Wednesday, February 8, 2012

February, Wednesday 08, 2012

DOW + 5 = 12, 883
SPX + 2 = 1349
NAS + 11 = 2915
10 YR YLD +.01 = 1.98%
OIL +.63 = 99.04
GOLD – 12.90 = 1733.00
SILV - .21 = 34.04
PLAT + 14.00 = 1668.00

Once again we had a quiet day on Wall Street, and the justification du jour was everyone was waiting on Greece. Which is kind of silly. Greece is finalizing details of a debt reduction deal, an orderly default on Greek bonds. They will swap the old bonds for new bonds at about 30 cents on the dollar. Quite a few private sector investors will take a hit, but very few if any are taking the full hit. These bonds have been trading lower over a period of time.

Officials in Brussels announced a meeting of Euro-zone finance ministers tomorrow. They wouldn't announce the meeting if they didn't have a deal; at least, that is the thinking. Once the deal is finalized, there is still a vote in Parliament on Sunday, and that means the politicians will have to sell the deal to the people. It won't be an easy sale. In exchange for an orderly debt default, the government gets bailout money, but they will force the people to cut public sector jobs, there will be a 22% drop in the minimum wage; pensions and benefits will also be cut; big chunks of the economy will be privatized. One politician described it this way: “Tough demands are like tight shoes, sooner or later, you want to kick them off.”

Austerity alone won't solve the problems in Greece and the Euro-zone. The orderly default and bailout doesn't generate economic growth. Greece is still separated from their currency and they really have no monetary policy structure in place that will allow them to compete with other Euro-zone countries. One of the more likely results will be a nasty bout of inflation.

Do you know Linda Green? For tens of thousands of homeowners facing foreclosure, Linda Green was the woman who personally reviewed and inspected the mortgage note, the payment history, the foreclosure documents, and all the other paperwork that was submitted to facilitate the foreclosure. Linda Green would have been the hardest working person in America if she had actually done all that work. Actually, Linda Green is a fiction, an name invented by the banks to bamboozle the courts and homeowners.The reality is that the banks didn't inspect the documents as required by law. The truth is they lied to the courts. The truth is they forged the signature of Linda Green, and then they hired notaries to lie attesting to the signature.

DocX, one of the largest companies that provided foreclosure services to the banks, has been indicted on 136 forgery charges by a Missouri grand jury — one of the few criminal actions to follow reports of widespread improprieties against homeowners. DocX is not the only company that forged documents; Missouri is not the only state where it happened. The real question is why we are just now seeing the first criminal indictments.

But wait, there's more! The banks have been forging documents and lying to the courts with impunity, and when that happens it just invites more bad behavior. Apparently, tens of millions of credit cards issued by banks have not been accompanied by good recordkeeping, either.

Chasing down delinquent borrowers in court requires original credit agreements and accurate payment histories to verify outstanding balances and claims. As it turns out, banks aren't providing them - either to the courts or to third-party debt collection companies that buy uncollected debts for pennies on the dollar.

As a result of these shoddy practices, judgments already granted to banks could be overturned and they could be sued by state attorney generals or pursued by the Consumer Financial Protection Bureau. The same banks could even be potentially charged by the Justice Department under the Racketeer Influenced and Corrupt Organizations (RICO) Statutes for selling dubiously documented accounts to debt collection companies.

Not surprisingly, the biggest offenders are often the biggest banks. Part of the problem is that the big banks were busy gambling with investor money, and the basic work of traditional banking just didn't produce the quick fix of fast money. So, the banks just stopped doing the basic work; they started taking shortcuts; they forged documents; they lied. Nobody held them to account. Robo-signing on foreclosure documents, that's just the tip of the iceberg.

And that brings us to the multi-state mortgage settlement that has been on hold for a few weeks. New York, Delaware and Massachusetts have recently filed lawsuits against the big five banksters, accusing the banks of deceptive and fraudulent use of a private database, MERS, used to register mortgages.  The banksters decided they didn't need to follow the laws about recording deeds with the county recorder. So, now the banks are saying the settlement is dependent on the states dropping their MERS litigation. As the settlement unravels, Florida is now trying to sweeten their deal with a side deal or two. So, for the banks, it is all about buying their way out of mortgage related liabilities; for the states, it is all about sweetening the deal for the states; and for most of the homeowners that were victims of predatory lending practices, it is about getting screwed again. And if the deal gets done and the banks pay $25 billion and that is it – they will skate away without being held to account, and we all know where that leads.

Five years ago today, February 8, 2007, HSBC's Household International announced huge losses due to subprime lending. HSBC had to restate its 2006 earnings significantly lower. So you might think of today as the fifth anniversary of the credit crisis.

How are we doing so far?

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