Friday, July 26, 2013 - Notes from the Favela

Notes from the Favela

by Sinclair Noe

DOW + 3 = 15,558
SPX + 1 = 1691
NAS + 7 = 3613

10 YR YLD - .01 = 2.56%
OIL - .82 = 104.67
GOLD - .30 = 1334.80
SILV - .26 = 20.09

Earlier in the week, the Dow and S&P hit record highs but the markets slipped; earlier today the Dow was down 150 points. For the week, the Dow rose 0.1 percent, the S&P 500 was flat (even as it hit a record) and the Nasdaq rose 0.7 percent.

It's Friday, and I have a bunch of notes and scraps that have been piling up, so we'll clean the desk, in no particular order.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment climbed to 85.1 from 84.1 in June, topping expectations for 84. It was the highest level since July 2007 and was also an improvement from July's initial reading of 83.9. Of course, if you paid a premium subscription, you could have had that information before the rest of the market.

Yesterday, I mentioned former Fed Chairman Paul Volker's remark that the only real financial innovation in the past 20 years was the ATM, which is actually about 30 years old now. And Volker wasn't quite right; the banks haven't done any real innovation but the hackers have. For nearly a decade, a band of cybercriminals rampaged through the servers of a global business who's who: Among the victims were 7-Eleven, Dow Jones, Nasdaq, JetBlue and JC Penney. Prosecutors say the hackers stole "conservatively" 160 million credit card numbers, and the dollar value of the crimes they helped facilitate is enormous; just four of the victims are out $300 million. The prosecutors say it's the largest data heist case ever and the suffering caused to identity theft victims was "immeasurable".

On Thursday, five of the gang's members were indicted. One is in custody in the US, a second is awaiting extradition in the Netherlands, and three more are still at large. Maybe if the banks paid more attention to providing a safe place to store money and a safe way to facilitate digital transactions, and if they spent less time trying to trade derivatives; maybe there could have been some financial innovation that actually was innovative.

The Federal Housing Finance Agency says the Swiss bank UBS has reached a settlement and will pay $415 million to the government-sponsored housing enterprises Fannie Mae and $470 million to Freddie Mac to resolve claims of misrepresenting the quality of collateral backing securities sold to Fannie and Freddie between 2004 and 2007.

The bank has already paid out $612 million to settle allegations of manipulating interest rates. UBS is now the third bank to settle with the FHFA after Citigroup and General Electric did so for undisclosed sums. UBS is just one of 18 banks the FHFA pursued in 2011 for allegedly lying about the quality of the collateral backing securities; essentially packaging subprime loans and selling them as a better quality.

 Home Affordable Modification Program or HAMP has been something of a disappointment nearly from its inception. After loudly touting the program’s ability to help 4 million borrowers, the administration was forced to concede it had barely helped a fraction of that number, or roughly 1.2 million mortgage modifications; and some advocates and administrators in the program actually came right out and declared the thing a failure. However, in recent months, we’ve been hearing a lot about how HAMP is finally getting going and hundreds of thousands of borrowers are getting the loan modifications that they need. What we haven’t heard until now, though, is just how many of them are re-defaulting on those loan modifications just months or years later; the number is now at 306,000.

I can see why many people think the HAMP program is a dud, but just to maintain perspective the Hope For Homeowners plan initiated by President Bush set aside $300 billion to refinance toxic loans and in 3 years time it managed to modify 71 loans; and the FHA-Secure plan managed to refinance 4,100 mortgages over a 3 year span. As far as the high number of re-defaults, the modification programs never dealt with the underlying problems, and for many, relief was just too little, too late.

One year ago today, Mario Draghi, the president of the European Central Bank spoke at an investment conference and he said:  "the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." The speech seemed to revive markets and stave off what looked like an impending collapse. A few weeks later, Draghi introduced OMT, or Outright Monetary Transactions, a conditional bond buying program. Spanish and Italian bond yields stabilized, even though the ECB hasn't actually used OMT to actually buy bonds. Germany’s constitutional court is due to rule later this year on OMT’s legality under German law. The ECB hasn't exactly managed to forge a solid plan, and so the financial improvement has not been accompanied by a meaningful change in what matters most: namely, the ability to generate economic growth, create jobs and arrest excessive income and wealth inequalities.

Earlier this week we marked the 3 year anniversary of the Dodd-Frank Act. Which is to say it was passed onto law, although less than half of the Act has been enacted. Mainly, it's been a battleground for bank lobbyists trying to tear out the entrails.

A federal grand jury indicted Steven A. Cohen's hedge fund SAC Capital Advisors on fraud charges. The hedge fund was charged with wire fraud as well as four counts of securities fraud, and the government is seeking to force SAC to surrender any fraud-related profits. According to the indictment from roughly 1999 to 2010, SAC obtained and traded on inside information to boost returns and fees and that the scheme involved a number of portfolio managers, research analysts and dozens of publicly traded companies.

The government has also filed civil money-laundering charges against the firm, which call for fines and penalties to be determined at a trial, the date of which hasn’t been set. Those civil charges pose the greatest threat to Cohen’s fortune because prosecutors allege that if the fund reinvested the proceeds of illegal insider trading into its capital pool, then the entire pool is tainted and subject to forfeiture, but it's expected that prosecutors won't try to go after the entire amount.

SAC oversaw $6 billion for outsiders at the start of this year, but have since withdrawn about $5 billion. The big question for those folks is whether they will face clawbacks. SAC is almost like Cohen's personal hedge fund; he has about $7.5 billion in SAC’s funds and employees account for $1.5 billion of assets. And the fund is conducting business as normal, or somewhat normal. Cohen wasn't named in the criminal indictment and faces no threat of prison time. In the corporate criminal world, avoiding indictment is the key battleground.

What does it take to be considered wealthy? A new survey finds the majority of people with a net worth of between one and five million dollars do not consider themselves wealthy; 28 percent of people worth between $1 million and $5 million call themselves wealthy. For people worth more than $5 million, just 60 percent of them say they’re rich. Of those surveyed, 50 percent said they’d consider themselves rich if they had no financial constraints on activities. So, it's not really a number.

Tell that to Eike Batista; he's the Brazilian oil tycoon who started 2012 as the eighth richest person in the world; net worth estimated at $34 billion; now that has dropped to $200 million. You might think that $200 million is a lot; if you had that money, you might think you were wealthy, but I'm not sure if that's how Batista feels. So, it's not really a number.

A few months ago, a Senate committee grilled Apple CEO Tim Cook over the company’s creative accounting strategies, accusing it of cheating the U.S. Treasury by stashing away billions of dollars that live in no tax jurisdiction at all. The company didn’t dispute the truth of the accusations, but blamed the United States for building a tax system that makes bringing overseas earnings back to the United States very expensive, and proposed simplified rules that would make it cheaper to do so.

The Organization for Economic Cooperation and Development has been working on the problem; in February they issued a report. The G20 held a meeting last weekend and they said they want a more globally uniform tax system, and they want the OECD to finish up a a concrete plan to crack down on tax cheats, and they want that plan within the next 2 years.

More problems for Boeing's troubled 787 Dreamliner today; one was grounded, an oven overheated in another and damage was found in wiring on two other planes. It's turning out to be like a flying cruise ship.

Halliburton Co has agreed to plead guilty to destroying evidence related to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, which killed 11 workers and left a horrific mess. The guilty plea is the third by a company over the spill, and requires the world's second-largest oilfield services company to pay a maximum $200,000 statutory fine; that's about how much Halliburton earns every 23 seconds, based on 2012 revenue numbers. Halliburton also made a separate, voluntary $55 million payment to the National Fish and Wildlife Foundation, plus 3 year probation.

Meanwhile, another Gulf of Mexico drilling rig caught fire this week off the coast of Louisiana. The blaze broke out Monday on a natural gas platform. The rig partially collapsed, but then sand and sediment covered up the spill and the fire is out or nearly out; and because it is natural gas it dissipated quickly in the ocean water. No one was injured.

Meanwhile, TEPCO, the Tokyo Electric Power Company finally admitted today, what had been suspected for quite some time; the Fukushima Dai-ichi nuclear power plant, the one damaged in the 2011 eathquake and tsunami, has been leaking contaminated water into the ocean. They don't know how much damage has been done by the leaks; they don't have a plan to clean it up and they don't seem to have a plan to stop it.

The northeast of Brazil is largely poor and rural. Years ago, there was a migration to the South, to the major cities of Rio de Janiero and Sao Paolo. The migrants were looking for jobs, industrial jobs. There were more people looking than getting. The migrants camped out. In Rio, they camped out in the hills surrounding the city. Eventually the encampments turned into shacks, the shacks turned into homes, but the entire process was haphazard. The homes lacked modern conveniences, and so the residents strung up illegal lines, they built illegal plumbing. The shacks turned into homes turned into small cities; slum cities known as favelas. The houses were built close together, the roads often not more than a tight alleyway, difficult for police to patrol. Poverty and unemployment were high. Gangs soon became a stronger authority figure than police; crime was pervasive; hope was not.

The favelas grew over time. In Rio, a city of more than 11 million people, it is estimated that more than 4 million live in favelas, or slums. The largest favela, Rocinha, is home to more than 500,000. Last year, the government sent in police with machine guns and armored vehicles to clean up the favelas in advance of the World Cup Soccer tournament next year, and the Olympic Games in 2016. You would probably not feel safe walking through a favela.

There is a favela in the north part of Rio, known as Varginha; it is very poor and violence is common. Built on swampland, Varginha is one of several favelas that have been "pacified," meaning the drug lords who once ran the place have been ejected or subdued by authorities. The government has allocated money for community centers, libraries and a train station. But residents say they have received more broken promises than actual help, and basic services such as sanitation remain woefully unavailable. They also complain that police are abusive and treat everyone like a criminal.

Pope Francis is visiting Brazil. He is not meeting with Brazil's president; the Pope instead headed to Varginha, telling residents of the notorious slum that their leaders must do a better job of helping them. The Pope said public authorities and "those in possession of greater resources" must "never tire of working for a more just world, marked by greater solidarity!" He told the crowds that "No one can remain insensitive to the inequalities that persist in the world!"

It was the most political message yet in the pope's pilgrimage to Brazil, and for many it echoed the enormous protests that erupted last month among Brazilians angry over government corruption, excessive state spending on upcoming international sports events, and lack of basic services such as education and healthcare.

And then after visiting the favela, he went to another favela, known as the City of God and he visited with recovering drug addicts, saying , “It is necessary to confront the problems underlying the use of these drugs, by promoting greater justice, educating young people in the values that build up life in society, accompanying those in difficulty and giving them hope for the future.”

And along the way, the Pope opened the windows of the Popemobile and even got out to walk with the crowds of people and kiss babies and give hugs and blessings to the crowds of people; he visited a little speck of a Catholic chapel; he just walked up to the modest home of a local family and was welcomed like a long lost brother. The security detail must have freaked out, but even in the most dangerous and violent slums of South America, there was not even the hint of a problem.

He stressed to the people of the favelas that he is on their side, saying: “The church offers its collaboration on all initiatives that lead to the development of all people. The church is with you. The pope is with you.”

Hours later, speaking under a rainy sky at the beach in Copacabana, the pope’s message to the more than one-million faithful was to shake up the church and make a “mess” in their dioceses by going out into the streets to spread the faith. He was less political and more centered on the importance of believing in Jesus. “He is a friend who does not defraud. ”

There has been revolution in the Middle East – the Arab Spring, and the n the Arab Spring-Part2. And throughout much of Europe there have been protests, especially in the periphery. It seems that we have forgotten what is important. How much real-world difference the papal visit might make remains to be seen. John Paul II visited the favelas of Rio in 1980, and obviously the underlying problems hardly disappeared in the intervening 33 years, but the Pope is the spiritual leader of more than one billion souls. And even if he can't change the reality on the ground, maybe he can make us consider how we keep score. He said, "The measure of the greatness of a society is found in the way it treats those most in need, those who have nothing apart from their poverty."

Tuesday, July 02, 2013 - Summer Swoon

Summer Swoon

by Sinclair Noe

DOW – 43 = 14,932
SPX – 1 = 1614
NAS – 1 = 3433
10 YR YLD - .02 = 2.47%
OIL + 1.65 = 99.54
GOLD – 10.20 = 1243.40
SILV - .27 = 19.48

Stocks started the second half of the year with a lukewarm rally yesterday; then the rally fizzled as the day wore on; still, yesterday was an up day. Today, stocks started in slightly positive territory, and as the day wore on, stocks sputtered. On a technical basis, the Dow and the S&P tried to break above the 50 day moving averages and failed. So, the 50 day MA is serving as a level of resistance, and stocks are not demonstrating the ability to break out.

It's easy to think stocks are still in an uptrend. The first half of the year posted solid gains, but those gains were slammed in June. Over the past week, prices started moving higher, but there's no conviction. Trading volume has been down. Tomorrow, the markets close early, and then stay closed for July 4^th, and Friday will be a low volume day. So, it's hard to be enthusiastic about stocks right here. Another failed rally could send prices lower, quick. It's easy to slip into summer slowdown mode, but this is not a time to be complacent if you are still in equities.

Since the FOMC’s June 22nd meeting, markets have been in turmoil. Commentators and Fed watchers have been speculating about exactly what Chairman Bernanke was trying to say on behalf of the Committee. Bernanke had indicated the asset purchase program might begin to be phased out when unemployment reached 7%. Actually, he indicated that by the time the program had ceased, unemployment would be at 7% sometime in the middle of next year. The import of this remark is critical, especially given that the publicly available FOMC central tendency forecast for unemployment by the end 2013 is 7.2-7.3% and by the end of 2014 the central tendency is an optimistic 6.5-6.8%. 

The Fed actually has a handy online calculator, the jobs calculator tool to estimate how many jobs per month will be needed to reach a certain unemployment level.
As an example, for the unemployment rate to decline to 7.3% in December (the high end of the Fed's forecast), with the participation rate staying steady at 63.4%, would require about 150,000 jobs per month for the next seven months.  This seems very possible. If the participation rate increases to 63.6%, than the economy would need to add 210,000 jobs per month for the unemployment rate to fall to 7.3% in December.
You can put in your own assumptions to the calculator. 

In economic news, CoreLogic reports home prices, including distressed sales, rose 2.6% in May and were up 12.2% for the past 12 months; the fastest annual increase in 2006. In addition to boosting household net worth, which supports consumer spending, the housing recovery has spilled over to manufacturing by fueling demand for construction materials and consumer items like stoves and refrigerators.

In a separate report, the Commerce Department said new orders for manufactured goods increased 2.1 percent after advancing 1.3 percent in April. Factory orders rose in most categories in May. Manufacturing slowed in recent months, weighed down by deep government spending cuts and slowing global demand

The Commerce Department also revised up the increase in new orders for durable goods - manufactured products expected to last three years or more - by a tenth of a percentage point to 3.7 percent. Even more encouraging, orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - increased 1.5 percent instead of the 1.1 percent rise the department had reported last week. That might lead to a slightly higher revision for 2Q GDP

Car makers posted stronger sales in June. General Motors posted 6.5% growth, Chrysler rose 8.2%, and Ford sales were up 4.4% from May. The automakers are back to pre-crisis levels in the annual sales rate. Auto sales account for about 16 percent of the country's overall retail sales. Part of that can be attributed to pent-up demand for cars. Part of it might be consumers looking for better fuel efficiency.

Oil prices broke above $98 a barrel a couple of week's ago; an area that had been resistance; at the time I said it seemed to be a breakout. Oil prices dropped with almost everything else on concerns about the Fed taking away the punchbowl of monetary stimulus, but now, we're back above $99 and poised to break into triple digits. And some of that is a risk premium, associated with unrest in Egypt; not a big producer, but a strategically located Middle East country.

Egypt's president has rejected an army ultimatum that the country's crisis be resolved by tomorrow;there are widespread and deadly protests across the capital. In a late-night televised appeal for calm, Mohammed Morsi admitted he had made mistakes, pledging his loyalty to the people, but he insisted on his constitutional legitimacy as president and said he would not be dictated to.

The army earlier leaked details of its draft "roadmap" for Egypt's future. Morsi was put under pressure by the resignation of six ministers from his government on Monday Military sources told the BBC the president's position was becoming "weaker" with every passing minute and suggested that under the draft plan, he could be replaced by a council of cross-party civilians and technocrats ahead of new elections.

On Sunday, millions of flag-waving supporters of the opposition movement behind the protests had rallied nationwide, urging the president to step down. Demonstrations that had been jubilant when the army's ultimatum was interpreted as a coup-in-the-making turned increasingly confrontational later in the day.

With a 20% shift in our annual infrastructure spending from 20th century technology to 21st century technology we can drive a new global $10 trillion economy by 2020. That was an undercurrent in a powerful speech President Obama delivered last week, demanding EPA set new standards for climate change to reverse its effect on our health and the environment. That action will help set goals to meet the desire of many to clean the environment. The president also noted: “A low carbon clean energy economy could be an engine for growth for years to come,” asserting that deploying American innovation by using our natural resources more effectively help boost the economy.

As impressive as the speech was, the president passed on the opportunity to focus on how the United States will compete with Germany and Japan as the largest climate-based wealth creators.  It's estimated that the technology needed to meet carbon emission reduction targets by 202 would require investment of about $10 trillion globally; that represents a shift of 20% in our global infrastructure spending.

The challenge is that while the technology exists we still don’t have the business model and financial innovation necessary to attract the $10 trillion by 2020. The president  made clear that he believes in our entrepreneurs, investors, and corporations who bringing climate change solutions to market. What he did not do is inspire thousands more to join them to unleash a climate wealth economy. These folks are all motivated to do well by doing good.

Our inspiration is not to just fix climate change, it is to ignite the next economy by meeting our energy needs using climate change solutions. Climate change is a trillion dollar opportunity masquerading a crisis. The next step for the president is to jump-start this next economy with the federal government taking the lead.

Congress failed in a last-ditch effort to reach a deal on student loans, and so yesterday, the rates doubled from 3.4% to 6.8%. Not all student loans are affected. Only rates on new, subsidized federal Stafford loans doubled from 3.4 percent to 6.8 percent on July 1. Rates on existing subsidized Stafford loans will remain at 3.4 percent. Rates on new and existing unsubsidized Stafford loans will remain at 6.8 percent. 

The doubling of interest rates means most monthly payments will increase by about 16%. About two-thirds of students take on debt to finance education; the typical debt load works out to about $30,000. Even if Congress can work out a deal, a retroactive change in rates, back to lower levels, seems unlikely. This is one more mistake by Congress; increasing the cost of education, rather than investing in education. Stupid, really.

According to new statements from Bank of America employees, the lender offered employees incentives for sending homeowners into foreclosure rather than modifying their loans. The BofA employees stated under oath that they were “told to lie to homeowners about loan modifications and were rewarded for sending homeowners to foreclosure rather than modifying their loans”. The allegations and incriminating statements are part of the evidence being presented in a federal class-action lawsuit brought by homeowners against BofA. The homeowners say that the lender deliberately “thwarted their attempts to take advantage of the federal Home Affordable Modification Program (HAMP).”

Former employees of BofA involved in the suit testified that they were “instructed to deny modifications for no reason, to pretend they had not received documents they received, to hold documents and then claim they were too old, and to cancel trial modifications for ‘nonpayment’ even when all payments had been received.” The employees also reported that the bank “drilled” into them that the longer loan modifications were delayed, the more fees the bank could collect, even if this meant “lying to customers.”

The mortgage workers reportedly received cash bonuses and gift cards for meeting quotas for sending distressed homeowners into foreclosure. Not surprisingly, BofA has denied all of these allegations.

I was thinking about saying at the beginning of this story that “According to shocking new statements from Bank of America employees”.., but you're not shocked by this are you?

Monday, June 17, 2013 - Preaching, Practicing, and Doing

Preaching, Practicing, and Doing

by Sinclair Noe

DOW + 109 = 15,179
SPX + 12 = 1639
NAS + 28 = 3452
10 YR YLD + .05 = 2.17%
OIL + .07 = 97.92
GOLD – 6.80 = 1385.70
SILV - .24 = 21.94

President Obama is in Northern Ireland today, part of a three-day European tour that includes a G-8 summit meeting. Maybe we could call this the “Practice what I preach, not what I practice Tour”. Obama kicked off the tour with a speech in Belfast to celebrate Northern Ireland's peace process; later he'll talk with Euro leaders, including Russian President Putin about lifting a European arms embargo to arm Syrian rebels.

The G-8 summit generally deals with economic issues, and tops on the list will be tax evasion. The Brits, lead by David Cameron and George Osborne will pressure for a comprehensive deal to include developing countries while preventing developed countries from trying to water down proposals. The two big ideas include having the beneficial ownership of offshore accounts made public and then having the G-8 countries commit to a global agreement on exchange of tax information that developing countries can join. The concern for poorer countries is that the G8 will deliver a "gold standard" for itself but offer a less satisfactory agreement for poor countries, which lose three times as much in tax evasion as they gain from aid.

The Syrian conflict might actually be a positive for pushing through a deal on tax havens. It is unlikely there will be an agreement on Syria, and so the G-8 might push through something on tax evasion to be seen as having accomplished something. Of course, a deal on tax evasion is not a good bet. The issue is much more prominent in Euro-land, where multinational companies like Google and Apple and Starbucks have been playing the system and stiffing taxpayers. The mega corporations tend to stiff US taxpayers as well, but we haven't raised a ruckus about it. In Euro-land, it's a hot topic. Don't be surprised if the G-8 does little more than agree to discuss it in the future.

There will also be talk about a transatlantic trade deal between the European Union and the US, but then there has been talk about a deal for years. The US and the EU already trade about $1 trillion a year in goods and services and invest another $4 trillion in each others economies, and most of that is already free of tariffs; a trade deal would look to eliminate the rest. As you might suspect, there are multiple industries that want to protect their turf.

Then there is the idea of how to stimulate economic growth. A couple of months ago, Treasury Secretary Jack Lew talked to Euro-leaders and urged them to avoid austerity. Last week, the International Monetary Fund said an excessively rapid and ill-designed deficit reduction plan had hampered a tepid recovery in the US economy. Against that backdrop, the Federal Reserve FOMC is meeting this week in Washington.

The time is nearing for the Federal Reserve to scale back its program of Quantitative Easing to support the economy, which involves buying $85 billion in bonds each month. It's clear that QE can't go on forever, but divisions remain over when it will start tapering its bond purchases. At some point there will be an exit, and the Fed will almost certainly provide plenty of warning, well in advance of any exit.

The central bank’s Federal Open Market Committee will meet on Tuesday and Wednesday, and issue a statement at the conclusion on Wednesday, followed shortly after by a news conference by the Fed chairman, Ben Bernanke.

How does the Fed announce an exit of QE, while the President is in Europe urging the G-8 to avoid austerity? It will be a balancing act that involves a fair bit of shaming the Congress for failure to deliver fiscal policy, combined with a fair bit of cheer leading for the strength of the US economy. A positive economic assessment from the Fed might also serve as a gift wrapped present for the remainder of the G-8, who appear to be in a race to drop the value of their currencies.

The Fed's primary challenge is to drive home the idea that while the economy may be improving, there is still uncertainty surrounding the bond-buying outlook. Central bankers also need to repeat what they’ve been saying in speeches: Smaller bond buying won’t represent a tightening in monetary policy, just a reduction in the amount of stimulus the Fed is delivering. It’s a crucial point, and how they deliver the message will determine, in part, how the bond market responds. So, it is now widely anticipated that the Fed will fine tune it's monetary policy this week. Or they might not do anything. Stay tuned.

The Supreme Court announced a couple of rulings this morning.

First, the court struck down an Arizona law that required people registering to vore in federal elections to show proof of citizenship. In a 7-2 vote, the court, in an opinion written by conservative Justice Antonin Scalia, ruled the voter registration provision of the 2004 state law was trumped by a federal law, the 1993 National Voter Registration Act.

The other decision announced today says federal regulators can sue drug companies for antitrust violations when brand-name drug makers pay generic competitors to keep cheaper, rival copies of a drug off the market.

In a decision that shifts the balance of power in the drug business, manufacturers will now have to defend the agreements against charges that they violate anticompetition laws, perhaps exposing the companies to a greater likelihood of aggressive competition from generic drugs and to lawsuits from drug retailers and wholesalers, insurers and others. Consumers also could benefit from sharply lower drug costs.

The court did not address whether the agreements, called pay-for-delay or reverse payments, were presumptively unlawful. But it laid out a number of possibilities under which the contracts could be attacked by antitrust officials.

The case pitted a company’s constitutional right to protect its intellectual property, through reliance on a patent that excludes competitors, against antitrust law, which holds that a company cannot unfairly exclude others from legitimately entering a business with a rival product.

According to affidavits filed in a Massachusetts lawsuit against Bank of America, the bank routinely denied qualified borrowers a chance to modify their loans to more affordable terms and paid cash bonuses to bank staffers for pushing homeowners into foreclosure.

In sworn testimony, six former employees describe what they saw behind the scenes of an often opaque process that has frustrated homeowners, their attorneys and housing counselors.  They describe systematic efforts to undermine the program by routinely denying loan modifications to qualified applicants, withholding reviews of completed applications, steering applicants to costlier "in-house" loans and paying bonuses to employees based on the number of new foreclosures they initiated. 

Five big banks-including Bank of America-settled a sweeping complaint with 49 states and several federal regulators about their foreclosure and loan modification practices. 

Bank of America agreed to abide by HAMP program guidelines, which require it to modify loans for qualified buyers, when it accepted $25 billion in bailout funds from the government in 2008 following the housing collapse. In return for the financial lifeline, the bank agreed to help millions of struggling homeowners by rewriting mortgages with more affordable terms. As an added incentive, the government agreed to pay a cash bonus for every loan that was modified successfully. But, according to the former employees, while the bank was lying to borrowers, it was also falsifying its performance when reporting to the government the number of loans that had been modified. 

Later this week, a monitor assigned to track the bank's practices will issue a report that's expected to cite ongoing violations of those new rules.

What does it take to get people off the couch? Who knows? We don't seem to protest much in the US anymore. It's common elsewhere around the world. The BBC reports more than 1,000 public protests per month in Egypt so far this year. A few hundred marched in Hong Kong shouting  “Shame on NSA! Defend freedom of speech!” They carried signs written in Chinese and English and wrapped in plastic to keep out the rain. “Protect Snowden!” In Indonesia at least 4,000 people took to the streets today to protest the governments plan to raise the subsidized price of fuel. Tens of thousands of people held a rally near Malaysia’s capital against alleged electoral fraud. Around 7,500 people participated in anti-nuclear protests in Tokyo. Yemeni security officials say thousands have protested in the capital against “excesses” by security forces, calling for the overthrow of the president and national security apparatus. Greeks set up an encampment outside th state broadcaster, Hellenic Radio and Television, after it was shut down by the Prime Minister. Some 15,000 people protested in Bulgaria yesterday about the appointment of a new national security chief. More than 3,000 Chinese villagers have maintained a 24-hour silent vigil for the past 12 days over a coal mine, which they say has devastated the ground near their homes, swallowed up a road, and left cracks in their houses. Thousands of Canadians marched in downtown Montreal on Saturday to protest changes in employment insurance. Portuguese teachers are on nationwide strike, right during final exams. And thousands of Brazilians protested increased bus and subway fares in Sao Paulo and Rio de Janeiro. Those protests have been going on for ten days, and police have been firing tear gas canisters and rubber bullets at the crowds.

The world is an edgy place these days.