Author: VD

Mailvox: first they came for the defaulters

No doubt it’s very satisfying to pontificate about the sanctity of contracts and the moral importance of paying one’s debts when considering the weighty question of whether mortgage bank fraud is outweighs the pecuniary sin of a defaulting homeowner in borrowing more money than they could reasonably afford. They didn’t make the payments, they should lose the house to somebody, right? What does any of this have to do with you? After all, you have always made all of the necessary payments on your mortgage because you are a fine, morally upstanding, and responsible debtor.

Of course, you may look at the matter just a little differently once you discover that not owing money to a bank doesn’t prevent it from home seizing and selling your home. R sent the following email:

Tonight, my girlfriend comes home to her house in Honolulu Hawaii only to find a foreclosure notice and public auction notice on November 19th, at the First District Court of Honolulu Hawaii.

Only problem is that Bank of America posted the notice. And her mortgage is with Wells-Fargo Bank.

And she’s never been served notice at all. Neither has her attorney.

But her home is going up for sale on the 19th of November.. just like that. Perhaps this fraud needs to be known more, just before election day on November 2nd, 2010, because I really believe that most Americans do NOT know what is going on.

Of course, this can’t possibly happen to you. Surely this guy’s girlfriend has somehow done something to justify having her home put up for auction. She’s probably late on her payments to Wells Fargo or perhaps Wells Fargo sold the mortgage to Bank of America and she should have been paying them. Or maybe Hawaii still has some crazy property laws left over from the reign of Queen Liliuokalani. Because everyone knows they can’t do that, and anyhow, your bank is a really good bank, they aren’t like the evil giant banks, and they were so nice and helpful when that last little detail came up before closing. So obviously nothing like this could ever happen to you….

In which Heimdall takes a deep breath

This news may help explain why the pension funds are so desperate to force the mortgage security push-backs though sooner rather than later… as if the thought of being able to legitimately reclaim billions of dollars in investment losses wasn’t enough incentive in its own right.

On Nov. 1, the Financial Accounting Standards Board (FASB) ceases to take public comment on a new rule requiring that companies more accurately report liabilities they have from participation in multiemployer pension plans. Unless FASB is persuaded otherwise, the rule takes effect Dec. 15.

There are some 1,500 multiemployer pension plans in the United States, which are unique to unions. In these plans, multiple companies pay into the pension plan, but each company assumes the total liability. Under “last man standing” accounting rules, if five companies are in a plan and four go bankrupt, the fifth company is responsible for meeting the pension obligations for the employees of the other four companies….

FASB’s new rule could effectively wipe out the paper worth of many companies, especially in the trucking and construction industries. Once banks and creditors are aware of these staggering pension liabilities, it will make it nearly impossible for union businesses to get loans, credit lines or bonding.

Now, obviously I didn’t know that the mortgage fraud would run as deep and wide as it does, nor did I know anything about the way in which this FASB rule is likely to put so much pressure on the pension plans. But I did know that the accounts of every bank, pension, and public corporation were fictitious to some level and would likely be exposed once the pressure of debt-deflation and economic contraction set in. This is why I have resolutely ignored all of the frantic cheerleading of the desperate economists and financial analysts; being cognizant of the true nature of Keynesianism, I recognized it as nothing more than a futile attempt to revive the animal spirits that they, like neolithic cavemen dancing around a bear skull, worship without comprehension.

Moreover, you can be certain there will be more unhappy revelations and “surprises to the downside” ahead.

In defense of double-standards

Donna Reed complains that women are criticized for the same behavior in which men indulge:

Her wanting to explore and have her fun before she settles hardly qualifies as a tramp. Tons and TONS of men do this same thing but what do we call them?

That completely depends upon how “fun” is defined. Considering that the woman concerned a) needed to break up with her boyfriend, b) was by her own admission envious of her single friends being able to go out with other men, and c) Ms Reed claims that “Tons and TONS of men” are doing “this same thing”, it is perfectly clear that what the little would-be tramp wanted to do was exactly what I described in the original post, namely, spend a few years riding the carousel before settling down.

But that’s obvious and one requires a furiously spinning rationalization hamster in order to claim that the young woman merely wanted to break it off with the perfect long-term relationship guy in order to spend time “taking trips with best friends, dancing, and doing anything silly and fun with your pals”. (Of course, as has been pointed out before, “taking trips” aka “travel” is femalespeak for “have sex with strange men”, so I suppose the assertion is not so much incorrect as an incompetent attempt at camouflage.) There is simply no question that the young woman very much wants to go out and get herself ravished a few times by a few different men. It is the bestial temptation that is there to either be resisted by her reason or justified by her hamster.

The more interesting question that Donna Reed raises is this: how and why can anyone object to a sex-based double standard? There is no double-standard if we are discussing morality; fornication and adultery are considered sins for both sexes alike. Therefore, to assert the existence of a double-standard inherently takes the discussion completely outside the subject of morality and puts it in the realm of mere social acceptability.

Now, the supposed double standard is that men who have sex with many women are studs whereas women who have sex with many men are sluts. But different labels for men and women with similar attributes are not a double standard; is it a double standard that attractive men are called “handsome” and attractive women are called “pretty”? Of course not. The labels derive from the observable fact that men’s attraction to women has a negative correlation with her sexual experience while women’s attraction to men has a positive correlation with his sexual experience.

Note that we’re talking about attraction here, not the reasoned pursuit of a life-long mate. As is usually the case, what a woman says about the men to whom she is attracted is irrelevant as the fact of the matter is that the virginal adult male is a figure of scorn in modern society whereas the virginal adult female is despised only by her fellow women in the same manner that they hate beautiful women.

So, the female standard for men is that men with less sexual experience are less attractive. The male standard for women is that women with less sexual experience are more attractive. This is not a single double standard, but rather two distinct standards held by two different groups of people about two different groups.

Behind the curve

There are four economics blogs which I follow on a regular basis, the Market Ticker, Mish, the Mises Institute, and Calculated Risk. They’re all considerably different, but CR is arguably the most useful in keeping track of the mainstream perspective because he does such a great job of publishing statistical updates and because he subscribes to more conventional economic theory than I do. So, I was curious as to why CR had been paying so little attention to the Great Mortgage Fraud, especially since he places particular importance on the housing sector as an engine for driving an economy out of recession. After reading his first post on the matter which indicated an opinion which appeared to downplay the issue, I shot him an email suggesting that he might not be quite as up on the burning issue du jour as is his usual wont; he was well ahead of the curve on both the housing bubble and the bank failures. So, it was with more than my usual interest that I read his latest post on the subject:

I fully support these investigations, but I’ve downplayed “foreclosure-gate” because I thought the impact on housing and the economy would be minor – depending of course on the length of the foreclosure delays. Many other people disagree with my view – and please remember I’m not always right.

It is important to separate out two other issues. The first is MERS (the “Mortgage Electronic Registration System”). There are many interesting issues with MERS – and plenty of litigation – but my feeling is that the defects are curable, and these issues will have little impact on the economy. Since I think the impact will be minor, once again I’ve mostly been ignoring these issues.

The third issue is repurchase requests based on Reps and Warranties for mortgages. This is an important story for the banks. I’ve been mentioning the increasing push-backs from the GSEs (Fannie and Freddie). That isn’t a new story. The important development today was that several major bond investors are pressuring BofA to repurchase defective mortgages. Although I’ve been following this story, I haven’t mentioned it – and some people think I’ve been “behind the curve”. Could be.

CR is completely correct to note the multiple facets of the situation. Unlike most of those who have minimized the issue or taken the banking industry’s defense line, he clearly recognizes that the issue is not limited to foreclosures and deadbeat borrowers. And his reasoning is perfectly sound, for as he adds in a comment: “I know others think the impact will be huge… I think they are wrong, especially about foreclosure-gate and MERS. The push-backs will take time and I expect the losses will be spread over several years, and just doesn’t seem like a “blowup” event.”

The reason I disagree with CR’s conclusion is three-fold. First, because his econonomic perspective is essentially a mainstream Samuelsonian one, he doesn’t take the economic impact of the continued decline in bank credit into account even though he is the Internet’s primary chronicler of bank failure and the latest FDIC shenanigans. (NB: I use CR as the source for updating my own bank failure spreadsheets.) Not being an Austrian, he is looking at economic indicators that are presently much less dire than credit indicators such as TOTLL and Z1. The economic environment is already precarious, which reduces the probability of the consequences of the mass bank fraud being contained to the financial sector.

Second, I don’t think the security push-backs are going to take time and be spread out over several years because the big banks are not only on the verge of bankruptcy, they are already insolvent. More importantly, all of the counter-parties to whom reimbursement are owed already know this. Therefore, they are not going to be content to wait and see the matter resolved slowly by federal regulators in the manner preferred by the big banks and their managerial staffs because every victim of the grand securities fraud is going to want to be first in line to get their money back lest they not receive anything at all.

And third, the amount of criminal wrongdoing here is far too excessive, far too obvious, and far too jurisdictionally widespread to permit it to be ignored under the banking industry’s usual “get out of prosecution free” card. (There is no other word for it, not when Wachovia got away scot-free after admitting that they laundered billions in Mexican drug money.) While there is no question that the federal agencies are not going to aggressively prosecute a series of frauds that they clearly permitted and even abetted, the same is not true of the agencies of the states whose tax coffers and pension funds were ripped off by the voracious banksters. And the states have more investigators as well as more autonomy than the SEC and other federal agencies. In short, I suspect the situation is beyond Wall Street-owned Washington’s ability to firewall it.

But, we will see. This is a complex matter and intelligent minds can reasonably disagree. If CR is ultimately correct, I won’t hesitate to congratulate him on his perspicacity. But I have to admit, I expect to be congratulating the Market Ticker instead.

It’s all about the foreclosures!

Which is why it is totally inexplicable why the New York Fed and PIMCO are now requesting a repurchase of mortgages sold to them by Bank of America. And why the Federal Home Loan Bank of Chicago is suing BOA:

According to a letter to investors from President and CEO of the FHLBC, Matthew Feldman, the securities listed in the complaint totaled more than $4.3 billion and were all rated triple-A when purchased. “We contend that the quality of the loans that comprise the pools of securities cited in today’s complaints was inconsistent with the description in the pre-purchase documents prepared by the underwriters and issuers of the securities,” Feldman wrote.

I suspect it is probably safe to declare that the big Wave Two rally that began in March 2009 and was led by the financial stocks has passed its peak now. This should also mark a surge in USD strength contra nearly everyone’s expectations.

That is NOT a smoking gun

It is a new, hyper-efficient form of communication designed around the noble Native American tradition of conveying messages via smoke signals. It is merely shaped like a gun due to convergent design evolution:

“It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies.”
– Bank of America, U.S. Bankruptcy Court, Jacksonville, CASE NO. 3:09-bk-07047-JAF

What Washington fails to understand is that double and even triple-pledging home loans made them more secure for the homebuyer. That’s what mortage securitization was all about from the start! Read a dictionary! Bank of America not only stands by its word and its commitment to the law and all the responsible homebuyers in this great nation of ours, it stands by it two and even three times!

On a completely unrelated note, my official Sponsored Post rate has increased to €23 million.

Warning: hamster at work

This is what it looks like when a woman’s rationalization hamster is actively at work:

I’m 23 years old and have been dating my boyfriend for just over two years. I love him, and I love spending time with him. He’s everything I’ve always wanted in a long-term partner: caring, intelligent, thoughtful and hardworking.

But lately, I can’t seem to shake this “antsy” feeling…. I’ve been thinking maybe it would be good for us to take a break so I could clear my head and figure out what I really want. Is that a disastrous idea?

This is precisely why men should pay very little attention when women, particularly young unmarried women, tell them what they think they want. What they want is very often mutually contradictory; shockingly few women fully grasp the basic concept of opportunity cost: IF you do X, THEN you cannot do Y.

Consider the “advice-seeker”, who isn’t actually seeking advice but rather permission/rational cover to do what she intends to do regardless of what anyone says. She is at the peak of her attractiveness to men, she has already landed a man who provides “everything she wanted in a long-term partner“, but she is unable to shake an “antsy” feeling. No doubt those familiar with Game theory were laughing when they read that, instantly recognizing what is quite clearly the usual desire to spend a few years riding the Alpha carousel.

Gammas and Deltas, note that it doesn’t matter in the least how perfect you are as a potential husband, gentleman, and provider. In most cases, a woman’s decision about pursuing a long-term relationship has very little do with your own behavior within that relationship and everything to do with what holds the tie-breaking vote in her individual case, reason or the rationalization hamster. Whereas reason will vote for a happy married life with the “caring, intelligent, thoughtful and hardworking” delta, the rationalization hamster is furiously throwing out one irrational “reason” after another to justify allowing herself to be mounted by a series of passing Alphas. (Note: women seldom come right out and phrase it this clearly, they usually describe it as “being young”, “having fun”, “enjoying myself”, and occasionally “taking a break”.)

What the woman really wants is to spend the next four years riding the Alpha carousel, then to come back to her current boyfriend, who will of course have spent that time loyally pining away after her and will happily marry her when she is no longer sufficiently attractive to command the level of Alpha interest to which she has become accustomed. It’s not an impossible dream, but it is a highly improbable one. On an anecdotal note, I have NEVER seen any woman of my acquaintance over the age of 27 end up with a higher-quality, higher-status man than the highest-quality, highest-status man with whom she was seriously involved prior to that age.

Is “taking a break” a disastrous idea? It all comes down to a woman’s time-preferences. If peak short term pleasure is her absolute priority, then obviously the carousel is the way to go. If greater long-term satisfaction is her objective, then yes, throwing away everything she’s always wanted in a long-term partner is almost criminally stupid. (The complete uselessness of the female advice columnist goes without saying, which is why there is no need to comment upon what passes for her “advice”.) And while it is certainly possible that marriage to her ideal delta may not work out as well as she imagines, it is also true that the carousel rides on offer may not turn out to be of the status/quality that she hopes for either.

This leads me to contemplating a related email in which GK asked about my acceptance of evolutionary psychology:

My impression from what I’ve read of your writings is that you don’t believe in evolution but agree with some things that could fall under the umbrella of evolutionary psychology. E.g., the whole “game” thing — if I’m understanding you correctly — sounds very much like the kind of stuff you hear from the EP folk.

EP has a mechanism for explaining why a character trait that provides a selective advantage (e.g., women wanting to mate with the alpha male) would be passed on and come to dominate the population. Do you accept that general notion? Of course it’s entirely possible to believe in evolutionary psychology and reject macro evolution. Is that your position?

No, my belief in the utility of Game theory has absolutely nothing to do with evolutionary psychology, which I completely reject. In fact, I outright reject evolutionary psychology whereas I am merely skeptical about evolution by (probably) natural selection. The key phrase is “mechanism for explaining”, which means that evolutionary psychology is nothing more than creative fiction. It has a scientific basis no stronger than the Biblical “Curse of Eve” and represents the confusion of “could” with “is”. Is any one scenario posited by an evolutionary psychologist correct? Perhaps. But the total inability to provide any metric to determine the probability of the correctness of any given scenario renders it no more scientific or useful than 17th century Basque poetry. The history of science is littered with many commonly accepted “coulds” that weren’t; for example the idea that tribes of European hunter-gathers adopted agriculture from the Middle East rather than being supplanted by Middle Eastern immigrants is now being called into question. Plus ça change….

This isn’t to say that it is worthless to attempt to discover the whys and wherefores behind the operation of Game. But accepting the idea that something works is not tantamount to accepting every idea attempting to explain why it works. It’s important to recall that the operative theory of Game preceded the attempts of amateur evolutionary psychologists to retroactively explain it. At times, it appears that no few male scientists have little white rationalization lab rats of their own.

Mailvox: an unfortunate series of minor mistakes

From an anonymous mortgage broker: “There are blatant efforts by several of the giant mortgage-security selling institutions to intentionally “fail to find” the relevant loan documentation. We have seen multiple clients in September and October who either face foreclosure or had been foreclosed and WERE NOT EVEN LATE on their mortgage payments!”

After looking into these serious allegations, I have been reliably informed that these sorts of unfortunate accidents are bound to happen from time to time given how many millions of mortgages are outstanding.  I have no doubt these isolated incidents were mere clerical errors and that the bank(s) involved will be pleased to sort out any mistakes that were made as well as making all appropriate restitutionary actions that are required by the law.  Which, I hasten to note, the mortgage banks totally respect.

In completely unrelated news, I would like to announce that I recently decided to begin accepting blog advertising. The cost for a Sponsored Post begins at €1 million.

In which we are called out

Chateau comments upon America reaching the Crazy Cat Lady Stage:

The crazy cat lady stage of America — yep, that about sums it up. So what follows? Who knows. It’s possible the pendulum will swing back, perhaps violently. As we here at the Chateau relish provoking reminding the readers, giving women the right to vote has been a disaster for liberty-loving small-government patriots. Do any of the mainstream conservative or libertarian bloggers have anything to say about Lott’s study? Their cowardly silence speaks volumes.

I responded thusly:

Cowardly silence? On women’s suffrage? Just to just to give one conservative and one libertarian example, Ann Coulter and I have both been very clear on our opposition to women’s suffrage. I have written on the subject numerous times; here’s one example from 2007:

“What Ann understands and so many nominal conservatives do not is that women’s suffrage is completely incompatible with human liberty or a republic as described in the U.S. Constitution. The two cannot co-exist. One cannot defend freedom on the basis of emotion, as fear always runs to promises of security, however nebulous.”

Women’s suffrage has been a complete and unmitigated disaster across the West and it is doubtful that any society can survive it for long.

The fact is that it is impossible to rationally defend women’s suffrage in a system of limited democracy on ANY grounds except to assert that it is an intrinsic and self-evident societal good. One may or may not agree with that, but regardless, to simply label something an intrinsic and self-evident good is not tantamount to actually making a case for it. To even attempt to begin making a genuine argument for women’s suffrage usually requires a fundamental error in confusing “the act of legal voting” with “freedom” and/or “human liberty”. But neither voting nor democracy are synonymous with freedom or societal well-being, which is precisely why the Founding Fathers limited the franchise so strictly and why so many of supposed champions of democracy are actively opposed to further expanding democracy in America beyond the equalitarian expansion of the electorate presently permitted to select its nominal representatives.

If a single American feminist has embraced the concept of genuine democracy with a 100 percent national franchise, which I support as being vastly preferable to modern American pseudo-democracy and in which there are absolutely no anti-democratic strictures on the will of the people of either sex, I have yet to hear of it. Which should suffice to demonstrate that whatever the feminist rationale in support of women’s suffrage might be, it doesn’t appear to be based on a principled commitment to democracy.

Obama is behind the curve

His adminstration is still tap-dancing around the central issue of the mortgage frauds despite the fact that everyone who is paying attention now knows that the foreclosure fraud is only the tip of the iceberg. Notice how the PR communique from his U.S. Secretary for Housing and Urban Development completely ignores everything but the foreclosure aspect and tries to portray illegal banking actions as “a bank mistake”:

No one should lose their home as a result of a bank mistake. No one. That is why the Obama Administration has a comprehensive review of the situation underway and will respond with the full force of the law where problems are found. The Financial Fraud Enforcement Task Force that President Obama established last November has made this issue priority number one. Bringing together more than 20 federal agencies, 94 US Attorney’s Offices and dozens of state and local partners to form the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud, the Task Force is examining this issue and the Attorney General has said publicly that if it finds any wrongdoing the members of the task force will take the appropriate action. The Federal Housing Administration and Federal Housing Finance Agency have launched reviews to make sure servicers are in full compliance with the law. The Office of the Comptroller of the Currency has directed seven of the nation’s largest servicers to review their foreclosure processes, fix the processing problems and determine whether there is specific harm that has been caused in individual cases.

The message all these institutions are sending is the same: banks must follow the law — and those that haven’t should immediately fix what is wrong.

What an unsurprising and incompetent PR-driven response. But it’s informative to note that a top administration official is willing to come right out and state that banks that have broken the law will not be prosecuted, but have merely to “fix what is wrong” in order to escape punishment. As I posted yesterday, there is absolutely no Rule of Law in the United States anymore. There is not even a serious pretense of it.

If a member of the non-favored classes breaks the law, he is arrested, prosecuted, and tried if he is lucky. If he is not, (in which case he may not have even broken a law, but merely been targeted by a bureaucratic agent), he is subjected to a non-judicial procedure and asset-stripped. If, however, a bank does not “follow the law”, it is expected to merely “fix the mistake”. Moreover, it is an explicit announcement that the Obama administration fully intends for foreclosures to continue less only those that are most PR-damaging to the banks.

It certainly settles the issue regarding Obama’s political intelligence. Like McCain in 2008, he has sent a very public message that he is taking Wall Street’s side against the rest of America.