I used to feel safe it was safe to let my kids go get a popsicle, but no longer. They have to walk by the long lines at the state unemployment office to get to the stip mall, and, well, you just never know who's standing in that line.
It has been on a buying binge in the United States over the last seven years, snapping up roughly $1 trillion worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.
Interesting. If geopolitics get any worse, war bonds will probably be issued.
Tanta - where did you hear about this Catherine Pitts whoever? Because her Wiki page made me all nostalgic for the first Bush administration. I mean we despised them at the time, but they look good now, by comparison. And she learned Mandarin Chinese and writes for a New Zealand paper.
From the page you quoted from, there's also this:
"As a result, corporations can make money exploiting people and places and their stock will go up. The stock of the place harmed will not go down; there is no stock of the place. By centralizing our investment capital into large corporations, our financial interests are not aligned with the interests of the people and our natural environment."
This lady may have (my Frist moment here) a brain tumor.
If she's as coherent in Mandarin Chinese as she is in standard written English, I hate to think what she gets served when she tries to order Mu Shu Pork down at the local Wong's Wok.
I'm sure this reporter was delighted to find Fitts. The sources actually quoted in the article make pretty uncontroversial points--i.e., don't march into my courtroom claiming the dog ate the mortgage. It's the reporter who "explains" these quotes who spins everything into a Les Mis sequel. So Fitts fit.
Usually you write great stuff, Tanta, but you dropped the ball big time by ridiculing Fitts and not digging deep enough into what she is about.
Catherine Austin Fitts was a director at a major investment bank.
She got appointed to a high position in HUD by the first Bush.
She knows more about how Wall Street and Washington work than just about any of us ever will.
Some of what she says sounds pretty flakey, but understand that the Solari group she is speaking to doesn't just think dollars and cents like we do.
Her interview on Financial Sense NewsHour is simply a must read for anyone with the guts to find out how badly corrupted our system is:
I think Ms. Fitts is a shill in blogger's clothing. Her web links on her web site are a pile of fear-mongering garbage. She prolly still works for the gov't.
Usually you write great stuff, Tanta, but you dropped the ball big time by ridiculing Fitts and not digging deep enough into what she is about.
Oh, spare me. Either the words "fraudulently induced" mean something or they don't. So which is it? A factual claim about an actual legal standard, or just gross hyperbole? And what changed in 1996?
If you don't want to be ridiculed, don't say ridiculous stuff. I didn't put the words in her mouth, she did.
I first saw this idea that the loans may not be valid from Michael Hudson. He calls it 'fraudulent conveyance' and he does suggest that it could be called into play for subprime mortgages where the lender knew that the borrower would be unable to pay the loan after it reset:
"HUDSON. Ill describe one solution I think is a good one. This approach was prevalent in New York State, where I live, before the American Revolution, and its a law that is still on the books here the law of fraudulent conveyance. Around the time of the Revolution, a lot of New York farmers borrowed from British lenders who would come over, make a loan to a farmer far in excess of the normal ability to pay, and then, just before the crop was harvested, just before the farmer had liquidity, they would call in the loan, that is, demand that it be paid. The farmer couldnt pay because he hadnt sold his crop yet or because the loan was too big to begin with, and the British creditor would foreclose. To stop this practice, New York State passed the law of fraudulent conveyance, which said that if a creditor makes a loan to a borrower without having any idea how the borrower can repay the loan, then that loan is nullified. That law is still on the books, as I mentioned, and it was often brought up in court in the 1980s, when corporate raiders would load down companies with corporate debt. If this law were implemented nationwide, it would apply to subprime borrowers and other borrowers who signed loan agreements far in excess of what they could pay, once the teaser interest rates adjusted to much higher levels."
Citigroup Inc., Merrill Lynch & Co. and three other banks were accused in a shareholder lawsuit of failing to warn investors about proposed accounting-rule changes that lowered the value of preferred Fannie Mae stock. ...
FASB is considering changes to Financial Accounting Standard 140 that may require Fannie Mae and Freddie Mac to bring a combined $3.7 trillion in off balance sheet assets on to their books, which would substantially raise their capital requirements.
Losses
``When news about these new accounting rules and their possible effect upon Fannie Mae became public, the company's stock dropped substantially,'' Orkin said.
Not kidding and not ridiculous. As I've noted here previously, we're going to see a number of actors try out for the role of this century's Huey Long. Fitts's audition may be a little premature, but sooner rather that later, this role is going to be cast. Politics trumps economics -- always.
Some of what she says sounds pretty flakey, but understand that the Solari group she is speaking to doesn't just think dollars and cents like we do.
Well, that's true, I guess. Here's Ms. Fitts:
July 24th 2006, 11:50 [PST] - The day after 9-11, a person whom I respect and care about a great deal said to me, "George Bush was anointed by God for a time such as this." He then asked me what I thought. I said that I thought that the Bush family was anointed by financial fraud, narcotics trafficking, and pedophilia.
She's a paranoid conspiracist hard-right nutcase. "Pretty flaky" doesn't do it justice.
I think the "popsicle index" is good and I'm going to stick up for it (so to speak). It's basically an index of whether a neighborhood is safe and walkable, both of which are good things and will tend to hold up desirability and prices. I think the shrubberies crack is (ahem) cold because she never said putting in shrubberies would help (except presumably supporting Bush in the last election.) Things that would help with the popsicle index, like more outdoor activity by neighbors, slower and safer driving, and convenient access to safe shopping, would improve a neighborhood and reduce the chance of defaults and walkaways.
There's a vast excess of oversized McMansion farms out there at the moment. Some will become sluburbs or even ghost towns. But some will remain nice places inhabited by the (still numerous) Americans who like that kind of place. I think the difference will mostly be driven by the kind of community issues the "popsicle index" is looking at.
I first saw this idea that the loans may not be valid from Michael Hudson. He calls it 'fraudulent conveyance'
I suggest, before you decide to start quoting Hudson all over the internet, you check with an actual attorney about what "fraudulent conveyance" is. I admit I am not a lawyer, but last I knew "fraudulent conveyance" was a fraud against a creditor, not a borrower. I have no idea what the concept might have had to do with callable loans in colonial times, but then again I don't know what it's got to do with contemporary non-callable mortgage loans, either.
In any case, Fitts turns this into "fraudulent inducement," presumably because "conveyance" doesn't make jack shit sense in context.
It's basically an index of whether a neighborhood is safe and walkable
But it is one that depends on no actual verifiable data. It depends on how you feel that your neighbors believe. Which probably has more to do with how many sensational child abduction stories you've seen lately on the cable shows than anything else. Depending, as it does, on "gut feelings," it is obviously unfalsifiable. What good is that?
And she wrote that when "living things and the land is happy, businesses thrive, and the value of real estate is good." She is not, apparently, claiming that "putting in shrubberies" would help, nor did I claim she claims that. What she wrote was that "the land" can be "happy" and this has a causal effect on economic success. Just exactly how is it unfair to describe this as implying we should cheer up the shubbery?
Tanta, check your link on Fitts. She's not rightwing at all. She sounds like a leftist communitarian actually, except that she's a big-time goldbug. How many rightwingers want to limit corporate rights?
I think we are going to see a lot of this kind of "not my fault" stuff. Wait until the Manhattan apartment market breaks and you will hear wailing and gnashing of teeth, as a very entitled group of young people who have never really seen a recession come face to face with reality. Walk-aways are going to be high in this group - they will walk away from jobs (not by choice), apartments and New York City.
But hey, I can finally get a seat on the subway...!
Actually the "popsicle index" sounds like a polling thing, which is indeed verifiable. Yes it's measuring opinions, not facts (directly). But there will be a correlation between facts and opinion, albeit imperfect. In addition, opinions per se have a lot to do with how much people will put up with and pay to stay in their house, which gets magnified by feedback because the more leave the more the neighborhood is likely to decline and drive more out.
"Happy land" is either metaphorical or hippie, I'm not sure which. You'll have no problem finding that kind of idea in the Utne Reader, Mother Jones, or Adbusters. The concept is mockable, but it's not about landscaping (it's about residents' attitudes) and the "shrubberies" business misses the mark entirely as an attempt to mock.
How far does one have to walk to get this said popsicle?
I mean, if my neighbors were asked if they thought my children were safe walking to the nearest store to get a popsicle and back by themselves, they would say to call DYFS on me as making my kids walk some 8 miles one way and crossing an interstate to boot is really child abuse...
Mebee this popsicle theory works in urban areas, but methinks someone hasn't gotten farther than her own 4 city blocks in a while...
Tanta should learn a few things before he goes blowing caca about Catherine Austin Fitts. She's heavy duty. Tanta is medium-duty, with recent hints of lightweight.
That is definitely an urban index.Hereabouts we have deer drunk on fermenting apples in the fall,and rabid quail year round.Letting the kiddies out alone without a trained dog or a shotgun is unwise.
Fair Economist, you need to learn that not all flaky talk about vaguely "environmentalist" themes is left wing or hippie or what have you. The Nazis, for instance, were into that kind of thing.
Green Party Turns Hard Right
Green delegates from Tennessee have recently advanced a proposal which they call "Moving the Money from Wall Street to Main Street". Certainly sounds innocuous enough. Tragically the delegates from Tennessee based their proposal on a presentation made to the Green Party delegates at their convention by a woman named Catherine Austin Fitts.
Ms. Fitts, a Republican, was Assistant Secretary of Housing in the administration of George Bush Sr. and now supports libertarian causes. Why was Fitts invited to talk to the Green Party about banking issues? Nobody really knows. Perhaps not surprisingly, one of the associates of Catherine Austin Fitts is Franklin Sanders, a leading thinker in the extreme right-wing Constitution Party. Sanders is also chairman of the Tennessee chapter of "The League of the South", yes, from the same state of the Green Party delegates who offered the proposal in the first place.
The League of the South is quite an outfit. They advocate the ideology of "kinism", and would outlaw racial intermarriage and non-white immigration, expel all "aliens" (including Jews and Arabs), limit the right to vote to white landowning males over the age of twenty-one, and re-institute black slavery. The Green Party is about to adopt a proposal based on the philosophy of people like Fitts and Sanders. One has to wonder who would influence these guys if they were savvy enough to win elections.
Well, there's one powerful example of that, but I'm afraid of a Godwin's Law violation.
Zing! T, I just love it when you are fully caffeinated. Great post!
I don't know how things work in Ms.Fitts 'hood, but around here, if one of my neighbor's 12-year old lookouts comes back from the corner store carrying a popsicle, that's the signal that the muthafukkin' police are about to kick in this door, so he knows it's time to flush all the crack rock down the toilet. Isn't that how it works everywhere?
If I bought my house before mortgages became "fraudulently induced", but refi'd balance-only for rate reductions afterward, am I a fraud victim or not?
And if I sue can I collect something other than popsicles?
I always look for motivation and intent whenever I run across something that isn't clear.
What's Tantas in writing about quotes from the Village Voice?
Calling BS when she runs across it. i.e. consumer advocate
What's Fitts in writing a blog?
Selling "truth" to induce you to buy gold/silver.
Problem here is Fitts puts herself out there with the full ability to check her credentials. Accept her impressive resume and you give credence to her insider information.
Tanta is an anonymous blogger we give credence too from her writing and the fact she's on the internet.
Everyone has an agenda. Your perspective guides what you believe. Perception is reality.
Perhaps because in 1996 new banking regulations were enacted. According to http://www.ers.usda.gov/Publications/RCAT/RCAT72/rcat72n.pdf , these new regulations (CRA and CDFI) decreased the "regulatory burden" and encouraged lending to low-income, rural and "underserved" areas.
An excerpt:
"In 1995, the Federal Reserve Board and the other bank and savings and loan regulators revised the regulations for the Community Reinvestment Act (CRA), which encourages banks and savings and loans to help meet the credit needs of their communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations.
"CRAs regulations were revised to increase lending in underserved areas while reducing regulatory costs for affected financial institutions. Revised regulations went into effect in January 1996, making it easier for small financial institutions to comply with CRA exams.
"Large finanacial institutions are not required to be tested under the new CRA exams until July 1997, although they had to begin collecting new loan data on January 1, 1996. Revised rules require larger banks to report separately small business lending data for their rural market areas. These changes may encourage an increase in rural lending in places served by large banks and reduce compliance costs for small banks serving rural areas.
"To provide additional incentives to banks and other institutions that provide credit to lowincome areas, Congress enacted a modified version of a Clinton administration initiative
to fund a series of community development financial institutions (CDFI). CDFI funding was set at $382 million over 4 years, but actual obligations have been well below authorized funding levels. One-third of the funds are meant to go to existing banks as rebates of deposit insurance premiums for doing a good job of servicing low-income areas. The CDFI legislation also reduces the regulatory burden for banks. This may help rural banks lower interest rates on loans and sell loans to other investors, and it leaves rural bankers with more time to make loans."
Mrs. Krabapple, "the children are right to laugh at you Ralph" (the Simpsons).
I certainly agree this woman needs a good mocking. But there is a nugget of an issue. How many people actually read all their mortgage documents? And if you did read it, would you understand it? Before the "secruitization" (more acurately descibed as "less security") of loans, the bank paternalistically decided who got a loan. Was the old model better, or is there an alternative that provides loans without fraud?
How can I get the Popsicle Index time series from HUD? Does HUD publish it or will I have to use FOI? I need the data to sue my lender. I'm sure I was fraudulently induced, but can't prove it. I hope the Index is still being maintained. At least HUD will be doing something useful, thanks to Ms. Fitts.
Tanta, the "1990" bubble burst did begin in 1989, at least in Rhode Island, where all of the credit unions were closed in one day. The fraud and negligence, abetted by the state government was about to explode over everyone, when the new Governor closed the CU's on his first day in office, which was January 1, 1990. The bubble had really burst in the summer of 1989, when individual credit unions and banks were closed down, and the number of insolvent financial institutions was becoming apparent.
Tanta, check your link on Fitts. She's not rightwing at all. She sounds like a leftist communitarian actually, except that she's a big-time goldbug. -Fair Economist
I listened to that podcast that was linked up above. She sounds fairly provocative at first with discussion of "black budgets", etc. But, she's talking her book, she's got something to sell. She offers a series of relatively simple, but unverifiable "explanations" for all of our complicated woes to further her own agenda that is about as opaque as the issues that she complains about. For some reason "Libertarian Psychiatrist" or "Libertarian Sociologist" comes to mind.
I assume what happened back then was that speculative buying in iffy areas that had recently run way up in price was behind the rate of defaults.
Not owner occupied housing.
Roger: Oh, what sad times are these when passing ruffians can say Ni at will to old ladies. There is a pestilence upon this land. Nothing is sacred. Even those who arrange and design shrubberies are under considerable economic stress at this period in history.
King Arthur: Did you say shrubberies?
Roger: Yes, shrubberies are my trade. I am a shrubber. My name is Roger the Shrubber. I arrange, design, and sell shrubberies.
I certainly think you are heavyweight and I have no desire to defend Ms Fitts, but I would say that one thing did change that caught some of us by surprise in the latest housing mess.
I remember hearing and believing (shame on me!) real estate and financial people telling me when I have bought houses in the past that they (the bank or so I thought) would not be lending me this money if the house wasn't worth the price.
I didn't realize until later that the bank wasn't lending me squat or if they were it was only for the purpose of collecting a fee and the whole point was to unload the loan.
The whole nature of the relationship was not clear. As I said, I am not complaining. I am an adult. But to say that this was a fair transaction between equals is not quite true.
I should have realized something was not quite right when I offered to put more money down (in hopes of a lower rate) and the guy taking my loan was uninterested. I now realize that he had no particular interest in whether I paid the loan back or not.
"Fraudulent inducement" deserves your ridicule. But let's be serious. Many of the bankers/brokers spent the last decade telling borrowers that they can just refinance their bad loan later. Given that anyone with a little industry knowledge knew that that statement would eventually turn out to be an outright lie, maybe there was an element of fraud.
Sadly, it seems that we really do need to pass a law requiring lenders to disclose the fact that the borrower signing the loan faces the risk that they will not be able to trade it in for a better one tomorrow.
"I'm pretty sure that I feel that at least 50% of my neighbors believe that granite countertops are like a retirement account you can put hot pans on, but certain ugly facts and figures keep intruding on the conversation."
Yes, Fitts has a number of strange connections that leave one's head spinning, if you believe the characterizations of them. On the one hand she hooks up with "League of the South" zealots, paleo-conservatives with racist agendas, supposedly. But also hooked up with Cynthia McKinney, ex-congresswoman with racial views more like Obama's ex-minister, Rev. Wright. They co-authored an article on the "911 Truther" website: "The Haunting of the White House" - 911truth.org
Does anyone have links that would provide a coherent description of her transition from Wall Street, HUD management, Hamilton Securities litigation, into this odd set of associations (other than her own websites and online interviews and articles)?
Yeah, that was a Godwin's law violation all right. I know the Nazis were environmentalist but they were decided PRO-corporate. Associating with racists doesn't make you one (on her blog Catherine supports a judge who got thumped from a case for calling the Feds "racist and imperialist"). Her screeds on environmentalism definitely draw from the left-wing tradition ("happy land", corporate malfeasance, need for close community etc.) and not from the libertarian environmentalist tradition (violation of individual property rights to water, air, etc.). Or the Nazi "good of the volk", for that matter. There are LOTS of strange bedfellows amongst libertarians. She may be a strange character, but she's not "rightwing" and certainly doesn't seem racist, regardless of her associates.
And regardless of whether she's a nut, the "popsicle index" is a useful way to think about neighborhoods. It rolls into one measurable concept a variety of intangible but very important aspects of a community - crime, walkability, auto safety, and images thereof - that have an important influence on housing decisions. It's not too far off to say the flight to the suburbs was to improve the "popsicle index". Plus it's vivid and personal, so good for rhetoric.
Fitts aside, it is not particularly radical to suggest that it is fraudulent to originate a residential home mortgage loan that the lender knows, or should have known, the borrower does not have the capacity to repay. This is clear-cut law in Massachusetts (as a recent high-profile case proved right here on this blog), and could conceivably also be the law in NYS.
This is quite separate from the claim that all loans issued after 1996 (WTF?) fall under this pattern.
Jim the realtor often has an ice cream/popsicle truck happening along into his real estate virtual tours. Jim really knows all the elements with which to sell a home.
I used to feel safe it was safe to let my kids go get a popsicle, but no longer. They have to walk by the long lines at the state unemployment office to get to the stip mall, and, well, you just never know who's standing in that line.
Perhaps because in 1996 new banking regulations were enacted.
I.e., new Community Reinvestment Act rules. Now there might actually be something to this. Not, mind you, that other journalists of our current mortgage misery are pointing to 1996 or to CRA revisions as a main source of changes in the business behavior of banks.
For instance, in The Trillion Dollar Meltdown Charles R. Morris does not have an index entry for the CRA. In Chain of Blame Muolo and Padilla date one key shift, the active pursuit by depositories of subprime customers that would often be located in CRA-targetted areas, to post-1998, with solid examples. The pre-1998 background factors that they cite in moving the lending industry toward its new model involve fallout from the previous banking crisis (lots of newly unemployed mortgage officers, etc) or the perennial ambitions of businessmen such as Mozilo, or pretty much anything but CRA regulations. Their only reference to CRA for this period concerns Mozilo's opening of a trading desk for CRA credits along with jumbos as a lucrative side business (pp. 1156). This desk was opened in 1993, before the expanded regulations in question. Ned Gramlich does mention the CRA in general in his monograph, but does not single out the post-1996 period, and is more interested in showing the (largely unused) opportunities for regulating lending that the CRA provided the Fed; and of course his book is on Subprime Mortgages and not on the wider financial crisis.
So it looks so far as though people who are trying to analyze what actually happened to cause the financial crisis are looking elsewhere than the CRA, mainly to post-1998 and post-2002 (or so) changes in the mortgage lending and securitization industries. Citing 1996 instead might be a nonsequitur or a solecism of some kind, or it might be the kind of racial dogwhistling that some of the kinds of folks mentioned above could be expected to promote.
But that's only so far: no doubt other scholars will come forward soon with the goods to fix our interest on 1996.
First I doubt you've never made a typo and the S&L crisis which induced the housing bubble of the 1980s and its collapse is well known. If tiny procedural errors won't negate mortgages, one typo ought not to destroy credibility.
I would suggest googling and check out solari and her wikipedia article (which includes her speech at the GATA conference). She has been featured on other podcasts and knows her stuff.
She is definitely worth listening too even if you don't agree with her. I think you would resent it if people just said "Tanta is one of those mortgage industry shills..." and picked a few things out of context.
You are worth listening to, and too many people don't want to listen, or only listen to an echo of what they themselves are saying.
(but I wish you would restore the full text in the RSS feed - I read far less since I'm not online all the time and I have to download the full articles manually; being spiteful to people who misuse RSS doesn't hurt them, only your loyal readers).
As to the fraud, this is one of those gray areas, but in many cases it was completely clear that the borrower could not service the mortgage after the first reset. If the origination (which has been dispersed and often was a broker who is now out of business) was done knowing this, i.e. if Tanta was asked to approve a loan, and Tanta knew it was likely, short of winning the lottery, to go bad, and Tanta did anyway, then it is fraud.
Who owns what when the smoke clears is speculative. And it is less clear than in cases where I sell you a car I claim has 100 miles on it but it turns out it is 1000100, you usually don't have to continue payments. You wouldn't have bought it if you knew.
The strange thing here is the fraud is not in the object but in the loan itself. What did the originators think was going to happen to the borrower after the first reset? If they believed the loan would go bad, and didn't tell the borrowers, "You really can't afford it and 5 years from now your life will be a nightmare" instead of "This was designed so you could afford a house, and everything will work out wonderfully", I can see it being fraud.
It looks to me that buyer and lender in typical subprime mortgages both assumed house prices would rise so that the buyer could refinance at or before the reset. The mortgages would be viable for buyer and lender in that case. However, they would not be viable otherwise. So the heart of the problem appears to be quite simple: buyer and lender both bet on rising house prices and lost.
My familiarity with this organization goes back to its role in establishing a widely referenced housing finance data reporting activity: ACORN Homesteading Program, Chicago
"For example, local activist Gail Cincotta, founder of National People's Action and the National Training and Information Center, helped establish the neighborhood movement against redlining, which brought about the Home Mortgage Disclosure Act and the Community Reinvestment Act in 1977" FFIEC Home Mortgage Disclosure ActFFIEC Community Reinvestment Act Who We Are
[excerpt]
"In addition, there are national organizations of neighborhood groups and grassroots organizers. By far the most important of these is the Association of Community Organizations for Reform Now, known as ACORN, which helps organize protests by its 150,000 member families in 50 cities, initiates living-wage campaigns, and builds affordable housing through its CDC, the Acorn Housing Corporation. National People's Action, which created the National Training and Information Center mentioned in the previous paragraph, included 302 neighborhoods in 38 states as of 2002 (Mariano, 2003). There's also the Chicago-based Industrial Areas Foundation, founded in the 1950s by the famous direct-action activist, Saul Alinsky (1909-1972), which works to organize and empower people in low-income neighborhoods, especially Mexican-American neighborhoods, and usually with the support of a diocese of the Catholic Church (Fisher, 1994, pp. 191-197)."
"Meanwhile, on the other (west) side of Chicago, still other Alinsky-inspired organizers were at work, trying to solve specific neighborhood problems and create black-Latino-white alliances. This story is best told from the perspective of a legendary organizer of the era, Shel Trapp, who left the Methodist ministry in 1965 (after eight years with different congregations and involvement in the Civil Rights Movement) to work in neighborhoods, and Gale Cincotta, a Greek-American mother of six sons whose neighborhood leadership skills and daring style carried her to a highly visible nationwide role in forcing financial institutions to reinvest in inner-city neighborhoods (Mariano, 2003; Squires, 2003a; Trapp, 2003). Starting with such tactics as harassing real estate agents who were trying to create panic selling, removing for-sale signs from houses, and loudly confronting public officials, Trapp, Cincotta, and their fellow activists gradually organized two neighborhoods into a West Side Coalition. They then put together plans for a national housing conference in 1972 to serve as a launching pad for a new national organization that would place neighborhood problems in a larger context."
The test of competency to contract is whether the powers of a persons mind have been so affected as to destroy the ability to understand the nature of the act in which he is engaged, its scope and effect or its nature and consequences . If a person, at the time of entering into a contract, understands the nature, extent and scope of the business he is about to transact, and possesses that degree of mental strength which would enable him to transact ordinary business, he is in law considered a person of sound mind and memory . Furthermore, a party who has not been adjudicated as mentally incompetent in a court of law is presumed to be competent. However, the presumption of competency is rebuttable. If the presumption of competency is rebutted, then the contract entered into by the mentally incompetent individual is voidable By contrast, a formal adjudication of in competency and appointment of a guardian divests the individual of any contractual capacity, thus making any contract entered into by the mentally incompetent person void
Will the lenders reimburse me for my paying down my fradualent mortgage these past 13 years?
Truth is stranger than fiction.
WOW.. Jobs lost 84K! Unemployment rate 6.1%
and the revisions are ugly also
WOW.. Jobs lost 84K! Unemployment rate 6.1%
When real estate isn't happy, nobody is happy.
To BB:
Wow is right.
Long term #'s ugly also...futures tanking.
Tanta - any free ponies for the unemployed
I thought the phrase was "ain't nobody happy".
Tanta - any free ponies for the unemployed
I say, free popsicles for the unemployed!
As in, "When Tanta ain't happy, ain't nobody happy"
This seems to imply that if we could just cheer up our shrubberies, real estate values would improve substantially.
Ha ha ha ha ha...
The sad thing is that CNNMoney is actually claiming the same thing this morning but they actually mean it:
CNNMoney on Lush Lawns
Yeah, but Sheila has a plan:
FDIC Report Highlights Suggestions for Expanding Mortgage Loans to Low- and Moderate-Income Households
Crispy, on your marks.
LOL! Cleared my calendar from 2-6 pm!
Every Village needs an idiot.
If it happens in MDT, you'll have me. I have to drive home from work sometime.
I used to feel safe it was safe to let my kids go get a popsicle, but no longer. They have to walk by the long lines at the state unemployment office to get to the stip mall, and, well, you just never know who's standing in that line.
Jobless Rate Zooms to 6.1%, Payrolls Off By 84,000
Jobless Rate Zooms to 6.1%, Hits Five-Year High - CNBC
U.S. Payrolls Fell 84,000; Jobless Rate Jumps to 6.1%
U.S. Payrolls Fell 84,000; Jobless Rate Jumps to 6.1% (Update2) - Bloomberg.com
Paulson quitting as soon as his term ends sure seems like a real smart move now for him!
Maybe Paulson will pass out popsicles to the folks on WS
Can I haz Dow intraday volatility thread?
Will the lenders reimburse me for my paying down my fradualent mortgage these past 13 years?
safe_as_apartments
Absolutely. You will never have to go without popsicles again. (But you may not get your choice of flavors).
Somebody needs to make a picture of Mortgage Pig eating a popsicle. Seductively, if possible.
Somebody needs to wake up the PPT. This is going to be on ugly trading day.
How China's Bet on US Paper Went Wrong
How China's Bet on US Paper Went Wrong - CNBC
Chinas central bank is in a bind.
It has been on a buying binge in the United States over the last seven years, snapping up roughly $1 trillion worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.
Interesting. If geopolitics get any worse, war bonds will probably be issued.
Can I haz Dow intraday volatility thread?
Ask and I shall receive! New unemployment thread up.
Catherine has convinced me that that illegal aliens are responsible for much of the housing disaster, and the government has always known about them.
They landed during the first Bush administration, and if I'm not mistaken "Granite Slabs" are one of their excretory by-products.
Put your hot pots on that!
Tanta - where did you hear about this Catherine Pitts whoever? Because her Wiki page made me all nostalgic for the first Bush administration. I mean we despised them at the time, but they look good now, by comparison. And she learned Mandarin Chinese and writes for a New Zealand paper.
From the page you quoted from, there's also this:
"As a result, corporations can make money exploiting people and places and their stock will go up. The stock of the place harmed will not go down; there is no stock of the place. By centralizing our investment capital into large corporations, our financial interests are not aligned with the interests of the people and our natural environment."
This lady may have (my Frist moment here) a brain tumor.
I want some of the drugs Ms. Fitts is taking. That looks like a lot of fun!
And she learned Mandarin Chinese
If she's as coherent in Mandarin Chinese as she is in standard written English, I hate to think what she gets served when she tries to order Mu Shu Pork down at the local Wong's Wok.
I'm sure this reporter was delighted to find Fitts. The sources actually quoted in the article make pretty uncontroversial points--i.e., don't march into my courtroom claiming the dog ate the mortgage. It's the reporter who "explains" these quotes who spins everything into a Les Mis sequel. So Fitts fit.
Remember that 6.1% s U-3 unemployment (unemployed receiving benefits).
U-6 (all unemployed + underemployed) is almost 13%. During the Great Depression this number hit 25%.
Usually you write great stuff, Tanta, but you dropped the ball big time by ridiculing Fitts and not digging deep enough into what she is about.
Catherine Austin Fitts was a director at a major investment bank.
She got appointed to a high position in HUD by the first Bush.
She knows more about how Wall Street and Washington work than just about any of us ever will.
Some of what she says sounds pretty flakey, but understand that the Solari group she is speaking to doesn't just think dollars and cents like we do.
Her interview on Financial Sense NewsHour is simply a must read for anyone with the guts to find out how badly corrupted our system is:
Scoop:
America's Black Budget & Manipulation Of Markets
I think Ms. Fitts is making a valid point. Some contracts aren't valid.
Brilliant!
Nice work, Tanta.
At least Ms. Fitts need not worry about brain freeze whilst enjoying her popsicles.
I think Ms. Fitts is a shill in blogger's clothing. Her web links on her web site are a pile of fear-mongering garbage. She prolly still works for the gov't.
Usually you write great stuff, Tanta, but you dropped the ball big time by ridiculing Fitts and not digging deep enough into what she is about.
Oh, spare me. Either the words "fraudulently induced" mean something or they don't. So which is it? A factual claim about an actual legal standard, or just gross hyperbole? And what changed in 1996?
If you don't want to be ridiculed, don't say ridiculous stuff. I didn't put the words in her mouth, she did.
I first saw this idea that the loans may not be valid from Michael Hudson. He calls it 'fraudulent conveyance' and he does suggest that it could be called into play for subprime mortgages where the lender knew that the borrower would be unable to pay the loan after it reset:
"HUDSON. Ill describe one solution I think is a good one. This approach was prevalent in New York State, where I live, before the American Revolution, and its a law that is still on the books here the law of fraudulent conveyance. Around the time of the Revolution, a lot of New York farmers borrowed from British lenders who would come over, make a loan to a farmer far in excess of the normal ability to pay, and then, just before the crop was harvested, just before the farmer had liquidity, they would call in the loan, that is, demand that it be paid. The farmer couldnt pay because he hadnt sold his crop yet or because the loan was too big to begin with, and the British creditor would foreclose. To stop this practice, New York State passed the law of fraudulent conveyance, which said that if a creditor makes a loan to a borrower without having any idea how the borrower can repay the loan, then that loan is nullified. That law is still on the books, as I mentioned, and it was often brought up in court in the 1980s, when corporate raiders would load down companies with corporate debt. If this law were implemented nationwide, it would apply to subprime borrowers and other borrowers who signed loan agreements far in excess of what they could pay, once the teaser interest rates adjusted to much higher levels."
It caught my attention.
m
Holy Fraudulent Bongwater, Tanta! There's banks out there getting sued for not reading your blog posts!
"Fannie Mae Investor Sues Citigroup, Merrill Over Stock Drop", by Patricia Hurtado, Bloomberg, September 5, 2008.
sorry...the link is
Michael Hudson - financial economist and historian
Debtor Nation: The Hijacking of Americas Economy - January 2008
Not kidding and not ridiculous. As I've noted here previously, we're going to see a number of actors try out for the role of this century's Huey Long. Fitts's audition may be a little premature, but sooner rather that later, this role is going to be cast. Politics trumps economics -- always.
Some of what she says sounds pretty flakey, but understand that the Solari group she is speaking to doesn't just think dollars and cents like we do.
Well, that's true, I guess. Here's Ms. Fitts:
July 24th 2006, 11:50 [PST] - The day after 9-11, a person whom I respect and care about a great deal said to me, "George Bush was anointed by God for a time such as this." He then asked me what I thought. I said that I thought that the Bush family was anointed by financial fraud, narcotics trafficking, and pedophilia.
She's a paranoid conspiracist hard-right nutcase. "Pretty flaky" doesn't do it justice.
Scoop:
The Real Deal: The Source Of Hopelessness
I think the "popsicle index" is good and I'm going to stick up for it (so to speak). It's basically an index of whether a neighborhood is safe and walkable, both of which are good things and will tend to hold up desirability and prices. I think the shrubberies crack is (ahem) cold because she never said putting in shrubberies would help (except presumably supporting Bush in the last election.) Things that would help with the popsicle index, like more outdoor activity by neighbors, slower and safer driving, and convenient access to safe shopping, would improve a neighborhood and reduce the chance of defaults and walkaways.
There's a vast excess of oversized McMansion farms out there at the moment. Some will become sluburbs or even ghost towns. But some will remain nice places inhabited by the (still numerous) Americans who like that kind of place. I think the difference will mostly be driven by the kind of community issues the "popsicle index" is looking at.
I first saw this idea that the loans may not be valid from Michael Hudson. He calls it 'fraudulent conveyance'
I suggest, before you decide to start quoting Hudson all over the internet, you check with an actual attorney about what "fraudulent conveyance" is. I admit I am not a lawyer, but last I knew "fraudulent conveyance" was a fraud against a creditor, not a borrower. I have no idea what the concept might have had to do with callable loans in colonial times, but then again I don't know what it's got to do with contemporary non-callable mortgage loans, either.
In any case, Fitts turns this into "fraudulent inducement," presumably because "conveyance" doesn't make jack shit sense in context.
It's basically an index of whether a neighborhood is safe and walkable
But it is one that depends on no actual verifiable data. It depends on how you feel that your neighbors believe. Which probably has more to do with how many sensational child abduction stories you've seen lately on the cable shows than anything else. Depending, as it does, on "gut feelings," it is obviously unfalsifiable. What good is that?
And she wrote that when "living things and the land is happy, businesses thrive, and the value of real estate is good." She is not, apparently, claiming that "putting in shrubberies" would help, nor did I claim she claims that. What she wrote was that "the land" can be "happy" and this has a causal effect on economic success. Just exactly how is it unfair to describe this as implying we should cheer up the shubbery?
Tanta, check your link on Fitts. She's not rightwing at all. She sounds like a leftist communitarian actually, except that she's a big-time goldbug. How many rightwingers want to limit corporate rights?
I think we are going to see a lot of this kind of "not my fault" stuff. Wait until the Manhattan apartment market breaks and you will hear wailing and gnashing of teeth, as a very entitled group of young people who have never really seen a recession come face to face with reality. Walk-aways are going to be high in this group - they will walk away from jobs (not by choice), apartments and New York City.
But hey, I can finally get a seat on the subway...!
How many rightwingers want to limit corporate rights?
Well, there's one powerful example of that, but I'm afraid of a Godwin's Law violation.
Actually the "popsicle index" sounds like a polling thing, which is indeed verifiable. Yes it's measuring opinions, not facts (directly). But there will be a correlation between facts and opinion, albeit imperfect. In addition, opinions per se have a lot to do with how much people will put up with and pay to stay in their house, which gets magnified by feedback because the more leave the more the neighborhood is likely to decline and drive more out.
"Happy land" is either metaphorical or hippie, I'm not sure which. You'll have no problem finding that kind of idea in the Utne Reader, Mother Jones, or Adbusters. The concept is mockable, but it's not about landscaping (it's about residents' attitudes) and the "shrubberies" business misses the mark entirely as an attempt to mock.
How far does one have to walk to get this said popsicle?
I mean, if my neighbors were asked if they thought my children were safe walking to the nearest store to get a popsicle and back by themselves, they would say to call DYFS on me as making my kids walk some 8 miles one way and crossing an interstate to boot is really child abuse...
Mebee this popsicle theory works in urban areas, but methinks someone hasn't gotten farther than her own 4 city blocks in a while...
Tanta should learn a few things before he goes blowing caca about Catherine Austin Fitts. She's heavy duty. Tanta is medium-duty, with recent hints of lightweight.
At least the article uses "borrowers" and not families.
"Heavy duty" for the "Illegal Aliens are among us" crowd. Not that there's anything wrong with that. I want to believe.
That is definitely an urban index.Hereabouts we have deer drunk on fermenting apples in the fall,and rabid quail year round.Letting the kiddies out alone without a trained dog or a shotgun is unwise.
Fair Economist, you need to learn that not all flaky talk about vaguely "environmentalist" themes is left wing or hippie or what have you. The Nazis, for instance, were into that kind of thing.
Green Party Turns Hard Right
Green delegates from Tennessee have recently advanced a proposal which they call "Moving the Money from Wall Street to Main Street". Certainly sounds innocuous enough. Tragically the delegates from Tennessee based their proposal on a presentation made to the Green Party delegates at their convention by a woman named Catherine Austin Fitts.
Ms. Fitts, a Republican, was Assistant Secretary of Housing in the administration of George Bush Sr. and now supports libertarian causes. Why was Fitts invited to talk to the Green Party about banking issues? Nobody really knows. Perhaps not surprisingly, one of the associates of Catherine Austin Fitts is Franklin Sanders, a leading thinker in the extreme right-wing Constitution Party. Sanders is also chairman of the Tennessee chapter of "The League of the South", yes, from the same state of the Green Party delegates who offered the proposal in the first place.
The League of the South is quite an outfit. They advocate the ideology of "kinism", and would outlaw racial intermarriage and non-white immigration, expel all "aliens" (including Jews and Arabs), limit the right to vote to white landowning males over the age of twenty-one, and re-institute black slavery. The Green Party is about to adopt a proposal based on the philosophy of people like Fitts and Sanders. One has to wonder who would influence these guys if they were savvy enough to win elections.
Joshua Frank: The End of the Green Party?
Spend a few minutes Googling Fitts+Sanders before you tell me this is the kind of thing you find in MoJo.
Well, there's one powerful example of that, but I'm afraid of a Godwin's Law violation.
Zing! T, I just love it when you are fully caffeinated. Great post!
I don't know how things work in Ms.Fitts 'hood, but around here, if one of my neighbor's 12-year old lookouts comes back from the corner store carrying a popsicle, that's the signal that the muthafukkin' police are about to kick in this door, so he knows it's time to flush all the crack rock down the toilet. Isn't that how it works everywhere?
If I bought my house before mortgages became "fraudulently induced", but refi'd balance-only for rate reductions afterward, am I a fraud victim or not?
And if I sue can I collect something other than popsicles?
I always look for motivation and intent whenever I run across something that isn't clear.
What's Tantas in writing about quotes from the Village Voice?
Calling BS when she runs across it. i.e. consumer advocate
What's Fitts in writing a blog?
Selling "truth" to induce you to buy gold/silver.
Problem here is Fitts puts herself out there with the full ability to check her credentials. Accept her impressive resume and you give credence to her insider information.
Tanta is an anonymous blogger we give credence too from her writing and the fact she's on the internet.
Everyone has an agenda. Your perspective guides what you believe. Perception is reality.
Oh, spare me.
OK. For now on, I will.
Why 1996?
Perhaps because in 1996 new banking regulations were enacted. According to http://www.ers.usda.gov/Publications/RCAT/RCAT72/rcat72n.pdf , these new regulations (CRA and CDFI) decreased the "regulatory burden" and encouraged lending to low-income, rural and "underserved" areas.
An excerpt:
"In 1995, the Federal Reserve Board and the other bank and savings and loan regulators revised the regulations for the Community Reinvestment Act (CRA), which encourages banks and savings and loans to help meet the credit needs of their communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations.
"CRAs regulations were revised to increase lending in underserved areas while reducing regulatory costs for affected financial institutions. Revised regulations went into effect in January 1996, making it easier for small financial institutions to comply with CRA exams.
"Large finanacial institutions are not required to be tested under the new CRA exams until July 1997, although they had to begin collecting new loan data on January 1, 1996. Revised rules require larger banks to report separately small business lending data for their rural market areas. These changes may encourage an increase in rural lending in places served by large banks and reduce compliance costs for small banks serving rural areas.
"To provide additional incentives to banks and other institutions that provide credit to lowincome areas, Congress enacted a modified version of a Clinton administration initiative
to fund a series of community development financial institutions (CDFI). CDFI funding was set at $382 million over 4 years, but actual obligations have been well below authorized funding levels. One-third of the funds are meant to go to existing banks as rebates of deposit insurance premiums for doing a good job of servicing low-income areas. The CDFI legislation also reduces the regulatory burden for banks. This may help rural banks lower interest rates on loans and sell loans to other investors, and it leaves rural bankers with more time to make loans."
Mrs. Krabapple, "the children are right to laugh at you Ralph" (the Simpsons).
I certainly agree this woman needs a good mocking. But there is a nugget of an issue. How many people actually read all their mortgage documents? And if you did read it, would you understand it? Before the "secruitization" (more acurately descibed as "less security") of loans, the bank paternalistically decided who got a loan. Was the old model better, or is there an alternative that provides loans without fraud?
How can I get the Popsicle Index time series from HUD? Does HUD publish it or will I have to use FOI? I need the data to sue my lender. I'm sure I was fraudulently induced, but can't prove it. I hope the Index is still being maintained. At least HUD will be doing something useful, thanks to Ms. Fitts.
Tanta, the "1990" bubble burst did begin in 1989, at least in Rhode Island, where all of the credit unions were closed in one day. The fraud and negligence, abetted by the state government was about to explode over everyone, when the new Governor closed the CU's on his first day in office, which was January 1, 1990. The bubble had really burst in the summer of 1989, when individual credit unions and banks were closed down, and the number of insolvent financial institutions was becoming apparent.
Tanta, check your link on Fitts. She's not rightwing at all. She sounds like a leftist communitarian actually, except that she's a big-time goldbug. -Fair Economist
I listened to that podcast that was linked up above. She sounds fairly provocative at first with discussion of "black budgets", etc. But, she's talking her book, she's got something to sell. She offers a series of relatively simple, but unverifiable "explanations" for all of our complicated woes to further her own agenda that is about as opaque as the issues that she complains about. For some reason "Libertarian Psychiatrist" or "Libertarian Sociologist" comes to mind.
Popsicle sticks have riddles. I have a large collection of popsicle riddles.
Tinkerbell works for the Fed...
Popsicle Index?
I assume what happened back then was that speculative buying in iffy areas that had recently run way up in price was behind the rate of defaults.
Not owner occupied housing.
No popsicles needed.
ken melvin wrote:
I think Ms. Fitts is making a valid point. Some contracts aren't valid.
Yeah, if the house goes up it was a valid contract, if the house goes down in value...I was cheated, I tell youse!
Roger: Oh, what sad times are these when passing ruffians can say Ni at will to old ladies. There is a pestilence upon this land. Nothing is sacred. Even those who arrange and design shrubberies are under considerable economic stress at this period in history.
King Arthur: Did you say shrubberies?
Roger: Yes, shrubberies are my trade. I am a shrubber. My name is Roger the Shrubber. I arrange, design, and sell shrubberies.
Tanta,
I certainly think you are heavyweight and I have no desire to defend Ms Fitts, but I would say that one thing did change that caught some of us by surprise in the latest housing mess.
I remember hearing and believing (shame on me!) real estate and financial people telling me when I have bought houses in the past that they (the bank or so I thought) would not be lending me this money if the house wasn't worth the price.
I didn't realize until later that the bank wasn't lending me squat or if they were it was only for the purpose of collecting a fee and the whole point was to unload the loan.
The whole nature of the relationship was not clear. As I said, I am not complaining. I am an adult. But to say that this was a fair transaction between equals is not quite true.
I should have realized something was not quite right when I offered to put more money down (in hopes of a lower rate) and the guy taking my loan was uninterested. I now realize that he had no particular interest in whether I paid the loan back or not.
"Fraudulent inducement" deserves your ridicule. But let's be serious. Many of the bankers/brokers spent the last decade telling borrowers that they can just refinance their bad loan later. Given that anyone with a little industry knowledge knew that that statement would eventually turn out to be an outright lie, maybe there was an element of fraud.
Sadly, it seems that we really do need to pass a law requiring lenders to disclose the fact that the borrower signing the loan faces the risk that they will not be able to trade it in for a better one tomorrow.
"I'm pretty sure that I feel that at least 50% of my neighbors believe that granite countertops are like a retirement account you can put hot pans on, but certain ugly facts and figures keep intruding on the conversation."
I just love your writing and your sense of humor!
if you read fits long long story about how the fed 'raped' her you will find she is a weird liberal nut.........
Yes, Fitts has a number of strange connections that leave one's head spinning, if you believe the characterizations of them. On the one hand she hooks up with "League of the South" zealots, paleo-conservatives with racist agendas, supposedly. But also hooked up with Cynthia McKinney, ex-congresswoman with racial views more like Obama's ex-minister, Rev. Wright. They co-authored an article on the "911 Truther" website:
"The Haunting of the White House" - 911truth.org
Does anyone have links that would provide a coherent description of her transition from Wall Street, HUD management, Hamilton Securities litigation, into this odd set of associations (other than her own websites and online interviews and articles)?
Yeah, that was a Godwin's law violation all right. I know the Nazis were environmentalist but they were decided PRO-corporate. Associating with racists doesn't make you one (on her blog Catherine supports a judge who got thumped from a case for calling the Feds "racist and imperialist"). Her screeds on environmentalism definitely draw from the left-wing tradition ("happy land", corporate malfeasance, need for close community etc.) and not from the libertarian environmentalist tradition (violation of individual property rights to water, air, etc.). Or the Nazi "good of the volk", for that matter. There are LOTS of strange bedfellows amongst libertarians. She may be a strange character, but she's not "rightwing" and certainly doesn't seem racist, regardless of her associates.
And regardless of whether she's a nut, the "popsicle index" is a useful way to think about neighborhoods. It rolls into one measurable concept a variety of intangible but very important aspects of a community - crime, walkability, auto safety, and images thereof - that have an important influence on housing decisions. It's not too far off to say the flight to the suburbs was to improve the "popsicle index". Plus it's vivid and personal, so good for rhetoric.
Fitts aside, it is not particularly radical to suggest that it is fraudulent to originate a residential home mortgage loan that the lender knows, or should have known, the borrower does not have the capacity to repay. This is clear-cut law in Massachusetts (as a recent high-profile case proved right here on this blog), and could conceivably also be the law in NYS.
This is quite separate from the claim that all loans issued after 1996 (WTF?) fall under this pattern.
Jim the realtor often has an ice cream/popsicle truck happening along into his real estate virtual tours. Jim really knows all the elements with which to sell a home.
Markel, I seemed to have missed that case. Could you point it out to me?
pbpcbs:
I used to feel safe it was safe to let my kids go get a popsicle, but no longer. They have to walk by the long lines at the state unemployment office to get to the stip mall, and, well, you just never know who's standing in that line.
Financial services types and Realtors.
Stay vigilant.
(Chinas central bank) has been on a buying binge in the United States over the last seven years
It's a widely-noted phenomenon.
An hour after you buy US securities, you need to invest again.
Well, this article reminds me that it's Friday and time to start drinking. Ms. Austin Fitts started a long time ago and I've no hope of catching up.
Boy, Bush I could pick 'em too. Now we know where his son inherited that skill at hiring personnel.
NoGuru writes:
Why 1996?
Perhaps because in 1996 new banking regulations were enacted.
I.e., new Community Reinvestment Act rules. Now there might actually be something to this. Not, mind you, that other journalists of our current mortgage misery are pointing to 1996 or to CRA revisions as a main source of changes in the business behavior of banks.
For instance, in The Trillion Dollar Meltdown Charles R. Morris does not have an index entry for the CRA. In Chain of Blame Muolo and Padilla date one key shift, the active pursuit by depositories of subprime customers that would often be located in CRA-targetted areas, to post-1998, with solid examples. The pre-1998 background factors that they cite in moving the lending industry toward its new model involve fallout from the previous banking crisis (lots of newly unemployed mortgage officers, etc) or the perennial ambitions of businessmen such as Mozilo, or pretty much anything but CRA regulations. Their only reference to CRA for this period concerns Mozilo's opening of a trading desk for CRA credits along with jumbos as a lucrative side business (pp. 1156). This desk was opened in 1993, before the expanded regulations in question. Ned Gramlich does mention the CRA in general in his monograph, but does not single out the post-1996 period, and is more interested in showing the (largely unused) opportunities for regulating lending that the CRA provided the Fed; and of course his book is on Subprime Mortgages and not on the wider financial crisis.
So it looks so far as though people who are trying to analyze what actually happened to cause the financial crisis are looking elsewhere than the CRA, mainly to post-1998 and post-2002 (or so) changes in the mortgage lending and securitization industries. Citing 1996 instead might be a nonsequitur or a solecism of some kind, or it might be the kind of racial dogwhistling that some of the kinds of folks mentioned above could be expected to promote.
But that's only so far: no doubt other scholars will come forward soon with the goods to fix our interest on 1996.
Are you kidding me?
The popsicle index is something that everyone who wants to buy a house in the US are aware of.
i LOVE Tanta!
First I doubt you've never made a typo and the S&L crisis which induced the housing bubble of the 1980s and its collapse is well known. If tiny procedural errors won't negate mortgages, one typo ought not to destroy credibility.
I would suggest googling and check out solari and her wikipedia article (which includes her speech at the GATA conference). She has been featured on other podcasts and knows her stuff.
She is definitely worth listening too even if you don't agree with her. I think you would resent it if people just said "Tanta is one of those mortgage industry shills..." and picked a few things out of context.
You are worth listening to, and too many people don't want to listen, or only listen to an echo of what they themselves are saying.
(but I wish you would restore the full text in the RSS feed - I read far less since I'm not online all the time and I have to download the full articles manually; being spiteful to people who misuse RSS doesn't hurt them, only your loyal readers).
As to the fraud, this is one of those gray areas, but in many cases it was completely clear that the borrower could not service the mortgage after the first reset. If the origination (which has been dispersed and often was a broker who is now out of business) was done knowing this, i.e. if Tanta was asked to approve a loan, and Tanta knew it was likely, short of winning the lottery, to go bad, and Tanta did anyway, then it is fraud.
Who owns what when the smoke clears is speculative. And it is less clear than in cases where I sell you a car I claim has 100 miles on it but it turns out it is 1000100, you usually don't have to continue payments. You wouldn't have bought it if you knew.
The strange thing here is the fraud is not in the object but in the loan itself. What did the originators think was going to happen to the borrower after the first reset? If they believed the loan would go bad, and didn't tell the borrowers, "You really can't afford it and 5 years from now your life will be a nightmare" instead of "This was designed so you could afford a house, and everything will work out wonderfully", I can see it being fraud.
It looks to me that buyer and lender in typical subprime mortgages both assumed house prices would rise so that the buyer could refinance at or before the reset. The mortgages would be viable for buyer and lender in that case. However, they would not be viable otherwise. So the heart of the problem appears to be quite simple: buyer and lender both bet on rising house prices and lost.
Who the hell is Catherine Austin Fitts?
This is reporting. I'll admit she doesn't work for the current administration, CNN or FOX but she has been interviewed on many financial programs.
Who the hell is Tanta? And why do they let her post on an interesting financial blog?
Of special interest to me, due to its long involvement in housing and housing finance issues, has been the electoral efforts of ACORN:
CaucusAnalysis: ACORN
User:Noroton/The case for including ACORN - Wikipedia, the free encyclopedia
Wade Rathke - Wikipedia, the free encyclopedia
My familiarity with this organization goes back to its role in establishing a widely referenced housing finance data reporting activity:
ACORN Homesteading Program, Chicago
"For example, local activist Gail Cincotta, founder of National People's Action and the National Training and Information Center, helped establish the neighborhood movement against redlining, which brought about the Home Mortgage Disclosure Act and the Community Reinvestment Act in 1977"
FFIEC Home Mortgage Disclosure Act FFIEC Community Reinvestment Act
Who We Are
Who Rules America: The Ford Foundation in the Inner City
Power in America: The Ford Foundation in the Inner City: Forging an Alliance with Neighborhood Activists
by G. William Domhoff
September 2005
[excerpt]
"In addition, there are national organizations of neighborhood groups and grassroots organizers. By far the most important of these is the Association of Community Organizations for Reform Now, known as ACORN, which helps organize protests by its 150,000 member families in 50 cities, initiates living-wage campaigns, and builds affordable housing through its CDC, the Acorn Housing Corporation. National People's Action, which created the National Training and Information Center mentioned in the previous paragraph, included 302 neighborhoods in 38 states as of 2002 (Mariano, 2003). There's also the Chicago-based Industrial Areas Foundation, founded in the 1950s by the famous direct-action activist, Saul Alinsky (1909-1972), which works to organize and empower people in low-income neighborhoods, especially Mexican-American neighborhoods, and usually with the support of a diocese of the Catholic Church (Fisher, 1994, pp. 191-197)."
"Meanwhile, on the other (west) side of Chicago, still other Alinsky-inspired organizers were at work, trying to solve specific neighborhood problems and create black-Latino-white alliances. This story is best told from the perspective of a legendary organizer of the era, Shel Trapp, who left the Methodist ministry in 1965 (after eight years with different congregations and involvement in the Civil Rights Movement) to work in neighborhoods, and Gale Cincotta, a Greek-American mother of six sons whose neighborhood leadership skills and daring style carried her to a highly visible nationwide role in forcing financial institutions to reinvest in inner-city neighborhoods (Mariano, 2003; Squires, 2003a; Trapp, 2003). Starting with such tactics as harassing real estate agents who were trying to create panic selling, removing for-sale signs from houses, and loudly confronting public officials, Trapp, Cincotta, and their fellow activists gradually organized two neighborhoods into a West Side Coalition. They then put together plans for a national housing conference in 1972 to serve as a launching pad for a new national organization that would place neighborhood problems in a larger context."
An introduction to that "larger context" :
Did Liberals Cause the Sub-Prime Crisis? | The American Prospect
The Mortgage Lender Implode-O-Meter News Pick-ups: CRA, Pro-Housing Government Programs, And The Housing Crisis
The test of competency to contract is whether the powers of a persons mind have been so affected as to destroy the ability to understand the nature of the act in which he is engaged, its scope and effect or its nature and consequences . If a person, at the time of entering into a contract, understands the nature, extent and scope of the business he is about to transact, and possesses that degree of mental strength which would enable him to transact ordinary business, he is in law considered a person of sound mind and memory . Furthermore, a party who has not been adjudicated as mentally incompetent in a court of law is presumed to be competent. However, the presumption of competency is rebuttable. If the presumption of competency is rebutted, then the contract entered into by the mentally incompetent individual is voidable By contrast, a formal adjudication of in competency and appointment of a guardian divests the individual of any contractual capacity, thus making any contract entered into by the mentally incompetent person void
Jack Ass. it says 1980's. Guess you're so perfect you've never made a typo.