New Orleans

The Times post-mortem for the business readers continued with their usual theme of trying to manage protest by promoting social media (remember Egypt which they immediately had to retract with the “real” story?) as the “organizing tool” for change with the enthusiastic, over-the-top help of www.change.org, which is a great outfit, but seems to have had no boundaries in their personal congratulations on this one.

“But those customers may have found their voice, which has been amplified by social media. “People can now use tools like Change.org, Facebook and Twitter to rapidly organize and collectively act to influence the policies of even the largest companies,” said Ben Rattray, founder of Change.org, which allows consumers to start grass-roots campaigns using its online platform.

He pointed to Molly Katchpole, a 22-year-old woman from Washington who collected more than 300,000 signatures opposing the fee by using his company’s platform. And then there is the grass-roots effort that is calling for this coming Saturday to be “Bank Transfer Day,” where customers of big banks move their accounts to community banks and credit unions.

Mr. Rattray and other consumer advocates said the outcry was about much more than fees. “Bank of America’s new debit card fee was the last straw for many consumers who are tired of banks that got bailed out that are now turning around and hiking fees,” said Norma Garcia, manager of Consumer Union’s financial services program. “There was this phenomenon with banks and others confusing passivity with loyalty. And consumers are saying, ‘You can’t take us for granted anymore.’ ”

To be fair the “powers that be” want to make sure that protest continues to operate between the straight lines, so ample praise of course in the same piece by Tara Bernard (http://www.nytimes.com/2011/11/02/business/bank-of-america-drops-plan-for-debit-card-fee.html?scp=1&sq=social%20media%20and%20bank%20fees&st=cse) :

Lawmakers also openly criticized Bank of America’s planned fee. Days after the bank announced that it would charge the fee, President Obama said customers should not be “mistreated” in pursuit of profit, while Vice President Joseph R. Biden Jr. called the move “incredibly tone deaf.” And Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat, spoke out on the Senate floor, urging consumers to vote with their feet. He had sponsored the rule, known as the Durbin amendment, that limited the amount banks could charge for debit card transactions.

On Tuesday, he took to the floor again. “What we have at work here is a very fundamental principle of our economy, the free market economy, transparency,” he said. “So people know what they are being charged. So they have a choice.””

But, speaking of “tone deaf,” how is it possible not to mention the daily protests around the country and the world around banks and the admitted traction that Occupy has picked up in hitting Bank of America hard where previous large protests by community organization networks and unions had failed to gain traction?

I don’t mind being manipulated by the media anymore than the next person, but, gee, can’t they be a little more slick about it?  I know we are not supposed to believe that direct action, social movements, and mass protests make a difference as we parse the new tools that focus on a “theory of change,” but it takes people to use tools, and when the people are in motion, as they are now, let’s at least be clear about stating the obvious no matter how much credit some might want to claim or how much others might want to deny.

Atlanta

A story broke yesterday on the wire and NPR which might more clearly indicate that the big boys can actually hear the footprints coming up behind them even as they stick to stonefaced spinning.   These three banks got together on something called ClearXchange in order to try and retain some of their customers exhausted with the constant fee rip-offs and increasingly inventing other alternatives including hand-to-hand transfers through prepaid debit cards within families or utilization of the PayPal if folks are sophisticated.

Frankly, this is a Band-Aid the banks are applying when a tourniquet is called for.  They may keep a couple of their more inept and lazy customers, but folks are leaving this train station and demanding other tools that reflect modern technology, rather than ancient and pervasive greed.

The NPR report seemed to hint that Google was talking about moving into the space of money transfer utilizing phones and mobile devices.  Talking about “doing good” or something like that which used to be their motto, I could fall in love again!  I couldn’t track down the whole story on a Google search (sounds contradictory doesn’t it?) but I did find that it has been possible to move money between various Google accounts fairly seamlessly using something called Google Checkout for the last two or three years.  Obviously not widely recognized or publicized, but they could also be knocking on the right door.

In Citizen Wealth I argued that companies, even big bad boys like Wal-Mart and H&R Block could create business models with huge returns by delivering service that low-to-moderate income families need and demand.  Money transfer of remittances is precisely the service that will see the game change fundamentally in a short time.  The banks and credit unions are trying to hold on to old models that are predatory and not realizing that you can’t leave $22 billion in profits out there and not have other, easier and cheaper services eventually suck them dry.

It’s past time for remittance justice.

Thus far GMAC, Chase, and Bank of America have had to suspend foreclosures in the 23 states that require judicial review of foreclosures because a judge in one of them finally said he wasn’t satisfied with the signatures on the paperwork.  It has now become clear that there was “robo-signing” of huge numbers of documents and complete fabrication of many files and records connected to foreclosures.  Banks have argued over who had the correct paperwork and the right to foreclose.  The mystery behind the true ownership of properties between the banks and the investors in the securitization pools has finally shown all of these Wall Street emperors to be totally without clothes.  The irresponsible fabrications of the banks have not only collapsed the foreclosure and modification side of the market, but reports today indicate that the banks have also had to alert Fannie Mae and Freddie Mac

that properties foreclosed and turned over to them, might not have been in “good faith” and are now being withdrawn from the market even where there were completed sales contracts.  Attorney-Generals in non-judicial review states like Texas and others are now clamoring that they want the foreclosure suspensions extended to their states, since hey don’t like fraud either.

Wow!  Who is surprised when Treasury turns over a program of saving the chickens to the very foxes that prowl the properties, that it ends up such a fiasco?

Is this serious?  Yes indeed!  We may tell people in places like India or Peru that the Bill of Rights is the heart of the American declaration and constitution, but in truth it’s always been property rights and how to protect and extend them whether the argument was about land, chattel, or the crown.  After billions of dollars with of bailouts and almost singlehandedly crashing the economy, the banks may have finally even crossed a line that Congress and the President will not allow.  In fact Obama pocket vetoed a bill that was charging through Congress (passed Senate on a unanimous voice vote – who was asleep there?) that would have allowed the foreclosure process to be accelerated.

Stop the madness!  All of the records are bad.  Look at the sample case files from Phoenix compiled by Arizona Advocates and Actions (www.advocatesandactions.org) for a shocking look at total incompetence by the banks and the servicers.

Some things need to be done now:
There needs to be a complete and total national moratorium on all foreclosures.
The government NOT the banks needs to take over the foreclosure modification process immediately.
Foreclosures and the TARP modification money need to be moved to HUD and away from the banks buddies and kissing cousins at Treasury for anything to work.
A special commission or authority needs to be able to review whether foreclosures already executed where based on valid or fraudulent paperwork,and void any that were not based on correct signatures and notarizations.
We need to devise an insurance program for homeowners to protect their mortgages against downturns and foreclosure risks so that citizen wealth is preserved, rather than just devising an insurance program for banks.  [Professor Steve Soifer, University of Maryland School of Social Work and I have been working on this program together.]

The  banks have to finally be made to realize that property means something to the working stiff, not just the Wall Street swell, and our rights must be protected by our elected representatives as well.  This is out of hand, and heads will continue to roll unless we finally start protecting people and their fight to hold on to their homes.

New Orleans

This was a bet, like so many at the time, that prices would just keep going up, up, and up, and in this case the bet was on rising gas prices.  People got paid on the bet.  The fork tongued CEO of TXU, C. John Wilder, who played most for the fool, claiming he was going to build a pile of coal fired plants when he could hardly finance lunch, and negotiated with the equity folks out of the other side of his mouth to sell out, managed to clear over $200 million as we walked away.  The equity folks paid themselves more than $300+ million for doing the deal.  Huh?  And, in the meantime the Great Recession has strained a lot of their big buddy investors including Warren Buffet, the so-called Oracle of Omaha, a job which seems to define, not much competition.

Now they are asking such bondholders to allow them to write new paper (and they’ll probably try and charge for that too, but that’s the big whoops own problem) which would discount the value by 25-50% according to the story, without the private equity partners taking such a discount.  The big bills come due in 2014, and by the looks of it, there’s virtually no way they make the bucks they had counted on scoring.

I would like to meet the Texan alive who doesn’t think that they aren’t still going to be asked to help pay for this mess before it’s all said and done with some more rate hikes.  This is all a perfect example of why we call these “public” utilities, and why we should actually be going the other way and taking them fully public, since if “investor owned” means more mess like what KKR, TPG, Goldman, and the big banks like Chase, have brought us, this cannot be the right way to go.

Told you so then and I’m telling you so now.

Quepos           

            Partially, it was simply the “one that got away.”  It’s footprint was smaller with a base in Santa Barbara that was too far away from our groups and members to do much damage.  They had gotten into this predatory business and done very well, but were impervious to the impacts.  What did it matter to their normal customer base  in Santa Barbara after all?

            Direct discussions with Jackson & Hewitt, when I was with ACORN, when round-and-round, with J&H always claiming they would not “unilaterally disarm,” but would do so as H&R Block did so and others like Liberty Tax Services.  H&R Block was going to move from HSBC to its own bank.  I’m not sure if that happened or not.  Liberty was also a big customer for Santa Barbara. 

            The actions of OCC and other banking regulators are key here, because the withdrawal of Santa Barbara from this line of lending could finally push RALs out of the market, which would be huge.

            This was the Christmas present report from Bloomberg News:

Regulators ordered Santa Barbara Bank & Trust to stop providing the loan money, which covered about 75 percent of Jackson Hewitt’s financial products program, according to a regulatory filing by Jackson Hewitt.

Shares of the company, the No. 2 tax preparer behind H&R Block, dropped $1.34 to $4.50 on Thursday.

The Office of the Comptroller of the Currency told Santa Barbara Bank & Trust on Dec. 18 that the lender would not receive regulatory approval to originate the refund anticipation loans in 2010, according to a statement from the bank’s parent, the Pacific Capital Bancorp.

A bank spokesman, Tony Rossi, said that “the tax refund loan business is a sort of niche business that falls outside of what would be considered core banking operations.”

The bank signed a nonbinding letter of intent with a private equity firm to sell the tax business, the statement said.

Tax preparers are locked in a battle for customers, with Jackson Hewitt vowing this month to regain market share from H&R Block. Firms can attract clients with refund anticipation loans, in which customers who need cash immediately can get a short-term loan, typically lasting a few weeks, that is based on the expected amount of their tax refund.

Jackson Hewitt, with 6,600 outlets and almost three million clients, has been losing customers to H&R Block and Intuit, which makes TurboTax software. It suspended its dividend in March and has hired Goldman Sachs to explore “strategic alternatives,” language that typically means a company may be sold.

            The next target for economic justice reformers and citizen wealth advocates will need to be the unknown “private equity” company that will be tarnishing its reputation and brand – if such a concept is possible in private equity – by buying the Santa Barbara RALs business.  The other target may end up being whomever buys Jackson & Hewitt if Goldman Sachs is able to do the offload.

            You sow what you reap.

New Orleans

The Obama Administration’s doctrine around banks seems to be “speak softly and carry no stick.”  All of which is bizarre.  The U.S. Government bailed these boys out for billions, but now they act like they don’t know our name.

Note to U.S. Citizens: next time let’s just federalize the banks until the crisis is over for all of us and not just for them!

I have to believe that part of the problem here rests squarely with Treasury Secretary Timothy Geithner.  I don’t know how to say this subtly, but the big Wall Street banks obviously think Tim is their bitch.  They managed to take him for all we were worth when he was at the NY Federal Reserve, and now that he has the big job, they clearly believe he is their cousin and they are taking every pitch he throws with a smile.  It is hard for me to believe that they have any fear of anything that he might threaten, since they know full well that his career and future is inextricably tied to theirs.  They survive, and then he survives.  They go down; he goes down.

The President had all of the leverage in the world over these banks, but can’t get a deal.  Furthermore, if I have to read one more time that he is on the phone all of the time chitchatting and asking for advice from Chase CEO Jamie Dimon, I’m going to puke.  We don’t need the President of the United States on Dimon’s Facebook fan page, we need him taking a stick to these guys and getting them to do right.

Paul Krugman, the Nobel economist and Times columnist, makes the point that we aren’t learning from the financial crises that we need more regulation and laments the weak soup of the Frank bill for “reform,” and the fact that 27 Democrats ran from that along with all of the Republicans.  I didn’t read him say how strong the Administration has gone to the mat for the bill on either side of Congress.  I know they didn’t fight to include the Community Reinvestment Act under these new protections.  I wonder if they are pulling any weight here, especially since everything we read indicates that they are allowing a turf fight between the Federal Reserve, FDIC, and everyone else.

On Sportscenter or one of those shows that I’ve found myself watching in order to enjoy the Saints season, they razz some great players with a series they call “Come on!”  Seems like we should all be saying to the President and his piddling around with the banks:  “Come on!”

New Orleans

Though they do not mention the obvious 600 pound gorilla in the room, the specter of “ghost banks” becomes even more real since many are still hiding behind presumed, and non-existent values on their books for many of these mortgages.  Real relief and write downs for homeowners would reduce the asset ledgers dramatically.  Sooner, rather than later, President Obama is even going to see these facts emerge and realize that he’s out selling something that begins to seem like a scam.  Less modifications being made, fewer write downs of principals amounts on the loans in order to protect fragile, papier-mâché balance sheets, and homeowners bounced out on the street in the name of this farce, while new buyers scoop the homes up at 2/3 or more discounts once they are in a foreclosure sale.

We need a real program now!

Here are the guts of the indictment from Morgenson’s column:

“The loans were written in 2005 through 2007; data on their performance is provided to the trusts’ investors. Mortgages handled by five of the nation’s largest loan servicing companies — Bank of America, Chase Home Finance and Litton Loan Servicing among them — are contained in the Wells Fargo data.

Mr. White found that mortgage modifications peaked in February and have declined in all but one month since. While servicers modified 23,749 loans in these trusts in February, they changed only 19,041 in May and 18,179 in June. This is exactly when servicers were supposed to be responding to the government’s loan modification urgings.

Foreclosures, meanwhile, keep rising. In June, 281,560 were in process, slightly above the 277,847 in May. Last January, there were about 242,000 foreclosures in the pipeline among the Wells Fargo trusts.

“I was hoping we would see some impact in June of the government’s program,” Mr. White said. “Is ‘Home Affordable’ working? My short answer is no.”

To be sure, the government’s data differs from that which Mr. White analyzed, and its loan modification figures for the second quarter may look better as a result. The O.C.C. includes prime loans as well as subprime, for example, while the Wells Fargo data contains no prime loans.

Nevertheless, Mr. White has collected the figures since November 2008, and he said that in the months since, the performance of the 3.5 million mortgages that he analyzes tracked the O.C.C. data pretty closely.

But the most fascinating, and frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.

Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. Perhaps no other single figure shows how wildly the mortgage mania pumped up home prices. It also bodes poorly for the quality of the mortgage-related assets lurking in banks’ books.

Loss severities, like foreclosures, are rising. In November, losses averaged 56.1 percent of the original loan balance; in February, 63.3 percent.

Given losses like these, Mr. White said he was perplexed that lenders and their representatives were resisting reducing principal when they modify loans. His data shows how rare it is for lenders to reduce principal. In June, for example, 3,135 loans — just 17.2 percent of the total modified — involved write-downs of principal, interest or fees. The total loss from these write-downs was just $45 million in June.

And yet, the losses incurred in foreclosure sales involving loans in the securitization trusts were a staggering $4.59 billion in June. “There is 100 times as much money lost in foreclosure sales as there was in writing down balances in modifications,” Mr. White said. “That is not rational economic behavior.”