FSOC’s 15 Minutes to Save the World

As I noted, the Financial Stability Oversight Council is meeting today. As announced, they discussed foreclosure fraud and securitization.

For less than 15 minutes.

And then they moved on, without once raising the issue of whether or not the banks’ exposure due to securitization problems posed a systemic risk to our financial system.

As the first order of business in the public session (the Council had an hour of private business before the public session), the departing Michael Barr reviewed what the “foreclosure working group” was doing about the problem. He noted that there seemed to be problems, but described that onsite examiners were collecting information and would not be done doing that until the end of the year; they’d issue a substantive report in January. He did, however, say that there had been significant putbacks and he expected them to continue.

And that was it. Timmeh Geithner asked if anyone had questions. And no one did. No one asked, “What do you expect will happen between now and January?” No one asked, “Do you think this is systemic?” No one asked, “What kind of exposure are we talking about here? Are the banks insolvent?”

No one even pointed out that existing home sales were sliding again, at least partly because the banksters couldn’t sell their foreclosures and partly because consumers weren’t stupid enough to buy them. So no one mentioned that waiting until January may not be so smart, as nothing is getting fixed in the meantime.

Now perhaps they did ask these questions during the hour of private business before the cameras started rolling. Perhaps they spent the hour before we got to watch screaming “hair’s on fire, hair’s on fire, hair’s on fire,” before taking a sip of tea, and then performing a complete lack of concern about this. Perhaps they talked about how serious this might be before we were allowed to watch, not wanting to concern the markets (which are busy freaking out, in any case, about a run on Europe’s banks).

But the optics of it–this apparent lack of concern about the way the banks will postpone admitting to their own insolvency by degrading the private property system in this country at the expense of real people–suck. They sure provide zero confidence that the FSOC intends to do its job to prevent this from becoming a systemic crisis.

Update: Felix Salmon has a good article describing where Michael Barr thinks this is all going.

Me? I’m w/Salmon. This isn’t going to fix things. Note, particularly, that Barr (who is probably one of the more aggressive folks at Treasury on this, at least for the next two weeks) is still just talking about fines, not prison.

  1. bobschacht says:

    Teacher! I know! I know! That one hour private session was spent rehearsing the script for the public session.

    Do I get a pretty hubcap or something?

    Bob in AZ

  2. kellyjohnson says:

    Well…what would you do if cocktail hour was approaching?

    Seriously…this is all part of the plan. All these smart people who need to be retained or else calamity will occur…are laughing uproariously at the calamity of their own making. It’s on purpose, and it’s working like a well oiled machine.

  3. BoxTurtle says:

    I hate to defend the FSOC, but any discussion of MAJOR banks that are about to fail has always been held behind closed doors. Until the fail actually happens. Probably wise, as a run on the bank could make things way worse.

    HOWEVER, this appears to me to be more of a collective ‘head in the sand’ than any actual action. Rather than keeping things quite until they act (normally a short term), they are trying to keep things covered up so they won’t HAVE to act before another administration is in the White House.

    Boxturtle (LA LA LA WE CAN’T HEAR YOU)

  4. cbl says:

    Kaptur on Ratigan right now – using the C word


    oooh damn, closing remark recommending Inside Job and Capitalism, A Love Story

    • eCAHNomics says:

      I’m sorry, cbl, but I’ve gone to watching nothing but Food Network. Beats eating oneself into a food coma, and certainly beats watching corp media, even Ratigan.

      • BoxTurtle says:

        I spend way too much time watching FOOD. For some reason,I find the cake challenges interesting. And I love Iron Chef. Ever see the episode of Iron Chef where William Shatner plays the Chairman? Yeah, it’s every bit as bad as you imagine.

        Boxturtle (Tonight’s ingredient: Ham)

        • eCAHNomics says:

          It’s a relatively new phenomenon for me, so no, I haven’t seen the episodes you refer to. I don’t like the contests, esp the ones involving time deadlines. Right now, food for me takes however long it takes, and is NOT a contest, it is about ideas for things that I haven’t thought of that might taste good. Or tips that aren’t in my cookbooks, that make the prep experience work better.

          Having typed that, I will note that yesterday I watched Chopped, where there was a timed contest. The ingredients were sooo gross (port wine cheese, canned ham, I forget the other ones, although one was little turnips, which I DO like), I had to see what they would do with them.

          • eCAHNomics says:

            Color me impressed. No snark! Even though I don’t like watching those kinds of hypercompetitive shows, I do now appreciate the skills and creative talent and work that goes into such accomplishments.

          • rosalind says:

            has he whipped up his “pan-seared scallops wrapped in apple tamales and accompanied with a toasted pumpkin seed relish and an apple-papaya salsa” for your pleasure?

  5. PeasantParty says:

    Marcy, you have done execellent in reporting on this issue and today’s addition is no exception. I don’t know how you managed to sit through the hearing, but we are thankful.

    Not one question was asked because they know if they do the taxpayers will understand that we will continue to pay for this. You and I already know it, but if they discuss it in open it will no longer be a secret. Plus, the congress persons asking will no longer qualify for money in their pockets.

    I don’t want to hear about cutting middle class dollars or social security to solve the deficit. Nope, I want to hear about cutting the risk from the TBTF!

  6. Cujo359 says:

    But the optics of it–this apparent lack of concern about the way the banks will postpone admitting to their own insolvency by degrading the private property system in this country at the expense of real people–suck.

    From my own limited vantage point, the optics look like they have for the past two years – the Obama Administration isn’t going to honk off the financial industry, no matter what.

    • arcadesproject says:

      Yeah. I think what we have here is a naked emporer scenario in which the arrogant emporer is convinced that even if the little girl does yell, He’s naked!, someone will step on her neck.

  7. eCAHNomics says:

    Oh, and on-topic, my martinis & ceviche, if you desire what I prepared, makes the 15-minutes-to-save-the-world pass so much more pleasantly than without them.

  8. wendydavis says:

    Fifteen minutes. Okay. But please remember Chris Dodd advised Tim Geithner the other day that he should advise the banks to run some more stress tests on themselves…er…no; through Moodys, maybe; and hey, Tim; if there are any weird, unexpected results, you could always take a gander into the Dodd-Frank Bill; there might be something in there that could help. (Yawn.)

  9. emptywheel says:

    Felix Salmon has a good article describing where Michael Barr thinks this is all going.

    Me? I’m w/Salmon. This isn’t going to fix things. Note, particularly, that Barr (who is probably one of the more aggressive folks at Treasury on this, at least for the next two weeks) is still just talking about fines, not prison.

    • phred says:

      They sure provide zero confidence

      FWIW, I think this pretty much applies across the board. I have zero confidence that our government will rise to the occasion with any of the myriad problems we face.

      Good thing eCAHN is mixing the drinks.

    • bmaz says:

      Yeah I think Felix is pretty square with what’s up here. Also right to be hesitant on what force private lawsuits can be if classes cannot be properly and effectively certified – and that has been a problem so far. This simply something in need of a strong and dedicated executive and DOJ. We do not have that. And Perelli is a manager here clearly not a prosecutor, and you can take that to the bank. So to speak.

      • papau says:

        interesting – if Barr’s “legal action” is the official route – on a case by case basis – at 8 hours per case to get a handle on the problems – we are talking about a lot of free rent between now and the eventual foreclosure date.

        We may finally have an incentive for a principal reduction rewrite for those able to pay the rewritten note.

        • bmaz says:

          That is a possibility I suppose. The cynic in me thinks it is still a bit rosy though and that there will be some mechanism devised to either directly, or indirectly, take the banks, title cos. etc. off the hook for the rampant fraud and failure to follow recording protocols. I have yet to see Obama have the stomach for the ugly and messy; he always wants it cleaned up. Here, that does not allow for actual people and homeowners in default to string the banks out. Man I hate saying that and hope I am wrong.

    • bobschacht says:

      Barr … is still just talking about fines, not prison.

      I agree with your take on the article, and your concluding sentence is the key, unfortunately. For some reason, the Obama administration is deathly afraid of indictments for fraud. On the news recently there was some reminder of two recent fraud cases where the prosecution *lost*. Apparently, fraud is really hard to prove– or, at least, that’s the lesson the DOJ has drawn from those cases, which is probably one of the reasons why they aren’t pressing for fraud indictments.

      But this isn’t rocket science. Surely they can find a few good agencies that already have a good record at prosecuting fraud. And maybe Congress needs to rewrite the fraud laws. Of course, that would take some Presidential leadership, which seems utterly lacking.

      Bob in AZ

  10. progress says:

    Financial Stability Oversight Council is meeting today.

    For financial stability one needs to have jobs again. Currently it is Social security which is saving the country from collapsing in a domino effect.
    For the jobs to be created one needs to fix the import-export deficit gaping hole created by a totalitarian regime. As long as that is present and increasing job issue will never be resolved. To resolve it either fix Currency manipulation or add import duties corresponding to the manipulation. Totalitarian regime blatently add import duties and do currency manipulation for exports and then buy our bonds to keep us in check. e.g. An iphone sells for $700 or more there due to duties and due to that its adoption is very low despite its widespread popularity. As consumers when we go to supermarket we do not even get a option to buy quality American made products where the whole shelf is flooded with products from this totalitarian countries shining with lead and cadmium materials. Consumer protection agency if it acts just on this aspect can clear the whole shelf and give a chance to American products to get a chance to compete in the market place.

  11. MadDog says:

    OT – From PaperlessArchives.com:

    …PaperlessArchives.com has announced the release of a collection primary source documents dealing with American and British domestic events leading up to the March 20, 2003 invasion of Iraq.

    Subsequent to the release of President George W. Bush’s memoir, “Decision Points,” PaperlessArchives.com has published 442 pages of key documents related to the political and public relations moves leading up to the 2003 Iraq War. The Iraq War Prelude papers have been added to the already 17,361 pages of President George W. Bush and Bush Administration papers published by PaperlessArchives.com.

    The Iraq War Prelude collection features documents highlighting the development of the Bush Administration and British government’s case for going to war against Iraq. The documents date from January 2001 to July 2004, with most documents from the year 2002. Some of the documents were not released through the Freedom of Information Act until September 2008.

    The Iraq War Prelude collection includes documents from the President George W. Bush Administration, United States State Department, Department of Defense, Central Intelligence Agency, British Foreign and Commonwealth Office and the British Prime Minister’s Office.

    Topics covered include Iraqi regime change policy, political strategy, press guidance, Iraq Liberation Act, aluminum tubes, weapons of mass destruction, September 11th attacks, gaining support of allies, Free Iraqi Forces and the aftermath of regime change. Includes correspondences from and/or to Colin Powell, Donald Rumsfeld, Condoleezza Rice, Douglas Feith, and British Foreign Secretary Jack Straw…

    Iraq War Prelude Documents (493 page PDF)

  12. jdmckay0 says:


    they discussed foreclosure fraud and securitization.

    For less than 15 minutes.

    Don’t want to rush hastily into anything foolish, I’m sure that’s why.

    It’s only been 2 elections and 3 years since the bubble went poof, still “money on (under?) the table.”

    This is Amer’can style free-market capitalism, after all.