I got blasted in another forum for pointing out that this was probably just negligence, even if Cfc is the favorite mortgage co. whipping boy.
I feel a bit vindicated. Not that negligence is good, but it makes sense that negligence is what it was--for heavens sake, Cfc and its lawyers know that BK judges can impose harsh penalties, and if they foreclose by mistake--it is definitely a mistake--they don't want property, they want money.
While there was much incompetence to go around, greed and corruption were a big part of this cycle. That, and just plain stupidity - the Housing Bubble has revealed the worst of human nature for all to see.
I bet the bungling in favor of the consumer is far lower than the bungling against. Wouldn't that effectively be bad faith?
Maybe if CFC had done themselves any favors here.
But making yourself look like the Keystone Kops in front of a BK judge could be considered "bunling in favor of the consumer."
My take on this is that we have to unpack this concept called "efficient operations" and "economies of scale." Because I think you get this kind of bungling when you have a business model like CFC's. It does not take a criminal conspiracy.
But if we want to continue to think of it as "bad faith," we will exempt the underlying assumptions that built this servicing portfolio from scrutiny. We'll say it's not trying to service $1.5 trillion in loans on the cheap that is the problem, it's some greedy dude in management.
My nephew many moons ago declared him self bankrupt, it was a big decision at that time to make, however he has bounced back and his bankruptcy ordeal is now in the past.
It's not any longer a read than Tanta's ubernerd posts, and you'll understand, REALLY understand, why Tanta was right. This bankruptcy judge spent more than a week of hearings on this particular, relatively minor incident.
Moreover, I learned about a new government agency I'd never heard of before: the United States Trustee, bankruptcy advocate extraordinaire. They are dipping their apparently unbounded bankruptcy advocacy powers into the mortgage industry, and I expect things are going to get more expensive for the lenders as they struggle to do things correctly. The cat is out of the bag, and I am sure handling this stuff is not going to get easier.
Finally, my favorite damning conclusion was that the law firm in Texas that bungled the issue at hand was contractually obligated to not communicate with Countrywide. That way, they virtually guarantee not getting these types of things correct. Local rules? What local rules! You mean it costs money to know the local court rules?!
... he was disheartened that Countrywide and its lawyers showed "a disregard for the professional and ethical obligations of the legal profession and judicial system."
I couldn't agree more, but I like to paint everybody with that brush.
my god. i just got back online too. internet access out at my business since i went in for last several hours. felt like my arm cutoff. my accts ballooned in the meantime.
Oh yes, the decision is well worth reading. This part made me nearly fall off my chair:
When this Court informed Thurmond that it had concerns that the Motion contained factual inaccuracies, Thurmond then represented to the Court that he would "check when I go back and see what the deal was with it."
I know I never expect an attorney to "know what the deal is" before the hearing.
Billy, negligence is only "punishable" in criminal cases, where someone was endangered, was injured or dies because of it. In personal injury or contractual (i.e., business) interactions negligence is typically dealt with by denying the request of the negligent party or fining them. The business world typically defines events where they lose money as having been painful and, given enough pain, as things they should really try to avoid doing again.
OT -- the schmucks are trying desperate, costly tricks: S&P is at 1310 right now, and some hedgie is buying S&P futures for September delivery at 1335, i.e., he is promising to buy the S&P in six months at a 2.5% premium to the current price.
Desperately, costly measures to try to get the market to close up.
Like I said above, you have to read the decision to understand why the judge chose to not levy fines. It was well within his right but he chose not to (in fact, the local texas firm was fined for earlier sloppy work to the tune of $150k). He went bezerk, and I don't think that's properly conveyed in most articles I've read. The lawyer involved in the incident that made Tanta fall out of her chair was fired, and still hasn't found work. The judge felt getting fired and the professional shame that brought the lawyer was better than beating a man while he's down.
The only thing the lawyer could not do is hold the participants in contempt to force them to testify, but they obliged out of professional courtesy and their desire to continue working with the court in question.
OT--Has anyone discussed the political/societal/cultural implications on our country of widescale foreclosures effecting communities? See quote below from "The Daily Journal" of San Mateo, CA.
Youre talking 10 percent of an entire city {Los Banos} becoming homeless, Cardoza said. I dont know how much worse things can get.
Tanta, I agree with you that the Attorney should have done some fact checking. In fact, professionally he is supposed to verify his filings and representations to the court as "an officer of the court". His license depends on it. However, the probable reality was that the poor bastard was probably just a law firm associate/drone with no clue or a burned out hack foreclosure attorney that was handed a stack of records and mortgages for foreclosure when Country Wide cut a bulk deal with his firm. He was also probably not allowed to spend time verifying his facts and records and just told to just prosecute them, contain costs and get the deadbeats out.
The bottom line is that, just like the origination process, the foreclosure process had gone cheapskate and lazy (doubly so, because they are probably working with the documents produced by the recent fast and loose origination process). This is now in the process of being corrected as judges give the cases more scrutiny and apply "pain" to the lenders to clean up their practices.
Well, the S&P and Nasdaq set new lows. I guess those who called a bottom in January have to eat their words coughO-Joecough. I guess CR is quite the LEADING indicator.
What I learned: a five-year-old dsl modem will wear out. Also, wow! The new ones are a lot smaller!
Yep, I had a linksys router blow up on me earlier this year. I always thought that solid state devices (i.e. no moving parts like a hard disk drive) shouldn't physically wear out. I guess there is hope for semiconductor Cap Ex yet!
thanks idoc: because of this blog i'm 60% cash, with GLD, SRS, some inverse OTC/SP, and Rydex Ultrashort dollar fund. so its been a good year so far. thanks guys and girls!
Top banking industry executives earned hundreds of millions through their salary, retirement and stock sales last year while their companies got scorched by the mortgage market meltdown, a congressional report said Thursday.
The report comes a day before Rep. Henry Waxman is expected to grill Angelo Mozilo, chief executive officer of Countrywide Financial Corp., former Citigroup CEO Charles Prince and Stan O'Neal, former CEO of Merrill Lynch & Co. In calling the hearing of his Oversight and Government Reform Committee, Waxman, D-Calif., said he'll examine if their "level of compensation is justified."
Back in 2001 it was the telcom industry top brass along with the VC industry that was getting the bad PR, nothing really changes at the top just the names and faces, what industry will be the next bubble option?
RE: Warsh...here's a snip of his bio from the Fed's website:
"From 1995 to 2002, Mr. Warsh was a member of the Mergers & Acquisitions Department of Morgan Stanley & Co., in New York, ultimately serving as Vice President and Executive Director. He served as financial adviser to numerous companies across a range of industry sectors, including manufacturing, basic materials, professional services, and high tech. In that capacity, Mr. Warsh helped structure capital markets transactions and facilitated fixed income and equity financings.
Mr. Warsh was born in April 1970 in Albany, New York. He received an A.B. in public policy (honors) from Stanford University in 1992 with significant course work in economics and statistics. Mr. Warsh went on to study law, economics, and regulatory policy at Harvard Law School and received a J.D. (cum laude) in 1995. He also completed course work in market economics and debt capital markets at Harvard Business School and MITs Sloan School of Management."
So to all the commenters here griping about Warsh's age or alleged political connections...sorry, you don't get cum laudes and honors degrees from these schools by being dumb or lazy, or by donations to schools by relatives. This guy is two years younger than I am and is a member of the FRB. I don't begrudge him that. Besides, what does the Constitution say the minimum age of the President is? That's right...35.
Now, this doesn't mean every decision this guy makes is going to be the correct one. But he is clearly not incompetent.
"could be considered "bunling in favor of the consumer.""
I understand your points. I was referring to the "including allegedly improper or unexplained fees" part. I bet there are far fewer unexplained credits.
Go find us a link to a paper from this 35 year old wonder child; he was given the job, along with his silverspoon grades at his fraternity clubs/ Get real, the guy has never done a thing, and also, please note, he says he is an expert on insurance......and was Bush's expert to boot. Tell that to Ambac, MBIA.......
Charlene Barshefsky: Hank Paulson said this week that most of the losses were in regulated institutions, not unregulated institutions. What does that say about regulation in this country?
TG: Economists wouldn't be surprised by that. They say that regulation brings moral hazard, and moral hazard brings risk-taking.
Problems occur in the middle: institutions attached to banks, or institutions which were a source of credit protection, or asset-backed financing vehicles, where there's a mix of explicit and implicit credit support. Banks were well capitalized going into the crisis and absorbed their losses reasonably well. The more awkward stuff was in the awkward middle.
This is all a product of the incentives created by regulation. We want to look at simplification and consolidation.
Could you refresh my memory? When a property becomes a REO from a mortgage sold into a MBS trust, does the bank servicing the mortgage pay the back taxes and maintenance until it is sold, or is it the trust?
"We'll say it's not trying to service $1.5 trillion in loans on the cheap that is the problem, it's some greedy dude in management.
Tanta"
Tanta - I'm curious what you think the difference is? Isn't it the greedy management dude who is cutting the back office to the bone? And STILL advertising in my local paper that you don't need a down payment to buy a house.
When a property becomes a REO from a mortgage sold into a MBS trust, does the bank servicing the mortgage pay the back taxes and maintenance until it is sold, or is it the trust?
The servicer advances funds to pay those things, but it is reimbursed first, before the trust gets paid (at liquidation). So if there isn't enough proceeds from sale of the home to cover everyone, the trust does indeed bear those costs, in the sense that the trust records a loss (while the servicer records a reimbursement).
It helps to figure all that out if you think in terms of the order in which liquidation proceeds are applied: the party who gets reimbursed first doesn't take a loss nearly as often as the party who gets "all remaining sums" last.
CFO.com | US
March 6, 2008
"Washington Mutuals board of directors have found a way to keep bonuses heftier in a year of extraordinary mortgage-related losses: moving the goalposts by excluding consideration of the losses in the bonus calculation.
The board's Human Resources Committee last week established 2008 bonus targets and performance measures for the companys executives, including CFO Thomas Casey. Citing "the challenging business environment and the need to evaluate performance across a wide range of factors," the thrift giant said the bonus formula would not take into account the huge losses the financial services giant has suffered from the housing crisis."
Not content with having trashed a vast amount of shareholder value,The Directors and senior staff seem to think that they should be imune from the consequences of their stupidity.
Is it 1st April today? If not it is a pretty sick joke!!
Isn't it the greedy management dude who is cutting the back office to the bone?
My point is it isn't this one dude. Or even several dudes (or dudettes).
It is an entire business culture, totally not specific to mortgages, that claims "we" all benefit from "efficiency." You know, we all get this giant benefit of cheap computers, at the cost of "only" spending ten hours on hold waiting for tech support and then getting someone in an offshored call center who is paid $5 an hour. Things get lost? Errors get made? Yeah, but looky how cheap laptops are at Best Buy!
That mentality is "respectable" enough to be all over the curriculums of business schools and the contents of business journals and part of the arsenal of big-name consultants. And cut me a break, shareholders rarely go on a sell-off binge when they hear about more "cost-cutting" and "efficiency."
It simply isn't possible to make any money servicing prime quality mortgage loans (which have extremely thin margins) on a nationwide basis without doing the kind of crap named in that decision (like not letting local attorneys talk to the servicer, instead having everything go through the one national firm who goes to CFC, turning the whole thing into a big game of "telephone.") It just is not possible. Smaller regional servicers could do it, but the 800 pound gorillas don't get their "economies of scale" by acting like 8 100 pound gorillas.
The whole goddam phrase "economy of scale" has an exceptionally "respectable" status in business culture.
So no, I don't want to hear about a couple of bad apples. Sure, bad apples don't help any. But the thing is structured to produce "negligent bungling." Read the judge's decision, and you see that he Gets It in that regard.
He isn't interested in making an example out of a couple of individuals. He went right after how CFC conducts its operations in a manner that is cheap for CFC but terribly error-prone. I'm cheering.
Did you hear this new thing called an automatic coffee maker?
You can even program it the night before. If you buy one with your coming rebate, you'll contribute to the employment of a retired senior at Walmart and a chinese political prisoner.
Ok to be fair, I doubt Bush, Hillary, Obama or anyone in The Fed, Senate or Congress has a "paper" worth a crap and perhaps in this age of ultra-nepotism this punk just stands out as a fine example of stupidity, where he can be a poster child for nepotism, and thus what be wrong with America!
Nepotism has been with us for a few years, but the degree of profound abuse by The Bush Coup is beyond "normal" and it's beyond comprehension how long it will take to find equilibrium in this really screwed up chaotic equation!!!!
Go pump up your 35 year old slut, he could probably use some support!
We'll say it's not trying to service $1.5 trillion in loans on the cheap that is the problem, it's some greedy dude in management.
Well, part of trying to service on the cheap is because of some greedy dude in management.
And it would still be telling how many of the non-coutroom mistakes favor CFC, compared to those that favor the borrower. I'll bet the latter get more "quality control".
Well, part of trying to service on the cheap is because of some greedy dude in management.
I am not arguing that management isn't greedy. Tan Man, Exhibit One.
I am trying to say that doing a couple of high-profile perp walks to get a few photogenic "bad apples" isn't going to fix the underlying problem of error tolerance.
Some folks want to say the errors are intentional. Frankly, I'm not sure this is the most effective way to steal money from consumers, if that's your goal in life.
I think the errors are 1) an inevitable result of the way the operation is structured which 2) is a structure that becomes, over time, impervious to the efforts of competent, non-evil employees, and 3) management tolerates that level of error. Now, I'll agree that they are well-compensated to tolerate it. And of course that kind of compensation structure is pernicious.
On the other hand, you can just assume that They Do Everything On Purpose Just To Screw People. I can't really get an interesting discussion going with anyone who believes that. Would that the world were so simple.
After all, I like cheap computers, coffeemakers, and mortgage loans, just like everyone else does. It is so much easier to call other people evil and greedy.
Tanta- With all the other institutionalized malfeasance that has surfaced at CFC, it is no stretch to see all those actions as malicious. Granted that is a loooong way from any legal standard. I'd vote for a clever racket put in place by some aspiring tech in the BK department (hahaha) as revenge for losing his red stapler to the division director. Possible to be a departmental initiative, but too many mouths in that chain to keep it undercover.
Congrats on getting back online. It's like having your eyes poked out and your brain frozen to be offline for long.
Being a former employee of Countrywide, I know how the beast operates. This is their business model. Put 10 pounds of s*#t into a five pound bag. Bags occasionally break open and stink up the place. Pretty simple.
In better times in the industry, they were known as the "sweatshop" of the mtg industry.
They are on death row awaiting final execution. They are done and their servicing portfolio will be absorbed by B of A.
Can things ever get so bad that the servicer can't recoup what they've paid out while the REO is up for sale? What are their options if that can happen?
Problem is, short of a perp walk, I see nothing changing.
Most of these "efficiencies" are just externalities. Companies crap wherever they want to, who cares if it smothers somebody's dog? They're not going to stop unless they're forced to pick up after themselves. And in a culture where BofA pleads for handouts in the name of homeowners and their little tiny children, it's more likely that we're going to pick up after them instead.
I don't see how bad faith and incompetent execution are incompatible, any more than I can see how finding malice should cause us to overlook bungling or poor choices of method.
A judge would not necessarily find good evidence of malice by a great big company in the case of one or a few scattered borrower, and anyway can't exceed the facts that are presented in court. You'd need evidence that was pretty wide or deep to get to malice. A single bankruptcy would ordinarily not be worth that expense, unless some unusual circumstance gave a plaintiff a good angle. That to me does not add up to evidence of absence.
Put it another way and ask whether an innocently-intentioned operation could possibly wind up by accident looking as much like a Ponzi scheme as CFC and many of the other faster and looser mortgage operations. You needn't think that's completely impossible to insist that they not be let off the hook without thorough (but untortured) examination.
Keep dreaming Tanta. I've worked representing servicers for the better part of 2 decades.
No way, no how will servicers do anything that an investor hasn't agreed to pick up the tab for.
Short of investors paying for it, the only other way they'll agree to a change - short of a judicial opinion, a Congressional act, or the FTC/OTS mandating it - is if they can get (force?) some vendor to foot the bill instead.
I thought FNMA and FHLMC were shaving basis points off their servicing contracts in the early 2000s due to "technological advances" that lowered the cost of servicing.
Nevermind that anyone whose servicing career actually extended back into the mid 1990s could have pointed out that the lowered cost of servicing was probably more due to the fact that those nasty, expensive things called "defaults" were running at all-time lows - and cutting the servicing fees then was a short term gain with long term consequences. But, hey, someone got their bonus, I guess.
If you've posted this in the comments already, sorry if I didn't hat tip you. I only just got back online, after a day and a half of no net.
What I learned: a five-year-old dsl modem will wear out. Also, wow! The new ones are a lot smaller!
Hey! She returns from Internet limbo.
S.
I bet the bungling in favor of the consumer is far lower than the bungling against. Wouldn't that effectively be bad faith?
There's a reason CFC is now trading at $5.36, significantly below the $7 + it gets if BAC happens to close on the buyout in the third quarter.
I got blasted in another forum for pointing out that this was probably just negligence, even if Cfc is the favorite mortgage co. whipping boy.
I feel a bit vindicated. Not that negligence is good, but it makes sense that negligence is what it was--for heavens sake, Cfc and its lawyers know that BK judges can impose harsh penalties, and if they foreclose by mistake--it is definitely a mistake--they don't want property, they want money.
Welcome back, Tanta. I went through similar withdrawal after spending a week in Detroit.
I think they think "high speed" is druggie slang.
Tater!
Angelo Mozilo = Malicious
While there was much incompetence to go around, greed and corruption were a big part of this cycle. That, and just plain stupidity - the Housing Bubble has revealed the worst of human nature for all to see.
I bet the bungling in favor of the consumer is far lower than the bungling against. Wouldn't that effectively be bad faith?
Maybe if CFC had done themselves any favors here.
But making yourself look like the Keystone Kops in front of a BK judge could be considered "bunling in favor of the consumer."
My take on this is that we have to unpack this concept called "efficient operations" and "economies of scale." Because I think you get this kind of bungling when you have a business model like CFC's. It does not take a criminal conspiracy.
But if we want to continue to think of it as "bad faith," we will exempt the underlying assumptions that built this servicing portfolio from scrutiny. We'll say it's not trying to service $1.5 trillion in loans on the cheap that is the problem, it's some greedy dude in management.
OT - S&P going thru Jan lows.
Are we having fun yet?
My nephew many moons ago declared him self bankrupt, it was a big decision at that time to make, however he has bounced back and his bankruptcy ordeal is now in the past.
I really recommend reading this stuff for yourself:
http://online.wsj.com/documents/countrywide120080305.pdf
http://online.wsj.com/documents/countrywide220080305.pdf
It's not any longer a read than Tanta's ubernerd posts, and you'll understand, REALLY understand, why Tanta was right. This bankruptcy judge spent more than a week of hearings on this particular, relatively minor incident.
Moreover, I learned about a new government agency I'd never heard of before: the United States Trustee, bankruptcy advocate extraordinaire. They are dipping their apparently unbounded bankruptcy advocacy powers into the mortgage industry, and I expect things are going to get more expensive for the lenders as they struggle to do things correctly. The cat is out of the bag, and I am sure handling this stuff is not going to get easier.
Finally, my favorite damning conclusion was that the law firm in Texas that bungled the issue at hand was contractually obligated to not communicate with Countrywide. That way, they virtually guarantee not getting these types of things correct. Local rules? What local rules! You mean it costs money to know the local court rules?!
... he was disheartened that Countrywide and its lawyers showed "a disregard for the professional and ethical obligations of the legal profession and judicial system."
I couldn't agree more, but I like to paint everybody with that brush.
I guess I have some perosnal issues to work out.
last time i checked negligence was a punishable offense.
my god. i just got back online too. internet access out at my business since i went in for last several hours. felt like my arm cutoff. my accts ballooned in the meantime.
last time i checked negligence was a punishable offense.
Kp
You hit the nail on the head! Wish the judge had done the same.
Oh yes, the decision is well worth reading. This part made me nearly fall off my chair:
When this Court informed Thurmond that it had concerns that the Motion contained factual inaccuracies, Thurmond then represented to the Court that he would "check when I go back and see what the deal was with it."
I know I never expect an attorney to "know what the deal is" before the hearing.
Countrywide and its lawyers showed "a disregard for the professional and ethical obligations of the legal profession and judicial system."
Good to know that unprofessional conduct, unethical conduct and abuse of the legal system combined don't rise to the level of bad faith.
Eventually some of these are going to show up in the Ventura County courts system and it will be a different story.
BREAKING OT:
Bond insurer CIFG loses top rating from Moody's
ice try scumbag Gasparino. made stupid, unsubstantiated claim that ABK will be backstopped by banks. hah!!! no one believes him anymore, nor CNBC.
reits getting pounded and SRS to the moon.
Billy, negligence is only "punishable" in criminal cases, where someone was endangered, was injured or dies because of it. In personal injury or contractual (i.e., business) interactions negligence is typically dealt with by denying the request of the negligent party or fining them. The business world typically defines events where they lose money as having been painful and, given enough pain, as things they should really try to avoid doing again.
Mother Merrill plunging!
Cramer's followers must be having a field day! Cramer asked them to buy GOOG at 650 and later sell at 450.
OT -- the schmucks are trying desperate, costly tricks: S&P is at 1310 right now, and some hedgie is buying S&P futures for September delivery at 1335, i.e., he is promising to buy the S&P in six months at a 2.5% premium to the current price.
Desperately, costly measures to try to get the market to close up.
Close red!
all those CNBC clowns should be put in prison. what a disservice to America.
Like I said above, you have to read the decision to understand why the judge chose to not levy fines. It was well within his right but he chose not to (in fact, the local texas firm was fined for earlier sloppy work to the tune of $150k). He went bezerk, and I don't think that's properly conveyed in most articles I've read. The lawyer involved in the incident that made Tanta fall out of her chair was fired, and still hasn't found work. The judge felt getting fired and the professional shame that brought the lawyer was better than beating a man while he's down.
The only thing the lawyer could not do is hold the participants in contempt to force them to testify, but they obliged out of professional courtesy and their desire to continue working with the court in question.
I ain't worried. Massa Bush done tole me ebby thangs otay...
Last minute Dollar destruction at hand...72.94
We just gotstah close under 12000 today, just gotta!
12,089
Come on baby, do it!
OT--Has anyone discussed the political/societal/cultural implications on our country of widescale foreclosures effecting communities? See quote below from "The Daily Journal" of San Mateo, CA.
Youre talking 10 percent of an entire city {Los Banos} becoming homeless, Cardoza said. I dont know how much worse things can get.
San Mateo Daily Journal
Tanta, I agree with you that the Attorney should have done some fact checking. In fact, professionally he is supposed to verify his filings and representations to the court as "an officer of the court". His license depends on it. However, the probable reality was that the poor bastard was probably just a law firm associate/drone with no clue or a burned out hack foreclosure attorney that was handed a stack of records and mortgages for foreclosure when Country Wide cut a bulk deal with his firm. He was also probably not allowed to spend time verifying his facts and records and just told to just prosecute them, contain costs and get the deadbeats out.
The bottom line is that, just like the origination process, the foreclosure process had gone cheapskate and lazy (doubly so, because they are probably working with the documents produced by the recent fast and loose origination process). This is now in the process of being corrected as judges give the cases more scrutiny and apply "pain" to the lenders to clean up their practices.
Aw, tj, you're just throwing gasoline onto the fire!
Youre talking 10 percent of an entire city {Los Banos} becoming homeless, Cardoza said. I dont know how much worse things can get.
I rent. Does this mean I'm homeless too? If so, can I get food stamps (now in the form of a kewl debit card)?
"my accts ballooned in the meantime.
idoc"
poor boy!
I say "Wow!!" so many times daily lately, it sounds like a broken record.
capitulation.
Well, the S&P and Nasdaq set new lows. I guess those who called a bottom in January have to eat their words coughO-Joecough. I guess CR is quite the LEADING indicator.
I can haz "boooyah!" now?
i had my best day ever today in the mkts. financials, reits, HB's devastated.
idoc, what about glod?
glod is poised to cross $1000 if the Fed cuts rates on the 18th. i'm approx. 25% energy, PM's, ag long and 75% short.
Burn, baby, burn!
What I learned: a five-year-old dsl modem will wear out. Also, wow! The new ones are a lot smaller!
Yep, I had a linksys router blow up on me earlier this year. I always thought that solid state devices (i.e. no moving parts like a hard disk drive) shouldn't physically wear out. I guess there is hope for semiconductor Cap Ex yet!
hey tj whaddayah say!!!
thanks idoc: because of this blog i'm 60% cash, with GLD, SRS, some inverse OTC/SP, and Rydex Ultrashort dollar fund. so its been a good year so far. thanks guys and girls!
Top banking industry executives earned hundreds of millions through their salary, retirement and stock sales last year while their companies got scorched by the mortgage market meltdown, a congressional report said Thursday.
The report comes a day before Rep. Henry Waxman is expected to grill Angelo Mozilo, chief executive officer of Countrywide Financial Corp., former Citigroup CEO Charles Prince and Stan O'Neal, former CEO of Merrill Lynch & Co. In calling the hearing of his Oversight and Government Reform Committee, Waxman, D-Calif., said he'll examine if their "level of compensation is justified."
Back in 2001 it was the telcom industry top brass along with the VC industry that was getting the bad PR, nothing really changes at the top just the names and faces, what industry will be the next bubble option?
CNBC: Citi "reducing" mortgage porfolio by $45 billion-
RE: Warsh...here's a snip of his bio from the Fed's website:
"From 1995 to 2002, Mr. Warsh was a member of the Mergers & Acquisitions Department of Morgan Stanley & Co., in New York, ultimately serving as Vice President and Executive Director. He served as financial adviser to numerous companies across a range of industry sectors, including manufacturing, basic materials, professional services, and high tech. In that capacity, Mr. Warsh helped structure capital markets transactions and facilitated fixed income and equity financings.
Mr. Warsh was born in April 1970 in Albany, New York. He received an A.B. in public policy (honors) from Stanford University in 1992 with significant course work in economics and statistics. Mr. Warsh went on to study law, economics, and regulatory policy at Harvard Law School and received a J.D. (cum laude) in 1995. He also completed course work in market economics and debt capital markets at Harvard Business School and MITs Sloan School of Management."
So to all the commenters here griping about Warsh's age or alleged political connections...sorry, you don't get cum laudes and honors degrees from these schools by being dumb or lazy, or by donations to schools by relatives. This guy is two years younger than I am and is a member of the FRB. I don't begrudge him that. Besides, what does the Constitution say the minimum age of the President is? That's right...35.
Now, this doesn't mean every decision this guy makes is going to be the correct one. But he is clearly not incompetent.
"could be considered "bunling in favor of the consumer.""
I understand your points. I was referring to the "including allegedly improper or unexplained fees" part. I bet there are far fewer unexplained credits.
idoc - too late to get in on DXD? What say you guys - a 30% haircut for the dow?
I'd bet there's a brutal rate cut on the 18th for one final pump, and then the wheels come off.
3 CEOs made $460 million - House panel - Mar. 6, 2008
O'Neal, Mozillo and Prince are to be criticized.
But not Robert Rubin?
Without Rubin none of this would have ever occurred.
Worst criminal in America? Bob Rubin!! No one else is even close.
YamhillMan,
Go find us a link to a paper from this 35 year old wonder child; he was given the job, along with his silverspoon grades at his fraternity clubs/ Get real, the guy has never done a thing, and also, please note, he says he is an expert on insurance......and was Bush's expert to boot. Tell that to Ambac, MBIA.......
Re:
Tim Geithner On The Financial Crisis A Mock Interview - Market Movers - Portfolio.com
Charlene Barshefsky: Hank Paulson said this week that most of the losses were in regulated institutions, not unregulated institutions. What does that say about regulation in this country?
TG: Economists wouldn't be surprised by that. They say that regulation brings moral hazard, and moral hazard brings risk-taking.
Problems occur in the middle: institutions attached to banks, or institutions which were a source of credit protection, or asset-backed financing vehicles, where there's a mix of explicit and implicit credit support. Banks were well capitalized going into the crisis and absorbed their losses reasonably well. The more awkward stuff was in the awkward middle.
This is all a product of the incentives created by regulation. We want to look at simplification and consolidation.
Tanta,
Could you refresh my memory? When a property becomes a REO from a mortgage sold into a MBS trust, does the bank servicing the mortgage pay the back taxes and maintenance until it is sold, or is it the trust?
Thanks,
"We'll say it's not trying to service $1.5 trillion in loans on the cheap that is the problem, it's some greedy dude in management.
Tanta"
Tanta - I'm curious what you think the difference is? Isn't it the greedy management dude who is cutting the back office to the bone? And STILL advertising in my local paper that you don't need a down payment to buy a house.
PEH
When a property becomes a REO from a mortgage sold into a MBS trust, does the bank servicing the mortgage pay the back taxes and maintenance until it is sold, or is it the trust?
The servicer advances funds to pay those things, but it is reimbursed first, before the trust gets paid (at liquidation). So if there isn't enough proceeds from sale of the home to cover everyone, the trust does indeed bear those costs, in the sense that the trust records a loss (while the servicer records a reimbursement).
It helps to figure all that out if you think in terms of the order in which liquidation proceeds are applied: the party who gets reimbursed first doesn't take a loss nearly as often as the party who gets "all remaining sums" last.
CFO.com | US
March 6, 2008
"Washington Mutuals board of directors have found a way to keep bonuses heftier in a year of extraordinary mortgage-related losses: moving the goalposts by excluding consideration of the losses in the bonus calculation.
The board's Human Resources Committee last week established 2008 bonus targets and performance measures for the companys executives, including CFO Thomas Casey. Citing "the challenging business environment and the need to evaluate performance across a wide range of factors," the thrift giant said the bonus formula would not take into account the huge losses the financial services giant has suffered from the housing crisis."
Not content with having trashed a vast amount of shareholder value,The Directors and senior staff seem to think that they should be imune from the consequences of their stupidity.
Is it 1st April today? If not it is a pretty sick joke!!
Isn't it the greedy management dude who is cutting the back office to the bone?
My point is it isn't this one dude. Or even several dudes (or dudettes).
It is an entire business culture, totally not specific to mortgages, that claims "we" all benefit from "efficiency." You know, we all get this giant benefit of cheap computers, at the cost of "only" spending ten hours on hold waiting for tech support and then getting someone in an offshored call center who is paid $5 an hour. Things get lost? Errors get made? Yeah, but looky how cheap laptops are at Best Buy!
That mentality is "respectable" enough to be all over the curriculums of business schools and the contents of business journals and part of the arsenal of big-name consultants. And cut me a break, shareholders rarely go on a sell-off binge when they hear about more "cost-cutting" and "efficiency."
It simply isn't possible to make any money servicing prime quality mortgage loans (which have extremely thin margins) on a nationwide basis without doing the kind of crap named in that decision (like not letting local attorneys talk to the servicer, instead having everything go through the one national firm who goes to CFC, turning the whole thing into a big game of "telephone.") It just is not possible. Smaller regional servicers could do it, but the 800 pound gorillas don't get their "economies of scale" by acting like 8 100 pound gorillas.
The whole goddam phrase "economy of scale" has an exceptionally "respectable" status in business culture.
So no, I don't want to hear about a couple of bad apples. Sure, bad apples don't help any. But the thing is structured to produce "negligent bungling." Read the judge's decision, and you see that he Gets It in that regard.
He isn't interested in making an example out of a couple of individuals. He went right after how CFC conducts its operations in a manner that is cheap for CFC but terribly error-prone. I'm cheering.
Hey Tanta:
Did you hear this new thing called an automatic coffee maker?
You can even program it the night before. If you buy one with your coming rebate, you'll contribute to the employment of a retired senior at Walmart and a chinese political prisoner.
Sweet. A Two-fer.
YamhillMan,
Ok to be fair, I doubt Bush, Hillary, Obama or anyone in The Fed, Senate or Congress has a "paper" worth a crap and perhaps in this age of ultra-nepotism this punk just stands out as a fine example of stupidity, where he can be a poster child for nepotism, and thus what be wrong with America!
Nepotism has been with us for a few years, but the degree of profound abuse by The Bush Coup is beyond "normal" and it's beyond comprehension how long it will take to find equilibrium in this really screwed up chaotic equation!!!!
Go pump up your 35 year old slut, he could probably use some support!
I tend to think incompetence IS malicious, myself.
If you're incompetent, don't be in the business.
We'll say it's not trying to service $1.5 trillion in loans on the cheap that is the problem, it's some greedy dude in management.
Well, part of trying to service on the cheap is because of some greedy dude in management.
And it would still be telling how many of the non-coutroom mistakes favor CFC, compared to those that favor the borrower. I'll bet the latter get more "quality control".
Well, part of trying to service on the cheap is because of some greedy dude in management.
I am not arguing that management isn't greedy. Tan Man, Exhibit One.
I am trying to say that doing a couple of high-profile perp walks to get a few photogenic "bad apples" isn't going to fix the underlying problem of error tolerance.
Some folks want to say the errors are intentional. Frankly, I'm not sure this is the most effective way to steal money from consumers, if that's your goal in life.
I think the errors are 1) an inevitable result of the way the operation is structured which 2) is a structure that becomes, over time, impervious to the efforts of competent, non-evil employees, and 3) management tolerates that level of error. Now, I'll agree that they are well-compensated to tolerate it. And of course that kind of compensation structure is pernicious.
On the other hand, you can just assume that They Do Everything On Purpose Just To Screw People. I can't really get an interesting discussion going with anyone who believes that. Would that the world were so simple.
After all, I like cheap computers, coffeemakers, and mortgage loans, just like everyone else does. It is so much easier to call other people evil and greedy.
ok...admit it...who else was thinking:
I see you've been grilled already.
Tanta- With all the other institutionalized malfeasance that has surfaced at CFC, it is no stretch to see all those actions as malicious. Granted that is a loooong way from any legal standard. I'd vote for a clever racket put in place by some aspiring tech in the BK department (hahaha) as revenge for losing his red stapler to the division director. Possible to be a departmental initiative, but too many mouths in that chain to keep it undercover.
Congrats on getting back online. It's like having your eyes poked out and your brain frozen to be offline for long.
Being a former employee of Countrywide, I know how the beast operates. This is their business model. Put 10 pounds of s*#t into a five pound bag. Bags occasionally break open and stink up the place. Pretty simple.
In better times in the industry, they were known as the "sweatshop" of the mtg industry.
They are on death row awaiting final execution. They are done and their servicing portfolio will be absorbed by B of A.
Countrywide: We're not efficient, we're HyperEfficient!
Tanta,
Can things ever get so bad that the servicer can't recoup what they've paid out while the REO is up for sale? What are their options if that can happen?
Can things ever get so bad that the servicer can't recoup what they've paid out while the REO is up for sale?
Sure. It has to get pretty bad for that, but it can happen.
What are their options if that can happen?
They don't have any options. They write off the loss and live a sadder and wiser life for it.
Problem is, short of a perp walk, I see nothing changing.
Most of these "efficiencies" are just externalities. Companies crap wherever they want to, who cares if it smothers somebody's dog? They're not going to stop unless they're forced to pick up after themselves. And in a culture where BofA pleads for handouts in the name of homeowners and their little tiny children, it's more likely that we're going to pick up after them instead.
I don't see how bad faith and incompetent execution are incompatible, any more than I can see how finding malice should cause us to overlook bungling or poor choices of method.
A judge would not necessarily find good evidence of malice by a great big company in the case of one or a few scattered borrower, and anyway can't exceed the facts that are presented in court. You'd need evidence that was pretty wide or deep to get to malice. A single bankruptcy would ordinarily not be worth that expense, unless some unusual circumstance gave a plaintiff a good angle. That to me does not add up to evidence of absence.
Put it another way and ask whether an innocently-intentioned operation could possibly wind up by accident looking as much like a Ponzi scheme as CFC and many of the other faster and looser mortgage operations. You needn't think that's completely impossible to insist that they not be let off the hook without thorough (but untortured) examination.
Keep dreaming Tanta. I've worked representing servicers for the better part of 2 decades.
No way, no how will servicers do anything that an investor hasn't agreed to pick up the tab for.
Short of investors paying for it, the only other way they'll agree to a change - short of a judicial opinion, a Congressional act, or the FTC/OTS mandating it - is if they can get (force?) some vendor to foot the bill instead.
I thought FNMA and FHLMC were shaving basis points off their servicing contracts in the early 2000s due to "technological advances" that lowered the cost of servicing.
Nevermind that anyone whose servicing career actually extended back into the mid 1990s could have pointed out that the lowered cost of servicing was probably more due to the fact that those nasty, expensive things called "defaults" were running at all-time lows - and cutting the servicing fees then was a short term gain with long term consequences. But, hey, someone got their bonus, I guess.
Can you tell how jaded I am?