Coruscation

The danger, some investors and securitization lawyers say, is that these provisions might allow some financial companies that engaged in improper lending -- and also happen to be loan servicers -- to escape legal punishment.

For example, if the servicer of an abusive loan was also the initial lender, the bill would take that company off the hook for any future predatory lending suits. The safe harbor, therefore, could encourage servicers to modify their most poisonous loans, even if they are not yet near default, just to reduce their legal exposures.

And allowing servicers to void buyback requirements on loans they modify would eliminate any liability for breaches in representations and warranties on the loans they made to investors who subsequently bought into the pools.

"Main Street investors need to know that banks who received their tax money through government bailouts are going to profit again from the safe-harbor loan modification provisions at the expense of their mutual funds, 401(k)'s and pension investments," said Thomas C. Priore, chief executive of ICP Capital, an investment firm that specializes in credit markets.

Another perverse incentive that the bill would create involves the problem of conflicting interests among investors who own the first mortgage on a property and holders of the second liens. First liens of any kind take priority and are supposed to be paid off before secondary obligations are. But many of the companies servicing loans today own second liens on the same properties whose first mortgages are held by investors in securitizations.

By removing any liability associated with modifying the first mortgage, the banks that own the second liens can expose invest

FAIR GAME
A Reality Check on Mortgage Modification
By GRETCHEN MORGENSON
Published: April 26, 2009
A mortgage modification bill in Congress would create problems like conflicts of interests and the elimination of certain liabilities.

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The compulsion to upgrade (and seeking positional goods and services) is most glaring in cities -- particularly New York and Los Angeles -- which are filled with the upwardly mobile who relocate in search of upgraded opportunities surrounded by savvier, richer, trendier people. These transplants are constantly trading up not just their jobs but their group of friends. Everyone in New York and L.A. has had this experience: you make a plan for dinner with a buddy, which he cancels with a lame, last minute excuse ("I'm just exhausted"). What you both know is that he got a late-breaking better offer. He upgraded his dinner.

WEEK IN REVIEW
No, You Can't Get an Upgrade
By DAVID SEGAL
Published: April 26, 2009
America's mania for bigger and better meets the recession.

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Northside Piers in NY by Toll Brothers saw prices fall: reductions up to 25 percent in some cases, including this 11th-floor 3BR unit, marked down to $894,990 from an ask of over $1.2 million.

Also, the Curbed comments take down broker shilling:

Spring clearance of winter goods. Toll Bros. is apparently contributing to the crack-smoking epidemic as well.

What is offensive to most people is gimmickry and lies. Just be honest about what the square footage is, the name of the neighborhood, don't photoshop the pics to make the apartment look bigger, don't neglect to mention that the tax abatement expires in 4 years.

Stop playing games. Get a reliable assessment of the property's value and price it based on that, not on what you paid for it three years ago or how much you owe on it or how much the apartment you want to buy costs.

Be honest with your adjectives, a 4x6 foot kitchen will never be a "chef's kitchen" no matter how expensive the appliances are and an apartment facing north into a courtyard on the ground floor does not have natural light by virtue of having a window. If the apartment is four feet from the FDR or BQE don't say "convenient to transportation" if the nearest subway is four long blocks away.

Toll hasn't toll realized that when you price chop people become more afraid of buying? In san francisco, a huge developer millenium partners (mind you, the guys who developed lincoln square)cut prices. You know what they did? they offered some money back for those who already closed in the development. you know what that does, it instills confidence in prospective buyers. if you're going to cut prices, people will stick on the sidelines waiting and waiting unless you do something to insure their investment.

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That said, there are hurdles to this theoretical new normal. For one, remodelers who specialize in eco-friendly projects say many homeowners still tend to focus on green stuff rather than green performance. It's easier to imagine friends being impressed by the virtue of your recycled-glass bathroom tiles than by properly sealed air-conditioning ducts, even though more systemic projects have "orders of magnitude" more impact, says Paul Eldrenkamp, president of Byggmeister Inc., a builder in Newton, Mass. But since redefining what's normal is invariably a step-by-step process, maybe one small green decision can lead to another. Michael Anschel, founder of Otogawa-Anschel Design-Build in Minneapolis, helped create a variety of eco-oriented certification tools that give homeowners a checklist that ideally prods them to keep green-ifying with every home project. Benchmarks a consumer can track make for "better backyard-barbecue conversation," he suggests.

A tougher barrier may be that consumers simply dislike anything that feels like a step backward. "No one has ever said, 'My water pressure is too high' or 'I want one sink instead of two,' " says Michael Strong of Brothers Strong, contractors in Houston. Quitzau and Ropke suggest it would certainly take a long time for what they call our "bathroom dreams" to prize sustainability and efficiency over the notions they wrote about.

CONSUMED
Refurbishing Normal
By ROB WALKER
Published: April 19, 2009
How consumer expectations about the home have changed, and how they might change again.

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Calling bottom? When David Brooks writes about the Gaussian copula function, can a quanfinance resurgence be far behind?

Many writers have described elements of this intellectual hubris. Amar Bhidé has described the fallacy of diversification. Bankers thought that if they bundled slices of many assets into giant packages then they didn't have to perform due diligence on each one. In Wired, Felix Salmon described the false lure of the Gaussian copula function, the formula that gave finance whizzes the illusion that they could accurately calculate risks. Benoit Mandelbrot and Nassim Taleb have explained why extreme events are much more likely to disrupt financial markets than most bankers understood.

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Are in house counsels the miniballers of law ?

Many in-house attorneys that I have met lead nice little simple lives. They shop at discount outlets for clothes and drive Volvos or low end luxury cars. I wouldn't call that the life of a big dog. The simple truth is most in-house attorneys could not handle the demands of working at a peer firm. The ones that worked at peer firms, burned out easily and escaped to the havens of in-house counseldom. A low six figure salary and some stock options. Very pitiful indeed. You better pray that you don't fall victim to the economic tsunami as I see very limited future employment opportunities for you. As a tip, you better dip yourself in sour mustard so that the big rodents won't eat you first.

Look, lawyers at firms have one duty, bill as much as possible. Depending on the client needs, the perceived "sophistication" of the firm, and what the situation would require, they bill.

In house counsel have one job. Handle internal legal matters on day to day issues and when anything hard comes in, get external counsel. This is generally because of man-power issues, but also conflict of interest issues and just being able to put the onus on someone else so just in case they lose a case or whatever, its not skin off their back.

But internal counsel ALSO spends lot of time effectively being beancounters. Spin it how you want. When a sizeable portion of your job is dealing with bills, your jobs substance is limited.

You clearly do not work in-house. Yes the hours are nice, or at least nicer than BigLaw. It is not that I am less stressed; it is that I don't get paid overtime or a bonus for hours and thus have no motivation to stay here past 5.

But if you think there is no kow-towing to clients, you are mistaken. Everyone else here is a client. I get looked down upon by the "real business people" every hour. My calls go perpetually unreturned. I live at the whim and pull of sales managers and department heads who see me as nothing more than a potential wrench in the gears.

Here, creativity is a four-letter word. The wheel has already been invented, and my job is to stamp it onto everything. Outside Counsel can worry about "new directions" and "aggressive strategies." My job is to push the required papers around as efficiently and unobtrusively as possible. I have a form-everything and a checklist for every task. I yearn for the days of document review.

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Bernanke speaks:

1. How Did We Get Here? What caused our financial and economic system to break down to the extent it has?

2. What Is the Fed Doing to Address the Situation?

3. Does the Fed's Aggressive Response Risk Inflation Down the Road? Could the Fed's aggressive actions to stabilize the economy today lead to an inflation problem down the road?

4. Why Did the Fed and the Treasury Act to Prevent the Bankruptcy of Some Major Financial Firms? Why did the Fed and the Treasury act to prevent the bankruptcy of some major financial firms, such as the investment bank Bear Stearns and the insurance company American International Group, or AIG?

[ Via BigPictureBarry ]

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The most astonishing change concerns the ending of boys' names. In 1880, most boys' names ended in the letters E, N, D and S. In 1956, the chart of final letters looked pretty much the same, with more names ending in Y. Today's chart looks nothing like the charts of the past century. In 2006, a huge (and I mean huge) percentage of boys' names ended in the letter N. Or as Wattenberg put it, "Ladies and gentlemen, that is a baby-naming revolution."

Wattenberg observes a new formality sweeping nursery schools. Thirty years ago there would have been a lot of Nicks, Toms and Bills on the playground. Now they are Nicholas, Thomas and William. In 1898, the name Dewey had its moment (you should be able to figure out why). Today, antique-sounding names are in vogue: Hannah, Abigail, Madeline, Caleb and Oliver.

In the late 19th century, parents sometimes named their kids after prestigious jobs, like King, Lawyer, Author and Admiral. Now, children are more likely to bear the names of obsolete proletarian professions, Cooper, Carter, Tyler and Mason.

Wattenberg uses her blog to raise vital questions, such as should you give your child an unusual name that is Googleable, or a conventional one that is harder to track? But what's most striking is the sheer variability of the trends she describes.

Naming fashion doesn't just move a little. It swings back and forth. People who haven't spent a nanosecond thinking about the letter K get swept up in a social contagion and suddenly they've got a Keisha and a Kody. They may think they're making an individual statement, but in fact their choices are shaped by the networks around them.

Furthermore, if you just looked at names, you would conclude that American culture once had a definable core -- signified by all those Anglo names like Mary, Robert, John and William. But over the past few decades, that Anglo core is harder to find. In the world of niche naming, there is no clearly identifiable mainstream.

August 7, 2007
Op-Ed Columnist
Goodbye, George and John
By DAVID BROOKS

Names matter. People named Dennis and Denise are disproportionately likely to become dentists. People named Lawrence or Laurie are disproportionately likely to become lawyers. People named Louis are disproportionately likely to live in St. Louis, and people named Georgia are disproportionately likely to move to the state that served as home in "Gone With the Wind."

As Brett Pelham of State University of New York at Buffalo has shown in dozens of different ways, people are drawn to professions, places and people that remind them of themselves. A thing as seemingly superficial as a name can influence, even if slightly, the course of a whole life (which is why I've named my own children President, Laureate and Hedge Fund Manager).

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Federal prosecutors indicted 24 people in a massive mortgage fraud scheme that they said was led in part by a gang member from San Diego and netted participants $11 million in profits.

In an indictment unsealed yesterday, prosecutors laid out a wide-ranging racketeering conspiracy that ran from 2005 to 2008 and targeted homes across the county. Among the identified leaders was Darnell 'Stringer' Bell, a documented member of the Lincoln Park street gang.

Bell, 38, used his status in the gang to recruit other members for the scheme and "maintain discipline," according to the indictment.

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NY State's legislative leaders agreed last week to raise tens of millions of dollars in fees and impose taxes on individuals earning more than $200,000 and couples earning more than $300,000. Is this a middle class tax hike ?

The tax increases and elimination of the property tax rebate program prompted an outcry among local officials in Westchester, which has towns with some of the highest property tax rates in the country.

...

Eliminating the property tax rebate will save the state $1.5 billion, while new income tax brackets for the highest earners will bring in $4 billion. Because Westchester has a high concentration of families with high incomes, its residents will feel the impact of the income tax increases more than most, officials said.

"We expect to see a disproportionate impact on New Yorkers in the region, and in particular Westchester," said Stephen J. Acquario, executive director of the New York State Association of Counties.

From Albany, Taxes Raised Enough to Hurt
By ROSS GOLDBERG
Published: April 5, 2009
The new state budget hit particularly hard in Westchester, where many residents will find it more difficult to keep up with their sky-high property taxes.

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People leaving struggling big established firms and joining newer smaller firms, including foreign banks, or start-up companies.
Standard Schumpeterian renewal, or a consequence of the bailouts, tighter regulation and crackdown on compensation ?

In:
Aladdin Capital
Broadpoint
Pinetum Capital
BTIG
LaBranche Financial Services
Moelis & Company
Perella Weinberg
Evercore
Deutsche Bank
Credit Suisse

Out:
UBS
Goldman Sachs
Morgan Stanley
Citigroup
Bank of America and Merrill Lynch
Bear Stearns or a Lehman
JPMorgan Chase

BUSINESS
Crisis Altering Wall Street as Big Banks Lose Top Talent
By GRAHAM BOWLEY and LOUISE STORY
Published: April 12, 2009
With financial institutions facing federal limits brought on after the bailouts, veteran bankers are leaving to join start-ups and foreign companies.

'More evidence', demands Atrios

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Over $100,000 income is the biggest group. Where is the middle class.

"This is a statement that the system is broken, and that inaction will lead to ruin," said Russell Hancock, chief executive and president of Joint Venture. "It's time to start over."

The report also showed that the gap between the wealthiest and the poorest residents continued to grow. The percentage of households earning more than $100,000 a year rose to 42 percent in 2008, from 35 percent in 2002, while the number of households earning $35,000 or less rose to 20 percent, from 19 percent in the same period.

During that period, the number of immigrants to Silicon Valley grew 9 percent.

Joint Venture is among a number of California organizations calling for an overhaul of the state government to help solve California's financial problems. Last week, Joint Venture's 49-member board voted unanimously to support a convention to rewrite California's Constitution. The group and others are hoping to gain enough support to place a proposition on the ballot in June.

[ Via NYT ]

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Still, the couple, like many others, is vulnerable to falling behind again as home prices decline further. But Robert M. Lawless, a law professor at the University of Illinois who favors cram-downs, said success should not be viewed simply "in terms of dollars and cents."

-- Lawless law professor on cramdowns.

Explanation of the Dennis the dentist rule.

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Bruce Sterling / Beyond Beyond WiReD catches news you missed. Example.

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On the drive home, a state trooper on the Pennsylvania Turnpike pulled (former President) Truman over for careless driving. He had been blocking traffic in the left lane, cruising along at 55 miles per hour with a line of cars behind him.

OP-ED CONTRIBUTOR
Harry Truman, Leader of the Freeway
By MATTHEW ALGEO
Published: April 5, 2009
The former president found that even in retirement, he could not get from under the glare that shines on the White House.

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Justine Lai celebrates with the 44 American presidents, one at a time.

I am interested in humanizing and demythologizing the Presidents by addressing their public legacies and private lives. The presidency itself is a seemingly immortal and impenetrable institution; by inserting myself in its timeline, I attempt to locate something intimate and mortal. I use this intimacy to subvert authority, but it demands that I make myself vulnerable along with the Presidents.

And playfully !

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Tis the taxing season. A look back at some Tax postings before filing income tax:

Tax Attorney 0, Turbo Tax 4
Tax Attorney vs Federal tax and spend

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A hypothetical on the middle class tax cut, or tax hike ?

You favor eliminating the cap on earnings subject to the 12.4 percent Social Security tax, which now covers only the first $102,000. A Chicago police officer married to a Chicago public-school teacher, each with 20 years on the job, have a household income of $147,501, so you would take another $5,642 from them. Are they undertaxed? Are they rich?

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