Re: some investment banks directed Clayton to halve the sample of loans it evaluated in each portfolio
Yah gotta love that idea, and why not look at half the collateral and half the income, half the payment...great idea that is ahead of the curve! Speaking of the curve:
Will anything President Bush says make much difference?
On the home front, no. His percentage approval rating in polls is down to the mid-30s, there are Democrat majorities in both the House and the Senate, and national attention is fixed on the battle to succeed him. Mr Bush is the lamest of lame ducks. Immigration reform will have to wait for a new president, while the stimulation package for the economy, on which he will dwell tomorrow, has bipartisan support and will pass whatever he does. In foreign affairs, presidents have a freer hand under the constitution. What Bush says must be taken seriously. Remember the "axis of evil" line in his 2002 address and what happened a year later?
It is unclear how many lending exceptions are contained in the $1 trillion subprime mortgage market, ...
Uhhh oh. They used the "t word." Must be serious. Good to know however that the exceptions are contained in the sub-prime market.
Yawn., wake m,e up when they start talking gazillions or admit they never saw it coming or it is happening far faster than anyone expected or that no one imagined the extent or....
This is a good development. Only after very public prosecutions will the government have the cover to bail out the monolines or otherwise throw 200 Billion dollars at the players to stabilize the financial system.
Personally I would like to see a very large number of prosecutions and a large number of 20+ year jail sentences. I would also like to see successful lawsuits ruin many of the firms involved. That ought to take care of much of the moral hazard worries.
There really needs to be a great deal of punishment though... enough so that the average person, who doesn't pay close attention to these matters says to themselves "Wow - so very many executives doing time and being bankrupted by fines - what was going on?"
Which can be summed by the following pasted summation:
Clayton performs Special Servicing for both conforming and non-conforming mortgage loans across non-performing assets. Clayton evaluates the investment value of whole loans or of a security through its modeling tools, coupled with our expertise on default related variables such as loss frequency/severity, foreclosure time frames, bankruptcy risk, REO time frames, and real estate valuation methods.
Our technological solutions provide asset managers with the information and analytical capabilities needed to focus on meaningful communications with borrowers and clients. Claytons default management system generates a NPV analysis of the optimal default resolution strategy and puts this strategy in place, in real time, while the asset manager has the attention and cooperation of the borrower.
Thr eason I like that there info, is because I like models that blow up.
Maybe just a coincidence but is Clayton Holdings related to Clayton Homes - a house trailer (pardon - manufactured home) dealer prevalent in NC for many years?
I always get excited about the first reports of these kinds of investigations, but the people who have profited rarely have to give much back. At best prosecutions permanently end practices that have already been abandoned.
But, hey, I take what I can get.
And the names are first! Yeah! (Though maybe on their own line? And get rid of the gravatar? Thanks, CR!)
If I was looking to be one of them bounty hunters, Id look at these types of things (below) related to my previous focus, i.e: some investment banks directed Clayton (MurrayHill) to halve the sample of loans it evaluated in each portfolio.
I think that implies that loans were altered or adjusted with one of them dang computer models that has fancy algorithms that help to adjust and tune in parameter variables like a fading country western radio station that increases its signal-to-noise ratio as the credit analyst zips down the credit highway, naked as a jaybird.
The information in this free writing prospectus is preliminary, and may be superseded by an additional free writing prospectus provided to you prior to the time you enter into a contract of sale. This preliminary free writing prospectus is being delivered to you solely to provide you with information about the offering of the securities referred to herein. The securities are being offered when, as and if issued. In particular, you are advised that these securities, and the asset pools backing them, are subject to modification or revision (including, among other things, the possibility that one or more classes of securities may be split, combined or eliminated), at any time prior to issuance or availability of a final prospectus. As a result, you may commit to purchase securities that have characteristics that may change, and you are advised that all or a portion of the securities may not be issued that have the characteristics described in these materials.
Loss Mitigation Advisor:
Clayton Fixed Income Services Inc. (formerly known as The MurrayHill Company).
Another interesting mix is if international banks, pensions, investment houses say "take it back"...lordy a huge outflow might be a huge inflow at par. The likes of MER and C will quiver at this thought....If it was mis-represnted send it back.
Hi, me Doc Ho, this is the late night show where things get done:
The Murrayhill Co. and Clayton Services have united under a newly formed company, Clayton Holdings Inc., which has received $134 million in capital from private equity firm TA Associates, the controlling shareholder of the new company.
Murrayhill, based in Denver, provides credit risk management to improve the performance of bonds, and monitors more than $800 billion in securitized bond portfolios. Clayton Services, based in Shelton, Conn., provides analysis, consulting and other services to companies that buy, sell and manage loans.
Im Doc and here is more stuff related to this unfolding story which Im now friggn focused on:
Note 1Organization, Description of Business and Basis of Presentation
Clayton Holdings, Inc. (collectively with its wholly owned subsidiaries, the "Company") was formed on March 31, 2005, as a Delaware corporation. The Company was formed to combine two companies which were under common control, GRP Holdings, Inc. ("GRP"), a Delaware corporation, and TMHC Holdings, Inc. ("TMHC"), a Delaware corporation. GRP was formed to acquire Clayton Services, Inc. ("CSI") and First Madison Services, Inc. ("FMS") from unrelated parties on August 2, 2004. TMHC was formed to acquire Clayton Fixed Income Services Inc., formerly known as "The Murrayhill Company" ("CFIS"), from an unrelated party on May 24, 2004.
Publication: Business Wire
Publication Date: 13-APR-05
The new organization will leverage each company's technology, robust databases, and analytical and consulting capabilities to provide a comprehensive spectrum of information-based services. These services support loan origination, securities issuance and securities performance management for the non-conforming mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) and asset backed securities (ABS) markets, which represent combined principal value in excess of $1.6 trillion.
tj & the bear, yeah, it's the opposite of all the other sites I read, but it does seem to help when scanning down the page. I've looked at some of the long comment threads, and this seems to help pick out names.
Clayton Loan Analysis System, CLAS Conduit and CLAS Reporting Tool. Our due diligence process utilizes the CLAS application. CLAS collects data and verifies it for accuracy during the on-site and centralized underwriting loan file review process. Additionally, CLAS accommodates all mortgage loan and other asset types and is a customizable application that gathers appropriate data depending on the scope of the project. CLAS verifies and tests the reasonableness and accuracy of all captured data. The system also has the ability to produce reports that identify emerging trends, while providing a real-time overview of asset quality.
High Cost Analyzer. HCA is a web-based application derived from CLAS that helps market participants identify loans that exceed federal, state and local predatory lending thresholds. Our experienced compliance professionals monitor changes in laws and regulations and update HCA accordingly. In addition, HCA is integrated with a leading on-line publisher of reference information and forms for the residential mortgage lending industry. This integration provides direct access to applicable predatory lending legislation, and streamlines the research process for compliance professionals.
Scout. Scout is an application that supports image-enabled due diligence. Scout accepts electronic images through secure file transfer protocol (sftp), DVD and CD. Images are processed, indexed and presented in our customized web-based viewer. In addition, the system utilizes OCR (Optical Character Recognition) to capture data from the loan images and present the data to a team for verification of accuracy. Scout then transfers data to CLAS and pre-populates fields based on the data collected.
Clayton.com. Clayton.com facilitates data conversion, analysis and electronic due diligence. Clayton.com is our portal through which clients, employees and our independent loan review specialists access reports and communicate with each other on transactions they are managing. Our conduit support services also use clayton.com to provide information to loan buyers and sellers as to the status of the loan acquisition process.
Mortgage Asset Recovery System. MARS is a proprietary servicing platform that assesses risk and value enhancement alternatives and identifies the optimal asset disposition methods for both performing and non-performing loans.
Clayton Fixed Income Services Report Archive. Report Archive is a secure web-based application used by our clients to download prior and current Credit Risk Manager reports for individual securitizations.
But investment banks did not give the rating agencies their due diligence reports, and it appears that the agencies did not demand them.
The firm noted that many of the problems would have been easy to identify by looking at loan applications, appraisals and credit reports but it appears that such review was either never done or ignored.
Everyone involved is guilty, because nobody wanted the party to end.
Fitch now says that it will no longer rate subprime mortgage securities unless it is provided access to loan files.
What the darn heck is the # (link to this comment) all about?
Although I have been ex-communicated and banished, its nice to see the input from today being applied; hope you dont mind me looking around the shop, f you do just shoot me.
Over the next few years, Sue traveled the country selling her credit risk management services to fellow first and second loss MBS investors that she met while at AIC. Sue demonstrated Murrayhills effectiveness by achieving a loss severity 12% lower than industry average on transactions that had Murrayhill as credit risk manager. Murrayhill achieved moderate growth with a core clientele of insurance companies and hedge funds who invested in subordinate bonds.
All candidates for credit risk manager positions at Murrayhill then must have eight interviews over three days. The eight interviewers, from different areas of the company, then meet to discuss the candidates, with the most important criteria being cultural fit.
Murrayhills culture was designed to give high energy, intelligent, and goal-oriented people a place to thrive. All employees must possess a great deal of self confidence to confront servicers and trustees to demand investor compensation for their errors. It is not unusual for a motivated credit risk manager in their first year to be given the responsibility of contacting and advising Wall Street traders regarding their MBS performance.
Using its three years of credit risk management experience, Murrayhill developed database risk filters that allow credit risk managers to electronically identify the loans in a security that threaten investors with losses, based on loan history, borrower behavior, loan characteristics, or risk events. Murrayhill filed for a patent on this technology, as it was truly innovative for the industry.
Credit Risk Management Murrayhills credit risk managers intensively review, analyze, and report on the loan-level data collected from servicers, master servicers, and trustees. This is done by applying the patented risk filter technology to the loan-level data. This allows credit risk managers to identify the most at-risk loans and loan pools. In the event of a foreclosure, Murrayhill ensures that servicers adhere strictly to state foreclosure timelines to minimize investor loss. Murrayhill also monitors mortgage insurance claims to ensure that they are filed timely and accurately.
** Word count; you have to limit words and stop this interesting stuff from becoming too chaotic; somebody help me......please, chop my words off and stop me from adding to your misery
Just took a quick look at Clayton's Q3 financials. Take out the goodwill and intangibles, and its not a pretty picture. Most likely they'll be BK before the trials ever get started.
Method and apparatus for processing billing transactions
Abstract
A computer system and method for processing bills for a plurality of customers of a plurality of node systems within a larger system, each customer bill having a particular billing cycle, comprises a memory for storing a plurality of customer bill records containing raw data to be processed to generate a customer bill. The system also comprises a bill production initiator for waking up periodically and initiating a billing cycle for a plurality of the customer bill records stored in the memory. At least one bill production manager generates a plurality of processing group files containing at least one of the customer bill records stored in the memory such each processing group file has an efficient size and contains customer bill records having at least one common variable. At least one bill production worker processes the customer bill records from at least one of the processing groups.
Inventors:\tLogan; James R. (Parker, CO), Gollob; David J. (Highland Ranch, CO), Cohen; Mark B. (Aurora, CO), Williams; Craig G. (Golden, CO)
Assignee:\tCSG Systems, Inc. (Englewood, CO)
Appl. No.:\t 09/026,095
Filed:\tFebruary 19, 1998
I'd be amazed if any lender could be dumb enough not to fully disclose everything in order to CYA theory, but then again I never thought I would see a tail on mortgage pig.
You know what doc, if you're want an improved blog with word counts and whatnot so you can double your cut n paste, bugger off out of here and start your own.
What does that manual of DTCC specification cover?
Is it data that mortgage pool buyers should have been receiving and analyzing all along?
Given the date shown, many of our captains of finance are going to feel very French (as in SocGen) when they notice the gap between theory and nuts-and-bolts reality.
CR - sorry to be hassle. I think there is a missing [tr] tag at the beginning of certain comments. An online validator says the first missing tag is between the following two elements.
[!-- cached 44 comments and j_u --] [td class="MessageCell"]
But it's not missing every time after that, and I don't see a clear pattern as to why.
The validator I used to find it is here (ignore all the complaints about [br] tags):
They did not even bother to review some of the loans.
"In November, Fitch Ratings published a detailed review of 45 loans in an effort to identify what went wrong as mortgages were turned into securities. It found extensive inaccuracies and fraud. The firm noted that many of the problems would have been easy to identify by looking at loan applications, appraisals and credit reports but it appears that such review was either never done or ignored. Fitch now says that it will no longer rate subprime mortgage securities unless it is provided access to loan files."
AZ Cowboy - Can you provide more detailed info on why you think things are so dire at CLAY? They've got a lot of cash in the bank, and the bleeding seems to be slowing. If I'm reading the financials right (definitely a stretch for me), they seem to be growing cash at the moment. I ask you this because, in a moment of contrarian idiocy, I went long on them a month or so ago.
F. Frederson, I checked other Haloscan sites, and they get that same error. I didn't touch the code at that spot (at least not intentionally) and it appears all the tr td tags are correctly balanced.
OFF Topic. This is very ominous assessment by Merrill Lynch.
"The recession in housing has spilled over to the rest of the economy, in our view. We now expect an outright contraction in economic activity in the first three quarters of 2008. This downturn should be led by consumer spending... As we saw in prior post-bubble de-leveraging episodes, the healing process takes time as the bad debts get extinguished and balance sheets repaired.... Home prices are expected to decline by 15% in 2008 and by a further 10% in 2009, with more depreciation likely beyond the forecast period. The inventory situation has become intractable and home prices are still far above historical norms when benchmarked against other measures such as rent or GDP. Housing starts will probably slide another 30% from current levels, to 700k by the end of 2008 a historic low needed to clear inventories amid the worst housing financial crisis in decades... We anticipate job losses in the range of 2.5 million, close to what we saw in the last recession. This in turn is expected to push the unemployment rate up, to 5.75% by the end of 2008 and to 6% by early 2009. Rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and the lack of participation from the baby boomers for the first time in three decades likely will result in the worst consumer recession since 1980..."
Ok, CR. I'm looking at the killfile script and it may be that some other change has thrown off its search pattern. I'll let you know if I find out anything.
Doesn't really matter what they disclosed, they made reps into the securitization pools as to the quality of loan origination (i.e. no fraud in the origination, loans are as described, independent appraisal, Fannie/Freddie eligible, etc.) Breach of those reps creates a repurchase obligation at par.
The investment banks who sponsored subprime originations have got serious repurchase liability, which means that the related RMBS are worth a hell of a lot more than the market is pricing them at.
Qataris poised to snap up $3bn stake in Credit Suisse "Powerful funds backed by the Qatari government are considering assembling a significant stake in Credit Suisse..."(there goes the Christmas party) Qataris poised to snap up $3bn stake in Credit Suisse - Telegraph
MLM: I'm using Yahoo's abbreviated presentation. From the Q307 comp. balance sheet: net recievables are down and fading quickly, take out goodwill and intangibles (both worthless placeholders) and compare to total debt. On the income statement: total revenue is taking a swan dive.
Like I said, I just took a quick look. Seems like most of their business was related to DD on the securitized trade. And now that they are ratting out their best clients, I imagine things will get worse for them.
I Trillion apologies for disturbing the peace here (again), but I wanted to find the Patents that Clayton uses (I dont think they are the holder though) so here goes:
United States Patent\t7,003,781
Blackwell , et al.\t February 21, 2006
Method and apparatus for correlation of events in a distributed multi-system computing environment
Assignee:\tBristol Technology Inc. (Danbury, CT)
Appl. No.:\t09/564,929
Filed:\tMay 5, 2000
The system is assumed to be, for this example, a system that receives data representing mortgage applications from on-line users or customers via a global data communications network such as the internet. One or more client machines receive the mortgage applications from the internet and provide them to an application (mortgage request processing) server. The server parses various data fields of the mortgage requests and sends messages to various distributed applications running on a plurality of hardware/software platforms or processors so as to process the mortgage requests. For example, these applications can include a credit check application, a tax assessment application, a verify income application, etc
Blogger Self Edit BSE
Blogger Self Limit Control BSLS
Doc Holiday Blog Filter DHBF
More: Headquartered in Danbury, Conn., Bristol Technology is a private company that primarily serves customers in the financial services and insurance industries in the United States and the United Kingdom. Financial terms of the transaction were not disclosed.
Re: PALO ALTO, Calif., Feb. 5, 2007
HP today announced that it has signed a definitive agreement to acquire Bristol Technology Inc., a leading provider of technologies that monitor business transactions.
Ok, Im done, thats gotta be it, but wait.....to confirm:
CFIS filed two patent applications (each with multiple claims) related to data filtering technology. The first patent relates to analyzing investment data in a manner that provides a single comprehensive
tool for filtering a loan pool to identify characteristics of the loan pool and
the loans in the pool. The second patent relates to an invention that provides
methods useful for the surveillance of loan pools and investing in loan pools,
including a method for generating a loss list, for estimating a loss for a
loan, and for determining a probability of loss for a loan. These two patent
applications are pending.
In 2004, CFIS filed a
provisional patent application related to its Question Portal
Who cares??? Why bother?? My point here is that with all the models and software and great analysis they are capable of, they ended up not doing thier job to provide risk management!
I know I should shut friggn up, but look at the story and the opening of this blog: ome investment banks directed Clayton to halve the sample of loans it evaluated in each portfolio...
They friggn cut the data in half with the patented correlation filters... please, gimmie a friggn break and a laser on a shark head, this financial industry is full of retarded scumbags that need to go to jail for fraud ASAP! The technology was fine as we see in France, either a lot of people are unregulated, unwatched and forgotten, or a few trillion down the drain is meaningless! Wake up!
"Bank's billions burnt in 10 days - much more on the Jerome Kerviel scandal
I did my duty and decided to unwind these positions, said Daniel Bouton, the chairman. The bank later accepted a lifeline from two big American banks to escape the financial black hole."
hahahahahaha!!!
first they run you in, then they generously help you out of your position.
Doc H- (Off Topic?)
Still learning about the mortgage/IB business, but I know patents... and this one seems odd for risk analysis and likely worthless to anyone but their attorney.
Don't know how you found it, but the spec mostly talks about billing for cable operators. Oh, and it's really insipid trying to describe things I suspect were done for the last hundred years. The claims are worse since they don't even bother to mention that new fangled computer thang till the system claim in 9.
The method of claim 1, wherein the step of processing the customer bills includes multiple phases.
The method of claim 4 comprising the step of indicating the initiation and completion of each of the phases of the processing step.
The method of claim 5 comprising the step of determining a point for restarting processing upon a failure to complete processing.
so the rogue trader lost 5 billion euros? where did they go? onto goldman sachs balance sheet? its pretty close to a zero sum game right? goldman seems to claim they have the strongest vacuum when it comes to sucking up other parties' money! other wise who would have taken the other side of the trades of the (supposed rogue trader). why did this roil the 'global markets' so?
I didnt belive the story when it first came out, but I'm dense when it comes to the rogue element...
Thanks AZ Cowboy and daveNYC. The theory was that as the DD biz blew up, there would still be value left in helping the world sort out which tranches of what CDO's were worth something (which CLAY should hypothetically know best). Sounds like a quarter or two more will determine whether there's a small updraft or a crater at the end of the spiral. The fact that any table scraps they manage to hang onto may be lost in lawsuits is something I hadn't considered...
And another friggn thing, Re: Clayton Holdings agreed to provide important documents.
This is about software and automated systems that were programmed to look away; parameters and variables were plugged in my humans who distorted risk transfer and the people that plugged in the wrong FICO scores or slipped in no-doc or verified collateral need to be on the hook.
This is actually a chain of software driven corruption that starts with millions of loans that drift into Fannie, who engineers loan pools, with automated software and then they provide that pool of toxic waste to the underwriters that turbocharge the toxic sludge into an insidious cancer like fallout that continues to spread like nuclear rain...ok, thats a bit heavy, but it spreads like Hurricane Katrina as it enters The Gulf Of Mexico, using the superheated waters riff with bulding boom runoff, to fuel the energy of systemic financial collapse.....no, thats too heavy also, how about..... self edit/word count too high and inflating out of control....
stinky,
The regulators have always in the past had marching orders to hold off anything BIG until after major elections if possible. Runs are another matter which would cause regulators to act quickly. I do not see many runs at this point, however if the market continues huge swings the public will become increasingly nervous about their money and its safety. I do see more money being deposited into banks for insurance protection short term as I think Mom thought would happen if they pull it out of a crashing market soon enough.
Qataris poised to snap up $3bn stake in Credit Suisse...
God, think of the terrible mess we'd be in were it not for these extreme "savers" and their bags of money. They have done the saving that we ought to have done and they will get the rewards for that. When greed is married to stupidity terrible things happen, like the US housing disaster.
CR - hopefully you'll read down this far tomorrow. I think that the last "|" got moved around and only shows up when the user adds a homepage. This needs to show up regardless of whether or not the user adds a homepage. The killfile script is looking for a total of two bars. (I think. I hate deciphering regex. If anyone enjoys that kind of thing please pitch in.)
bankrate has a link to search your local banks and it will show you their exposure to various categories of lending....
The banks it puts in category 5 (one star) which is the worst, are the ones to watch. It would be interesting to follow and see what percentage of these go bk. (There are more one star banks than I imagined at first).
did u ever answer that post from previous thread that showed the borrowed reserves spike for the last wk to have dropped significantly? how does that affect your 12 noon conjure clock?
International Monetary Fund director-general Dominique Strauss-Kahn said a "serious" response was required to counter the risk of slowing global growth, including both interest rate cuts and increased government spending.
Yah, the bars, the new look, you need more cowbell
Hey dudes, what about a message post number also; I have begun to enjoy the references to time posts, like when someone says, hey you friggn fool where is your link @ 2:36 .....I like that, but you do have room for a number sequence
Very nice additions and Im sure your posters will all enjoy your efforts!
Reinsurance contracts that do not effectively transfer the underlying economic
risk of loss on policies written by the Company are recorded using the deposit
method of accounting, which requires that premium paid or received by the ceding
company or assuming company be accounted for as a deposit asset or liability.
The Company primarily records these deposits as either reinsurance receivables
or other assets for ceded recoverables and reinsurance balances payable or other
liabilities for assumed liabilities.
Income on reinsurance contracts accounted for under the deposit method is
recognized using an effective yield based on the anticipated timing of payments
and the remaining life of the contract.
stinky, your my last hope; Im just looking at something, but what think?
Good decisions come from knowing the facts. In the mortgage industry, that means more than simply using current rates and trends. Fidelity National Information Services (FIS) Applied Analytics division, the market leader in prepayment, default and mortgage analytics, offers immediate access to millions of loans, with the indicative data most important to your company. We can:Run custom analyses Filter out inconsequential data Pinpoint exactly what todays events mean for your loan portfolio FIS Non-Agency Loan Database is a new option for consumers of mortgage loan data and consists of millions of loans, representing up to 80 percent of the current market and acquired by FIS Applied Analytics from some of the industrys foremost trustees. After carefully screening and calibrating the data, FIS Applied Analytics research analysts use this database to develop and enhance our market-leading suite of analytic software models and libraries. Now this data is available to you...
Assignee:
SOURCETEC, Inc. (Pleasant Hill, CA, US)\t
We claim:
A data processing system, comprising: means for managing the origination of a mortgage loan by a loan originator in coordination with a loan broker distinct from the loan originator for a loan customer distinct from the loan originator using already possessed data for the loan customer, comprising: means for the loan originator providing services necessary for the origination of the mortgage loan and not duplicative of services provided by the loan broker, further comprising:
, Jan. 22 /PRNewswire-FirstCall/ -- Clayton Holdings,
Inc. (Nasdaq: CLAY), a leading provider of information-based analytics,
consulting and outsourced services for capital markets firms, lending
institutions, fixed income investors and loan servicers announced today
that its special servicing unit, Quantum Servicing Corp. has been rated
"average" by Standard & Poor's.
Right on S&P, work those ratings!!
Re: Clayton Holdings, a company ... that vetted home loans for many investment banks, has agreed to provide important documents and the testimony of its officials to the New York attorney general, Andrew M. Cuomo, in exchange for immunity from civil and criminal prosecution in the state.
Eric Dinallo has been twisting the arms of major banks to get them to put up $15 billion or so to bail out Ambac Financial Group (NYSE: ABK) and MBIA Inc. (NYSE: MBIA). If the muni bond insurers cannot maintain their high ratings with agencies like S&P, the value of the bonds that they insure could drop sharply, leading to more write-offs at Wall Street firms.
S&P has now said that the $15 billion may be just fine. "The dollars we understand that he's talking about -- $5 billion immediately and $15 billion ultimately
$15 billion might work if Dinallo can segregate to muni bond insurance and put all of the $15 billion into back-stopping the muni business.
The swaps and taxable securities are black holes that will suck up all the capital that any fool is stupid enough to throw into these companies.
He should think of ways to create "good" insurance companies and "bad" insurance companies from these zombies. Recapitalize the "good" insurance companies. Do triage and let the "bad" insurance companies die.
Well, haloscan preview destroyed my escape characters. An important part to preserve if you don't want to use the killfile-compatible default is the first part...
/^s(S[^|].?S|S)s|
The first open/close parentheses form a regex grouping that is used to extract the commenter name, upon which the rest of the killfile javascript depends.
in exchange for immunity from civil and criminal prosecution in the state.
Can the attorney general prevent private parties from filing civil suits against Clayton? If, as some have suggested, Clayton will be going bankrupt soon, I guess this doesn't matter.
I wonder what will happen if they discover the folks selling MBS intentionally misled investors and ratings agencies? What is the appropriate punishment? Is Cuomo prepared to send some execs to jail and drive some companies out of business like Arthur Anderson was shut down after Enron? I wonder what insurance companies are on the hook for securities fraud liability?
I see this as significant in a couple respects in that it could potentially increase the liability of the IB's and ratings agencies, the prior for less than full disclosure of a material change in the underlying quality, and the latter due to a lack of due diligence to uncover the change & a subsequent move in the ratings to reflect the deterioration.
One more thing that people may have blown by in regard to a link by crispy-
" The problems have been exacerbated by the fact that prime brokers, the arms of investment banks that finance hedge funds, have tightened lending policies.
One manager said: Since market losses are magnified by leverage in a hedge fund, there can be a sudden need for a cash injection. But this time, the banks cant lend as easily. Funds are then forced to sell, which causes even more problems.
This is very significant, if correct, various publications over the last month have reporting the tightening of margin requirements by the IB's, the hedge problem in this environment faces significant problems should the markets move contrary to their models. In my opinion, as stated many times, the risks to the markets are real and this is exactly what you have been witnessing over the last few weeks. Significant deleveraging at any cost.
Normally non-correlated assets are now correlated, short positions are covered (financials) and longs liquidated (commodities & tech), tremendous volatility and momentum that changes on a dime.
I believe there will be hedge fund bodies scattered across the board when all is said and done, question remains whether those who thought their hedge fund investment which was to provide "diversification" benefits (pension) is one of those bodies and has a direct end-effect on their own future well being.
CR, Thank you! I love being able to scroll past DH's posts without reading them first!
I also scroll past any anonymous posts and find I get through 100+ posts much faster this way!
Sure, I could have done this under the old system but it seemed that I tended to read those posts before disregarding them when I saw the poster's name (or lack of a name).
Thanks from a dedicated reader and normally non-poster!
I don't think the state could offer immunity from civil liability, only from criminal. Arguably if the state prevents people injured by Clayton's conduct from suing Clayton for recompense, that would constitute an unlawful taking by the state for which the state itself would owe damages. Is New York absorbing Clayton's liabilities or should the article have only stated immunity from criminal prosecution? Arguably it would only be from state criminal prosecution and, should Clayton's conduct have violated any federal law, they could still be open to federal prosecution.
First - CR and Tanta - names at the top is a wonderful enhancement. Thank you for making this change.
riskcapital - very good post. This is way OT but do you have any sense for whether the sharpness of the moves (vol of vol if you will) has been exacerbated by Reg NMS?? Depth of market (imo) has been degraded.
To everyone else sorry for the OT question to riskcapital.
good question, the intention would seem to support the top end, but, as you state, the depth of the support would seem to be called into question. maybe someone else has a better, more educated answer.
"Were in the last camp; we now think that the trough will be 2½%, or 50 bp lower than previously. The reason: The Feds actions have been on pace, but both financial restraint and their own communications gaffes now require them to be more aggressive. Whether or not such a trough will represent an overshoot is unclear. To be sure, market-based inflation measures bounced higher following the Fed move. But its important to recast the debate in risk-management terms: The key message in an uncertain world is that the FOMC is willing to err on the side of more ease. And as long as officials are willing to take any overshoot back quickly, it need not be a policy mistake. That logic does not apply to the outcome of next weeks FOMC meeting, however; we expect that officials will opt for a 25 bp move."
Seems like most of their business was related to DD on the securitized trade. And now that they are ratting out their best clients, I imagine things will get worse for them.
I'm not so sure about that.
I think it's possible that they are ratting out the clients who were planning on throwing them under the bus. They might not lose much this way.
This is the age-old problem with a due diligence firm (and, um, a rating agency). You have to be willing to rat out your clients at a certain point. The failure to do so corrupts the system.
I just get terribly frustrated with stock analysts who take this sort of line, because that just builds even more pressure on these businesses to cave in to the "best clients." That's exactly what eAppraiseIT did: caved in to WAMU because WAMU was the big dog account.
Clayton's choice at this point is to be known as the firm that did the DD and "gave their blessing" to total stinking piles of trash, or the firm who blew the whistle on the stinking piles of trash. They won't lose any clients they currently have who actually want to hear the bad news from the DD firm.
Maybe just a coincidence but is Clayton Holdings related to Clayton Homes - a house trailer (pardon - manufactured home) dealer prevalent in NC for many years?
Jim
No, no relation. Clayton Homes was a public company for many years, and a damm well run one at that. Buffet bought them about five years ago. Back when I was running money, CMH was a core holding of mine.
"Le DAX ayant baissé de 600 points entre le début de l'année et le 18 janvier, le trader aurait perdu environ 2 milliards d'euros dans cet investissement"
i remember seeing DAX being down 5% on Monday and thinking what the heck, 5% in one day? i guess Societe Generale was busy unwinding the positions way before they had admitted the loss being way too high to keep hiding it. Euro2B between 1/1 and 1/18 and another Euro2B in just one day 1/21. Glad federal reserve came to the rescue on 1/22 ;-> who, though, was on the other side of the trades? wouldn't be hank paulson's buddies, would it?
Clayton homes (of Knoxville, Tennessee) was bought out by Berkshire Hathaway during one of the many mobile-home industry implosions of the last 10 years.
I don't think Cuomo's investigation will help anyone. He is borrowing from the Spitzer playbook, which involved pressuring very solvent companies with criminal prosecution and then settling for dollar amounts that seemed moderate compared to the risk of litigating.
He would like to extract a few billion which would then be used to find NY's various bailout schemes.
The problem is that the targets don't have the money. If any on the IB's are charged criminally, they are out of business, immediately.
It may be a feeding frenzy for lawyers, but it will be a short one.
Chris Atkins, a spokesman for Standard & Poor's, said the firm was not responsible for verifying information provided to it by issuers of securities. It is customary for rating agencies to accept the information they are provided by issuers of securities.
That will be a defense of sorts. Are they subject to any form of regulation or oversight short of the courts/Attorneys General after the landscape is already blasted?
There is still some denial that the game is over. Perhaps Clayton is taking the position that we ain't goin back to 2005 anytime soon and we might as well move forward as best we can.
I'm still not convinced that after a few, very few attempts at using the sunshine disinfectant that the prosecutors don't get a glimpse of the size of the problem and slam the lid closed again. Face it, there just aren't enough salt mines to employ all the guilty parties and Universal Artists would sue for copyright infringement if Manhattan were turned into a maximum security prison.
It's clear we need to reestablish an adversarial component to appraisals, escrows, and such. I actually hate myself for saying it but a larger more intrusive County Recorder's Office might be the "neutral party" solution to firewalls and oversight.
Well, it's a defense of sorts to the accusation that the rating agencies didn't do any independent due diligence.
However, the issuers did do (some) due diligence: they hired Clayton and got back reports. Then they did not share that information with investors.
Any prospectus can say "there might be some exceptions in here, that's a risk."
What they don't say is, "We cannot guarantee that all loans meet published guidelines and documentation standards. However, a 10% sample of this pool was examined by our independent due diligence firm, and shows that the exception rate is approximately x%. Furthermore, as part of the due diligence process x% of the loans in the sample were removed from the pool. You should therefore be aware that these results imply that there are loans in the pool that would have been removed for noncompliance if they had been subject to intensive full-file review."
If Cuomo can force the SEC to require such language, this will be victory as far as I'm concerned. It's one thing to not do your DD; it's another thing entirely to do it and then not disclose the results.
The RAs are saying they weren't in possession of adverse material fact because they don't bother to check.
By hiring Clayton, the issuers put themselves in the position of possessing adverse material fact. They can't "unknow" it.
Bank's billions burnt in 10 days - much more on the Jerome Kerviel scandal...
Here's what seems to me like a hole in the SocGen story...but I could be wrong.
They say he used "plain vanilla" (listed) futures and covered up his bullish trades with fictitious short hedges. But with futures, it's my understanding that exchanges require margin on every contract.
If you simultaneously bought and shorted the same contact, you would have neutral exposure...but you would still have to meet margin on each contract. If one side of the hedge were falsified (a la SocGen), it could not generate the equity required to offset margin calls on losses.
Maybe somebody who works in futures can clarify. Nobody has yet explained how a rogue trader managed to meet over a billion dollars of daily mark-to-market margin calls over more than two weeks.
P.S. Regarding the question of who won on SocGen's losses, if the real problem was a swap counterparty reneg (my theory) then the counterparty's losses were transferred to SocGen and nobody won until SocGen started panic-selling the futures portfolio.
This is something that actually went on all over the place at the height of the dumb-mortgage boom:
You have a "stated income" program that your guidelines say is only available to self-employed borrowers. (OK, at least you're not doing stated for W-2 borrowers.) Your guidelines further state that employment must be verified (not income; just the fact of self-employment).
You get a borrower who says on the application that he runs some unincorporated Schedule C business. It doesn't require a license and it doesn't require audit by a CPA. So the usual forms of business verification (a copy of the license or a CPA letter) are not available.
You would actually see underwriters requesting a copy of the borrower's tax returns with the numbers blacked out.
They wanted the returns to prove the existence of the business. But they didn't want to have any "knowledge" of what the actual income was.
That wasn't just happening at Scumballz R Us. It went on at "respectable" joints. The issue is that every loan sale agreement has a general representation that the seller of loans is not in possession of any fact that is material to the investment quality of a loan that has not been disclosed. Lenders decided that the best way to deal with this is to go to outrageous lengths to make sure they didn't "know" anything they didn't want to disclose.
The whole perversion of the process was completed when the published guidelines (the ones agreed to in the loan sale agreement) specifically stated that "blacked out docs" were acceptable forms of business verification. Voila! The loan is not an "exception."
My point is that the process now has to put a stop to this kind of dynamic. We have to be motivated to know as much as we can practically know and disclose everything we know. The whole securitization machine is dysfunctional because it motivates people to know as little as you can get away with.
Tanta, obviously I agree with you. Just stunned this language or similar hasn't been required all along. On the evidence, the only reason for issuers to have commissioned DD was to grant them the appearance of proper disclosure.
So looks like these matters get addressed after the fact. I hope Cuomo and his counterparts on the federal side are persistent, effective . . . and brave.
I am reminded of an old boss who came up with solution to the liability crisis that killed the small aircraft market in the US.
This aircraft is designed to crash. It will kill you. This is its stated purpose. If after a period of time this product fails to perform to this guarantee the manufacturer agrees to repurchase this vehicle at the lesser of the purchase or prorata price.
He went on to suggest that cigarette manufacturers do the same. Given the unbelievably high costs of liability insurance this made financial sense. Maybe we can do the same for securitized mortgages and forget all this due diligence crap that serves only to diminish yields.
Re: i t is unclear how many lending exceptions are contained in the $1 trillion subprime mortgage market
I sort of condensed that last night:
The Murrayhill Co. and Clayton Services have united under a newly formed company, Clayton Holdings Inc., which has received $134 million in capital from private equity firm TA Associates, the controlling shareholder of the new company. Murrayhill, based in Denver, provides credit risk management to improve the performance of bonds, and monitors more than $800 billion in securitized bond portfolios.
These services support loan origination, securities issuance and securities performance management for the non-conforming mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) and asset backed securities (ABS) markets, which represent combined principal value in excess of $1.6 trillion.
Re: Moody's Raymond W. McDaniel Jr., said in reference to the information the company received, Both the completeness and veracity was deteriorating.
Chris Atkins, a spokesman for Standard & Poors, said the firm was not responsible for verifying information provided to it by the issuers of securities.
Fitch now says that it will no longer rate subprime mortgage securities unless it is provided access to loan files.
It is unclear how many lending exceptions are contained in the $1 trillion subprime mortgage market, but industry participants cite figures ranging from about 50 percent to 80 percent for some loan portfolios they examined.
Re: These (Clayton?) services support loan origination, securities issuance and securities performance management for the non-conforming mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) and asset backed securities (ABS) markets, which represent combined principal value in excess of $1.6 trillion.
Tanta,I remember the first time an underwriter showed me one of those blacked out tax statements.My first thought was " I do NOT want to explain that to a jury,under any circumstances".
Is the difference between 5 and 10% relevant? If the IBs were asking for a sampling that would provide a 95% confidence interval then >10% would be adequate in most cases. The due diligence was ineffective because the products were designed to avoid due diligence.
The whole securitization machine is dysfunctional because it motivates people to know as little as you can get away with.
I think the problem was also dependent on the size of the credit expansion. Greed mode was allowed to run wildly for too long due to overly accommodative monetary policy and lacking derivatives regulation. People care quite a bit about the details of their structured products now. A fully transparent securitization mechanism could add value to the system, but the regulators shouldn't have allowed so much unlimited financial innovation because the cost of a system failure could be high (political breakdown, social destabilization, wars). I know the argument is to over innovate and see what sticks but I'm not sure that is the right approach for nuclear power plants and monetary systems. So far the stress test is proving that violent disruptions are possible, which doesn't bode well for the overall stability of the system. My worry is that the situation will worsen considerably due to econo-political reasons somewhere on the system periphery where these disruptions can lead to serious political crises. One last comment on securitization -- there are diminishing returns on security complexity. Complex entities don't stand up well to periods of high stress and turbulent change in systems.
I believe that article explains the real reason the Fed cut rates -- they don't want an explosive unwinding of hedge funds to take down the entire financial system. I don't think it was so much about propping up stock prices.
The manager of one of Britains biggest hedge funds said: Its been an extraordinary week. Even in the crash of 1987 I dont remember so much carnage.
Experts warned that the problems among hedge funds were likely to cause more disruption in the markets, especially if many are forced to liquidate positions.
These revelations re: Clayton are not new over in the Appraiser's Forum site. The image of the three monkeys who didn't hear, speak or see any evil in fraudulent loan originations
has been right out in front of honest appraisers for the past 5 plus years.
The collective chicanery of the deception faction of the lending industry made making a living honestly go from troublesome to difficult to next to impossible as
order taker appraisers helped feed the deception machine. Though merely enablers of this deception, and not bearing the major part of the blame,
the enablers played their part willingly for a small fraction of the
total of fees and charges associated with the sum of all toxic loans.
Willingness based on the promise of repeat business to the order takers, freezing out the truthful.
In this business model, ethics were a liability to future income.
This nationwide scheme was more intense in markets now suffering the most (hello, the O.C.!!) decline in value. Howver, the values were propped up by multiple deceptions.
So we now see propped up prices dropping back to realistic values as many others have pointed out.
In many ways this is also reflected in securities market "readjustment".
Day of reckoning has arrived. Quality Appraisal reviews, always available, were infrequently called upon for truthful investigations. However, a good review is time and money consuming and since Wall Street did not care much what was being bought to be passed on to other people's portfolios, who needs honest reviews?
I merely point this out as a similar
situation to the pickle Clayton finds
themselves in. In fact, there is a trend in the appraisal world right now for repentant order takers to go to their state regulatory confessionals and plead to help rat out the "bad guys and girls" and by so doing build a slight defense for their own sins.
OT Hmmm, new phrase for 2008,
"thumbwheel the trolls"
Appreciate this blog, has been educational, mostly.
Transparency in Derivatives? As the securitization system crumbled last summer, some of the unfortunate owners of the securities discovered that there was no way to know how much they were worth. The derivative securities in question were quoted only by the bank that issued them, and that bank did not want to buy. Transparency in Derivatives? - Floyd Norris Blog - NYTimes.com
--
"I believe that article explains the real reason the Fed cut rates -- they don't want an explosive unwinding of hedge funds to take down the entire financial system"
Fed is serving its real masters and politically impotent American People ain't them (Fed is helping keep oil price high by ignoring the dollar). Daily confirmations of:
A system of the Crooks...
Remember the end game: Blood will conquer money! And Financial Nazis will be eliminated like rats. My apologies to rats.
ac: I believe that article explains the real reason the Fed cut rates -- they don't want an explosive unwinding of hedge funds to take down the entire financial system.
I agree. The underlying story is that behind the scenes the Fed is battling the monster that is the first significant stress test of derivatives. The ship is scraping icebergs and they've got the bilge pumps cranking. Meanwhile, people have at least stopped dancing because they felt a bump. Some people are heading for life rafts. I hopped in mine awhile ago, when I noticed the captain had passed out from drinking with the throttle wide open.
Just hope the monolines wrote into their contracts to absolve of any claims if fraud is committed... pretty standard for other types of insurance but not sure about bond insurance...
From:
A Poor Monoline Shareholder
Living in a Cardboard Box
Outside in the Cold Winter
--
"The underlying story is that behind the scenes the Fed is battling the monster that is the first significant stress test of derivatives."
Greenspan and Bernanke were the biggest supporters of derivatives as innovations and giving the economy flexibility. They knew how much American dopes love terms like innovation and flexibility (part of the propaganda toolkit). The same dopes ignored a real businessman, or capitalist, Warren Buffet.
Finance does not lend itself to innovation. Innovation is usually a cover for fraud (hiding the risks or pushing risk to the future). One day the future knocks at the door.
The French government has sounded out the country's two largest banks, Crédit Agricole and BNP Paribas, to find out if they would be prepared to launch a break-up bid for Société Générale, which last week admitted that it was the victim of a massive fraud, costing it £3.7bn.
Why are you so bitter? Did Goldman short your gold stocks down to zero in the 90's?
JAS JAIN: "Greenspan and Bernanke were the biggest supporters of derivatives as innovations and giving the economy flexibility. They knew how much American dopes love terms like innovation and flexibility (part of the propaganda toolkit). The same dopes ignored a real businessman, or capitalist, Warren Buffet. "
You do realize that Buffett uses derivatives all the time right? Buffett's concern is not the existence of derivatives but the speculative use of them. He also doesn't understand derivatives so he stays away from them. That doesn't mean they are bad.
For example, Buffett never invests in technology stocks because he doesn't understand them. It doesn't mean they are bad companies. There are some value investors, like Bill Miller, who actually invest in tech stocks (eg. Miller's investment in Intel and Dell in mid-90's; or Amazon in the early-2000's).
Another example is where Buffett said index futures are bad (this was back in the 80's when they were first introduced). But it didn't result in the end of the world...
JAS JAIN: Finance does not lend itself to innovation. Innovation is usually a cover for fraud (hiding the risks or pushing risk to the future). One day the future knocks at the door."
Perhaps... but in a free market, investors (i.e. capitalists) take risk under their own free will. I don't know how you can call something a fraud when investors themselves undertake risk on their own.
What we don't need are socialism for the investors (who are mostly rich) when risk bites them back.
That is priority #1 IMHO, shut off the derivative market and regulate the synthetic explosion of chaos which adds far too much risk into the securities markets. I read a story months ago, which I will try to get, which talks about how Moody's did not understand the ABX market, but they didnt want to be outplayed by other agencies, so they jumped in to weigh in on synthetic crap that they didnt know how to model. In addition, its very obvious the regulators and every form of government oversite is based on an era of stock trad'n that is 100 years old, and the people in charge, dont know what crack is and things are being abused. That has to stop Monday -- the derivatives markets have to have a moratorium imposed ASAP and we need to put any llobbyist from SIFMA in jail if they obstruct justice.
As a matter of fact, thats the way it should be, The DOJ or FTC should take control of The Fed and we should have a historic Constitutional rollback and slap them bitc--s down!
Fed is helping keep oil price high by ignoring the dollar
I think the Fed is driving the herd of speculators toward commodities, but this is the one bubble I can get behind (though not so far as putting my money where my mouth is).
It potentially acts as a control rod for the printing presses. The rising gas prices keep inflation at the front of everybody's concerns, and gives people a taste of what helicopters could really be like (imagine energy prices increasing at 5x the rate of your retirement income for the next 20 years).
What you see is what you get. If you dont see it, it will get you.
Jacob Frenkel, vice chairman of AIG, calling for more transparency in financial markets and reform of rules that allow banks to keep assets off their balance sheets. Business - Floyd Norris Blog - NYTimes.com
Should be fun to watch the crisis responses as everybody gets back all pumped up from Davos.
Dont mean to argue here, but IMHO, Buffett is the biggest crook out there and I hope he gets busted for his reinsurance derivaties and the lack of risk transfer related to $33 billion in goodwill accounting which hopefully will force him to play ball and bring his Level 3 Unobservable derivatives out where they can be seen at the next shareholder meeting in Omaha!
Re: You do realize that Buffett uses derivatives all the time right? Buffett's concern is not the existence of derivatives but the speculative use of them. He also doesn't understand derivatives so he stays away from them. That doesn't mean they are bad.
He doesnt understand derivatives, like he doesnt understand marketing a snakeoil sales pitch to boobs!
--
Sivaram Velauthapillai writes: Jas, Why are you so bitter? Did Goldman short your gold stocks down to zero in the 90's? ;)
Welcome to the party!
What makes you come the conclusion that I am bitter? I am simply warning people against the real evildoers in America and the world Bankrupters and Fraudsters of New York City.
I never bought gold stocks. But, I do know the history of Goldchain Silverknife during late 1920s and early 1930s. These Crooks were able to emerge again from the financial rape of the public. These born-and-bred Crooks know the game periodic rape can be done again and again (once or twice during a lifetime). Hence, the cycles of boom and bust.
BTW, do you believe that you know more about the American financial system and its history?
Wow, names at the top represent a quantum leap in searchability. Since I only read the parts of the threads that pass Tanta or CR's reply-worthy filter, this makes it easy (search for "Tanta writes" instead of Tanta). There must be 20 occurrences of "Tanta" for every actual post by her. That change just saved me 10 minutes a day!
JAS: "BTW, do you believe that you know more about the American financial system and its history?"
No! But I'm a free market guy. I like to think that buyers and sellers in a transaction know what they are doing. Booms & busts are a part of a free market. I don't think anything you are referring to has anything to do with it.
If you don't like the system, there is nothing to say you have to play the game. Just like all these people complaining about the declining US$ can simply invest in a foreign currency or a commodity or shares or whatever, and not worry.
Behind every con is someone who wants something for nothing.
Now the map in the BBC piece shows the concentration of subprime loans in the black areas of Cleveland. Bad,bad mortgage brokers.
BUT where were the leaders of that community. I remember that several years ago hi-potency heroin was being sold and there were many overdose deaths from it.Somehow word of the danger was gotten out to the Junkie community and with days the OD deaths dropped to normal leels
So why didn't word get out about the dangers of OD-ing on a hi-potency mortgage? Surely there were those in that community who knew the risks of these loans, but was there any moral outcry, warnings from the pulpit anything at all?
WRONG. Booms and busts are part of systemic periodic fraud. They are caused by "bankers' mischief," according to Schumpeter. Have you ever bothered to read, let alone study, Business Cycles by Schumpeter, the best insight into the American econo-political system? His Democracy, Capitalism and Socialism is also a good read.
A friendly suggestion: You will learn a lot if you knew how much you really dont know.
Americas educated dopes suffer from the knowledge that they dont have. Their knowledge of history is pathetic. And so are their comments on the current economic system.
Reminds me of my time in the risk management unit of a top 5 subpime lender (now bye-bye), ostensibly tasked with rooting out fraud and bad underwriting.
The magnitude of fraud and the absence of any reasonable underwriting, especially in 2006, meant that our limited resources were directed only at cases made high profile priority due to press inquiries and law enforcement subpoenas.
Management would bog us down with huge investigations and then override many of our key recommendations in the end. Hundreds of man-hours wasted with every phony show investigation intended only to show the world that this subprime lender was playing by the same rules as mainstream lenders (NOT!). In those cases where management agreed with our recommendations to suspend or litigate they'd simply allow these criminals to simply change their vendor name so they'd get on the approved list again, or in-process individual loans would be allowed to fund. "But boss, it's the same crook!" "Sorry, we'd have to initiate a new investigation regarding that new name... gotta cover our asses so they don't "sue" us if we arbitrarily suspend them and thus deny them the right to due process and the right to make a living... (management didn't put it exactly in those terms but that is basically what they were saying... playing dumb and hiding behind their legalistic, bureacratic policies and procedures" Blah Blah Blah.
We supposedly had one of the better underwriting platforms in the industry. But what good was that if docs themselves were forged, the info inputted into the system was not the same as on the docs, and "management discretion business decisions" overrode red flags into green flags with just a push of a button? Crap in, crap out.
A big con game all around.
And upper management's connections went all the way to the top, in both New York City and Washington D.C. These guys knew exactly what they were doing. Their only mistake was that they thought they'd have alot more time before it all blew up.
I interviewed with a Clayton competitor after becoming disillusioned with my subprime employer. Guess I shouldn't have questioned in one of the three interviews how their business would fare down the road if lenders and investors really didn't want to uncover or find anything, that a spot check here and there didn't mean anything, that there soon wouldn't be anybody to sue, recover from or repurchase anyway because they'd all be BK, and that token forensic underwriting was apparently all just for show.
Needless to say, I did not get that job.
My fraud prevention unit was actually a fraud-enabling unit. The Clayton's of the world are just CYA show fraud-enablers that kept the game going. Just like the boxes full of contraband at the airport. "Boy do I feel safer knowing the authorities confiscated all those nail-clippers and drinks."
Now I'm in the foreclosure business. So I guess it all worked out in the end...
Travis: "And upper management's connections went all the way to the top, in both New York City and Washington D.C. These guys knew exactly what they were doing. Their only mistake was that they thought they'd have alot more time before it all blew up."
They wanted the returns to prove the existence of the business. But they didn't want to have any "knowledge" of what the actual income was.
That seriously blows my mind. Why on earth would anyone want to write a loan (under those conditions) without knowing if the redacted numbers were $1K, $50K, or $100K ?
Rick writes:
I don't think the state could offer immunity from civil liability, only from criminal. Arguably if the state prevents people injured by Clayton's conduct from suing Clayton for recompense, that would constitute an unlawful taking by the state for which the state itself would owe damages. Is New York absorbing Clayton's liabilities or should the article have only stated immunity from criminal prosecution? Arguably it would only be from state criminal prosecution and, should Clayton's conduct have violated any federal law, they could still be open to federal prosecution.
States can also file civil suits. As I understand it, the AG is promising that his office won't pursue criminal charges OR civil damages. He can't, of course, stop other people from suing them silly.
Sivaram Velauthapillai @ 1:27 Re: Biggest crook? What are you talking about? $33b in fraudulent accounting?
I didnt say it was fraudulent, I just said he has unobservable Level 3 accounting issues which will have to be disclosed, if they dont disclose the nature if this $33 Billion in goodwill accounting and disclose the true marked to market value of whats holding up the $33 Billion in goodwill accounting, then IMHO, that would be fraudulent accounting! What would you call that kind of accounting, if they dont have to disclose Level 3 assets?
Blacked out IRS forms? Blacked out IRS forms. Any peons with even a modest sense of self-preservation would run like hell away from dealing with anything like that. God, this Floridian, thought she had heard it all. . . .
Bush = Warren Harding + the worse aspects of Herbert Hoover
John Stark comments on states pursuing civil liability and offering immunity from that.
Good point. Mish (Blogger: Page not found posted links to several articles mentioning cities pursuing fraud and nuisance causes of action against lenders to recover losses caused by foreclosures.
The prosecutors and attorneys for the bondholders would get some interesting details if they could talk to the investigators hired by the MI claims departments to look into claims on loans with manifest fraud involving originator personnel. It is no accident that MGIC, for example, has ceased to bid on pools accumulated by Wall Street securitizers, and that company's experience with Wall Street solicitations for "bulk" and "pool" insurance quotes is far from unique.
The MI coverage contract does not exclude all fraud, but it relies on the "reps and warranties" of the insured, and DOES exclude fraud in which representatives of the insured collude. This cannot always be proved, but when it can be factually established, MI coverage can and is rescinded.
Reverse geometric substitution:
Re: some investment banks directed Clayton to halve the sample of loans it evaluated in each portfolio
Yah gotta love that idea, and why not look at half the collateral and half the income, half the payment...great idea that is ahead of the curve! Speaking of the curve:
Will anything President Bush says make much difference?
On the home front, no. His percentage approval rating in polls is down to the mid-30s, there are Democrat majorities in both the House and the Senate, and national attention is fixed on the battle to succeed him. Mr Bush is the lamest of lame ducks. Immigration reform will have to wait for a new president, while the stimulation package for the economy, on which he will dwell tomorrow, has bipartisan support and will pass whatever he does. In foreign affairs, presidents have a freer hand under the constitution. What Bush says must be taken seriously. Remember the "axis of evil" line in his 2002 address and what happened a year later?
A nothingburger here, a nothingburger there...pretty soon we'll be talking about some real beef....
how innovative!
Did the investment banks adequately disclose the information from Clayton to the investors in the mortgage securities?
Hedgies are so yesterday; lawyers will be the new megabucks superstars.
It is unclear how many lending exceptions are contained in the $1 trillion subprime mortgage market, ...
Uhhh oh. They used the "t word." Must be serious. Good to know however that the exceptions are contained in the sub-prime market.
Yawn., wake m,e up when they start talking gazillions or admit they never saw it coming or it is happening far faster than anyone expected or that no one imagined the extent or....
So the dancing is over and the singing has begun.
Good prosecutors have always used divide & conquer tactics. This scandal will be no different.
This is a good development. Only after very public prosecutions will the government have the cover to bail out the monolines or otherwise throw 200 Billion dollars at the players to stabilize the financial system.
Personally I would like to see a very large number of prosecutions and a large number of 20+ year jail sentences. I would also like to see successful lawsuits ruin many of the firms involved. That ought to take care of much of the moral hazard worries.
There really needs to be a great deal of punishment though... enough so that the average person, who doesn't pay close attention to these matters says to themselves "Wow - so very many executives doing time and being bankrupted by fines - what was going on?"
Hi, My Name Doc Holiday:
I found this here link: The resource cannot be found.
Which can be summed by the following pasted summation:
Clayton performs Special Servicing for both conforming and non-conforming mortgage loans across non-performing assets. Clayton evaluates the investment value of whole loans or of a security through its modeling tools, coupled with our expertise on default related variables such as loss frequency/severity, foreclosure time frames, bankruptcy risk, REO time frames, and real estate valuation methods.
Our technological solutions provide asset managers with the information and analytical capabilities needed to focus on meaningful communications with borrowers and clients. Claytons default management system generates a NPV analysis of the optimal default resolution strategy and puts this strategy in place, in real time, while the asset manager has the attention and cooperation of the borrower.
Thr eason I like that there info, is because I like models that blow up.
Yippie
Monolines don't have to address claims that are pending litigation, do they?
generally when there are insolvent borrowers, there are insolvent lending instutions.
I posted this on the previous thread but its more applicable here and i dont know if anyone saw it...
Want to sue a bank? Here's who you should call
Want to sue a bank? Here's who you should call - Times Online
So the dancing is over and the singing has begun.
Hey-O!
Could that mean there's at least a germ of a case there? I guess we'll see.
(granted its london)
Maybe just a coincidence but is Clayton Holdings related to Clayton Homes - a house trailer (pardon - manufactured home) dealer prevalent in NC for many years?
Jim
HA ! what just happened? The names are above the comments!
Good work CR!
Offtopic, I've tried putting the name at the top of the message - so people could scan down and see the author first.
Best to all.
I always get excited about the first reports of these kinds of investigations, but the people who have profited rarely have to give much back. At best prosecutions permanently end practices that have already been abandoned.
But, hey, I take what I can get.
And the names are first! Yeah! (Though maybe on their own line? And get rid of the gravatar? Thanks, CR!)
my eyes are confused!!!
Ah, spacing, too. Schweet!
F. Frederson, ok the gravatar should be gone too.
Hopefully this helps.
Best Wishes.
CR - Name first..I love it. way to go. Now people can scroll by my post faster.
"Monolines don't have to address claims that are pending litigation, do they"
Nope monolines will claim fraud and be absolved of any claim or action.
I suspect the lawyers will have a fieled day with this one.
Hi, My name Doc H:
If I was looking to be one of them bounty hunters, Id look at these types of things (below) related to my previous focus, i.e: some investment banks directed Clayton (MurrayHill) to halve the sample of loans it evaluated in each portfolio.
I think that implies that loans were altered or adjusted with one of them dang computer models that has fancy algorithms that help to adjust and tune in parameter variables like a fading country western radio station that increases its signal-to-noise ratio as the credit analyst zips down the credit highway, naked as a jaybird.
The information in this free writing prospectus is preliminary, and may be superseded by an additional free writing prospectus provided to you prior to the time you enter into a contract of sale. This preliminary free writing prospectus is being delivered to you solely to provide you with information about the offering of the securities referred to herein. The securities are being offered when, as and if issued. In particular, you are advised that these securities, and the asset pools backing them, are subject to modification or revision (including, among other things, the possibility that one or more classes of securities may be split, combined or eliminated), at any time prior to issuance or availability of a final prospectus. As a result, you may commit to purchase securities that have characteristics that may change, and you are advised that all or a portion of the securities may not be issued that have the characteristics described in these materials.
Loss Mitigation Advisor:
Clayton Fixed Income Services Inc. (formerly known as The MurrayHill Company).
And then, owing to a combination of better formatting and greasemonkey scripts, bloggy goodness forever blessed the land. Amen.
Another interesting mix is if international banks, pensions, investment houses say "take it back"...lordy a huge outflow might be a huge inflow at par. The likes of MER and C will quiver at this thought....If it was mis-represnted send it back.
Hi, me Doc Ho, this is the late night show where things get done:
The Murrayhill Co. and Clayton Services have united under a newly formed company, Clayton Holdings Inc., which has received $134 million in capital from private equity firm TA Associates, the controlling shareholder of the new company.
Murrayhill, based in Denver, provides credit risk management to improve the performance of bonds, and monitors more than $800 billion in securitized bond portfolios. Clayton Services, based in Shelton, Conn., provides analysis, consulting and other services to companies that buy, sell and manage loans.
"As a result, you may commit to purchase securities that have characteristics that may change"
I aint no lawyer but if it was misrepresnted this dont mean a hill of beans!
Im Doc and here is more stuff related to this unfolding story which Im now friggn focused on:
Note 1Organization, Description of Business and Basis of Presentation
Clayton Holdings, Inc. (collectively with its wholly owned subsidiaries, the "Company") was formed on March 31, 2005, as a Delaware corporation. The Company was formed to combine two companies which were under common control, GRP Holdings, Inc. ("GRP"), a Delaware corporation, and TMHC Holdings, Inc. ("TMHC"), a Delaware corporation. GRP was formed to acquire Clayton Services, Inc. ("CSI") and First Madison Services, Inc. ("FMS") from unrelated parties on August 2, 2004. TMHC was formed to acquire Clayton Fixed Income Services Inc., formerly known as "The Murrayhill Company" ("CFIS"), from an unrelated party on May 24, 2004.
Doc H Enterprizes
Publication: Business Wire
Publication Date: 13-APR-05
The new organization will leverage each company's technology, robust databases, and analytical and consulting capabilities to provide a comprehensive spectrum of information-based services. These services support loan origination, securities issuance and securities performance management for the non-conforming mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) and asset backed securities (ABS) markets, which represent combined principal value in excess of $1.6 trillion.
The name above the comment does take a little adjustment, but it definitely works.
Ooh, the name in bold -- I like that alot!!!
tj & the bear, yeah, it's the opposite of all the other sites I read, but it does seem to help when scanning down the page. I've looked at some of the long comment threads, and this seems to help pick out names.
Best Wishes.
Can we have colors and a pony, too?
Hrm, did anyone's greasemonky script just stop working on this thread?
Yeah, my greasemonkey/killfile doesn't work anymore, unless the user has a homepage.
NorkaWest, how about a mortgage pig instead of a pony? Color is possible, but I think bold stands out well.
Best Wishes.
Added color on Clayton:
Clayton Loan Analysis System, CLAS Conduit and CLAS Reporting Tool. Our due diligence process utilizes the CLAS application. CLAS collects data and verifies it for accuracy during the on-site and centralized underwriting loan file review process. Additionally, CLAS accommodates all mortgage loan and other asset types and is a customizable application that gathers appropriate data depending on the scope of the project. CLAS verifies and tests the reasonableness and accuracy of all captured data. The system also has the ability to produce reports that identify emerging trends, while providing a real-time overview of asset quality.
High Cost Analyzer. HCA is a web-based application derived from CLAS that helps market participants identify loans that exceed federal, state and local predatory lending thresholds. Our experienced compliance professionals monitor changes in laws and regulations and update HCA accordingly. In addition, HCA is integrated with a leading on-line publisher of reference information and forms for the residential mortgage lending industry. This integration provides direct access to applicable predatory lending legislation, and streamlines the research process for compliance professionals.
Scout. Scout is an application that supports image-enabled due diligence. Scout accepts electronic images through secure file transfer protocol (sftp), DVD and CD. Images are processed, indexed and presented in our customized web-based viewer. In addition, the system utilizes OCR (Optical Character Recognition) to capture data from the loan images and present the data to a team for verification of accuracy. Scout then transfers data to CLAS and pre-populates fields based on the data collected.
Clayton.com. Clayton.com facilitates data conversion, analysis and electronic due diligence. Clayton.com is our portal through which clients, employees and our independent loan review specialists access reports and communicate with each other on transactions they are managing. Our conduit support services also use clayton.com to provide information to loan buyers and sellers as to the status of the loan acquisition process.
Mortgage Asset Recovery System. MARS is a proprietary servicing platform that assesses risk and value enhancement alternatives and identifies the optimal asset disposition methods for both performing and non-performing loans.
Clayton Fixed Income Services Report Archive. Report Archive is a secure web-based application used by our clients to download prior and current Credit Risk Manager reports for individual securitizations.
Ok, pigs are good if they have wings and wear lipstick.
I hope my post didn't kill the greasemonkey. It was my friend.
C.R. & Tanta;
The "author" name,
at the top of the post,
is a "BIG" improvement !
( Easy to 'Scroll on' ! )
Thank you,
But investment banks did not give the rating agencies their due diligence reports, and it appears that the agencies did not demand them.
The firm noted that many of the problems would have been easy to identify by looking at loan applications, appraisals and credit reports but it appears that such review was either never done or ignored.
Everyone involved is guilty, because nobody wanted the party to end.
Fitch now says that it will no longer rate subprime mortgage securities unless it is provided access to loan files.
Barn's empty, folks.
CR - you might have taken out one too many [tr] tags somewhere. I'm trying to find the broken HTML and that's my first guess.
The name on top is better, now if you could reduce the word count, this could be on auto pilot and you could go on vacation!
Testing with a homepage. Which seems to do things. Odd, that.
Yall better keep on top of the new lingo out there and the automated programs and software that got us to this point IMHO:
The Depository Trust Company
Underwriting SOURCE
Message Specifications Document
Version 4.2
11th June, 2007
What the darn heck is the # (link to this comment) all about?
Although I have been ex-communicated and banished, its nice to see the input from today being applied; hope you dont mind me looking around the shop, f you do just shoot me.
Over the next few years, Sue traveled the country selling her credit risk management services to fellow first and second loss MBS investors that she met while at AIC. Sue demonstrated Murrayhills effectiveness by achieving a loss severity 12% lower than industry average on transactions that had Murrayhill as credit risk manager. Murrayhill achieved moderate growth with a core clientele of insurance companies and hedge funds who invested in subordinate bonds.
All candidates for credit risk manager positions at Murrayhill then must have eight interviews over three days. The eight interviewers, from different areas of the company, then meet to discuss the candidates, with the most important criteria being cultural fit.
Murrayhills culture was designed to give high energy, intelligent, and goal-oriented people a place to thrive. All employees must possess a great deal of self confidence to confront servicers and trustees to demand investor compensation for their errors. It is not unusual for a motivated credit risk manager in their first year to be given the responsibility of contacting and advising Wall Street traders regarding their MBS performance.
Using its three years of credit risk management experience, Murrayhill developed database risk filters that allow credit risk managers to electronically identify the loans in a security that threaten investors with losses, based on loan history, borrower behavior, loan characteristics, or risk events. Murrayhill filed for a patent on this technology, as it was truly innovative for the industry.
Credit Risk Management Murrayhills credit risk managers intensively review, analyze, and report on the loan-level data collected from servicers, master servicers, and trustees. This is done by applying the patented risk filter technology to the loan-level data. This allows credit risk managers to identify the most at-risk loans and loan pools. In the event of a foreclosure, Murrayhill ensures that servicers adhere strictly to state foreclosure timelines to minimize investor loss. Murrayhill also monitors mortgage insurance claims to ensure that they are filed timely and accurately.
** Word count; you have to limit words and stop this interesting stuff from becoming too chaotic; somebody help me......please, chop my words off and stop me from adding to your misery
Doc, the # lets you link directly to a comment from somewhere else.
F. Frederson, I could have goofed something up. It looks like the tags are balanced. What does the code look for? Send me an email if you like.
Best Wishes.
Just took a quick look at Clayton's Q3 financials. Take out the goodwill and intangibles, and its not a pretty picture. Most likely they'll be BK before the trials ever get started.
Hey, this is my life, I love dumbass research. Here is that patent:
United States Patent\t6,493,680
Logan , et al.\t December 10, 2002
United States Patent: 6493680
Method and apparatus for processing billing transactions
Abstract
A computer system and method for processing bills for a plurality of customers of a plurality of node systems within a larger system, each customer bill having a particular billing cycle, comprises a memory for storing a plurality of customer bill records containing raw data to be processed to generate a customer bill. The system also comprises a bill production initiator for waking up periodically and initiating a billing cycle for a plurality of the customer bill records stored in the memory. At least one bill production manager generates a plurality of processing group files containing at least one of the customer bill records stored in the memory such each processing group file has an efficient size and contains customer bill records having at least one common variable. At least one bill production worker processes the customer bill records from at least one of the processing groups.
Inventors:\tLogan; James R. (Parker, CO), Gollob; David J. (Highland Ranch, CO), Cohen; Mark B. (Aurora, CO), Williams; Craig G. (Golden, CO)
Assignee:\tCSG Systems, Inc. (Englewood, CO)
Appl. No.:\t 09/026,095
Filed:\tFebruary 19, 1998
heeehehehe
I'd be amazed if any lender could be dumb enough not to fully disclose everything in order to CYA theory, but then again I never thought I would see a tail on mortgage pig.
You know what doc, if you're want an improved blog with word counts and whatnot so you can double your cut n paste, bugger off out of here and start your own.
Cockroaches are crawling all over Wall Street now.
ooops, ahh crap, guess not but that was close, my mistake, many bows; next patent guess will be withheld until conformatio
Doc:
What does that manual of DTCC specification cover?
Is it data that mortgage pool buyers should have been receiving and analyzing all along?
Given the date shown, many of our captains of finance are going to feel very French (as in SocGen) when they notice the gap between theory and nuts-and-bolts reality.
This is outstanding, this adjustment.
Highlight of my Saturday night...
Thanks CR&Tanta
CR - sorry to be hassle. I think there is a missing [tr] tag at the beginning of certain comments. An online validator says the first missing tag is between the following two elements.
[!-- cached 44 comments and j_u --] [td class="MessageCell"]
But it's not missing every time after that, and I don't see a clear pattern as to why.
The validator I used to find it is here (ignore all the complaints about [br] tags):
The W3C Markup Validation Service
They did not even bother to review some of the loans.
"In November, Fitch Ratings published a detailed review of 45 loans in an effort to identify what went wrong as mortgages were turned into securities. It found extensive inaccuracies and fraud. The firm noted that many of the problems would have been easy to identify by looking at loan applications, appraisals and credit reports but it appears that such review was either never done or ignored. Fitch now says that it will no longer rate subprime mortgage securities unless it is provided access to loan files."
translation: We're going to go ahead and hit the back 9 early.
BBC World
The US sub-prime crisis in graphics:
BBC NEWS | Business | The US sub-prime crisis in graphics
AZ Cowboy - Can you provide more detailed info on why you think things are so dire at CLAY? They've got a lot of cash in the bank, and the bleeding seems to be slowing. If I'm reading the financials right (definitely a stretch for me), they seem to be growing cash at the moment. I ask you this because, in a moment of contrarian idiocy, I went long on them a month or so ago.
F. Frederson, I checked other Haloscan sites, and they get that same error. I didn't touch the code at that spot (at least not intentionally) and it appears all the tr td tags are correctly balanced.
BEst WIshes.
OFF Topic. This is very ominous assessment by Merrill Lynch.
"The recession in housing has spilled over to the rest of the economy, in our view. We now expect an outright contraction in economic activity in the first three quarters of 2008. This downturn should be led by consumer spending... As we saw in prior post-bubble de-leveraging episodes, the healing process takes time as the bad debts get extinguished and balance sheets repaired.... Home prices are expected to decline by 15% in 2008 and by a further 10% in 2009, with more depreciation likely beyond the forecast period. The inventory situation has become intractable and home prices are still far above historical norms when benchmarked against other measures such as rent or GDP. Housing starts will probably slide another 30% from current levels, to 700k by the end of 2008 a historic low needed to clear inventories amid the worst housing financial crisis in decades... We anticipate job losses in the range of 2.5 million, close to what we saw in the last recession. This in turn is expected to push the unemployment rate up, to 5.75% by the end of 2008 and to 6% by early 2009. Rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and the lack of participation from the baby boomers for the first time in three decades likely will result in the worst consumer recession since 1980..."
Ok, CR. I'm looking at the killfile script and it may be that some other change has thrown off its search pattern. I'll let you know if I find out anything.
Thanks muchly.
Doesn't really matter what they disclosed, they made reps into the securitization pools as to the quality of loan origination (i.e. no fraud in the origination, loans are as described, independent appraisal, Fannie/Freddie eligible, etc.) Breach of those reps creates a repurchase obligation at par.
The investment banks who sponsored subprime originations have got serious repurchase liability, which means that the related RMBS are worth a hell of a lot more than the market is pricing them at.
London Times - Sunday
Bank's billions burnt in 10 days - much more on the Jerome Kerviel scandal...
Bank's billions burnt in 10 days - Times Online
Qataris poised to snap up $3bn stake in Credit Suisse "Powerful funds backed by the Qatari government are considering assembling a significant stake in Credit Suisse..."(there goes the Christmas party)
Qataris poised to snap up $3bn stake in Credit Suisse - Telegraph
exRMBSlawyer-
Only to current bagholders you mean, right?
MLM: I'm using Yahoo's abbreviated presentation. From the Q307 comp. balance sheet: net recievables are down and fading quickly, take out goodwill and intangibles (both worthless placeholders) and compare to total debt. On the income statement: total revenue is taking a swan dive.
Like I said, I just took a quick look. Seems like most of their business was related to DD on the securitized trade. And now that they are ratting out their best clients, I imagine things will get worse for them.
Forgot to add: the growth in cash is due to conversion of receivables. Q407 will probably be the last time that happens.
Figure if Clayton is getting immunity, it's likely that the IBs asked them to be a little less diligent than they should have been.
This will make it a bit harder to play pass the buck when the lawsuits start rolling in.
ffdic, what is your take on the bank failure situation? I know you said you had heard 300 for this year.
bankrate has a link to search your local banks and it will show you their exposure to various categories of lending.
I Trillion apologies for disturbing the peace here (again), but I wanted to find the Patents that Clayton uses (I dont think they are the holder though) so here goes:
United States Patent\t7,003,781
Blackwell , et al.\t February 21, 2006
Method and apparatus for correlation of events in a distributed multi-system computing environment
Assignee:\tBristol Technology Inc. (Danbury, CT)
Appl. No.:\t09/564,929
Filed:\tMay 5, 2000
The system is assumed to be, for this example, a system that receives data representing mortgage applications from on-line users or customers via a global data communications network such as the internet. One or more client machines receive the mortgage applications from the internet and provide them to an application (mortgage request processing) server. The server parses various data fields of the mortgage requests and sends messages to various distributed applications running on a plurality of hardware/software platforms or processors so as to process the mortgage requests. For example, these applications can include a credit check application, a tax assessment application, a verify income application, etc
Blogger Self Edit BSE
Blogger Self Limit Control BSLS
Doc Holiday Blog Filter DHBF
More: Headquartered in Danbury, Conn., Bristol Technology is a private company that primarily serves customers in the financial services and insurance industries in the United States and the United Kingdom. Financial terms of the transaction were not disclosed.
Re: PALO ALTO, Calif., Feb. 5, 2007
HP today announced that it has signed a definitive agreement to acquire Bristol Technology Inc., a leading provider of technologies that monitor business transactions.
Ok, Im done, thats gotta be it, but wait.....to confirm:
CFIS filed two patent applications (each with multiple claims) related to data filtering technology. The first patent relates to analyzing investment data in a manner that provides a single comprehensive
tool for filtering a loan pool to identify characteristics of the loan pool and
the loans in the pool. The second patent relates to an invention that provides
methods useful for the surveillance of loan pools and investing in loan pools,
including a method for generating a loss list, for estimating a loss for a
loan, and for determining a probability of loss for a loan. These two patent
applications are pending.
In 2004, CFIS filed a
provisional patent application related to its Question Portal
Who cares??? Why bother?? My point here is that with all the models and software and great analysis they are capable of, they ended up not doing thier job to provide risk management!
I know I should shut friggn up, but look at the story and the opening of this blog: ome investment banks directed Clayton to halve the sample of loans it evaluated in each portfolio...
They friggn cut the data in half with the patented correlation filters... please, gimmie a friggn break and a laser on a shark head, this financial industry is full of retarded scumbags that need to go to jail for fraud ASAP! The technology was fine as we see in France, either a lot of people are unregulated, unwatched and forgotten, or a few trillion down the drain is meaningless! Wake up!
wawawa, would you be kind enough to provide a link to that Merrill forecast.
Thanks.
"Bank's billions burnt in 10 days - much more on the Jerome Kerviel scandal
I did my duty and decided to unwind these positions, said Daniel Bouton, the chairman. The bank later accepted a lifeline from two big American banks to escape the financial black hole."
hahahahahaha!!!
first they run you in, then they generously help you out of your position.
I vote putting everything about the post on one line, giving something like:
praetorian (safe to ignore) | 01.27.08 - 1:45 am | #homepage
This is a useful comment.
Just to tighten up the comments a bit. Killer change though.
Cheers,
prat
Doc H- (Off Topic?)
Still learning about the mortgage/IB business, but I know patents... and this one seems odd for risk analysis and likely worthless to anyone but their attorney.
Don't know how you found it, but the spec mostly talks about billing for cable operators. Oh, and it's really insipid trying to describe things I suspect were done for the last hundred years. The claims are worse since they don't even bother to mention that new fangled computer thang till the system claim in 9.
LOL!
What a waste.
so the rogue trader lost 5 billion euros? where did they go? onto goldman sachs balance sheet? its pretty close to a zero sum game right? goldman seems to claim they have the strongest vacuum when it comes to sucking up other parties' money! other wise who would have taken the other side of the trades of the (supposed rogue trader). why did this roil the 'global markets' so?
I didnt belive the story when it first came out, but I'm dense when it comes to the rogue element...
Thanks AZ Cowboy and daveNYC. The theory was that as the DD biz blew up, there would still be value left in helping the world sort out which tranches of what CDO's were worth something (which CLAY should hypothetically know best). Sounds like a quarter or two more will determine whether there's a small updraft or a crater at the end of the spiral. The fact that any table scraps they manage to hang onto may be lost in lawsuits is something I hadn't considered...
And another friggn thing, Re: Clayton Holdings agreed to provide important documents.
This is about software and automated systems that were programmed to look away; parameters and variables were plugged in my humans who distorted risk transfer and the people that plugged in the wrong FICO scores or slipped in no-doc or verified collateral need to be on the hook.
This is actually a chain of software driven corruption that starts with millions of loans that drift into Fannie, who engineers loan pools, with automated software and then they provide that pool of toxic waste to the underwriters that turbocharge the toxic sludge into an insidious cancer like fallout that continues to spread like nuclear rain...ok, thats a bit heavy, but it spreads like Hurricane Katrina as it enters The Gulf Of Mexico, using the superheated waters riff with bulding boom runoff, to fuel the energy of systemic financial collapse.....no, thats too heavy also, how about..... self edit/word count too high and inflating out of control....
FFDIC thanks for the BBC graphs. Very nice and succinct.
joeblo,
The first patent I posted was the wrong one, and sorry; Id delete it and should have read it in depth, but the second one is it Im almost sure!
United States Patent\t7,003,781
Blackwell , et al.\t February 21, 2006
Method and apparatus for correlation of events in a distributed multi-system computing environment
Assignee:\tBristol Technology Inc. (Danbury, CT)
Appl. No.:\t09/564,929
Filed:\tMay 5, 2000
wawawa,
I second mp -- where's that link?
wawawa,
Nevermind -- found it:
US Edition - Financial News Online
stinky,
The regulators have always in the past had marching orders to hold off anything BIG until after major elections if possible. Runs are another matter which would cause regulators to act quickly. I do not see many runs at this point, however if the market continues huge swings the public will become increasingly nervous about their money and its safety. I do see more money being deposited into banks for insurance protection short term as I think Mom thought would happen if they pull it out of a crashing market soon enough.
mp:
I got Merrills report from Blogger: Blog not found.
Qataris poised to snap up $3bn stake in Credit Suisse...
God, think of the terrible mess we'd be in were it not for these extreme "savers" and their bags of money. They have done the saving that we ought to have done and they will get the rewards for that. When greed is married to stupidity terrible things happen, like the US housing disaster.
CR: Please delete my comment at
NorkaWest writes:
01.27.08 - 1:40 am
I sent you an email with PDF attachment instead.
david_in_ct,
Check out the bloody good Daily Mail headline!
"Mummy I've done nothing wrong' - I thought I was reading about Geo. Bush at first...
Rogue trader to escape fraud charges as it emerges his brother was sacked for 'get rich scheme' | Mail Online
CR - hopefully you'll read down this far tomorrow. I think that the last "|" got moved around and only shows up when the user adds a homepage. This needs to show up regardless of whether or not the user adds a homepage. The killfile script is looking for a total of two bars. (I think. I hate deciphering regex. If anyone enjoys that kind of thing please pitch in.)
bankrate has a link to search your local banks and it will show you their exposure to various categories of lending....
The banks it puts in category 5 (one star) which is the worst, are the ones to watch. It would be interesting to follow and see what percentage of these go bk. (There are more one star banks than I imagined at first).
Testing: now with a homepageburger.
Testing: sans homepageburger.
mp
did u ever answer that post from previous thread that showed the borrowed reserves spike for the last wk to have dropped significantly? how does that affect your 12 noon conjure clock?
ffdic, gracias:)
I'm buying shorts on Jas Jain posts!!
hey,
F. Frederson
How do I link something in the dodad, guess Ill try agai
A stiff J&B on the rocks for everybody on-line to celebrate JJ's leaving CR for his very own site.
Ok never mind it worked....LOL!
Thanks, this is great
he really didnt leave! that was an imposter!
we need some blamescape on american traders pretty soon. we need to stop blaming it on the french!
FFDIC, thanks for the J&B! It's been a long week (of a long year--and only January!)
This is the actual report by Merril.
http://cfcr.ml.com/GetDoc.aspx?e=9YhRnwvMzjDHV5nMTFs8bDKppVhpHO9X0%2bgMcb9D4eLNKCYm9wea%2bChrDydr6TEUnZFLbSjxykK09fOPWLTogQ%3d%3d&ctbDocIDs=10689902&v=1&m=qQVXKNXS2W94OW5%2f6C8LqMdMWVM%3d
javascript:add_smilie(%22:(%22)
Very interesting, I my need to break out my old HTLM XML book
Ok, testing one 2, 3
wawawa,
Thanks!
F. Frederson, OK, I'll take a look at that. I did delete a bar somewhere - if I can remember where!
Best Wishes.
International Monetary Fund director-general Dominique Strauss-Kahn said a "serious" response was required to counter the risk of slowing global growth, including both interest rate cuts and increased government spending.
Check out Mauldin's take on the Fed:
Safe Haven | What Does the Fed Know?
Pay special attention to the section "What does the Fed really know?"
okay, names back at the bottom...i hope bernanke and greenspan start posting their real names here soon....
Yah, the bars, the new look, you need more cowbell
Hey dudes, what about a message post number also; I have begun to enjoy the references to time posts, like when someone says, hey you friggn fool where is your link @ 2:36 .....I like that, but you do have room for a number sequence
Very nice additions and Im sure your posters will all enjoy your efforts!
Another really farfetched shocker, can you change the color of the links to red...I want to follow red, not blue.
Please? Maybe just once?
F. Frederson, Ugh. I reordered several things - so I'm not sure what your hack software is looking for.
More bars in more places?
Best Wishes.
Reinsurance contracts that do not effectively transfer the underlying economic
risk of loss on policies written by the Company are recorded using the deposit
method of accounting, which requires that premium paid or received by the ceding
company or assuming company be accounted for as a deposit asset or liability.
The Company primarily records these deposits as either reinsurance receivables
or other assets for ceded recoverables and reinsurance balances payable or other
liabilities for assumed liabilities.
Income on reinsurance contracts accounted for under the deposit method is
recognized using an effective yield based on the anticipated timing of payments
and the remaining life of the contract.
CR-much appreciated, all you do!
I hope the CA economy doesn't collapse! long live the Okies!
stinky, your my last hope; Im just looking at something, but what think?
Good decisions come from knowing the facts. In the mortgage industry, that means more than simply using current rates and trends. Fidelity National Information Services (FIS) Applied Analytics division, the market leader in prepayment, default and mortgage analytics, offers immediate access to millions of loans, with the indicative data most important to your company. We can:Run custom analyses Filter out inconsequential data Pinpoint exactly what todays events mean for your loan portfolio FIS Non-Agency Loan Database is a new option for consumers of mortgage loan data and consists of millions of loans, representing up to 80 percent of the current market and acquired by FIS Applied Analytics from some of the industrys foremost trustees. After carefully screening and calibrating the data, FIS Applied Analytics research analysts use this database to develop and enhance our market-leading suite of analytic software models and libraries. Now this data is available to you...
I really like the:
LOL!
Thanks for the database tonight:
Mortgage loan and financial services data processing system - Patent 7315841
Assignee:
SOURCETEC, Inc. (Pleasant Hill, CA, US)\t
We claim:
Subprime resets.....yah
, Jan. 22 /PRNewswire-FirstCall/ -- Clayton Holdings,
Inc. (Nasdaq: CLAY), a leading provider of information-based analytics,
consulting and outsourced services for capital markets firms, lending
institutions, fixed income investors and loan servicers announced today
that its special servicing unit, Quantum Servicing Corp. has been rated
"average" by Standard & Poor's.
Right on S&P, work those ratings!!
Re: Clayton Holdings, a company ... that vetted home loans for many investment banks, has agreed to provide important documents and the testimony of its officials to the New York attorney general, Andrew M. Cuomo, in exchange for immunity from civil and criminal prosecution in the state.
Eric Dinallo has been twisting the arms of major banks to get them to put up $15 billion or so to bail out Ambac Financial Group (NYSE: ABK) and MBIA Inc. (NYSE: MBIA). If the muni bond insurers cannot maintain their high ratings with agencies like S&P, the value of the bonds that they insure could drop sharply, leading to more write-offs at Wall Street firms.
S&P has now said that the $15 billion may be just fine. "The dollars we understand that he's talking about -- $5 billion immediately and $15 billion ultimately
$15 billion might work if Dinallo can segregate to muni bond insurance and put all of the $15 billion into back-stopping the muni business.
The swaps and taxable securities are black holes that will suck up all the capital that any fool is stupid enough to throw into these companies.
He should think of ways to create "good" insurance companies and "bad" insurance companies from these zombies. Recapitalize the "good" insurance companies. Do triage and let the "bad" insurance companies die.
Looks like Cuomo may have found his smoking gun.
The reps and warranties might be the basis for putbacks or civil liability, but a smoking gun is a real killer in front of a criminal jury.
The real tragedy is that this all should have blown up at least a year sooner than it did.
Great format. Scrolling is much faster. Thanks, CR.
It's simple, it just needs to match this regex for the killfile script
/^s(S[^|].?S|S)s|s(?:<a href="([^"])"[^>]>Homepages|)?[^|]|[^|]$/
The old default was this I think (from google search):
user | Homepage | 01.20.08 - 10:42 am | #
It should also probably be a single line. Don't want to read the script to verify whether it is multiline regex matching or not...
Well, haloscan preview destroyed my escape characters. An important part to preserve if you don't want to use the killfile-compatible default is the first part...
/^s(S[^|].?S|S)s|
The first open/close parentheses form a regex grouping that is used to extract the commenter name, upon which the rest of the killfile javascript depends.
in exchange for immunity from civil and criminal prosecution in the state.
Can the attorney general prevent private parties from filing civil suits against Clayton? If, as some have suggested, Clayton will be going bankrupt soon, I guess this doesn't matter.
I wonder what will happen if they discover the folks selling MBS intentionally misled investors and ratings agencies? What is the appropriate punishment? Is Cuomo prepared to send some execs to jail and drive some companies out of business like Arthur Anderson was shut down after Enron? I wonder what insurance companies are on the hook for securities fraud liability?
I see this as significant in a couple respects in that it could potentially increase the liability of the IB's and ratings agencies, the prior for less than full disclosure of a material change in the underlying quality, and the latter due to a lack of due diligence to uncover the change & a subsequent move in the ratings to reflect the deterioration.
One more thing that people may have blown by in regard to a link by crispy-
" The problems have been exacerbated by the fact that prime brokers, the arms of investment banks that finance hedge funds, have tightened lending policies.
One manager said: Since market losses are magnified by leverage in a hedge fund, there can be a sudden need for a cash injection. But this time, the banks cant lend as easily. Funds are then forced to sell, which causes even more problems.
Error Page
This is very significant, if correct, various publications over the last month have reporting the tightening of margin requirements by the IB's, the hedge problem in this environment faces significant problems should the markets move contrary to their models. In my opinion, as stated many times, the risks to the markets are real and this is exactly what you have been witnessing over the last few weeks. Significant deleveraging at any cost.
Normally non-correlated assets are now correlated, short positions are covered (financials) and longs liquidated (commodities & tech), tremendous volatility and momentum that changes on a dime.
I believe there will be hedge fund bodies scattered across the board when all is said and done, question remains whether those who thought their hedge fund investment which was to provide "diversification" benefits (pension) is one of those bodies and has a direct end-effect on their own future well being.
CR, Thank you! I love being able to scroll past DH's posts without reading them first!
I also scroll past any anonymous posts and find I get through 100+ posts much faster this way!
Sure, I could have done this under the old system but it seemed that I tended to read those posts before disregarding them when I saw the poster's name (or lack of a name).
Thanks from a dedicated reader and normally non-poster!
I don't think the state could offer immunity from civil liability, only from criminal. Arguably if the state prevents people injured by Clayton's conduct from suing Clayton for recompense, that would constitute an unlawful taking by the state for which the state itself would owe damages. Is New York absorbing Clayton's liabilities or should the article have only stated immunity from criminal prosecution? Arguably it would only be from state criminal prosecution and, should Clayton's conduct have violated any federal law, they could still be open to federal prosecution.
OT: a beautiful broadside volley on Cramer that'll bring a smile to your face while contemplating the end of the banking system as we know it...
Rick Santelli Takes Down Jim Cramer -- Seeking Alpha
cd
What about the feds, other states or even foreign governments? Can they still prosecute the IBs?
First - CR and Tanta - names at the top is a wonderful enhancement. Thank you for making this change.
riskcapital - very good post. This is way OT but do you have any sense for whether the sharpness of the moves (vol of vol if you will) has been exacerbated by Reg NMS?? Depth of market (imo) has been degraded.
To everyone else sorry for the OT question to riskcapital.
Mike-
good question, the intention would seem to support the top end, but, as you state, the depth of the support would seem to be called into question. maybe someone else has a better, more educated answer.
First - CR and Tanta - names at the top is a wonderful enhancement. Thank you for making this change.
Don't thank me. CR is waaay too smart to let me touch the code.
My thanks to F. and dr. strangemoney and everyone else who is helping out with the technical issues.
"Were in the last camp; we now think that the trough will be 2½%, or 50 bp lower than previously. The reason: The Feds actions have been on pace, but both financial restraint and their own communications gaffes now require them to be more aggressive. Whether or not such a trough will represent an overshoot is unclear. To be sure, market-based inflation measures bounced higher following the Fed move. But its important to recast the debate in risk-management terms: The key message in an uncertain world is that the FOMC is willing to err on the side of more ease. And as long as officials are willing to take any overshoot back quickly, it need not be a policy mistake. That logic does not apply to the outcome of next weeks FOMC meeting, however; we expect that officials will opt for a 25 bp move."
Morgan Stanley - Global Economic Forum
Seems like most of their business was related to DD on the securitized trade. And now that they are ratting out their best clients, I imagine things will get worse for them.
I'm not so sure about that.
I think it's possible that they are ratting out the clients who were planning on throwing them under the bus. They might not lose much this way.
This is the age-old problem with a due diligence firm (and, um, a rating agency). You have to be willing to rat out your clients at a certain point. The failure to do so corrupts the system.
I just get terribly frustrated with stock analysts who take this sort of line, because that just builds even more pressure on these businesses to cave in to the "best clients." That's exactly what eAppraiseIT did: caved in to WAMU because WAMU was the big dog account.
Clayton's choice at this point is to be known as the firm that did the DD and "gave their blessing" to total stinking piles of trash, or the firm who blew the whistle on the stinking piles of trash. They won't lose any clients they currently have who actually want to hear the bad news from the DD firm.
Maybe just a coincidence but is Clayton Holdings related to Clayton Homes - a house trailer (pardon - manufactured home) dealer prevalent in NC for many years?
Jim
No, no relation. Clayton Homes was a public company for many years, and a damm well run one at that. Buffet bought them about five years ago. Back when I was running money, CMH was a core holding of mine.
"Le DAX ayant baissé de 600 points entre le début de l'année et le 18 janvier, le trader aurait perdu environ 2 milliards d'euros dans cet investissement"
i remember seeing DAX being down 5% on Monday and thinking what the heck, 5% in one day? i guess Societe Generale was busy unwinding the positions way before they had admitted the loss being way too high to keep hiding it. Euro2B between 1/1 and 1/18 and another Euro2B in just one day 1/21. Glad federal reserve came to the rescue on 1/22 ;-> who, though, was on the other side of the trades? wouldn't be hank paulson's buddies, would it?
Clayton homes (of Knoxville, Tennessee) was bought out by Berkshire Hathaway during one of the many mobile-home industry implosions of the last 10 years.
I don't think Cuomo's investigation will help anyone. He is borrowing from the Spitzer playbook, which involved pressuring very solvent companies with criminal prosecution and then settling for dollar amounts that seemed moderate compared to the risk of litigating.
He would like to extract a few billion which would then be used to find NY's various bailout schemes.
The problem is that the targets don't have the money. If any on the IB's are charged criminally, they are out of business, immediately.
It may be a feeding frenzy for lawyers, but it will be a short one.
From the NYT Clayton article:
Chris Atkins, a spokesman for Standard & Poor's, said the firm was not responsible for verifying information provided to it by issuers of securities. It is customary for rating agencies to accept the information they are provided by issuers of securities.
That will be a defense of sorts. Are they subject to any form of regulation or oversight short of the courts/Attorneys General after the landscape is already blasted?
Re Tanta's 01.27.08 - 9:06 am comment:
There is still some denial that the game is over. Perhaps Clayton is taking the position that we ain't goin back to 2005 anytime soon and we might as well move forward as best we can.
I'm still not convinced that after a few, very few attempts at using the sunshine disinfectant that the prosecutors don't get a glimpse of the size of the problem and slam the lid closed again. Face it, there just aren't enough salt mines to employ all the guilty parties and Universal Artists would sue for copyright infringement if Manhattan were turned into a maximum security prison.
It's clear we need to reestablish an adversarial component to appraisals, escrows, and such. I actually hate myself for saying it but a larger more intrusive County Recorder's Office might be the "neutral party" solution to firewalls and oversight.
That will be a defense of sorts.
Well, it's a defense of sorts to the accusation that the rating agencies didn't do any independent due diligence.
However, the issuers did do (some) due diligence: they hired Clayton and got back reports. Then they did not share that information with investors.
Any prospectus can say "there might be some exceptions in here, that's a risk."
What they don't say is, "We cannot guarantee that all loans meet published guidelines and documentation standards. However, a 10% sample of this pool was examined by our independent due diligence firm, and shows that the exception rate is approximately x%. Furthermore, as part of the due diligence process x% of the loans in the sample were removed from the pool. You should therefore be aware that these results imply that there are loans in the pool that would have been removed for noncompliance if they had been subject to intensive full-file review."
If Cuomo can force the SEC to require such language, this will be victory as far as I'm concerned. It's one thing to not do your DD; it's another thing entirely to do it and then not disclose the results.
The RAs are saying they weren't in possession of adverse material fact because they don't bother to check.
By hiring Clayton, the issuers put themselves in the position of possessing adverse material fact. They can't "unknow" it.
CR - I likey names at top. [Big High Five]...
Billy Hill writes:
01.27.08 - 7:01 am | #
in exchange for immunity from civil and criminal prosecution in the state.
Can the attorney general prevent private parties from filing civil suits against Clayton?
No, I think what is happening is the State agreed not to file any civil suits against Clayton in exchange for their cooperation.
Here's what seems to me like a hole in the SocGen story...but I could be wrong.
They say he used "plain vanilla" (listed) futures and covered up his bullish trades with fictitious short hedges. But with futures, it's my understanding that exchanges require margin on every contract.
If you simultaneously bought and shorted the same contact, you would have neutral exposure...but you would still have to meet margin on each contract. If one side of the hedge were falsified (a la SocGen), it could not generate the equity required to offset margin calls on losses.
Maybe somebody who works in futures can clarify. Nobody has yet explained how a rogue trader managed to meet over a billion dollars of daily mark-to-market margin calls over more than two weeks.
P.S. Regarding the question of who won on SocGen's losses, if the real problem was a swap counterparty reneg (my theory) then the counterparty's losses were transferred to SocGen and nobody won until SocGen started panic-selling the futures portfolio.
This is something that actually went on all over the place at the height of the dumb-mortgage boom:
You have a "stated income" program that your guidelines say is only available to self-employed borrowers. (OK, at least you're not doing stated for W-2 borrowers.) Your guidelines further state that employment must be verified (not income; just the fact of self-employment).
You get a borrower who says on the application that he runs some unincorporated Schedule C business. It doesn't require a license and it doesn't require audit by a CPA. So the usual forms of business verification (a copy of the license or a CPA letter) are not available.
You would actually see underwriters requesting a copy of the borrower's tax returns with the numbers blacked out.
They wanted the returns to prove the existence of the business. But they didn't want to have any "knowledge" of what the actual income was.
That wasn't just happening at Scumballz R Us. It went on at "respectable" joints. The issue is that every loan sale agreement has a general representation that the seller of loans is not in possession of any fact that is material to the investment quality of a loan that has not been disclosed. Lenders decided that the best way to deal with this is to go to outrageous lengths to make sure they didn't "know" anything they didn't want to disclose.
The whole perversion of the process was completed when the published guidelines (the ones agreed to in the loan sale agreement) specifically stated that "blacked out docs" were acceptable forms of business verification. Voila! The loan is not an "exception."
My point is that the process now has to put a stop to this kind of dynamic. We have to be motivated to know as much as we can practically know and disclose everything we know. The whole securitization machine is dysfunctional because it motivates people to know as little as you can get away with.
Tanta, obviously I agree with you. Just stunned this language or similar hasn't been required all along. On the evidence, the only reason for issuers to have commissioned DD was to grant them the appearance of proper disclosure.
So looks like these matters get addressed after the fact. I hope Cuomo and his counterparts on the federal side are persistent, effective . . . and brave.
I am reminded of an old boss who came up with solution to the liability crisis that killed the small aircraft market in the US.
He went on to suggest that cigarette manufacturers do the same. Given the unbelievably high costs of liability insurance this made financial sense. Maybe we can do the same for securitized mortgages and forget all this due diligence crap that serves only to diminish yields.
Re: i t is unclear how many lending exceptions are contained in the $1 trillion subprime mortgage market
I sort of condensed that last night:
The Murrayhill Co. and Clayton Services have united under a newly formed company, Clayton Holdings Inc., which has received $134 million in capital from private equity firm TA Associates, the controlling shareholder of the new company. Murrayhill, based in Denver, provides credit risk management to improve the performance of bonds, and monitors more than $800 billion in securitized bond portfolios.
These services support loan origination, securities issuance and securities performance management for the non-conforming mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) and asset backed securities (ABS) markets, which represent combined principal value in excess of $1.6 trillion.
Re: Moody's Raymond W. McDaniel Jr., said in reference to the information the company received, Both the completeness and veracity was deteriorating.
Chris Atkins, a spokesman for Standard & Poors, said the firm was not responsible for verifying information provided to it by the issuers of securities.
Fitch now says that it will no longer rate subprime mortgage securities unless it is provided access to loan files.
It is unclear how many lending exceptions are contained in the $1 trillion subprime mortgage market, but industry participants cite figures ranging from about 50 percent to 80 percent for some loan portfolios they examined.
Re: These (Clayton?) services support loan origination, securities issuance and securities performance management for the non-conforming mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) and asset backed securities (ABS) markets, which represent combined principal value in excess of $1.6 trillion.
Tanta,I remember the first time an underwriter showed me one of those blacked out tax statements.My first thought was " I do NOT want to explain that to a jury,under any circumstances".
Being able to skip past the people who annoy you before they do so is sweet.
Nicely done CR and tech-minded folk.
Yes, well done indeed.
Tanta, your troll treatise has been excerpted at length over at Eschaton.
Is the difference between 5 and 10% relevant? If the IBs were asking for a sampling that would provide a 95% confidence interval then >10% would be adequate in most cases. The due diligence was ineffective because the products were designed to avoid due diligence.
OT
Has anybody figured out how to modify the Killfile user script to work with the new signature format?
The whole securitization machine is dysfunctional because it motivates people to know as little as you can get away with.
I think the problem was also dependent on the size of the credit expansion. Greed mode was allowed to run wildly for too long due to overly accommodative monetary policy and lacking derivatives regulation. People care quite a bit about the details of their structured products now. A fully transparent securitization mechanism could add value to the system, but the regulators shouldn't have allowed so much unlimited financial innovation because the cost of a system failure could be high (political breakdown, social destabilization, wars). I know the argument is to over innovate and see what sticks but I'm not sure that is the right approach for nuclear power plants and monetary systems. So far the stress test is proving that violent disruptions are possible, which doesn't bode well for the overall stability of the system. My worry is that the situation will worsen considerably due to econo-political reasons somewhere on the system periphery where these disruptions can lead to serious political crises. One last comment on securitization -- there are diminishing returns on security complexity. Complex entities don't stand up well to periods of high stress and turbulent change in systems.
risk capital,
I believe that article explains the real reason the Fed cut rates -- they don't want an explosive unwinding of hedge funds to take down the entire financial system. I don't think it was so much about propping up stock prices.
The manager of one of Britains biggest hedge funds said: Its been an extraordinary week. Even in the crash of 1987 I dont remember so much carnage.
Experts warned that the problems among hedge funds were likely to cause more disruption in the markets, especially if many are forced to liquidate positions.
"Orderly annihilation" is the goal here.
These revelations re: Clayton are not new over in the Appraiser's Forum site. The image of the three monkeys who didn't hear, speak or see any evil in fraudulent loan originations
has been right out in front of honest appraisers for the past 5 plus years.
The collective chicanery of the deception faction of the lending industry made making a living honestly go from troublesome to difficult to next to impossible as
order taker appraisers helped feed the deception machine. Though merely enablers of this deception, and not bearing the major part of the blame,
the enablers played their part willingly for a small fraction of the
total of fees and charges associated with the sum of all toxic loans.
Willingness based on the promise of repeat business to the order takers, freezing out the truthful.
In this business model, ethics were a liability to future income.
This nationwide scheme was more intense in markets now suffering the most (hello, the O.C.!!) decline in value. Howver, the values were propped up by multiple deceptions.
So we now see propped up prices dropping back to realistic values as many others have pointed out.
In many ways this is also reflected in securities market "readjustment".
Day of reckoning has arrived. Quality Appraisal reviews, always available, were infrequently called upon for truthful investigations. However, a good review is time and money consuming and since Wall Street did not care much what was being bought to be passed on to other people's portfolios, who needs honest reviews?
I merely point this out as a similar
situation to the pickle Clayton finds
themselves in. In fact, there is a trend in the appraisal world right now for repentant order takers to go to their state regulatory confessionals and plead to help rat out the "bad guys and girls" and by so doing build a slight defense for their own sins.
OT Hmmm, new phrase for 2008,
"thumbwheel the trolls"
Appreciate this blog, has been educational, mostly.
Transparency in Derivatives?
As the securitization system crumbled last summer, some of the unfortunate owners of the securities discovered that there was no way to know how much they were worth. The derivative securities in question were quoted only by the bank that issued them, and that bank did not want to buy.
Transparency in Derivatives? - Floyd Norris Blog - NYTimes.com
--
"I believe that article explains the real reason the Fed cut rates -- they don't want an explosive unwinding of hedge funds to take down the entire financial system"
Fed is serving its real masters and politically impotent American People ain't them (Fed is helping keep oil price high by ignoring the dollar). Daily confirmations of:
A system of the Crooks...
Remember the end game: Blood will conquer money! And Financial Nazis will be eliminated like rats. My apologies to rats.
Jas
ac: I believe that article explains the real reason the Fed cut rates -- they don't want an explosive unwinding of hedge funds to take down the entire financial system.
I agree. The underlying story is that behind the scenes the Fed is battling the monster that is the first significant stress test of derivatives. The ship is scraping icebergs and they've got the bilge pumps cranking. Meanwhile, people have at least stopped dancing because they felt a bump. Some people are heading for life rafts. I hopped in mine awhile ago, when I noticed the captain had passed out from drinking with the throttle wide open.
Just hope the monolines wrote into their contracts to absolve of any claims if fraud is committed... pretty standard for other types of insurance but not sure about bond insurance...
From:
A Poor Monoline Shareholder
Living in a Cardboard Box
Outside in the Cold Winter
--
"The underlying story is that behind the scenes the Fed is battling the monster that is the first significant stress test of derivatives."
Greenspan and Bernanke were the biggest supporters of derivatives as innovations and giving the economy flexibility. They knew how much American dopes love terms like innovation and flexibility (part of the propaganda toolkit). The same dopes ignored a real businessman, or capitalist, Warren Buffet.
Finance does not lend itself to innovation. Innovation is usually a cover for fraud (hiding the risks or pushing risk to the future). One day the future knocks at the door.
Jas
OT : last news regarding Société Générale.
The French government has sounded out the country's two largest banks, Crédit Agricole and BNP Paribas, to find out if they would be prepared to launch a break-up bid for Société Générale, which last week admitted that it was the victim of a massive fraud, costing it £3.7bn.
Sarkozy plan to carve up fraud-hit SG |
Business |
The Observer
hey the killfile is working again! huzzah!
Jas,
Why are you so bitter? Did Goldman short your gold stocks down to zero in the 90's?
JAS JAIN: "Greenspan and Bernanke were the biggest supporters of derivatives as innovations and giving the economy flexibility. They knew how much American dopes love terms like innovation and flexibility (part of the propaganda toolkit). The same dopes ignored a real businessman, or capitalist, Warren Buffet. "
You do realize that Buffett uses derivatives all the time right? Buffett's concern is not the existence of derivatives but the speculative use of them. He also doesn't understand derivatives so he stays away from them. That doesn't mean they are bad.
For example, Buffett never invests in technology stocks because he doesn't understand them. It doesn't mean they are bad companies. There are some value investors, like Bill Miller, who actually invest in tech stocks (eg. Miller's investment in Intel and Dell in mid-90's; or Amazon in the early-2000's).
Another example is where Buffett said index futures are bad (this was back in the 80's when they were first introduced). But it didn't result in the end of the world...
JAS JAIN: Finance does not lend itself to innovation. Innovation is usually a cover for fraud (hiding the risks or pushing risk to the future). One day the future knocks at the door."
Perhaps... but in a free market, investors (i.e. capitalists) take risk under their own free will. I don't know how you can call something a fraud when investors themselves undertake risk on their own.
What we don't need are socialism for the investors (who are mostly rich) when risk bites them back.
Re: lacking derivatives regulation
That is priority #1 IMHO, shut off the derivative market and regulate the synthetic explosion of chaos which adds far too much risk into the securities markets. I read a story months ago, which I will try to get, which talks about how Moody's did not understand the ABX market, but they didnt want to be outplayed by other agencies, so they jumped in to weigh in on synthetic crap that they didnt know how to model. In addition, its very obvious the regulators and every form of government oversite is based on an era of stock trad'n that is 100 years old, and the people in charge, dont know what crack is and things are being abused. That has to stop Monday -- the derivatives markets have to have a moratorium imposed ASAP and we need to put any llobbyist from SIFMA in jail if they obstruct justice.
As a matter of fact, thats the way it should be, The DOJ or FTC should take control of The Fed and we should have a historic Constitutional rollback and slap them bitc--s down!
Fed is helping keep oil price high by ignoring the dollar
I think the Fed is driving the herd of speculators toward commodities, but this is the one bubble I can get behind (though not so far as putting my money where my mouth is).
It potentially acts as a control rod for the printing presses. The rising gas prices keep inflation at the front of everybody's concerns, and gives people a taste of what helicopters could really be like (imagine energy prices increasing at 5x the rate of your retirement income for the next 20 years).
Floyd Norris' Davos coverage has some gems:
What you see is what you get. If you dont see it, it will get you.
Jacob Frenkel, vice chairman of AIG, calling for more transparency in financial markets and reform of rules that allow banks to keep assets off their balance sheets.
Business - Floyd Norris Blog - NYTimes.com
Should be fun to watch the crisis responses as everybody gets back all pumped up from Davos.
Dont mean to argue here, but IMHO, Buffett is the biggest crook out there and I hope he gets busted for his reinsurance derivaties and the lack of risk transfer related to $33 billion in goodwill accounting which hopefully will force him to play ball and bring his Level 3 Unobservable derivatives out where they can be seen at the next shareholder meeting in Omaha!
Re: You do realize that Buffett uses derivatives all the time right? Buffett's concern is not the existence of derivatives but the speculative use of them. He also doesn't understand derivatives so he stays away from them. That doesn't mean they are bad.
He doesnt understand derivatives, like he doesnt understand marketing a snakeoil sales pitch to boobs!
--
Sivaram Velauthapillai writes: Jas, Why are you so bitter? Did Goldman short your gold stocks down to zero in the 90's? ;)
Welcome to the party!
What makes you come the conclusion that I am bitter? I am simply warning people against the real evildoers in America and the world Bankrupters and Fraudsters of New York City.
I never bought gold stocks. But, I do know the history of Goldchain Silverknife during late 1920s and early 1930s. These Crooks were able to emerge again from the financial rape of the public. These born-and-bred Crooks know the game periodic rape can be done again and again (once or twice during a lifetime). Hence, the cycles of boom and bust.
BTW, do you believe that you know more about the American financial system and its history?
Jas
New_me,
Biggest crook? What are you talking about? $33b in fraudulent accounting?
Wow, names at the top represent a quantum leap in searchability. Since I only read the parts of the threads that pass Tanta or CR's reply-worthy filter, this makes it easy (search for "Tanta writes" instead of Tanta). There must be 20 occurrences of "Tanta" for every actual post by her. That change just saved me 10 minutes a day!
JAS: "BTW, do you believe that you know more about the American financial system and its history?"
No! But I'm a free market guy. I like to think that buyers and sellers in a transaction know what they are doing. Booms & busts are a part of a free market. I don't think anything you are referring to has anything to do with it.
If you don't like the system, there is nothing to say you have to play the game. Just like all these people complaining about the declining US$ can simply invest in a foreign currency or a commodity or shares or whatever, and not worry.
Re
BBC NEWS | Business | The US sub-prime crisis in graphics
Behind every con is someone who wants something for nothing.
Now the map in the BBC piece shows the concentration of subprime loans in the black areas of Cleveland. Bad,bad mortgage brokers.
BUT where were the leaders of that community. I remember that several years ago hi-potency heroin was being sold and there were many overdose deaths from it.Somehow word of the danger was gotten out to the Junkie community and with days the OD deaths dropped to normal leels
So why didn't word get out about the dangers of OD-ing on a hi-potency mortgage? Surely there were those in that community who knew the risks of these loans, but was there any moral outcry, warnings from the pulpit anything at all?
--
"Booms & busts are a part of a free market"
WRONG. Booms and busts are part of systemic periodic fraud. They are caused by "bankers' mischief," according to Schumpeter. Have you ever bothered to read, let alone study, Business Cycles by Schumpeter, the best insight into the American econo-political system? His Democracy, Capitalism and Socialism is also a good read.
A friendly suggestion: You will learn a lot if you knew how much you really dont know.
Americas educated dopes suffer from the knowledge that they dont have. Their knowledge of history is pathetic. And so are their comments on the current economic system.
Jas
Reminds me of my time in the risk management unit of a top 5 subpime lender (now bye-bye), ostensibly tasked with rooting out fraud and bad underwriting.
The magnitude of fraud and the absence of any reasonable underwriting, especially in 2006, meant that our limited resources were directed only at cases made high profile priority due to press inquiries and law enforcement subpoenas.
Management would bog us down with huge investigations and then override many of our key recommendations in the end. Hundreds of man-hours wasted with every phony show investigation intended only to show the world that this subprime lender was playing by the same rules as mainstream lenders (NOT!). In those cases where management agreed with our recommendations to suspend or litigate they'd simply allow these criminals to simply change their vendor name so they'd get on the approved list again, or in-process individual loans would be allowed to fund. "But boss, it's the same crook!" "Sorry, we'd have to initiate a new investigation regarding that new name... gotta cover our asses so they don't "sue" us if we arbitrarily suspend them and thus deny them the right to due process and the right to make a living... (management didn't put it exactly in those terms but that is basically what they were saying... playing dumb and hiding behind their legalistic, bureacratic policies and procedures" Blah Blah Blah.
We supposedly had one of the better underwriting platforms in the industry. But what good was that if docs themselves were forged, the info inputted into the system was not the same as on the docs, and "management discretion business decisions" overrode red flags into green flags with just a push of a button? Crap in, crap out.
A big con game all around.
And upper management's connections went all the way to the top, in both New York City and Washington D.C. These guys knew exactly what they were doing. Their only mistake was that they thought they'd have alot more time before it all blew up.
I interviewed with a Clayton competitor after becoming disillusioned with my subprime employer. Guess I shouldn't have questioned in one of the three interviews how their business would fare down the road if lenders and investors really didn't want to uncover or find anything, that a spot check here and there didn't mean anything, that there soon wouldn't be anybody to sue, recover from or repurchase anyway because they'd all be BK, and that token forensic underwriting was apparently all just for show.
Needless to say, I did not get that job.
My fraud prevention unit was actually a fraud-enabling unit. The Clayton's of the world are just CYA show fraud-enablers that kept the game going. Just like the boxes full of contraband at the airport. "Boy do I feel safer knowing the authorities confiscated all those nail-clippers and drinks."
Now I'm in the foreclosure business. So I guess it all worked out in the end...
(Sorry for my wordiness)
Travis: "And upper management's connections went all the way to the top, in both New York City and Washington D.C. These guys knew exactly what they were doing. Their only mistake was that they thought they'd have alot more time before it all blew up."
Thanks you, Travis!
I have known it for more than ten years.
Jas
They wanted the returns to prove the existence of the business. But they didn't want to have any "knowledge" of what the actual income was.
That seriously blows my mind. Why on earth would anyone want to write a loan (under those conditions) without knowing if the redacted numbers were $1K, $50K, or $100K ?
Rick writes:
I don't think the state could offer immunity from civil liability, only from criminal. Arguably if the state prevents people injured by Clayton's conduct from suing Clayton for recompense, that would constitute an unlawful taking by the state for which the state itself would owe damages. Is New York absorbing Clayton's liabilities or should the article have only stated immunity from criminal prosecution? Arguably it would only be from state criminal prosecution and, should Clayton's conduct have violated any federal law, they could still be open to federal prosecution.
States can also file civil suits. As I understand it, the AG is promising that his office won't pursue criminal charges OR civil damages. He can't, of course, stop other people from suing them silly.
--
"Why on earth would anyone want to write a loan (under those conditions)..."
Simple -- they are not loaning their own money.
It Is the OPM, Stupid! (That turned the whole system into invitation to fraud).
Jas
Sivaram Velauthapillai @ 1:27 Re: Biggest crook? What are you talking about? $33b in fraudulent accounting?
Blacked out IRS forms? Blacked out IRS forms. Any peons with even a modest sense of self-preservation would run like hell away from dealing with anything like that. God, this Floridian, thought she had heard it all. . . .
Bush = Warren Harding + the worse aspects of Herbert Hoover
John Stark comments on states pursuing civil liability and offering immunity from that.
Good point. Mish (Blogger: Page not found posted links to several articles mentioning cities pursuing fraud and nuisance causes of action against lenders to recover losses caused by foreclosures.
Rick
Bush = Warren Harding + the worse aspects of Herbert Hoover
The prosecutors and attorneys for the bondholders would get some interesting details if they could talk to the investigators hired by the MI claims departments to look into claims on loans with manifest fraud involving originator personnel. It is no accident that MGIC, for example, has ceased to bid on pools accumulated by Wall Street securitizers, and that company's experience with Wall Street solicitations for "bulk" and "pool" insurance quotes is far from unique.
The MI coverage contract does not exclude all fraud, but it relies on the "reps and warranties" of the insured, and DOES exclude fraud in which representatives of the insured collude. This cannot always be proved, but when it can be factually established, MI coverage can and is rescinded.