financial crisis

Want to Foreclose? Show Me the Paper!

Susanne Trimbath — Wed, 04 Mar 2009 20:55:15 -0500

Since October 2008 I’ve been writing here about problems in mortgage backed securities (MBS). There is more evidence surfacing in bankruptcy courts that the paperwork for the underlying mortgages wasn’t provided correctly for the new bond holders, leading to delayed or denied foreclosure proceedings.

New York Times’ Gretchen Morgenson is reporting new successes in cases from Florida and California. A judgment on a home in Miami-Dade County (FL) was set aside on February 11 when the new mortgage holder could not produce evidence that the original mortgage lien had been assigned. In one of the California cases, the lender tried for foreclose on a mortgage that had previously been transferred to Freddie Mac!

The earliest decision I’ve seen is from Judge Christopher A. Boyko in Cleveland. Plaintiff Deutsche Bank’s attorney argued, “Judge, you just don’t understand how things work.” In his October 31, 2007 decision to dismiss a foreclosure complaint, Boyko responded that this “argument reveals a condescending mindset and quasi-monopolistic system” established by financial institutions to the disadvantage of homeowners. The Masters of the Universe were anxious to pump out mortgages into MBS so they could continue to earn fees – making money at any cost.

One element of the newest Homeowner Bailout program is to allow bankruptcy court judges to modify mortgage loans. If the types of cases decided in OH, FL and CA continue to spread, that may not be necessary. The first question in any foreclosure procedure will become: can you prove a lien?

This raises further questions about those “toxic assets” that Geithner and Bernanke are so anxious to buy up at taxpayer expense. According to the Morgenson article, some MBS holders are trying to force the mortgage originator to take back the paper. However, many of the worst offenders are already defunct.

Oh, Canada? A Safe-Haven for Banking Investments

Susanne Trimbath — Thu, 26 Feb 2009 18:05:30 -0500

Looking for a safe haven for your banking investments? The Royal Bank of Canada is about three times the size of Citigroup, Royal Bank of Scotland or Deutsche Bank – and they haven’t cut their dividend in more than 70 years. Although Canadian banking profits declined double-digits last year, they actually had profits. Pretty much the rest of the world’s banks are reporting massive losses.

It seems the folks above the 49th parallel have been fiscally responsible. According to a story on Bloomberg.com “not one government penny” has been needed to support any Canadian bank “from British Columbia to Quebec” since the financial meltdown began in 2007. Not that the Canadian government left them out in the cold, either. A $C218 billion fund was set up last October – ostensibly to be sure Canadian banks could compete in international markets with all the government-backed banks in the rest of the world – but none of the banks took any of it.

According to Bloomberg, European governments “committed more than 1.2 trillion Euros ($1.5 trillion) to save their banking systems from collapse.” As close as I can tell, between the Federal Reserve and Treasury, the US has poured over $3 trillion down the drain of financial institutions.

(To understand the complications in calculating an exact U.S. amount, see my earlier articles for more information on how the Federal Reserve Bank of New York, under now-Secretary of the Treasury Tim Geithner, funneled money through Delaware limited liability companies to non-bank entities.)

Only 7 banks in the world have triple-A credit ratings – 2 of them are Canadian. While the rest of the developed, industrial nations are pouring hundreds of billions each down the black hole that is their financial systems, our Neighbors to the North were engaging in “solid funding and conservative consumer lending.”

Canada is the only member of the G-7 to have balanced their budget 11 years in a row. Immigrating to Canada is looking like a better idea all the time.

Not Everyone is Playing the TARP Game

Ian Lausa — Wed, 25 Feb 2009 17:25:37 -0500

Banks in Connecticut, once interested in accepting funds from the Trouble Asset Relief Program, are now “questioning whether it’s worth participating in the program.”

Concerns over the undefined terms and changing conditions imposed on those accessing TARP money has made the banks uneasy about such long-term commitments.

President and CEO of Connecticut River Community Bank, William Attridge, said that the fundamental problem with the program is its open-endedness and the reliance on total-compliance from the banks regardless of any future changes.

President Obama and members of Congress “are under public pressure to toughen conditions on the TARP money in order to improve the poor public image.”

The TARP program was originally created with the intent to “revive bank lending” according to Treasury officials. However, with the obscure terms and conditions currently associated with the program, some argue we’ve lost sight of TARP’s original purpose.

With approximately $293.7 billion in TARP funds distributed as of Jan. 23, undefined regulation doesn’t have all banks protesting.

Some smaller bank feel that increased capital will help the banks “continue to steal market shares from larger banks and help offset inevitable weaknesses among borrowers due to the recession.”

It remains to be seen whether or not the Connecticut bankers will take TARP money, but too many unknowns and perceived risks will certainly be factors in its approval.

Where is the financial bailout money going?

Mark Schill — Tue, 02 Dec 2008 16:42:19 -0500

So far the Treasury Department has spread out $241 billion to AIG and 124 banks in mostly coastal states and Ohio and Indiana. Check out ProPublica's frequently updated map of financial bailout recipients. ProPublica is monitoring the bailout and offers an RSS feed and a bailout widget to keep tabs on where the money is going.

Here's some other financial crisis visuals:

Visual Guide to the Financial Crisis
A map at GEOCommons of the Wachovia takeover by Wells Fargo
Our GeoCommons Map of states dependent on the securities, commodities and investments industries