America's Debt Crisis Worsens While Europe Progresses: "Black Swan"

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Europe Making More Progress On Debt Than US: Black Swan


Europe is ahead of the United States in its debt crisis in that it at least has identified the problem and is taking steps to correct it, "Black Swan" author Nassim Taleb told CNBC.

The two regions differ in that the US instead has chosen to bail out institutions, which Taleb, promoting his latest book "The Bed of Procrustes," said is immoral.

"At least we know that we need austerity there. People can't spend money they don't have," he said. "They're ahead of us in that they have identified the problem further. We over here still don't know that we're living on borrowed money and we're borrowing more."

Taleb spoke as global policy makers are working through a plan to help troubled countries such as Ireland, Portugal and Italy deal with their sovereign debt issues. The debt problems have caused wide swings in the stock market as investors try to get a handle on where the crisis is heading.

The US, meanwhile, is working on a far-reaching plan to cut U.S. deficits and slow the growth of long-term debt. The plan, announced earlier this week by a commission appointed by President Obama, gained crucial support from two key Republican senators on Thursday but remained short of votes needed to trigger congressional action.

Taleb rose to prominence with this 2007 book in which he cautioned against excessive risk-taking. The title arose from the discovery of black swans that were thought not to exist, and the philosophy espoused in the book cautions investors that such unpredicted events have the greatest consequences.

In his latest piece, he takes Federal Reserve Chairman Ben Bernanke to task for engineering the bailouts of institutions that got into trouble through excessive risk.

Whether the gamble turned out to work in the end is immaterial, Taleb said. The larger point is moral hazard—that Bernanke used the money of innocent taxpayers and investors to rescue those who jeopardized the system in the first place.

"He's trying to bail out those who made mistakes with retirees' money," Taleb said. "We have a subsidy...of those who made a mistake, taking money away from those who are innocent. To me that is immoral...it's beyond unwise.

He advocated austerity measures such as program cuts undertaken during the Ronald Reagan presidency, reasoning that Americans would willingly accept "the pill knowing it's the remedy."

As for those on Wall Street and in Washington who caused the financial crisis, he recommended stiff retribution.

"You need to go after people promoting risk management methods that don't work, that help hide risk and at the same time have no downside," Taleb said. "The best way to get rid of the problem is the captain goes down with the ship—every captain, every ship."


Sources: CNBC, MSNBC

Bank Of America Immediately Halts All U.S. Foreclosures To Help Consumers! 50 States!

Bank of America Halts All U.S. Foreclosures


Bank of America, the nation’s largest bank by assets, is placing a moratorium on all foreclosure proceedings and sales across the United States, according CNBC and a report on The Wall Street Journal’s Web site. The postponement takes effect Saturday.

Separately, PNC Financial Services Group Inc. is halting most foreclosures and evictions in 23 states for a month so it can review whether documents it submitted to courts complied with state laws.

An official at the Pittsburgh-based bank confirmed the PNC decision, which was reported earlier by the New York Times. The official requested anonymity because the decision hasn't been publicly announced.

The moves come amid mounting political pressure on big U.S. banks to examine foreclosure-documentation problems. Bank of America is the first financial institution to stop all foreclosure actions amid revelations that the banking industry had used "robo-signers," people who sign hundreds of documents a day without reviewing their contents, when foreclosing on homes, the Journal said.

In a statement released Friday, Bank of America said it will stop foreclosure sales until “our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.”

PNC becomes the fourth major U.S. lender to halt some foreclosures amid evidence that mortgage company employees or their lawyers signed documents in foreclosure cases without verifying the information in them.







Bank Of America Gets Friday Deadline To Halt Foreclosures In N.C.

N.C. Attorney General Roy Cooper is giving Bank of America until Friday to halt foreclosure proceedings in the state amid concerns the Charlotte bank and other lenders haven't properly reviewed documents.

In a letter sent to the bank, Cooper questioned why Bank of America voluntarily suspended foreclosures in 23 states that involve a judicial process but not in its home state. North Carolina requires a "quasi-judicial" process in which clerks of court frequently review affidavits submitted by banks.

"If Bank of America has halted foreclosure proceedings in other states due to flaws in its affidavit process, we do not understand why Bank of America should routinely continue with foreclosures with the same flaws in North Carolina," Cooper's office wrote.

The attorney general wants the bank's foreclosures suspended until it shows its processes are legal. Bank of America said it's responding to officials' concerns.

"Our initial assessment findings show the factual loan information underlying our foreclosures is accurate," spokesman Dan Frahm said, adding the bank continues its "exhaustive efforts to assist our customers who have been unable to make their mortgage payments."

The statement did not address how Bank of America would respond to the Friday deadline set by Cooper.

Cooper has asked 13 other large mortgage servicers to also halt foreclosures in the state until they prove compliance. Those lenders have until Oct. 12 to respond to the attorney general's questions.

North Carolina is also seeking more information about practices at Ally Financial, which has halted foreclosure-related evictions in North Carolina and 22 other states.

In an interview, Cooper said lenders could be breaking an N.C. law requiring a good-faith effort to work out loan modifications if they're improperly handling foreclosure paperwork. One of his main concerns is that homeowners get a "fair shot" at loan modifications, he said.

The attorney general has broad powers to investigate unfair and deceptive business practices, including assessing civil penalties. Cooper said he didn't want to discuss possible penalties until he has heard back from the lenders.

"We are looking to work with the lenders to make sure they get it right," he said.

Among the lenders, Wells Fargo has said its procedures are appropriate and that it doesn't plan to halt foreclosures. BB&T and HSBC also said their processes comply with the law. Citigroup said it doesn't believe a suspension is necessary because it has no reason to believe its employees haven't been following procedures. JPMorgan and Ally have said they are reviewing affidavits and will fix any problems.

SunTrust said it's reviewing the attorney general's letter, while MetLife said it intends to cooperate. OneWest declined comment. Others didn't respond or couldn't be reached.

The attorney general's move comes after Bank of America, Ally and JPMorgan Chase stopped some foreclosure-related actions in about half of the country after concerns that employees and outside lawyers signed documents without verifying information. JPMorgan's moratorium includes North Carolina.

Attorneys general in other states and members of Congress have also called for foreclosure suspensions as well as investigations of lenders' procedures. On Wednesday, Sen. Richard Shelby, R-Ala., called on bank regulators to review the foreclosure activities at Bank of America, JPMorgan and Ally.

In some cases, in a process nicknamed "robosigning," bank employees have said they have rapidly signed documents, raising questions about whether they are properly verifying information about homes that are being foreclosed upon. In a deposition obtained by the N.C. attorney general, a Bank of America employee in Texas testified that she would sign as many as 8,000 documents in a month, often in batches.

In another case, a Wells Fargo supervisor based in Fort Mill testified to signing 50 to 150 documents per day. A Wells spokesman noted a judge reviewed the bank's procedures and dismissed the borrower's case, confirming the foreclosure as valid.

Although foreclosures are traumatic for homeowners and damaging to neighborhoods, analysts say the selling off of these homes to financially stable buyers is an important step in a much-needed recovery for the housing market. "If you freeze foreclosures, the overhang in housing gets worse," said Virginia-based banking consultant Bert Ely. "The market isn't clearing."

Cooper said he hopes lenders can work quickly through the process of verifying their practices.

"We don't want to stop foreclosures that are legitimate and need to happen," he said.

"We want to make sure that homeowners are getting a fair shot at keeping their homes and the process has been done legally."










New Foreclosure Mess Shows Need For Reform In North Carolina

For many North Carolina homeowners, losing their homes to foreclosure was devastating. It is beyond outrageous that many banks were so cavalier with the process that employees didn't even bother to read or verify the information in foreclosure documents.

It is even more dismaying to us that one or both of Charlotte's big banks may be among the culprits in this travesty of faulty work known as "robo-signing."

Bank of America has halted foreclosures while it investigates and straightens out faulty paperwork. It's delaying foreclosures in 23 states including South Carolina. Over the weekend, questions arose about Wells Fargo's foreclosure documents. Wells said it doesn't plan to delay foreclosures because it's confident its foreclosures documents are accurate.

We're not so confident. N.C. Attorney General Roy Cooper is right to ask lenders to suspend foreclosures in this state until they can show their process conforms with the law. Given how badly this state was hit with foreclosures, banks involved in lending to North Carolinians should be probing robo-signing practices.

Nationwide, Ally Financial's GMAC Mortgage unit and JPMorgan Chase have halted tens of thousands of foreclosures. Ally stopped evictions here and in 22 other states. Robo-signing is so prevalent more banks are expected to follow suit.

What are those practices? In some cases, bank employees admit they signed foreclosure papers without reading them or determining if crucial information - such as how much borrowers still owed on the property - is accurate. Sometimes documents were notarized illegally with indications that the notary did not actually witness the signing of papers.

These practices are unacceptable. Some appear to be illegal. The N.C. attorney general's office notified Ally last week that using unverified affidavits could constitute fraud. Cooper is right when he says that such practices could mean that "some N.C. homeowners may not be getting a good-faith shot at loan modifications."

This mess is exasperating. The reckless lending practices of financial institutions helped cause the foreclosure tsunami that swept over the country. That damage has been so hard to repair in part because many have been tight-fisted with money they could have loaned consumers and small businesses. Many lenders have been reluctant to modify mortgages, instead moving much too swiftly on foreclosure.

Some of that rush resulted in faulty paperwork that will be costly to fix. Courts may impose sanctions on lenders or force banks to pay borrowers' legal costs in these cases. Judges may even dismiss the foreclosures, barring lenders from refiling and awarding the home to the borrower.

These lenders deserve to be penalized if they failed to meet legal requirements before evicting defaulting borrowers from their homes. Consumers, who often also were losing their financial stability, deserved that consideration.

Belatedly, many lenders will now have to meet those requirements. Investigations by attorneys generals in several states and a probe by federal regulators are forcing them to do so. It did not have to come to this. But it is an apt reminder of why reforms and better oversight of financial institutions are so badly needed.


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Sources: BOFA, CNBC, McClatchy Newspapers, MSNBC, Telegraph.co.uk, Wikipedia, WRAL, Google Maps

Unemployment Rate For Sept. 2010 Remains At 9.6! Hurts Democrats

Will The Job Numbers Affect The Election?


The new national unemployment rate released this morning held steady at 9.6 percent, marking the final time this economic data point comes out before the November elections. But voters’ perceptions of the economy were likely determined months ago, according to political scientists and economists, and this latest number should have little effect on the outcome of the races. “It’s way too late to change the public’s very pessimistic view of the economy,” says Thomas E. Mann, a senior fellow at the Brookings Institution.

Although the midterm congressional elections have dominated news headlines during the past few weeks, Americans remain focused on the state of the economy, according to the latest poll from the Pew Research Center for the People & the Press. Roughly 28 percent of the 1,002 people surveyed paid close attention to economic news, compared to just 12 percent of respondents who said they followed congressional races.

And the economy remains the key issue in the fall campaign, according to the latest NEWSWEEK poll.

This new unemployment number re-enforces voters’ dismal view of the economy, Mann says. Roughly 14.8 million people remain unemployed, with jobless rate virtually unchanged for all major demographic groups, and the number of discouraged workers has risen to 1.2 million, up by roughly 500,000 from one year ago, according to the labor department data.

Historically, a weak economy has hurt the political fortunes of incumbent candidates. It’s hard to imagine voters in the state of Nevada, for instance, being as receptive to the advances of GOP Senate nominee Sharron Angle if the unemployment rate were lower than its current 14.4 percent. President George H.W. Bush was tripped up by a bad economy when he reneged on a campaign promise to not raise taxes, and Jimmy Carter’s presidency, which lasted for one term, was similarly hurt by a recession and a spike in oil prices.

The latest unemployment numbers won’t do anything to counteract voters’ impression that President Obama is not doing enough to tackle the economy. Now that the president has been in office for close to two years, the sputtering recovery and lack of economic growth and substantial job creation inevitably hangs on him. “He went for health care over jobs. It turns out the sequencing was wrong,” says Sharyn O’Halloran, a political economist at Columbia University.

The weak economy also has disproportionately hurt the blue-collar workers nicknamed “lunch-pail Democrats,” who can easily swing toward Republicans if they’re dissatisfied. The unemployment rate for men now stands at 9.8 percent; the gap between the unemployment rate for men versus women remains at 9.8 percent versus 8 percent, continuing the trend of this economic downturn being a “mancession.”

The only way Democrats won’t suffer losses in the midterms is if the economy makes a dramatic comeback, and that seems unlikely over the next few weeks. All the party can do now is focus on long-term economic growth—not just the soon-to-expire Bush tax cuts, O’Halloran says, but investments in infrastructure that hopefully can boost productivity and create jobs eventually.


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Sources: CBS News, CNBC, Newsweek, Pew Research, Google Maps

Obama's Failure To Feel Voters' Pain Could Backfire In Nov. 2010

Obama, Empathy And The Midterms


MY homework for an hour long interview with President Obama last week began with reviews of his earlier speeches and interviews, and conversations with economists and political operatives. It ended around a dinner table.

That’s where, over salad and swordfish, former aides to another Democratic president, Bill Clinton, explored principal questions hanging over the coming midterm elections.

How can Mr. Obama do better at defending his record and his party’s candidates from the wrath of an unhappy electorate? Why doesn’t he receive more credit for winning passage of expanded health care coverage, new financial regulations and an economic stimulus package that many independent economists say helped end the Great Recession? Why can’t he get his message out?

Republicans argue that it’s because Mr. Obama has expanded the size of government and swelled federal deficits, with little to show for it, in the face of public resistance. But Democrats, who share the president’s philosophy, look for other explanations.

The former Clinton aides, like many pundits, turned to Mr. Obama’s cool, cerebral public style. Emotional connection was an aspect of leadership at which Mr. Clinton, for better or worse, excelled. If only Mr. Obama could more effectively demonstrate empathy, they argued, he might be able to convince the supporters he thrilled in 2008 that he’s still on their side.

That observation has gained wide acceptance in Washington. Mr. Obama may have played like a rock star in the campaign arenas of 2008, according to this view, but he displays a Spock-like emotional aridity in more intimate settings. In reality, however, a look back at previous midterm elections, especially during economic weakness, suggests that dollars and cents matter far more than hugs or lip-biting.

It’s not that the Obama administration isn’t striving to touch economically squeezed voters in more direct and personal ways. Mr. Obama risked criticism for breaching presidential decorum by appearing on “The View.” He has begun holding backyard meetings with suburban families.

Last week’s hourlong “town hall” on CNBC, which I moderated, was part of that effort.

But Mr. Obama declined to offer any Oprah-style emotional revelation when I asked whether his unusual background — as a biracial child who spent part of his youth overseas, then attended Ivy League schools — made it harder to connect with average Americans.

“When the unemployment rate is so high and people are having a tough time, it doesn’t matter if I was green, it doesn’t matter if I was purple,” he said matter-of-factly. “I think people would still be frustrated.”

Perhaps that was a moment missed, but history offers scant evidence to think so.

Despite President Dwight D. Eisenhower’s celebrated World War II record, voters didn’t “like Ike” enough to keep his fellow Republicans from losing 48 House seats amid the 1958 recession. For all his talents, Mr. Clinton watched his party lose control of both the House and Senate in the 1994 midterm election, in which economic weakness was one of many factors. “We have a controlled experiment,” observed Stan Greenberg, one of Mr. Clinton’s pollsters, downplaying the significance of Mr. Obama’s empathic skills. “Clearly Bill Clinton had the ability to connect emotionally. He got slaughtered in 1994.”

Moreover, the unemployment rate Mr. Clinton faced then never got higher than 6.6 percent — nowhere near the 9.6 percent rate Mr. Obama faces today. Late last year, notwithstanding his stimulus program, unemployment hit 10 percent for the first time since the 1982 recession, during Ronald Reagan’s presidency.

After studying their predecessors in similar circumstances, aides to Mr. Obama have come to see Mr. Reagan’s challenging midterm campaign that year as something of a model. “This one feels more like 1982 than 1994,” said Daniel Pfeiffer, the White House communications director.

Mr. Reagan, like Mr. Obama, had assumed immense economic challenges after succeeding a deeply unpopular president of the other party. After persuading Congress to cut tax rates and spending, Mr. Reagan beseeched voters to “stay the course,” and warned against a return to the policies of Jimmy Carter and tax-and-spend Congressional Democrats. He held Republican losses to 26 House seats — a level that, if repeated this year, would allow Democrats to retain control of the chamber.

It’s easy to forget how politically weak Mr. Reagan appeared for much of that year. According to Gallup, Mr. Obama’s current mid-40s approval ratings are comparable to or slightly higher than Mr. Reagan’s at a similar point in 1982 (as well as Mr. Clinton’s in 1994).

Mr. Obama aims to use President George W. Bush’s record in the same way Mr. Reagan used Mr. Carter’s. It was Mr. Bush and his Republican allies in Congress, he tells campaign audiences, who drove the economy “into a ditch.”

The velocity of contemporary media, not to mention its ferocity, may render that argument more difficult to make. In the ever-advancing news cycle, on cable television and the Internet, news tends to get old faster.

Thus, Mr. Pfeiffer asserted, in 1982 “Carter’s presidency seemed more recent than Bush’s presidency” does to voters this year. To compensate, he added, Mr. Obama and his aides began t contrast themselves with Republicans long before the traditional Labor Day campaign kickoff. In any event, the raucous and frenetic quality of the Information Age almost certainly hinders Mr. Obama more than his demeanor.

The town hall ended up carrying an emotional wallop anyway. But it didn’t come from my questions or Mr. Obama’s answers. Instead, it came from an audience member, Velma Hart, a black Obama supporter who works at a service organization for military veterans.

“I’m exhausted — exhausted of defending you, defending your administration,” Ms. Hart said, looking straight at the president. “I’ve been told that I voted for a man who said he was going to change things in a meaningful way for the middle class. I’m one of those people and I’m waiting, sir.”

Her riveting statement struck some observers as an embarrassing public relations setback for Mr. Obama. Jon Stewart, on Comedy Central’s “Daily Show,” called Ms. Hart an “Obama-sapping machine.”

White House aides hope that the exchange will have a different effect: to demonstrate that Mr. Obama isn’t isolated inside the presidential “bubble,” deaf to the suffering a weak economy has engendered. As it happens, that view of the hour’s emotional impact was endorsed by the master of the genre.

“I may be one of the few people that think it’s not bad that that lady said she was getting tired of defending him,” Mr. Clinton told Politico. “He needs to hear it.”


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Sources: CNBC, NY Times, Google Maps

Dick Cheney Humbly Welcomes Colin Powell Back Into The G.O.P.

Well, well how quickly the tables have turned.

During former V.P. Dick Cheney's recent interview with CNBC's Larry Kudlow, host of "The Kudlow Report", he decided to make amends with his "buddy" General Colin Powell.

During the broadcast Cheney basically begged Powell to remain a member of the Republican Party.

I Guess Cheney must have seen Powell's high approval poll numbers.

Here are some excerpts from the interview:

KUDLOW: ... You kind of took a shot at General Colin Powell the other day, said you didn't know he was still a member of the Republican Party. He responded to you by saying that you were mistaken. He is a member of the Republican Party, and he regards himself a, quote, "Jack Kemp Republican," end quote. Could you react to what Mr. Powell is saying?


Mr. CHENEY: Well, we're happy to have General Powell in the Republican Party. I was asked a question about a dispute he was having, I think, with Rush Limbaugh, and I expressed the consent, the notion I had that he had already left since he endorsed Barack Obama for president. But I meant no offense to my former colleague. I wasn't seeking to rearrange his political identity.

KUDLOW: So you welcome him back into the party.

Mr. CHENEY: We're in the mode where we welcome everybody to the party. What I don't want to do, in the course of trying to expand the overall size of the Republican Party and expand our base, is to take away from basic fundamental principles. I think it's very important that we remind people out around the country what it is that we stand for, that we do believe in a strong national defense, in low taxes and limited government; and giving up on those principles, in order to try to appeal to people who are otherwise going to vote Democratic, seems to me is a--would be a fundamental defeat for those of us who are essentially conservative, who've been long-time supporters of the Republican Party.

Sources: Huffington Post, CNBC, The Kudlow Report, Crooks and Liars, American Spectator, Day Life, Reuters