Mortgage-gate

There is a slow-motion train wreck unfolding before us while attention is focused on whether Christine O’Donnell’s flirtation with Hare Krishna is interesting or not. Once again, it involves the nation’s cancerous house-building habits of recent years in which endless new suburbs were carved out of cornfields to stoke millions of American Dream lives and make gazillionaires in Wall Street. Like all addictions, it ended badly.

But the destruction may not be over by a long shot. Foreclosure mills have been churning out tens of thousands of ejections and repossessions because the sharpies who created the mess now want people out fast. (Forget trying to help people stay in these homes, which is official policy—that’s usually not convenient for the financial industry, which is still very much in charge.)

But it turns out that key aspects of the legal chain of ownership were ignored starting in the mid-00s, and now there is hell to pay. Huge banks like JPMorganChase and BOFA are shutting down their foreclosure actions, and despite the assurances that tut-tut, these are mere technicalities, there are now inklings of acknowledgment that the impact may be huge.

A NY Times article argued that this will be good for the housing market and even ‘lay the groundwork for recovery’ because it will boost prices by slowing down the foreclosure tsunami. But other, wiser heads in the econ-blog world have been saying for months now that what housing urgently needs is to hit bottom, to get to a true price level so that people wanting to enter the market will be assured that the value of the property won’t decline further.

Interruption of foreclosure where the household is hopelessly in the tank will not help this process, and meanwhile the banks and pension funds holding the rubbery mortgage security bonds cannot even liquidate the underlying properties. This could quickly aggravate the woozy state of bank solvency nationwide as the AFP piece today stated:

“It is bad for the finance market because the lenders can’t get their money for years. The losses for the banks will be much bigger.”

The latest round of revelations include the rather amazing fact that the foreclosure mills have been fabricating documents to be presented in court. That strikes us as, um, potentially quite annoying to, um, like, judges? Sounds as though any minimally alert homeowner about to get his sofa put on the sidewalk might have a good case for halting the process—imagine the ripple effect throughout the entire economy if it’s not clear who owns the country’s houses.

The Next Housing Crisis

Given the fetishistic obsession with legality when it comes to Mexican gardeners (‘What part of ILLEGAL don’t you understand?’), a curious lawlessness rules the land in the arena of mortgage foreclosures as detailed in numerous articles recently. Turns out that the same get-rich-quick ethic that led subprime mortgage mills to churn out phony paperwork in the fee-creation-securitization-blow-up-the-world-economy process is again operative in the judicial sphere as tens of thousands of insolvent households are reduced to penury and homelessness.

A spate of reports now shows that the mad rush to cash in on the housing bubble led, not surprisingly, to sloppy procedures, including the all-important transfer of title. Since mortgages were being bundled into huge portfolios (bonds) and sliced up for ease of resale to gullible bond buyers, little care was taken with the costly and time-consuming process of placing the ownership of the mortgaged houses into the trusts, the shell companies that were the formal vehicles for the bond creation. Since the juicy fees were elsewhere (in churning out new mortgages as fast as possible), huge numbers of disputed properties now have dubious and easily challenged title claims.

Any lay observer who played Monopoly as a kid would assume that a court-supervised foreclosure procedure would require clear title to the property being seized just as you can't charge rent for Park Place without the little cardboard deed in your hand. But apparently through collusion between lawyers for foreclosure mills and the courts, that step has been largely ignored—up to now. Some major firms, including GMAC (the finance arm of General Motors) and today JPMorganChase, have halted foreclosures proceedings in some places while the extremely serious issues raised are studied.

What better example could we ask for of the collapse of a founding principle of our own capitalist economy? Has it not been the Republican/Tea Party wing of our polity that for decades has placed private property at the center of its ideological crusade? For them, taxes are a curse because what’s mine is mine—now suddenly the courts are incapable of assuring homeowners that they won’t be evicted based on concocted, fraudulent documents.

My casual reading of these accounts is that despite the banks’ and lawyers’ claims of a mere ‘technical lapse’, the mess could be gigantic as a few million desperate homeowners realize they can contest the foreclosers’ legal standing to prosecute them.

It would be ironic if, after all the failed efforts by the Obama Administration to halt the foreclosure avalanche, the housing finance system itself provided the ammunition to paralyze it. And the implications for the still crippled banking system are dire: how many more banks will teeter on the edge if they cannot even seize property from the bankrupted households? And will Rick Santelli stage a new hissy-fit if a million busted homeowners suddenly cannot be thrown onto the streets?

Postscript: anyone interested in this farce really must watch a couple minutes of this videotaped deposition of one of GMAC’s ‘robot signers’, the guy whom they hired to attest to the accuracy of something like 10,000 foreclosure proceedings a month. I was expecting some sleazy character in a suit who thought he wouldn’t get caught, but not this: someone hire him quick as an extra in their next biker movie.

Obama’s silly search for ‘bipartisan’ Middle East

Like Obama’s courtship of ‘moderate’ Republicans in the early months of his term (while they openly declared war on him), his attempt to play reasonable centrist with Israelis and Palestinians has now collapsed as any sixth grader could have foreseen.

The Israelis, correctly seeing that Obama is a bag of wind, ignored him and restarted their 40-plus-year campaign of colonization of seized territory. (We could add ‘illegal’ colonization as if anyone cared—concern for legality only applies to Mexican immigrants.) They confidently predicted that he was cajoling them from a position of weakness and would back down. And so he did.

Expert commentators lay out the fairly simple details of Obama’s useless advisers and the historical background, no need to repeat the obvious. But I am curious about what goes on in our president’s mind—did he really think that all this situation needed was some serious talk over after-dinner cordials?

Obama is said to be intellectually curious and fascinated by the pull and tug of ideas. That makes for a good college professor, but it’s not a substitute for political leadership where you have to be capable of telling people to sit down and shut up. It continues to amaze me that someone with that much power could look and act so helpless. Imagine what George Bush would have done with hefty majorities in both houses of Congress, an historic electoral mandate and a huge mess left by the outgoing party.

I am slowly coming to the conclusion that Obama is presiding over exactly the kind of march into polarized nuttiness that we were hoping he would prevent and that his weakness is empowering the lunatic fringe in ways that a right-wing regime could not do better. First the Republicans grab his nose and twist it; now Netan-Yahoo does the same. If we’re going to have a right-wing program anyway, why not have the right-wingers in charge of it?

The assassination consensus

Here’s the choice shaping up for November: proud assassins on the one hand and . . . proud assassins on the other.

At first glance the candidacy of Ilario Pantano, 39, [right] for a seat in the House of Representatives from North Carolina appears rather distasteful. After all, here’s a guy who blasted two unarmed Afghans he deemed to be advancing toward him in a ‘suspicious manner’, utilizing 60 bullets to dissuade them. The military thought that was excessive and charged him with murder but finally bought his story about self-defense even though Pantano had put a sign next to the dead men saying ‘No Better Friend, No Worse Enemy’. Mother would be proud.

Not surprisingly, the case became a cause celebre among the right-wing kooks who never met a (white) triggerman they didn’t like. So Pantano capitalized on his notoreity, wrote a book using the title of his brave feat of derring-do against unarmed civilians and now may become a Republican member of Congress.

And who is his opponent? Seven-term Mike McIntyre of the Obama-led Democratic party, the same Obama who just asked a federal court to reject a petition from one Nassar al-Aulaqi requesting that the U.S. please desist from its plan to murder his son.

Al-Aulaqi innocently thought that in the Land of the Free and Home of the Brave one could get a court to decide whether the death penalty should be applied to a U.S. citizen (his son is one) rather than just have the head guy decide to lop your head off and send his goons to do it.

The individual is question is fair game as part of Obama’s ‘targeted killing’ program, a fancy name for legalizing death squads. Obama not only authorized this action, he challenged the court’s standing to hear the case on national security grounds.

I don’t know whether Al-Aulaqi’s son is a member of al-Qaeda, a dangerous bomb-thrower, a raving lunatic, or just a weird guy in a robe, and I don’t care. When the government decides it can off you without trial far from a battlefield and argues that you shouldn’t even be allowed into court to challenge the decision, we are taking yet another step toward a police state.

So Pantano doesn’t strike me as extreme at all, given the general consensus, just a bit more direct in his methods. We feel threatened, we see people we don’t trust, we murder them. What’s the problem? Pantano uses automatic weapons, Obama uses something more high-tech.

Meanwhile, my inbox is filling up with increasingly hysterical pleas from all sorts of do-gooder groups in greater or lesser thrall to the Democratic Party arguing that it is some sort of firewall of defense against total lunacy. When all sides agree that we should slaughter anything that moves because we can, so there, why should I favor one over the other?

No joy in ‘I told you so’

I am quite disturbed to say that my post last week on madman gubernatorial candidate Carl Palladino here in New York was far more prescient than I hoped. Today’s Daily News poll show this openly racist nut only 6 points behind Andrew Cuomo to preside over our fragile lives from Albany.

And this in liberal New York. Fox News must be doing a great job of providing the story line for the seething white masses whose desire to slap down the pols is clearly bubbling over.

Meanwhile, Obama had the nerve to call upon us to ‘wake up’ at his little too-little-too-late rally in Ohio. What have we been telling his stone-deaf team for a year?

Yves Smith nails it in her highly illuminating blog column, Naked Capitalism.

‘Past Presidents whose policies rankled special interests, such as Roosevelt, Johnson and Reagan, were tenacious and not ruffled by noise. Obama, by contrast, announces bold-sounding initiatives—and any real change will break eggs and alienate some parties—but then retreats. So he creates opponents yet fails to deliver for his allies’.

And just in case anyone thinks I am being unduly alarmist, here is one of the notorious videos Palladino circulated to his yuk-yuk buddies.

Democratic death-wish

As we approach the Democratic Donnybrook and prepare for the triumphant crowing of the nasty and mean-spirited, one yearns to unearth the reasons for the strange official immolation of the movement that coalesced behind Barack Obama two years ago. I was tempted to say ‘self-immolation’ since it is the familiar phrase, but that would be misleading. This is a social force that was dismantled from above, and that, it seems to me, is the phenomenon that compels our notice.

I was part of that movement in a way I had not been for decades and witnessed the enthusiasm awakened by the Obama campaign as it was acknowledged, thanked and dismissed once the deed was done. When people sought to find a way to throng into the ongoing fights—for things like financial system and health care reform, clean energy, peace-making and a dozen other pressing national and worldwide problems—I saw them acknowledged, thanked and dismissed. We had done our job, as far as the big boys were concerned, and now could go home and leave the rest to them.

How distinct is the right’s attitude toward its base of Christian fanatics! They, by contrast, were channeled into church-centered political groupings, their fires stoked by the panic du jour (pornography, abortion, sex ed, flag-burning, school prayer, gays, gay marriage, now Muslims), their operational capacity managed and developed by the many evangelical lobbying and mobilization entities like Focus on the Family and the Christian Coalition. While their Republican masters may have disliked aspects of the preacher caucus, they relied upon it and knew better than to call them “fucking retards”, even in private—a lesson lost upon political genius Rahm Emanuel who will now preside over one of the worst electoral drubbings in recent history.

I am reminded, as usual, of the Chilean experience in which the democratic opposition to Pinochet’s dictatorship swept into power in 1990 and immediately jettisoned its own popular base while sucking up to the wealthy elites that until recently had cheered the secret police as it murdered their members. Emblematic of this shift was Socialist president Ricardo Lagos’s all-out efforts to bring Pinochet back from house arrest in England on the phony grounds of ill health.

Why do they do this? Obama himself provided a clue with his remarks at a recent fund-raiser for rich Democrats in Connecticut. According to reports, Obama twitted people like me for always ‘seeing the glass half-empty’, for failing to recognize his administration’s achievements in health insurance reform and financial services regulations. Obama echoed in milder terms the outburst from his spokesman Gibbs who said we all needed a drug test for criticizing them and comparing Obama’s record to W’s.

Gibbs doesn’t think people like Christine O’Donnell, the Republican-Wiccan candidate for the U.S. Senate from Delaware, needs a drug test, nor does Rahm think John Boehner is a “fucking retard”. Those are the people to engage with, to sit down at the table and hash out legislative details, to listen to respectfully while they question your birth certificate, shout you down in joint sessions of Congress and openly defy your attempts—and even your right—to govern.

Obama’s team has a colonized mentality that his one-time troops do not share. We are not beholden to the Republican minority and do not bear their vicious insults gladly. At a healthy distance, we actually see them much more clearly than the experts promoted beyond their Peter Principle level of incompetence into 1600 Pennsylvania Avenue. We see their cynical opportunism, their willingness to junk the country’s economy, its constitutional traditions (and ‘values’) and its long-term viability for immediate gain. They are not all crude, racist demagogues, but many are, and the rest eagerly pander to them.

Obama, Gibbs and Rahm argue that they have done a great job, and if they are right, I have one question: why is the country turning against you? Isn’t part of being president and running the country the task of generating a convincing narrative and mobilizing support for your program?

Like traumatized wives of alcoholics, Obama’s team returns again and again to the illusion that this time, or next time at the latest, if I just try a little harder, offer a little more, cook the right dinner, find the right formula, my husband will approve and love me. Meanwhile, the defenseless children huddle in the background, fearing the next outburst and Daddy’s blows.

Not so fast

The crowing about the Tea Party lunatics winning nominations for major elective office is premature. I hope Kos and others are right that the victories of these frauds and wackos will deliver senate seats and governorships to the undeserving Democrats. But I would prefer not to hear so much triumphant optimism just yet.

The rise of a hominid like Carl Palladino to the candidacy of a major party for governor of New York would amuse in normal times. These are not. While the likelihood that a creepy perv like Palladino will get enough traction in coming weeks to pose a serious challenge to Andrew Cuomo is not great, there are enough disturbing tendencies afoot to give the sober pause.

Palladino has latched onto a message that is dangerously seductive—racism. He is utterly shameless about it and pounds away on it relentlessly without even trying to hide behind code words. He obviously struck a chord with many voters, which in itself is hardly remarkable—racism is very appealing. That’s why it is so common, and those of us who recognize its dangers know it must be identified quickly and its purveyors called out.

And that is where the establishment, led by the post-racial president, is making an historic error. Pretending that we are beyond all that and apparently terrified to even hint at the racist undertone of opposition obstructionism, Obama, his Democratic Party and most of the old-boy network think that Palladino-style demagoguery either is a useful cudgel to motivate their partisans or else will go away soon. They must look at Palladino’s ads like this one and think, Who can possible swallow that?

The answer is, A whole slew of unhappy, angry and resentful people unless they are provided a counter-narrative. I don’t hear one. When the racists attack an entire religion for its collective responsibility, where are the voices calling this what it is? Instead, Obama and our pathetic governor and Harry Reid and just about everyone else in the land pander to it by backpedaling on the bogus ‘Ground Zero Mosque’ issue. They pretend that if this building just moves down the street a few blocks, everyone will be happy.

But if the mosque really is offensive enough to be forced into hiding, then Muslims really are guilty, aren’t they? Sort of like how Jews shouldn’t come too near the Eucharist since, after all, they killed the Christ and make matzo bread with the blood of baptized infants. So why should anyone in Rochester or New Paltz reject Palladino’s attack line? After all, he is merely being more emphatic about what Obama and Reid concede is a reasonable view.

If there is not a determined, principled and unambiguous response, we will begin to see Palladino’s numbers—fueled by his limitless personal fortune—creep upward, and please don’t bother telling me that it’s impossible because the man is crazy. There is far too much historical precedent for entire societies flipping their collective lids to sustain that argument. It was not that long ago when we thought separate drinking fountains were normal, and yesterday’s Tea Baggers were up in arms over any suggestion that we should eliminate them.