2007 archive

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I don’t have the time to summarize them, but there are a couple of new articles at Factcheck dissecting claims of pretenders to the throne of King George the Wurst from both the Democratic and Republican Parties that are worth a look.

Customers fight back:

This seems to be where many of the subprime 2/28 ARMs ran afoul: They failed to meet the disclosure laws regarding actual interest amounts and payments.

Who has gotten tagged with these cases so far? Subprime lender NovaStar Financial Inc. (NFI) in Kansas City settled a class action suit for $5.1 million. And, consumers in Wisconsin recently won a class-action TILA suit (its under appeal).

Via Atrios.

Brendan.

As we proceeded southwards to the grandchild location, we caught today’s Diane Rehm Show:

In recent weeks the administration and some military leaders have said that the 18 benchmarks set by Congress may not be the best way to measure progress in Iraq. We hear different views on how progress there may be assessed.
Guests

Michael O’Hanlon, senior fellow in foreign policy studies at the Brookings Institution

Jonathan Weisman, reporter, “The Washington Post”

Lawrence Korb, senior fellow at the Center for American Progress, and former Assistant Secretary of Defense in the Reagan administration.

You can listen to it here (Real).

Listening to Michael O’Hanlon try to find something positive from recent events in Iraq was like watching pretzels being made from human flesh–painful.

It is painful to watch a bankrupt ideologue try to defend his bankrupt ideology.

From a commentor at one of Gene Weingarten’s chats:

I will add to your list that I want a President who can speak without seeming like it takes every amount of energy he has in his body and brain to get the words out. Being a great aurator may not be the best qualification for President but since I watch a lot of speeches its important to me. Bush seems like every time he takes the podium he may collapse under the weight and brutal sheer agony of just having to mouth the English language.

Who referred to this:

I’m off tomorrow to meet my new grandson.

After a month of almost no rain, we’ve had almost two inches in 36 hours. The brown grass is already green again.

I’m glad I hired my neighbor Danny to cut my lawn.

Doonesbury:

Oh, yeah. Read this.

Robert Reich tries to explain.

Shorter version: Mortgage bankers and hedge fund managers saw a way to make a few lots of easy bucks lending money to people who couldn’t afford the loans, then reselling the loans over and over again as investments. It’s part of the “everything should be for sale” mentality.

It’s called “securitization.” It means turning items that are not traditionally investments (that is, not stocks and bonds, but, rather, things like credit card debt and mortages) into things that look like investments (that is, turning them into “securities”–see definition number 6 here).

These things that have been “securitized,” though, have no intrinsic value (unlike a stock or a bond that, supposedly, is backed by the value of the products manufactured by the company issuing it). Those who buy those “securities” are investing in the debt of others and in the expectation that the debt will be paid off.

And, when persons suddenly can no longer afford to pay the debt, as when their mortgage rate suddenly goes up two or three percentage points, the “investors” are left holding a bag of useless paper. (Aside: When buying a house, 30-year fixed is your friend.)

Anyhoo, back to Robert Reich:

But what exactly happened to set this off? The story isn’t simple, but I’ll try to state it as simply as I can. In recent years, with so much money sloshing around the global economy, American banks and other mortgage lenders found themselves with lots of cash. They thought they could make a tidy profit by pushing home loans – not only on average Americans (whose eagerness to own a home or two thereby bid up housing prices) but also on poorer Americans who wanted to own a house but normally couldn’t afford the interest on the loans. Oddly, private credit-rating agencies judged these “sub-prime” loans to be relatively good risks. The loans were then sliced up and sold to other financial institutions where they were repackaged with other loans. Meanwhile, hedge funds created what can only be described as giant betting pools – huge amalgamations of money from pension funds, university endowments, rich individuals, and corporations – whose assumptions about risk were derived from the assumed low risks of the home loans (hence, the term, “derivatives”). Investors in these hedge funds had little or no understanding of what they were actually buying because hedge funds don’t have to disclose much of anything.

It was not just a housing bubble but a financial house of cards that would tumble when central bankers tightened up on the global money supply in order to fight inflation, as they inevitably would, and when the home loans were thereby revealed to be far riskier than thought. Because the bad loans are so widely dispersed and because so much additional credit is connected to them through derivatives, a contagion of fear has spread through financial markets. The credibility of the whole financial system has become shaky. Large numbers of stocks and bonds appear riskier than before, which is why Wall Street is taking a beating.

(snip)

In other words, the Fed has to bail out the speculators because we’ll all suffer if it doesn’t.

That doesn’t mean, though, that the irresponsibilities now so clearly revealed in American financial markets should be excused or forgotten when the crisis ends. Wall Street has been living in an anything-goes world for too long. It has been widely – and wrongly – assumed that investors, creditors, and borrowers are smart enough to take care of themselves, especially if they’re big. That’s wrong.

Yeah.

Watch.

Poor people will lose their homes because they were sold loans they couldn’t afford with assurances from the salespersons that they could, indeed, afford those unaffordable loans, and no one, absolutely no one, who knowingly sold them those unaffordable loans will lose a home or see the inside of the pokey.

Mark my words.

Addendum, Later That Same Evening:

In the case of securitized credit card debt, the risk of default is negligible, because the default by a few of millions of credit card users has little or no effect on the value of the overall portfolio. But when you start looking at mortgage holders, whose debt is measured in hundreds of thousands of dollars, and see, suddenly, that hundreds or thousands of mortgage holders are falling into default, well, you can see what is happening . . . .

Securitization dot net, your free source for structured finance (whatever the hell that means) information.

Addendum, 8/20/2007:

My two or three regular readers have pointed out that the customers for many of the mortgages were adults who did not exercise due care. In many cases, that was the case. Nevertheless, I do think there were additional factors in play, so I’m putting my reaction to the comments up front, rather than burying them in the comments. Here’s what I originally wrote as a comment:

Unfortunately, as cases come to light, it’s apparent that many of the mortgage companies (Ameriquest comes to mind; remember, companies don’t sign consent decrees for nothing) exercised less than–er–full disclosure. Customers can’t ask questions that they don’t know to ask.

They were, in fact, selling the mortgage equivalent of toothpaste with antifreeze in it. Some of us (like Bill and Opie and, indeed, me) wouldn’t touch anything less that a fixed rate mortgage, ever. But we shouldn’t have to ask whether there is antifreeze in the toothpaste, either,

To call some of the mortgage sales practices “predatory” is to insult predators.

One of the damned shames of what’s going on right now is that Countrywide, which, by all reports, conducted itself with good business sense and treated customers fairly, is getting caught in the riptide.

Remember, too, that people do tend to be trusting (enron). They tend assume that, if a company (enron) is doing something, that something (enron) is not only legal, but, at some level, ethical (enron).

Until the roof caves in.

What a chicken shit outfit is the Current Federal Adminstration. Every time you think they can’t do something dumber, they prove you wrong:

Chicken houses across the country are one step away from being named the newest terrorist targets demanding stricter access and regulation, according to the U.S. Department of Homeland Security.

As part of the DHS Chemical Security Anti-Terrorism Standards, facilities with more than 7,500 pounds of propane gas – 1,785 gallons – could be considered high-risk. To determine if a facility is a security risk, operators must process complete “Top Screen” safety measures, including vulnerability assessments, develop site security plans and implement protective measures approved by DHS.

(snip)

“We appreciate the fact that Homeland Security does have a responsibility to the security of this nation, but in terms of what is considered a threat, I would think chicken houses would be so far down on the list that nobody would ever find it,” said Worcester County farmer Virgil Shockley, who has 9,000 gallons heating six chicken houses.

At the same time they pull this sort of stunt, they ask you to trust them in their spying programs.

Addendum, Minutes Later:

Richard Blair over as ASZ has another example of Bushie absurdity.

Atrios sums it up.

David Walker, head of the Government Accountability Office, in the Financial Times:

The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.

David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.

These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.

Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.

And, well, what else is new?

Via Le Show.

Steve Clemons analyzes the NeoCon rush to (another) war:

. . . Ledeen, James Woolsey, Norman Podhoretz, and others want war now with Iran. They want the bombs to fly. They are obsessed with delegitimating the important diplomatic efforts of Undersecretary of State R. Nicholas Burns, US Ambassador to Iraq Ryan Crocker, Ambassador to the United Nations Zalmay Khalilzad, and others. They despise Defense Secretary Bob Gates and Secretary of State Condoleezza Rice — and they are increasingly offering defamatory comments about George W. Bush himself at their small dinner parties and neocon gatherings.

Ledeen has a piece, “Talking with Iran,” that has just appeared in the Wall Street Journal that tries to savage those calling for negotiations with Iran. It’s embedded throughout with distortions, but it is an important case statement profiling neocon obsession with waging war against Iran as soon as possible.

Follow the link the see the whole thing.

Two letters short of finishing the Sunday New York Times crossword puzzle.

Undue influence.

A Northampton Township supervisor who circulated an e-mail urging the recruitment of Bucks County employees and vendors for a Republican voter-registration drive resigned yesterday from the executive committee of the county GOP.

Vincent J. Deon said he did not want to be a “distraction” in a letter to Bucks Republican Chairman Harry Fawkes giving up the volunteer party post.

Given his resume, the Current Federal Administrator will no doubt consider him a prime candidate for a position as a United States Attorney.

As I was working at home today, I also listened to Diane Rehm’s regular Friday news roundup. Even the panelest from the Moonie Washington Times couldn’t find anything positive to say about Gonzo.

TPM Muckraker collects Gonzo’s top lies.

Another hypocrite, that is.

You know, it’s one thing to say you like the days of wine and roses, and then to live for them. Say, for instance, no one could ever accuse Hef of being a hypocrite.

(Then again [I’m not implying cause and effect here–well, yeah, actually, I am], Hef is not a Republican.)

It’s quite another to say you hate the days of wine and roses, then throw back a bottle and start arranging the flowers.

Tim Droogsma, a former press secretary to a U.S. senator and a Minnesota governor, was arrested Tuesday in a midafternoon prostitution sting on St. Paul’s East Side.

He allegedly arranged a deal for sex from an undercover officer through Craig’s List, police spokesman Tom Walsh said Wednesday.

Go over to Susie’s place to see the full story.

Nothing to add.

Delaware Attorney General Beau Biden is preparing to don his National Guard uniform and head to Iraq next year, potentially leaving the state Department of Justice in someone else’s hands for 12 months.

At a campaign stop in Iowa Wednesday, U.S. Sen. Joe Biden, Beau’s father, noted that his son’s unit — the 261st Signal Brigade — has been placed on alert for an Iraq deployment sometime next year.

The brigade specializes in setting up communications and Biden serves as a captain and a Judge Advocate General’s Corp officer — a military lawyer.

Steve has a great post over at ASZ on family values.