'd stop by and join in....

 

Gangster Bankers: Too Big to Jail

How HSBC hooked up with drug traffickers and terrorists. And got away with it

"The deal was announced quietly, just before the holidays, almost like the government was hoping people were too busy hanging stockings by the fireplace to notice. Flooring politicians, lawyers and investigators all over the world, the U.S. Justice Department granted a total walk to executives of the British-based bank HSBC for the largest drug-and-terrorism money-laundering case ever. Yes, they issued a fine – $1.9 billion, or about five weeks' profit – but they didn't extract so much as one dollar or one day in jail from any individual, despite a decade of stupefying abuses."

Read more: http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214#ixzz2KuYrIjeS

Follow us: @rollingstone on Twitter | RollingStone on Facebook

Where did all the post go?

 

All that QE debt and still no escape velocity.

 

Economists Across Wall Street Are Axing Their Forecasts For US Growth

"Today's disappointing U.S. retail sales report is sending shockwaves across Wall Street's economics departments.

"The disappointing 0.4% m/m rise in US retail sales values in June  increases the chances that GDP grew at an annualised rate of less than 1% in the second quarter," said Capital Economics' Paul Dales.

Barclays just cut its Q2 GDP growth tracking estimate to 0.5% from 0.6%, reports CNBC's Bob Pisani."

Read more: http://www.businessinsider.com/economists-cut-q2-gdp-forecasts-2013-7#ixzz2Z9ZUe98V

 

What is "QE debt," exactly? The Federal Reserve (not the Treasury or any actual branch of the Government) purchases assets with money created out of thin air. There's no borrowing.

 

Sorry, I didn't really follow this thread much, and now that the recent history has been erased I don't know what has already been said about the issue.

I feel bad for those in areas were home prices are rising rapidly and yet incomes and job pay are not. The new generation coming into the workforce is being squeezed from all sides.

 

Mort Zuckerman: A Jobless Recovery Is a Phony Recovery

More people have left the workforce than got a new job during the recovery—by a factor of nearly three.

"In recent months, Americans have heard reports out of Washington and in the media that the economy is looking up—that recovery from the Great Recession is gathering steam. If only it were true. The longest and worst recession since the end of World War II has been marked by the weakest recovery from any U.S. recession in that same period.

 

The jobless nature of the recovery is particularly unsettling. In June, the government's Household Survey reported that since the start of the year, the number of people with jobs increased by 753,000—but there are jobs and then there are "jobs." No fewer than 557,000 of these positions were only part-time. The survey also reported that in June full-time jobs declined by 240,000, while part-time jobs soared by 360,000 and have now reached an all-time high of 28,059,000—three million more part-time positions than when the recession began at the end of 2007."

http://online.wsj.com/article/SB10001424127887323740804578601472261953366?mg=reno64-wsj.html?dsk=y

BLS number is BS

Rate’s closer to 11%, former insider insists

 

"Keith Hall believes the US economy is a lot sicker than the 7.6 percent unemployment rate would lead you to believe.

Hall was, from 2008 until last year, the guy in charge of Washington’s Bureau of Labor Statistics, the agency that compiles that rate.

“Right now [it’s] misleadingly low,” says Hall, who believes a truer reading of those now wanting a job but without one to be more than 10 percent.

The fly in the ointment is the BLS employment-to-population ratio, which is currently at 58.7 percent. “It’s lower than it was when the recession ended. I think that’s a remarkable statistic,” says Hall, a senior research fellow at the Mercatus Center at George Mason University in Fairfax, Va.

That level tells Hall the real unemployment rate is actually about 3 percentage points higher than the BLS number. If the jobless rate is unacceptable at 7.6 percent, it’d be shockingly bad if he is right and the true rate is 10.6 percent.

How could they be so different? I asked the former number-cruncher.

No surprise here. I’ve been saying it for years. Hall confirms that the jobless rate that makes the headlines — called the U-3 by BLS — doesn’t take into account people who have stopped looking for work but does count as employed folks who have worked as little as an hour during the preceding month."

http://www.nypost.com/p/news/business/bls_number_is_bs_jaKS2Nc8Yu2TrnETK2bXEM

 

NY Post + current GMU professor (who specifically works in the Mercatus Center)..... call me skeptical.  There are several ways to calculate unemployment and all are far from perfect.  The fact remains that the calculation method has not changed.

Interesting read.

 

Never mind the Czech gold the Nazis stole...

The Bank for International Settlements actually financed Hitler’s war machine

 

"The documents released by the Bank of England are revealing, both for what they show and what they omit. They are a window into a world of fearful deference to authority, the primacy of procedure over morality, a world where, for the bankers, the most important thing is to keep the channels of international finance open, no matter what the human cost. A world, in other words, not entirely different to today.

The BIS was founded in 1930, in effect by Montagu Norman and his close friend Hjalmar Schacht, the former president of the Reichsbank, known as the father of the Nazi economic miracle. Schacht even referred to the BIS as “my” bank. The BIS is a unique hybrid: a commercial bank protected by international treaty. Its assets can never be seized, even in times of war. It pays no taxes on profits. The Czechoslovaks believed that the BIS’s legal immunities would protect them. But they were wrong.

The Bank of England’s historian argued that to refuse the transfer order would have been a breach of Britain’s treaty obligations with regard to the BIS. In fact there was a powerful counter-argument that the Nazi invasion of Czechoslovakia had rendered any such obligations null and void as the country no longer existed.

A key sentence in the Bank of England documents is found on page 1,295. It reads: “The general attitude of the Bank of England directors of the BIS during the war was governed by their anxiety to keep the BIS to play its part in the solution of post-war problems”. And here the secret history of the BIS and its strong relationship with the Bank of England becomes ever more murky.

During the war the BIS proclaimed that it was neutral, a view supported by the Bank of England. In fact the BIS was so entwined with the Nazi economy that it helped keep the Third Reich in business. It carried out foreign exchange deals for the Reichsbank; it accepted looted Nazi gold; it recognised the puppet regimes installed in occupied countries, which, together with the Third Reich, soon controlled the majority of the bank’s shares."

http://www.telegraph.co.uk/finance/bank-of-england/10213988/Never-mind-the-Czech-gold-the-Nazis-stole....html

NY Post + current GMU professor (who specifically works in the Mercatus Center)..... call me skeptical.  There are several ways to calculate unemployment and all are far from perfect.  The fact remains that the calculation method has not changed.

 

I have posted numbers mainstream articles that show it has. So prove it hasn't.

Mort Zuckerman: A Jobless Recovery Is a Phony Recovery

It is Zuckerman's party that caused "sequestration" that is causing a slow economy and the joblessness that he decries.  We need more public spending,!

NY Post + current GMU professor (who specifically works in the Mercatus Center)..... call me skeptical.  There are several ways to calculate unemployment and all are far from perfect.  The fact remains that the calculation method has not changed.

 

I have posted numbers mainstream articles that show it has. So prove it hasn't.

 

BLS did change the calculation method..... in 1994.  The changes to the CPS were first contemplated under the Reagan Administration and implemented under the Clinton Administration.

There is no conspiracy to change the unemployment statistics to make President Obama look good.

Interesting, I can't believe anybody would invest in this crap after what has happened the last five years.

 

Wall Street Engineers Newest Frankenstein’s Monster For Housing

Wednesday, July 31, 2013 at 8:03PM

 

Wall Street engineering is back in the housing market. Its newest product is one heck of a contraption, a synthetic structured security of the type that helped blow up the financial system back in 2008. It’s like those triple-A rated mortgage-backed securities that became toxic waste in your “money-market-equivalent” bond fund or elsewhere in your 401(k) or in the portfolio of a town in Norway – only worse.

 

To get that deal done, private-equity giant Blackstone Group is conniving with too-big-to-jail Deutsche Bank, which is already buried under an avalanche of legal problems, scandals, and write-offs in Germany.

 

Blackstone has been on the forefront in the housing market, gobbling up 32,000 single-family homes for $5.5 billion, helter-skelter, at foreclosure auctions on courthouse steps scattered around the country, hoping for capital appreciation and rental income. Deutsche Bank has been on the forefront funding this binge and leading the issuance of $3.6 billion in loans.

 

http://www.testosteronepit.com/home/2013/7/31/wall-street-engineers-newest-frankensteins-monster-for-housi.html?source=Patrick.net

 

 

 

Blackstone, Deutsche Bank in Talks to Sell Bond Backed by Home Rentals .

By JEANNETTE NEUMANN

 

Two major Wall Street firms are in detailed discussions to create and sell the world's first bond backed by home-rental payments, people familiar with the matter say.

 

Blackstone Group LP is in negotiations to bundle monthly rental payments on about 1,500 to 1,700 of its homes. The private-equity giant is among the firms that have spent billions buying homes out of foreclosure, an investment strategy that has helped to bolster demand and strengthen the U.S. housing market.

 

http://online.wsj.com/article/SB10001424127887324170004578638093802889384.html?source=Patrick.net&mod=djemRealEstate_h

Yeah, this makes me nervous as well.  However, it could actually work, and in many respects, I think a security based on rental income could actually be more stable than one based on mortgage notes.  The reason is that, hopefully, the rental income will be tied to the property, not the borrower, meaning that the security can maintain a flow of payments with only a brief interruption if a tenant defaults and must be evicted and replaced.  When a mortgage borrower defaulted, the bank got the right to sell the property, but that was time-consuming, expensive, and not ideal for a security that was supposed to produce a fixed income stream.  In the case of collateralized rental payments, as soon as you find a new tenant, the money can start flowing again.  And at least in this instance, the financial institution already owns the houses in question.

 

The real risk that I see, and that hopefully the bankers do a better job of managing this time, is decisionmaking authority.  This was one of the nightmarish parts of the CDO meltdown.  No one could even get in touch with anyone with the authority to negotiate settlements when workouts were needed.  Authority was too scattered and vague.  A similar problem could arise with these rentals.  Someone will need to be managing the properties, likely many different property management companies given the size of Blackstone's portfolio at this point.  Someone is going to need to pay those management companies, and those management companies are going to have legal obligations under applicable landlord-tenant law in the states in which they operate.

That's not a a bad idea for an investment vehicle. Though I think that Blackstone or whoever else does it would eventually want to take management in-house especially in the larger cities. There might be too many Balkans otherwise. Thing is, I don't think that many companies like being in the property management game because it is a highly specialized skill set that requires a lot of entrepreneurial ability. Not enough people out there know a lot about both finance and plumbing.

I imagine that Blackstone will end up hiring someone to be the property manager and trusting themselves to handle the finance.  (The latter is kind of their shtick, or at least so they like to believe.)  Blackstone may admit (in highly classified internal documents) that plumbing isn't their specialty.

The highest yielding "intermediate" corporate bonds at fidelity.com are investment banks. The highest of them all are these notes by Goldman Sachs that yield over 3% for a six year note. I wonder what they are actually backing these with.

My biggest concern would be what happens with the tranche investing and "ratings companies" (Moody's, S&P) that start giving this crap good ratings because the big hedge funds and investment banks pay them to do and some poor investor/pension fund down the line starts buying "safe" investments that have no history of returns or could turn to crap once the properties start requiring a lot of repair/maintenance money.

& My  employer can only eek out an A- bond rating.

So how can over 873,000 people come off the unemployment rolls when there were only a little over 114,000 jobs created? Below is a transcript of a conversation between two eminent economists discussing this very question! 

 

COSTELLO: I want to talk about the unemployment rate in America .

ABBOTT: Good Subject. Terrible Times. It's 7.8%.

COSTELLO: That many people are out of work?

ABBOTT: No, that's 14.7%.

COSTELLO: You just said 7.8%.

ABBOTT: 7.8% Unemployed.

COSTELLO: Right 7.8% out of work.

ABBOTT: No, that's 14.7%.

COSTELLO: Okay, so it's 14.7% unemployed.

ABBOTT: No, that's 7.8%.

COSTELLO: WAIT A MINUTE. Is it 7.8% or 14.7%?

ABBOTT: 7.8% are unemployed. 14.7% are out of work.

COSTELLO: If you are out of work you are unemployed.

ABBOTT: No, Congress said you can't count the "Out of Work" as the unemployed. You have to look for work to be unemployed.

COSTELLO: BUT THEY ARE OUT OF WORK!!!

ABBOTT: No, you miss his point.

COSTELLO: What point?

ABBOTT: Someone who doesn't look for work can't be counted with those who look for work. It wouldn't be fair.

COSTELLO: To whom?

ABBOTT: The unemployed.

COSTELLO: But ALL of them are out of work.

ABBOTT: No, the unemployed are actively looking for work. Those who are out of work gave up looking and if you give up, you are no longer in the ranks of the unemployed.

COSTELLO: So if you're off the unemployment roles that would count as less unemployment?

ABBOTT: Unemployment would go down. Absolutely!

COSTELLO: The unemployment just goes down because you don't look for work?

ABBOTT: Absolutely it goes down. That's how they get it to 7.8%. Otherwise it would be 14.7%. Our govt. Doesn't want you to read about 14.7% unemployment.

COSTELLO: That would be tough on those running for reelection.

ABBOTT: Absolutely. 

COSTELLO: Wait, I got a question for you. That means there are two ways to bring down the unemployment number?

ABBOTT: Two ways is correct.

COSTELLO: Unemployment can go down if someone gets a job?

ABBOTT: Correct.

COSTELLO: And unemployment can also go down if you stop looking for a job?

ABBOTT: Bingo.

COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to have people stop looking for work.

ABBOTT: Now you're thinking like an Economist.

COSTELLO: I don't even know what the hell I just said!

ABBOTT: Now you're thinking like Congress.

 ###

The question is how would they know someone has stopped looking for a job when no one hired them?????

What happens to that 14.7% when you factor in 'under-the-table' workers or otherwise 'off-the-books' ummmm..... earners?

The question is how would they know someone has stopped looking for a job when no one hired them?????

Telephone polling, IIRC

My biggest concern would be what happens with the tranche investing and "ratings companies" (Moody's, S&P) that start giving this crap good ratings because the big hedge funds and investment banks pay them to do and some poor investor/pension fund down the line starts buying "safe" investments that have no history of returns or could turn to crap once the properties start requiring a lot of repair/maintenance money.

 

I've long been amazed that the ratings agencies made it through the financial crisis and the ensuing Dodd-Frank reforms basically untouched by anyone except those in the fairly hardcore financial media.  The mainstream media barely covered that aspect of the story, even though it was basically the keystone of the arch that collapsed.  I hope they've learned their lesson, but I doubt it, given the amount of intervention that the government was willing to undertake to prevent any serious consequences to all the actors involved.

 

The mainstream media barely covered that aspect of the story, even though it was basically the keystone of the arch that collapsed

 

...you got that right!

 

Shocking, just shocking. I am sure they have learned their lesson and everything is on the up and up now days.

 

Feds: Bank of America lied about mortgages

"The U.S. government has accused Bank of America Corp. of civil fraud, saying the company failed to disclose risks and mislead investors in its sale of $850 million of mortgage bonds during 2008."

"Bank of America's reckless and fraudulent origination and securitization practices in the lead-up to the financial crisis caused significant losses to investors," said U.S. Attorney for the Western District of North Carolina Anne M. Tompkins. "Now, Bank of America will have to face the consequences of its actions."

http://www.cbsnews.com/8301-505145_162-57597258/feds-bank-of-america-lied-about-mortgages/

My biggest concern would be what happens with the tranche investing and "ratings companies" (Moody's, S&P) that start giving this crap good ratings because the big hedge funds and investment banks pay them to do and some poor investor/pension fund down the line starts buying "safe" investments that have no history of returns or could turn to crap once the properties start requiring a lot of repair/maintenance money.

 

I've long been amazed that the ratings agencies made it through the financial crisis and the ensuing Dodd-Frank reforms basically untouched by anyone except those in the fairly hardcore financial media.  The mainstream media barely covered that aspect of the story, even though it was basically the keystone of the arch that collapsed.  I hope they've learned their lesson, but I doubt it, given the amount of intervention that the government was willing to undertake to prevent any serious consequences to all the actors involved.

 

The rating agencies are facing a slew of litigation (including by the Justice Department since earlier this year), and have begun paying out big settlements to private plaintiffs.  I don't think they've really been untouched. 

 

I actually think the role of the ratings agencies has been a bit exaggerated. By far the biggest factors tanking MBS are house price declines and unemployment, and it's a bit unfair to expect ratings agencies to have foreseen those with more accuracy than all the sophisticated institutional investors who lost out. This isn't to say they did their job particularly well or honestly, though.

Another boost for the part time low wage numbers for the BLS employment stats.

 

Meijer plans to hire more than 9,000 in five states

"Midwest retailer Meijer Inc. plans to hire more than 9,000 new employees in five states in the coming months."

http://www.ibj.com/meijer-plans-to-hire-more-than-9000-in-5-states/PARAMS/article/42878

 

Man, I really liked Meijer when they had all those warm colors inside. Now they're just white and scary inside. Plus most of their locations are way, way out there. I can't even think of one close.

You gotta read the whole article department:

Your mortgage documents are fake!

Prepare to be outraged. Newly obtained filings from this Florida woman's lawsuit uncover horrifying scheme (Update)

 

If you know about foreclosure fraud, the mass fabrication of mortgage documents in state courts by banks attempting to foreclose on homeowners, you may have one nagging question: Why did banks have to resort to this illegal scheme? Was it just cheaper to mock up the documents than to provide the real ones? Did banks figure they simply had enough power over regulators, politicians and the courts to get away with it? (They were probably right about that one.)

 

A newly unsealed lawsuit, which banks settled in 2012 for $95 million, actually offers a different reason, providing a key answer to one of the persistent riddles of the financial crisis and its aftermath. The lawsuit states that banks resorted to fake documents because they could not legally establish true ownership of the loans when trying to foreclose.

 

This reality, which banks did not contest but instead settled out of court, means that tens of millions of mortgages in America still lack a legitimate chain of ownership, with implications far into the future.

...

Szymoniak stated in her lawsuit that, “Defendants used fraudulent mortgage assignments to conceal that over 1400 MBS trusts, each with mortgages valued at over $1 billion, are missing critical documents,” meaning that at least $1.4 trillion in mortgage-backed securities are, in fact, non-mortgage-backed securities. Because of the strict laws governing of these kinds of securitizations, there’s no way to make the assignments after the fact. Activists have a name for this: “securitization FAIL.”

 

http://www.salon.com/2013/08/12/your_mortgage_documents_are_fake/

 

This could upend the bond market. The article notes that the Federal Reserve has been buying these "securities", which I believe has been part of Quantitative Easing. How can the Federal Reserve "write off" tens of billions of dollars of unsecured bonds?

 

CBS' 60 Minutes has been all over this story. Here is one of their segments, hosted by Scott Pelley: http://www.cbsnews.com/stories/2011/08/07/60minutes/main20086862.shtml

...

edit: the Federal Reserve has been buying $85 billion/month of Treasuries, mortgage-backed-securities, & such, so I am sure that they (the banks) have picked up tens of billions of dollars of this bad paper.

The fact that the Fed has been buying these securities has been contemptible from its inception ... but at the end of the day, it is a creature of the banks, for the banks, by the banks.  The Fed can write down an unlimited amount of losses because it is really too big to fail, unlike comparatively insignificant players in the financial ecosystem like, oh, say, Citigroup, Bank of America, and JP Morgan Chase.  Securitized packages of loans that were (a) overwhelmingly in default or at serious risk of default and (b) difficult to collect upon due to documentation errors should have been sold for pennies on the dollar.  The best guess is that the Fed paid close to face value in order to "recapitalize" (i.e., bail out) the big banks.

 

That said, it's not necessarily true that 100% of the mortgages within those trusts had document failures fatal to foreclosure efforts, so the $1.4 trillion figure is going to be high.  Also, foreclosure is not the only means to collect upon a note, though of course it's the easiest and most traditional.

 

These borrowers still borrowed the money.  There are limits to how much they can effectively take free money from their lenders by relying on assignment errors.

^It's a tricky issue, though.  On the one hand, I agree with your implication that there is a bit of false outrage here, because by and large these borrowers do owe money and aren't really being harmed by this type of "fraud." The lenders know who owns the beneficial interest of the notes, so it's not like there's much substantive confusion, just mass incompetence/under-investment in back office management. 

 

On the other hand, though, it's somewhat analogous to 4th Amendment protections: as a policy matter, we probably should hold lenders/servicers/trustees to the longstanding legal requirements for showing ownership because of the possibility for fraud or abuse that otherwise could be perpetuated against truly innocent borrowers. And as a legal matter, the lenders are probably just in the wrong, even if the borrowers are getting a windfall out of it.

Well, as a legal matter, you're definitely in the wrong when you start trying to pass a "mock-up" of a mortgage or deed as the real thing.

 

And the requirement for lenders to show the chain of assignments or possession has strong legal and policy grounds behind it, because if you can't prove that you are the proper holder of the note, then there is a chance that there is some other lender out there who is actually the proper holder of the note.  That exposes either the borrower to the risk of having to pay twice on the same debt or exposes that other lender to a due process violation.

 

That is different than what the Salon article seems to believe (and be pushing for), though.  The Salon piece goes much further.  It seems to argue that if a MBS trust does have clear title to the note, but questionable possession of the mortgage, then the mortgage is essentially void or otherwise unenforceable because the 90-day window for the closure of the trust lapsed.  That looks very problematic to me.  First, as best I know, there is no federal regulation that would stop a trustee from accepting possession of a mortgage after the intended closing date.  To the best of my knowledge, these are just contractual requirements between the trustee and the originator (and the borrower is not a third-party beneficiary ... these securitization agreements are separate from the actual lending transaction in which the borrower actually borrows money).  If so, then they can be relaxed by the parties.

 

Second, in many jurisdictions, the holder of the mortgage is simply presumed to be the holder of the note.  This flows from the related axiom of secured transactions law that you cannot have a lien without a debt.  Therefore, the mortgage is of no use to someone who isn't owed money by the borrower.  (Thus, you will seldom see judges make a separate inquiry about the chain of possession of the mortgage, though I won't say never.  In general, though, what sinks foreclosing servicers is when they cannot prove possession of the note itself--and they also sometimes cannot satisfactorily prove that they are the agent of the holder, if they aren't the holder themselves, which is generally the case with servicers.)

 

Oh well.  My wife and I bought our house through her employer's credit union, and they retain their entire residential loan portfolio.  So I won't be getting free money at the expense of a hapless lender anytime soon.

^^I would beg to differ that the borrowers were not harmed by mortgage lender fraud.  Borrowing money is one thing; borrowing money based on fraudulent sub-prime mortgages which were marketed door-to-door in lower-income neighborhoods is completely another.  This type of fraud has resulted in the destruction of once-stable neighborhoods throughout Cleveland and inner-ring suburbs which are much worse off now than they were before the housing crisis.  Any outrage against the banks which perpetrated mortgage fraud is warranted and justified, IMO.  And any windfall which would be given to the borrowers would be justified as well. 

Not when the borrowers were participants in the "fraud."  It takes two to make a loan.

 

The real difference is that the banks had the political power to get bailed out.  The borrowers didn't.

 

That is different than what the Salon article seems to believe (and be pushing for), though.  The Salon piece goes much further.  It seems to argue that if a MBS trust does have clear title to the note, but questionable possession of the mortgage, then the mortgage is essentially void or otherwise unenforceable because the 90-day window for the closure of the trust lapsed.  That looks very problematic to me.  First, as best I know, there is no federal regulation that would stop a trustee from accepting possession of a mortgage after the intended closing date.  To the best of my knowledge, these are just contractual requirements between the trustee and the originator (and the borrower is not a third-party beneficiary ... these securitization agreements are separate from the actual lending transaction in which the borrower actually borrows money).  If so, then they can be relaxed by the parties.

 

 

I think the alleged misdeeds are far broader than violating contractual provisions, actually, but I'm not current on it all.  Everything from state trust laws to REMIC rules likely come into play here. Generally speaking, the trust is to be more or less complete after it's closed (to be truly off-balance sheet), and I think that would bar acquisition of new property interests. I was speaking more generally than the case presented in that Salon article, though. Despite the windfalls to borrowers, I'm not sure I've read about a single case that seemed like a manifest injustice to the lender/mortgage-holder.  Very similar issues have come up with the foreclosure process itself, even when standing uncontested, do to the absurdly sheister-ish behavior of some of the top foreclosure mill law firms. I don't think I'm telling you anything you don't already know or agree with though.

 

Ultimately, these cases point to the huge disconnect between the way ownership interests are tracked in the financial industry (MERS, etc.) vs. public recording systems, which to me calls for a broad modernization of the recording system.  That would be a gargantuan enterprise, though, which would have to occur at the state level, and it would be opposed by a long list of stakeholders.

^^I would beg to differ that the borrowers were not harmed by mortgage lender fraud.  Borrowing money is one thing; borrowing money based on fraudulent sub-prime mortgages which were marketed door-to-door in lower-income neighborhoods is completely another.  This type of fraud has resulted in the destruction of once-stable neighborhoods throughout Cleveland and inner-ring suburbs which are much worse off now than they were before the housing crisis.  Any outrage against the banks which perpetrated mortgage fraud is warranted and justified, IMO.  And any windfall which would be given to the borrowers would be justified as well. 

 

Agreed, but that's an entirely different kind of fraud (though probably with some overlap among the perpetrators).  In this case we're just dealing with post-origination fraud by the back office folks, as opposed to the fraud by mortgage brokers and correspondent lenders. In fact, that type of fraud managed to victimize borrowers and lenders.

 

That is different than what the Salon article seems to believe (and be pushing for), though.  The Salon piece goes much further.  It seems to argue that if a MBS trust does have clear title to the note, but questionable possession of the mortgage, then the mortgage is essentially void or otherwise unenforceable because the 90-day window for the closure of the trust lapsed.  That looks very problematic to me.  First, as best I know, there is no federal regulation that would stop a trustee from accepting possession of a mortgage after the intended closing date.  To the best of my knowledge, these are just contractual requirements between the trustee and the originator (and the borrower is not a third-party beneficiary ... these securitization agreements are separate from the actual lending transaction in which the borrower actually borrows money).  If so, then they can be relaxed by the parties.

 

 

I think the alleged misdeeds are far broader than violating contractual provisions, actually, but I'm not current on it all.  Everything from state trust laws to REMIC rules likely come into play here. Generally speaking, the trust is to be more or less complete after it's closed (to be truly off-balance sheet), and I think that would bar acquisition of new property interests. I was speaking more generally than the case presented in that Salon article, though. Despite the windfalls to borrowers, I'm not sure I've read about a single case that seemed like a manifest injustice to the lender/mortgage-holder.  Very similar issues have come up with the foreclosure process itself, even when standing uncontested, do to the absurdly sheister-ish behavior of some of the top foreclosure mill law firms. I don't think I'm telling you anything you don't already know or agree with though.

 

To get even more technical: In such cases, I support dismissals without prejudice, meaning that such lenders could file again once they had their files in order.  Of course, if they can't do that, then they can't foreclose, meaning that that lender is SOL and the borrower does, in practice, get a windfall.  But the loan does remain outstanding; the borrower is not discharged on the debt.

 

However, you may well be right about the REMIC rules.  Though I'm not sure that transfers in violation of the REMIC rules are void ab initio.  It may be that transfers against REMIC expose the trust to tax liabilities that it would have been sheltered from had it complied fully with the rules, but I would doubt that the transfer itself would be void.  And even then, my guess would be that the tax rules would allow for taking possession of the mortgage if the trust already held the note.

 

Ultimately, these cases point to the huge disconnect between the way ownership interests are tracked in the financial industry (MERS, etc.) vs. public recording systems, which to me calls for a broad modernization of the recording system.  That would be a gargantuan enterprise, though, which would have to occur at the state level, and it would be opposed by a long list of stakeholders.

 

It would indeed, and actually, a lot of the work is actually done county by county, not even at the state level.  At least in Ohio, state law simply directs counties to maintain adequate real property title and encumbrance recording systems.  (The state does centrally maintain records of security interests on personal property, but that's a whole separate issue.)  Some counties are more aggressive about modernizing than others (to put it mildly).  And I haven't even really noticed any particular pattern as to which counties are on the ball and which aren't--it doesn't necessarily correlate with either population or wealth.  It may simply be a case of which counties happened to elect an attorney to a responsible office who had a chip on his/her shoulder about the existing system in that county.

^Right, the county-level implementation of recording systems is precisely why useful reform would have to come at the state level. There's no way so many counties could be persuaded individually to change their recording systems (and from their perspective, I can't blame them).  Given the state level systems most SOS offices maintain for perfecting UCC interests, I'm surprised not a single state has tried to move in that direction for real property interests.  Though I guess there's been some experimentation, whith Torrens system in New England and the Upper Midwest.

We actually have some Torrens-system properties in Hamilton County (we usually colloquially refer to them as Registered Land properties).  It makes for some interesting times. 

More evidence that the housing rebound is being fueled by large investment companies and not as much by individual buyers. These investment companies will only buy if profit can be made, as prices rise the profit end is get smaller and smaller.

 

Report: Half of All Homes Are Being Purchased With Cash

"More than half of all homes sold last year and so far in 2013 have been financed without a mortgage, according to an analysis by economists at Goldman Sachs Group."

"There’s no exact way to know who is responsible for all of these cash purchases, though they are likely to include some combination of investors, foreign buyers, and wealthy homeowners that don’t want to go through the hassle of getting a mortgage before closing on a sale. Mortgage lending standards have sharply tightened up since the housing bubble, with banks scrutinizing borrowers’ tax returns and bank statements to verify their incomes and the source of their down payment."

http://blogs.wsj.com/developments/2013/08/15/report-half-of-all-homes-are-being-purchased-with-cash/

I wonder if a lot of them will turn into rentals.

Does everybody have their emergency stockpile of food and water.  I heard on the radio that you can make monthly payments towards one.

I wonder if a lot of them will turn into rentals.

 

I would imagine that that's the case for the short term.  I'm betting many plan to rent the houses out for several years and then sell them when the market is more of a seller's market.