Foreclosures just lower cause banks are too busy foreclosing

As anyone not working in economic leadership in Washington knows, the housing market has not stabilized and foreclosures, along with the pain they cause, remain unnecessarily high with no real signs of abatement. There remains no federal legal requirement for banks to renegotiate mortgages in a fair and quick (or any) manner, nor, sadly, will there be. As I've mentioned many times before, much of the mortgage pain could have been reduced using federal bailout money (or any of the more than $4 trillion of excess reserves, treasuries, and mortgage assets on the Fed's books) to forcibly reduce mortgages, rather than being given to sustain the banks that created them and are sitting on devalued assets (the homes) the loan risk for which, they continue to shove onto borrowers, that don't have access to 0-.25% money.

This troubling report came out yesterday from RealtyTrac. It basically states that the reason foreclosure figures are at 40 month lows, is because banks are just backed up with all their foreclosure activity, and the growing pace of delinquent mortgages that banks ultimately turn into foreclosure proceedings. In other words, they are just too busy screwing their borrowers to screw them more quickly.

"Nationwide, foreclosures completed (REOs) in the first quarter of 2011 took an average of 400 days from the initial default notice to the REO, up from 340 days in the first quarter of 2010 and more than double the average 151 days it took to foreclose in the first quarter of 2007.

The average timeframe from initial default notice to REO in New Jersey and New York was more than 900 days in the first quarter of 2011, more than three times the average timeline in the first quarter of 2007 for both states. The average foreclosure process in Florida took 619 days for foreclosures completed in the first quarter, up from 470 days in the first quarter of 2010 and nearly four times the average of 169 days it took in the first quarter of 2007. The average foreclosure process in California took 330 days for foreclosures completed in the first quarter, up from 262 days in the first quarter of 2010 and more than double the average of 134 days in took in the first quarter of 2007."

in practice, that means that people fighting foreclosures do so at greater legal costs drawn out over longer, more painful time periods. It also means banks are lying about their true conditions - but, that's nothing new. Even as investigations into mortgage practices, such as the one just announced by New York Attorney General, Eric Schneiderman, continue, the glacial pace of inspection compared to the intense devastation afflicting borrowers, provides little comfort, though hopefully some light at the end of a really arduous tunnel.

The Global Economy Burns, While its Leaders Fiddle

China is by no means a panacea of economic equality or perfect policy. It has a fast growing portion of billionaires and accounts for nearly a third of the world’s luxury goods consumption, while its per capita GDP ranks 125^th globally, and 2.8% of Chinese live below the poverty line (according to ‘official’ stats).

In contrast, the US has an official poverty rate of 14%, though think tanks like the Economic Policy Institute, consider this estimate low. Still, in its latest 5-year economic plan, the Chinese government at least gave lip service to how to deal with its growing inequality - by increasing certain wages by 40%, decreasing taxes on the poor and increasing them on the rich.

The US government has no such strategy, except in campaign speeches, as reflected by our anemic economy. Instead, we witness inane partisan prattling over the deficit and what mini-budget modifications are needed to bring it into line, most of which would disproportionately detract from the people that had the least to do with inflating it. (i.e. anyone not running a bank or hedge fund.)

Yet, like our own, inequality figures will worsen for China, which will ultimately destabilize its economy. The result of attracting that menacing, mercurial entity called ‘global capital’ is inflated growth figures predicated on bulging service sectors and population wealth gaps. The more capital sloshing around a country, the more destabilized it becomes, and the more its leaders pretend that’s not the case. 

Global speculative capital (the kind flowing through any major financial entity) is cunning, aggressive, greedy, shortsighted, and yes, cowardly (it doesn’t stick around when things get shaky.) If it were a person, it would smack down minions of grandmothers and infants to get to the door of a fiery building first, and then deny burn victims healthcare. It hates rules, which is why it likes promoting the notion of markets free of them.

Individual investors in silver are the latest casualties of speculative capital’s fickleness. People that invested their own money in silver were snuffed by the entities that borrowed or invested other people’s money to do the same. The COMEX found the anti-speculation religion it never sought during run-ups of commodities prices for items like food and fuel, and raised silver trading margins.  Though those hikes were the prevalent reason for silver’s price plummet, all they really did was give fast capital a chance to book profits and alter course.

Any investment is subject to fundamental forces, like supply and demand or how much US economic policy is devaluing its currency. But, it’s more subject to speculative whims, like who's in and out, by how much and how fast, whether its a fund or an entire nation.

The time-honored scheme in which controlling capital cons ordinary people (or governments) to join it before crashing or heading for the hills has devastated many individuals and economies. That ploy ran rampant during the crash of 1929. Banks put up their ‘own’ capital, which was really borrowed capital, to spur individuals to do the same with their savings. When banks pulled out, people were hosed thrice – through the loss of their savings, the decimation of their bank accounts that the powerhouses used for speculative purposes  -  under the guise of – serving their clients, and by a raging Depression that killed jobs and hopes.

Not much has changed. Matt Taibbi’s recent excoriation of Goldman Sachs reveals how gray the line is between screwing and screwing, one’s clients. Only now, when banks lose money, governments and central banks reward them with trillions of dollars of subsidies, using the excuse of aiding the population and avoiding larger catastrophe. They say things like - it takes time to increase employment, but we can waste no time in propping up our financial system. Or - pensions and teachers caused budget failures, but we’ll keep holding excess reserves, borne of debt, for banks in case they need it, and pay interest on it.

We are in an ongoing global economic depression. The signs are everywhere, even as they are lost on economic leaders that put private banks and short-term speculative capital before citizens and long-term working capital. Central banks use other people’s future money in the form of debt to do this. No central bank holds, and thus enables, more national debt than the Federal Reserve.

I hate to keep repeating this, but until someone of some ability to do anything gets it, I’m going to keep going. Last week, Fed chairman, Ben Bernanke, co-enabler with Treasury Secretary, Tim Geithner (among others) of our ballooning debt and mis-prioritized economic policy, urged Congress for another debt cap increase, or else.  The guy holds about  $2.5 trillion of debt on his books, being used for – nothing helpful to the general economy. A simple transfer would solve the debt cap problem in a nanosecond. Going a step further, a simple exchange of any of the $1.5 trillion of excess bank reserves receiving interest from the Fed, would do the same.  Instead of defaulting on, how about retiring, some debt? Thinking outside the box.

All around the world, the bodies and countries with the most power keep screwing people (some like IMF head, Dominique Strauss-Kahn, literally) and entire nations, while supporting their banking systems.  Last week, S&P announced it would downgrade Portugal if it didn’t play ball with the IMF and EU over its 4-year 78E billion-bailout program in return for hacking public programs.

Echoing our own Congressional goons spewing spending cuts in the face of inadequate revenues and for-bank-manufactured mega-debt, the S&P noted, “Two-thirds of the projected savings in [Portugal’s] 2012 budget will likely come from spending cuts.”

On a roll, the IMF also declared Italy needs ‘structural reform’, meaning labor market reform, less public ownership and more private investment to “unlock its growth potential.” (aka invite more speculative capital at its earliest convenience.)

Meanwhile, thousands of people are again striking in Greece, as the IMF and EU discuss more austerity measures, following the bank bailout that provoked public outrage a year ago, and a rating downgrade by S&P. The EU remains more concerned with investors regaining confidence in Greece than economic stability of its citizens. Then, there’s Ireland, for whom its last bailout didn’t dent its 14.5% unemployment rate, or fill in the gaping holes its banks dug.

In short, the global ‘remedy’ for depressed economies and debt-bloated banking sectors remains to do  – more of the same - and pretend  this will beget a different outcome. Yet, there is no way this strategy will result in more stable economies.  What we can expect instead is further widespread deterioration.

Can't blame economic policy on Osama

When William Shakespeare penned the words, “All the world’s a stage“ in, As you like it, it was centuries before tense photos of tense leaders would show tense concern over tense military operations.

What transpired around the killing, or killing announcement, of Osama bin Laden has been astounding. Whether you believe that bin Laden was “taken out” by this NAVY Seal operation, after nearly a decade, two wars, an over 81% increase in the military budget, and thousands of deaths, following the tragic loss of life on 9/11, or whether you believe he was dead and iced years ago and strategically used as a sign of unflappable leadership, is irrelevant. The surrounding uproar was theatre of the extravagant, no matter how you slice it.

But, theatre was invented for distraction, in culture and in politics. So while all the Osama drama was unfolding, the Treasury Department issued another plea for raising the debt ceiling, aka supporting its pro-bank policy. It went something like this:  We need to borrow more to pay social security obligations and not default on our debt, so other countries won’t question our ability to manage an economy  (as if that hasn’t already happened) and we won’t have to pay more to borrow more. If we don’t – you know what’ll happen – yep, another financial crisis.

The actual quote was: “The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.”

Though technically correct, omitting the fact that our leaders chose to float the financial system on such an unprecedented scale with no obvious Main Street benefits - hence the massive and quick debt increase - continues to show an aversion to reality.

Flashback five years. George W. Bush’s second Treasury Secretary, John Snow, pled the same thing. (He wasn’t unique, of course, Congress has acted at Treasury Secretary request to raise the debt ceiling 78 times since 1960, 49 times under Republican presidents, 29 times under Democrats.) Snow threatened he was being forced to cut payments to civil servants, among other things, but didn’t mention the real reason for the debt hike requirement, like the Iraq war or the tax cuts that stifled revenue collection. He had used similar arguments at the end of 2004, at a time when the debt ceiling was about half what it is today.

Raising debt ceilings is a bi-partisan institution. The show is always the same. The Treasury Secretary begs Congress. Congress debates than agrees. No one questions the real reasons we pursued the excess borrowing.

Since Snow made his plea, a number of things happened; a continued war, an extra war, a collapse of the financial system, a subsidization of the financial system, a decline in employment, home prices, average wages for most of the population, and an increase in foreclosures, executive bonuses, and personal bankruptcies.

Hitting the debt ceiling isn’t about spending gone haywire because the Social Security and Medicaid buckets are too small for the people that rely on these programs; it’s about the big-ticket items– like recently, bailouts.

Here are some terms and numbers, intentionally blurred by those that control them. Feel free to jump ahead:

The total US debt is a combination of two things: the public debt (the amount of securities the Treasury issues in order to borrow money from international or national investors) and intragovernmental holdings (the amount of borrowing done from funds like the Social Security trust fund.) Public debt is always higher.

As of April 30, 2011 – the public debt stood at $9.63 trillion dollars and intragovernmental debt at $4.6trillion (68% and 32% respectively of the total debt of $14.24 trillion vs. a debt ceiling, or cap, of $14.294 trillion.)

In April 2010, public debt was $8.41 trillion and intragovernmental was $4.48 trillion (65% and 35% respectively of the total debt.) In April 2009, public debt was $6.91 trillion and intragovernmental was $4.27 (62% and 38% of the total debt. The debt cap then, was $12.14 trillion.

In April 2008, just after federal subsidization of the sale (read: hostile takeover) of Bear Stearns to JPM Chase, and before the rest of the big bailout began, public debt was $5.22 trillion, intragovernmental was $4.08 trillion (56% and 44% of the total debt.) The debt cap then, was $9.815 trillion.

In April 2007, public debt was $4.97 trillion, intragovernmental was $3.78 trillion (57% and 43% of the total debt.) The debt cap was $8.965 trillion.

Basically, what all these numbers show is that; public debt has nearly doubled since before the big bailout, while intragovernmental debt has increased just 15%.  Some (like Geithner, Bernanke, etc.) may argue that this balloon in public debt was required to save our economy, though there’s little evidence of it doing anything but cheaply floating our financial system, not least because nearly half of the additional $4.4 trillion of public debt that was created is stashed at the Fed as either excess reserves, QE1, or QE2. 

Now that the Osama drama has died down a bit, and Congress returns to economic discourse with Tim Geithner over not whether, but by how much, the debt ceiling will be raised, the partisan bickering will resume its thunderous levels of inanity.

No one on the Hill will question the true why behind the debt – because it would lead back to that mammoth fuchsia elephant - we, the elected and appointed, screwed the country to support the power banks, and we’d do it again, in fact, we already are.

With respect to bin Laden, conflicting stories will go on forever – when did he die?, whose body is in the ocean?why didn’t Obama release a photo? But with respect to the economy, it’s super clear -  our debt ballooned and our economy deflated, to subsidize banks and their practices, period. We can’t blame that on Osama bin Laden.