Republicans Vote to Ban the Terms “Wall Street” and “Deregulation”

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Apparently, the Republicans on the Financial Crisis Inquiry Commission have abandoned the commission because the other six members would not agree to ban the phrases “Wall Street” and “deregulation” from the final report.

The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission’s work.

[snip]

Frustrated in part by the Financial Crisis Inquiry Commission’s chairman, Phil Angelides, and the tenor of the panel’s preliminary findings, the Republicans are choosing to ignore the five Democrats and lone independent and issue their document ahead of the commission’s Jan. 15 release.

[snip]

During a private commission meeting last week, all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.

[snip]

“I certainly felt, and I think the majority of the commission felt, that deleting those phrases would impair the commissioners’ ability to give a full and fair and understandable report to the American people about the causes of the financial crisis,” Born said.

“Certainly, it’s hard to imagine Wall Street wasn’t involved,” she added.

It all sounds so childish. But then, it’s no more childish than holding a bunch of unemployed Americans hostage to make sure the very wealthy get tax cuts and an estate tax cut. So, as much as the Obama Administration seems intent on giving the banks what they want, Republicans seem insistent on using nuclear tactics to steal even more for the banks.

I guess both parties really are going to insist on pushing us into a Depression and/or full-on feudalism, aren’t they?

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Timmeh Geithner to House of Representatives: Fuck Off And Die

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A month ago, Brad Miller and a dozen other Congressmen — including House Financial Services Committee Chair Barney Frank — wrote the Financial Stability Oversight Council to ask that they look into the systemic dangers of foreclosure fraud. The letter requested that three very specific things be included in upcoming stress tests and overall consideration of the systemic threat this represents to the economy:

  1. Examine random collateral loan files to see if they include all required documents, notably the note, the mortgage, and documents recording the assignment of the mortgage
  2. “Examine the servicing of first mortgages by servicers that hold second liens … [as some people contend] there is an indefensible conflict of interest for servicers of securitized first mortgages to hold second liens on the same property”
  3. Consider using the authority of Dodd-Frank to “require that financial companies divest affiliates or other holdings involved in servicing securitized mortgages”

Timmeh Geithner just responded to that letter. His response makes it clear he actually read Miller’s letter — because he references the first item I’ve laid out above, though rather than actually respond to that request, he describes what the FSOC is actually doing instead of examining collateral loan files. His response to the second and third requests is even more insolent; he refuses to even repeat the second one, and rather than consider either one seriously, he just says FSOC will take action “if abuses are found.”

Here is Timmeh’s response to Miller’s request that the Council examine random collateral files:

With regard to your suggestion of examinations of financial institutions by FSOC member agencies, these reviews are currently ongoing as part of a foreclosure task force formed by the Administration in early September.

[snip]

The main objectives of the task force are to determine the scope of the foreclosure problems, hold banks accountable for fixing these problems, protect the homeowners, and mitigate any long-term effects this misconduct could have on the housing market.

Note that even though Timmeh admits the banksters have engaged in “misconduct,” he makes no mention of holding them legally accountable. Instead, he simply repeats the Administration line that banks will “fix[] these problems.”

But rather than address Miller’s specific request — that investigators look at random collateral files — Timmeh describes how the investigators will examine other things, and then boasts of the (inadequate) number of investigators on the job.

Regulators are conducting onsite investigations to assess each servicer’s foreclosure policies and procedures, organization structure and staffing, vendor management, quality control and audit, loan documentation including custodial management, and foreclosure prevention processes. The task force is also closely reviewing related issues that include loss mitigation, origination put-backs, securitization trusts, and disclosure put-backs.

These examinations are extensive and resource intensive. For example, the Office of Thrift Supervision has approximately 80 examiners on-site at their four servicers, and the Office of the Comptroller of the Currency has 100 examiners at the top eight national bank servicers.

Now granted, some of the things the FSOC is investigating might cover Miller’s request. “Loan documentation including custodial management” might get at the issues Miller specifically requested FSOC examine. But Timmeh makes absolutely no promise that these 20 examiners per non-bank servicer or 8 examiners per bank servicer (Really, Timmeh!?!?! You think 8 people can investigate Bank of America’s morass?!?!) will actually look in detail at the actual loan files, much less a randomly selected collection of loan files.

That’s enough of a non-answer.

But here’s how Timmeh summarizes Miller’s two other requests.

You also suggest that the FSOC consider the potential risk associated with the role of large financial institutions in the servicing of mortgages and to consider requiring these firms to divest of their servicing affiliates.

Note what phrase Timmeh doesn’t utter there?

“Second lien.”

That little matter of the half a trillion dollars in conflicted exposure these banks have, which goes to the heart of the reason this is systemic issue.

In fact, Timmeh doesn’t utter the phrase “second lien” anywhere in his letter. It is, apparently, the elephant in the bank vault that shall not be named, for fear Timmeh would have to acknowledge the magnitude of the problem. Timmeh apparently wants to spin the problem of second liens as nothing more than part of the size of the institutions in question, and not the very real conflict of interest that provides motivation for all the foreclosure fraud Timmeh doesn’t want to criminally prosecute.

And while Timmeh does use the word “divest,” here’s his actual response to Miller’s description of the very real and very avoidable problem of having the banksters service the loans that threaten to expose their insolvency.

As you suggest, the Dodd-Frank Act also provides the FSOC, and its member agencies, with a variety of tools to recommend heightened prudential standards and take other remedial actions when necessary for financial stability. With that in mind, the FSOC and its member agencies will remain critically focused on working with the foreclosure task force, and will use all appropriate authorities available to them if abuses are found.

So while Timmeh can manage to at least utter “divest” (unlike his apparent allergy to “second lien”), when push comes to shove, he won’t admit that FSOC has the ability to force bankster to divest of a part of their business. More importantly, he envisions using the power granted him under Dodd-Frank (and remember, Frank is one of the recipients of this letter) only “if abuses are found.”

Because it would be too much to ask for Timmeh actually take an obvious proactive move to fix one of the problems weighing down our housing market and with it our entire economy. I guess if he did, he might actually have to think about those second liens he’s refusing to acknowledge.

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Bernie Sanders Quotes Jeff Immelt: “I am a Nut on China”

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This was, IMO, the highlight of Bernie Sanders’ non-filibuster on Friday:

GE is of course one of our major corporations, and in fact this recent disclosure pointed out the taxpayers of this country, through the Fed, provided $16 billion in bailout to General Electric during the recent crisis. This is what the head, CEO, of General Electric, Jeffrey Immelt, said in 2002, December 6. Quote, Jeff Immelt, head of CEO [sic].

“When I am talking to GE managers, I talk China, China, China, China, China. [Five Chinas] You need to be there. You need to change the way people talk about it and how they get there. I am a nut on China. Outsourcing from China is going to grow to 5 billion. We are building a tech center in China. Every discussion today has to center on China. The cost basis is extremely attractive. You can take an 18 cubic foot refrigerator, make it in China, land it in the United States, and land it for less than we can make an 18 cubic foot refrigerator ourselves.”

End of quote. Jeffrey Immelt, Chairman, CEO of General Electric, quoted in an investor meeting, on December 6, 2002.

Gee! When GE had, a couple of years ago, some really difficult economic times, they needed $16 billion to bail them out, I didn’t hear Mr. Immelt going to China, China, China, China, China. I didn’t hear that. I heard Mr. Immelt going to the taxpayers of the United States for his welfare check. So I say to Mr. Immelt, and I say to all these CEOs that have been so quick to run to China, that maybe it’s time to start reinvesting in the United States of the America.

No word yet whether Jeff Immelt will be among the CEOs Obama hosts at the White House tomorrow. Though the companies of the CEOs who have been publicly invited–Google, Cisco, IBM, AmEx, Dow, and Pepsi–have been all pushing into China.

On Sunday, Masaccio described this entire CEO summit as just Obama’s effort to outsource the effort the government should, instead, be leading: job creation. I guess Obama has gone to the experts on that front!

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A Tale of Two Bailout Paybacks

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As promised over the weekend before I realized I had forgotten my Toobz, I wanted to compare the behavior of two bailout recipients, the UAW and the banksters.

A number of people have pointed to this intriguing interview about the Korea Trade deal with the UAW’s President Bob King. In addition to confirming my math showing that the most the UAW could reasonably expect to get out of his deal is 75,000 additional exports–or 800 extra jobs for the UAW–King also had this to say:

It was important to endorse in order to reward the administration for its good behavior of including labor in negotiations.

While not directly an admission that UAW endorsed this NAFTA-style trade deal in thanks for the US bailout of the auto industry, it does seem to support that overall sentiment. The UAW capitulated further when it endorsed the Obama-McConnell tax deal giving 2 years of relief to the very rich, 1 year to the medium-term unemployed, and nothing to the 99ers whose Unemployment Insurance has expired (many of whom used to work for the auto companies).

Compare that to the behavior of JP Morgan Chase Vice Chairman Jimmy Lee during negotiations under the Chrysler bailout. According to Steven Rattner, Lee,

demanded to know why, if the government thought banks important enough to give them tens of billions in TARP money, it wanted to squeeze them on [the Chrysler] deal.

Mind you, JPMC wasn’t getting squeezed. Timmeh Geithner had specifically instructed Rattner not to ask for any special favors because the government had also bailed out JPMC (Timmeh apparently didn’t mention the additional support JPMC got from the Fed).

Tim had instructed me not to be taken in [by Lee’s complaints] but to maintain strict neutrality. I was not to demand anything of JPMorgan just because it had received an infusion of TARP money; nor was I to show it favor because of Bear Stearns or anything else.

And as Rattner calculates, Lee was asking for full value on their debt even while it was only worth about $.15 on the dollar.

In our phone calls, he also relentlessly reminded me that creditors deserve to be paid. “When you lend somebody $6.9 billion,” he would say, “you expect to get $6.9 billion back. And not a penny less.” I listened knowing that Jimmy’s position was patently ridiculous. Chrysler debt was trading at around 15 cents on the dollar (admittedly, infrequently), and according to Chrysler’s own analysis, the liquidation value of the company was perhaps as low as $1 billion. Clearly, Jimmy didn’t believe that the Obama administration would be willing to push back and let the banks take over Chrysler rather than cave in to their demands.

So unlike the UAW–which endorsed the kind of trade deal it has spent the last decade railing against–JP Morgan Chase responded to getting bailed out by asking for more special deals.

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UAW Sells Out American Workers for 800 Jobs

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The White House appears to be calculating that by getting the UAW to support the NAFTA-style trade agreement with South Korea (KORUS), it can avoid any discussion of the jobs that will be outsourced as a result of the agreement. Their big accomplishment, then, has been changing the original 2007 agreement enough to get the UAW–and Ford–to buy in.

The price for their buy-in?

55,500 additional cars.

800 jobs.

As this Congressional Research Service report on the original deal explains, one of the biggest reasons why a free trade agreement with South Korea sucks for the auto industry is that South Korea puts odd safety requirements on their cars. Because the market is relatively small, it is cost prohibitive to adapt existing models to meet those requirements.

For years, unique South Korean automotive safety and environmental standards have been a major concern for U.S. and European carmakers. Some of the flagged technical import barriers include front tow hooks, headlamp standards, tinted rear-windows, and vehicle emissions changes. Safety and environmental standards have the potential to add costs associated with compliance, thus both the KORUS and KOREU FTAs include provisions to address those standards viewed as unfair by some U.S. and EU automakers.

[snip]

A country like South Korea can decide to require compliance with its own standards, making it expensive for foreign-based manufacturers to export cars to the relatively smaller South Korean market, or in some cases effectively shutting foreign producers out of the market altogether. Some in the United States government and industry claim South Korean auto standards are “unique, non-transparent and out of sync with international standards.”71

[snip]

KORUS FTA permits “low-volume seller exemptions,” which allow each U.S. automaker to sell up to 6,500 vehicles per year in South Korea built to U.S. safety standards without any additional modification.72 The low-volume seller exemption nearly equals the number of cars sold by all three U.S. automakers combined in South Korea in 2009 (see Table 3). Some worry the exemption could act as a ceiling and effectively become a disincentive for U.S. carmakers to export more cars to South Korea.

In other words, the KORUS agreement signed in 2007 basically didn’t address the “non-transparent” safety issues that effectively exclude non-Korean cars; it just made an exemption that would cover the small number of cars already being imported in Korea.

Here’s how the White House hails their big improvement over that:

Safety standards have effectively operated as a non-tariff barrier to U.S. auto exports. The 2010 supplemental agreement announced today allows for 25,000 cars per U.S. automaker – or almost four times the number allowed in the 2007 agreement — to be imported into Korea provided they meet U.S. federal safety standards, which are among the most stringent in the world.

So one of the big concessions (it’s not the only one) in the renegotiated deal is the allowance for 55,500 additional cars a year into Korea.

It takes about 30 hours of labor to build a car. So the UAW got bought off for an extra 1,665,000 hours of work a year, not all of which will go to union employees. 41,625 weeks of work. Or work for 800 workers a year. In exchange for a trade agreement that the Economic Policy Institute estimates could cost 159,000 jobs in the next five years. (And in 10 years, after the duty on trucks expires, it would remove the biggest incentive for Hyundai to keep its SUV factories in Alabama, which account for 16,900 jobs, though those aren’t union jobs.)

800 jobs in exchange for losing 159,000 jobs–that’s the math the UAW has done.

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White House Brags about Exporting our Pyramid Schemes to Korea

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The list of statements of support for the Korea Trade Agreement the White House sent out last night tells you a lot about what you need to know about the trade agreement. Among others on the list are Tom Donohue, whose laundering of foreign money into election coffers had a significant role in the shellacking Democrats took in November. Donohue thinks this deal is great:

This agreement will create thousands of new jobs, advance our national goal of doubling exports in five years, and demonstrate that America is once again ready to lead on trade. The administration has done its part. Now it’s time for the new Congress to make passage of KORUS a top priority in January. We will do everything in our power to round up the votes.

Then there’s John Engler, who for a while as head of the National Association of Manufacturers instituted a policy of refusing to meet with Democrats.

Then there’s the CEOs of credit card nation, Vikram Pandit and Jamie Dimon.

But to me, the most telling endorser of this agreement is Dick DeVos, the CEO of Amway and perennially one of the biggest single funders of the Republican Party. DeVos is thrilled because this will help Amway meet their growth targets.

Like most companies, we support a more competitive playing field. This new trade agreement allows Amway to continue meeting aggressive growth targets, and gives a much needed boost for all export business in Michigan.

So we’re going to push through this trade agreement so Dick DeVos can expand his pyramid scheme, get richer, and funnel that money into the Republican Party.

But then, I guess that’s what Pandit and Dimon have in mind, too.

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Mr. Obama’s Very Very Busy Week

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Since Obama tried to sneak in a trade agreement making it easier to outsource jobs to Korea after the newspapers have gone to bed, I thought it wise to catalog what a “productive” (in the Frederick Taylor sense) week he has had:

  1. Freeze pay of federal workers
  2. Attack Social Security
  3. Cut taxes for the stinking rich
  4. Censor Wikileaks
  5. Cut Food Stamps at a time of record reliance on them
  6. Make it easier to send manufacturing jobs to South Korea
  7. Fiddle while 10% of the country can’t find jobs
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Senate Banking Commitee on Foreclosure Fraud

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Follow along on CSPAN or the Committee Site.

Dodd started by noting the increasing evidence that foreclosure fraud is a giant mess, both by referencing the Bank of America testimony that notes did not get sent to trusts during the securitization process, and by noting that the estimates for how much this may cost the bank have gone up, to $134 billion.

Btw, it’s not part of the hearing, but consider this stat:

Housing and aggregate demand have not recovered because nearly 15 million owners are estimated to owe about $771 billion more on their homes than they are worth.

That basically means that roughly 15 million families have had a $51,000 tax imposed on them, largely because of the bank-created inflated prices.

Thus far, FDIC head Sheila Bair has said that second lien-holders need to take a hit, and Fed Governor Dan Tarullo has said that banks will need to provide estimates for expected putback losses.

OCC Acting head John Walsh says they’ve got 100 Bank Examiners investigating foreclosure fraud.

John Walsh, in response to Dodd’s question about why the regulators have been so delayed, said, “We were conducting horizontal exams in 2008, saw rise in complaints, there were clear deficiencies. We were pushing servicers.” No. He hasn’t explained why they haven’t done anything about these deficiencies.

Tarullo: The attention was focused on pace of modifications, not on the process itself.

Shelby to Tarullo: When did you first learn of the problems.Tarullo: When Ally came to us the day before the public announcement.

Shelby: Are we close to solving problem. Tarullo: Related to relative balance of foreclosures to mods. Need integrated approach.

Shebly: They have standards.

Tarullo: No, the banks are required to have their own processes. Race to foreclose among owners, but be standardized.

Reed: Should 100% of loans be evaluated for mod.

Bair: We think a global settlement.

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Vampire Squid Pissy about Response to Data Octopus Demands

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We’ve discussed US negotiations with Europe over the SWIFT database at length here. Basically, after the Lisbon Treaty went into effect last year, the EU Parliament balked at giving Americans free run of the SWIFT database. The EU and US put an interim agreement in place. Which the EU Parliament then overturned in February. The US then granted EU citizens privacy protections Americans don’t have. But then the US started negotiating unilateral agreements with countries, using the Visa Waiver as blackmail to force individual countries into submission (and, some in Europe suggested, drumming up a terrorist threat to add to the pressure).

Alexander Alvaro, the home affairs spokesman of the Germany’s Free Democratic Party (FDP) in the European Parliament, likened the US demands for data sharing to a “data octopus.”

One of the cables from yesterday’s WikiLeaks dump offers a window into the US perspective on the negotiation, in a cable from the US Embassy to Germany to the Secretary of State’s Office. The cable speaks disparagingly of the FDP.

Germany has become a difficult partner with regards to security-related information sharing initiatives following the September 27 national elections, which brought the FDP into the governing coalition. The FDP sees themselves as defenders of citizens’ privacy rights and these views have led the FDP to oppose many of Germany’s post-9/11 counterterrorism legislative proposals (see reftels). At times, the FDP’s fixation on data privacy and protection issues looks to have come at the expense of the party forming responsible views on counterterrorism policy.

[snip]

The FDP returned to power after a ten-year foray in the opposition and key leaders lack experience in the practical matters of tackling real-world security issues in the Internet age. In our meetings we have made the point that countering terrorism in a globalized world, where terrorists and their supporters use open borders and information technology to quickly move people and financing, requires robust international data sharing. We need to also demonstrate that the U.S. has strong data privacy measures in place so that robust data sharing comes with robust data protections.

So Ambassador Philip Murphy’s office bad mouths a party that had been in opposition for ten years to his colleague–including Hillary Clinton–who had been in opposition for eight, suggesting the Germans were too naive to understand what was good for them.

But there’s one more detail that makes this disdain of those who dislike the data octopus cute.

Before Ambassador Philip Murphy was the DNC’s Finance Chair for its last two years of apparently ignorant opposition, he spent 23 years at the Vampie Squid, Goldman Sachs.

So this amounts to one of the geniuses who crashed the global economy–not least with some pretty tricky international financial flows–badmouthing the Germans for not understanding the crime that can happen using those flows.

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Ireland Cuts Minimum Wage 11.5% to Protect 12.5% Corporate Tax Rate

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The Fianna Fail government in Ireland has released the austerity plan it promised in response for the big bank bailout the rest of Europe forced on it.

There’s a lot that’s awful in it: big cuts in pension, huge increases in tuition costs, and a ludicrous claim that this austerity plan will help Ireland’s economy grow.

But I think the most telling aspect of it is that it lowers minimum wage from 8.65 euro to 7.65, a cut of 11.5%. But it retains Ireland’s controversial 12.5% corporate tax.

Meanwhile, the bond markets are none too impressed with Ireland’s plan.

There are lot of reasons to treat the plan with skepticism, if not outright derision. But I think the lack of confidence that this will work is the increasing likelihood that the governments on which the banksters are relying to push through this bankster bailout may not survive.

Imagine how banksters would fear the prospect that democracy will eventually, inevitably, if not here than in Portugal, get in the way of bank bailouts?

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