My absentee ballot hasn't arrived. I'm hearing from other expat friends that theirs haven't either. Son. Of. A. Bitch.

At least my riding is going Liberal. But seriously, man. Fuck.

Please don't hate me, all of you. Hate the postal service.

Rewrite

If you have to ask, the regression has taken seven days. From the blissful detachment of the internet deprived, it has taken me all but a week to forget that more important things in life do exist beyond those things that I read about on the news but cannot change and to get back to fuming over what the latest A1 New York Times article seems to imply:

The United States has long had a sterling credit report from ratings agencies because of the global preference for the dollar. But the latest deficit gridlock in Washington may have taken some of the luster off the reputation of the world’s largest economy and its currency.

On Monday, the ratings firm Standard & Poor’s lowered its outlook on the United States rating to negative. Although the agency did not actually lower its highest AAA rating on the country’s debt, it was the first time since the S.& P. started assigning outlooks in 1989 that the country was given an outlook that was something other than stable.

While it had not been completely unexpected, the S.& P. decision shifted the nation’s deficit debate out of the political arena — at least for the day — and thrust it on Wall Street. The action spooked investors, sending the three main stock indexes down more than 1 percent.

Treasury yields, or the interest rate that the country pays on its debt, spiked immediately after the announcement. Since the United States owes more than $9 trillion in outstanding debt to the public, even a one-tenth of a percent increase could potentially add billions to the deficit over time.

There are a number of things wrong with these introductory paragraphs--namely those last two. In fact, those last two paragraphs are so flawed, I've decided to just rewrite them. You will find my corrections below in italics:

While it had not been completely unexpected, the S.& P. decision shifted the nation’s deficit debate out of the political arena — at least for the day — and thrust it on Wall Street. That isn't necessarily to say that the rating agencies should to be seen as apolitical, or, most importantly, as qualified and competent to actually offer trustworthy ratings. I mean really, after spending the first half of the aughts telling everyone that U.S. mortgage-backed anything constituted prime investment-grade material, who on earth would pay any degree of credence to anything they say? I mean, you'd really have to be an idiot to put any faith in these companies. This is particularly true when it comes to their assessments of government, as opposed to corporate, debt where the rating agencies have access to just as much relevant information as the general public and so there really is no other way to see this but as a guess which is supported by, at best, nothing at all and, at worst, mindless ideology. The action spooked investors, sending the three main stock indexes down more than 1 percent. Though obviously it's difficult to say whether the stock market was spooked because they actually feared a U.S. government default (an opinion they'd evidently not held or realized they'd held until S.&P. published its own), higher interest rates resulting from market fears of U.S. government default, future austerity measures imposed by the government responding to assumed market fears of U.S. government default, or something else entirely, like higher oil prices or Japan or Portugal or whatever.

Treasury yields, or the interest rate that the country pays on its debt, spiked immediately after the announcement. And by "spike immediately," I mean rose slightly from one historic low to another historic low before actually finishing the day lower than it started. Which is to say, I am completely making shit up at this point, but nevermind, you probably won't read past the jump to the business section anyway and you definitely won't bother looking up the April 18th figures from online sources that are readily accessible. Since the United States owes more than $9 trillion in outstanding debt to the public, even a one-tenth of a percent increase could potentially add billions to the deficit over time. Paul Ryan Paul Ryan PAUL RYAN!

Get out yo ruler.

Now here is some science I can get behind thank you Cory Doctorow from BoingBoing.
Men's taint-size correlated with fertility

thoughts for the season of buying shit

"Un artiste est un scarabée qui trouve, dans les excréments mêmes de la société, les aliments nécessaires pour produire les œuvres qui fascinent et bouleversent ses semblables. L’artiste, tel un scarabée, se nourrit de la merde du monde pour lequel il œuvre, et de cette nourriture abjecte il parvient, parfois, à faire jaillir la beauté."

-wajdi mouawad

parfois!

Today I found the ugliest assortment of Christmas bulbs ever manufactured, hand-blown in India for Old Navy (really), "Targét," and some other unnamed temple to misguided consumption, overpaid marketers, and underpaid producers. I reflected on the bulbs (and for that matter, in them, but that is a different story), both because the holidays sometimes provide ample reason to remain in musty basements longer than needed, and because I found in these hideous artifacts some twisted commentary on our collective idea of value.

We are all taught a simple formula - value, or rather, price, is a relation between scarcity and demand. Demand may be elastic or inelastic, but this itself is a function of relative value. Inelastic demand comes from objects that satisfy basic needs, or that are priced so low that any modest increase would not impact the decision to purchase. In other words, it relates to the things we need the most, and the things that seem to impact our financial lives the least. But what does it mean to "need" something, and how is value affected when cost becomes meaningless?

There're many answers, both varied and valid, but this is the one I came across that struck me the most.

http://www.slate.com/id/2083452/

Because often, when price is meaningless, the need is abstract. In this case, meaning, whatever the Sotheby assessment, is a matter of narrative significance. The article undersells the enormously decadent saltshaker by implying it could be replaced by a four-dollar table set from Target - a short trip to the smelter could turn that irreplaceable, irreplicable piece of Western cultural history (a true monument to décadence) into several thousand dollars worth of bullion. Inevitably, though, we would say that it had lost "value." But what do we lament, the entropic loss of Cellini's virtuosic craftsmanship, or the gaping hole in our archeological record - the dissolution of an artifact into specious accounts and unremarkable specie. Both of course, but while the one has disappeared permanently, the figurative loss remains: a debit against the past that cannot be repaid.

And so, in the spirit of Christmas, we remember that it's "the thought that counts," but that thought is fear. This fear of being without the hard stuff, the bullion, the proof takes on a ritualistic quality come the holiday season. Who wants to be the one without a gift? The social capital invested in the wrapped whatever-it-is has far more value than the item itself. This is not the same as spontaneous giving. We all know which gifts we may have bought each other anyway, out of pure consideration (though the cynic would suggest that they all fall in the category of items with meaningless cost). We also know the season creates certain holes that must be filled, lest our stories and our cultural memory slip into "the" abyss. Otherwise, there may be empty spots on your Christmas tree.

That's why we buy cheap ornaments when the tree's about to go up, even if some poor Bangledeshi uttered an ancient curse on the miserable designer when she had committed another day to blowing his nauseating glass balls. The fear of losing meaning at this highly meaningful time compels some people, including my precious mother, to buy these absurdities even when quaint and perfectly lovely orbs sit below piles of other trucs (there is no real translation for "stuff").

That's why I took them to the garbage and smashed them individually. And go figure, there was nothing inside.

(sauf, peut-être, une histoire).

also, on spending time in the basement alone: http://www.youtube.com/watch?v=39UJuPogwiY

Let's blame the new generation

This is a response to the New Yorker article Sarah posted on Facebook, "Small Change," written about two months before this moronic cartoon character anti-child abuse campaign* started, but certainly applicable. It's an interesting piece, and all its points about the futility and idiocy of making a change to one's ephemeral online persona in order to support an activist cause are generally good. Unfortunately, however, it strikes me, like so many New Yorker pieces do, as thoroughly patronizing and extremely unself-aware. I know this is a literary piece and not a scientific study, but the points the author makes are based on comparison of "internet-age" activism and civil-rights era activism, and the things he's comparing are simply not comparable.

The author's point, like most people who complain about these things (including myself), is that the internet and social media are lowering the standards of activism so that someone can feel warm and fuzzy about helping abused children without actually having done jack shit - "slactivism" is the incredibly annoying neologism I've read a few times to describe this phenomenon. As anyone arguing about the activism (or lack thereof) of young people today must do, Gladwell brings up the rightly legendary sacrifices of the civil rights protestors, marchers, etc. And hey, maybe a little shame would get some people (again, including myself) off their asses and out to an actual protest. But, it's really not a good argument he's making.

Gladwell is essentially saying that we can compare the 500 million users of Facebook (and OK, not all of them are students) to the tens of thousands of student activists who did so much in the fight for civil rights. Can anyone spot the problem here? He's taken the top couple percent of the 50's and 60's student population in terms of activism and is claiming that since more people than live in the United States are not doing the same work that they did, the internet must be making us soft.

Now, by saying what I'm about to say, I am being equally non-evidence-based as Gladwell was, but I'm going to say it anyway. I would put my money on the internet and social media in fact increasing rates of activism among young people - if we look at the number of students today who are active comparably to the civil rights activists. The problem here isn't that it's so easy to do something meaningless - it's ALWAYS been easy to do something meaningless. The problem is that those meaningless things are so much more visible now. For every civil rights activist - and anti-civil rights activist - in the 50's and 60's, there were lots of people who didn't do anything - just like changing your profile picture doesn't do anything. The problem is that no one knew they weren't doing anything, because there wasn't a global platform for them to not do anything on!

Anyway. Sorry this is so badly written, I have been working non-stop for the past week and my brain is rather tired. Also, since Dave and Ben are both unlikely to have blog access for the next little while, I guess it's just me, Sarah, and Lion (and maybe Dan) on this one.

------------------------------------------------------------



* I would like to point out that my profile picture has been Milhouse since October 22, and that changing it from a cartoon character to something else to avoid the campaign would simply be giving in to the moronism.

A Wave of Cold Water

Much is being said around the blogosphere recently about this revitalizing nugget of Charlie Cook wisdom concerning wave elections:

The one sobering thought that veteran Republican consultants are already contemplating is that the larger the wave this year, the more difficult it will be to hold onto some of these seats in 2012 and 2014 in the House and 2016 in the Senate.

The bigger the wave, the weaker the class and the harder it will be to hold onto those seats. Democrats only have to look at their 2006 and 2008 classes for plenty of examples.

What this means is that we will likely have our third wave election in a row this year, and the bigger this one is, the more likely that there will be a countervailing wave in either 2012 or 2014.

I'll admit, when I first read the article, I was encouraged. On its face, it seems logical. If the Republicans make big gains this year, they will come in regions that are demographically trending blue, they look to be relying on depressed democratic turnout, and of course this crop of Republican candidates is particularly insane. It's somewhat cold comfort for those of us who had hoped for a continued legislative agenda that wasn't bogged down by fishing expeditions and threats of government shutdown, but this kind of analysis offers, dare I say it, hope. All we need to do is tough it out for two years, and we'll be okay again. The Republicans will stretch themselves too far, far beyond the actual geographic contours of their party, and a large correction will follow. At that point, assuming the economy doesn't crash groin-first into a cactus again, Obama keeps the presidency and gets back to work passing more desperately needed legislation.

Well, as much as I'd like to leave it there, that's not the way it crumbles, cookie-wise. As Matthew Yglesias points out, Republican gains this year are going to be coming out of a very large Democratic majority. The current breakdown is 255-177; just to reach parity, the Republicans need to pick up 40 or so seats. The Democrats are the ones that are already stretched way beyond their bounds, holding seats in all kinds of places they just never would have without George Bush's help. Many of these seats were picked up by the much-maligned Blue Dog democrats, most of which are now trapped in "who's the most conservative conservative" style battles with well-financed and typically crazy Tea Partiers. If there's ever a "natural" state to party control, these are "naturally" Republican areas, now matter how the demographics may slowly be trending. In other words, this election is the countervailing wave, and only if it's a wave of such a magnitude to tip into traditionally blue districts (a 70+ seat wave) could we reasonably expect another wave to come.*

Cook also has this to say:

Should the Senate end up with a 9-seat net gain for Republicans, or even eight, there will be immediate speculation about what Sens. Ben Nelson, D-Neb., and Joe Lieberman, I/D-Conn., do. Both are up for re-election in 2012 and neither is likely to be oblivious to the fact that Democrats have twice as many seats at risk in 2012 and 2014 as Republicans. Whether the GOP captures a Senate majority this year or not, the odds are pretty good that they will have one in either two or four years. That kind of exposure is enormously important, particularly given the rarefied circumstances in which Democrats won some of those seats in 2006 and 2008.

So even if there is a countervailing wave, and somehow the House returns to Democratic control, the GOP is still going to have two more decent shots to take the Senate, where the real action is. And it's the Senate which has caused progressives the most grief in the last two years, slowing up every confirmation or bill that so much as looked at them funny. Worse yet, Senate control may lie in the hands of Ben Nelson and Joe Lieberman, two crabby old "moderates", in the worst possible sense of the word.**

So, cold water. Of course, it's possible that the Republican Party somehow deviates from its current strategy (though unlikely, considering both how much success they've had with obstructionism and how many Tea Partiers will soon be in Congress), or that legislative procedural reform is passed (also unlikely, as the Democrats will be happy to pick up those tools once used against them), and then Obama is once again capable of passing large, ambitious, and vital legislation. It's much more probable, though, that the next 4-6 years are a blur of frivolous congressional investigations, hyperbolic showdowns, and maybe even an impeachment or two.

* And keep in mind that the natural breakdown of voting constituencies has always resulted in a lopsided congressional map towards the Republicans. Democratic voters tend to cluster in higher concentrations (urban areas) than Republican voters do, so even if the congressional vote is 50-50, you'll have a Republican majority due to the way the districts are laid out.

** I wrote about this way back, but these guys get away with murder under the guise of being "independent". Remember the Cornhusker Kickback? Or, say, anything Joe Lieberman has ever done? They possess enormous power simply because they've positioned themselves at the ideological fulcrum of the Senate.

Always Be Foreclosing

Maybe you've heard it called the "foreclosure mess." Or, from those who can somehow still affix the suffix with a straight face, maybe it was "foreclosure-gate." And then there are the few hand-wringing bloggers, finding both "mess" and "gate" too trivial, who warn that we are already confronting with all-to-familiar obliviousness the beginnings of a full-blown "Foreclosure Crisis." But I suspect that the majority of people are calling it nothing at all, having never heard of any of this.

So much the better, according to the editorial board of the Wall Street Journal. As they see things all this hysteria--the foreclosure moratorium, the fighting words from the politicians, the bloggers, always hysteria from the bloggers--is all over a legal glitch. A minor, albeit oft-repeated, technical error. Nothing to get all riled up and frothy about, Comrade.

Talk about a financial scandal. A consumer borrows money to buy a house, doesn't make the mortgage payments, and then loses the house in foreclosure—only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine? The affidavit was supposed to be signed by the nameless, faceless employee in the back office who reviewed the file, not the other nameless, faceless employee who sits in the front.

The result is the same, but politicians understand the pain that results when the anonymous paper pusher who kicks you out of your home is not the anonymous paper pusher who is supposed to kick you out of your home. Welcome to Washington's financial crisis of the week. (WSJ)

Totez. Leave it to the libs to make such a big deal out of something as trivial as property rights and contract law.

Here's the story:

Remember the housing crisis? Remember all of those complicated financial arrangements that bankers devised to make lending absurd sums of money to Guatemalan cleaning ladies a riskless proposition? The details don't really matter--only this general point: the dizzying tangle of unnecessary complexity that now connects a single mortgage payer to a single beneficiary of that payment is sufficiently labyrinthine to make even Jareth the Goblin King, codpiece and all, feel a little inferior.


Now with so many borrowers unable or otherwise unwilling to pay their mortgage debt, their homes (the collateral on those loans) are being seized by debt servicers (located either in the bank or outsourced to Knee-Breakers Corp.) and sold off, the proceeds going, minus fees, to investors. Hence, the Gregorian knot of mortgage payments is traced backwards to its source where it is unceremoniously cut.*

But now that process has stalled and most fingers initially pointed at "robo-signers." When a servicer forecloses upon a home, it must provide to the court (in states where foreclosures are passed through the court) a number of necessary documents--most notably, the actual mortgage note (the IOU)--along with a sworn affidavit that says something like, yes, it would seem that we actually have the right to take this person's house away.

But, alas, it was discovered that employees within a number of banks (GMAC, JP Morgan Chase, and Bank of America most notably) were processing these files at a rate of about a case per minute. That's a case examined and deemed to be in order, another foreclosure approved by the bank, every sixty seconds.

Now, here's the debate:

Is the problem simply that that the robo-pens are flying a little too quick for regulatory comfort, that the underpaid schlub in the front office was signing at the dotted line instead of the underpaid schlub working in the back? Is it, to paraphrase the Wall Street Journal editorial, that the servicers aren't certifying their right to foreclose on a property in exactly the proper way? Or is it that, in a number of cases, the servicers just don't have the right to foreclose, period?

Maybe, as many are suggesting, the servicers don't have all the necessary documentation. As the New York Times reported on October 2nd, one of the countries largest title insurers has suspended insuring sales on homes foreclosed by either JP Morgan Chase or GMAC until "the objectionable issues have been resolved." An explanation:

In every sale, a title insurance company insures that the title is free –and clear —that the prospective buyer is in fact buying a properly vetted house, with its title issues all in order. Title insurance companies stopped providing their service [to servicers trying to sell foreclosed-upon properties] because—of course—they didn’t want to expose themselves to the risk that the chain of title had been broken, and that the bank had illegally foreclosed on the previous owner. (The Big Picture)

In other words, these independent private insurers are refusing to sign-off on what the minute-men robots had. And while it's impossible to know exactly what those "objectionable issues" are (the author of the blurb above seems certain, but who knows?), they're obviously serious enough to raise questions over the legality of a given foreclosure.

Recall the housing boom. The business model of most mortgage originators (initial lenders) was originate-to-sell: lend money, sell the debt to a big bank on Wall Street, repeat. This process was, it goes without saying, under-regulated and the poor standards employed by the originators are evidenced by the last three years of financial history. Further up that food chain, mortgages notes (the IOUs) were often traded 18 separate times while claims on their payments were sliced and diced and repackaged down to the cent. Given all that, it certainly seems possible that some of those notes were misplaced--or at the very least, transferred from one party to the next incompletely or improperly. To avoid this, most banks began submitting these notes to a central registry, MERS. But it turns out that the folks at MERS sucked just as bad at their jobs as everyone else in the industry. A worrying statistic:

A 2008 study by the University of Iowa showed that mortgage servicers, most often than not, were neglectful in their storage of original documents that will support foreclosure. The study showed that out of the 1,700 cases of bankruptcy due to home foreclosures, 40 percent have missing original mortgage notes and other required documents. (Real Estate Pro Articles)

Now understand that within the under-regulated complex of industries called Modern Finance, the debt servicing sector stands out as one of its least regulated cogs. With little supervision, the incentives facing servicers are largely skewed towards foreclosure. An example: when homeowners stop making their payments, all existing financial arrangements pertaining to that debt enter a kind of legal limbo. Investors owning securities backed by the mortgages are entitled to their monthly payments and property taxes and insurance must be paid on the property after the first 90 days of delinquency. The servicer must cover these costs until the property is sold. Furthermore, most servicers are paid additional fixed fees to cover default and foreclosure expenses. With so many reasons to foreclose, it would thus appear that the assembly-lines lenders like Countrywide adopted during the housing boom are being re-assembled--in reverse.

And with the attempt to constantly churn out as many foreclosures as possible, like the attempt three years ago to constantly churn out as many mortgages as possible, comes the predictable fraud. Meet the new crisis, same as the old crisis:

Last year, the Department of Housing and Urban Development (HUD) received nearly 2,500 complaints about servicers, a 379 percent increase over 2007. In the first 10 months of 2009, consumers filed about 1,000 legal complaints against 10 of the largest servicers for illegal foreclosures and other predatory practices...A federal class-action suit against Ocwen asserts that it has hiked mortgage payments without fair notice, forced borrowers to buy unnecessary insurance, and intentionally processed payments late. (Mother Jones)

Unmentioned here (and on the editorial pages of the Wall Street Journal and on CNBC) is the wide-spread assertion that, in the absence of valid documentation, many servicers working on behalf of banks or bank-managed trusts simply filled in the blanks. As in, they would just make shit up. Exhibits 1, 2, and 3.

So here's the up-shot:

There has been a systemic breakdown in the national foreclosure process. What some are still trying to call a series of technical errors in actuality represents the untethering of an entire subsection of American Finance from the rule of law and property rights. Blatant fraud aside, many foreclosures seem be taking place based not on legal contract, but on the word of the servicer and the complacency and legal ignorance of the borrower. Shoddy paperwork becomes much more than just shoddy paper work when you are discussing the institution of property rights as it pertains to a 2.6 trillion dollar industry. State attorney generals and major investors are only waking up to that fact now. That is the crisis.

On one end of the broken chain of title sits a class-action law suit waiting to happen in every former homeowner who might have reason to believe that a single detail on their mortgage note was violated, plus a growing army of angry borrowers grinding the foreclosure process to a halt.

On the other end of the chain, sit the investors. Imagine this: back in '05 or '06' or '07, an investor buys a financial product offering a certain amount of cash, sliced off from a thousand different mortgage payments from a thousand different counties around the country. With the meltdown, most of those mortgage payments stopped coming. Now, as the investor waits for foreclosure to squeeze the last dollars out from a disappointing stream of payments, that investor learns that the trust that sold him the security never legally owned the underlying mortgage notes. Hell, maybe those notes were sold simultaneously to three separate banks! So now the investor, and every one of his/her counterparts, wants the principle investment back--right now and with interest too.

So what does the trustee say? We can't be entirely sure in all cases, but the blog Rortybomb gives the following real-world example of a contract between the original underwriting of a pool of mortgages (in this case Goldman Sachs) and the company that bought the pool to slice and dice for investors (in this case Deutsche Bank):

In connection with the transfer and assignment of each Mortgage Loan, the Depositor has delivered or caused to be delivered to the Trustee for the benefit of the Certificateholders the following documents or instruments with respect to each Mortgage Loan so assigned:

(i) the original Mortgage Note (except for up to 0.01% of the Mortgage Notes for which there is a lost note affidavit and the copy of the Mortgage Note) bearing all intervening endorsements showing a complete chain of endorsement from the originator to the last endorsee...In the event, with respect to any Mortgage Loan, that such original or copy of any document submitted for recordation to the appropriate public recording office is not so delivered to the Trustee within 180 days of the applicable Original Purchase Date as specified in the Purchase Agreement, the Trustee shall notify the Depositor and the Depositor shall take or cause to be taken such remedial actions under the Purchase Agreement as may be permitted to be taken thereunder, including without limitation, if applicable, the repurchase by the Responsible Party of such Mortgage Loan. (Rortybomb; emphasis his)

Get that? If any more than one in ten-thousand of the underlying mortgages notes is missing or improperly endorsed, the second bank can force the first to buy everything back. And the originator can't go back and fill in the blanks now, assuming it would be able to do so, because it had 180 days after the purchase date to do that. So all those banks with all those toxic assets sitting on their balance sheets? They might soon find themselves having to make bit more room.

This isn't solely a theoretical possibility. Just before writing this, I found this via Ezra Klein:

The Federal Reserve Bank of New York has joined a group of investors demanding that Bank of America buy back billions of dollars worth of mortgage securities that are plagued with shoddy documentation and lending standards, according to people familiar with the matter...If Bank of America refuses to comply, these investors could end up suing, a person familiar with the matter said.(Washington Post)

And never fear an insufficient number of reasons to feel fear, Felix Salmon has identified a related clusterfuck-in-the-making. This one involves investment banks potentially withholding material information from investors to whom they were selling these mortgage backed monstrosities. Which aside from not being a very gentlemanly thing to do constitutes insider trading and could serve as a solid basis for litigation--either from the SEC or any number of pissed-off investors. Or both. Oy.

With the sins of the mid-oughts potentially coming back to wreak havoc upon the balance sheets of the big banks, a number of people are predicting another full-fledged financial crisis. And this time around, it's hard to imagine any policy maker with the stomach for TARP II. For no particular reason though, I doubt things will get that apocalyptic. Maybe I'm just having a hard time imagining the big banks not finding a way to legally or politically slither out of another existential crisis. What I don't doubt is that with major financial interests opposing the banks on the so-called "buy-side," this problem isn't going away anytime soon. A month or two or three from now, if we're calling it anything, I'm guessing that we will no longer be calling this the Foreclosure Mess (or gate or crisis), but something more along the lines of Pissed-Off Investor-Gate or the There Aren't Enough Lawyers in Hell to Deal with All These Lawsuits Crisis.

But down at the ground level, I suspect that maybe a few high profile cases will bring down a particularly flagrant servicer or two--and with it, the entire foreclosure fraud issue as a publicly recognized scandal. Unless the poor paperwork was so bad as to actually invalidate existing debt (which is not going to happen and if it did would open a whole other can of worms), I have a hard time believing that the servicing and foreclosure system will suffer much more than a few aftershocks. Without regulation, the sector will remain in the shadows. And all those deadbeat defaulters that nobody cares about, without the indignation of a defrauded mutual fund or national government to back them up, will remain deadbeat defaulters, even when they aren't. In the meantime, let's all pray to Saint Elizabeth Warren.

*It is worth mentioning that in all the chatter about fraud and abuse, few are questioning the economic logic of foreclosing at all. Rortybomb has a great post on this.