Author: Matt Browner Hamlin

http://holdfastblog.com

Debt Forgiveness

Yesterday Robert Cruickshank had an excellent post proposing the idea of total forgiveness for all student loan debts. There is now over $1 trillion in student loan debt and it is bogging young workers down, preventing them from starting businesses or spending money that could otherwise help the economy grow. Total forgiveness of student loan debt would amount to a $1t stimulus and some of the people who are most in need of stimulus – young workers – would be the immediate beneficiaries.

Atrios goes a step further and calls for a complete debt jubilee. In fairness, he’s been calling for a helicopter cash drop for regular people for well over three years. He writes:

When the financial crisis first hit, one way or another all the banksters got a free money do over. It wasn’t quite as simple as Ben showering them with bags of cash, but essentially that’s what happened. The rest of us, including certain sovereign sates, just need a free money money do over as well. There’s no reason to continue with the endless crises.

This is one of the core points of the Occupy Wall Street movement – that the top 1% get an economy that works for them and a government that works for them in the event the economy stops working, while the other 99% get neither an economy nor a government that works for us. If it’s good enough for the banks and financial elites, it’s good enough for the other 99%, be it students or homeowners or working stiffs who had to use credit cards to pay health care bills.

We have the power to solve our crises and it’s high time that power is exercised.

Inside the Schneiderman and Biden investigation of the foreclosure crisis

Originally posted at AMERICAblog.com

New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden have a joint op-ed in Politico yesterday. The dynamic duo have lead the charge to investigate the nation’s largest banks around robosigning, foreclosure fraud, and mortgage securitization fraud. They’ve also resisted a deal being worked out by Iowa AG Tom Miller and the Obama administration to grant a broad release of liability for matters connected to foreclosure fraud which haven’t even been investigated. They have been joined in that effort by a few other Justice Democrats, including Nevada’s Catherine Cortez Masto, Minnesota’s Lori Swanson, and Kentucky’s Jack Conway (Kamala Harris of California has left the Miller/Obama talks, but not joined the independent investigation of Schneiderman and Biden).

The Politico op-ed looks at the investigation that Schneiderman and Biden have undertaken.

The key to our strategy to root out the conduct that triggered the biggest financial crisis since the Great Depression is recognizing that a comprehensive effort requires an attack from both sides — looking at harm both to borrowers and to investors. So we are investigating four distinct, but interdependent, areas of abuse. Only one of those areas is being discussed in the negotiations now under way among the banks, the administration and some of our colleagues.
…

The American people deserve a full investigation and public exposure of the conduct that got us into the economic quagmire we face today. We must ensure that it never happens again. And we must restore public confidence that ours is a nation committed to the goal of equal justice for all.

This is a critically important investigation and one that should be conducted by all fifty state attorneys general, as well as the federal government. But sadly it hasn’t happened. Schneiderman and Biden have shown tremendous leadership in this area, as has Masto in Nevada. If there’s ever going to be accountability for actions which helped create the need and energy around Occupy Wall Street, it’s going to come through the work of Biden and Schneiderman.

Tibet is burning for freedom

Time Magazine’s Hannah Beech has a first hand account from inside Tibet of the epidemic of self-immolations and other bold acts by Tibetans calling for freedom and a return of the Dalai Lama. It’s rare to get this sort of reporting from Tibet and the piece is illuminating for both the recent phenomenon of Tibetan’s lighting themselves on fire to protest China’s military occupation of Tibet and the larger symptoms of China’s colonization that disempower Tibetans and seek to crush Tibetan language and culture.

Taibbi on Bloomberg & housing crisis blame

Last week, New York City’s billionaire mayor Mike Bloomberg made the remarkable assertion that Wall Street banks bore no blame for inflating the housing bubble, leveraging themselves out their ears, and causing the financial collapse when their house of cards fell apart.

Mayor Michael Bloomberg said this morning that if there is anyone to blame for the mortgage crisis that led the collapse of the financial industry, it’s not the “big banks,” but congress.

Speaking at a business breakfast in midtown featuring Bloomberg and two former New York City mayors, Bloomberg was asked what he thought of the Occupy Wall Street protesters.

“I hear your complaints,” Bloomberg said. “Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.”

Matt Taibbi had one good response, but when readers kept trying to spin him with bogus pro-bank talking points, he put up an even more thorough debunking of Bloomberg. Taibbi explains not only how Bloomberg is wrong, but how he is monumentally and deliberately dishonest. I’m pulling a longer-than-usual quote from it because Taibbi’s response is really important.

Nomi Prins pointed out in her book It Takes a Pillage that we could have paid off every subprime loan in America at the start of the crisis for about $1.4 trillion dollars. But the bailouts ended up being four, five, perhaps as much as ten or twelve times that size.

Why? Because we weren’t paying off the underlying loans of those subprime, personal-responsibility-deficient homeowners. We were paying off the banks’ bets on those loans. We were adopting all those clones they made.

Anyway, there’s is a massive gap between making a bad decision with one’s personal finances and committing criminal fraud in billion-dollar amounts. Morally, the two acts are not even in the same universe.

Homeowners who took on those bad loans did so for a variety of reasons. Some were coaxed into adjustable-rate loans when they qualified for fixed-rate loans, for the simple reason that the ARM loan garnered a bigger commission for the seller. Others were told by their brokers that if interest rates went up, or they couldn’t make their payments, they could just sell their homes, or come back to the same broker for a refinance.

Some were flat-out defrauded, like the prison guard in Massachusetts I interviewed who was told he was buying a fixed-rate loan, and only found out (from Goldman subsidiary Litton) that he’d been sold an ARM when rates went up — right around the time his wife developed cancer, incidentally.

And, yes, there were others who were just dumb and irresponsible, and still others who never even intended to live in their homes and simply bought properties with no cash down as a speculative gamble.

But from what I’ve seen, most foreclosures involve ordinary people with jobs who bought houses when the economy was good, but are caught now in the triple death-trap of an underwater home, rising costs of living, and declining wages and opportunity. And as far as personal responsibility goes, those people who bought that home-ownership ticket, if they missed payments, they’re all taking the foreclosure ride right now.

What we have on the other hand, however, is a bunch of financial companies who consciously created huge volumes of bad loans, dumped them on retirees and foreigners and union stiffs, then doubled down on the problem by creating mountains of new liabilities based on those bad loans via synthetic derivatives. Then, when it all blew up, they came to us and asked us to buy the whole pile at full retail prices, clones and all.

Which we did, flooding them with bailout cash. This allowed them to instantly jack their annual bonus pools back up into the $150 billion range while the rest of the country waited out mass unemployment and a foreclosure epidemic.

So these people created giant masses of these defective loans, pumped the global system full of toxic debt, asked for the biggest government handout in history when it all went wrong, then walked away in the end even richer than before, forcing the rest of us to deal with their messes.

It baffles me that people can look at that behavior and still think it’s individuals in foreclosure who need to be lectured about “personal responsibility.”

A lot of people had to make bad decisions for the crisis to happen. People had to buy houses they couldn’t afford. Ratings agencies had to give AAA ratings to junk securities. Regulators had to be asleep at the wheel. The GSEs had to lower their standards and provide billions of dollars of government-backed financing for dicey home loans. Nobody is denying that all of those things played roles in the crisis.

But the main driving factor was the simple fact that banks were able to make trillions of dollars selling defective products. You take away that simple market-driven reality, there’s no bubble and no crash, no matter what people like Michael Bloomberg say. No one is insisting that they take the whole rap — but don’t insult us by trying to say they shouldn’t take any at all.

Yes, exactly.
There are a lot of different elements involved in the blaming of individuals for the financial crisis. Much of it is transparently racist – the “undeserving” people who benefited from the CRA are typically minorities who for some unknown reason don’t deserve to own a home. There’s also a note of inherent fear that the Masters of the Universe aren’t being honest with the public and what that means. The defenders of the banks, at least those libertarian types who aren’t themselves billionaires, are just incapable of ascribing malice to the banksters in the face of all the evidence.
Taibbi seems to get this and is one of the best at calling out the perpetrators of the financial crisis, even in the ways that there is culpability with individual homeowners and Democratic policy makers. He’s right about the causes and he’s right to spend so much time elucidating what actually happened in the face of the lies of people like Mike Bloomberg.

Occupy Wall Street protests Obama admin pursuit of bank immunity for foreclosure fraud

TheStreet.com recently reported that the Obama administration is pushing hard for a broad foreclosure fraud settlement between the federal government, all fifty states, and the nation’s five largest banks.

According to FBR’s Washington contacts, “the Obama Administration, especially Housing and Urban Development Secretary Shaun Donovan, has stepped up efforts to come to a settlement,” along with the U.S. Justice Department, ” on behalf of claims related to FHA loans.” Attorneys General Tom Miller (D-Iowa) and Lisa Madigan (D-Ill.) continue to lead the negotiations, with New York Attorney General Eric Schneiderman continuing to oppose a multistate settlement.

According to the report, the major remaining hurdles to the settlement — which will include penalties for improper foreclosure filings, as well as large outlays for principal reductions to facilitate mortgage loan refinancing — are “to convince California Attorney General Kamala Harris that the deal is large enough and provides enough political cover to sign onto,” and “to convince the servicers, especially Bank of America, that the liability release is worth the penalty it will be paying.”

The Obama administration is putting pressure on California’s Harris, so the nation’s largest state would add the patina of this being an actual national deal. Everything that’s been reported about this deal says it’s a horrible deal for homeowners and a disgrace to the rule of law.

As a result, it’s not shocking that a movement that is going directly after Wall Street lawlessness and the power of financial elites would specifically target the Obama administration around the pending retroactive immunity for bank fraud connected to the financial and foreclosure crises. Occupy Wall Street is marching today around the foreclosure deal, calling on President Obama to be Wall Street’s puppet:

“This is a clear, moral issue that cuts to the core of why we occupy,” said Max Berger, an Occupy Wall Street participant helping to plan the event. “Instead of throwing corrupt bankers in jail, the administration is pushing to give them a get-out-of jail-free card.”

“President Obama and the attorneys general have a choice: do they stand with Wall Street, or do they stand with the 99%?” he said.
…

“We will not stand for a system that gives campaign contributors a right to immunity, while serving foreclosure papers to the 99%,” said Beth Bogart, a volunteer with Occupy Wall Street. “We will not stand for a country where bankers that issued deadly mortgage-backed securities are bailed out, but homeowners with mortgages are illegally thrown out on the street.”

This is an important and savvy foray by Occupy Wall Street into a very specific policy issue. But the foreclosure crisis is core to the problems of our economy and any efforts by the Obama administration to bail out the banks at the expense of homeowners should be opposed by the Occupy movement.

Food Stamps Make People Rich!

This strikes me as a bit crazy. Usually people needing food stamps is a sign of poverty. But now, critics of the awareness of how many millions of Americans are in poverty want the need for food stamps to count as wealth!

To put it differently, yes it’s a good thing that the government helps prevent people from experiencing abject poverty. But that doesn’t really mitigate the existence of completely downtrodden people who are suffering and living at risk.

Tammy Baldwin introducing resolution against weak foreclosure fraud settlement

Tammy Baldwin, a Wisconsin Senate candidate and current member of the House of Representatives, is going to introduce a resolution on foreclosure fraud and the ongoing negotiations between the nation’s five largest banks, fifty forty-four state Attorneys General, and the Obama administration. Amanda Terkel of Huffington Post reports:

Baldwin’s resolution states that any settlement should follow three guidelines: 1) Banks that engaged in fraudulent behavior “should not be granted criminal or civil immunity for potential wrongdoing related to illegal mortgage and foreclosure practices,” 2) the federal government and state AGs should “proceed with full investigations into claims of fraudulent behavior by mortgage servicers” and 3) any monetary sum paid by the banks should “appropriately compensate for, and accurately reflect, the extent of harm to all victims.”

“We have to do the best we can to make innocent victims whole. But secondly, especially in light of the taxpayer bailout of the biggest banks, we owe taxpayers a solemn effort to do everything we can do to uncover what went wrong and whether laws were broken,” Baldwin said in an interview with The Huffington Post. “Part of that is to make certain this won’t happen again. That, to me, is one of the most basic responsibilities we have.”

David Dayen at FireDogLake has a copy of Baldwin’s proposed legislation. It’s simple and powerful, while including a stinging indictment of the big banks who have systematically been stealing peoples’ homes.

I don’t know that this resolution has much hope of passing the Republican-controlled House of Representatives, but it’s a strong statement that the anger we see around the country in the Occupy movement has made its way into the Capitol building. Good for Tammy Baldwin, a new member of the Justice Democrats.

Third Way advising Tea Party to support Super Committee

The conservative Democratic think tank Third Way has written a policy memo as to why the Tea Party should support the Super Committee making big budget cuts, as opposed to the sequestration that would happen if the Super Committee can’t come to agreement . Some examples of Third Way’s reasoning to support this version of austerity and not the automatic cuts include:

  • 12,000 Criminals Evade Incarceration
  • Possible Prison Furloughs
  • A More Porous Southern Border
  • Gun Purchase Delays

Basically Third Way is saying that unless the Super Committee gets to make big cuts to the federal budget, the automatic big cuts will make America filled with dangerous brown people and Tea Partiers will have a harder time buying guns to defend themselves.

Remind me again why any Democrat would listen to Third Way’s advice?

GAO report rips NY Fed bailout of AIG counterparties

Originally posted at AMERICAblog

When AIG failed, the New York Federal Reserve stepped in to manage the wind down of the counterparties to the insurance company’s massive credit default swaps (CDS) business. In short, the failure of AIG meant that the company couldn’t pay off all of the bets they lost in CDSs in the residential housing market. Faced with an AIG bankruptcy, the counterparties – all big Wall Street banks – were in a position where they might get none of the money they were owed. Since the government was stepping in to save AIG, it was an open question as to how much money would be needed to pay AIG’s counterparties. It was assumed that no one would be getting 100% of what they were owed, as AIG’s failure meant they would probably have received nothing. Basically anything that came from AIG after it’s failure was unexpected and largely undeserved money. The banks making swaps with AIG took risk when they made the bets and in the real world, but perhaps not the world of Wall Street, it’s actually possible to lose money when gambling. As Dean Baker notes, “the government bailout of A.I.G. ensured that [financial institutions] suffered no consequences from their mistake.”

The New York Times reports on a GAO study into the New York Fed’s behavior around the 2008 AIG bailout. The GAO found that the NY Fed, under Tim Geithner, basically refused to drive a hard bargain with the AIG counterparties and have lied about their actions.

The report, by the Government Accountability Office, says that New York Fed officials have offered inconsistent explanations for their decision to pay other financial companies the full amounts they were owed by A.I.G., and that some of the explanations were contradicted by other evidence.

The report also asserts that the decision to pay the full amounts, rather than seeking concessions as the government later did in other cases, disregarded the expectations of senior Fed officials in Washington and the expressed willingness of some of the companies to accept smaller payments.

Did you get that last bit? Geithner’s New York Fed even went so far as to turn down offers by banks to take less money than they were owed.

The AIG bailout was over $180 billion and, according to the Times, a quarter of that went to 16 Wall Street firms. To put it differently, money going to “save” AIG was being funneled straight to the people AIG owed money to…Wall Street banks like Goldman Sachs. The AIG bailout was a back-door bailout for the Wall Street banks which crashed our economy.

The GAO report suggests that this was done at the behest of Geithner’s New York Fed, somewhat autonomously from the national Federal Reserve. The New York Fed has not been honest with the government about what they did and the conditions they were taking action in. Whether that’s because Geithner’s NY Fed was genuinely ignorant of the market they were entering into or they just wanted to give as much money to their friends at big banks and are lying to cover it up, it’s not really clear.

But what is clear is that this is what a Tim Geithner orchestrated deal looks like: bailing out banks by preventing them from suffering losses that the market has suggested they should suffer. This is important for the current national mortgage/robosigning settlement talks with the nation’s largest banks, which are being lead at the federal level by Geithner and Geithner’s proxies and also include about 45 state attorneys general. By all accounts, the deal Geithner and the Obama administration are pushing looks awfully similar to the deal Geithner’s NY Fed orchestrated for AIG’s counterparties. That is, a sweetheart bailout for banks at the public’s expense. While this shouldn’t have been surprising prior to the GAO report on the NY Fed’s work around AIG, the desire to bail out banks for their liability connected to foreclosure fraud, securitization fraud, and origination fraud is exactly what we now know we will get when Tim Geithner is involved. It goes without saying that President Obama should fire Geithner.