Central Perk: 7 ian. 2012

sâmbătă, 7 ianuarie 2012

Mish's Global Economic Trend Analysis

Fed to Announce Monetary Penalties for Robo-Signing and Unsafe Practices ; Another Whitewashing Move by the SEC

Posted: 07 Jan 2012 11:24 AM PST

The always behind-the-curve Fed seeks to fine mortgage servicers for unsafe practices and robo-signing with an amount dependent on allegedly independent review by consultants.

Federal Reserve Governor Sarah Bloom Raskin on Saturday said the Fed must impose monetary penalties on banks who entered into an April agreement with regulators over how to fix problems in their mortgage servicing businesses.

"The Federal Reserve and other federal regulators must impose penalties for deficiencies that resulted in unsafe and unsound practices or violations of federal law," Raskin said in remarks prepared for delivery to the Association of American Law Schools. "The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties."

In April, 14 mortgage servicers, including Bank of America and JPMorgan Chase entered into a settlement with the Fed, the Office of the Comptroller of the Currency and the now defunct Office of Thrift Supervision on steps that have to be taken to correct and improve their servicing practices, such as providing borrowers with a single point of contact for questions.

As part of the agreement, these mortgage servicers have hired consultants to review foreclosures that took place in 2009 and 2010 to see if any were improper.

Regulators have said these reviews will help determine the size of any penalties the servicers will have to pay.

Expect Trivial Penalties, Spread a Mile Wide

Don't expect this announcement to amount to much of anything. Penalties, if any will be trivial and the fines are nearly guaranteed to not benefit those harmed in any substantial way. Instead, expect fines to be spread out to include those not harmed at all.

Another Whitewashing Move by the SEC

Similarly, don't expect much of anything from this feeble announcement: SEC to demand admission of wrongdoing in some cases

Securities regulators will no longer let companies settle civil cases without admitting or denying the charges if they have already admitted wrongdoing in parallel criminal cases.

The policy change, announced by Securities and Exchange Commission Enforcement Director Robert Khuzami on Friday, applies only to instances where a defendant has already admitted to violating criminal laws.

It comes just over a month after a federal judge in New York rejected a proposed $285 million settlement between the SEC and Citigroup, in part because the bank had not admitted to wrongdoing. However, in that case, no parallel criminal charges have been filed.

It seemed "unnecessary" for the SEC to include its traditional "neither admit nor deny" approach if a defendant had already been criminally convicted of the same conduct, Khuzami said.

In one of the most egregious examples, Bernard Madoff pleaded guilty for his role in a multi-billion dollar Ponzi scheme in 2009, but neither admitted nor denied the allegations in a settlement with the SEC.

In rejecting the Citigroup accord, U.S. District Judge Jed Rakoff said the SEC's failure to require Citigroup to admit or deny its charges left him with no way to know whether the settlement was fair. Rakoff also called the $285 million payout "pocket change" for the third-largest U.S. bank.

The Citigroup settlement was intended to resolve charges that the firm sold risky mortgage-linked securities in 2007 without telling investors that it was betting against the debt.

"My take on things is it is all about managing the press," said James Cox, a professor at Duke Law School. The agency "looked pretty silly before Judge Rakoff the other day," he said.

This policy "non-change" borders on the absurd. The ruling only applies to only to instances where a defendant has already admitted to violating criminal laws. Notice that the ruling does not even apply to the Citigroup case in which a Judge Blasted the the SEC.

"Doesn't the S.E.C. have an interest in what the truth is?" Judge Rakoff asked, in reference to the commission's longstanding practice of not forcing a defendant to admit any wrongdoing when settling a case.

Judge Rakoff called the contempt power — a judge's ability to punish a party for disobeying a court order — "the backbone of the judiciary." He questioned whether the S.E.C. was really serious about ever seeking an injunction against repeat offenders.

"It's just for show," Judge Rakoff said.

"We're not saying that we will never use injunctive relief," said the S.E.C. lawyer.

"Hope springs eternal," the judge replied.

The S.E.C.'s current enforcement action against Citigroup is at least the fifth time that the commission has reached a settlement with the bank related to civil fraud accusations.

SEC Fine vs. Citigroup Gain

Please consider SEC Tired of Fighting Big Banks-Calls Federal Judge Rakoff Refusal to Approve Citigroup Settlement-Shortsighted.

Estimates are that Citigroup made a $3.8 billion profit from the bogus investment portfolio. The investors lost over $700 million. The $285 million offer to settle is a joke. The Judge made clear he would not allow corporations to continue to buy their way out of fraud from "a cost of doing business" fund. The Judge demands the truth to be revealed and the public protected.

Public service is a public trust. Federal employees have a duty to protect the public interest. Apparently, the SEC forgot their duties and the fact that the Court is the final arbiter. The legal team at the SEC that crafted the Citigroup deal need to remember they are federal service not bank employees. It's refreshing to see Judge Rakoff remind government workers who employs them. show.php?db=special&id=138

Rakoff's words to the SEC and big banks has been globally hailed as public policy genius. Thank you Judge Rakoff.

The trial is scheduled for July 16, 2012.

While essentially ignoring billions of dollars in repeated fraud allegations against Citigroup, the SEC brought full weight down on Martha Stewart over (drum roll please) ... $45,673.

Martha Stewart went to prison and was fined $30,000. Since then, no one has gone to prison or even been criminally indicted in $trillions of dollars of fraud in the global financial crisis. And unless someone does admit criminal action, the SEC reserves the right to do more whitewashing without seeking admission of guilt.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

German Factory Orders Drop Most in Nearly 3 Years; Icing On the European Recession Cake

Posted: 07 Jan 2012 12:31 AM PST

It is amusing to see how other writers portray a story vs. what I would say about the same data.

For example, Bloomberg columnist Rainer Buergin reports German Factory Orders Declined Most in Almost Three Years.

Please consider Buergin's interpretation of the story vs. mine. Both follow.

Bloomberg: German factory orders dropped the most in almost three years in November as the euro region economy edged toward a recession and global demand weakened.

Mish: German factory orders dropped the most in almost three years in November as the European recession deepened.

Bloomberg: Orders, adjusted for seasonal swings and inflation, slipped 4.8 percent from October, when they surged a revised 5 percent, the Economy Ministry in Berlin said in a statement today. That's the biggest drop since January 2009. Economists forecast a decline of 1.8 percent, according to the median of 25 estimates in a Bloomberg News survey.

Comment: That paragraph is fine.

Bloomberg: While the euro region's sovereign debt crisis has clouded the outlook and cooling global growth is hurting export orders, Europe's biggest economy may still avert a recession.

Mish: The euro region's sovereign debt crisis, coupled with austerity measures and rising taxes in Greece, Spain, Italy, France has clarified the outlook, and it's not pretty. The European recession will be extremely harsh and Germany will not escape.

Bloomberg: Unemployment at a two-decade low is helping to bolster consumer sentiment, service industries expanded in December and business confidence unexpectedly rose for a second month.

Mish: German unemployment at a two-decade low has temporarily helped boost consumer sentiment. In addition, service industries expanded in December and business confidence unexpectedly rose for a second month. However, do not expect those conditions to last. Any notion that Germany will escape a brutal European recession is complete silliness. Indeed, Germany and the entire Eurozone is already in a recession. Conditions will worsen as tax hikes and austerity measures take an enormous toll. Fundamentally, hiking taxes in the midst of a recession is the worst possible thing to do, yet various officials, including Nicolas Sarkozy, the president of France are clamoring for still more tax hikes.

Escalating trade wars between France and Spain are icing on the recession cake. For details please see ...
"Social VAT" Trade Wars Heat Up Between Spain and France

Brussels Recommends Sucking Spain Dry with Increased VAT; France to Raise Sales Tax to Protect Jobs; Is There Any Point or Reason for the Eurozone?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Weekly Address: Continuing to Grow the Economy in the New Year

Your Daily Snapshot for
Saturday, January 7, 2012

Weekly Address: Continuing to Grow the Economy in the New Year

President Obama shares his New Year's resolution: doing whatever it takes to move the economy forward and ensure that middle class families regain the security they've lost in the last decade.

Watch the video:

Weekly Wrap-Up

Consumer Watchdog: After appointing Richard Cordray to lead the Consumer Financial Protection Bureau earlier this week, the President traveled to Shaker Heights, Ohio to talk about his decision -- and the fight to help secure a better future for the middle class. The CFPB is in place to ensure the integrity of the financial system and protect all American consumers from fraud and unfair play. The President said: “See, most people in the financial services industry do the right thing, but they're at a disadvantage if nobody is enforcing the rules. We can't let that happen. Now is not the time to play politics while people’s livelihoods are at stake. Now is the time to do everything we can to protect consumers, prevent financial crises like the one that we’ve been through from ever happening again. That starts with letting Richard do his job.”

Jobs for Youth: ‘We Can’t Wait’ to help young Americans find jobs. The President announced Summer Jobs+, a new initiative that will create internship and job opportunities for America’s young people. It calls for businesses, non-profits and government to work together to provide pathways to employment for low-income and disconnected youth in the summer of 2012. Employers are still signing on to commit jobs to the Summer Jobs+ Bank, a one-stop search tool for youth to access postings from participating employers that is targeted to launch in 60 days.

Military Strategy: The President spoke at the Pentagon Thursday to outline a new global military strategy -- moving away from the expansive wars in Iraq and Afghanistan and toward a different posture that emphasizes a new focus for the future. He also reminded us of our duty here at home – to ensure that our troops returning from war receive the care and benefits they deserve. He Said: “We’re also going to keep faith with those who serve, by making sure our troops have the equipment and capabilities they need to succeed, and by prioritizing efforts that focus on wounded warriors, mental health and the well-being of our military families. And as our newest veterans rejoin civilian life, we’ll keep working to give our veterans the care, the benefits and job opportunities that they deserve and that they have earned.”

Year in Photos: From his trip to Ireland to Sasha Obama’s basketball game, the White House photographers have captured it all. Don’t miss some of the most memorable moments from 2011. Check out the slideshow.

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Seth's Blog : I was wrong

I was wrong

In 1993, I saw the web coming. I was hired to write the cover story for a now defunct computer magazine about the internet, and dismissed the new Mosaic browser in a single paragraph.

I figured the web was just like Prodigy, but slower, harder to use and without a business model.

About as expensive a wrong analysis as a single entrepreneur with an email company could make in 1993.

The reason it was an insanely valuable lesson: I got better at announcing that I was wrong, learning from it and doing the next thing.

Politicians, of course, are terrible at this. They are never wrong, apparently, and when they are, spin instead of admitting it. Which not only hurts their trustworthiness, it prevents them from learning anything.

Two elements of successful leadership: a willingness to be wrong and an eagerness to admit it.