By Simon Johnson
How much damage to the financial system should we expect from what is now commonly called the foreclosure morass, the still-developing scandal involving document robo-signing (and robo-dockets), completely messed up mortgage paperwork and high-profile inquiries into accusations of systematic and deliberate misbehavior by banks?
The damage to banks’ reputation is immeasurable. They have undermined property rights – the ability to establish clear title is a founding idea of the American republic. They have mistreated customers in a completely unacceptable manner. If anyone doubted the need for a new consumer protection agency dealing with financial products – and the importance of having a clear-thinking reformer like Elizabeth Warren at its head – they are presumably silenced by recent events. (If you need to get up to speed on the basics of this issue, see this series of posts by Mike Konczal.)
But what is the cost in terms of additional likely losses to big banks? The likely size and nature of these are leading to exactly the kind of systemic risks that the Financial Stability Oversight Council was recently established to anticipate and deal with.
It is hard to know how the precise numbers for losses will end up, so much uncertainty remains about the basic parameters of the foreclosure problem. A lot of smart people are looking for ways to sue the big banks – in particular to force them to take back (at face value) securities that were issued based on some underlying degree of deception.
This is a fast-evolving situation in which every day brings potentially significant news, but our baseline view is that the losses are in the range of $50 billion to $100 billion – that is, these are “new” losses not yet recognized by banks. (Our downside scenario, with perhaps a 10 percent probability, is that the losses are much larger.) Most of this is so-called putbacks to the banks from Fannie Mae and Freddie Mac, meaning that the banks are forced to take back on to their books the underlying securities (and absorb the associated losses) if there was significant misrepresentation in the original documentation.
In almost all scenarios, these additional losses will remain an order of magnitude smaller than the trillions of dollars in credit losses that brought down the global financial system in 2008-9. Still, these latest losses are not helpful to confidence in big banks, and the continuing uncertainty – which is entirely the banks’ own fault – will make their managements more cautious about extending new credit.
Capital is the buffer that banks hold against losses, and banks really do not want to raise more capital under current conditions. Their executives’ fear about potentially having insufficient capital will further undermine loan availability, even for creditworthy borrowers. This is exactly what the economic recovery does not need.
In addition, Bank of America is a particular worry, because its capital position is already precarious and any downgrade by rating agencies will push it into dangerous territory. To the extent the market believes that the government does not stand fully or immediately behind Bank of America (a view expressed by Morgan Stanley analysts in a note this week), we should expect pressures reminiscent of fall 2008 We also learned yesterday of sizable additional potential exposure from the lawsuit filed by the Federal Reserve Bank of New York, PIMCO and BlackRock — seeking to force Bank of America to buy back bad mortgages packaged into $47 billion of mortgage-backed securities issued by Countrywide.
The best approach would be a fresh set of stress tests, resulting in the requirement that Bank of America and perhaps other banks need to raise a specified dollar amount of capital (not hit a particular capital-asset ratio, as that would just result in further dumping of assets), and reassuring the market that other banks have sufficient capital, including under the augmented Basel III requirements. (For a primer on capital requirements and the thinking that underlies the approach we are recommending, see our post of Oct. 7.)
Created by the Dodd-Frank financial regulatory act, the Financial Stability Oversight Council has plenty of power to order and organize such stress tests. In fact, because of the powers granted to the council under the Kanjorski Amendment, the country’s top regulators have a complete menu of choices available in terms of what they can require banks to do in order to reduce risks to the system (up to and including preemptively breaking up big troubled banks).
The foreclosure morass clearly poses systemic risk, both through its general effects on uncertainty about losses and because any manifest weakness at one big bank could spread – in some obvious ways and in some unanticipated ways – through the rest of the system.
In addition, the stress tests of 2009 (known as the Supervisory Capital Assessment Program) did not consider the possibility of large losses arising from the litigation now surrounding mortgage-backed securities. When Representative Brad Miller, Democrat of North Carolina, asked Treasury Secretary Tim Geithner about this at a House Financial Services Committee hearing on Sept. 22, the exchange went like this:
MILLER, asking about possible breach of contract in securitized mortgages: Okay. was potential liability on these theories taken into account at all in the stress test? I mean, the securitizers, who presumably would be the defendants in any litigation, are the 19 biggest banks that got the stress tests, was their potential liability taken into account at all in the stress tests a year ago?
GEITHNER: I…I don’t think so….
Mr. Geithner also said he would take this question up in more detail with his colleagues at the Federal Reserve, which administered the 2009 stress tests. The exchange can be heard in full online, with the Miller-Geithner exchange at about the 42-minute mark.
The only fair, reasonable, and safe way to handle this situation is to order a fresh round of stress tests for all systemically important financial institutions. The stress scenario should consider not just the current dismal macroeconomic prognosis (and the potential for another slip back into recession) but also the downside with regard to litigation losses.
If the Financial Stability Oversight Council refuses to act decisively in this regard, a vital piece of the Dodd-Frank financial reforms will have failed.
An edited version of this post appeared this morning on the NYT’s Economix blog; it is used here with permission. If you wish to reproduce the entire post, please contact the New York Times.
The Baseline Scenario 
Another TARP like extortion attempt is coming. Whom will the new Congress listen to? The Tea Bagger activists who turned out to threaten the Democrats and the media, or the corporate pimps who financed them?
Sadly, I think their refusal to act thus far shows the failure has already occured. The financial system still looks at B of A’s exposure as risk to a single entity, not a symptom of systemic risk. IF and when severl of the other TBTF banks divulge similar balance sheet problems, then the “system” will lumber awake, pronounce the risk systemic, and turn to the Fed immediately to get more cash from the discount window to buy that risk down.
Oh wait, we tried that three years agao, didn’t we. And we keep being assured by the financial sector they will not have to do it again . . .
The Obama administration continues to posture in a business-friendly manner in the run-up to the midterm elections. Frantic private meetings are likely taking place at a fevered pitch while the outward veneer is intended to promote market stability. I would be SO surprised to see the Financial Stability Oversight Council do anything that might upset major lobbying interests. We will receive vague platitudes designed to reassure jittery investors as to the soundness of mortgage-backed securities. Ultimately, any significant leverage will allow the amplification of any collapse of confidence to spiral into a very damaging cascade of events, and this is the outcome the Obama administration most wishes to avoid.
Repeat after me: your money is safe, your investments are safe, the system is not flawed.
The Obama administration continues to posture in a business-friendly manner in the run-up to the midterm elections. Frantic private meetings are likely taking place at a fevered pitch while the outward veneer is intended to promote market stability. I would be SO surprised to see the Financial Stability Oversight Council do anything that might upset major lobbying interests. We will receive vague platitudes designed to reassure jittery investors as to the soundness of mortgage-backed securities. Ultimately, any significant leverage will allow the amplification of any collapse of confidence to spiral into a very damaging cascade of events, and this is the outcome the Obama administration most wishes to avoid.
Repeat after me: your money is safe, your investments are safe, the system is not flawed.
Stress tests should include potential “Litigation losses.”. At this point, win or lose, the legal costs of litigation are virtually certain, as it the diversion of significant staff time that might otherwise be possible. But the greatest cost to all of us could very well be the additional marginal cost of uncertainty as banks find yet another reason not to lend and, when lending, adding another layer of hoops for even “creditworthy” borrowers.
On another note, are there not property rights laws on the books that will give the investors cause for redress. If so, they should pursue them — as i suspect they will. It doesn’t follow to me that therefore we must have a “well-headed” new protection agency. They haven’t undermined “clear title” (a founding idea), they have tried to skirt it and should pay an appropriate price to the people they may have defrauded. Again, so where is the need for yet another agency? (Please forgive typos. My iPhone has a vocabulary of its own choosing sometimes and I cannot scroll up to edit/review)
I hate to be pessimistic, but fooled me once for 30 years, shame on all of us.
These people, the financial community, and generally the CEO’s of all companies of any size that they have corrupted, aren’t just emulating Japan out of ignorance, but rather by design.
The fact that a Democratic president and staff is so in their pocket that they can’t see this is atrocious.
Sweep it under the rug. The three blind mice were never so effective.
Simon asks, “How much damage to the financial system should we expect from what is now commonly called the foreclosure morass? What is the cost in terms of additional likely losses to big banks?”
Simon says, “The likely size and nature of these are leading to exactly the kind of systemic risks that the Financial Stability Oversight Council was recently established to anticipate and deal with.” But will it?
Isn’t it, as Dan Fromkin said, “blindingly obvious that pervasive fraud was at the heart of the financial crisis and the ensuing foreclosure catastrophe? And yet the mainstream media still by and large hasn’t connected the dots.”
Aren’t we seeing, as Fromkin says, “the continued effects of a vast criminal enterprise that has never been brought to account, employing a process that involved the equivalent of counterfeiting, laundering and fencing.”
William K. Black, one of the few effective regulators in recent history during the savings and loan crisis of the late 1980s, and author of the book, “The Best Way to Rob a Bank Is to Own One,” shared these observations with Fromkin/Huffington Post/10/20.20:
1. These mortgage frauds were overwhelmingly due to consciously fraudulent lending practices in which the CEOs of seemingly legitimate entities used accounting tricks as their “weapon of choice” to report higher profits and get bigger bonuses.
2. The disgraceful lack of prosecutions which has resulted from regulators virtually ending the practice of making criminal referrals and the pathetic March 2007 “partnership” that the FBI entered into with the Mortgage Bankers Association (the trade association of the “perps”) that led the FBI and the Department of Justice to (implicitly) define out of existence fraud by the lenders (and to conceive of them as the “victim” — which they are, but only of their controlling officers). Bush Attorney General Mukasey notoriously refused to create a national task force against mortgage fraud based on his claim that mortgage fraud was analogous to “white collar street crime.”
3. The “echo” epidemics of fraud were set off by the primary epidemic of accounting “control fraud”. The fraud designed by CEOs in turn kicked off an epidemic of fraud among loan brokers and appraisers.
4. The massive foreclosure fraud we are seeing now is another “echo” epidemic. To optimize their accounting control fraud, lenders gutted underwriting. That led to “fraud in the inducement” (vis a vis borrowers), endemic documentation problems, and an extraordinary numbers of defaults. The process required tens of thousands of real estate financing personnel to commit fraud on a daily basis as their core function. Some of these people are unemployed, but many are in the industry and are presently engaged in loan servicing. Now that their job is to foreclose on properties, there is no reason to expect that they would suddenly become honest, and they haven’t.
5. There is the continued absence of effective regulation. It should be scandalous that President Obama left in charge, or even promoted, the anti-regulators who permitted the Great Recession. This is significantly insane as a matter of both economics and politics. (The administration doesn’t even seem to realize the issue of integrity.)
Again go back to what Simon says, “The likely size and nature of these are leading to exactly the kind of systemic risks that the Financial Stability Oversight Council was recently established to anticipate and deal with.” But will it, given what Black says about the disgraceful lack of prosecutions and the continued absence of effective regulation?
Mr. Johnson wrote:
“How much damage to the financial system should we expect from what is now commonly called the foreclosure morass?
Plenty.
Obama Team Punts On Foreclosure Fraud: ‘Problem For The Banks and Servicers To Fix’
10-20-10 10:02 PM
“….the administration had yet to find anything fundamentally flawed in how large banks securitized home loans or how they foreclosed on them…
…the administration is focused on ensuring future compliance, rather than on looking back to make sure homeowners and investors weren’t harmed…
….Donovan added that “we have not found any evidence at this point of systemic issues in the underlying legal or other documents that have been reviewed.”
http://tinyurl.com/29af4mr
“This story was updated at 10:00 p.m. ET to include additional information from a Treasury spokesman.”
“And if the blind lead the blind, both shall fall into the ditch.”
Bible, Matthew xv. 14.
Idiom: “Fool me once, shame on you; fool me twice, shame on me.”
“Capital is the buffer that banks hold against losses, and banks really do not want to raise more capital under current conditions. Their executives’ fear about potentially having insufficient capital will further undermine loan availability, even for creditworthy borrowers. This is exactly what the economic recovery does not need.” Just print some dollars and slap em in!
But anyways, why can’t bank executives be prosecuted based on Sarbanes-Oxley?
Does anyone know — is this kind of mess happening anywhere else but in the USA ?
Bill wrote:
“But anyways, why can’t bank executives be prosecuted based on Sarbanes-Oxley?”
Too big to prosecute. Don’t take my word.
“I believe that banking institutions are more dangerous to our liberties than standing armies.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.
The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
Thomas Jefferson, (Attributed)
Is this our chance to break up the Too Big To Fail banks? :)
It will take political courage, i.e., a lack of fear in the face of political suicide. I don’t sense Obama welcoming the enmity of the big banks.
About the Jefferson attribution:
Were the terms, “inflation” and “deflation” current at his time? I think that the hyperinflation of the Continental Dollar was termed “depreciation”, wasn’t it? (Checking the OED, the first use of “inflation” they give in regard to prices or currency is from 1864. Jefferson was quite dead by then. :))
It will be interesting — and scary — to watch what the financial and corporate world does now that they have so baldly taken power. I expect there will be measures taken to recover credit card debts, because doubtless most the people who are losing their homes, and who are out of work, have maxed out their credit cards and defaulted. There must be a huge amount of money involved which the lenders stand to lose unless they change the laws. I am thinking of the sort of powers the income tax collectors now have — I know of one case where they took the wedding rings off of the wife’s hands. If they pass such changes, they would have to apply to debts incurred BEFORE the laws were passed — despite our legal protection against retroactive prosecution under a new law. I think we will soon see systemic erosion of that protection. I have warned my children and friends to get out of debt if at all possible, and not take it for granted that if they default on credit card debt they risk only their “credit rating.” If I am wrong about this, maybe someone can straighten me out. I am certainly no expert — can’t even remember the name of that protection against retroactive prosecution which we learned in high school . .
I am not sure how much political courage it will take. It is not only Tea Partiers who are mad at the big banks. Obama could restrain the Department of Justice, but there are lawsuits in the works. There was a lot of political maneuvering during Watergate, but it was the Judicial system that brought Nixon down.
We have experienced political deadlock for the past two years, and it looks like it will only get worse. For the big banks to fall, politically it may simply take doing nothing. :)
The disputed (attribution) section used to read like this….
http://en.wikiquote.org/wiki/Talk:Thomas_Jefferson
His opposition to the Bank of the United States was fierce: “I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”[56]
Thomas Jefferson to John Taylor May 28, 1816, in Appleby and Ball (1999) p 209); also Bergh, ed. Writings 15:23; also Library of Congress
“The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens.[57]
– Thomas Jefferson, 1816
http://en.wikipedia.org/wiki/Thomas_Jefferson
Jefferson is still dead, his warnings still live.
Simon,
The estimates to date have been south of the $100 million mark, with Richard Ramsden of Goldman Sachs topping the estimates at $84 million. While we don’t know the technique used by Ramsden to compile that figure, I haven’t seen a reputable estimate beyond that.
Here’s what may cap the loss estimate: Most of the toxic waste mortgages are worth little anyway, so a second wave of write-downs may involve absorbing losses on homes at nominal value. I could be wrong, but the hyper-productivity of mortgage origination is what generated both poor record keeping practices and bad loans.
Without a doubt this documentation crisis could lead to many years of bad lawsuits, bad lawyers, and bad bank outcomes. Capital will be tied up, homes will deteriorate by neglect (something that hasn’t been pointed out yet), and people will be thrown into the streets as the system resists loan modification.
Oh, and I forgot to add: Don’t worry about BofA having their equity layer wiped out. The accountants will massage the losses into the books to offset future profits. Think Citi: If Citi marked to market, they’d be insolvent. Clearly management, the auditors, SEC, Federal Reserve, Treasury, bank examiners, et al will look the other way. Again.
Scott, remember TARP was the US government extorting money out of US Banks.
Here’s how the situation looks to me:
Mortgages are issued, often using inflated appraisals – Gresham’s Dynamic eliminates or corrupts the prudent bankers and appraisers.
Notes are separated from the liens
The mortgage revenue is securitized, sometimes more than once
The notes are left “blank” or “lost” as both a shortcut and to hide the fact that there are more claims than notes
CDS are issued to cover losses to AND as bets against the mortgages/MBS.
CDS revenue is securitized as CDOs, sometimes more than once
CDS are issued to cover losses to AND as bets against the CDOs.
CDS revenue is securitized as CDO^2s, sometimes more than once
CDS are issued to cover losses to AND as bets against the CDO^2s.
Etc.
This works like an enormous ponzi scheme. All the while the banks themselves are asset mined by the executives via bonuses and compensation.
Bubble bursts, and now the banks need both revenue and cover.
TARP, FASB changes, et al buys time for more mining
Foreclosures are delayed because of balance sheet exposure, risk of MBS/CDO buyers opening empty box and discovering fraud
Meanwhile ponzi setup allows new money (CDO^3-99, TARP, etc) to pay revenue to securities
Foreclosures are rushed through when they finally happen to avoid discovery
Note and lien separation causes seemingly low-probability foreclosure problems (more than one bank, no mortgage, not in default, etc) but hides the trail of fraud that occurred when the mortgage was issued and securitized (multiple times).
Banks sell foreclosed houses (that they don’t own) to keep paying into the ponzi, face no risk since they don’t own it they don’t have to write anything off since they don’t own the asset in the first place. Foreclosure sales are essentially pure profit.
The problem is that the investors now realize that they have at best ownership in unsecured debt, or more likely nothing but an empty box!
Putbacks start to happen.
The putbacks will eventually destroy the banks, but they have already been asset mined with the stripped wealth going to the bankers.
Bankers and their minions have enough wealth to buy power to avoid prosecution or clawback.
Economy goes KABOOM, and the bankers win.
Welcome to feudal system 2.0.
As I see it, this explains the whole mess without using any active conspiracy beyond simple greed.
Comments?
Simon, surely the effect is not just the “new losses” that you referred to, directly draining bank capital? Taking back massive volumes of notes also amounts to forced releveraging of banks, the exact opposite of what they have been doing so far. Which means that as the toxic assets return back home to bank balance sheets, there may be a lot less room for new assets: in other words, less new lending for Main St, USA.
Some two years ago the TARP was passed by congress and signed into law by the former administration. They had few real plans on how to deploy the money, and the can was essentially kicked down the road for the incoming administration (which by November was already touting its economic big guns).
Prior to the inauguration, a lot of ideas about using the TARP resources were discussed — the “good bank/bad bank” was often mentioned. (It has been used on other occasions, both here and abroad.) After January, 2009, the good bank/bad bank option disappeared, apparently because it was too hard for Tiny Tim to conceptualize and then implement. So he decided to just lend the money to some banks. (The AIG and GN/Chrysler bailouts were marching to a different drummer.)
By now, almost two years later, much of the TARP money has been repaid by the big banks, the TARP money well has pretty much gone dry, and the toxic assets based on the mortgages being foreclosed are sloshng around the system and threatening to swamp it.
What a disaster! And these guys are supposed to be smart? Maybe like Yogi Bear!
So, what do we do if they fail the stress tests?
In any case, I think we should hire some robo-prosecutors, robo-judges, and robo-juries and start hauling these people off to jail.
Give `em a fair trial and a quick hangin’.
@Del
“And these guys are supposed to be smart?”
I know lots of very smart people who don’t have the sense to take care of children much less an economy. We have no end of weapons, economic or otherwise, but very few people who are up to the job of wielding them.
There’s only one answer to this, which deals with the banks exactly as they deserve.
Every housedebtor, distressed or not, underwater or not, should:
1. Stop paying on the mortgage;
2. Stay in the house.
If America jubilated that way, it would be a good start toward our desperately needed Land Reform.
(I notice that for a long time I was the only person advocating that. But in the last week or so I’ve started seeing others.)
What? Through the looking glass….
Guilty till proven guilty. :-)
October 20th 2010 – Star City News – excerpt
“And the question now of concern, can the banking system survive?
In all likelihood this new crisis may begin another round of Government bailout discussions. BoA is one of those banks Congress and the Administration consider “to big too fail” and who will be next, JP Morgan Chase also initiated these securitization trusts, and so did Wells Fargo, and Deutsche Bank…..”
http://tinyurl.com/2br5wgs
Russ, if we were capable of that kind of unity, we would have thrown off our oppre$$ors a long time ago.
On the other hand, what’s happening in France is pretty impressive.
I don’t know much about this guy’s background. His name is Reggie Middleton. But we can tell by his eyes and his words he is a sharp one (by that I mean intelligent). This guy is a straight-shooter. We have people like “Bondgirl” and Desi above (Liars in my personal opinion), who want to blame this on the government and things like CRA. Or they want to set it as an argument of bankers vs. deadbeats. Again, this is a false premise. Guys like Middleton here see things clearly and as they are, not as a trader, derivatives speculator, or bank worker who benefits from the large banks’ extortion of American savings and extortion of citizens’ equity in real estate.
“Another TARP like extortion attempt is coming.”
Coming?
The extortion is not an attempt, and it is in fact the ongoing reality.
The private banking system and fractional reserve lending IS extortion. It is a PONZI scheme and would be patently illegal…excepting: who makes the laws?
Oh, right. The banks.
I think what Reggie Middleton is talking about here is closely connected to what you are addressing Edward. Banks have been lying about assets and capital on their balance sheets for years, and the Lies have only worsened in recent years. You’ll notice the more prescient and wisdom filled the words are, the shorter the interview camera time people get on CNBC (and even Bloomberg, although they are much better). Unfortunately for Mr. Middleton he didn’t have any stocks to tout or holdings to pimp, so he could explain his message more thoroughly.
Chris Whalen is forecasting bank nationalisation in 2011 (Bank of America, Wells Fargo, and others.) According to Whalen, foreclosure is very costly and it will ‘break the banks’. They don’t have enough money to do the volume of foreclosures properly.
“The damage to banks’ reputation is immeasurable. They have undermined property rights – the ability to establish clear title is a founding idea of the American republic.”
Well said
See Herrnando De Soto’s “The Mystery of Capital” for a global perspective
Re: @ Min___”For the big banks to fall, politically it may simply take doing nothing”… The “TBTF’s” have been moving offshore since 2008 at a frantic pace. They’ve anticipated the unmasking of their nefarious doings long ago,and have taken the percautionary, and necessary measures to incorporate where the hand of the law will be handcuffed to the american citizens pocketbooks! Their banks are but half emptied shells, employed with deludable neophytes. Soon…the town of Delaware will be a ghost (who dares call it a state – but D.C.?) town, that only a slang word could/would appreciate…that being “Deltawhere”? Bye, bye America, it’s off to India we go…so long America, it’s off to China we go…been nice knowing ya America it’s off to Europe we go, and don’t worry Russia or you poor in South America we left a door open for ya all! Bye, bye America, catch us if you can, cause the Federal Reserve System is now defunct, and the treasury has commited suicide, putting our democracy in political funk.
Whalen is also saying that ZIRP is decimating their cash flow. Even w/o mortgage/security fraud they’d be in dire condition by 2011.
http://www.ustream.tv/recorded/10034228#utm_campaigne=synclickback&source=http://www.wealthdaily.com/articles/americas-next-crisis-is-already-here/2764&medium=10034228
He starts at 1:07
And if the FSOC find breach of contract in securitized mortgages to an extent revealing systemic fraud, then what? What will be the “fair, reasonable, and safe way to handle this situation?”
The gentleman himself.
Someone will have to press this issue publicly. I haven’t heard anything in the last couple of days, and Shawn Donovan, the chief of HUD, seems to be backtracking (subtly of course) on his statement late last week, that a full investigation was underway to match the 50 States’ Attorneys General as they investigate within their states. My fear is the same as everyones, and that is the somehow, there will be some kind of perceived quick and ugly fix while the Adminstration talks about “going forward” as they did when issues were raised regarding Wall Street prosecutions. The problem now is that this is very real, and there are so many people’s lives and livelihoods at stake here that the size carpet needed to sweep the problem under simply doesn’t exist. This is actually an ideal time for the President, Justice, HUD, and the oversight council to step to the plate. Mazillo has already paid serious fines in a settlement, but the problem is that these were only millions to cover a multi-billion dollar problem. And, CountryWide, while being probably the largest of the bad actors, is still only the tip of the iceberg on this problem. At stake are actually trillions is potentially flawed mortgage bond problems. At this point there is no one who would be willing to bid for a foreclosed home, and no title insurance company will lend without a full review of all documents underlying the foreclosure or taking exception to it and just no insuring over it. If we thought that the value of real estate was problem before, this will be much icing on that rotten cake.
I agree, impressive. The unity here is still rudimentary, but we’re making some progress with the Show the Note demand.
I have some posts about France at my blog.
http://attempter.wordpress.com/2010/10/20/france-national-strike/
http://attempter.wordpress.com/2010/10/22/france-workers-and-students/
Ted K, thanks for the Whalen video. What a dog’s breakfast! It helps to connect the dots.
Um, how so? Didn’t the Federal Reserve give money to the banks to keep them solvent? Oh yes they did, but on the condition that the banks PAY IT BACK. And yes, some supposedly health banks were politely coerced into taking funds they probably didn’t need – but sine the banks didn’t want anyone to know how many of them were about to collapse, I think that was a fair trade. And then, the banks started to pay back the federal dollars, unlike the mortgage holders they are foreclosing on at record rates, without much participation in the federal program to renegotiate mortgages.
Hum, if the Fed was engaged in extortion, what is B of A doing exactly?
Stphen A. Boyko wrote:
“The damage to banks’ reputation is immeasurable.”
Is it possible to damage the reputation of financial serial-killers?
Economist Joseph Stiglitz: Put Corporate Criminals In Jail
6:30 AM 10/22/10 – AOL – excerpts
“Legal penalties for financial fraud in the U.S. have become “just a cost of doing business,” Stiglitz said. “It’s like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.”
“We fine them, and what is the big lesson?” said Stiglitz. “Behave badly, and the government might take 5% or 10% of what you got in your ill-gotten gains, but you’re still sitting home pretty with your several hundred million dollars that you have left over after paying fines that look very large by ordinary standards, but look small compared to the amount that you’ve been able to cash in.
Meanwhile, the astonishingly disproportionate influence of the big banks and corporations on the American political system has allowed powerful executives to exert their will on the U.S. government at the expense of the people, Stiglitz said.
“As individuals we have certain basic rights,” Stiglitz continued. “We aren’t created by the law. We exist by nature. But corporations are man-made. They are supposed to serve our interest, our society’s interests. And we are creating them with powers that are not serving our society’s interests.”
“If you’re going to rob your shareholders, shouldn’t they have the right to say I don’t like this?” asked Stiglitz. “It’s basically a vicious cycle in which we’ve gotten ourselves, because the corporate executives control the corporations.
The corporations have the right to give campaign contributions. So basically we have a system in which the corporate executives, the CEOs, are trying to make sure the legal system works not for the companies, not for the shareholders, not for the bondholders — but for themselves.
“When you say the Pledge of Allegiance, you say, with ‘justice for all,” Stiglitz said. “People aren’t sure that we have justice for all. Somebody is caught for a minor drug offense, they are sent to prison for a very long time.
And yet, these so-called white-collar crimes, which are not victimless; almost none of these guys, almost none of them, go to prison…. There were victims all over the world.”
“Families are as important as corporations,” he said. “Keeping kids in school, not forcing them out of their home, keeping the community together, is certainly as important as keeping a corporation alive.”
http://srph.it/aRwI4I
Google @ Ref: The Big Banks’ Biggest Problem (MONEYSHOW.com)
http://www.moneyshow.com/investing/Jubak_Journal.asp?aid=jubak_journa-21105&jid=Jubak_Journa&page=2#
Note: Jubaks article is “2” pages (link for final page my error)
Google @ Ref: “J.P. Morgan expands Latin American Presence (10/21/09)”…”J.P. Morgan Chase & Co. (JPM) Forms Joint Venture with China’s First Capital Securities Co.(6/9/10)”…”Why Global Banks Are Banking on India (1/11/07)”
PS. as I casually mentioned in a sarcastic tone above…there are many more reasons for my “out-of-this-country” hypothesis. Thankyou Simon and James for all your great digging, and thought provoking articles that only a true “Professor of Knowledge” can create by opaque questions baked into an answer. “Bravo too the Teacher’s Teacher! :-))
It’s safe to say that a serious criminal investigation is needed and that it can’t start soon enough if this fiasco is to be brought to a conclusion. The “perps”, as you accurately call them, need to go to jail. They certainly need to told to get their hands off the foreclosure process. The stark reality is probably that they can’t do that without revealing how deep the hole they’re in really is. The fact that they’re actively subverting the legal process tells us all we need to know.
I’ve had people in the industry confirm for me that no database was ever built to track which portion of which mortgage went into which tranch of which investment. It’s only takes a small leap of the imagination to come to the conclusion that many of the banks never tracked the note either.
They’re trapped at this point, squeezed between the competing demands for a fair foreclosure process and the bondholders’ lawsuits. I’d like to say it’s poetic justice, but our economy is at stake.
It’s time for people to go to jail. In the words of William Black, they need to be removed from positions of corporate power from which they can continue to control this fraud. There are no other options.
Treasury slapped them around with one hand even as it gave them their TARP funds with the other. This is different. They need to put cuffs on them with both hands.
The New Tax Man From Ancient Rome
10-22-10 12:22 PM – excerpt
“Sheila Rice, who sold her Maryland home to avoid foreclosure, was surprised to learn JPMorgan Chase was her property tax collector. But the bank can’t claim to be the first private company to play the role of tax man: It’s taken part in a more than 2,000-year-old tradition that, from its very start, has been tainted by abuse.
As the Huffington Post Investigative Fund reported this week, big banks and hedge funds in the U.S. have been quietly collecting taxes on hundreds of thousands of homes. The process, called “tax farming,” is simple: A company goes to a local government and reimburses it for taxes that citizens aren’t paying. In return, the company gets to act like an old-fashioned tax thug — the kind rabbis condemn in the Bible — charging up to 18 percent interest and thousands of dollars in legal fees, simply because it can. As the District of Columbia attorney general told the HuffPost Investigative Fund, there’s “no oversight at all.”
Like many great American traditions, the tax farming game was perfected by the ancient Romans. Provincial governors, and later Rome itself, sold tax-collection rights to private companies called publicani. As in modern America, this was a speculative bet — a company paid a local government’s tax debt, and then tried its own hand at recouping the loss. The Roman version was plainly brutal. In ours, the brutality is subtle.
But in the estimation of one expert in ancient finance, it’s just as bad: In our own way, we’re sliding toward the conditions of ancient Rome, where private tax collectors employed soldiers to wring excessive amounts of cash from debtors.”
http://tinyurl.com/2bqqalp
“All saint without, all devil within.”
Roman proverb
I have been trying to quantify the potentials of the mortgage documentation crisis. Naturally, there are shrill voices and various stripes of shilling all over the place.
By now, everyone paying off or even down on a mortgage knows to enforce getting their original note back or securing assurances that documentation is complete that are enforceable. If the note is lost, they can insist in most, if not all states, on a Lost Instrument Bond paid for by the creditor represented as being owed the debt. These bonds are usually a multiple of the debt and past fees for the bond have been 2 % of the coverage. If lost notes are as prevalent as some maintain the bonding companies themselves may not be able to prudently issue the bond. Fees will go up. Even with a bond, the veracity of the mortgage release comes into question for purposes of title insurance in that the title companies may seek indemnities to offset their including the potentially defective to fraudulent mortgage release.
Would not most performing mortgages now too carry a stigma that they prove the existence of a fully complying original mortgage document package?
There is also a lot of hoopla in play that the mortgage instrument itself was separated from the Note legally. This raises the question that the Mortgage was extinguished and the related Note is now simply unsecured.
There are all kinds of defective instrument note permutations being exposed. This must eventually have a fearful effect on the valkue of all mortgage securities that might only be curable through bonding. Failing a bond, if the Note is missing a judge would be asked to impound the pay off funds pending an absolute clearance of the land title as a secured interest.
This seems to be a far greater problem than even putbacks taken separately. Certainly, a performing mortgage lacking legal documentation itself should be able to put back in recourse to the originator.
The problem looks immense right now. Just how big is the over all problem?
Jerry J wrote:
“The problem looks immense right now. Just how big is the over all problem?”
Housing Armageddon – Charting The Foreclosure Crisis’s Far-Reaching Consequences
11:20 AM 10/14/10 – AOL – excerpt
“Even as the consequences of the ongoing foreclosure crisis slowly unfold — and the ultimate impact is yet unknown — it’s not too early to tote up a list of 10 potentially important developments that have already happened…
The ultimate resolution of the crisis is unknown and unpredictable. Phrases such as “housing Armageddon” are now appearing in the mainstream financial media as commentators and legal authorities hazard guesses about how the crisis may play out.
The key feature of the issue may well be that nobody knows.”
http://tinyurl.com/3a4t7aq
Clear Capital: “Sudden and Dramatic Drop in U.S. Home Prices”
10/22/2010 12:58:00 PM – CalculatedRisk
“This special Clear Capital Home Data Index (HDI) alert shows that national home prices have declined 5.9% in just two months and are now at the same level as in mid April 2010, two weeks prior to the expiration of the recent federal homebuyer tax credit. This significant drop in prices, in advance of the typical winter housing market slowdowns, paints an ominous picture that will likely show up in other home data indices in the coming months.”
http://www.calculatedriskblog.com/
Bracing For Fallout Of Foreclosure Freeze
05:17:38 PM PDT – The Washington Post – excerpt
FORT MYERS, Fla. — “In his spacious cookie-cutter townhouse on a tidy street near downtown Fort Myers, Joshua Bartlett has waited nearly three years for the knock on the door that never came.
He hasn’t made a mortgage payment since late 2007 and doesn’t plan on starting now. He could benefit from the recent halt on foreclosures announced by major lenders, amid concerns that flawed paperwork has been used to seize homes across the country, because it means he’ll likely be able to stay even longer without paying.
This is one of the unintended consequences of the spreading foreclosure freeze. Although there are no statistics on how many homeowners are taking advantage of a foreclosure moratorium to avoid making monthly payments, some economists warn that this practice could become more common if a national freeze is put in place, as some lawmakers are trying to do.
This is called a “moral hazard” — the notion that borrowers might decide to stop paying back what they owe or continue to withhold payment because they see no repercussions.”
http://www.insidebayarea.com/top-stories/ci_16388398
Here is a link to an interesting story regarding China’s shedding of its foreign debt:
Complaint Filed with U.S. Justice Department Against Standard & Poor’s, Moody’s –
S&P, Moody’s Complicit in Hiding Billions of Dollars of China’s Debt:
http://www.istockanalyst.com/article/viewarticle/articleid/4548858
It doesn’t matter how much the banks stand to lose. The pornographers at the Fed and Treasury will simply continue to hand their banker F-buddies an endless supply of profits by borrowing money from them at 3 full percentage points higher than the 0% rate they lend it to them at in an endless game of kick-the-can that accomplishes nothing except to make all the incompetent banksters richer still at the tax payer’s expense.
Until Bernanke and Geithner are fired and some people with some real balls are hired to stand up to the banksters, this country will face greater and greater peril.
At what point does gross incompetence become criminal negligence, if not outright fraud? After the turn of the century mergers that built the big banks, everything became finance driven – operations quality was willfully ignored and said measures eradicated. In at lease one case post merger, management elected to stop requiring nightly ledgers to be balanced. A thorough and honest audit of the banks would most likely show mortgage is only the tip of the iceberg in terms of incompetence/negligence/fraud – not to mention the opportunities created for internal embezzlement.
William K. Black and Randall Wray on putting BOA into receivership: http://tinyurl.com/39f95hv
P.S. Uhm. Get behind it, people.
Certain “tribes” of humanity have spent ALL of their past history in one collective and cooperative attempt at stopping from seeking permanent “family” shelter in trees, caves and tents…
So turning home-ownership into a weapon of mass financial DESTRUCTION against the RIGHTS of an individual to LIVE in what their brains and labor built as “shelter” is a WAR, in the final analysis. There is NO HISTORY of life-maintenance invention and wealth building outside of the “small business” of a family HOME – up to and including better weaponry against PREDATORY animals of all stripes.
On CNBC, they were CHEERING the profits HUMANA made this past year because people are now TOO POOR to go to the doctor, at all, so there was far less paid out FOR ACTUAL HEALTH CARE, hence more for “shareholders”.
Basically, the “banks” have turned shelter and medicine into weapons of mass DESTRUCTION against any and all individuals who are not psychotic game players with “math” like they are.
And the IRS is going to LEGALLY levy penalties against people NOT BUYING for-profit “health insurance”…?!
There is going to be a lot of home-grown violence sooner than everyone thinks – mano et mano – if psychos keep shooting “down” into the “middle class” via Patriot Act secret “software”.
Certain “tribes” of humanity have spent ALL of their past history in one collective and cooperative attempt at stopping from seeking permanent “family” shelter in trees, caves and tents…
So turning home-ownership into a weapon of mass financial DESTRUCTION against the RIGHTS of an individual to LIVE in what their brains and labor built as “shelter” is a WAR, in the final analysis. There is NO HISTORY of life-maintenance invention and wealth building outside of the “small business” of a family HOME – up to and including better weaponry against PREDATORY animals of all stripes.
On CNBC, they were CHEERING the profits HUMANA made this past year because people are now TOO POOR to go to the doctor, at all, so there was far less paid out FOR ACTUAL HEALTH CARE, hence more for “shareholders”.
Basically, the “banks” have turned shelter and medicine into weapons of mass DESTRUCTION against any and all individuals who are not psychotic game players with “math” like they are.
And the IRS is going to LEGALLY levy penalties against people NOT BUYING for-profit “health insurance”…?!
There is going to be a lot of home-grown violence sooner than everyone thinks – mano et mano – if psychos keep shooting “down” into the “middle class” via Patriot Act secret “software”.
Goldman Sachs = reputable?
LOL, thanks for that! I really needed a laugh.
I wouldn’t discount Tiny Tim’s intelligence. I think things are progressing as planned. None of the CEOs of the large banks lost there jobs, GS just had a stellar quarter, BofA is on the ropes (this makes Wall Street happy – “damn Southerners”), and if you’re lucky enough to have $$$ in the bank (like the Wall Street thugs) it is “blue-light-special” all the way – from yachts to beach houses to patek phillips.
Don’t forget, GS and the other traitors (i.e., pretty much all investment bankers) hired the absolute best and brightest.
Things are likely going just as planned…
Yes, thank God for the French. The only developed country on the face of the planet where the citizens actually scare the begebus out of the elected politicians. What a novel concept, eh?
I love the way the media in the US (and the UK) demonizes the French for actually standing up for their rights. Bastages!!!
We have some excellent French citizens up here in Canada too —
DG aka SJ you need a reality check: Your thinking is dyslexic at best:
Michael W.Hudson is a former Wall Street economist AND JOURNALIST. “THE MONSTER: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis” (2010, Times Books) © 2010 Times Books All rights reserved.
View this story online at: http://www.alternet.org/story/148577/
BANKS/ MORTGAGES / FORECLOSURES / FRAUD:
DR. MICHAEL HUDSON : (DISTINGUISH FROM M.W.HUDSON the journalist above)
The truth is more that the banks utilized their capture positions in Government to extort money from the (future of)American People after committing blatant fraud in a massive frenzy of profiteering by extorting money directly from (present) real time American people; and passing it on the last greatest fool as the norm, but crashing the whole systemic process of value in the process. The bailout was not so much a momentary float as much as it was a continuation of the theft, fraud and a cover-up of the whole corrupt business spiral. The real problem is not a new level of stress tests…the real problem is that the crooks have not been prosecuted…which would encourage more honest equilibrium and homeostasis in the financial markets. As it is now the biggest of the financial crooks now believe they are untouchable…and are recycling the debt/risk back onto the original victims as blisters over bubbles. We need some jail time not bail times to save our banks and our homes.
MOST SERIOUS WORK: CONTROL FRAUD @
Click to access William_K_Black.pdf
STILL AT THE HEART OF THE MATTER!
I find it ironic that “BlackRock Inc.”(BLK) is going after Bank of America (BAC) regarding their buyout of Countrywide Financial Corp., and the hypothetical $47bn in naughty (can sombody find Waldo?) electronic forensic paper – with the N.Y. Federal Reserve Bank marrying up with PIMCO/BLK for dirty deeds that must be bleached clean? Kinda reminds me of a fox gaurding the hen house…seeing they all feed off the henhouse. Strange indeed? It was Larry Fink the CEO of BlackRock Inc. that pionerred the “Mortgae Backed Securities” (MBS’s) back in the mid 80’s as a managing director at First Boston. Just how does this all add up is quite interesting. BlackRock Inc. wants the remaining ~35% stake that BAC owns when Bank of America purchased Merrill Lynch for a tighty sum of ~$50bn. back in Sept./08 with the (~$44bn +/+ = $20bn + $25bn respectively from TARP, and $6.0bn in options) our money, and to add insult to injury it was the very day (Sept.16,2008) Lehman Brothers filed for bankruptcy. Now let us not forget that BLK Inc. purchased “Merrill Lynch Investment Management” (MLIM) ~ 65% stake back in Sept.29,2006 , and thusly purchased “Barlays Global Investors (BGI / Management Investment both active & passive) from Barclays for $13.5bn (~Nov-Dec/09). The subsequent mergers/acquisitions of BlackRock Inc. now creates the “World’s Largest Assets Management Firm” on planet earth with more than $3.4tn under active/passive management as of Jan/2010. Now…remember PIMCO, well they got into the ETF’s late but are gaining market share (the name of the game is “Economy’s of Scale”) in these “Indexed Exchange Traded Funds” through iShares/ETF’s, you name it they’ve got it in a basket of “Greater Fool’s Pixie Dust” (remember, this guy “Fink” created the “MBS’s?)! The NY Fed. could care less about capturing the consumers lost money, but they would gladly help BlackRock Inc. crush BAC’s back and have them sell off the remaining (MLIM) holdings to BLK Inc. in order to maintain their Agency (Tier 1 capital/ratio) Rating. Thus using the money to shore-up their balance sheet (BAC) that surely will be jeopardized by the MBS’s scandal ( pay for legal fee’s ,etc., etc.,) that BlackRock is willing to pony-up to purchased (kinda like blackmail,really,really strange?) the remaing ~35% stake in MLIN. It’s truly sad that the goings on just help humongous companies like PIMCO, BlackRock, and Vanguard just get to the “TBTF’s” stage? The bottom line is that once BLK Inc. buys BAC’s remaining chess pieces the game is complete with no public benefits other than for the $-GOP-$ when in control to handover on a silver platter the $Trillions of Dollars in 401k’s to these wolves in sheep clothing. Note: Let us not forget revisions to Social Security, which will come riding in on a “White Horse” if GOP wins congress! Giddy-up Cowboy,…
http://www.alacrastore.com/mergers-acquisitions/BlackRock_Inc-2107770
http://www.wikipedia/wiki/BlackRock
http://en.wikipedia.org/wiki/Mortgage-backed_security#Background
Google @ Ref: “BlackRock Lining Up Buyers if BofA Sells Stake”…and “Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages”
PS. There were at least a half dozen banks involved with nefarious dealings (not to feel any empathy for BAC) but they put the microscope on BAC…when AIG,Citigroup,MS,WF,BofNY,Mellon,JPMC,GS,PNC,HBSC are as guilty – just adds up to todays logic?
October 23, 2010 – NY Times
“The whole essence of this crisis is fraud and unless we restore the rule of law and transparency of disclosure, we are not going to fix this.”
Laurence J. Kotlikoff, economics professor, Boston University.
Note: JMHO…Thankyou Simon and James :-)
http://en.wikipedia.org/wiki/BlackRock
http://www.foxbusiness.com/markets/2010/10/22/blackrock-lining-buyers-bofa-sells-stake/
http://www.bloomberg.com/news/2010-10-19/pimco-new-york-fed-said-to-seek-bank-of-america-repurchase-of-mortgages.html
@Rickk. Yeah, I saw Kotikoff’s remark also, as the very last line of the article.
It echoes the piece by William K. Black at http://tinyurl.com/39f95hv
“The interesting thing about sceptics is that they are always looking for proof.
The question is, what on earth what we do with it, if we found it?”
Matt Baglio
Uh. Gee. Anonymous.
Well, in a country that purports to be based on the rule of law, we would bring the people guilty of criminal fraud against the American people to justice and many of them would go to jail. After all, 50 Attorneys General are now investigating this mortgage fraud.
Maybe the (very considerable) assets of those criminals would be seized and put to good use rebuilding the country said criminals have so seriously damaged.
The Federal Reserve might very likely be absorbed into the Department of the Treasury, and for the first time since 1913, control over the U.S. monetary system could be returned to the Congress, where it Constitutionally resides.
If you believe nothing can be done, stay Anonymous. And since you are Anonymous, I trust you’ll get out of the way of those who are trying to do something.
“Though justice be thy plea, consider this,
That in the course of justice none of us
Should see salvation: we do pray for mercy;
And that same prayer doth teach us all to render
The deeds of mercy.”
William Shakespeare (1564 – 1616), “The Merchant of Venice”, Act 4 scene 1
Yes it is. Derivatives found their way into bank and institutional portfolios around the world. It was the loud noises from Europe after the depth of problem was discovered that had Treasury scrambling to placate the French, the Germans and others in the European Commonwealth where they watched their assets evaporate.
Ireland and Greece have the most obvious problems, with an enormous real estate bubble in the former that has popped, and outright fraud in latter in the form of hidden debt. But there’s enough chaos to envelop lots of other places as well.
Even vibrant economies such as those in East Asia and in Brazil are wary at this point, with cash flowing in from around the world. Much of that money was probably made from hedge bets against the worthless paper now raining down on the banks. That money is looking for a place to go and much of it is headed towards where it perceives a boom. That means there’s a real potential for bubbles in those economies as well.
So yes, there are real problems everywhere. Everything is connected up at this point, with waves of money (and troughs of debt) sloshing around the electronic ocean we’ve built.
Stark stuff from Chris Whelan of Institutional Analytics. This is from an AEI symposium held Oct 6th. As you listen to this, you might remind yourself that these are conservative analysts. The sky-is-falling narrative is usually attributed to liberals, but not this time. His presentation starts at around 1:07:30.
http://www.ustream.tv/flash/video/10034228?v3=1
He seems to have little doubt that both Bank of America and Wells Fargo will have to be restructured in relatively short order, pointing out that their efficiency (how much it costs them to make a dollar) is nearing a dollar.
Allowing the banks to skate on mark to market has only forestalled the inevitable, something Elizabeth Warren pointed out at the time. There will be blood.
October 25, 2010
“While it may be true that many homeowners may benefit from temporarily reduced payments even though the modification ultimately fails, Treasury’s claim that ‘every single person’ who participated in HAMP gets a ‘significant benefit’ is either hopelessly out of touch with the real harm that has been inflicted on many families or a cynical attempt to define success as failure,” the report says.”
Neil Barofsky, the Special Inspector General for TARP
I would like to thank Mr.Johnson for his honest and insightful articles throughtout the crisis period. There are only a few people in his position who have the intelligence and the courage to point out the undue influence of the financial industy on governments.
Appendum: High Frequency Trading (HFT’s) and their Master? (BLK Inc.) The world is their oyster, and it ain’t America’s (NYSE & Nasdaq & etc.,etc.) Markets! Ref:
http://thesurvivalistforum.com/index/?tag=high-frequency-trading-htf
http://www.marketsmediaonline.com/news_details.htm?wP=i&wPI=5&cN=6970&eG=4
Thanks Norm. I meant do other countries have these problems with robosigning and improper foreclosures and lost titles? Do you know?
Thanks for posting this. It’s a much pithier bookend to the AEI link in my previous post and Whalen’s talk there.
There’s a bucket of quotes in this 7+ minute interview. He says that “Obama is walking in Herbert Hoover’s shoes”, that we need something along the lines of the bank restructuring that happened in the 30s.
Moreover, he has very bad news for institutional investors, about their recourse if they feel they’ve been swindled. The trustee of an MBS is nothing more than a paper shuffler, with no stake in the instrument, “with the least amount of responsibility of any investment trustee”. Moreover, like any other corporatized asset, it takes 25% of proxies to take legal action against the people who created it.
And they have been swindled. Given the bank’s failure to follow New York real estate statutes, the MBS holders may have no legal claim on the property liens they thought was their collateral.
Big, big mess. Whalen is the clearest voice I’ve heard in a while and he answers a bunch of questions I’ve had about asset tracking, about loan servicing capabilities at banks, and about whether this thing was anywhere near the end. It’s not.
I don’t have any idea. I know there was a huge real estate boom in Spain and in Ireland, one that probably stoked the same derivatives machine that fired up the mortgage madness in the US. What’s now happened to that property isn’t something I’m familiar with, though the second of the two Reggie Middleton videos may be instructive here. That’s a European city he’s walking around in, examining empty store fronts. And that’s a European interviewer I do believe.