In the end, economic systems work, and judicial systems modify to accommodate that.? The only exception to that is when a culture is dying.
I have been scratching my head over all the problems in the residential mortgage market.? How can foreclosure take place, when there is no note, properly endorsed, to display?? How can certificate holders of securitizations be comfortable when the transfer of ownership interests in mortgages was never completed.
But, I’m not all that worried.? In one sense, the bigger the problem, the easier it is to solve.? Why?? Because the political systems that surround the economic systems tend to focus better on big problems than little problems.
As in Cordwainer Smith’s “The Instrumentality of Man,” the first priority of any government is to survive.? This is one reason why it is easier for them to survive large crises than small problems.? That’s why I give Rudy Giuliani relatively little credit for what he did on 9/11, but give him more credit for what he dealt with on budget issues.
In large crises, the range of options becomes limited.? Also, it becomes easier to see which option is the best one.
So, given the systematic and severe errors that occurred in residential mortgage securitization, shouldn’t there be an obvious answer to what must be done now?? Yes, but a solution here will take time.? Banks will have to make the effort to secure the notes that allow them to foreclose.? And then, they will foreclose.? Will that mean a lot of upset for the residential property market in the short run?? Yes.? Will the residential property market survive this?? Yes.
Foreclosures will take place.? But the legal niceties that protect our property rights in other areas must be observed by the banks.? Courts should not give in to pressure that they must do something to preserve the proper functioning of the market.? Yo, courts.? The markets will survive even if you delay.? Take your time and do it right. Yo, lenders; delay is the price for not having done it right in the first place.
As for the securitization certificateholders, let me remind you of the investment banks and AIG.? AIG absorbed subprime mortgage risk from all of the investment banks.? The investment banks thought they were pretty clever, until they realized that they all had taken advantage of AIG, and thus, AIG might not be able to make good on all the risks that they had absorbed.
In the same way, if all residential mortgage-backed securitizations are unwound at the same time, the sponsors of the mortgage-backed securitizations will not be able to make good on their obligations.
As I see it, residential mortgage-backed certificate holders have an incentive to work with the sponsors to see how this crisis can be worked through.? And as I see it, perhaps the solution is to pay a consent fee to the certificate holders in exchange for waiving their rights to sue over the malfeasance of not transferring the notes from the originator all the way to the trust.
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As with other crises, the probability of total failure is remote.? Total failure only occurs when those at the top of the power structure are so self consumed that they do not see the threat to their lives.
That’s why I see a slow but reasonable solution coming through the court system to solve the malfeasance engendered through the sloppy execution of securitizations.? Yes, things are bad.? Yes, our current politicians are clueless.? But there is enough interest in coming to a solution for society as a whole that an equitable solution will be arrived at in the courts ? not through Congress, not through the President.
That doesn’t mean that things won’t be choppy and messy.? Indeed, there will be many ugly times en route to a solution.? But things are not so bad in our judicial systems, as a whole, that we will not come to the correct solution, after exhausting all imaginable alternatives.
I would have quoted Ecclesiastes 5:8-9, but I fear it would have been too obscure.
http://www.biblegateway.com/passage/?search=Ec%205:8-9&version=NKJV
I think you are far too optimistic. I do see “slow”: I do not see reasonable… how could it be, given the long slide that got us here was not only grossly unreasonable, it was approx. 100% negligent of reason.
Much less pro-active intelligence.
non illuminating statement: clueless to what? And which groups of politicians are clued in to what?
We got here in large part because various FED agencies entrusted w/overseeing even a modicum of equity in markets/finance/bonds (etc.) were either defanged or, (worse) staffed w/industry cronies fully empowered by both congress & Bush WH to write and pass legislation (literally) ver batem, as it suited them.
This particular group was certainly clueless regarding overall society well being, but very very much clued in to precisely what they did… and lie about it.
And, hugely financed by same financial interests that got us here, this same group is poised to get major increased #s($) in congress.
Has any of this been cleaned up, shown the light of day?
That Dems (Obama, congress) has had their chance and more or less done nothing…
Really? Where is this interest… what do you see? Personally, I see nothing of the sort, not even in incubation. What I see is a ramping up of entirely non-reality based blather for another bubble run.
With all due respect David, that seems like wishful thinking to me.
I’ve been watching judicial appointments for a long time now, going back well into Clinton years. There was massive obstruction of his nominations by Sen. Hatch… massive. That gap was filled en masse during Bush years, largely appointing FEDERALIST SOC trained loyalists to the most influential courts in the land. Over and over, Bush judicial nominations were described in (mostly) obscure observed descriptions as handpicked by the FEDERALIST guys.
This bunch is a black whole: they meet secretely, they are populated by mostly anonymous members, and they advocate for POV’s which would turn the stomach of most reasonable people if folks were actually aware of what they did.
Most US Law schools have a FEDERALIST “club” for these young, up & coming future power brokers of America. If you never have, I would invite you to go sit in on several of these such gatherings. In doing so, you’ll garner some serious insight into what drives the minds of those brokering greatest influence over what we call our currency.
I have watched these decisions by these guys closely as well, for some time: the remnants of non-business aligned judicial decisions from lower courts are routinely… and I emphacize that word routinely, overturned on appeal by the crew I mention above.
And their rulings are all very similar: narrow focus on minor (eg: small… not indicative of the whole) procedural circumstances are cited as basis for dismissal. I can give you a long litany of examples if you’re interested.
W/out getting specific, the whole notion as defined, established, and continued (very recently by Robert’s court) of corporate personhood and how that plays out… I dun’o, it’s absurd.
Or spending $$ anonymously, for political purposes, w/sponsor groups touting names entirely non-representative of thier intent or purposes, spouting outright lies w/non traceable donors… what kind of judicial thinking equates this with constitutionally guaranteed free speech?
Our courts have established the US’ right to execute torture, protected by the same exact processes: a sound moral premise, diluted through layers upon layers of obfuscationary abstractions, culminating with SCOTUS “precedents” asserting “rights” which are untraceable to their original principles.
In God’s universe, there is commonality of principle built into it’s creation. Much of it is shared between humans and the physical creation, observable to anyone who has the integrity to open their eyes and look for themselves. Among these principles is the immutable influence of critical mass: where it occurs, it moves things. It destroys stars, it keeps planets in orbit, and it holds atomic structures together.
It also drives human activity. Some would call it “group think”. When a group of humans, aligned upon whatever, reaches critical mass, they move things.
Propagandists understand this well. And propoganda can indeed create critical mass sufficient to move humans in directions contrary to their best interests. We have abundant evidence of this in our most recent history, just this decade.
It’s really a matter of truth, or something else. There’s not much evidence of the former that I can see. Rather, it’s just a whole lot of “something else”.
There is no critical mass to move things where you suggest, in judicial system or anywhere else. Equity (your term) is a near logical impossibility, as there are some many long ignored layers of non-truth (lies) influences stacked up…
Or to put it simply: it’s much easier to clean things up as you go, then to let the messes accumulate. We are in the later scenario, and mostly being told lies about the messes.
One last thing about critical mass: when a given system loses equilibrium, it disintegrates in one way or another. Black holes (sucks everything w/in it’s reach into it’s destructive process), nuclear breakdowns (released energy transforms/destroys what surrounds the event), etc. etc.
In human affairs, equilibrium is mainained by human activity aligned along recognition of truth. Conversely, human equilibrium is destroyed when activity is driven by something else.
Globally, just recently, we can see the affects of US influence in affairs having changed: whereas until only 5-10 years ago the productive realities of US endeavors drove global economics, we see now the largest global economic initiatives being driven by critical mass from other societies.
The recent G-20 meetings largely ignored our (US) efforts to agree on US TREASURY proffered currency valuation notions. The reason is, the meaningful global econ activity that matters is not coming from our shores, it’s happening in real time elsewhere.
The US does not have the critical mass of reliable econ action to move things, and it’s showing up in real time. South America has gone it’s own way. Same w/ME. Same with almost everywhere else.
On a macro and micro level, the US is in non-truth based critical mass disintegration: there is no equilibrium, there is no fabric of common initiative based on reality/truth, rather foolish games hoping currency shenanigans can fix massive underlying dysfunction.
Where you garner “hope” for judicial “equity” sorting out this mess… I dun’o.
As I’ve said before, I like you a lot a appreciate what you do on this blog. Within you’re industry, you represent yourself very well to my eye.
But also as I’ve said prior, I think your contexts are too small. And this judicial solution notion you proffer is, just off the top of my head, more wishful thinking imputed upon areas outside your expertise (finance) concluding notions which the current operations in that realm (judicial) provide little evidence to support.
Rortybomb has a good post that I can find agreement with.
http://rortybomb.wordpress.com/2010/10/27/blackrock-vp-editorial-on-bankruptcy-reform-for-foreclosure-fraud-crisis-junior-lien-problems/#comment-9377
I read that, and your comment as well. I could find “some agreeement” as well, but I think the notions break down quickly.
First of all, Novick’s proffers are not unique: same thing has been said all over the place since the processing mess has gotten attention. Bloomberg has had a number of pieces saying, essentially, the same thing.
2ndly, and with all due respect to the professionals, I have grown increasingly dubious of anything Blackrock: since the “birth” of our “financial crisis”, they have (as an organization, and their individual “professionals”) worked very dilligently at positioning themselves to profit from the mess. They have done little to deconstruct, analyze, and participate in intelligent, thoughtful, equitable corrections.
They were (as were a number of their “managers” who broke off and got in line for TARP $$ to manage toxic assets, much of it assumed by FED) all about Blackrock AFAIC.
I’d also point out that Mike says…
That corruption is far more wide ranging then has been reported. I could give details if you like.
But to address my skepticism vs. your optimism on issue of “judicial solutions”: here’s what I mean generally.
First, Mike’s reference (and Yves’ citation) on HAMP and 2nd tier/lien claims on mortgages. I’d point out that HAMP was law: it was more then political policy. It also was not exectuted, was more or less put on the shelf by Obama admin… eg: window dressing. Reasons for that, I assume, need no explanation.
But more fundamentally, the mess involves multiple layers, each w/huge social/cultural/economic interactive fundamentals, executed (mostly) over last decade. Deconstructed, looking at each process… how it led to the next, seems to me the “solutions” Novick describes are more or less non-relevant to our current problems. She looks at this end result, proposes a divying of spoils at this point in time based on some “equitable” distribution of current value, while (as *all* of those proposing similar “solutions”) have little to say about what got us here, recovering losses and/or preventing worst perpetrators from executing a repeat performance.
It goes something like this:
* massive outsourcing of everything, beginning early in Bush’s presidency. This has not been described/explained to American public in anywhere near comprehensive fashion to depict what happened. I was in the middle of the tech part, and saw/understand it w/minute precision. I have commented/written on this on several well read econ blogs (Yves for one), and can tell you *they* don’t understand… they describe this process from WS POV entirely, and seem oblivious to the underlying business decisions which drove it. Bottom line: managers who led the first big waves of outsourced tech did so 100%, entirely to improve balance sheets. They also did it in full knowledge that the work product they received and subsequently marketed (for big gains) was inferior: dramatically shorter produict cycles (eg: software could not be updated for rapidly changing environments). It was known India (eg: 1st major destination of outsourced tech) was incapable of product cycle maintenance design , nor were Chinese (2nd wave destination).
Summary: profits showed big margins (“increased productivity”), work product quality decreased massively, and what we call “high paying jobs” evaporated en masse. Along with that went US domestic progress, expertise & maintenance of this domestic professional class. The capability, a driving economic force on our shores both current a future, was uprooted and left to die, period.
What happened in China/India, however, was quite interesting: these guys learned. They got better. On their very low wages, they used this time to gain some mastery over their shortcomings. They have now, in last decade, matured and passed us by. If you read international financial (especially Asian: HK, Taiwanese, Korean…) reports, this trend is well plotted, but entirely misrepresented here.
What also happened w/those guys (predictably) is, having done their outsourced work for peanuts, they sat up and said: “hey, why should we bust our butts for these foreigners and make them rich, when we can do the work ourselves… for less, and have enough left over to buy a new car and a condo.”
And that’s basically what happened. They are as good or better then US in these fields, they work for a lot less then US techies during the boom (nearly 75% so), and they’ve invested heavily in education/mfg infrastructure/planning to go forward. We have not.
So… what does this have to do w/forecloure issue?
The US wages which financed “consumers” for those light-speed home value increases… it’s gone. The groundwork to get it going again has been decimated: there simply is not real income generated to support anywhere near those prices. And even if we jumpstarted things now somehow, the wages/earnings would be nowhere near what’s necessary to support those pre-crash prices.
But that jumpstarting is not on the horizon, so…
Along the way, huge portion of those displaced professionals got on housing boom. They flipped, they built, they put their $$ into it (and commercial BTW, which hasn’t really gotten shaken out yet).
So one digs a little deeper, look more closely at processes in finance (mortgage bond packaging/marketing), mortgage issuers: exemplified but not restricted to COUNTRYWIDE type sweatshop issuers which have one thing in common w/current foreclosure mess: they cranked out their product in saturating fashion, w/approx. -0- regard for economy (environment) in which they operated. They made paper profits all right, they got their nice bank accounts, and they basically pushed an equilibrium passed a breaking point (see critical masse in my prior comment). In summary: they were a NET NEGATIVE contribution to US economy and wealth… they chewed up & spit out US Wealth.
But… WS didn’t think so. And still doesn’t.
This process was supported, in full, by FED government, by (mostly) repub congress, and we all know how astute GREENSPAN was.
Summary: our most promising economic driver is shipped overseas, it is replaced by a housing boom built on quicksand, and a very few “profit” massively while US social/economic upheaval goes largely unnoticed and/or innaccurately described to US public.
Within the buyer portion of this equation, we have huge disparity of people who got in for all kinds of different reasons. Some of it honest and playing by the rules (decent income, 2 parents working, etc.). Then we have the “flippers”… legal and all that, but riding housing as sole vehicle for “profit”. And then we have those caught up in “momentum” (critical masse)… assuming credit wherever they could tap it and then some… and this group, still legal, has -0- hope of getting “caught up” in this economy, no matter what happens.
Put all this under the microscope,deconstruct, look more closely at details, put it back together… and many many more nuances which, in somewhat honest times, would suggest favorable or unfavorable treatment by the courts as to HAMP, refi (etc.) solutions.
But the problem is so large, the underlying economy so displaced, and the original issuers (riddled w/fraud in so many stops along the way) firmly entrenched in our current “financial system”… there’s whole lot of really bad, immoral actors in this story w/laws entirely inusufficient to address real situations.
The remaining dilapidated pie (home values) in no way resembles what we started with a decade ago. The values do not stand in isolation: they stand representative of real earnings from an underlying economy drastically altered, in every manner and every influence, from where it started.
The things I’ve suggested to you in comments going back a ways… that our 2ndary ED was slipping into both decay and grossly over specialization (that’s a story in itself), that US DOW inspired economy is a huge distortion of our economic activity, that global economies are passing us by (and we have largely financed their learning curve)…
Novick and that crew’s description of the “foreclosure problem” is a narrow POV of finance which, as I’ve also tried to impress previously, relies on the currency metrics which have become entirely disconnected from the underlying economy which that currencly (USD) represents.
AFAIC, it’s an exercise in “let’s pretend”.
I have also told you previoulsy my own personal experience w/things Chinese… what they are doing not just economically but w/their society as a whole. I find, over this decade, a complete mis-representation of this in the US by everyone responsable for describing it… media, econ/finance/investment gurus… everyone.
If you’ve been following international markets closely, however, what is happening at breakneck speed is maturing (*very* maturing) Chinese products in very globally needed markets. Just in last week, their communications hardware production mentioned quite a bit as forming US based operations poised to win contracts w/our biggest carriers (Sprint/Verizon). Huawei, ZTE and several others: all homegrown Chinese technology, cutting edge… best on the planet. Yet, Google on “conservative” US financial writings on these companies and you’ll find mostly scare tacticts: they “threaten our national security”, “unfair state subsidies”, etc. etc. Or in other words, anything but acknowledge the Chinese have organized their finance & activities so as to produce cutting edge products in much needed markets, and we have not.
The Chinese have delivered very high tech glass products for US high rise in last couple years… stuff that dramatically lowers construction costs and provides better energy/effecient use of available material benefits… because Chinese glass manufactureres have been willing to hugely invest in state of the art equipmjent while US glass mfgs were not.
It’s the same story across the board. They are selling clean coal tech/products around the globe. They are building state of the art energy plants all over ASIA for a fraction what US competitors can/will deliver. Same w/water processing. Same w/hi tech materials.
There is a big exodus of best/brightest Chinese US citizens going back to the mainland, drawn by what’s going on there and disillusioned w/what they see as this decade of “free market enterprise” resulting in this absurd mortgage mess and deteriorating, unintelligent, rudderless political NON SENSE.
There are less resources available for more people on the globe. Our (US) ability to exploit cheap labor to maintain a standard of living has just about run it’s course. We can’t turn that switch on again. These “emerging economies” have emerged. China, over last 7 yrs., has re-invested +/- 15% of GDP in R&D, infrastructure, etc. US, less then 3%.
And we’re having conversations about how do divy up remaining foreclosure values, which in themselves remain massively distorted by their abstracted relationship to our underlying economy.
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Our populace does not understand any of this. They don’t understand we’ve been pushed aside globally, and they don’t understand the problems we have which really need to be addressed but, sadly, are being discussed in non-relevant non-sense (more tax cuts, less government, whatever) that doesn’t really address anything that matters. And the same people (finance) who got us in this mess are driving the conversations, setting “the agenda”.
US has more then a housing/mortgage bubble aftermath to deal with, we have a un-reality bubble that most don’t want to acknowledge.
This divying up of remaining morsels of the mortgage mess does not begin to address the dysfunction in entirety of what we call economy. Looks more to me like fools arguing over their portion of largest pieces of the Titanic.
One last thing on principles… there is another one, built into the fabric of creation: that is…
This is immutable fact. Gravity requires two or more bodies of something to act. Gravity operates on everything in creation, everywhere in our Universe. Nuclear structures, exactly the same w/exactly the same immutable laws (principles). All participants matter… they all affect the others. Immutable, and reality based. Always the same, never a single incident where the laws do not hold.
Principles… principles. No amount of jargon… “free market”, “liberty” or any of the rest masking (essentially) massive theft by our professional money changers… none of it alters the principles built into creation. I mention this only because you have made a point on several occasions of your religious beliefs, specifically stating “we all belong to God” and simliar statements. I take that as an implication that means something. As I’ve said previously, I see/applaud a moral determination in your writings I do not see in most finance/econ/investing blogs/media. So, my purpose in these screeds is an attempt to tap into that moral core, and suggest to you there is meaningful value in both considering and speaking to the larger environment in which these things operate.
Principles exist in creation. They exist. They are fundamental… the most basic and unalterable foundations of creation. Principles have charactaristics, which I have described (eg: always true, always operate throughout creation/universe w/out a single exception), and they can be used by human beings. It is the reliability of these principle in creation, understood and appropriated by people, which allows me to put my thoughts on your blog. They underly the certainty by which we put satelites in reliable orbits. Soooo much of our daily lives depend on principles, well understood by those who work w/them, but not only ignored but lied about by our captains of finance.
We are having arguments/discussion/descriptions of scenarios that ignore interactions of all the parts. We mock the rules (principles) of creation currently. When there is a critical mass of people lieing about the reality, and making plans based on those false assumptions, no worthwhile solutions will ensue (to put it optimistically).
Everyone matters, everything everyone does contributes. This discussion (foreclosure resolution) attempts to address layers upon layers of abstraction, each non-representative of the larger systems in which they operate, becoming more focused on small pieces while ignoring the whole (eg: myopic).
Our (US) culture is imploding w/mis-informed stupidity. The evidence is overwhelming. Yet, it’s largely ignored.
We are in the midst of a society wide exercise attempting to define reality w/stupidity while ignoring the unalterable rules built into the environment in which we live.
Currency is not a principle, it has no value in and of itself. It is a human construct. It requires honest metrics in order to have it reflect even a modicum of whatever exists that we call value. It is a symbol, at best.
Currency works as a social contract… the participants of a society abide by the laws… the *agree* to the rules layed out to make it work. The value in currency, ultimately, is a function of critical mass agreement in the rules laid out for it’s participants. Whether this foreclosure mess, or the corrdoing of what we call economy in larger context, these agreements have been transgressed grossly. At some point, if this trend continues here, the agreement will disintegrate.
Currency, quite obviously, properly implemented, is the tail on the dog… not the head.
Our captains of finance… those who direct most of our currency, have put the tail in charge: the currency is operating functionally as the head. The economy is being defined by it, while ignoring the human activity in our society which ultimately creates or disintegrates it’s value. Or, in religious terms you sometimes articulate, looks to me like it’s very much become the golden calf our Christian traditions warned of. EG. an idol, non representative of anything of value.
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The thing I’m reading a lot from what appears to be incoming “conservative” lawmakers is embryonic discussion coalescing around eliminating the mortgage tax credit. I take it that explaining how this will affect us culturally (not to mention economically), given we have a century or more where owning a home was the “American Dream”. If indeed this happens (eliminate mortage deduction), w/out any meaningful economic refocusing here, looks to me like just another indication of US slide socially/culturally/economically.
We have no US intelligent conversation about Energy, rather that one is dominated by very narrow interests of fossil fuel industry. That melting the polar ice cap to get access to reserves there goes undiscussed nationally, it is evident in their ambitions. Yet, as w/this finance fiasco, no intelligent discussion. None.
Same with water. We’re running out, our infrastructure is wholly insufficient to support our needs. But again, -0- intelligent discussion. The captains of finance tell us “free market” solutions are the answer. What they don’t say is their attempted free market implementations around the globe have done much to further isolate/diminish US influence, as these efforts were wholly exploitative.
Just like the mortgage mess.
I’ve been reading for some years now that anonymous international investors are waiting in earnest to buy up our public roadways if privatized. Going this way is a “solution” on the minds of many of incoming lawmakers. The evidence of consequences from this are already evident… have you driven from downtown Denver to the airport and back?
$15 or so roundtrip. Is this effecient use of those who commute to work at that airport… +/- $500 p/mo. per employee going into private hands?
Am I getting any resonance w/you at all?
We need a critical masse of smart, intelligent people getting honest about stuff. Only reason I bother is a hope that perhaps *you* might (as I’ve said) expand your contexts and join w/some other smart people so as to contribute to more worthwhile conversations thoughtfully considering things.
As usual, if you find me trollish or foolish or whatever, just let me know… I don’t need to do this and don’t want to be a pest.