Election 2010: Teabaggin' the Ds & Rs

[sgtclub]

Originally Posted by Tyrone Slothrop

BofA is also saying that they have sufficiently big problems that they need to stop foreclosures in all fifty states. Draw your own conclusions. I would have thought that you would be a little more sympathetic to the property rights of all of the people who are being foreclosed upon, but apparently not.

That's not what I have read. WSJ (I think) reported that BoA says so far its review has not found anything problematic, but we shall see.

I am sympathetic to the rights of property owners, which at default really are the banks. If you are not paying your mortgage even after all of the relief programs and moratoriums the banks have implemented, its time to go. It sucks for the individuals, but that's life. There is no right to own property that you have not paid for, and the quicker we move through this process, the quicker we can look to a recovery in the housing market.

[sgtclub]

Originally Posted by Adder

Perhaps we are just focusing on different parts of the timeline.

That's probably right. My recollection is that BoA's problems were Merrill related.

Part of Lehman went to Barclays, which reportedly was very close to acquiring all of Lehman before the bankruptcy but was nixed by the UK financial regulators at the last minute. My former colleagues worked on the deal for the piece Barclays bought.

Yep, and Barclays has done quite well with that part from what I understand.

Lewis and Fuld were both in the room as potential buyers of Lehman, actually. Merrill had been raising cash (it did more than one deal with sovereign wealth funds, one of which I worked on), but my recollection is that it wasn't seen as being on its last legs when BoA agreed to buy it. It has been reported as though Lewis thought it was a good business deal, not a bailout.

At least until around the time of the shareholder vote, the events around which were the basis of one of the SEC's suits against BoA.

I think you mean Jaimi, no? Fuld certainly was not a Lehman suitor. The cash Merrill raised was not enough and yes, I think Lewis thought it was a good deal, which was signed over a weekend (before market open on Monday). They then realized the shit storm pre-close and wanted to pull out but were "convinced" not to.

I've heard that as well, and always wondered if those saying it (usually Goldman itself) are including the $13 billion it got from AIG when they say it. I rather doubt it.

From what I read, their exposure to AIG was less than widely reported because they were (1) hedged, and (2) increasing collateral sweeps on a daily basis. There was a story that came out on this a few months ago, but it could have been a GS publicity piece.

Those two were fine, although one has to wonder how fine they would have been had the others not been bailed out.

Right, and that is why I supported the bailouts. Had 6 of those institutions gone down, it would have been a catastrophe.

[Adder]

Originally Posted by sgtclub

Not really. As I read this, the only question is who has the right to foreclose, not whether the loans are in default.

That's the current issue (although there have been at least a few invalid foreclosures). But Konczal points out the potential liability for the the sponsor banks to the securities holders for fucking up the documentation (and therefore costing them money), which is what I was alluding to as a more substantive problem in that its another fun way in which the banking system is threatened.

[Adder]

Originally Posted by sgtclub

I think you mean Jaimi, no? Fuld certainly was not a Lehman suitor.

Actually, I mean Thain. Sorry.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

2. That woman is talking about fraud on the people who were buying mortgage-backed securities. The fraud that AG Cordrey is talking about is fraud on the courts, with banks seeking foreclosure on the basis of, e.g., affidavits from people which claim to be based on a review of papers, etc., but were instead just robo-signed.

The difference being the first was an actual fraud, in that damages accrued from it. The second being at most a technical, administrative form of corner-cutting from which no one was harmed.

If there weren't "frauds on the courts" we wouldn't have 2/3 of the tort cases we do in this country. The term means nothing.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

BofA is also saying that they have sufficiently big problems that they need to stop foreclosures in all fifty states. Draw your own conclusions. I would have thought that you would be a little more sympathetic to the property rights of all of the people who are being foreclosed upon, but apparently not.

No they're not. They're paying lip service to this McScandal before the media can make any more of a mountain out of a molehill. It's a shrewd public relations play.

[Adder]

Originally Posted by sebastian_dangerfield

The difference being the first was an actual fraud, in that damages accrued from it. The second being at most a technical, administrative form of corner-cutting from which no one was harmed.

Again, the only bit that sounded interesting and potentially ominous to me was Konczal's (via Yves Smith if I recall) suggestion that the first fraud could potentially be pinned on the sponsors via failing to handl ethe paperwork correctly.

[Cletus Miller]

Originally Posted by Adder

Again, the only bit that sounded interesting and potentially ominous to me was Konczal's (via Yves Smith if I recall) suggestion that the first fraud could potentially be pinned on the sponsors via failing to handl ethe paperwork correctly.

But that first fraud is a fraud by the borrower, and perhaps by the loan originator, the RMBS issuer or both, on the eventual owner of the RMBS. That would create NO basis for slowing a foreclosure--unclean hands and all.

In looking at the problems that BofA, JPM, WFB, etc, are having, realize that they are wearing at least 3 hats in this whole thing--1. loan originator, 2. acquirer of a really, really, really shitty loan originator and 3. issuer of RMBS, both of their own and others loans.

The rortybomb link is a decent basic understanding of the problem, but includes commentary and extraneous info that distracts from the root problem that has given judges bases for stopping fc.

One basic unmentioned problem is that the lenders/servicers act as if the mortgage documentation and foreclosure process is fundamentally the same in every state, when that is far, far from the truth. And the issue of having no idea where the original note is, whether it was ever properly indorsed to the lender/servicer and then either lying about or post hoc creating assignment documentation is creating a major problem.

Also, a lot of these foreclosures that get flagged are in podunk, and when NotBob says to the judge who eats breakfast at the same diner "lender hasn't shown us any documentation of standing" and the associate from out of town says "uh, I was told we had everything", that causes a major problem.

[Cletus Miller]

Originally Posted by Adder

Even accepting the (dubious) assertion that state governments are inherently bloated, is there a perspective other than the hot pan from which now is a good time? In other words, it is all kinds of bad otherwise.

The state governments of California, Illinois and Pennsylvania are bloated. I won't hazard about any other state.

Yes, bad time for them to be cut, relative to other times, but the feds giving $100mm to Illinois to keep 1,000 people on the payroll doesn't automatically make it a good idea *for Illinois* to keep those 1,000 people on the payroll (tho definitely a good idea for the nation and the economy as a whole).

[Atticus Grinch]

Originally Posted by Cletus Miller

The state governments of California, Illinois and Pennsylvania are bloated.

The problem with California is that people have incorrectly learned that expenditures and taxation are inherently disconnected. If California's levels of government spending bore some kind of relationship to the levels of taxation approved by those voters who were going to actually pay the tax, we would not consider that government "bloated." But Prop 13 has meant that the decision to spend is irrelevant to the need to impose tax. Property taxes are X because property taxes are X (hey, it's maxed out at 1% of net assessed value); meanwhile, the Legislature and electorate have a number of tricks up their sleeves to make spending Y and Y can be whatever number we want it to be. Only a small number of policy wonks have cared before now that X < Y. And now it seems the best solution is to make Y=X, but it's equally possible to make X=Y. And, I would argue, in no place on earth where voters set both X and Y is the government "bloated." They have simply made a resource allocation between public and individual expenditure.

ETA I am not among those who believe the rest of the country has any moral duty to rescue California from the natural consequences of the selfishness and shortsightedness of the voters who enacted Prop 13.

[Cletus Miller]

Originally Posted by Atticus Grinch

And, I would argue, in no place on earth where voters set both X and Y is the government "bloated."

? How so? Defend the size of the Greek government.

Also, tyranny of the majority (or, majority of the influence), much?

[sgtclub]

Originally Posted by Atticus Grinch

ETA I am not among those who believe the rest of the country has any moral duty to rescue California from the natural consequences of the selfishness and shortsightedness of the voters who enacted Prop 13.

This is fucking rich.

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

The difference being the first was an actual fraud, in that damages accrued from it. The second being at most a technical, administrative form of corner-cutting from which no one was harmed.

If there weren't "frauds on the courts" we wouldn't have 2/3 of the tort cases we do in this country. The term means nothing.

I think we can all hope that all of the lenders had all of the papers they should have had and were simply cutting corners on how they presented them to the courts. We should be so lucky.

[Tyrone Slothrop]

Originally Posted by Atticus Grinch

The problem with California is that people have incorrectly learned that expenditures and taxation are inherently disconnected. If California's levels of government spending bore some kind of relationship to the levels of taxation approved by those voters who were going to actually pay the tax, we would not consider that government "bloated." But Prop 13 has meant that the decision to spend is irrelevant to the need to impose tax. Property taxes are X because property taxes are X (hey, it's maxed out at 1% of net assessed value); meanwhile, the Legislature and electorate have a number of tricks up their sleeves to make spending Y and Y can be whatever number we want it to be. Only a small number of policy wonks have cared before now that X < Y. And now it seems the best solution is to make Y=X, but it's equally possible to make X=Y. And, I would argue, in no place on earth where voters set both X and Y is the government "bloated." They have simply made a resource allocation between public and individual expenditure.

ETA I am not among those who believe the rest of the country has any moral duty to rescue California from the natural consequences of the selfishness and shortsightedness of the voters who enacted Prop 13.

A big 2 to that last point. Five years ago, it looked to me like things were spiralling towards earth, and I thought that someone (or some group of someones) would rise to the occasion, take the rudder, and find the horizon again. Flash forward and you have Meg Whitman and Jerry Brown running to run the mess, and it doesn't sound like either of them has the foggiest idea what needs to be done. ("Targeted tax breaks to stimulate job creation"?) Oh noes!

[Cletus Miller]

Originally Posted by Tyrone Slothrop

I think we can all hope that all of the lenders had all of the papers they should have had and were simply cutting corners on how they presented them to the courts. We should be so lucky.

And holding onto that hope is madness. The first of the Ohio case I read about (from 2008?) made it clear that the f/c by RMBS servicer process was a big mess.