Mish's Global Economic Trend Analysis |
- 40 State Attorneys General to Investigate Mortgage Fraud; Bank of America Halts Evictions Nationwide; Senator Reid Calls for More Suspensions
- Fantastic News: Nonfarm Payrolls Decline by 95,000, Much Weaker than Expected; Involuntary Part-Time Work Soars by 612,000!
- SEC Failure to Regulate MBS Resulted in "Interconnected Ponzi Scheme with Various Types of Concurrent Fraud"
Posted: 08 Oct 2010 03:50 PM PDT Bloomberg reports Attorneys General in 40 States Said to Join on Foreclosures Attorneys general in about 40 states may announce a joint investigation into foreclosures at the largest banks and mortgage firms, according to a person with direct knowledge of the matter.If by some chance you have missed this story, please see SEC Failure to Regulate MBS Resulted in "Interconnected Ponzi Scheme with Various Types of Concurrent Fraud" for a detailed recap. Bank of America Halts Evictions Nationwide Reuters reports BofA U.S.-wide foreclosure halt draws calls for more U.S. lawmakers pushed for the country's largest mortgage lenders to suspend foreclosures in all 50 states after Bank of America Corp announced on Friday it would temporarily halt evictions nationwide.Proper Perspective Before this is over I would expect nearly every state to join in these lawsuits. Legal costs will be massive. However, it is very important to remember that except in extremely rare and highly publicized cases, there is essentially no dispute that who were foreclosed on have not been paying their mortgages and are in default. In other words, in nearly every case, these people are going to lose their homes and indeed should lose their homes. The question is not whether these people should or will lose their homes, but rather who has the legal right to foreclose. These delays will be very expensive which should be expected when there is this much fraud. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 08 Oct 2010 09:57 AM PDT Today we have fantastic news from the BLS that the economy shed 95,000 jobs, far weaker than the economists' consensus expectation of a mere 5,000 drop. Moreover, part-time workers for economic reasons increased by a whopping 612,000 workers, much higher than an recent numbers and also higher than a year ago. The effect of rising part-time work is the effective unemployment rate shot up .4% to 17.1% Shedding jobs is great news because it seals the fate for Bernanke's Quantitative Easing program that is all but guaranteed to create jobs and drive the stock market higher according to the consensus opinion of Wall Street cheerleaders. The worse the news, the better off the economy would be. Unfortunately, the official unemployment rate stayed flat at 9.6%. Had it blasted higher to 9.9% or better yet 10.1%, I am sure the stock market wold be up 3% right now. To recap, the only way the economy can get better is if it gets worse first. So bad news is good news, and good news shows the bad news worked. Thus, all news is good news. Such is the magic of QE. In case you missed the sarcasm, and think stocks are cheap and QE will blast the market higher until the economy improves, please consider the following missives:
Employers in U.S. Cut More Jobs Than Forecast Bloomberg reports Employers in U.S. Cut More Jobs Than Forecast The U.S. lost more jobs than forecast in September, reflecting a decline in government payrolls that shows the damage being done by rising budget deficits.What's Not To Like? The above article is chock full of great news such as downward revisions for August on top of an additional 366,000 jobs in the 12 months ended March 2010 (especially when economists like Zandi said that revisions would surprise to the upside). More seriously, the only thing keeping the unemployment rate "low" at 9.6% is a huge drop in the participation rate this year with people (at least according to the BLS) dropping out of the economy at a staggering rate. BLS vs. Gallup One more thing before diving into the actual BLS report. Here is something I wrote yesterday: Gallup Survey Shows Unemployment Jumps From 9.4% to 10.1% As economists up their forecasts for tomorrow's jobs report, I am lowering mine.Looking ahead, I expect economic and jobs conditions to worsen, and for new all time highs in the unemployment rate. BLS September Report Please consider the Bureau of Labor Statistics (BLS) September 2010 Employment Report.
Index of Aggregate Weekly Hours Production and non-supervisory work hours were flat at 33.5 hours. Average hourly earnings rose $.01 at $19.10. BLS Birth-Death Model Black Box For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals). Birth Death Model Revisions 2009 click on chart for sharper image Birth Death Model Revisions 2010 click on chart for sharper image Birth/Death Model Revisions The BLS Birth/Death Model methodology is so screwed up and there have been so many revisions and up it is pointless to further comment other than to repeat a few general statements. Please note that one cannot subtract or add birth death revisions to the reported totals and get a meaningful answer. One set of numbers is seasonally adjusted the other is not. In the black box the BLS combines the two coming out with a total. The Birth Death numbers influence the overall totals but the math is not as simple as it appears and the effect is nowhere near as big as it might logically appear at first glance. Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another. The BLS knows full well their model is screwed up. Yet they stick with it, hoping that someday it will work again. The problem is the model assumes this is a normal recovery. It isn't, and it won't be. Thus we have a third major revision to prior birth-death adjustments. Here is a table from today's jobs report. Household Data The number of unemployed persons, at 14.8 million, was essentially unchanged in September, and the unemployment rate held at 9.6 percent.Table A-8 Part Time Status click on chart for sharper image 612,000 more people are working part-time for economic reasons than last month. This was a massive jump from June, July, and August, and even from one year ago today! There are now 9,4720,00 workers whose hours may rise before those companies start hiring more workers. Table A-15 Table A-15 is where one can find a better approximation of what the unemployment rate really is. click on chart for sharper image Grim Statistics The official unemployment rate is 9.6%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6. It reflects how unemployment feels to the average Joe on the street. U-6 is 17.1%, up a whopping .4 from last month. Looking ahead, there is no driver for jobs. Moreover, states are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. Those cutbacks will weigh on employment and consumer spending for quite some time. Expect to see structurally high unemployment for years to come. Keep in mind that huge cuts in public sector jobs and benefits at the city, county, and state level are on the way. These are badly needed adjustments. However, economists will not see it that way, nor will the politicians. Recap The private sector hiring increase of 64,0000 is very weak for a recovery. It is consistent with rising unemployment rate. Part-Time workers for economic reasons increased by a whopping 612,000 workers, much higher than an recent numbers and also higher than a year ago. The effect of rising part-time work is the effective unemployment rate shot up .4% to 17.1% This was all such good news, the stock market is higher. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 08 Oct 2010 12:11 AM PDT The problems associated with a clogged foreclosure system continue to mount. Foreclosures in 23 states have been halted by major banks after allegations surfaced of various illegal practices. PBS has a video discussion of some of the issues in 'Robo-Signing' Paperwork Breakdown Leaves Many Houses in Foreclosure Limbo Ohio Seeks $25,000 for Every Violation WCPN News reports Ohio AG Sues GMAC Mortgage Over So-Called Robo-Signings Just about two weeks ago, the country's fourth largest lender, GMAC announced it was suspending foreclosure and eviction actions in 23 states, including Ohio. The reason? A document processor for the company admitted he had approved 10,000 foreclosure documents a month without even reading them. In the days that followed, Bank of America and JP Morgan Chase also halted foreclosures in states that require judicial approval. They, too, were concerned about the integrity of their foreclosure actions.Congress Passes Bill To "Streamline Foreclosure Process" Adding fat to the burning fire of consumer anger, Congress ramrodded a measure that would "streamline the recognition of notarizations across state lines", arguably validating much of the robo-signings. Obama Avoids Political Suicide With Pocket Veto The New York Times reports Obama Plans to Veto Foreclosure Bill White House officials said Thursday that President Obama would not sign a little-noted measure that suddenly gained attention amid questions about some big lenders' slipshod bookkeeping on home foreclosures, Jackie Calmes of The New York Times reports from Washington.Congressional Chickens It would have been political suicide for the President to have signed that bill and he knows it, thus the "pocket veto". But how in the hell did such a bill pass Congress in the first place? The answer is the chickens in both houses of Congress passed the "Interstate Recognition of Notarizations Act" by voice vote. In a blatant act of galling chicken behavior here is the result. Apr 27, 2010: This bill passed in the House of Representatives by voice vote. A record of each representative's position was not kept. Sep 27, 2010: This bill passed in the Senate by Unanimous Consent. A record of each senator's position was not kept. Timely Blowup If ever there was a timely blowup, this was it. Had the Senate acted earlier in the year, the president would have signed this monstrosity. In retrospect it is rather amazing it did not pass earlier. Time To Abolish Voice Votes For still more on the pocket veto, please see Obama To Veto 'Robo-Foreclosure' Bill Right before it recessed last week, the Senate passed a bill — the Interstate Recognition of Notarizations Act of 2010 — that could have made it more difficult for foreclosure victims to challenge banks that may have improperly approved their foreclosure. The legislation would have forced states to accept documents that were notarized in other states, under potentially different sets of notary standards, without verifying any of the documentation. The Senate passed the bill without debate and despite widespread reports of foreclosures across the country being approved by bank "robo-signers" (employees who weren't verifying the necessary documentation to legally okay a foreclosure).It is amazing, as well as amazingly telling that the Senate passed this bill AFTER the robo-signing scandal story broke wide open. Sadly, we do not know the idiots who voted for this measure. This disgusting process certainly highlights ample reasons to abolish voice votes. Who Should Pay? The above articles and commentary discusses in detail what happened, but questions linger about who should pay, and how to determine the losses. Economist economist Tom Lawler discusses the situation in "Foreclosure-Gate": Who Will, and Who Should "Pay"? It seems pretty clear that one of the outcomes of the recent "revelations" is that many foreclosures will be postponed; there will be more "refilings" of foreclosure petitions that will cost money; more borrowers facing foreclosures will hire lawyers, and servicers will have to reimburse more borrowers for legal fees; and some foreclosures could be delayed for quite a while. It is unclear at this point whether there will be any significant number of completed foreclosures that might be reversed, but if so that's gonna cost! Net, there are going to be significant costs that someone is going to have to bear.More Likely Than Not, Taxpayers Will Pay Lawler says he does not have the answers to those questions, and right now I don't either. However, the attempt by the Senate to ramrod through that legislation shows the senate's intent to minimize the damage to the guilty parties. Voters are extremely angry right now, and the next Congress is likely to be far more conservative than this one, but after the election the slate will be clear for another two years. I hope I am wrong about this, but I smell another taxpayer sponsored bailout, possibly via some backdoor concocted scheme involving Fannie Mae. This trick will be to pass a bailout that does not look like one. If that can be done, rest assured it will be done. Problems Deeper Than Paperwork The Washington Post reports In foreclosure controversy, problems run deeper than flawed paperwork Millions of U.S. mortgages have been shuttled around the global financial system - sold and resold by firms - without the documents that traditionally prove who legally owns the loans.Janet Tavakoli Blames the SEC as a "Failed Regulator" The one thing we have not discussed about this mess is who to blame. I received an email from Janet Tavakoli on Thursday laying the blame smack on the SEC. Janet Writes ... The SEC is a failed regulator.Free Market Failure? Hardly! Someone is sure to blame this mess on the "free market". Nothing could possibly be further from the truth. The Fed's loose monetary policies were the great enabler in this scheme. The mere existence of the Fed, Fannie Mae, Freddie Mac, and the FHA run counter to free market philosophies. Note too, that the big three rating agencies (Moodys, Fitch, S&P) were sponsored by the SEC. Please see Time To Break Up The Credit Rating Cartel for details. Regulators in Bed with Industries they are Supposed to Regulate Finally, and as I have pointed out on many occasions, the one legitimate function of government is to protect civil rights and property rights, with everyone treated equally under the law. Regulation designed to prevent fraud, does just that. However, and as is typically the case, regulators get into bed with those they are supposed to regulate. How does this happen? Look no further than the appointment process itself. How many key players in the Bush and Obama administrations have ties to Goldman Sachs and JPMorgan? How many have other ties to Wall Street and other large banks? Playing Field Purposely Dishonest Cries for more regulators will not do a damn thing when people like Elizabeth Warren Tossed a Bone and Appointed Geithner's Lapdog We do not have a level playing field for the simple reason Wall Street and the big banks do not want an honest playing field. Unfortunately, the corrupt way corporations buy politicians all but ensures the status quo, even as screams for more regulation reverberates from the mountain tops. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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