The money non-lenders.... 

The message to bank executives today is simple: build your bank to be as big as possible – and then keep growing. If you manage to become big enough, you and your employees are not just too big to fail, but also too big to jail. (Simon Johnson)

There's simply no way I could have read this editorial in Bloomberg the other day and not posted it here. It's an unstinting condemnation of the White House, the Justice Dept,  AND congress, both sides of the aisle,  by the former special inspector general in charge of oversight of the Troubled Asset Relief Program (what most of us know as the Big Bank Bailout of 2008, yes, Mr. BUSH's little show, otherwise known as the financial coup d'etat that drained the US Treasury and stole the Common-wealth of the American people. I figure we can pretty much take his word when he says we've been hosed.


It's a long editorial but well worth reading, particularly considering the gathering warning signs of another market crash due soon. This guy's pissed, and so should we all be.

Bungled Bank Bailout Leaves Behind Righteous Anger

By Neil M. Barofsky - Jul 22, 2012

In the year since I stepped down as the special inspector general of the Troubled Asset Relief Program, the sadly predictable consequences of the government’s disparate treatment of Wall Street and Main Street have only become worse. As the banks amass size and power, Main Street continues to get pummeled.

Part of the current economic malaise can be traced directly to Treasury’s betrayal of its promise to use TARP to “preserve homeownership.” TheHome Affordable Modification Program has brought little meaningful improvement, with fewer than 800,000 ongoing permanent modifications as of March 31, 2012, a number that is growing at the glacial pace of just 12,000 per month.

In June 2011, Treasury appeared to take a tentative step toward holding the mortgage servicers accountable for the widespread misconduct in the program by pledging to withhold the incentive payments to three of the largest banks -- Wells Fargo (WFC) & Co., Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) -- until they came into compliance with HAMP’s rules.

Released Payments

Treasury couldn’t even keep this modest commitment. Although Wells Fargo had improved its performance and was awarded all of its withheld incentive payments, JPMorgan Chase and Bank of America continued to fail to meet the baseline standard. Nonetheless, in March 2012, as part of a broader settlement of the so-called robo-signing scandal, Treasury released all of the withheld payments, totaling more than $170 million. As a result, the government hasn’t held any servicer responsible for the widespread abuses of HAMP applicants, nor is it ever likely to do so.

In return for what was touted as a $25 billion payout, the banks received broad immunity from future civil cases arising out of their widespread use of forged, fraudulent or completely fabricated documents to foreclose on homeowners.

The headline number sounds impressive, yet the banks only had to cough up $1.5 billion to provide a paltry $2,000 to each borrower wrongfully foreclosed upon, a few billion dollars more in penalties to the states, and a few billion to provide for borrower refinancing. The remaining $17 billion, however, won’t involve payouts of money, but will be met in the form of the banks receiving “credits” for certain activities. This includes $7 billion that will be “earned” for routine tasks related to the housing crisis, such as bulldozing worthless houses, donating homes to charity, and agreeing not to pursue deficiency judgments against homeowners, whereby banks seek to force a homeowner to pay the difference between the balance of the loan at the time of foreclosure and what is recovered by the bank from a foreclosure sale. This sounds good, but it should be noted that these are all part of the normal course of business for the banks.

The remaining $10 billion in credits are supposed to be scraped together through principal reductions on “underwater” mortgages, but that doesn’t mean that the banks themselves will be taking $10 billion in losses. The settlement grants them partial credit for reducing the principal on loans that they service but don’t own, such as those contained in mortgage- backed securities. Worse still, they can earn additional “credits” toward the settlement through taxpayer-funded HAMP modifications. For example, if a servicer reduces $100,000 in principal for a mortgage through HAMP and receives a taxpayer incentive check for $40,000, it will still be able to claim $60,000 in credit toward meeting its obligations under the settlement.

Taxpayer Pays

As a result, the settlement will actually involve money flowing, once again, from taxpayers to the banks.

Another announcement that accompanied the settlement, made by President Barack Obama during his State of the Union address, was the creation of a working group under the Justice Department’s Financial Fraud Enforcement Task Force to investigate toxic mortgage practices. This arose out of the political fallout from the government’s failure to bring any significant criminal cases related to the financial crisis (other than my office’s case against Lee Farkas, the former chairman of the mortgage lender Taylor, Bean & Whitaker Mortgage Corp.). With the statute of limitations fast approaching for much of the conduct underlying the crisis, it seems increasingly unlikely that any criminal cases will be brought.

It is fair to ask why more haven’t been pursued. The president, Attorney General Eric Holder, and Treasury Secretary Timothy Geithner have all answered this question by suggesting that it was greed and bad judgment, not criminal conduct, that contributed to the crisis, and a number of high-profile investigations have been closed.

The answer more likely lies with the Justice Department’s lack of sophistication and the timidity that set in after it lost a high-profile case against two Bear Stearns Cos. hedge- fund executives in 2009. In any event, it seems unlikely that an 11th-hour task force will result in a proliferation of handcuffs on culpable bankers.

It is clear that the criminal-justice system has proved ill-equipped to address the financial crisis. For that, we needed effective regulatory reform. Instead, we got the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

My fear about the inadequacy of Dodd-Frank has only gotten worse over the past year. The top banks are 23 percent larger than they were before the crisis. They now hold more than $8.5 trillion in assets, the equivalent of 56 percent of gross domestic product, up from 43 percent just five years ago. The risk in our banking system is remarkably concentrated in these banks, which now control 52 percent of all industry assets, up from 17 percent four decades ago. There is broad recognition that Dodd-Frank hasn’t solved the problem it was meant to address -- the power and influence of banks deemed too big to fail.

More Rescues

More important, the financial markets continue to bet that the government will once again come to the big banks’ rescue. Creditors still give the largest banks more favorable terms than their smaller counterparts -- a direct subsidy to those that are already deemed too big to fail, and an incentive for others to try to join the club. Similarly, the major banks are given better credit ratings based on the assumption that they will be bailed out.

As a result, the market distortions that flow from the presumption of bailout may have gotten worse. By failing to alter this presumption, Dodd-Frank may have inadvertently sowed the seeds for the next financial crisis.

Although there have been calls to break up the biggest banks, the Financial Stability Oversight Council has still taken no significant action to limit their size or power, and has only just begun to make noises about bringing nonbank financial institutions (such as American International Group Inc.) under its jurisdiction. Even basic steps such as creating and implementing the new rules have lagged, with two-thirds of Dodd- Frank’s rulemaking deadlines blown by May 1, 2012. And in some instances, the regulators have taken a step backward.

For example, one of the best protections against future bailouts is to ensure that banks have thick capital cushions that can absorb potential losses. Although Dodd-Frank called for higher capital levels to be set by the regulators for the largest banks, they still haven’t formally done so. Worse, the Federal Reserve authorized 15 of the 19 largest bank holding companies to drain their capital through cash payouts in the form of dividends to their shareholders and share repurchases. These actions benefit the banks’ senior executives, who own large amounts of stock, and increase the risk to the taxpayer that the banks will once again have to be bailed out.

Diluted Rules

The banks have also been gaming and watering down the rules and regulations. One of the best examples is with respect to the Volcker rule, which is supposed to prohibit banks from making risky proprietary bets that could lead to large losses and eventual bailouts. The final version contained a number of carve-outs and exceptions that created large potential loopholes. For example, in April 2012, Bloomberg News reported that JPMorgan Chase had moved some of its soon-to-be banned trading operations overseas into its London-based Treasury unit, branding a multi-hundred-billion-dollar trading position in synthetic credit derivatives as a “hedge.”

Legitimate hedging was one of the hard-fought exemptions to the Volcker rule won by the banks, intended to permit them to minimize risk to the system by allowing them to offset specific risks from positions that may remain in their portfolios. But as the New York Times and Bloomberg reported, JPMorgan’s supposed Treasury “hedges” appeared profit-driven and were so large that they moved markets.

After the articles warned that JPMorgan’s positions were potentially destabilizing and were probably difficult to unwind without “causing a dislocation in the markets,” the bank’s chief executive officer, Jamie Dimon, claimed such concerns were little more than a “tempest in a teapot.”

JPMorgan recently disclosed that the trade had cost it at least $5.8 billion.

Hopefully the incident will help embolden regulators to better use Dodd-Frank’s tools to clamp down on risk taking. To date, however, the response has been more accommodating. As Geithner told Congress in March 2012 when confronted with arguments similar to those made by the banks: “We’re going to look at all the concerns expressed by these rules,” he said. “It is my view that we have the capacity to address those concerns.”

Words like these presumably led one of the Volcker rule’s authors, Senator Carl Levin, a Michigan Democrat, to warn that some at “Treasury are willing to weaken the law.” Indeed, words like Geithner’s, when accompanied by actions such as the Fed’s authorization of the largest banks to release capital, send what should be a clear message. We may be in danger of quickly returning to the pre-crisis status quo of inadequately capitalized banks that take outsized risks while being coddled by their over-accommodating regulators. A repeat of the financial crisis would soon be upon us.

TARP’s Losses

As the election approaches, Treasury’s triumphant declarations of mission accomplished for TARP have picked up steam, focusing largely on the reduction in expected losses. While it is good news that the program’s losses will be far less than originally anticipated, the numbers that Treasury has been publishing are incomplete. For example, Treasury continues to offset expected TARP losses by declaring the more than 500 million shares of stock that the New York Fed received in return for a pre-TARP bailout of AIG (AIG) as part of “Treasury’s investment.” Similarly, Treasury’s projections don’t include, or make reference to, the potentially enormous losses in future tax revenue from AIG, Citigroup Inc. (C), General Motors Co., and others that Treasury exempted through a change in Internal Revenue Service rules.

Treasury’s focus on TARP’s financial costs, of course, detracts from its significant nonfinancial costs, including the worsening of “too big to fail” and the lost opportunity to help struggling homeowners. But a separate cost -- the loss of many Americans’ faith in their government -- may still yield a major benefit.

The missteps by Treasury have produced a valuable byproduct: the widespread anger that may contain the only hope for meaningful reform. Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.

Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.

(Neil M. Barofsky served as the special inspector general in charge of oversight of the Troubled Asset Relief Program and is currently a senior fellow at New York University’s School of Law. This is an excerpt from his book, “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street,” which will be published July 24 by Free Press, an imprint of Simon & Schuster.)

Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles.

Today’s highlights: the editors on corporate-tax reform and on how to make air travel even safer; William D. Cohan on a merger gone very wrong; Albert R. Hunt on why this U.S. presidential campaign is tame; Simon Johnson on why HSBC should find a CEO who will break up the bank; Pankaj Mishra on the hidden history of state capitalism. 

summertime!

How appropriate that today,

lush field of ferns nearby

the official first day of summer,  should be marked by the arrival of Jersey- style heat and humidity here along the Maine coast. Only last week we were still switching on the forced air heat briefly each morning to take the chill off the tindo before heading outside, clad in pajamas and a sweatshirt, with coffee to greet the day and take a moment to marvel at the greening wonder that is Mother Nature coming alive once again. 

Last night Mimi, that intrepid adventuress, (a cat after my own heart) pulled one of her all nighters, (I call them Will’s Nights Out after an event in 2006), failing to return for supper, preferring to sleep rough in the jungle surrounding the “house”, and come home damp and exhausted in the early morn.  Minuit, our other cat, is black and older with a few grey hairs. She came to us with the name “Midnight”, a name far too hard sounding and sinister for such a sweet and affectionate feline, not to mention damn hard to say with the offhandedness required of a pet owner, so we renamed her a la francaise so both the kitties now sport frenchified monikers. So there’s Mimi (pronounced Meemee) and Minuit (Meenwee) and I can call them in by shouting anything resembling the sound eee – eee.  Beebee works nicely for both of them, they know what I mean and it’s efficient.

Anyway, Mimi decided to pull one of her all nighters out of doors. She knows I worry about her, out there in the jungle (I kid you not) that surrounds the tindo, where lurks an unknown (but heard creeping in the dark, dense, wet fern- smothered woods) collection of creatures: coyotes, deer, porcupines, wild turkeys (vicious fekkers), owls (one actually flew in the open window kamakazi style a couple of months ago, committing suicide right there at T’s feet!). You get the picture. So this morning, I’m outside on the step with my caffé and Minuit comes out to sit shiva with me for our departed Mimi and I call to Meems to Dammit come on in! A spritely Mimi comes prancing out of the woods and up the steps heading for her food bowl, where Minuit takes a quick, mean swipe at her (well done, Min!) as if to say How dare you make us all worry like that! Bad cat! Whereupon Mimi looks appropriately rebellious and crestfallen at the same time and scoots off to eat before shooting back outside, the envious Minuit in tow. They’re a pair, those two.

Speaking of pairs, Click on this picture to enlarge, I mean, really just awesome.

woman on top, Lunas sunning on our front door this morn

Of course the heat will be nothing compared to the hotbox that was Wilmington, NC last summer, and, being a Jersey girl (and a former DCer) myself, I’m looking forward to a few days of real summer languor under a ceiling fan, where there’s nothing for it but to sit at a laptop and type away, drinking my newly invented lemon fizzy (a quarter lemon squeezed in a tall glass, half a packet of stevia, plain selzer, then a few cubes of ice – wonderful! A shot of Souza tequila may be added once the sun is over the yardarm, which as everyone knows is a capricious measurement entirely dependent on perspective). 

The big news is the arrival last night of not one but TWO Luna moths  (Actias luna - see above photo), one male, one female, on the door trim 'neath the porch light we left on all night for the errant cat. (No errant cat = no moths? makes one wonder, it does.) It’s a BIG deal. AND it's the summer solstice no less. The Luna is a symbol of spiritual transformation, and we have TWO of them! T and I were so excited we were jumping up and down, gleeful at our good fortune, I (ooooo) wondering whose spirits they might be (Mom? Dad? Patti? Probably the gals as this is a ‘gal’ kind of place at the moment). Then we did some actual homework.

 Luna Moth waiting for lunasex partner four feet away

Luna moths (cool video here) are silk moths, the adults live for but one precious week, they mate, the female lays over 100 eggs during that week, under leaves she likes, especially white birch. They have no mouth, existing on the energy they stored as caterpillars last spring, wintering over in the snowbound woods, clinging to a leaf, waiting…. The female exudes a sexy smell (pheromones) around 10:30 at night, the guy (the lower moth in first photo)  likes this and comes a runnin, from up to, yes, twenty miles away – like a willing man to Chanel NO. 5. (Or so Marilyn believed and who's to say she was wrong?) 

Back on the island over several years a huge Luna moth would arrive at the Barn every summer, I was always sure it was my late sister somehow come to visit, to reassure, and it was a deeply treasured thing at which we all marveled every morning. One year it would be on the kitchen screen, another on the bathroom one over the old claw foot tub, but all of us felt it was somehow a blessing, an indulgence of some kind from a world we don’t notice enough, and sometimes foolishly profess we don’t believe in. Apparently the Luna is now endangered, so we feel all the more blessed to have them perched at the door today. I hope they stay awhile, all they ask is that you notice them, take a moment to wonder, be awed by their amazing beauty and delicacy. The fascia trim by the front door looks like the runway at JFK, so full of exotic varieties of moths is it this muggy morning. 

Honestly I’m so excited I can hardly contain myself.

It feels like a very good sign.

morning diamonds

I’ve been thinking about my last two and a half years of wandering, in search of spiritual enrichment and self-revelation, the Real ( real in spanish means royal, or authentic, depending on how used, odd, no?). And it's clear to me, (on the rare occasion, more habitual now, that I let go the Catholic school- bred whip of self-flagellation), that I’ve been, as several friends have pointed out, quite brave for an aging bird. Heading into unknown territories that opened me to new experience, following wonderful Anne’s advice to always Feel the fear and do it anyway. Bless you for that, A. It’s what she told me as I headed off to Spain on very short notice, a place I’d never been whose language I knew little of (and left knowing not much more I’m ashamed to say, but then my days were spent mostly speaking English there, a bad idea). It’s excellent advice, it will get you through almost anything, I’ve found. Just Feel the Fear and Do It Anyway. Really feel it, then say, screw it, I’m doin it anyway cause I want to. Cause I’m curious, and what is life if not an adventure? The willingness to take bigger risks, to believe in both instinct and the love of others, to discard fear, has opened me to myself and others in a new way, and I’m grateful and mustn’t forget to carry on believing the world has more good people in it than bad. Why only today I got an email from a high school classmate, male and very smart, who has started reading my novel and actually likes it! so far.... Made my day, a guy no less. I mean it is sort of a woman's story. Anyway, nice, huh?  People have been unfailingly kind and generous everywhere I’ve been. And now I think perhaps there really is no such thing as risk, there is only faith. As Sally Potter said, There is no NO, there is only YES. 

Years of Catholic school did teach me one valuable thing: confession may be discomfiting, but it is good for the soul. The words “I’m sorry” can be a blessed unburdening, and when they arise from a deep and stunning realization of what an ass you’ve been, that we’re all capable of cowardice and meanness toward those we love when we’re frightened, and we 'own' that as they say, a great weight is lifted, a new opening to life occurs.

                                                     And Luna moths arrive at your door.

field  nearby where we walk 

mothers day mementos, pot of forget me nots... sweet girls.

Break time!

hip kitties Occupying

Kick out the Jams! Finally got that sucker in the mail, to a small literary publisher out West somewhere. They publish Pulitzer writers, among others, no genre fiction at all, just Lit’rature, so I’m not all that hopeful, but hey, you don’t ask, you don’t get. I thought some feedback from them would be a good thing. It got there two days under the deadline, after three months of solid, 5 to 10 hours a day work at the desk, struggling with my ego and delving into the depths of my much abused and harried soul. Viggo Mortensen’s new publishing company is my next unwitting victim. So..

Let us pray...

My blessed daughter, the editor par excellence witout whom I could not have done it. A poet in her own right;  she read me something she dashed off late last night {after our three hour Sopranos marathon) in the style of Neruda that was simply gorgeous. Her recent 15 page essay delineating the motivation behind her choice of major, Global Violence Against Women,  moved me to tears with its eloquence and candor. When I read what she writes my usual response is, “I don’t know why I bother, dear.” She has a way of seeing the wrong word, putting it right, and WAALAA! Perfect. It’s invaluable in life to have someone who  really gets what your’re getting at.

THIS IS HOW HAPPY I FELT ON TUESDAY after hitting SEND SUBMISSION.

So, now it’s deflation time, after a happy evening of  celebration. The invitees included Johnny Walker Black, a nice Spanish Tempranillo, a bit of this and that, and Twistin round the Tindo singin, “I’m too sexy for my shirt, too sexy for my skirt, to sexy for the.. other.. things,” A good writer once told me then that the BEST moment isn’t the day they want to sign you, it’s the day you send a finished product OUT, and he was right.

So I’m a bit restless. Love life remains elusive, although a cute guy did ask me out this week. For the moment I've declined. Kind of stuck at home as daughter needs my car, hers died. New project? The sequel? (Need to via a mehico for that) . A short story? such a long list I have going. Nah, just chill a little, catch up on filing and clean up laptop trash. I’ve picked up a little pleasant part time work, which helps with survival, and have time to get in touch with friends again. Plan late summer adventures. Time for films and such, two worth noting are : A Dangerous Method (with Viggo, sigh), about Jung and Freud's relationship and others, Jung is pretty much of a hypocritical ass, but the film is gorgeous, extremely well done; and my fave of the month: One Day. A must see, it's great. Perfect, in fact. Both high quality films one rarely sees  ces jours.

The news? Blech! These days I rely on others to bring newsworthy things to my attention. I download scholarly analysesof the world econ crisis for fun instead. Don't even have television, haven't for most of the last two years. And too often I find myself glancing at headlines, thinking, blahblahblah, politics as usual, nothing new there, ever. Except, unbelievably, this –

"Barack Obama declared Mitt Romney’s allegation that he had unleashed a 'prairie fire of debt' to be a “cow pie of distortion,”   hahahahahahaha!

Quel wit! Now that’s calling a spade a spade. By all means gives us more of this frank talk and less Washington blather. 

(When I was in Spain the lovely people of its southern regions told me the same thing, via!)

I find myself drawn more to bizarre incidents that strike me as symptomatic of the state of the nation. It seems clear that the Zombie Revolution is upon us, the details somewhat goulish. To wit:

A guy in Hackensack, NJ, (where else?) was in his home in the process of stabbing himself multiple times when the police arrived and, in defiance of their order to put down the knife AND a dose of pepper spray, proceeded to disembowel himself in front of the cops and throw his entrails at them. He’s in critical condition in hospital. A commenter on Facebook, (in a quip that would do Dorothy Parker proud) noted: Just goes to show, it takes guts to stand up to the cops. (Shameless, these young'uns.)

A female Israeli activist threw herself between a young Palestinian boy and Border Cop trying to arrest him for, apparently, being Palestinian In Public on Jerusalem Day. Courageous young woman.

There’s been a spate of body part deliveries lately (hands, feet and the like), to the conservative members of congress, perhaps in an effort to “bring home” the true cost and dire effects of conservatives like Paul Ryan’s austerity agenda as they go about trying to crush what’s left of the poor and middle classes. Apparently torsos have been delivered elsewhere too. I can’t help but think these are all somehow representative of a national zeitgeist (not to say hunger, both carnal and spiritual) no one in DC is talking about.

If you’re still with me, let’s move on to Burgeoning Global Revolution Movements.

The Maple Spring! Be still my heart! This generation of social consciences are everywhere on the globe in the streets, having taken their cue from the Arab spring they are stunning in their commitment and ardor and courage. Amazingly well organized, well-informed, wireless savvy par excellence, artful, and just plain good. It’s all on the web if you’re not a devotee of Democracy Now, check out the Occupy site. Smart, savvy and heartfelt. Powerful combination. And more power to ‘em.

The NATO summit demonstrations in Chicago blew me away, thousands out there standing up for what’s right, for a fairer and more moral society. One of the most moving sights was the war vets’ speeches before throwing their medals in the street in the direction of the well-cordoned NATO meeting spot. Heartbreaking video, one can’t help but admire their courage. 

And what of the courageous Afghan granny Terminator? See here. Some cojones. You go, Gran.

If the more fortunate women in the world tuned into to the suffering of their global family of sisters and brothers, including in our own country, there would finally be hell to pay for all the corporate warlords. The Taliban’s got nothing on these guys.

I’ve made a stab at doing my part with my book. Plan on doing more though, we’ll all have to if things are gonna change for the better, find our courage, that is.

On occasion, a picture is worth about 400,000 words, voices anyway. This is what Democracy looked like in Quebec last week. Cowards and fools will be those on the losing side of this one. Absolutely mindblowing photo of collective courage.. Pulitzer anyone?