terça-feira, 16 de novembro de 2010

What In The World Is Going On Inside Bank Of America?

What In The World Is Going On Inside Bank Of America?

by Dan Froomkin, Huffington Post, November 8, 2010
WASHINGTON -- You could do a lot worse things with your time than read every word of what William K. Black and L. Randall Wray have written for the Huffington Post in the last two weeks -- even though it would take a while.
Black and Wray both teach economics at the University of Missouri-Kansas City. Black, himself a regulator during the S&L scandal of the 1980s, has emerged as one of the most blistering critics of the Obama administration's limp response to the mortgage and foreclosure crisis. For an introduction, read my article on Black and his list of nine stories the press is underreporting - most of them involving fraud, fraud and more fraud.
In their first piece, back on Oct. 22, Black and Wray described how the ongoing foreclosure fraud epidemic is the work of precisely the same unrepentant bank officers whose fraudulent mortgage schemes crashed the financial system in the first place. They called on the FDIC to put some of the nation's biggest banks into receivership, in order to clean house. "Foreclose on the foreclosure fraudsters," they wrote -- and start with the worst: Bank of America.
I wrote a news story about their piece, I thought it was so important.
In part two, they called for a foreclosure moratorium, and explained why the guilt gets greater the higher you go in the mortgage fraud food chain - not the other way around.
Black, writing alone, also corrected President Obama's assertion during his interview with Jon Stewart, that chief economic adviser Larry Summers had done a "heckuva job." Summers did not resolve the financial crisis, Black wrote, he just papered over the problem. In another solo effort, Black warned that papering over the problem will actually increase the total cost of the crisis in the long run, and he concluded that "the administration's banking policies have attained the terrible trifecta: terrible economics, terrible ethics, and terrible politics."
After Bank of America executive Rebecca Mairone posted a largely nonresponsive rejoinder to Black and Wray's call for her bank's dissolution, the professors took to their keyboards again and wrote about how "[t]he bank's response primarily criticizes its borrowers as deadbeats, yet the data it provides support points we have made in our prior posts."

In her defense of BofA, Mairone noted that most of the bank's problem loans were made by Countrywide Financial, which Bank of America acquired in January 2008 -- well after the toxicity of its mortgage holdings had made the company and its practices notorious. Mairone casts the action as a heroic one, staving off a failure that "would have been devastating to the economy, the markets, and millions of homeowners." But Black and Wray argue that putting Countrywide into receivership would have been a much better option: "A receiver would have fired Countrywide's fraudulent senior leaders. Bank of America, by contrast, put them in leadership roles in major operations, including foreclosures, where they could commit continuing frauds." And Bank of America bragged at the time of having had more than 60 people doing "due diligence" on Countrywide before the acquisition. So they knew what they were getting into; or at least they should have known.
In the second part of their response to Mairone, Black and Wray called on Bank of America to come clean. And in that post, they raise some fascinating questions that all of us should be asking. Among them:
  • How did you determine the losses in Countrywide's assets?
  • How large were the market value losses at that time?
  • How large are the market value losses now?
  • Which members of the due diligence team were assigned to determine the incidence of fraud in various loan categories? What did they find?
  • How large a sample of subprime and liar's loans did BofA's due diligence team review?
  • What likely mortgage fraud incidence did BofA's due diligence team discover?
  • What did they report to BofA with regard to fraud incidence?
  • What changes in lending and personnel did BofA implement in response to these findings?
  • What actions did BofA take in response to finding the incidence of mortgage and accounting/securities fraud?
Ambac Assurance sued Bank of America in September, saying Countrywide had fraudulently induced Ambac to insure bonds backed by loans that they knew had been improperly made. This came after Ambac's review of the underlying loans. Black and Wray ask:
  • Ambac reviewed Bank of America's assets and reported a 97 percent rate of false reps and warranties. Has Bank of America done such a review?
  • If so, who conducted the review, and what rate of false reps and warranties did they find?
  • Does Bank of America agree that liar's loans have extremely high fraud rates?
  • Does Bank of America agree that an honest secured lender would never seek to inflate an appraisal?
  • Does Bank of America agree that a competent, honest secured lender would prevent others from frequently inflating appraised values?
  • Does Bank of America agree that appropriate home mortgage underwriting can minimize adverse selection and produce a positive expected value to home lending?
  • How many fraudulent mortgage loans made by Countrywide has Bank of America identified?
  • What is Bank of America's procedure when it finds suspicious evidence of a fraudulent loan?
  • How many fraudulent mortgage loans, by year, since 2000, have Countrywide and Bank of America identified.
  • Has Bank of America reviewed Countrywide's nonprime loans for fraud incidence, fraud losses, and the incidence of lender fraud and fraud by the lender's agents? Please provide the results.
  • What has Bank of America done to remedy the injuries that borrowers suffered through loan or foreclosure fraud by them or Countrywide?
  • Does Bank of America agree that Countrywide's nonprime lending was often conducted in a manner that was unsafe and unsound?
  • Does Bank of America agree that Countrywide's record keeping was not adequate and required substantial improvement?
  • At current market value of its assets, just how insolvent is Bank of America?
  • How much can the bank sell its toxic assets for in today's market?
  • What is the value of mortgages and mortgage backed securities held by Bank of America for which it has no clear title?
  • How many mortgage-backed securities has the bank sold to investors for which it does not hold the notes that are required?
  • What is the bank's current estimate of losses it will suffer in court due to lawsuits by investors?
  • The top four banks are holding $434 billion in second liens (good only if the first lien -- the mortgage -- is paid), and carrying these on their books at 90% of face value. What are Bank of America's reasonably expected losses on second liens against properties that are delinquent, in foreclosure, or likely to go into foreclosure?
As for the ongoing foreclosure crisis, in which it has become apparent that banks are forcing people out of their homes despite the absence of original, "wet ink" documentation, Mairone blamed the foreclosures on deadbeat borrowers, many of them unemployed, a third of whom no longer occupied their homes. Black and Wray asked:

  • Does Bank of America hold the "wet ink" notes on any of these homes, as required by 45 states?

  • How many of the mortgages were fraudulent from the very beginning: low docs, no docs, liar loans, NINJA's (all specialties of Countrywide)?

  • How many homes are now vacant because the homeowners were illegally removed from them?

  • How many of these homeowners were unemployed or otherwise financially distressed when the loans were originally made?

Jim Swilley, courageous Georgia megachurch (Church of The Now) pastor, comes out to congregation after gay teen suicides

Jim Swilley, Georgia Megachurch Pastor, Comes Out To Congregation After Gay Teen Suicides

Huffington Post, November 14, 2010

Jim Swilley, the pastor of a Georgia megachurch (Church of The Now), recently revealed to his congregation that he is gay. The 52-year-old father of four said that his wife, to whom he was married for more than 20 years, encouraged him to come out years ago, but at the time, he told her: "These words will never come out of my mouth."
However, the recent spate of teen suicides, particularly that of Rutgers student Tyler Clementi, prompted him to change his mind. "For some reason his situation was kind of the tipping point with me," Swilley told CNN's Don Lemon this weekend.
"There comes a point in your life where you say 'How much time do we have left in our lives? Are we going to be authentic or not?'"

domingo, 14 de novembro de 2010

Frank Rich: "Who Will Stand Up to the Superrich?"

Who Will Stand Up to the Superrich?

Barry Blitt

by Frank Rich, The New York Times, November 13, 2010
In the aftermath of the Great Democratic Shellacking of 2010, one election night subplot quickly receded into the footnotes: the drubbing received by very wealthy Americans, most of them Republican, who tried to buy Senate seats and governor’s mansions. Americans don’t hate rich people. They admire and often idolize success. But Californians took a hearty dislike to Meg Whitman, whosacrificed $143 million of her eBay fortune — not to mention her undocumented former housekeeper — to a gubernatorial race she lost by double digits. Connecticut voters K.O.’d the World Wrestling groin-kicker, Linda McMahon, and West Virginians did likewise to the limestone-and-steel magnate John Raese, the senatorial hopeful who told an interviewer without apparent irony, “I made my money the old-fashioned way — I inherited it.”
To my mind, these losers deserve a salute nonetheless. They all had run businesses that actually created jobs (Raese included). They all wanted to enter public service to give back to the country that allowed them to prosper. And by losing so decisively, they gave us a ray of hope in dark times. Their defeats reminded us that despite much recent evidence to the contrary the inmates don’t always end up running the asylum of American politics.
The wealthy Americans we should worry about instead are the ones who implicitly won the election — those who take far more from America than they give back. They were not on the ballot, and most of them are not household names. Unlike Whitman and the other defeated self-financing candidates, they are all but certain to cash in on the Nov. 2 results. There’s no one in Washington in either party with the fortitude to try to stop them from grabbing anything that’s not nailed down.
The Americans I’m talking about are not just those shadowy anonymous corporate campaign contributors who flooded this campaign. No less triumphant were those individuals at the apex of the economic pyramid — the superrich who have gotten spectacularly richer over the last four decades while their fellow citizens either treaded water or lost ground. The top 1 percent of American earners took in 23.5 percent of the nation’s pretax income in 2007 — up from less than 9 percent in 1976. During the boom years of 2002 to 2007, that top 1 percent’s pretax income increased an extraordinary 10 percent every year. But the boom proved an exclusive affair: in that same period, the median income for non-elderly American households went down and the poverty rate rose.
It’s the very top earners, not your garden variety, entrepreneurial multimillionaires, who will be by far the biggest beneficiaries if there’s an extension of the expiring Bush-era tax cuts for income over $200,000 a year (for individuals) and $250,000 (for couples). The resurgent G.O.P. has vowed to fight to the end to award this bonanza, but that may hardly be necessary given the timid opposition of President Obama and the lame-duck Democratic Congress.
On last Sunday’s “60 Minutes,” Obama was already wobbling toward another “compromise” in which he does most of the compromising. It’s a measure of how far he’s off his game now that a leader who once had the audacity to speak at length on the red-hot subject of race doesn’t even make the most forceful case for his own long-held position on an issue where most Americans still agree with him. (Only 40 percent of those in the Nov. 2 exit poll approved of an extension of all Bush tax cuts.) The president’s argument against extending the cuts for the wealthiest has now been reduced to the dry accounting of what the cost would add to the federal deficit. As he put it to CBS’s Steve Kroft, “the question is — can we afford to borrow $700 billion?”
That’s a good question, all right, but it’s not the question. The bigger issue is whether the country can afford the systemic damage being done by the ever-growing income inequality between the wealthiest Americans and everyone else, whether poor, middle class or even rich. That burden is inflicted not just on the debt but on the very idea of America — our Horatio Alger faith in social mobility over plutocracy, our belief that our brand of can-do capitalism brings about innovation and growth, and our fundamental sense of fairness. Incredibly, the top 1 percent of Americans now have tax rates a third lower than the same top percentile had in 1970.
“How can hedge-fund managers who are pulling down billions sometimes pay a lower tax rate than do their secretaries?” ask the political scientists Jacob S. Hacker (of Yale) and Paul Pierson (University of California, Berkeley) in their deservedly lauded new book, “Winner-Take-All Politics.” If you want to cry real tears about the American dream — as opposed to the self-canonizing tears of John Boehner — read this book and weep. The authors’ answer to that question and others amounts to a devastating indictment of both parties.
Their ample empirical evidence, some of which I’m citing here, proves that America’s ever-widening income inequality was not an inevitable by-product of the modern megacorporation, or of globalization, or of the advent of the new tech-driven economy, or of a growing education gap. (Yes, the very rich often have fancy degrees, but so do those in many income levels below them.) Inequality is instead the result of specific policies, including tax policies, championed by Washington Democrats and Republicans alike as they conducted a bidding war for high-rolling donors in election after election.

The book deflates much of the conventional wisdom. Hacker and Pierson date the dawn of the collusion between the political system and the superrich not to the Reagan revolution, but to the preceding Carter presidency and its Democratic Congress. They also write that contrary to the popular perception, America’s superhigh earners are not mostly “superstars and celebrities in the arts, entertainment and sports” or the stars of law, medicine and real estate. They are instead corporate executives and managers — increasingly (and less surprisingly) financial company executives and managers, including those who escaped with outrageous fortunes as their companies imploded during the housing bubble.
The G.O.P.’s arguments for extending the Bush tax cuts to this crowd, usually wrapped in laughably hypocritical whining about “class warfare,” are easily batted down. The most constant refrain is that small-business owners who file in this bracket would be hit so hard they could no longer hire new employees. But the Tax Policy Center found in 2008, when checking out similar campaign claims by “Joe the Plumber,” that only 2 percentof all Americans reporting small-business income, regardless of tax bracket, would see tax increases if Obama fulfilled his pledge to let the Bush tax cuts lapse for the top earners. The economist Dean Baker calculated that the yearly tax increase at the lower end of that bracket, for those with earnings between $200,000 and $500,000, would amount to $700 — which “isn’t enough to hire anyone.”
Those in the higher reaches aren’t investing in creating new jobs even now, when the full Bush tax cuts remain in effect, so why would extending them change that equation? American companies seem intent on sitting on trillions in cash until the economy reboots. Meanwhile, the nonpartisan Congressional Budget Office ranks the extension of any Bush tax cuts, let alone those to the wealthiest Americans, as the least effective of 11 possible policy options for increasing employment.
Nor are the superrich helping to further the traditional American business culture that inspires and encourages those with big ideas and drive to believe they can climb to the top. Robert Frank, the writer who chronicled the superrich in the book “Richistan,” recently analyzed the new Forbes list of the 400 richest Americans for The Wall Street Journal and found a “hardening of the plutocracy” and scant mobility. Only 16 of the 400 were newcomers — as opposed to an average of 40 to 50 in recent years — and they tended to be in industries like coal, natural gas, chemicals and casinos rather than forward-looking businesses involving the Green Economy, tech or biotechnology. This is “not exactly the formula for America’s vaunted entrepreneurial wealth machine,” Frank wrote.
As “Winner-Take-All Politics” documents, America has been busy “building a bridge to the 19th century” — that is, to a new Gilded Age. To dislodge the country from this stagnant rut will require all kinds of effort from Americans in and out of politics. That includes some patriotic selflessness from those at the very top who still might emulate Warren Buffett and the few others in the Forbes 400 who dare say publicly that it’s not in America’s best interests to stack the tax and regulatory decks in their favor.
Many of the countless tasks that need to be addressed to start rebuilding an equitable America are formidable, but surely few, if any, are easier than eliminating a tax break that was destined to expire anyway and that most Americans want to see expire. Two years ago, Obama campaigned on this issue far more strenuously than he did on, say, reforming health care. Now he and what remains of his Congressional caucus are poised to retreat from even this clear-cut battle. You know things are grim when you start wishing that the president might summon his inner Linda McMahon.