When Google announced that Eric Schmidt was stepping down yesterday, I joked that Schmidt must be leaving to lead Obama’s campaign economy — the one he’ll use to get re-elected with. After all, Schmidt is one of the Obama’s closest CEO buddies, and he’s leaving at the same time as Jim Messina and Patrick Gaspard are leaving to take over the campaign infrastructure. The decision to close the Office of Political Affairs seems to indicate a decision to stop governing and start spinning wildly to ensure re-election. There’s no area where Obama will need to spin more wildly than with the economy, right?

Turns out, I wasn’t far off.

What else can you conclude from the news that Obama is replacing his President’s Economic Recovery Advisory Board, led by Paul Volcker, with a President’s Council on Jobs and Competitiveness, led by General Electric CEO Jeff “Nut on China” Immelt?

President Obama has asked me to chair his new President’s Council on Jobs and Competitiveness. I have served for the past two years on the President’s Economic Recovery Advisory Board, and I look forward to leading the next phase of this effort as we transition from recovery to long-term growth. The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world.

Aside from the tired DC trick of renaming the Council with the latest buzzwords — jobs and competitiveness — there’s all the things GE has done under Immelt that make the U.S. less competitive. I noted the other day that GE had signed a big deal with China that will involve us sharing our jet technology with China, which will ultimately help China compete with both GE and — China has said explicitly — Boeing. Then there’s the fact that, even as Immelt has been calling for manufacturing in the U.S., his company has been shutting U.S. plants to move the work to China.

While Immelt was calling for manufacturing to stay in the U.S., his company was at the same time shipping manufacturing jobs overseas by canceling an order with an American-based wind turbine maker, ATI Casting Service in LaPorte, Ind., so that GE could instead buy the parts from a factory in China.

Recently, ATI made $30 million worth of investments to buy, convert, and modernize a shuttered factory in economically ravaged Michigan so the company could provide more parts to GE as the green economy expands with federal stimulus funding. But a Chinese firm underbid ATI, and the factory faced having to lay off 302 union workers and shutter the plant.

In an aggressive bid to keep the factory open, ATI offered to match the price of the Chinese producers. GE once again said they would prefer to buy from China. The ATI plant is now closed, the jobs gone.

Then there is Immelt’s call for Free — not Fair — Trade in his op-ed announcing the Kabuki Council.

Free trade: America cannot expand its manufacturing base without greatly increasing the volume of goods it sells overseas. That is why I applaud the free-trade agreement recently concluded between the United States and South Korea, which will eliminate barriers to U.S. exports and support export-oriented jobs. We should seek to conclude trade and investment agreements with other fast-growing markets and modernize our systems for export finance and trade control. Those who advocate increasing domestic manufacturing jobs by erecting trade barriers have it exactly wrong.

And then, finally, there’s the little detail that GE managed, alone of “manufacturing companies” in the U.S., to turn itself into a Too Big To Fail overleveraged finance company in need of a $16 billion bailout from the government (as has happened with all the TBTF finance companies, bailouts have made GE’s financing business profitable again).

In short, no matter how many times Immelt gets up on a podium or in an op-ed and feigns an interest in American jobs, his actions make him the poster child for everything wrong with the U.S. economy right now.

And that’s what Obama is rolling out, as he moves into campaign mode, to convince Americans he’s going to do a damn thing about jobs.

I think a lot of the discussion about Freddie DeBoer’s “the blindspot” (with Steve Hynd as one exception) focuses too closely on the personalities–on whether Jane is mean in print or whether Ezra is too conciliatory–and not on whether our political dialogue is dangerously ignoring the plight of workers. For the purposes of this post, I’d like you to first ask yourself why, during the Depression, we started building a safety net for working people, whereas during this current crisis in capitalism, many developed nations are using the crisis as an opportunity to dismantle the safety net.

Then read this part of what DeBoer had to say:

That the blogosphere is a flagrantly anti-leftist space should be clear to anyone who has paid a remote amount of attention. Who, exactly, represents the left extreme in the establishment blogosphere? You’d likely hear names like Jane Hamsher or Glenn Greenwald. But these examples are instructive. Is Hamsher a socialist? A revolutionary anti-capitalist? In any historical or international context– in the context of a country that once had a robust socialist left, and in a world where there are straightforwardly socialist parties in almost every other democracy– is Hamsher particularly left-wing? Not at all. It’s only because her rhetoric is rather inflamed that she is seen as particularly far to the left. This is what makes this whole discourse/extremism conversation such a failure; there is a meticulous sorting of far right-wing rhetoric from far right-wing politics, but no similar sorting on the left. Hamsher says bad words and is mean in print, so she is a far leftist. That her politics are largely mainstream American liberalism that would have been considered moderate for much of the 20th century is immaterial.

[snip]

I look out onto an America that seems to me to desperately require a left-wing. American workers have taken it on the chin for thirty years. They have been faced for years with stagnant wages, rising costs, and the hollowing out of the middle class. They are now confronted with that and a cratered job market, where desperate people compete to show how hard they will work in bad conditions for less compensation. Meanwhile, the neoliberal policy apparatus that brought us here refuses even to consider the possibility that it is culpable, so certain of its inherent righteousness and its place in the inevitable march of progress. And the blogosphere protects and parrots that certainty, weeding out left-wing detractors with ruthless efficiency, while around it orbits the gradual extinction of the American dream.

What seems most important, to me, is that a blind faith in capitalism led to catastrophe. And at a time when we should be reining in the capitalism that failed so badly, we are instead capitulating to it, using the event of the failure of our corporate masters to give them even more. How is that even happening? And to what degree does the blogosphere deserve some of the blame?

Now, aside from the fact that the blogosphere came of age at a time (after Bush v. Gore v. Nader) and with a politician (Dean) when the left reinvested in the two party system, I’m not sure how much of this is distinctly a problem with the blogosphere. Rather, it’s a problem with US discourse generally, and the taxonomy that DeBoer maps out largely comes from compromises many in the blogosphere made to be able to take part in that discourse. (Oh. Btw. Blowjob.) The blogosphere has been certified and thereby neutralized by our political elite, but only certain parts of that blogosphere.

And voila: that means not enough of the leading voices of the blogosphere speak for workers (or the unemployed or the elderly poor or immigrant workers)–or even speak out against our failed capitalist masters. More importantly (and this is why I think DeBoer’s point about socialism is important), while some–many of us here at FDL, for example–do offer critiques of our capitalist masters and support for labor such as it exists, almost no one is offering an affirmative ideological alternative to the neoliberalism of the Village.

The absence of a viable threat from the working class makes it easy for DC to use this failure of capitalism to double down on it, to further disenfranchise the poor. Shock Doctrine, baby.

Mobilization Threats

Just as a way of thinking about this, consider last year’s three big political rallies in DC. Obviously, rallies are not the only way for real people to inspire fear among the elite, it is a way such threats get narrativized.

Consider, first of all, the rally that probably got the most attention: Glenn Beck’s Restoring Honor rally in August, which brought out tens of thousands of TeaPartiers. Now, I think the elite does fear the Tea Partiers. The left (and some Republicans) have reason to fear TeaPartiers physically; the right has to fear them ideologically.

But the rally was notable not for the way it expressed populist anger. Rather, Beck shifted his focus from central TeaParty anti-government issues to instead focus on religion. This was a message about putting your faith in God, not your boots into mobilization. Moreover, the rally would never have been as big as it was without a bunch of Koch-funded buses to ship people to DC. So rather than an expression of class anger, the Beck rally was more an expression of the cooptation of it by big capitalism (the Kochs) and the neutralization of it with religious themes.

Then there was the other big rally celebrated by the press: the Stewart/Colbert Rally to Restore Sanity/Fear in October. What does it say that one of the biggest popular mobilizations last year, in a year that should have featured pitchforks, instead starred comedians? Sure, the rally got younger people excited about politics, it may have increased electoral turnout among independents. But it was a politics that explicitly espoused the same kind of narrow–and more importantly, polite–discourse that DeBoer is calling out.

And then, finally, there was the forgotten rally, the one which may well have been the biggest in terms of participants: the immigration rally in March, with probably more than 200,000 in attendance. It was a more traditional populist rally, supported by the SEIU and UFCW as well as the immigration groups that sponsored it. And unlike the other two, it called for policies that would benefit working people in America. This was real populist mobilization.

What’s truly remarkable about the immigration rally is what didn’t happen. First of all, there was little reporting on the rally, effectively disappearing them in the same way the big anti-Iraq war rallies were disappeared. (Note: I’m at fault for this as much as anyone else; I didn’t cover it.)

But it’s telling, too, how not just the rally but the overall mobilization got neutralized. In spite of the fact that Latino voters are more of an electoral threat than TeaPartiers, in spite of the fact that Latinos were instrumental in Harry Reid’s miracle victory last November, we still didn’t even pass the DREAM Act, much less comprehensive immigration reform.

Underlying the way popular mobilization worked out last year is racism exacerbated by globalization. Our press doesn’t cover important events that happen at least partially in Spanish, and even politicians who once favored CIR flip-flopped when faced with (or given the excuse of) the economic crisis. Which is important, I think, because one of the reasons for the ideological narrowness of our discourse is the way ideological battles have worked out under globalization.

Governance versus Ideology

A corollary to the question, “after such a catastrophic failure in 2008, why aren’t we reining in capitalism and expanding the safety net?” is “why isn’t anyone declaring victory over capitalism in the same way capitalism once declared victory over communism?”

But who would declare victory? (Some humor: “Hu would declare victory.”)

There are several reasons no one is declaring victory. As I suggested, the most obvious country to declare victory would be the Chinese. And the Chinese–being as circumspect as they are–would not declare victory so boisterously as America once did. Moreover, how would a country that regained world standing by playing globalization better than the capitalists declare victory over capitalism? Plus, in this country, there’s a willful misunderstanding (at least in the popular press) of how the Chinese have succeeded as they have, with the claim that China beat us with free trade rather than mercantilism. While the US was busy trying to dominate the world through the spread of something it called free trade, China was better at using trade to serve its nation.

So one of the reasons no one is acknowledging that capitalism lost, at least here in the States, is that doing so would amount to a recognition that the US may well lose its hegemonic position. I think in some crowds there’s a prohibition on talking about capitalism’s failure because doing so would concede the logic behind US hegemony on the world stage.

Incidentally, I think that’s part of what NeoFeudalism is about: an effort on the part of the elite that was always behind the ideology called “capitalism”–which includes the banksters and the contractors of the US, but also includes people like the Saudi royal family–to retain hegemonic control of the world by dramatically changing the social structure of it. There are a lot of people–including a number of “lefty” bloggers–who are committed to US hegemony first, and to the ideology called “capitalism” second, who are happily going to be suckered into supporting policies that will lead to NeoFeudalism.

But back to the Chinese. The other reason the Chinese haven’t declared victory, yet, is that it’s not entirely clear we haven’t brought them down with us. China has its own bubbles right now, food inflation will affect its masses a lot more quickly than it’ll affect ours, and there are a whole slew of reasons the country could get shaky pretty quickly. The still unfolding failure of capitalism that started in 2008 hasn’t finished unfolding yet, and it’s not entirely clear that it won’t hurt China almost as much as it will us.

And even if it doesn’t, how is a country of 1.3 billion going to do what we have done? This is not to say I begrudge the Chinese the same luxuries I have enjoyed. But one issue that underlies any further contest over ideology is the stark reality that the globe cannot sustain even half the world’s population at the living standards produced by consumer capitalism currently enjoyed in the developed world, at least not using fossil fuels to drive it. If China were to weather this crisis successfully, after all, it would need to encourage a significant portion of its population to become American-style consumers. Back when I was in China, the auto companies aspired to sell cars to China’s middle class–300 million people–so basically another America again full of cars. A lot would need to change to make that possible, and I think few people trying to turn the Chinese into consumers as the next stage of the advance of capitalism have thought through the implications of that.

So there seems to be a finite limit to the degree to which China can use capitalism to beat the capitalists.

But I also think something else is going on with ideology as it existed during the Cold War. With the failure of both communism and (thus far, in more limited fashion) capitalism, it becomes increasingly clear that ideology doesn’t make for successful countries, governance does. Whether or not capitalism will experience a resurgence, our country has become corrupt and ineffective enough that it’s not clear we’d go with it. Moreover, the bogeyman that has replaced the Evil Empire–terrorism–is as much about an increasingly viable challenge to the nation-state, at a time when a rising number of failed states offer a geographic beachhead for such challenges. One of the most important ways to combat “terrorism” is to prevent militarization and climate issues to create more failed states. And that means there will be less emphasis on ideology as it worked in the Cold War and a greater premium on governance.

Which is important because failing capitalism is having real repercussions on things like food supply. Which, as we saw in Tunisia and may well see across the globe, cuts through any debate about ideology quickly. When it comes to the point where governments can’t feed their people, then they begin to fear the popular classes again, even if they’ve managed to insulate themselves from that for deacades.

Which brings us full circle, I think. DeBoer suggests we need greater ideological diversity in the blogosphere, and he’s right. But what we need just as badly is some way to articulate and mobilize the needs of the working class before our failure to govern (which the narrowness of our discourse fosters) ends up in food riots.

With the end of the Cold War, the US has had the luxury, for now, of completely ignoring the ideological left because the threats to the country–as the governing class sees them–have everything to do with the market and nothing to do with workers. But ultimately, the combination of failed governance and the market will lead right back to the workers.

FROM: Mr. Lloyd Blankfein

200 West Street

New York, New York

202-555-MOTU

TO: CEO

Chump City, ForeignLand

Dear Sir:

I have been requested by the Facebook Company to contact you for assistance in resolving a matter. The Facebook Company has recently concluded new agreements to share its users’ identities. The contracts have immediately produced moneys equaling US$50,000,000,000. The Facebook Company is desirous of harvesting user identities in other parts of the world, however, because of certain regulations of the Securities and Exchange Commission, it is unable to move these funds to another region.

You assistance is requested as a non-American citizen to assist the Facebook Company, and also the Goldman Sachs, in moving these funds out of America. If the funds can be transferred to your name, in your non-United States account, then you can forward the funds as directed by the Facebook Company. In exchange for your accommodating services, the Facebook Company would agree to allow you to retain 10%, or US$5 billion of this amount.

However, to be a legitimate transferee of these moneys according to American law, you must presently be a depositor of at least US$1,000,000 in a Special Purpose Vehicle which is regulated by the Goldman Sachs.

If it will be possible for you to assist us, we would be most grateful. We suggest that you meet with us in person in Chump City, and that during your visit I introduce you to the representatives of the Facebook Company, as well as with certain officials of the Goldman Sachs.

Please call me at your earliest convenience at 202-555-MOTU. Time is of the essence in this matter; very quickly the Securities and Exchange Commission will realize that the Goldman Sachs is maintaining this amount on deposit, and attempt to levy certain depository taxes on it.

Yours truly,

Lloyd Blankfein

You’d think after it had become the poster child for robo-signing foreclosure fraud, at a time when it was facing a class action suit arising out of that fraud, and at a time when all servicers had been anxiously awaiting the result of the US Bank v. Ibanez suit in MA, GMAC would be very very careful about the way its purchase of mortgage notes interacted with its servicing department.

You’d be wrong. The Consumerist has the story of a guy whose local originator told him and his wife that GMAC would probably be buying the note when they refinanced back in November. But the day after GMAC actually completed that purchase, they started pestering him with claims he was delinquent on a payment he had made 11 days earlier.

This afternoon I answered my cell phone and heard a recorded message that GMAC was trying to reach me. Interested, because we have no relationship at all with GMAC at this time, I held on the line until a gentlemen spoke, asking me “Am I speaking with (my first and last name)?”

I confirmed that he was speaking to me and asked who he was, explaining that I have no relationship at all with GMAC. He responded by telling me he was calling about the property at my address. I reiterated that I have no relationship with GMAC and demanded that he explain what the purpose of the call was. He coldly stated that he was calling regarding a delinquency on a mortgage for the property at my address.

[snip]

After several calls with the originator, they were able to explain what happened. Apparently, GMAC indicated they wanted to buy the mortgage back in November, when we closed on it, but never actually purchased it (and I’m sure I’m not using the correct industry terminology here) until YESTERDAY, January 11th. The originator did receive my payment for the 1st but were unable to send it to GMAC until GMAC officially owned the note.

So, GMAC let my note sit with the originator for more than a month and a half before they actually purchased it. Then, one day after they took ownership, it was flagged in their computer as delinquent and they immediately called me about it.

Now, I’m actually really curious whether this simply reflects GMAC is so on top of collections that it really did make a call on the loan the day after they purchased the note. Or, as would be more damning, whether GMAC’s servicing department is still doing what led to all the robo-signing in the first place: putting loans into their servicing system before they have the legal basis to do so.

In any case, it suggests GMAC’s claims that they’ve reviewed all their processes and fixed any problems with them may be over-optimistic.

A man about to go on trial in Switzerland for breaking that country’s secrecy laws has promised to give details of 2,000 individuals and corporations who are hiding their money in offshore accounts to Wikileaks tomorrow.

The offshore bank account details of 2,000 “high net worth individuals” and corporations – detailing massive potential tax evasion – will be handed over to the WikiLeaks organisation in London tomorrow by the most important and boldest whistleblower in Swiss banking history, Rudolf Elmer, two days before he goes on trial in his native Switzerland.

British and American individuals and companies are among the offshore clients whose details will be contained on CDs presented to WikiLeaks at the Frontline Club in London. Those involved include, Elmer tells the Observer, “approximately 40 politicians”.

Elmer, who after his press conference will return to Switzerland from exile in Mauritius to face trial, is a former chief operating officer in the Cayman Islands and employee of the powerful Julius Baer bank, which accuses him of stealing the information.

That’s interesting enough. But I’m equally interested because of who Elmer’s lawyer is: Jack Blum. Blum explains why Elmer has resorted to leaking this to Wikileaks.

“My understanding is that my client’s attempts to get the banks to act over various complaints he made came to nothing internally,” says Elmer’s lawyer, Jack Blum, one of America’s leading experts in tracking offshore money. “Neither would the Swiss courts act on his complaints. That’s why he went to WikiLeaks.”

Calling Blum, “one of America’s leading experts in tracking offshore money” doesn’t convey the degree to which Blum’s investigations–perhaps most famously of BCCI–exposed the ties of the very powerful to corrupt money. After Blum’s Senate investigation of BCCI got too close to the Democratic fixer Clark Clifford, he was fired; he had to bring his work to NY’s DA and the press to reveal what he had found.

In a book review for HuffPo last year, Blum described how important it is to map the networks that run our world, yet noted that doing so has gotten more difficult since he first started investigating such things.

When I came to Washington 45 years ago to work as an investigator for the Senate Antitrust Subcommittee, a senior investigator with years of experience told me that the beginning of any good investigation was a clear understanding of the players. “Everyone you will look at has a history,” he explained. “They will have mentors and sponsors. They will have networks of political and business connections. They will play many roles. If you understand those, everything else will fall into place.”

The advice was sound and has served me well in years of investigations of corporate wrongdoing, organized crime, money laundering, and securities fraud. My career highlights include serving as Special Counsel to the Senate Foreign Relations Committee and before that as Assistant Counsel to the Senate Antitrust Subcommittee followed by work as a private lawyer representing victims of financial crime and financial institutions on compliance matters.

Despite the desperate need for such an investigative approach, throughout my career I have been constantly perplexed by the reception to it. A frequent response by newspaper columnists and pundits was to dub me a “conspiracy nut.” Another common response was to call my evidence “anecdotal,” a word uttered with a dismissive sneer.

[snip]

The approach of looking to the roles, activities, sponsors, and networks of players–be they organized crime figures, politicians, experts, influencers, or some combination thereof–is today, more than ever, imperative. Profound changes in government and society have vastly increased the opportunities for agenda-bearing players wearing multiple hats (and often working in close-knit networks) to significantly influence public policy. Such activity is much less transparent to the public eye than when I first began my career. An amazing variety of corporate entities with strange and complex interrelationships today do much of the work of federal government, virtually substituting for it in some arenas. These entities and their sponsors are harder to identify, more insidious, and much more plentiful than the corporate fronts of yesteryear. [my emphasis]

It says something, I think, that the client of a guy who has gone to such lengths to expose the corrupt money running our world is going to Wikileaks.

Jamie Dimon says they’re going to have to chase 5% of their customers away in response to limits Dodd-Frank put on the usurious rates banks charge merchants for each debit card transaction.

Federal limits on debit card processing fees will force banks to charge customers more for services, making accounts too expensive for as many as 5 percent of customers, JPMorgan Chase’s chief executive Jamie Dimon said Friday.

The rules, proposed as part of the Dodd-Frank financial reform law, would cap the fees that merchants pay banks for processing debit card transactions at 12 cents each.

That is almost 75 percent less than the average 44 cents per transaction that banks get now.

U.S. banks could lose about $13 billion of their annual industry debit processing revenues because of the rules, which the Federal Reserve proposed last month.

Dimon also announced today that their profit was up 47% last quarter. And that’s after the $10 billion in bonuses Dimon’s banksters will share.

In other words, JP Morgan could easily afford to keep serving its poorest customers, just by accepting reasonable profit and bonus levels instead of the positively immoral ones they’re now getting. But it has chosen, instead, to push millions into “unbanked” status, I guess because those people aren’t as worthwhile as people as JPM’s MOTUs are.

Note, too, that Chase is one of the national leaders in contracting with states to provide debit cards for state unemployment benefits. I wonder if JPM will forgo these big state contracts and captive consumers as part of its “unbanking” plans?

The Third Way has just released a response to the US Bank v. Ibanez decision that purports to offer a solution to the foreclosure problem.

I’m sure others will point out other problems with this document: its embrace of the “strategic default” myth, its focus on the Uniform Commercial Code rather than the Pooling and Servicing Agreements that govern securitization, its confusion of the dual track problem with the robo-signer problem, its apparent ignorance of other problems in foreclosure fraud, such as insufficient notice to homeowners, even though that, too was an issue in Ibanez.

But I wanted to point out something about the first step in its purported remedy, in which it describes how to protect injured homeowners. It includes among its injured homeowners:

• Those who were current on their mortgage payments but who were foreclosed on anyway
• Those who were robo-signer foreclosed via on while awaiting a modification decision
• Those who were robo-signer foreclosed while in the process of short-selling their home
• Those who had made a payment on delinquent mortgage but were foreclosed “because of a faulty process that failed to take that payment into account”

Note how carefully this paper avoids admitting the improper payments that servicers often use to force people into foreclosure, which are a separate problem from robo-signing?

In any case, here’s the remedy the Third Way advocates:

These aggrieved borrowers should be entitled to four things: (1) the immediate suspension of foreclosure proceedings; (2) the right to sue for actual damages caused by a wrongful signed foreclosure; (3) access to a 30-day expedited application process for loan modification if they have an application pending (but without a guarantee the modification will be granted); and (4) a refund of any fees and charges assessed by the bank, as well as protection from any deficiency judgments (if a borrowers was seeking a modification or short sale). [my emphasis]

It goes on to suggest that banks should be in charge of points 1, 3, and 4. That is, while elsewhere it espouses putting the Consumer Finance Protection Board in charge of standardizing servicing, it does not want the government involved in the process of “protecting injured homeowners.” Maybe that’s so it can retain for the banks–as it does later in the paper–sole discretion whether or how to modify loans. That is, even while the paper admits Ibanez shows that the banks still have a shitpile problem, it doesn’t want banks to take the hit for the fact that they don’t have legal standing to foreclose on the loans they’re foreclosing on. Nor does it really provide a solution for what to do with truly delinquent loans on which banks do not have legal standing to foreclose. Nor does it say what happens when people are denied a modification by a bank that doesn’t have the legal right to foreclose.

Meanwhile, the paper remains silent on who should be in charge of point 2.

You know, the right to sue, that right protected by the Constitution?

But of course, point 2 is not actually a protection. Rather, it is a limitation on their protection. Rather than admit that property owners have the right to sue in this country, the Third Way thinks that we can best protect them by limiting their right to sue to actual damages.

And the Third Way supported limit to rule of law goes further. It calls for Congress to bail out the banks holding shitpile by:

• Eliminating foreclosure challenges on vacant or abandoned homes
• Eliminating foreclosure challenges on borrowers who defaulted 18 months ago who have not cured the default
• Instituting 12-month statutes of limitation on “paperwork-related” lawsuits

To begin with, their envisioned bailout doesn’t account for many realities: homeowners who were harassed into leaving their home, homeowners who are only in default because of the often-undisclosed and exorbitant fees banks slap onto late payments, and homeowners who did not get proper notice of the foreclosure. The Third Way wants to take away the right to sue of all these people, even though they have a legitimate grievance.

But don’t worry, Third Way says, this does not amount to letting banksters avoid any consequences for their actions:

What it emphatically does not do is shield bad actors from the consequences of their behavior. A safe harbor and statute of limitations will do nothing to protect banks and their lawyers from the investigations currently underway by state attorneys’ general across the country.15 Nor will it prevent disbarment and other consequences that are likely to be suffered by lawyers at the “foreclosure mills” at the heart of the robo-signing scandal. The now infamous firm headed by David J. Stern in Florida, for example, “has seen its fortunes plummet, with major clients, like Fannie Mae, Freddie Mac, and Citigroup, cutting ties to Stern. Stern’s operation has also laid off hundreds of employees in recent weeks.”

The consequences the Third Way believes are adequate for bankster trying to take property they don’t have legal standing to take, resorting to legal fraud to do so, involves an Attorney Generals’ investigation that itself says will include no criminal charges, disbarment no one expects to happen, and the loss of business.

But nowhere does the Third Way envision the banksters will have to take a financial hit on the value of these loans, much less any legal consequences for fraud. Now, ultimately, the former may well be negotiated by the Attorneys General. But the Bill Daley-connected Third Way seems to see the Ibanez decision as a moment to offer pseudo-solutions that are not only inadequate, but stop short of what would otherwise come out of the Attorneys General “investigation.”

In short, this seems like an admission by the Third Way that the shitpile remains a serious problem. But also an attempt to preempt processes already underway to solve the shitpile. Not to mention eliminate legal recourse for many of the people who have been wronged here.

Update: The more I think about this paper, the more it seems like Third Way is saying, “Congress, we’ve had a major setback in the courts. Can you please make sure to 1) limit access to the courts and 2) preventing any more of these judgments that will reveal just how deep the shitpile really is?”

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.

[Ed. note: Mary provides some background on what may be up with Nigeria’s announced plan to charge Dick Cheney.]

… ready to sue your Vice President. Please send 130 Million Dollars by reply mail to …”

After the news about charges against Dick Cheney relating to the Nigerian bribery scandal it may be worthwhile to sip some coffee and swap clues on what the heck might (or might not) be going on. Let’s start with a little background on one sliver of a very complicated matter.

In 1995-2004, KBR was involved in a joint venture in Nigeria that included KBR/Halliburton; a Dutch subsidiary Snamprogetti Netherlands B.V/Italian parent ENI S.p.A. (aka Snamprogetti, ENI), a Paris-based oilfield engineering company Technip S.A., and a Japanese company, JGC. The joint venture set up some special purpose corporations (not that unusual when companies joint venture) in Portugal (okay, maybe they don’t always use Portugal). The business entities and structures are pretty much oversimplified here, but since these pretty much track the pleas deals the Department of Justice worked out, let’s not make it more complicated.

This joint venture wanted to split up some liquefied natural gas (LNG) contracts in Nigeria that were going to be worth around $6 billion to them.  Those kinds of big contract almost always get split up, for various (and some actually pretty darn good) reasons.  When the “TSKJ” group was trying to get the liquefied natural gas (LNG) contracts, their bidding rival was another consortium, BCSA (Bechtel, Chiyoda, Spibat, Ansaldo).

Not to jump around, but for context, you need to know how the Nigeria scandal (arrangements to bribe Nigerian officials to get the LNG contract)  was “exposed.”  A former “Director General” of Technip, Georges Krammer, was accused of wrongdoing in a different deal (involving France’s Elf) and argued that he was just following company policy.  Supposedly, Technip hung him out to dry and he decided to return the favor by offering up info against Technip, regarding deals that included the Nigerian LNG bribes.  .

When the French began investigating, the Swiss and US and Nigeria also started investigations.  If, by investigation, you mean the thing that happens when you throw a hunk of raw meat into a pen of well fed dogs and see which one grabs it and growls loudest, whether it plans on doing anything much with it or not. 

At this point you get into a lot of finger pointing as to who authorized or pressured for what.  The end result is that the TSKJ group ended up “hiring” a company called Tri-Star Investments, Ltd. that was being used by a UK-based lawyer, Jeffrey Tesler.  Money meant for bribes to Nigerian officials went  to Tesler and Tri-Star (about $180 million).  They tried to paper over this arrangement as being something in the nature of PR payments to Tri-Star to help with their image in Nigeria.  Another UK citizen,  Wojciech Chodan, was an employee or consultant of Halliburton/KBR entities involved in the Nigerian deal  and worked extensively with the Nigerian joint venture, reporting to a Halliburton/KBR guy named Jack Stanley who was in Houston, Texas.

You followed that? Really?  Great.

So the U.S. has muscle, a statute (the Foreign Corrupt Practices Act), a person (Jack Stanley, located in Houston, TX), a market all the TSKJ group need, and a vice president who is implicated.  Guess which well-fed dog growls loudest?

A great blog, the FCPA blog, has a series of articles summarizing the deferred prosecution and plea deals that the U.S. cut with the companies involved.   This article has links to articles in the series that discuss the U.S. guilty plea of KBR in February 2009 ($402 million fine) and Halliburton ($177 million disgorgement); and deals made by Snamprogetti, ENI ($365mill)  and Technip ($338 million).  Those deals all came after a deal made by KBR’s former CEO, Jack Stanley.

Back in September of 2008, Stanley entered into a plea agreement (pdf) that laid out some interesting details.  Not only was Stanley setting up bribes, he had received a $10.8 million kickback himself.  And in September of this year, the DOJ had to go to court to explain why the wanted to keep Stanley free for now, despite his two-year old plea.  At that time, it came out that the $182 million that the consortium had kicked in for bribes to Nigerian officials — well, it seems as if $130 million may not have made it into Nigerian hands after all.  It  might be sitting in a Swiss bank account the U.S. has managed to have frozen.

Nigerian watchers were pretty interested in that.  The Nigerian story provides the hints on what might be going on with the decision to file charges against Cheney, since there is a $130 million account at stake.

A highly-placed source, who was central to the investigation, said: “During the trial of the ex-CEO of Halliburton, the US government traced about $130million to Tesler’s account. It means that the $180 milion was not wholly disbursed.

“After the conviction of the former Halliburton boss, the US Department of Justice succeeded in convincing the Swiss authorities to freeze access to the bribe sum by Tesler.

“That is why the Commissioner of Police, Presidential Panel of Investigation, Amodu Ali and his team recommended the trial of the 15 suspects.

“Nigeria can only have the $130 million repatriated, if only the bribe beneficiaries in Nigeria are tried and justice meted out.”

The story discusses some of the tension between the U.S. and Nigeria in their efforts to get extradition of Tesler (and presumably Chodan, the UK-based employee-then-consultant).  So, from a timeline standpoint, you have Nigeria finding out in September of this year that there’s $130 million just sitting in an account (when the DOJ made it’s pitch for Stanley, despite his plea deal back in 2008, to continue to stay free until at least January, 2011).

Earlier this year, in March and April respectively, Tesler and Chodan had lost initial rounds in UK courts fighting against extradition.  But for some unknown reason, on November 8, Chodan gives up his fight against extradition.  And a recent  (Dec 1) Guardian article (I can’t get the link to work — I get server messages — the title should be Retired UK businessman faces extradition to the U.S.)  says he’ll be here within 10 days.  With the distinct implication that Tesler is coming right behind him.  Competing with that story is the Nigerian roundups of various oil industry officials and the release that in addition to the 15 individuals and companies formerly indicted in Nigeria — it’s adding Cheney to the list.

In the midst of all this, with the $130 million beckoning and Dick Cheney making his all too familiar gesture as well, off goes Eric Holder to Zurich with the  cover story that he’s there to bolster our pitch to get the World Cup  (in 2022, which will be 6-10 years after Holder and Obama are long gone) by demonstrating in all kinds of ways that Bill Clinton (also on the delegation) can’t, that the US will be able to “safely” host the World Cup without terrorism threats.  In addition to Holder, nothing says SCOOOOOOOOOOOOOOORE like Bill Clinton.

The Gods of Irony love this so much that they make sure it comes a) at the same time leaked U.S. cables call Qatar “the worst” on counterterrorism in the Middle East, and b) it’s followed by the award of the World Cup to … you got it — Qatar.

Obama expects the press to buy the story that Holder is in Zurich to hit hard on that all important 2022 counterterrorism safety issue at the same time Qatar is walking off with the award.  And no one bothers to ask Holder if he’ll be talking to officials in Zurich about the $130 million in the frozen Tesler account, especially now that Nigeria is indicting Cheney.

Obamaco is beginning to have the same elements of farce found in the Robert Ludlum “Road to” novels.

Apparently the Road to Obamaha leads through Zurich.

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.

Bair explains that the servicers need to be out of modification business.

Tarullo: We’ve seen some degree of management failure, and from some banks, a substantial degree of management failure.

Bair makes the first mention of crime, discussing how, “Law enforcement … potential for law enforcement actions” might bring about systemic risk. An hour and 15 minutes into the hearing, the first acknowledgment that this stuff is criminal.

Until we get overhand in housing market, there will be problems in the housing market, and thus with the rest of the market. WRT putback risk, it’s a function of several things. Including default rate. We can model that based on macro assumptions. Second the legal issues. Those are harder to pull apart at this point. DeMarco can talk about GSE putbacks. When you get to private agreements, those vary enormously. You could have rep w/mortgages but w/o strong reps. We’re going to try to get to it in capital assessments.

Bob Corker’s worried about how this will affect property rights. But primarily in the way 2 liens have taken precedence over 1st liens.

Menendez now hitting on HAMP failure, particularly the use of just 2% of the funds. “Why can’t we get that done by Treasury?”

DeMarco repeats that things are upside down now, w/1st lienholders taking losses while 2nd lienholders continue to get payment. There’s some widespread concern about property rights here, but it only extends only to 2nd lienholders, not actual homeowners.

Merkley points out that Fannie and Freddie requests for putbacks exceed reserves. Asks Tarullo how big a problem this is. Though Tarullo refuses to say how big a problem, on scale of 1-10 it is, he says that for some “that number will be reasonably high.”

Merkley: We think this dual track is a bigger problem than Treasury does. Two banks just told us that they’re still engaged in dual track.

DeMarco (head of the GSEs) has basically just said, since I’m conserving these assets for the taxpayer, I’ve got to make sure we foreclose on the taxpayer in rapid fashion.