Tuesday, October 19, 2010

Today's Best Reads

1--Geithner Weak Dollar Seen as U.S. Recovery Route Versus BRICs, Bloomberg

Excerpt: “In an era where deflation pressures appear to be the greatest risk, growth is below trend and the U.S. wants to boost exports, why would they not want” a weaker dollar, Jim O’Neill, chairman of Goldman Sachs Asset Management in London, said in an interview. “The answer is when it becomes a problem for financial markets. Until then it’s a straightforward strategy.”

“The dollar is going to go down,” Martin Feldstein, a Harvard University professor who was chief economic adviser to President Ronald Reagan, said Oct. 7 in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “It will cause Americans to shift from imported goods into domestic services. All of that will strengthen the economy.

“A low dollar will be with us for longer than most people expect,” he said.

2--Brazil's top economic officials won't attend G20, Reuters

Excerpt: Brazil's top economic officials will not be attending meetings of Group of 20 finance ministers and central bank governors in South Korea this week, the finance ministry and central bank press offices said on Monday.

Finance Minister Guido Mantega canceled his trip because of currency issues, the press office confirmed, adding that he had just come back from an international trip and would be accompanying President Luiz Inacio Lula da Silva to the Group of 20 leaders meeting next month.

Reuters reported on Friday that Mantega would not be attending the meeting and would unveil new currency measures aimed at containing a rapid rise in the real BRBY this week.


Excerpt: The myth that the Banks/Lenders were not paid 100% for these defaulted loans.... Ask any attorney that does loan modification. What is happening is that the borrower finally – after 8 months or more – gets a trial period loan modification from the Lender. The trial period modification amounts to something like 31% of the total income of the Borrower. The monthly mortgage is reasonable and the Borrower enters the agreement.

Several events quickly transpire after that. First and foremost, the Lender is getting paid from the U.S. Government (read Tax Payers) anywhere from $1000 to $2500 for that modification. So a Borrower you gets a payment of $1200 under the HAMP program enters the agreements and pays. At the same time the Bank is getting another $1000 to $2500 from the Government. In sum, the Bank is actually receiving between $2200 to $3700 for that same loan. What happens when the Bank no longer receives the Government money – all of a sudden the Borrower, who has paid in accordance with the agreement, no longer qualifies for the modification.

The trial period was designed to prove that the Borrower could and would pay the agreed upon sum. After the three months the trial period modification was suppose to turn into a permanent modification. What happened in the majority of cases is either the Bank simply informs the Borrower that he/she no longer qualifies or the Bank jacks the monthly payment up to the original monthly mortgage payments. Following this action the Bank wrongly reports that the Borrower fell out of the modification. What really happened is that the Bank forced the Borrower out of the modification by refusing to make the modification a permanent modification. In short, it is the Banks fraudulent activity that forced the Borrower out of the modification as it is the Banks fraudulent activity (by way of securitization) that has caused the foreclosure crisis.

4--Mary Daly of the SF Fed: We are at Risk of a Long period of Sustained Disinflation, Economist's View

Excerpt:Despite the official announcement, the public thinks the recession is ongoing. According to a CNN/Opinion Research Corporation Poll in September, more than 70% of those surveyed thought the U.S. economy was still in a recession.

One reason for that view is that the economic recovery is proceeding at a very slow pace and has lost momentum since the spring. The effects of this downshift are visible in consumer confidence, which has fallen from earlier in the year.

Japan's experience beginning in the early 1990s underscores the risk of getting into a long period of sustained disinflation. Japan fell into deflation in the mid-1990s and has yet to recover.

5--That Sinking Feeling, Bob Herbert, New York Times

Excerpt: Barack Obama seems to think he’s done a pretty terrific job as president, but maybe he hasn’t trumpeted his accomplishments effectively enough...

The voter unrest that is manifesting itself in myriad (and often peculiar) ways reflects a real fear that not just family finances but the country itself is in a state of decline.....Job creation was the most important issue. ... Employment never seemed to be the top priority. What ordinary voters see is an economy that is not working for them and an increasingly dismal outlook for their children...

... the Obama administration needs to begin focusing much more intently on the economic plight of ordinary Americans. Nearly 44 million are living in poverty. ... Job security and benefits like paid vacations, health insurance and a secure retirement are going the way of the typewriter. More than 11 million new jobs would have to be created just to get us back to where we were when the Great Recession began. No one sees that happening anytime soon.

6--Even More On The Origins of the Deficit, Paul Krugman, New York Times

Excerpt: During the pre-crisis period, spending grew slightly faster than GDP — that’s Medicare plus the Bush wars — while revenue grew more slowly, presumably reflecting tax cuts.

What happened after the crisis? Spending continued to grow at roughly the same rate — a bulge in safety net programs, offset by budget-slashing at the state and local level. GDP stalled — which is why the ratio of spending to GDP rose. And revenue plunged, leading to big deficits.

But I’m sure that the usual suspects will find ways to keep believing that it’s all about runaway spending. (Don't be "put off" by the boring title)

7--Income Inequality: Too Big to Ignore, Robert frank, New York Times

Excerpt: During the three decades after World War II, for example, incomes in the United States rose rapidly and at about the same rate — almost 3 percent a year — for people at all income levels. America had an economically vibrant middle class. Roads and bridges were well maintained, and impressive new infrastructure was being built. People were optimistic.

By contrast, during the last three decades the economy has grown much more slowly, and our infrastructure has fallen into grave disrepair. Most troubling, all significant income growth has been concentrated at the top of the scale. The share of total income going to the top 1 percent of earners, which stood at 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average inflation-adjusted hourly wage declined by more than 7 percent.

No one dares to argue that rising inequality is required in the name of fairness. So maybe we should just agree that it’s a bad thing — and try to do something about it.

8--Mortgages were pledged to multiple buyers at the same time, Washington's blog

Excerpt: Bank of America alleged in a court filing this June:

It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies....

April Charney - a consumer lawyer with Jacksonville Area Legal Aid - and CNBC's Dennis Kneale noted in February 2009 that courts have found that some mortgages have been sold again and again to different trusts, when they should have only been sold once....

And as long-time foreclosure investigator Nye Lavalle writes:

On thousands of occasions I stated to regulators, CEOS, banks, Fannie and Freddie that the practices of the banks were that they were double and multi-pledging assets and pledging paid off and refinance notes to securitizations. This is something April, Max and I have discussed for years now. Now, they come and admit that each of my allegations were true Without analyzing the deal, as complex as they are, you WILL NEVER KNOW IF THE FORECLOSING PARTY HAS “ANY” RIGHT TO FORECLOSE!!!

The motives I identified for the “Blank Endorsements” and missing assignments and "pre-notarized" “Blank Assignments” and “Blank Allonges” that “were placed into the “custodial/collateral” files were to be able to:

Multi-pledge collateral (Notes) so as to cook the books ....(must read)

9--The Unbearable Slowness of Understanding, Paul Krugman, New York Times

Excerpt: It was obvious to me, soon after Lehman fell, that this was the big one — that we were well on our way to a lost decade unless decisive action was taken quickly. Yet we’ve spent most of the last two years worried about the wrong things — inflation, crowding out, invisible bond vigilantes.

Even now, we get things like this:

Many economists remain confident that the United States will avoid the stagnation of Japan, largely because of the greater responsiveness of the American political system and Americans’ greater tolerance for capitalism’s creative destruction....

... what on earth would give one reason to consider our political system “responsive”? The truth is that we’re responding worse than Japan did....And yes, I’m depressed about it.

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