Making Money System

By Richard Smith, a recovering capital markets IT specialist

Housing Wire’s Paul Jackson has another post up continuing his row with Yves over securitization chain of title issues. It presents itself as a rebuttal of her previous post, about an Alabama trial court decision that Jackson deems to be a significant defeat, but which Yves and more recently Adam Levitin have argued is both insignificant and not very relevant.

Normally I’d leave the two of them to slug it out. However, Jackson’s weekend submission, in which he says he is “going to address her latest talking points” piqued my interest. Rather than addressing any of the substance of the post itself, he mounts a bizarre attack on the motives of the attorneys behind the Alabama case, based on a pretty peculiar interpretation of one of Yves’ comments to the post. The comment:

Are you kidding? Each side spent over $250K on this case. Trials where you are making real legal arguments, as opposed to presenting papers for a judge to approve, are costly. And Alabama billing rates are a lot lower than in other states. For borrower’s counsel, since the borrower has no money, the “spent” is what their time was worth plus hard dollar expenses (experts witnesses and so on). They are out the real out of pocket real costs.

The banks’ lawyer gets paid, so yes, this is an epic fail for the bank. I’ve mentioned this in other posts. The more borrowers fight cases, the more loss severities are gonna rise. Investors already are losing 70% on the average foreclosure and housing prices are projected to fall further in most states this year. If on top of that they start having more cases with 300% losses on foreclosure, investors might wake up and finally do something a lot more serious to pressure servicers.

Sooo…bank attorneys run up a tab fighting a foreclosure in a pretty obscure courthouse, that results in a 300% loss to investors, when all the borrower’s attorney wanted was the house back and a loan modification. The big numbers are the result of the bank attorney’s posture, and of eleventh hour moves that many judges would have rejected: introducing an allonge on the eve of the trial. This was clearly a bad economic result for the borrowers’ attorney! It was not hard to see that the trial had become a war of escalation, with the bank’s attorney in an ideal position to up the ante. The post makes clear that unlike the bank’s lawyers, borrower’s counsel was “out”, in hard dollar terms, vastly less than the total, which would have to include the opportunity cost of unpaid for billing time.

For Jackson this somehow becomes the basis for a statement of his worldview: that everyone is greedy, ergo these attorneys must be too! In his own words:

Morality and the accompanying emotions to that noble love of justice are simply a varnish for the fires of greed. In other words, everything is about the money, and if you can find a viable angle to make more of it than someone else. And I mean everything.

Taking guidance from this exceedingly dubious, indeed self-refuting claim (if it’s all about the money, we can’t trust Jackson either, can we?) is quite foolish. In fact Jackson doesn’t really believe it either: elsewhere in his oeuvre, we find a bizarre exception to his rule:

Believe it or not, mortgage servicing is a noble industry. Or, at least, it’s supposed to be. Even in managing borrower defaults and repossessing property, there is something noble to the work, underneath it all — and it comes from following the law, enforcing contracts, ensuring that our nation’s system of property rights maintains its integrity for all Americans.

Though it could be that he’s just slapping a spot of varnish, on some fires of greed, for the money; I do hope that varnish isn’t flammable, Mr Jackson, or you may decide you are underpaid.

At any rate, armed only with his distractingly inept imagery and his defective moral compass, Jackson sets out on a fishing trip, in his latest, and gets hopelessly lost almost immediately:

Yves tries to suggest that in writing about the Congress case I was claiming “Mission Accomplished,” attempting to associate me with an infamous Dubya moment during the far-from-over war in Iraq. Nothing could be further from the truth.

If you have the attention span of a gnat, you might take this at face value. On the other hand, the very next sentence says this:

Yves spends a fair amount of time suggesting that the effect of the Congress case elsewhere will be muted, if it has any effect all. In attempting to minimize the relevance of this case, however, what she misses is an important reality: that the defense here saw fit to mount one in the first place.

So make your mind up, Mr Jackson: is the case widely relevant or not?

Or was the choice of court and case, perchance, simply something of a goof by some attorneys looking to develop a theory that might have more lucrative applications? That’s one sensible conclusion you could draw, and a basic step in puzzling that out, that does not even occur to Jackson, is doing some minimal research and actually looking up the plaintiff’s lawyers. And the idea that deep pockets types would go to of all places Alabama, not exactly known for cutting edge jurisprudence or friendliness to consumers, and hire two no-name attorneys to represent a black borrower, is beyond belief. If you are Jackson, though, you skip the homework, or the sanity check, and go for the ASF paranoia:

In many ways, the plight of the distressed borrower is a convenient lever to pull if — for example— you’re a buyside Wall Street firm that decided to load up with cheap nonagency mortgage-backed securities in the wake of the market’s collapse, betting on a mechanism that could open the door to damage claims and settlements worth more than the securities themselves. Or maybe a mortgage insurer looking for novel ways to repudiate claims en masse.

I’m not at all suggesting that’s what went on here…

I have a suggestion straight back at Mr Jackson: if you want to not suggest something, the best way is simply not to make the suggestion. Otherwise, it looks as if you’re trying to have it both ways.  Keeping the accusation vague is a smart move, admittedly, if you happen to be a bit clueless and not very brave. Bill Gross for one has made the trade that Jackson mentions, but does Jackson actually mean Bill Gross? He doesn’t say. Perhaps he doesn’t want Bill Gross on his case.

Yves by contrast doesn’t care a bit, roundly dissing Mr Gross’s self interested utterances. Ultimately, Jackson is too vague to be interesting here: it’s just a smear. As for the mortgage insurer theory: there’s no evidence for that either; just Tom Adam’s prior employment history and his occasional contributions at this blog. Mortgage insurers can make claims directly, on the very same theory that Naked Capitalism and the Congressional Oversight Panel have discussed. They have no reason to test a theory on a case in a largely irrelevant jurisdiction. And there are business reasons that the monolines are going the putback case route rather than this one. Remember that most of the MBS exposure (excluding CDOs) that monolines have is via HELOCs or second liens. That may put them in a position similar to that of the big banks: unwilling to take action on the first lien mortgages for fear of write downs on the second liens.

Yes, Bill Gross and MBIA and others are out there. And if they want to work the legals to make some money, or claw some back, they, or others like them, will. It’s really hard to see why the output of “Naked Capitalism” would so heavily in their ruminations as to be worth paying for (if that is what Jackson’s insinuating: he doesn’t seem to be able to bring himself to spell it out).

All of this stuff of Jackson’s is irrelevant and pretty much content-free;  but still, it’s an interesting glimpse of sell-side anxieties.

So what really matters about this case? Three things: the unfortunate Erica Congress, who has had her hopes dashed twice over now, once when she couldn’t pay her mortgage and a second time when she was turfed out of her house; and two blithe but pernicious affirmations by the judge: first, that an allonge doesn’t have to be affixed to the note, which just opens up the floodgates for document fabrication, and second that “digital signatures” are valid endorsements to the note.

Unfortunately, neither Jackson nor the judge seem to grasp the difference between a digital signature, “a mathematical scheme for demonstrating the authenticity of a digital message or document”, as Wikipedia has it, and a digitally reproduced signature, a simulacrum that can be knocked up in minutes by any sad sack in a servicer that can use Photoshop, Word, and a laser printer, and doesn’t authenticate anything at all, least of all a transfer of title. Using 21st century technology to recreate a state of screwed-up title that hasn’t existed in anglophone countries since the mid-17th century is nothing to crow about, Mr Jackson. As a citizen of the US, it ought to make your blood run cold. It’s not just about the money.

At any rate, the more this stuff is talked about, the more lawyers (in less frivolous jurisdictions) will furrow their brows about the damage being done to the integrity of basic property transfers. So we will keep the pot boiling.

"The American system of public education is the greatest mechanism for social and economic mobility in the history of the world." I wish I had said that. Actually, it was my friend Tim. Tim is a conservative Republican. Let me clarify that. At various points in his life Tim has been a professional conservative Republican, with credentials that make Scott Walker look like an over-promoted Boy Scout. Among other things, Tim was the Chairman of California College Republicans, a member of the CA GOP State Executive Committee, and a GOP nominee for state Assembly. In other words, there is nothing liberal or Democratic about recognizing the fact that an assault on public education is an assault on equality.

I do not mean to minimize the extent of inequalities in American education that Jonathan Kozoll and Jennifer Hochschild have so ably documented. And Wisconsin is no different. Since 1993 the state has employed an insanely complicated system of "tiered" state and local funding that numerous analyses show has resulted in money being funneled toward wealthier districts and away from those most in need. The poorer districts in Wisconsin are already operating on a shoestring. But despite all its defects, it remains the case that in America, and specifically in Wisconsin, publicly funded education is a powerful equalizing force, almost the only one left.

Scott Walker's budget seeks to change all that. The budget that Walker unveiled on March 1st contains cuts to education that will devastate Wisconsin's traditionally fine system of public schools, including specific provisions that end state funding for Advanced Placement courses and "science, technology, engineering and mathematics programs," among many other things. There is a great deal to be said about those cuts and their likely consequences, but the cuts in state funding are actually not the most disturbing part of Walker's budget. What is even more disturbing is this: Walker's budget mandates a 5.5% cut in per-pupil local education spending, approximately $550 per pupil. This has absolutely nothing to do with balancing the state budget: it doesn't save the state a dime. This rule specifies that overall education spending must decline regardless of the wishes of the residents of a local district. No district will be permitted to maintain even its current level of property tax-based funding for education, let alone increase that tax to offset state cuts.

Again, this is a provision that does not save the state a dime (not to mention making a mockery of the idea of local control.) To mandate cuts in local spending on top of cuts in state spending is astonishing. Do the math (and thank your math teacher): cuts in state funding plus cuts in local funding equals the end of all those "special" programs. In poorer districts the effects will be even more extreme; here is an excellent analysis by Andre Reschovsky (LaFollete School of Public Affairs) of the distribution of economic effects across districts.

But never mind the poor districts for a moment. What's going to happen in the wealthier districts? I find it hard to believe that Wisconsin Republicans (let alone Democrats) will want to send their children to schools that offer no AP classes or advanced courses in math and science, not to mention drug education programs, language programs, and K-5 enrichment programs. And in fact, that's not likely to happen. Instead, what is likely to happen is a whole new level of inequality.

The first thing that is likely to happen is that families who can afford it will flee the public schools; Walker's budget is the best advertisement for Wisconsin private schools that could be imagined. One local private school in the Madison area reports double the number of inquiries compared with a year ago -- and that was before the budget was unveiled.

And there's another solution: privatize public education. That's what happened in Seattle. Years ago, confronted by deep cuts in education spending, local districts established private foundations. Alumni and current parents contribute money which is then spent in the district. One of the most successful is Roosevelt High School in Seattle: they boast the only full time drama program in the state, funded by private spending. Here's the web site for Roosevelt's private foundation. The list of current grants covers a range of items, including Chemistry textbooks. The school's principal is on the Board of Directors. Now take a look at the names on the Advisory Board: the name "Nordstrom" gives you some idea of the socioeconomic profile of the district. As for other districts that cannot sustain a private foundation? They'll just have to do without Chemistry textbooks. And Washington's shortage of funding for public education is nothing compared to the scenario that Governor Walker is unleashing on Wisconsin.



The budget that Governor Walker announced today cannot be described by any of the usual terms. This is a budget that is targeted like a guided missile, and its target could not be more clear: Governor Walker wants to destroy the state's system of publicly funded education and replace it with charter schools (teaching certification not required), private schools, and private funding.

This would be shocking anywhere -- in Wisconsin it is inconceivable. Let me tell you something about Wisconsin. We like to think we are not just another state. At the University of Wisconsin we talk a lot about "the Wisconsin Idea," the idea that we have a specific mission to serve the public of our state in the tradition of the land grant colleges. Every semester I have been here I have met at least one student who has told me that he or she is the first person in their family to go to college. Those students are the best thing about teaching at a public university. They are what public education is all about. They come from small towns in the northern part of the state, often from families that operate farms or small businesses in their communities. They leave here and they go on to become lawyers or scientists or teachers, or to start businesses of their own.

This is what the Tea Party's capture of the Republican Party has brought us. Right here in Wisconsin we are sounding the death knell for the single greatest mechanism of social and economic mobility that the world has ever known.

bench craft company reviews

New Company Promises to Give You a Pretend Facebook Girlfriend

Your relationship troubles are over with the help of Cloud Girlfriend, a new startup that creates virtual girlfriends for social media like Facebook.

Antique Gold Chain Worth $250000 Found Off Florida - AOL <b>News</b>

Bill Burt, a diver searching for the wreckage of the Spanish ship Nuestra Senora de Atocha, finds a 17th century chain worth $250000 on the ocean floor.

Small Business <b>News</b>: Creative Marketing Secrets

Marketing for your small business can be part art/part science. But however you would describe it, it is the key to both getting new customers and keeping the.