Obsidian Wings

Tell all the truth, but tell it slant

by Doctor Science

Well, tell *some* of the truth. But the slant part they can do.

I walked to the convenience store to get milk. I saw the sign for the "Naanwich" of the day -- tandoori chicken and pepper strips with chutney, wrapped in a naan. The convenience store in this teeny semi-rural NJ town is now run by Gujaritis, and the results are *delicious*.

While I was waiting for my naanwich, I read the headlines in the stacks of newspapers. The NY Times was there, next to the Wall Street Journal. The lead story in the Times: Top Corporations Aid U.S. Chamber of Commerce Campaign. The lead story in the WSJ: Campaign's Big Spender: Public-Employees Union Now Leads All Groups in Independent Election Outlays.

Keep Them Doggies Movin'

by Gary Farber

My apologies for having posted so little since becoming an official ObWier; I'm now leaving for Oakland, CA, in less than two weeks, and am working on moving, and minimizing my usual irrational panic. 

Perversely, I have done some link dump posts at my home blog, Amygdala, in recent weeks, so feel free to check those out before they're too aged, if you desperately need more reading.

I've certainly been frustrated to not join in on the income inequality discussions when there is such wrongness being perpetrated on the internet, and even ObWi, but I'm sure it will still be there when I get back, and meanwhile the rest of you do such a great job in comments, as do the other front page bloggers, it's not as if I'm necessary, anyway.  (But it's a topic I'm passionate on, nonetheless, so later on that, dudettes and dudes.)

Meanwhile, to briefly follow up on a past post of Dr. Science's, SF³ has withdrawn the invitation to Elizabeth Moon to attend WisCon 35 as guest of honor.  That followed SF³, the parent body of WisCon, having passed these two resolutions on October 3rd.  This is a precedent for sf conventions, for better or worse.

In another very quick hit, Why Does Abu Dhabi Own All of Chicago's Parking Meters? Yes, let's discuss privatization, virtues and faults, uses and limitations.  Let's start by reading some of Matt Taibbi's Griftopia: Bubble Machines, Vampire Squids, and the Long Con That is Breaking America, as excerpted at the link.

the great ones never go out of style

by russell

Via self-evident, a discussion of the banking mess that many here will, I think, find congenial.

The money quote:

What market regulations should prohibit are practices in which profit-taking can routinely occur without wealth creation

But, if you have a few minutes, read the whole thing.

A Second Porsche Won't Fill That Hole

by Jacob Davies

A nice short piece on inequality in the NYT:

Many economists are reluctant to confront rising income inequality directly, saying that whether this trend is good or bad requires a value judgment that is best left to philosophers. But that disclaimer rings hollow. Economics, after all, was founded by moral philosophers, and links between the disciplines remain strong. So economists are well positioned to address this question, and the answer is very clear.

Recent research on psychological well-being has taught us that beyond a certain point, across-the-board spending increases often do little more than raise the bar for what is considered enough. A C.E.O. may think he needs a 30,000-square-foot mansion, for example, just because each of his peers has one. Although they might all be just as happy in more modest dwellings, few would be willing to downsize on their own.

People do not exist in a social vacuum. Community norms define clear expectations about what people should spend on interview suits and birthday parties. Rising inequality has thus spawned a multitude of “expenditure cascades,” whose first step is increased spending by top earners.

The rich have been spending more simply because they have so much extra money. Their spending shifts the frame of reference that shapes the demands of those just below them, who travel in overlapping social circles. So this second group, too, spends more, which shifts the frame of reference for the group just below it, and so on, all the way down the income ladder. These cascades have made it substantially more expensive for middle-class families to achieve basic financial goals.

I was sitting in the middle of the floor with our 1 year old boy today and we were flinging Duplo in all directions and I was thinking, you know, you really don't need much more than this. Four walls, a roof, a floor, indoor plumbing, refrigeration, cooking, heating, storage, Internet access, Lego. What else can money buy that I actually care about? Maybe more Duplo, I'm short on orange pieces...

Humans have simple needs. Most middle class Americans of my acquaintance would be much happier if they lived on a much less steeply-sloped income curve, and would suffer much less anxiety over housing and healthcare and schooling.

I don't think it's too much to say that a large sector of American economic activity has been simply devoted to counterfeiting - the production of paper with apparent face value but no underlying worth - mortgage backed securities with no actual mortgages backing them are just the most obvious form. Inequality is inevitable in a system where one group is allowed to print money and spend it.

"One nation, under fraud"

by Jacob Davies

I don't have much use for the Daily Caller generally, but you should read this. The banks ran their mortgage units like a 1999 dot-com: no paperwork, everyone runs around like chickens with their heads cut off, next week we're all either millionaires or fired. But mortgage lending is a 30 year business.

Tomorrow, a bank — not your bank, but any bank — could evict you from your home. Even if you didn’t know the bank was foreclosing. Even if your mortgage is paid off. Even if you never had a mortgage to begin with. Even if the bank doesn’t hold a single piece of paper that you signed. And major banks not only know this fact, but have spent millions of dollars to defend it in court.

... Earlier this year, Goldman worked with Jane Doe, an elderly woman whose real name couldn’t be disclosed for legal reasons. She had just spent several weeks outside of her home state of Florida visiting relatives, and she was current on her mortgage payments, which she had been paying for the past 15 years. She even called up her bank during her trip to ask about the best way to send in her latest payment. The bank told her that it wasn’t allowed to discuss the mortgage with her because her husband was the property owner, not her. But the bank couldn’t discuss the mortgage with her husband, either. Why? Because he was dead. And he had been for five years. Confirming this fact would have taken mere minutes.

Instead, when Jane returned home, the locks to her house had been changed and all of the property inside the house was gone. She still hasn’t recovered that property, and the bank hasn’t even told her where it is. According to Goldman, the wrongful repossession was first admitted, and then, inexplicably, the bank actually changed its mind and tried to make the outrageous claim that the homeowners’ association was actually the entity which had ultimately decided to change the locks and empty the house.

Hey, this is America. If a bank wants to break into your house and steal all your possessions, that's their right. Got a problem with that?

This was best highlighted by an event that generated plenty of late-night chuckles last fall, when Wells Fargo sued … Wells Fargo. Wells Fargo wanted to foreclose on a condo unit which had multiple mortgages attached to it. Wells Fargo also owned one of those second mortgages. So Wells Fargo spent money to hire a law firm and file suit against the irresponsible lenders at Wells Fargo. Then, Wells Fargo spent money to hire a different law firm in an understandable effort to defend Wells Fargo from the vicious legal attack coming from Wells Fargo. The second law firm even prepared a legal statement for Wells Fargo which called into question the dubious claims being made by Wells Fargo. Sadly, Wells Fargo won the case, crushing the hopes of Wells Fargo.

We have given vast power and influence to banks that act like a gigantic, headless, blind worm thrashing around. They don't even know what they're rolling in or why they're doing it. Their ostensible role in the mortgage market is to help people buy homes. Instead they blew up the housing market, in the process randomly dispensing money to some people in the form of windfall gains and stripping it from others in equity losses. Gorged on US mortgages and kept alive with transfusions from the US government, the worm keeps ripping its way through the country with false-document foreclosures.

The purpose of the US mortgage system is to provide financing for Americans to buy or build good-quality homes to live in and raise families in. It wasn't designed to be a casino.

Should possession be nine points of the law? UPDATED

by Doctor Science

I did a quick spin around some articles on Mortgage Crisis: Electric Boogaloo this morning -- Krugman, for instance -- and glanced at the comments to get a sense for how the outrage was forming. The NY Times' system is quite useful, I find (as suggested by a commenter on Balloon Juice a while back): comparing comments labelled "Reader Recommendations" to the "Highlights" (chosen by the Times) gives a useful insight into editorial bias and how it is or isn't working.

In any event, I noticed commenters at every blog giving a ritual statement that "of course I don't have any pity for people who are defaulting on their mortgages" before they get down to the business of apportioning blame. And I started to wonder, why not?

That is, why is it that though people can't agree which faction of the rich and powerful is most to blame, there seems to be a consensus that regular people -- who are actually living on the disputed properties -- *must* be punished. And yet, no-one who puts most of the blame on bankers, regulators, speculators, etc., seems to have any rational expectation that any of these rich/powerful people will be punished in any real way.

We *know* that the rich will, on a personal level, get away with it -- even if their company is "punished", no-one who got rich by title fraud will be impoverished, there is almost no chance that anyone will go to jail, and if one or two *do* go to jail it will be a really, really nice place by jail standards.

Yet, even though legal title to the properties has been tangled and obscured, we know who is in actual possession: the people living in the houses. What is the downside of letting them continue to live there? They may not have a clear legal right to live there -- but at the moment no-one else does, either. Unlike everyone else involved in the process, the residents have a direct, personal, and tangible interest in the properties, because they need a place to live.

What are the moral, legal, and social downsides to letting defaulting residents stay in possession? Why is it so important to punish them directly and tangibly, when the powerful people who set up this whole mess will never be directly punished?

Does the fact that we all know the faceless powerful will get away with it make us more determined to punish the powerless? Am I wrong to assume that they *will* get away with it -- does one of you have a reason to think that anyone in the financial industry will actually end up hurting in a way that hurts? By which I mean things like living on welfare and food stamps, worrying about medical bills and keeping the family together.

Update:
Via digby: L. Randal Wray, actual economist, suggests suggests a bank holiday to reboot the whole property system, including

Give purported mortgage holders 30 days to produce the original notes; if they cannot find them, hand the homes over to the owner-occupants—free and clear of debt.

But then, it's a pretty magic-sparkly-unicorns proposal overall, with multiple instances of

Prosecute the crooks and jail the guilty.

Ha ha ha! Yeah, like that'll happen.

Defense is to State as masculine is to feminine

by Doctor Science

Eric's recent post talked a little bit about the imbalance in US policy between negotiation (and the Department of State) and force (and the Department of Defense). I'm pretty sure I read something about it on another blog, too, one with comments (i.e. not Sullivan).

In the past couple of decades -- since the fall of the Soviet Union, at least -- I've seen US foreign policy fall more and more into a stance of: "We don't negotiate with ... anyone, really. Negotiation, or even talking to people, is for wimps." But even more, it's for women, and the stink of anxious masculinity is all over this.

I can't help noticing that the last time a white male was US Secretary of State was January, 1997. Meanwhile, both Secretary of the Treasury and Secretary of Defense continue their unbroken records of White Dudes Only (hair optional).

I'm not saying that the Secretaries of State and Defense should be drawn from the same pool. It would be reasonable and effective for State to be the "Good Cop" and Defense the "Bad Cop", for instance, and that may be part of the dynamic Presidents are trying to evoke. And of course there's issue of the "where can we put a woman to show that we Really Care about having women in government? I know! She can talk to people! Women are good at that!"

But I don't think that's all that's going on here. I also see what I call subtractive masculinity: the only *manly* activities, the ones that give you masculinity points[1], are things women do not do, or not well -- peeing against a wall, for instance.

If you're using a yin/yang or complementary spheres model of gender roles, then the more things women do -- and even the more virtues women display -- restricts what men can do for those critical masculinity points. Which means that, now that women have been Secretary of State, it can no longer be a sought-after post for manly manly men. It may be an important, prestigious job -- theoretically -- but it's not *manly*, so it just doesn't have the cachet of a Real Man Job.

It doesn't make a difference that, of all the candidates in the 2008 Presidential election campaign, Hillary Clinton was the toughest one with the most metallic metaphorical balls. She can talk to people, she can negotiate, she can be tough or nice as the occasion demands, because she has no masculinity dangling delicately on the line. A man -- especially a white man -- in the job might have to huff and puff like John Bolton, making sure that everyone knows he doesn't really believe in this namby-pamby stuff.

So basically, I blame the patriarchy -- and not for the last time.

[1] I do not personally know what these are used for, but there is some evidence that they enhance the size and functionality of some body part or another. Ask your email spam filter.

money love

by russell

OK, this is a short one.  I'm trying to get my head around some numbers and it's making my brain hurt.

This wiki article cites this Bank for International Settlements report to say:

Thus, derivatives trading – mostly futures contracts on interest rates, foreign currencies, Treasury bonds, etc. had reached a level of $1,200 trillion, $1.2 quadrillion, a year. By comparison, U.S. GDP in 2006 was $12.456 trillion.

For "derivative" I read "a financial instrument based on speculation about what the value of other things will be".  AKA, a bet.  A well-informed bet, perhaps, but a bet.

Please correct me if I'm mischaracterizing the nature of derivative financial products.

So, in 2006, the market in speculative financial instruments was approximately one hundred times the value of the entire GDP of the United States.

One hundred times the value of the entire GDP of the United States.

US GDP runs in the neighborhood of 30% of global GDP, so that means in 2006 the market in derivative products was, order of magnitude, thirty-plus times the productive output of the entire world.

Wait, what?!?

It's late in the day, I'm a little tired, maybe my math is wrong.  Somebody help me out if so.

If it's not, does anyone besides me see a problem here?

 

everything is broken #17 and #24

by russell

Just to follow up on seb's post....

Via the the powder blue satan, a pretty good introduction to the hideous train wreck that is the mortgage industry today.

The article is not very long, and is well worth a read (as are the supporting articles, links to which are included in the article).  But the very very short form is this:

Garbage in, garbage out

Mortgage originators wrote loans to any warm body they could find.  In addition, as it turns out their clerical skill and accuracy, shall we say, was often slipshod. 

These loans were sold off and bundled into securities, where they were sliced and diced n five thousand creative ways, and then the securities were sold off. 

The mortgages themselves are managed at a hands-on level by service organizations that have no interest in the note per se, they are just working for a fee.

Uh oh.  Millions of these mortgages are being foreclosed on each year.

This creates two problems (at least):

1. The sheer volume is driving service organizations to not do due diligence when foreclosing.  So, folks are having their homes foreclosed on fraudulently.

2, The paper itself - the documentation that is bundled into the security - is turning out to quite often be crap.  As in, the note itself - the promise to pay by the buyer - isn't there.

So at some point somebody allegedly promised to pay for the loan, but we can't prove it, but they're not paying now, so the security that the mortgage part of is turning into crap, so we want to reclaim the property.  But this is happening to so many loans that the servicers don't even have time to look at the docs for each one, and even if they did the paper might be garbage.  So they're forging the docs and we're setting up special courts to fast-track the whole mess, but folks are starting to catch on and demanding to see the note.

Is anybody in this scenario happy?  This will take years to sort out.

In the meantime, what is the status of the property?  Who owns it?  Can they sell it?  Would you want to buy it?  If you are holding the security that contains the mortgage, and the note isn't there, how are you going to get your money?

And the most fun question of all: who is responsible?  Who is going to end up holding the hot potato?

Buckle up, it's going to be a bumpy ride.

Updates

Foreclosure fraud part 2, part 3, and part 4.

h/t Atrios, and kudos and thanks to Michael Konczal and Rortybomb for the series.

More updates

FUBAR

Hypocrisy From the Mortgage Banker's Association

--by Sebastian

 

So it counts as hypocrisy when you publically moralize against something that you do your self, right?

Witness, strategic default:

 

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Mortgage Bankers Association Strategic Default
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity