Two Boxes, a Bag, and a Chair

It's moving time in CorpWorld. I'm to be relocated to be closer to my project team. In theory, this is a good thing. Project teams that are scattered all over creation have communication issues - and bad communication eats time like candy.

Moving the team to a common area has been discussed ad naseum for so long - I regard the idea like some mythological creature. I'll believe it when I see it.

Well, I've seen it. Out of the blue one day, I get an all-bold-text email informing me that I will be moving in four days. I am to respond with the ID numbers of all office equipment that will be moved, indicate the number of boxes the movers should expect, and add any special needs I may have.

I have only one special need: Where the hell am I going?

This was not in all-bold email - and my manager was not informed that I was moving- so they don't know. My project leader tells me what floor I will be on - but in CorpWorld, that's like saying "Move to Cleveland. Details to follow."

I typically have a light footprint at my desk. I put crap on my walls like any office stiff, but the idea of bringing in anything other than photos from the outside world is just alien to me.

This is work, I reason. Work stuff goes here.

So I email my equipment IDs back and say I'll have two boxes of stuff. I think it's closer to 1, but might as well have a cushion.

Which leaves only three items I give a rip about.

1) Laptop
2) Laptop bag
3) Chair

This seems a bit ungrateful - after all, when I first arrived in CorpWorld, they gave me loads of stuff. I remember thinking I'd landed in Shangri-La. My old gig had small cubes and office gear you scrounged from the abandoned gear of your predecessor.

In Corpworld you got a box of new office swag delivered to your desk. The nicest pair of scissors I've ever seen is the one I got here. Yes, it's just a pair of scissors - but it's clearly a design that's been focus-group tested to seem solid and expensive. It does.

In the same box was a (black) swingline stapler and an assortment of NEW office gear. An impersonable welcome, but a welcome nonetheless.

Now - four years later, I'm shoveling it into a box along with a random collection of paperwork and office printouts.

Because - and this occurs to me only as I'm moving - I've almost never used any of this stuff. The job I do leaves very little physical evidence behind. The sum total of four years work amounts to a series of differently aligned magnetic bits on a network drive. It is entirely possible the reason I'm saving any paperwork at all is because pitching it would destroy the scant evidence I was even here.

The evidence takes up two boxes, with room to spare. These will be picked up by unseen forces and delivered to my new location.

These same forces will be moving the one asset I value above all others: My laptop. Improbably - I was given a good laptop. It has been reliable, durable, and its battery outlasts virtually every other machine I'm around. Even the case is good. Moving my laptop is not my job - so I just leave it behind and hope the process goes well.

-----------------

Not that the early intel from the move is encouraging. My pod-mate, BD, was slated to move yesterday. Being a gregarious sort of person - they went to their future desk and introduced themselves to the neighbors.

What appears to have followed is that these same neighbors smiled, shook BD's hand, and as soon as they were out of sight - ran to their manager to protest BD being stationed in their midst.

The net result was that BD shows up the following morning with pastries for their new neighbors and sees that none of their stuff has been set up: No laptop; no boxes - and the neighbors are saying in no uncertain terms that BD will not be relocating to the desk in question.

BD has no laptop - no desk - and a box full of pastries. Oh, and a meeting to present at in less than two hours. Welcome to limbo. They ended up back at their old desk, sans tech.

There was a happy ending though - I got to eat pastries.

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Stuff like that makes me think I'm about to pay for any good corporate karma I've experienced. My laptop will get broken and I'll end up with some POS Toshiba (the horror!!).

Or they'll take my chair.

I love my chair. It's a genuine, undeserved luxury item. An ergonomic masterpiece with all the trimmings. Bequeathed to me by a co-worker who had the good sense to bail before the layoffs. They got it by way of an ergonomic need. I have it by way of.... well... having it.

There's a spot on the form to indicate that I want to keep my chair. Rather than entrust my chair to unseen forces - I opt to wheel the thing up there myself.

I have to go up there early anyway. I've collected all my personal items into a single bag - I figure I'll move them myself and if there's no room - I'll just take them home.

So the afternoon finds me wheeling my chair and bag to the new digs, along with a coworker who (miracle of miracles) has a printout that says where we are supposed to go.

As everything looks the same in these buildings, I turn up the wrong aisle and run right into the Client. Now, I consider myself a grown up - but this is not a happy event. The few times I've seen the Client this past year - I have been greeted with an incredulous "Do you still work here?" (To which I always reply "What kind of 'hello' is that?").

The Client sees me and is visibly disappointed. "There goes the neighborhood," they say - but they are obviously not kidding that much.

Honestly I'm thinking I get that we're not friends, but is barely masked hostility the best you can do?.

Turns out, I'm in the wrong row - which relieves both of us, for a little bit anyway.

I roll to my new digs and there the reality is inescapable: I will be sitting at the midpoint between the desks of two other people. One has been my team leader for years - and is awesome. The other I have no idea who they are.

The personalities are beside the point, actually. I will be sitting at a spot that is in the middle of a through route and essentially looking over the shoulders of two people while they work. This sucks for everyone. I used to have my own desk, and now I'm downsized to this non-space - but more to the point even if you would argue that only one out of the three of us deserves a desk, that person should get a desk of their own. Not some half measure with me lurking over their shoulder while they work.

Cube farms are anything but private, and I've learned more about the private lives of my co-workers than I've wanted to - but there's always been some remedy to minimize the intrusion. Earbuds, or just turning more towards your screen. Now I'm literally staring over their shoulder while they work. They want to check their bank statement, they get to feel like I'm spying on them.

Which is just crap. I get the idea of locating project teams together - I'm all for it, frankly - but give them their own space, eh?

I leave the chair and the bag. I have no drawer space for office tools and no place for my files. My team leader volunteers some of their desk for my papers. It's looking more and more like I should have pitched them. Madness.

It's only temporary I remind myself. In a few months we're supposed to move again.

In the morning, I go up to meet the new neighbors - and find that none of them have arrived. It's just me and my team leader - so far. My laptop is there (yea!) and my chair is there also - alongside another chair that the unseen forces saw fit to deliver (no doubt because I said I wanted to keep my chair). I unbox my boxes into my team leader's deskspace. I make a mental note to destroy these items if I haven't referred to them by summer.

The bag of personal stuff is (still) here as well. As my laptop and its docking station take up my entire desk surface - I opt to take all the stuff home. I tape one picture of the kids to my monitor - but there's no place to hang anything up.

My Swingline and scissors go into my team leader's overhead bin - not that I'll miss them - and I put up my nametag.

And that's it. I'm unpacked.

I scope out the network printers, search in vain for a supply room, and resign myself to the new reality that is my workspace.

All set. Buds in. Time to work.

Foreclosure Mess Hitting Critial Mass

Memo to the Wall Street Journal Editorial Board:

Remember how you told us that the whole foreclosure mess was much ado over nothing?

...allowing people to live in homes without paying for them is not cost-free. That cost will be borne directly by investors in mortgage-backed securities and mortgage servicing companies, and ultimately by American taxpayers, who now stand behind 90% of new mortgages, thanks to guarantees by Fannie Mae, Freddie Mac and the Federal Housing Administration.

The bigger damage here is to the housing market, which desperately needs to find a bottom by clearing excess inventory and working through foreclosures as rapidly as possible.

WSJ Editors? This just in:

Shut. The Fuck. Up.

Seriously. Read that article. Or better still, the follow up.

Here's just the first paragraph:

CLEVELAND, Ohio -- Michael and Pamella Negrea have never been late on a mortgage payment in the 15 years they've owned their home in Eastlake. But they've been foreclosed on three times.

Tell me this kind of harm isn't worse than excess inventory cluttering up the housing market.

(H/t Ryan Chittum over at CJR)

Pirate Bay

There’s no doubt that in Somalia, crime pays—it’s about the only industry that does. -Jeffrey Gettleman

Fascinating article in the NYT Book Review about Somali Pirates - and their maddening ability to operate in that small space between what we're able to put up with - and what we're willing to do to stop them.

Once on board, the pirates go directly to the bridge, hold the crew at gunpoint, and typically lock them up in the steamy crew quarters. But Somali pirates almost never intentionally hurt their hostages. Many are governed by a strict code of conduct that fines gunmen for abusing captives. Boyah said that there was even a printed copy of these rules, a so-called “Pirate’s Handbook.” The pirates seem to realize that the minute they start harming or killing captives they give Western powers the rationale to attack their onshore bases. Until then, the world is content to play an increasingly expensive game of cat and mouse.

(H/t The Two Way)

The Baying Hounds of the Foreclosure Mess

Yowza. Lots of "I'm as Mad as Hell" articles making it into the press these days.

(Via Felix Salmon) Here's a full on rant by Joseph Tauke at the Daily Caller, One Nation Under Fraud. He does a nice walkthrough of the issues - and brings a pieces that were new to me:

• A company called DOCX offered its services to "recover." As Yves Smith pointed out - this means they created documents that the banks thought should have existed. Created from nothing - for a set price.
  
• There are tax implications for trust companies who do not acquire the mortgages they will hold within three months. Implication might be an understatement - the payments to the trust go from untaxed, to taxed at 100%. Ow.
• A class-action lawsuit was just filed in California which challenges MERS legal standing to hold mortgages. I'm thinking that might cause some re-valuing of some 60 million mortgages that list MERS as their mortgage owner.

David Kotok is cited over at The Big Picture, where he posts the anonymous rant of one of his sources in finance:

“You can endorse the note as many times as you please…but you have to have a clear chain of title right on the actual note: I sold the note to Moe, who sold it to Larry, who sold it to Curly, and all our notarized signatures are actually, physically, on the note, one after the other.

“If for whatever reason any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.

“To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.

“Read that last sentence again, please. Don’t worry, I’ll wait. “You read it again?

Good: Now you see the can of worms that’s opening up.

Put me in the camp that says there is no way government is going to allow defauting homeowners to remain in houses for free in perpetuity. Kotok's suggestion seems the most rational:

An example of a possible fix in a full blown litigation might be for the court to order the mortgage modified to the current equity value of the home, so that it a) punishes the lenders who failed to do their proper legal work on the documents, but b) does not give a home to a defaulted homeowner for free. The odds would be that the homeowner still gets foreclosed on, but does not owe additional monies to the bank. Since these are very often uncollectible judgments anyway, the court’s judgment can mete out justice fairly, not give anyone an undeserved windfall, yet move the cases forward. That is but one “just” solution, and I am confident that most courts have the sophistication to fashion an appropriate remedy.

Homeowners get a shot at staying in their homes based on better terms - lenders get a shot at owning SOMETHING of value - and we take a long, slow walk out of the woods.

Gah.

Also - from the NYT's always ass-kicking Gretchen Morgenson - a story about how Countrywide Financial kept up appearances.

Money quote from their CEO, Anthony Mozilo, describing their 80/20 loan (which allowed borrowers to finance 100% of a home's value):

“In all my years in the business, I have never seen a more toxic product,” he wrote to Mr. Sambol in an April 17, 2006, e-mail cited by the S.E.C. “With real estate values coming down ... the product will become increasingly worse.”

Nice to hear, Ant'ny - but would have been a lot more useful if we'd heard it a few years ago, no?

Window Into a Foreclosure Mill

I know, I'm all about this foreclosure stuff - but mostly because what I read I can scarcely believe.

The NYT's profile of the foreclosure case that first deposed a robo-signer in public was just awesome. CJR's Ryan Chittum says pretty much everything I wanted to say about it.

Except for this bit. There are a lot of statements in mass media and (eyeroll, please) WSJ editorials about how this whole mess is just "paperwork" or about "technicalities." I though this statement from the attorney in the NYT profile is the best takedown of that viewpoint.

He's describing the conduct of the deposed robo-signer (Stephan) - and what his conduct amounts to as a matter of law:

“When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t. When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits. When he makes any other statement of fact, he has no idea if it is true. When the notary says that Stephan appeared before him or her, he didn’t.”

That ain't no technicality. That's out and out fraud. When you picture that fraud resulting in someone losing their house, you get a better idea of what is and is not a technicality.

As a co-worker of mine pointed out - "To say that the lender not having the paperwork is a technicality - is to allow homeowners to dispute late or nonpayments by merely claiming that 'the check is in the mail - your not having the money is merely a technicality..."

Then there's WaPo's account of what happens in a foreclosure mill - one of the many law firms retained by banks to process their increasing number of foreclosures. These mills were paid by the unit, rewarded for speed - and even penalized for slow processing. It is not a pretty picture:

The law firm of David J. Stern in Plantation, Fla., for instance, assigned a team of 12 to handle 12,000 foreclosure files at once for big financial companies such as Fannie Mae, Freddie Mac and Citigroup, according to court documents. Each time a case was processed without a challenge from the homeowner, the firm was paid $1,300. It was an unusual arrangement in a legal profession that normally charges by the hour.

The office was so overwhelmed with work that managers kept notary stamps lying around for anyone to use. Bosses would often scream at each other in daily meetings for "files not moving fast enough," Tammie Lou Kapusta, the senior paralegal in charge of the operation, said in a deposition Sept. 22 for state law enforcement officials who are conducting a fraud investigation into the firm. In 2009 alone, Stern's law firm handled over 70,000 foreclosures.

"The girls would come out on the floor not knowing what they were doing," Kapusta said. "Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents."

It's not just quantity that was the problem:

To keep up with the crush of foreclosures, document processors and mortgage service firms rushed to hire anyone they could - hair stylists, Wal-Mart clerks, assembly-line workers who made blinds - and gave them key roles in their foreclosure departments without formal training, according to court papers.

A number of these employees have testified that they did not really know what a mortgage was, couldn't define "affidavit," and knew they were lying when they signed documents related to foreclosures, according to depositions of 150 employees for mortgage companies taken by the law firm run by Ticktin, the Florida lawyer.

Picture that lady from the Amazing Race who thought London was a country processing your mortgage paperwork. In a hurry.

Ye gods.

MERS, the Black Hole of the Title Transfer World

In reading about the ongoing foreclosure mess, one acronym keeps coming up: MERS. That would be the Mortgage Electronic Registration System, Inc. - a Delaware based company that (for a fee) will agree to be listed as the mortgage owner in county records.

If that sounds odd to you - you don't know the half of it.

By way of Felix Salmon - I started reading a paper by the University of Cincinnati Law Review's Christopher L. Peterson: Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System.

Yeah, yeah, I know - but it's actually fascinating reading.

Here are the highlights. MERS is basically an umbrella corporation that interposes itself between normal title transfer registrations (and their resulting fees), maintains its own records of those transactions, and allows lenders to assume the role of MERS employees when they need to foreclose.

Here's a visual aid (from the paper):

This is a normal series of title transfers for a mortgage.
At number 1 is the original mortage where the homeowner and the loan originator make a deal.
At 2 - is where that bank sells the loan to some other bank or broker
At 3 is where that bank or broker sells the loan to Trust or special purpose vehicle (SPV) so it can be sold to large numbers of investors.

At each of these steps you'll notice that the transfer of the note (the actual contract saying what property is involved and who owes what to whom) is recorded in the county register (each time requiring a fee).

It should suprise no one that county records are frequently written ledgers on dusty old shelves.
But they are public records and rigorously maintained to avoid conflicting claims on the same piece of land.
Prof. Peterson goes on at length about the notoriously anal retentive standards of title registration. Title insurance exists to cover what error remains - but as anyone who as been to a real estate closing will tell you - these folks sweat the details.

This takes time, and annoys bloated financial industry types - who want to avoid paying fees and having to wait for the clerk's office to process their transfer.

So, they created a go between - MERS.

In its ultimate form, picture above, MERS is listed on the mortgage. They track subsequent transfers of the title (which are not recorded by the county) and no further fees are paid to the county no matter how many times the title changes hands. MERS remains on county record of the sale.

This is problematic for lots of reasons, but you can see why at first this system worked. The county and the homeowner see nothing unusual - because from where they are sitting nothing changes. The county records the original sale - and never sees the later deals. The homeowner is told to send checks to a servicing agency at the time of the deal, and that does not change.

MERS has served its primary purposes: cutting transaction costs and speeding up the process. It's been wildly successful:

With the rating agencies' stamp of approval, the use of MERS exploded in the early 2000s. By late 2002, MERS had recorded its name, instead of the actual assignee or mortgagee, in ten million residential home mortgages. As the subprime mortgage refinancing boom took off, MERS registered an average of 21,000 loans on its system per day. Only a year later, the total number of loans recorded in MERS's name doubled to twenty million. By May of 2007, this number had tripled again to sixty million loans. Sixty percent of all new mortgage loan originations are recorded under MERS's name, and more than half of the nation's existing residential loans are recorded under MERS's name.

MERS maintains a database of the subsequent transactions, which is available to its member institutions (but not to the public).

And that's the first problem. State laws require that subsequent sales of a property be recorded in THEIR records - and MERS is making that not happen.
MERS would (and does) say that this is not necessary, that MERS is still on the mortgage of record and that has not changed.

Peterson points out that this is bull$hit - because the laws are looking for the role you actually play - not what you call yourself. In other words, you can call yourself the mortgage holder - but unless you lent the homeowner money, are owed payments, or have the right to foreclose on their property - you're nobody. Here's Peterson again:

In thousands of cases around the country MERS's counsel continues to recite the statement that "MERS holds legal title to the mortgage" as though it were the fmance equivalent of some tantric mantra. Yet any meaningful economic analysis of this claim exposes it as a simple falsehood. MERS does not own the lien because it does not own the proceeds of the sale rendering disposition of the property seized in exercising the lien.

That's why MERS is increasingly in the news these days. The MERS system works well when loans get paid, even when a few don't. But when loans start to blow up left and right - sooner or later somebody's going to ask "Who the hell are these MERS guys? And how come they don't have the note?"

And that's when MERS guys will show up and say they're here to foreclose on a property. What will be weird about them is that they will look exactly like the guys who work for the XYZ Trust that the loan was sold to. This is because the MERS guys aren't MERS guys at all. Oh, they'll say they are employees of MERS, they'll even have paperwork that will say they are a "Secretary and Vice President of MERS" - but they've never been paid a cent by MERS. The opposite is true. They pay MERS so they can (and I'm not making this up - read the paper) enter their names into a web form on MERS's website and print out credentials for the express purpose of appearing in a foreclosure proceeding as agents of MERS.

Why would they do this?

Primarily, because MERS is listed on the mortgage of record. If a foreclosure proceeding was begun by XYZ Trust, they'd have to explain why XYZ trust isn't listed on the county register as owning the property. MERS does.

Better still, XYZ Trust - were they working as MERS legal designates under their own name - would fall under federal regulation for debt collection. Crucially, federal debt collection regs do not apply to original creditors. By pretending to be MERS agents at time of foreclosure, the XYZ Trust can assert they are the original creditor and go at a homeowner with hammer and tongs without fear of federal intervention.

So MERS operates as a flag of convenience for lenders at two critical points in the deal: first, as a way to avoid paying fees - and second as a way to avoid regulations when it comes to foreclosure proceedings.

Peterson points out another unfortunate service MERS affords its less than savory members:

When thinly capitalized originators churned out more and more securitized loans, claims against those lenders accumulated, while their assets did not. Once the projected costs of disgruntled investor recourse demands and borrower predatory lending lawsuits exceeded the projected costs of bankruptcy and reformation under a new corporate guise, originator management would predictably discard their corporate identity. 206 MERS made this easier by . offering a super-generic placeholder that transcended. the aborted life of lenders. MERS reassured investors that even when an originator goes bankrupt, county property records would remain unaffected and foreclosure could proceed apace. By serving as the true mortgagee's proxy in recording and foreclosure, MERS abetted a fly-bynight, pump-and-dump, no-accountability model of structured mortgage fmance.

All of this is over and above the lack of paperwork foolishness> The MERS database of transactions may assist creditors and homeowners in figuring out what loans went where - but only if they are permitted to see it.

More to the point - the appearance of MERS in county records as the mortgage holder of record is essentially a roadblock to public inquiry. Somebody sells you a house and the former owner was listed as MERS - your title insurance company is going to have a harder time figuring out if MERS really holds title, or if they've sold it to someone who has since gone bankrupt or resold it, or god knows what.

Which is not to say the end is nigh, but as Prof. Peterson points out in detail - when a private record system is used to supplant a public one - all kinds of bad things can occur.

I'll leave a summation of some of those things to wiser minds like Barry.

This is Where Things Get Positively Evil

After the housing bubble, the credit crisis, and the foreclosure mess, is there something else looming out there to derail our financial system?

If you believe Felix, the answer is yes - and the money quote in this post's title comes from him:

You thought the foreclosure mess was bad? You’re right about that. But it gets so much worse once you start adding in a whole bunch of parallel messes in the world of mortgage bonds. For instance, as Tracy Alloway says, mortgage-bond documentation generally says that if more than a minuscule proportion of notes in a mortgage pool weren’t properly transferred, then the trustee for the bondholders can force the investment bank who put the deal together to repurchase the mortgages. And it’s looking very much as though none of the notes were properly transferred.

But that’s not even the biggest potential problem facing the investment banks who put these deals together. It also turns out that there’s a pretty strong case that they lied to the investors in many if not most of these deals.

Felix trots out a report by Clayton Holdings that shows the high percentage of mortgages that weren't passing underwriting standards. These were mortgages destined to be part of Mortgage Backed Securities.

Felix points out that Clayton rejected more than half of a set of loans bound for a Citigroup MBS. Rejected sounds good until you realize that this was a mere sampling of the loans involved. Meaning if half of the sample was rejected - there's a very good chance that a similar percentage of the remaining loans deserved to be rejected.

Did this stop the deal?

NoOOooooo

Instead Citi leans on the sellers for a better price - and does the deal anyway. The billion dollar question is did Citi properly inform its investors of this highly important information adequately enough?

Here's Felix (emphasis in original):

Now here’s the scandal: the investors were never informed of the results of Clayton’s test. The investment banks were perfectly happy to ask for a discount on the loans when they found out how badly-underwritten the loan pool was. But they didn’t pass that discount on to investors, who were kept in the dark about that fact.

Investors? You may now contact the attorney of your choice.

Two More on Foreclosures

Barry goes to town:

The fraud that has come to light [involves legally mandated document verification] is not taking place by bank executives. Reviewing a file can take anywhere from, 20 minutes to well over an hour. Yet some bank employees are testifying that they have signed off on as many as 150 per day (Wells Fargo) or 400 per day (Chase).

It is impossible to perform that many foreclosure reviews and data verifications in a single day. The only way this could happen is via a systemic banking fraud that orders its employees to violate the law. Hence, how we end up with the wrong house being foreclosed upon, the wrong person being sued for a mortgage note, a bank without an interest in a mortgage note suing for foreclosure, and cases where more than one note holders are suing on the same property that is being foreclosed.

This is more than mere accident or error, it is willful recklessness. When that recklessness is part of a company’s processes and procedures, it amounts to systemic fraud. (THIS IS CRIMINAL AND SHOULD BE PROSECUTED).

The next step in our cavalcade of illegality is the Notary. Their signature and stamp allows these fraudulent documents to be entered into court as actual evidence (no live witness required). Hence, we have no only fraud, but contempt of court on top of it (BOTH OF WHICH REQUIRE PROSECUTION).

And here was an excellent summary/overview of the foreclosure mess from John Carney of CNBC:

Get ready to hear the phrase “pig through the python” a lot. For example, “We need to get the pig through the python very quickly so that the market can be free of uncertainty.”

This is the favorite metaphor of bankers discussing the foreclosure crisis. The idea is that anything that slows down foreclosures will unsteady the housing market. There’s a lot of truth to this. Buyers will hesitate to bid on foreclosure sales if they are not confident the foreclosure is legitimate. Other buyers may worry that the lack of foreclosure sales in an area is a false indicator of the health of the local housing market.

Banks concerned about the recovery values of their mortgage portfolios and higher capital requirements, may pull back lending even further than they already have. In short, this could be the beginning of the second leg of the credit crunch.

(H/t Felix)

Show Me the Mortgage

Some really great stuff coming out on the emerging scandal of foreclosure industry fraud.

Rortybomb has a great two parter explaining what has broken down and why it matters. A winning segment:

In the event, with respect to any Mortgage Loan, that such original or copy of any document submitted for recordation to the appropriate public recording office is not so delivered to the Trustee within 180 days of the applicable Original Purchase Date as specified in the Purchase Agreement, the Trustee shall notify the Depositor and the Depositor shall take or cause to be taken such remedial actions under the Purchase Agreement as may be permitted to be taken thereunder, including without limitation, if applicable, the repurchase by the Responsible Party of such Mortgage Loan.

Read that again through to the end and use the chart to follow the chain. If more than 0.01% (!) of mortgage notes weren’t properly transferred, the trust can force the sponsor (in this case, Goldman Sachs) to repurchase the bad mortgages. And this is just one contract for one part of the ~$2.6 trillion dollar mortgage backed securities market. How’s that for systemic risk? Especially if this is found to be widespread….

Ow. (H/t to Ritholtz)

CJR's Dean Starkman brings a foreclosure linkfest our way.

...as [HuffPo's] Mike Hudson...reminds us, the fraud factories on the back end of the mortgage process are only an extension of the mortgage boiler rooms on the front end that generated millions of what turn out to be the financial equivalent of Ford Pintos and Chevy Chevettes.

Manna From Heaven

It's a truism of home ownership that the prior inhabitants of your home were wrong about a great many things. Our last home had lousy windows, bad attic ventilation and drainage issues that boggled my mind. Didn't these people have EYES?? I would exclaim. HOW could they let this go??

The answer of course is, easily. Selling the house is easier than fixing a great many problems. I solved our old houses drainage by band-aiding it until I could sell. Months after we sold, I ended up getting a tour of the old house from the new owner. The guy was in the process of completely renovating the kitchen and wanted me to see the new stairs he'd installed. As an aside he mentioned fixing the backyard drainage (by drilling through over six feet of clay - running two 4" pipes to the front and installing a french drain). He rattled off the numbers on how much water would pile up in the backyard after a typical deluge (something in the tens of thousands of gallons) and mentioned that after he finished, his neighbors no longer got water in their basements.

Then he showed me the table he was making out of the scrap wood of the old kitchen door and leftover stair parts.

I want to be that guy. The guy who leaves a house in a condition where the new owners say Wow, we SO lucked out! The last owners really fixed this place up."

Better than we found it. Just once.

So we've made some reasonable headway with our current place. Did the kitchen - got the landscaping/drainage out of the way - but there's been a looming issue we've been putting off because it's fabulously expensive.

The roof.

Much like our old place, we were told by our inspector that the roof would need to be replaced in the short term (3-5 years) and two winters have demonstrated beyond any doubt that we have inadequate ventillation.

In our heads, a re-roof job was going to cost us twelve grand or more. Not because we'd done any research, but because our experience has taught us that life sucks and twelve large seemed like the minimum number it would take to utterly suck.

We began getting bids. We called The Man (from our kitchen job) and a few others and the numbers were considerably better. Still expensive - but something we could dig deep to do. We joke to our friends how we're praying for a hailstorm before we get going, but we're going to have to get this done. Our roof is not merely old and badly ventilated, it leaks. A leak that was disclosed as a "fixed" issue by the prior owners - but clearly and obviously has been leaking for some time.

I keep picturing dad's disapproval for my having put in a kitchen without fixing the roof first. Roof! FIRST! You want your fancy kitchen to get wet? Somehow, this is the opposite of motivation. I put off scheduling the job until after the Norway trip. Now here we are in fall, and I'm yet to get something scheduled.

And then... magic:

That, my friends - is a hailstone. One of surely thousands that hurled themselves against my house a few weeks ago. Sounded like a freight train, woke us in the middle of the night. I was positively giddy at the thought that this could help defray the costs of a roof.

With our luck, it wouldn't be much (the roof is old) but anything is something, right?

In the morning, I eyeballed the roof and saw nothing out of order. Downer. The roof vents had serious dents, but I don't know if that means they'd pay for the vent replacement or what. Having never put in a claim for this sort of thing - ya kinda expect the worst.

The adjuster came last Saturday - I wasn't going to be home, but he was early so I was there when he started.

"Sir?" He was over on the side of my house.

I walked over thinking of the disastrous state of my side lawn - and waiting for him to tell me "you can't claim this."

Instead, he points to a length of vinyl rain gutter that looked like it had chunks bitten off of it.

"That's hail there. And this siding is totalled."

WTF?

At this point two thoughts run through my head:

1) I haven't been on this side of my house in three weeks?; and
2) Score!!!!!

I'm unsure what the proper decorum is for dealing with an adjuster. Will he be offended if I whoop with joy and ride horsey in a circle right there? Should I wait??

I opt to focus on reaction one: "Wow! If I'd have seen those holes - I would have called sooner!"

The Adjuster takes a piece of chalk and rubs it sideways across my siding. What should (on undamaged siding) look like a wide blue band looks like polka dots with a blue background.

Siding. Not even what I was calling about or hoping for. The back of my house is the same. Blue with polka dots, over and over.

He goes up on the roof and I have to get the boy ready for his soccer game. We're heading out and I call up "How's it look?"

He snorts at me, as if to say: You really need to ask?

"Totalled. Good time for new roof, too, this one's about done. Good thing you have a replacement policy, eh?"

I have a replacement policy? I am soOOOoooo resisting the urge to go all horsey in a circle.

He throws me a few pieces of the shingles to drive home the point that my roof is kaput and there's no better time to get a new one - especially one that my insurance will pay for.

I bite back euphoria and thank him for his time. "Wow," is the best I can do.

Incredibly, my slow rolling on this particular item has paid off. If we'd have done the roof first thing, we'd have been out of pocket and probably had to cut corners on the kitchen.

Instead, we're going to reroof, ventilate, fix the damn leak and reside with insulation.

Procrastination: Boo yah, baby!

Reading the Fine Print

Okay, first off - if you haven't seen this, watch this as a warm up.




Mortgages were written with crap paperwork that are now being used to foreclose on people's houses. Stewart presents this as a "Sophie's Choice" scenario: we could allow the banks to foreclose using BS paperwork - or we could stop foreclosures and blow huge holes in the finances of the companies who sold securities that were supposedly backed by this paperwork.

That's the soundbite version, complete with flashy visuals.

Here's Yves Smith for the dry, analytical version:

That puts a cloud over the entire US RMBS market, the biggest asset class in the world. This paper was sold as secured; the ability to offset the cost of borrower defaults by seizing and selling his house is critical to the value of the instruments. And if no assets were conveyed to a particular trust by closing, an even uglier possibility exists: under New York law, which was elected by RMBS as governing law for the trust, it would be considered to be “unfunded”, which means it does not exist.

But Yves Smith has a marvelous pushback on they way Stewart (and the financial press) are framing this (emphasis mine):

Now the rather sick irony is that this monster screw-up probably affects Fannie and Freddie paper only indirectly; presumably, it will a given that this will be treated as if the government guarantee covers this little mess. The Obama Administration is the last bunch of folks that will look into the fine print to see if Fannie and Freddie ought to eat this liability.

I’ll admit I have not looked into the Fannie/Freddie procedures on this one, but I’d have trouble believing their rules would include having the government guarantee extend to operational screw ups that prevent losses on guaranteed mortgages being relieved by foreclosures. I’d have to believe they have putback procedures which will not be applied because the consequences would be too devastating to Team Obama’s best friend, the banking industry.

So Frannie and Freddie not pushing the losses related to foreclosures back to the banks would be yet another back door bailout.

In other words:

• If a consumer doesn't read the paperwork, they are bound by the unbreakable bonds of the contract they signed. Tough bounce.
• If a corporation is rescued from bankruptcy owes bonuses to is employees - those bonuses must be paid. There was a contract.
• But if a financial institution ignored proper paperwork in a rush to make money, and everything blew up in its face - the contracts that it signed with secondary lenders (like Freddie and Fannie) that require underwriting and due diligence must be ignored - because otherwise it would end up costing a corporation money.

And banks apparently have veto power on contracts that cost them money.

What a crock of sh!t.

Brace for another backdoor bailout.

(H/t Felix Salmon and if you're in the mood to have your mind blown, by all means read the NC posts he links to. They are simply incredible.)

Inside Job

Charles Ferguson: Why do you think there isn't a more systematic investigation being undertaken?

Nouriel Roubini: Because then you would find the culprits.

Added to my list of must see movies... Inside Job



(H/t Felix Salmon)

Frak You, Right Back

If you haven't heard this guy's story - you should.

(From the trailer for Gasland)

But there's a new chapter to this story that's worth telling. One of the offending companies, Cabot Oil & Gas, is being called on the carpet for destroying people's water supply - and they're digging in their heels (emphasis mine).

"We have had people here in Pennsylvania without safe drinking water for nearly two years," said John Hanger, head of Pennsylvania's [Department of Environmental Protection]. "That is totally unacceptable. It is reprehensible. We have given Cabot every opportunity to resolve this matter."

But Cabot has pushed back against the agency, taking out a full-page ad this week in several local newspapers and calling plans to construct the water system "unreasonable, unprecedented ... and unfair."

...

A group of Dimock residents — among them, a former Cabot employee and several residents whose wells had caught fire — filed a lawsuit last year against the company for the contamination and the health risks it could pose to them.

Cabot mentioned the lawsuit in its ad this week, adding that it "does not believe it caused these conditions and intends to fight these allegations through its scientific findings."

(Via ProPublica)

Writing the Great American ePub

There's one less excuse for writing your novel, courtesy of Barnes & Noble.

PubIt! another entry into the self publishing ePub world - dares you to write, upload and sell your work. No start up fees (just a good amount of personal data) and voila! Your work is global, baby!

Just make sure you give it a good editorial pass before you upload. QA is nonexistent.

You wonder how B&N will help users sift through the flood of mediocrity to reach the good stuff.

Still, you wonder who will be the first ePub writer to make a name for themselves outside of the traditional channels....

(Via Crave Blog)

On the List of Sentences I Didn't Expect to Read...

This would appear somewhere near the top:

The New Orleans police officers charged with shooting Henry Glover and burning his body might not be allowed to use the defense that they were just following orders if federal prosecutors get their way.

Ye gods.

The Latest Development in the War on Vampires

Electricity vampires that is...

Behold, Belkin's partial solution to electronic appliances that draw power for no reason when they have been turned off:

It's a plug that cuts off all power after a set interval (30 min, 3 hours, or 6 hours).

The good: Put it on the end of your Wii plug - and save $25 bucks a year.

The bad: Why do I have to buy something in order to NOT use electricity?

(H/t Good blog)

Lies For Sale

I so love this:

In the constantly-contradicting world of tabloid journalism, is anyone reliable? [Gawker] analyzed 20 months of reported break-ups, marriages, and pregnancies to tabulate our first-ever Tabloid Reality Index, batting averages for America's five major celebrity glossies and the rumors they monger.

I just love to see their batting averages virtually never rise above 50% (and usually hang out south of 25%).

(H/t CJR)

Game Changer

Coming to a garage sale near you.

This is a seriously good idea:

To become a credit card merchant, you have to buy the card-reading equipment, which costs several hundred dollars. You generally pay a setup fee, and you commit to a one- or two-year contract with the processing company. You pay $15 to $25 a month, and minimum transaction fees of $25 a month, even if you had no sales at all.

The Square Up system, on the other hand, eliminates that stuff. All of it. It makes the barrier to entry into the credit card world so low, there’s virtually nothing to stop you, the little guy, from taking the leap.

Sir Terry Pratchett is Way Cooler Than You

How much cooler?

This much cooler:

(Via Geekosystem)

Bloody Brilliant

Aussie or Kiwi - this magician has a simply marvelous card trick (after a quick warm up, that is)

Dear Potential MBS Investor...

On behalf of Goldman Sachs, we would like to inform you that a recent study of their mortgage backed securities showed that over 1 in 10 of the home mortgages they contain did not meet current underwriting standards. This ratio has been increasing each year for the past few years - and we wanted you to be aware of this trend before you made any further investments.

We have contacted the originators of these loans and impressed upon them that while we reserve the right to include them in our securities, we will not pay full price for them. The price savings on securities containing these loans will be passed along to you if you decide to invest in ---

Okay, sorry. I just can't continue writing that without bursting into hysterical laughter.

By now, the news is out that while investment banks knew full well that their MBS pools had loans that didn't pass underwriting - and that the percentage of those loans was increasing.

Thanks to Gretchen Morgenson over at the NYT, we now know that the firm who studied these loans tried to provide the information to the ratings agencies - who weren't interested.

So the banks who paid for the study learned that their MBS pools were getting uglier.

What did they do? They leaned on their loan suppliers to get a discount on ugly loans - continued to charge full fare to their investors - and kept the data to themselves.

Nice.

Felix seems to think prosecutions are nigh. Let's hope so.

If you see the world in terms of Left & Right...

...you really aren’t seeing the world at all.

So sayeth The Big Picture's Barry Ritholtz

Here's a sampling:

For those of you who are stuck in the old Left/Right debate, you are missing the bigger picture. Consider this about the Bailouts: It was a right-winger who bailed out all of the big banks, Fannie Mae, and AIG in the first place; then his left winger successor continued to pour more money into the fire pit.

What difference did the Left/Right dynamic make? Almost none whatsoever.

War Memorial

A propo of nothing-

So, I'm on a tour bus in Bergen and our guide is prattling on about this or that. She has a peculiar way of saying OnTheLeftHandSide or OnTheRightHandSide all run together with perfect clarity - right before dropping her voice so she becomes unintelligible.

Then she'll surge back into my audible range with a painfully earnest IsItOkay? punctuated with a smile you can hear. We'd all given up on listening for detail - so a busload of tourists would nod in unison.

At some point her singsong voice skips out the words war and Germany - and there is mention of a building that is OnTheLeftHandSide. As her perspective shifts from her left to our left - I haven't the foggiest idea which direction I'm supposed to look.

Not that I know what she's even talking about.

I've been snapping pictures at random - so has Mom - and I figure we may have a picture that will make it make sense. She mentioned naval and symbol which ties with the fact that Bergen is a huge port. In any event, whatever it was is long behind us by the time we start to compare notes.

-------
One thing that struck me about Norway - at least in contrast to the UK or the US - there are no war memorials. Which of course is an exaggeration. Yes; surely there are some - somewhere. But wherever they are, they are certainly not front and center. All the statues you see are of musicians, poets, leaders of the fishing guild (seriously). No soliders, no plugged up cannons - not even a plaque. Compare this with a recent side jaunt we took into a town here in the US. A WWII tank displayed on the main road, a WWI cannon in the town square, and civil war monuments graven into the side of their courthouse. This was in a town of barely 10,000.

Bergen has over a quarter of a million people.

Admittedly, Norway was out of the fight pretty early in WWII. There are some truly amazing stories of the resistance - and the odd espionage adventure - but Norway has no Omaha beach. I read somewhere that after the war, the Norwegians located the German cruiser they sunk (the Blücher). They then salvaged the oil from its fuel tanks and cut up the ship for scrap - and sold it. Eminently practical these Norwegians - in contrast with how Americans reverentially allow the USS Arizona to leak oil into Pearl Harbor to this very day.
-------

In any event - up until that muted mention by our guide - there had been no signs of the war. And I was curious what she had meant.

When we stopped for some other photo op (digital cameras have turned tourists into snap happy maniacs - but the truth is volume pays off) I cornered the guide and asked about what she was trying to point out.

I showed her my photographic guess: a grey, ugly building with odd stone sculptures under each window that vaguely resembled eagles. "Is this what you meant?"

The guide shook her head. NoNoNo. The yellow building. It was built by the Germans... I hop through a few of my surrounding snaps - no yellow building.

German, AND yellow. Well, sorry I missed that.

Lots to see and do, that was the last I thought of it. Then after we get back, mom and I exchange pictures and I see this:

A yellow building in Bergen - was it the German one? Pastel yellow buildings in Bergen are like Starbucks in the US. Unless there's some plaque I can see in the picture...

I zoom in with photoshop. Nothing visible by the door - but with this resolution, it's not like I could read it.

I need a sign.

Then I zoom on the window balcony:

And there it is. German Naval Headquarters in Bergen, circa WWII.

The Norwegians will hoist a sunken battlecruiser off the bottom of their fjord for salvage - but the swastika-laced ironwork of their conquerors is preserved for all to see.

Lest anyone forget.

A very different kind of war memorial - and the only one I saw in Norway.

Florida, BofA: "We Don't Know What the F%#* We're Doing"

I gotta read Barry more often.

Here's a gem from his WTF file:

"When Jason Grodensky bought his modest Fort Lauderdale home last December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. “I feel like I’m hanging in the wind and I’m scared to death,” said Grodensky. “How did some attorney put through a foreclosure illegally?”

Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens."

Barry has a few suggestions - the best of which is his number 3:

3. Freeze the Florida foreclosure mills. IF A COURT CAN FORECLOSE ON A HOUSE WITHOUT A MORTGAGE, THERE IS SOMETHING TERRIBLY FATALLY WRONG WITH THAT COURT SYSTEM. They are administratively incompetent, and until they demonstrate they are not renegade organized criminals (i.e., have some basic competency), they must freeze what they are doing.

I Will Never Complain About My Commute Again

Do this on full screen.

As Barry says, this is "The sickest thing you will watch this weekend":

DADT in Brief

(H/T Will Wheaton)

Stewart vs. O'Reilly: Don't Call it a Battle of Wits

Jon Stewart goes on O'Reilly and just plays straight man to O'Reilly's firehose of stupid.

Part I:


Part II:


It's sad to watch O'Reilly stick to his worn-out playbook as if there is something for him to win.

Bill? Stewart isn't playing - he's just smarter and funnier than you are.

(H/t TPM)

Obama's Kryptonite

This was just too perfect:

Jack Shafer: My Hero

How does a journalist count to three? One, Two, Trend!

Poynter profiles Slate's Jack Shafer - a man who specializes in letting the air out of bogus "Check out this new Trend!" stories. (like "Toothing" or drunkorexics)

Money quote:

"I think we write trend stories because we think they're news," Shafer said in a phone interview. "We write bogus trend stories because we're wrong, we're lazy, and we're mentally tardy."

(Via Felix Salmon)

The Best Way to Take Out a Unicorn

Thanks to The Oatmeal, for teaching grammar with possibly the most attention getting examples.

(Shout out to my man, MTB)

Bucket of Cold Water

(Via CJR)

Bloomberg's Jonathan Weil tells it like it is

Here’s the kind of thing that passes for free enterprise now. Last month a fellow named Michael Carpenter, who is the chief executive officer of Ally Financial, got on a conference call with securities analysts and gushed with delight about the $3.5 billion price that General Motors had just agreed to pay for the subprime auto lender AmeriCredit. Based on that transaction, he proclaimed, Ally might be worth $30 billion.

GM, which owns a 6.7 percent stake in Ally, is Ally’s former parent.

“I love the AmeriCredit deal,” said Carpenter, whom some might remember from his days as the head of the securities firm Kidder Peabody. “I don’t have any doubt about our ability to repay the U.S. Treasury. So I think it’s great.”

The federal government so far has spent $17.2 billion to bail out Ally, the lender formerly known as GMAC Inc. Taxpayers hold a 56.3 percent stake in the company, which says it may hold an initial public offering next year if it can’t find a buyer.

What a spectacle. Here you had the CEO of a thrice-bailed- out zombie bank, drooling over how much a government-owned carmaker was going to pay for a publicly traded subprime lender, and using this price as a yardstick for his own bank’s paper worth. In a sane world, Ally would have been liquidated already. Any capital it’s able to raise is money that otherwise might go to more deserving enterprises.

Bizarro world laid bare.

My Kind of Place

This is a cafe I could seriously get into.

How Old is Your Gas Pipeline?

Why do I ask? Oh, I don't know...

San Bruno, CA: 4 dead and counting

But here's another question - when was the last time your gas lines were evaluated by professionals?

Which is not to say this sort of thing should be on homeowners. It shouldn't. Unseen batallions of quiet professionals should be keeping this off your worry radar by making sure everything is maintained properly.

But here's something to jolt you out of that safe mental picture:

the Pipeline and Hazardous Materials Safety Administration, the federal agency that regulates 2.3 million miles of oil and natural gas pipelines, largely relies on standards written by the oil and gas industry. It has about 100 inspectors, leaving industry a great deal of latitude with inspections. (Even after the blast, state utility regulators ordered PG&E to inspect its own network of gas pipelines.)

And according to The Washington Independent, federal regulators are required to inspect only about 7 percent of the country’s natural gas pipelines. That percentage is based on how populated the surrounding area is, and not the actual conditions of the pipelines.

Regulating agency dependent on industry expertise? Check. Regulator's resources laughably inadequate to the task it is given? Check.

Now where have I seen that pattern before?

Zero Tolerance

Let's do a little role play, shall we?

Imagine you are the principal of a middle school.

A 13 year old boy is brought into your office. He was overheard talking about firearms, then threatened another student and himself.

A search of the boy and his locker have produced no weapons or contraband. The boy admits to talking about target shooting - and mouthing off to another student who overheard the discussion.

His version - the exchange went like this:

Q:What would you do with a gun if you had one?

A:Well, I'd shoot you and then myself.

"You see," says the kid - "I was making a joke."

There were no injuries and no altercation between the kids involved. This kid has no priors, lives with both parents, and seems embarrassed by the whole thing.

What do you do?

Talking to the kids parents is a given, as is telling the kid that this kind of "joke" is not funny at all - nor something that is taken lightly in the post-Columbine world.

But what else?

Do you suspend the kid?
Call the police and have them investigate?
Schedule a meeting with the school counselor to figure out if this kid is dangerous or merely foolish?

Take a few seconds and think what you should do - as the responsible administrator of a public school.

Then relax - because apparently (at least in southern Illinois) you don't get to decide. School policy suspends the boy immediately and refers him to juve mental health. They take him and hold him for five days of observation, where he will be evaluated for possible treatment. If his parents object to his being treated - mental health officials can overrule them and treat him anyway.

Both of the kid's parents are deaf - so communication between the school, the mental health facility lags far behind the events on the ground.

[By now, you will have guessed - this is not a hypothetical. This is what is currently happening to the family of one of my colleagues]

The boy speaks to his hearing relatives by phone, who relay messages to his parents. He has not showered since his arrival at juve mental health - as group showers are a new and frightening thing for him.

No word on weather treatment will be administered - I would hope the probability would be low - but there's the open question of how five days of incarceration will alter the trajectory of this boy's life. How will he view himself ?- and how will he be labeled by his peers?

Think of all the stupid things you ever said in your adolescence - would you have ever believed that one of them could land you in a juve mental ward?

Messed up.

Which is worse: HAMP or Wells Fargo?

(Via Felix Salmon)

As if further proof was needed - when banks and governments jointly declare their eagerness to "help homeowners" - that's the time to put them under the frigging microscope until they scream for mercy:

[David Lazarus] is telling the story of Mike and Ellen Kahara, who signed up for a HAMP mortgage-modification program through their lender, Wells Fargo. They made all their HAMP payments in full for the three-month trial period, and then continued to make payments as Wells dawdled over whether or not to make the loan-mod permanent.

Eventually, on August 11, Wells Fargo sent the Kaharas a letter saying that the bank had rejected their application for a permanent loan modification. That’s bad enough — but the bank made matters infinitely worse by then turning around and selling the Kaharas’ house, in a foreclosure sale, just five days later, on August 16.

And yes - it gets worse from there.

Wall and Peace

Just flipped through a copy of Wall and Peace by the guerrilla artist extraordinaire, Banksy.

Just a rollicking good time.

His art and clandestine art installations are brilliant, of course - but he intersperses it with copy that is as delightfully venomous as the rest of his work.

I especially like his observation that giving respect to the property rights of public advertisements is like "asking for permission to keep a rock that someone's just thrown at your head."

My Big Fat Greek Bankruptcy

(Via Felix Salmon)

Michael Lewis scrapes off Greece's financial scab and reveals the horrors underneath.

The [Greek] national railroad has annual revenues of 100 million euros [yet pays its workers] 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,” Manos put it to me. “And yet there isn’t a single private company in Greece with that kind of average pay.”

And that's just the beginning.

a law on the books [makes] it a jailable offense to cheat the [Greek] government out of more than 150,000 euros [in taxes]—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.” One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to 15 years to resolve tax cases.

Perhaps the most entertainingly horrific thing you will read this month.

Your Best Friend is Suing You For 600 Million Dollars

It's no secret that I'm a Facebook holdout.

I view Facebook as more of a disease than a pastime - a tool that entices people to give up their personal data in exchange for its aggregated entertainment and networking tools.

So it's no small surprise that I feel like watching a movie about the creation of Facebook.

All of this you could put down to the fact that we have gotten very, very good at making movie trailers - but I like to think it's because I really liked Radiohead.



Slick.

13 Out of 1,000

Caught this off CJR

You remember back when we had that flash crash on the stock market? The market lost a staggering number of points, then got them back just as fast.

The WSJ reports that the SEC is looking into quote stuffing as a potential factor in that mess. Quote stuffing is flooding the market with orders that are visible enough to influence other trades - but are canceled before they are completed.

Head-faking the market, in other words. But how bad could these signals be?

According to the WSJ - which uses the NASDAQ trading volume of Feb 18, 2010 as an example.

There were offers to buy or sell 89.704 billion shares on NASDAQ that day.

These offers resulted in 1.247 billion shares being traded.

That's a completion rate of  1.3%

Chittum says "Dang" - I'd use something a bit stronger.

Sure, offers to buy and sell will outstrip what can actually change hands - but 98.7% of all offers on the NASDAQ don't happen?

Really?

I'd love to see that metric plotted over a the life of the NASDAQ.

Taxes for Thee, but not for Me

(Via CJR Yves Smith, and Loren Steffy)

Because this just rocked:

Dear IRS: Please note that beginning this year, I am no longer earning an income. From now on, I am compensated through what I like to call column interest. It isn't pay. It's a capital gain that I receive in exchange for providing about 2,000 words a week to this newspaper. Please lower my tax rate accordingly.

Hey, you can't blame me for trying. After all, a similar strategy has worked for years for money managers at hedge funds and private equity firms. In fact, now that Congress is threatening to close that loophole, the private equity world has erupted with an anguished wail. Such is the reaction when the privileged few are asked to pay their fair share.

Asymmetrical Warfare

I've been reading Free Range International for awhile now, a blog by Tim Lynch - a private security contractor in Afghanistan - and one of the recurring themes of his blog is that the Taliban really, really suck at fighting:

There was an attack on the HQ of one of the security firms in Kabul last week involving two suicide bombers.  They popped up well inside the new Kabul “Ring of Steel” checkpoint system which seems to be designed to harass internationals and opened up on the exterior guards as they walked down the street housing Hart Security.  The Hart guards returned fire for a second or two and locked themselves inside the compound as did the exterior guards outside the gates of every other compound on that street which means about 25 men jumped inside their compounds when the two attackers unmasked.  The attackers reached the gate and, according to eye witnesses, one said he’ll take the gate down and the other moved back about 20 feet. When bad guy one blew down the gate, bad guy two also perished because 20 feet of stand off is inadequate for powerful suicide vests.

FRI points out, this is despite years and years of experience planning such operations. Granted the participants are always noobs - but you wouldn't be out of line expecting the people who orchestrate these attacks to learn from failure. And there is plenty of failure - trouble is, when a bomb goes off in a city - very few people know what the original plan was. It is very easy to assume that a detonation is a success - and reporters love an easy story.

Which is precisely why I like to read FRI and articles like the one in The Atlantic he's posting about - The Case for Calling Them Nitwits. Not just because it heaps abuse on those who are attempting to kill our soldiers and pretty much anyone they dislike - but because it presents a deeper analysis of what truly happened when a bomb goes off.

It is depressing to learn that an almost random assortment of tactics, executed by impressionable and gullible novices can simultaneously threaten two nations - and be thought to be a cohesive, organized enemy.

Which is not to dismiss them - they are not losing because they do not give up. The fact that any success in Afghanistan hinges on getting them to do something other than kill people is even less encouraging.

But still - the perspective is useful.

For the Good of the Public

ProPublica knocks two out of the park:

1) Bank's Self Dealing Super-Charged Financial Crisis -
Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

2) Take It With a Grain of (Sea) Salt: Gulf Microbe Study Was Funded by BP 

Earlier this week, major news outlets ran with headlines about how a new microbe [4] has been found eating up BP’s oil  and how microbes have degraded the hydrocarbons so efficiently that the vast plumes of oil in the Gulf are now undetectable. No joke.

A bit skeptical of all the oil-is-mostly-gone claims, the day that microbe study was released we chose instead to focus on the Gulf’s thousands of dead fish. Lucky for us.

MIT’s Science Tracker, in a post published yesterday, noted that the microbe study was conducted by U.C. Berkeley scientists through a grant with the Energy Biosciences Institute, and that the Energy Biosciences Institute is funded by none other than BP, through a $500 million, 10-year grant. (To the researchers' credit, they also mentioned the funding in their press release — you just had to read about three-quarters of the way through.)

Stewart on Heston on the Bill of Rights

I just love this:


(H/t TPM)

Hallowed, My Butt

(via Felix Salmon)

The brilliantly named History Eraser Button blog shows you some of the sights and sounds surrounding our most hallowed ground zero.

Short version: It's only hallowed if strip clubs and bars are now holy.

But see for yourself

Oh... you meant THIS torture tape???

You gotta be sh!tting me.

Gitmo in Brief

(Via ProPublica)

So far, only 24 of the 779 men held at Guantánamo at some point have been charged with a crime to be heard by a military commission. Four of them have been convicted. Only one detainee, Ahmed Khalfan Ghailani, has been moved from Guantánamo to face charges in a civilian court; that case is currently unfolding in federal court in New York.

For those of you keeping score at home, that would be 3% of those ever held at Gitmo end up getting charged - and 17% of those charged so far have been convicted.

Google-Verizon: C|net's Telling Me It's Nothing To Worry About

This year, I'd love something to not be as bad as I thought.

'spose this is it?

Here's C|net's Marguerite Reardon:

...most of the [Google-Verizon] proposal sounded a lot like a plan FCC Chairman Julius Genachowski offered nearly a year ago, which many Net neutrality proponents seemed to support.

In short, Google and Verizon say they agree to a set of rules for the Internet that would prohibit broadband providers from blocking or degrading lawful content on the Internet. Broadband providers would also not be allowed to take action to impede competition.

This is pretty much what Genachowski has proposed.

The CRA: Weaker Than Weak

Felix Salmon catches a nice one: National People's Action released a report showing how the nation's top banks have managed to end run the Community Reinvestment Act.

Banks beating a particular regulation is not exactly an earth shattering revelation - but you'll remember that the CRA is the law Wall Street apologists were blaming for causing the financial crisis.

The argument went - the CRA "forced" banks to lend money to poor people, so bad loans got made and the crisis followed.

Which is total crap for all sorts of reasons:

1. the CRA was passed almost a quarter century ago and the subprime bubble didn't swell until after 2000 (and oh-by-the-way the CRA is still in effect, yet banks have somehow managed to stop making subprime loans now that they cannot be securitized for profit).
2. The CRA explicitly (and repeatedly) states that community lending should not be at odds with sound business practices
3. There are no mandatory punitive measures for being out of compliance with the CRA.

National People's Action adds another item to this list:

4. The banks were using subsidiaries to lend to the low income market - so the parent bank's CRA evaluation would be unaffected

Here's Felix

...if you get a mortgage from Citimortgage or Citifinancial rather than from Citibank, you’re not going to get noticed in Citi’s CRA exam. And at Wells Fargo, the list of affiliate mortgage lenders [in NPA's report] goes on for the best part of three pages.

Nice.

A Bar In Amsterdam

Back from my trip. Short version - it rocked.

I'll post pics when I have my act together. In the spirit of my Norwegian interlude (and at the suggestion of Penguin) - here's a video from an offbeat Norwegian band called Katzenjammer.

Good fun.