Sunday, October 16, 2011

notes on the week ended Oct 15th

as expected, the obama stimulus, aka "the american jobs act", that was introduced with the hoopla of speech before a televised joint session of congress on sept 8th was defeated in the senate on tuesday - or i should say it wasnt even taken up, as two democrats joined the republicans to assure that it wouldnt have nearly enough votes to get the 60 votes needed to shut off an expected filibuster & have it considered; at least now it wont even have to go to the republican house to be defeated...the administration is now expected to turn to what components of the plan that might be salvaged and pass both houses of congress piecemeal...its likely that the portion of the payroll tax cut that is now in place (as of last december's mcconnell-obama deal) will be re-introduced, and possibly some of the hiring incentives for business may also see the light of day if introduced separately...but the critical portion of that package we'll have to keep our eyes on would be the $49 billion extension of unemployment rations to cover the 6 million of us who've been unemployed more than 26 weeks...if you recall, those rations expired for weeks at a time last year, first at easter, then at the end of june, & again at thanksgiving, as they were being extended in short term fixes of a couple months each until the year end deal solidified them for this year...but unless they're extended before Dec 31st, the unemployed will start getting cut off every week as whatever tier of those rations an individual is on expires...

on the same day as the jobs bill was killed, the senate also took up & easily passed a bill charging china with currency manipulation, which would impose unilateral and broad-based tariffs against them; so instead of a jobs bill, we have political scapegoating likely as ill advised as the smoot-hawley tariffs were in the Great Depression, as everyone loses in a trade war; china's currency has been undervalued, but they had been letting the yuan float up slowly; their reaction to congress's action was to defiantly push the yuan lower...there is nothing unique in the way china controls it's yuan's value; 58% of IMF-member nations do the same; & while only 14% allow their money to float freely, even some of those, such as japan & the swiss, have recently intervened to hold theirs below certain levels...since 2005, when they first allowed the yuan to float to a limit, china's yuan has gained 30% against the dollar, at a even pace of 1/2% a month (except for a hiatus at the height of the crisis), which impresses me as a reasonable way to assure an adjustment with as little domestic dislocation as possible...& even if chinese goods were to suddenly become more expensive here, this country would be slow to retool its industry to produce those same goods domestically...

then on wednesday, the house approved 3 free trade deals, with colombia, south korea and panama, which had been languishing since the Bush years, which moved quickly through the senate so they could be signed by the president before the korean president's visit thursday...to clear the path for the passage of those deals, both houses also approved a renewal of the Trade Adjustment Assistance program, which will aid companies & retrain workers who lose their jobs to outsourcing to those countries...the trade deals are also expected to increase US exports to those countries by $13 billion...

i was quite surprised on thursday to see the ohio county i live in, Geauga, enter into a class action against MERS (Mortgage Electronic Registration System), MERSCORP, & its member banks, on behalf of all counties in ohio…you'll recall that the banks formed MERS in the 90s to get around the requirements (& fees) of state laws that required every mortgage (deed of trust) and note (obligation to pay the debt) to be recorded manually at the county courthouse where the real estate transaction took place...since it's inception, most every mortgage transferred has gone through this MERS system, and MERS has claimed to now hold title to roughly half of the home mortgages in the nation — something between 60 & 65 million loans...we've talked about challenges in several states as to whether MERS had legal status to foreclose, and the fabrication of documents used in that process, but the geauga lawsuit goes to a deeper problem...the complication that arose during the securitization process (wherein banks packaged the loans into MBS, then sliced & diced them into CDOs of multiple tranches) was that the electronic record keeping of the multiple rapid security transfers broke down, & no reliable paper trail was maintained...so the geauga county lawsuit addresses this problem, & charges that the "defendants systematically broke chains of title throughout Ohio counties' public land records by creating "gaps" due to missing mortgage assignments they failed to record, or by recording patently false and/or misleading mortgage assignments. Defendants' purposeful failure to record has eviscerated the accuracy of Ohio counties' public land records, rendering them unreliable and unverifiable -- damage to public land records that may never be entirely remedied" ...what we see here is that because of the banks slipshod record keeping, even those people who have been paying faithfully on their mortgages may not have clear title to their homes when their mortgage is paid off, possibly making it difficult for subsequent owners to get title insurance...it goes without saying that this is national problem; there is no way of telling from this lawsuit how many home titles may be clouded, but i know that this county & its politicians are very conservative, low-key & laissez-faire, so they wouldnt have acted if it werent a serious problem & they didnt have MERS dead to rights...

the mortgage servicers themselves will be coming under some pretty heavy scrutiny as well; the CFPB (Consumer Financial Protection Bureau), the dodd-frank agency inspired by elizabeth warren, has published a set of servicer examination procedures, so they may soon be faced with complying with the laws they have heretofore been ignoring...& realtytrac reported 3rd quarter foreclosure statistics. which were reported on by MSM with an array of confusing headlines; first time default notices were up 14% over the 2nd quarter, but total activity - default notices, scheduled auctions, and bank repossessions - was up only 1% over the second quarter; moreover, most of that was in August, during the surge of filings by BofA i reported on at that time, and it slowed again in September...overall, foreclosures fell 34% from a year earlier in Q3, and the average time to process a foreclosure in New York State, where courts have required that the foreclosing attorney certify the accuracy of documents, is now up to a record 986 days...

there werent any economic reports that i normally follow closely this week, but there was a surprising jump in september retail sales of 1.1%, led by new car sales, but even ex car sales retail sales were still up 0.6%...this flies in the face of declining consumer sentiment as reported by Thomson Reuters / UofM and Gallup, and a Pulse of Commerce Index which tracks diesel fuel, which is showing a 3 month decline an annualized rate of 10 percent; moreover, if retailers were optimistic, we wouldnt be seeing YoY declines of as much as 15% at the five busiest US container ports, at a time when christmas shipments should be coming in...

europe, of course, is still the elephant in the world's economic crisis room...& it continues to be frustrating to try to get a handle on what's happening; one can read on one hand of leaders like merkel & sarkozy coming to a broad agreement which they say will solve europe's problems, & on the other hand see slovakia block the expansion of the stability fund which would require they put up 12% of their GDP to help save greek pensions, which are 4 times more than slovak pensions...and the major reason the fund needs to be expanded would be to protect italy; yet italy's own contribution amounts to 18% of the fund, so they'd have to pony up more, too...and banks are expected to need more capital in anticipation of a greek default, but even the wall street journal reports estimates of needs as low as €7.6 billion to as much as €413 billion...greek bondholders agreed to take a 21% loss in july, now there's talk that may be as much as a 50-60% haircut...greece, portugal and spain are now all reporting they will miss their deficit targets, but it's easy to see why; imposed austerity left them with unemployment rates of 16 1/2%, 12.3%, & 21% respectively, & the pay has been cut for those who are working, so of course they're collecting less taxes! and as those countries are continuously bled by foreign investors, less remains in their domestic economies, & their downward spiral accelerates...in greece, refinery strikes have just about shut down transportation, garbage is piling up, and even the tax collectors are on strike because of pay & pension cuts, so it seems whatever their government has agreed to is moot...

yesterday, the protests against the banks inspired by "Occupy Wall Street" spread to at least 1500 cities in 93 countries; obviously, as i've been working on this & my link package while they were ongoing, i havent watched the news on them & cant report much...i know they started yesterday at sunrise in wellington, auckland, & christchurch, new zealand, and noticed as they followed the time change to sydney, tokyo, & hong kong; although generally peaceful, some violence had been reported in a takeover of a goldman sachs building in milan, and anarchists were said to be leading the demonstrations in rome...in this country, i've seen that much of the left establishment wants to guide OWS & Occupy Together into an agenda with specific demands on the system…i disagree; our system has been captured by plutocratic special interests, & solutions to our problems will not arise through our corrupt & dysfunctional politics...our generation blew it; we screwed it up, or let it be screwed up, for these kids, so we should just shut up & get out of the way; it’s time to let them decide where they want to take it from here; it’s their world now, & they have the most to lose if they get it wrong…i can only hope they can find it in themselves to reject most of the failed structures we've left them...

the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me


No comments:

Post a Comment