Sunday, February 27, 2011

Divide and conquer - With Prequel

UPDATE NOTE: This following story is related enough to the subject of this post as to mention here rather than a new post, and serves better to introduce this post than Post Script it:

Plutocracy Now: What Wisconsin Is Really About
Income inequality has grown dramatically since the mid-'70s -- the bulk of our growing inequality has been a product of skyrocketing incomes among the richest 1 percent and—even more dramatically—among the top 0.1 percent. It has, in other words, been CEOs and Wall Street traders at the very tippy-top who are hoovering up vast sums of money from everyone, even those who by ordinary standards are pretty well off.

American politicians don't care much about voters with moderate incomes. relentless concentration of wealth and power among the rich is deeply corrosive in a democracy, and this makes it a profoundly political problem as well.

How did we get here? In the past, after all, liberal politicians did make it their business to advocate for the working and middle classes, and they worked that advocacy through the Democratic Party. But they largely stopped doing this in the '70s, leaving the interests of corporations and the wealthy nearly unopposed.

it's not that the working class has abandoned Democrats. It's just the opposite: The Democratic Party has largely abandoned the working class.

because politicians don't respond to the concerns of voters, they respond to the organized muscle of institutions that represent them. With labor in decline, both parties now respond strongly to the interests of the rich—whose institutional representation is deep and energetic—and barely at all to the interests of the working and middle classes.

This has produced three decades of commercial and financial deregulation that started during the administration of a Democrat, Jimmy Carter, gained steam throughout the Reagan era, and continued under Bill Clinton. There were a lot of ways America could have responded to the twin challenges of '70s-era stagflation and the globalization of finance, but the policies we chose almost invariably ignored the stagnating wages of the middle class and instead catered to the desires of the superrich

Income volatility has risen dramatically over the past 30 years. The odds of experiencing a 50 percent drop in family income have more than doubled since 1970, and this volatility has increased for both high school and college grads. At the same time, traditional pensions have almost completely disappeared

This didn't all happen thanks to a sinister 30-year plan hatched in a smoke-filled room, and it can't be reined in merely by exposing it to the light. It's a story about power. It's about the loss of a countervailing power robust enough to stand up to the influence of business interests and the rich on equal terms. With that gone, the response to every new crisis and every new change in the economic landscape has inevitably pointed in the same direction. And after three decades, the cumulative effect of all those individual responses is an economy focused almost exclusively on the demands of business and finance.

For this to change, America needs a countervailing power as big, crude, and uncompromising as organized labor used to be.

But what?

Over the past 40 years, the American left has built an enormous institutional infrastructure dedicated to mobilizing money, votes, and public opinion on social issues, and this has paid off with huge strides in civil rights, feminism, gay rights, environmental policy, and more. But the past two years have demonstrated that that isn't enough. If the left ever wants to regain the vigor that powered earlier eras of liberal reform, it needs to rebuild the infrastructure of economic populism that we've ignored for too long. Figuring out how to do that is the central task of the new decade.

Now back to the original post:

Guambat is unimpressed with the tempest in Wisconsin, and elsewhere. Unimpressed with the base cynicism of it. It's a classic case of the big money guys playing around with a divide and conquer tactic. Don't fall for it.

The pitch is being made that state and local governments just cannot afford the overly paid workers on their payroll. It's a pitch aimed to divide middle class, many of who are tea sippers, many of whom are laid off, many of whom are in uninspiring government employment.

And the cynical little game is getting some traction, based on this article:

GOP governors gambling on challenge to public-sector unions
Michael Wernick, 61, a longtime body and fender man, says his financial fortunes have gone nowhere but down over the past decade. His salary is stagnant, and his 401(k) has shrunk, derailing his retirement plans.

So as he watches Gov. Scott Walker (R) take on the public-employee unions by not only demanding steep reductions in their pension and health-care benefits but by also insisting they give up many of their collective-bargaining rights, Wernick is quietly cheering him on.

"Maybe there is a little bit of jealousy here, but public workers have what I don't have."

But do public workers really have what private sectors don't have? Maybe in individual cases, but across the board, it's hardly a clear story.

For instance, The Business Insider, hardly a screaming socialist union voice, has this:

For Anyone Who Thinks Wisconsin State Workers Are Overpaid...
Paul Ryan and everyone else freaking out at the Wisconsin's striking state employees keep getting one fact wrong.

Wisconsin's public sector workers get paid LESS than the private sector.

You can see this in a couple of charts from economist Menzie Chinn. First, national compensation by education level. Public workers earn less at every level except for high school dropouts.

Second, here's how this breaks down in Wisconsin. Real annual compensation is 4.8% lower for public sector workers.

Read more:

And this perspective:

Comparing Public and Private Sector Compensation over 20 Years, April 2010
The current recession and the resulting fiscal difficulties faced by state and local governments have renewed interest in the compensation of the public workforce in regard to pay, pensions, and other benefits. In this report we examine the extent to which state and local government compensation in the United States is comparable to compensation in the private sector.

The analysis finds that:

• Public and private workforces differ in important ways. For instance, jobs in the public sector require much more education on average than those in the private sector. Employees in state and local sectors are twice as likely as their private sector counterparts to have a college or advanced degree.

• Wages and salaries of state and local employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11 percent less; local workers earn 12 percent less.

• Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees.

• The pattern of declining relative compensation remains true in most of the large states we examined, although some state-level variation exists.

• Benefits (e.g., pensions) comprise a greater share of employee compensation in the public sector.

• State and local employees have lower total compensation than their private sector counterparts. On average, total compensation is 6.8 percent lower for state employees and 7.4 percent lower for local workers, compared with comparable private sector employees.

On the other hand, the big boys have this to say,

Employee Compensation in State and Local Governments
State and local governments face large budget deficits
as revenues have stagnated and spending has remained at
high levels.

To reduce deficits, large savings can be found
in the generous compensation packages of the nation’s Fat Cat Finance and Industry Management
million state and local workers.

In 2008, wages and
benefits of $1.1 trillion accounted for half of total state and
local government spending. This bulletin examines state
and local compensation costs, with a focus on the lucrative
pensions enjoyed by public sector workers.

Public sector pay averaged $39.66 per hour in 2009, which
was 45 percent higher than the private sector average. The
public sector advantage was 34 percent in wages and 70
percent in benefits.

So, we all know that there are lies, damned lies and statistics, but what is the smoke and mirrors going on here?

Ezra Klein has sort of a bead on it:

Are Wisconsin's state and local workers overpaid?
Consider this analysis the Economic Policy Institute conducted comparing total compensation -- that is to say, wages and health-care benefits and pensions -- among public and private workers in Wisconsin. To get an apples-to-apples comparison, the study's author controlled for experience, organizational size, gender, race, ethnicity, citizenship and disability, and then sorted the results by education. Here's what he got:

"Wisconsin public-sector workers face an annual compensation penalty of 11%. Adjusting for the slightly fewer hours worked per week on average, these public workers still face a compensation penalty of 5% for choosing to work in the public sector."

The deal that unions, state government and -- by extension -- state residents have made to defer the compensation of public employees was a bad deal -- but it was a bad deal for the public employees, not for the state government.

State and local governments were able to hire better workers now by promising higher pay later. They essentially hired on an installment plan.

And now they might not follow through on it. The ones who got played here are the public employees, not the residents of the various states. The residents of the various states, when all is said and done, will probably have gotten the work at a steep discount. They'll force a renegotiation of the contracts and blame overprivileged public employees for resisting shared sacrifice.

State and local budgets are in bad shape. They'll need deep reforms across a variety of categories, from tax increases to service cuts to changes to employee compensation.

But the focus on public employees -- and the accompanying narrative that they're greedy and overcompensated -- obscures a lot of that: It makes it seem as if the decisions that have to be made are easy and costless and can be shunted onto an interest group that some of us, at least, don't like.

It's the Republican version of when liberals suggest we can balance the budget simply by increasing taxes on the rich. But it's not true.

Guambat begins to suspect this whole thing is an effort to shift focus from the big bucks the big guys make. Stir up a battle in the suburbs and who knows what's going on in the yacht harbor?

For instance, remember the publicity about the huge CEO and other highflyer pay packets? Well, now, if we can just pit the ex-body mechanic against the local teacher, they won't be paying much attention to that little item, which is steadily returning to business as usual

And this disparity of the big money at the top is most likely what is behind the lies being spread around as statistics, as in this:

Federal salaries fall behind private sector, panel says
Official numbers released by the government late last week show salaries of federal workers falling slightly farther behind their private-sector counterparts in the last year, by an average of 2.1 percent across the country.

The government's numbers also show that higher-paid, more senior employees tend to fall behind their counterparts at private companies, whereas lower-paid employees in government come out ahead.

The non-government jobs often include bonuses or incentive pay in financial services and other industries, which helps skew those salaries up,said Allan G. Hearne, pay expert with the Office of Personnel Management.

"The highest-paid federal employee makes $400,000 a year," said Philip M. Doyle, assistant commissioner for compensation for the Bureau of Labor Statistics, referring to the president.

"There's a cap on federal salaries that's going to keep the higher end from going too high."

This story was picked up by the Federal Computer Weekly, which noted such studies were being hotly contested by the usual suspects:

Federal vs. private pay: The latest take on who makes more
These numbers, compiled by the Bureau of Labor Statistics, are likely to be hotly contested. USA Today issued a report in March that said the typical federal worker is paid 20 percent more than a private-sector employee in the same occupation. Salary figures listed by USA Today did not include benefits such as health insurance and pensions.

The CATO Institute, a libertarian think tank, arrived at a similar conclusion, as did The Heritage Foundation, another conservative association, which also issued a report stating that federal employees earn 22 percent more in hourly wages than the private sector, reported FCW on July 26. Republicans had cited these earlier reports as examples of overspending in the government.

BLS’ report also found different pay disparities based on an employees’ level, with higher-paid executives experiencing a larger wage gap than lower-paid employees, who may earn more than those in the private sector, the Post states.

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Friday, February 25, 2011

Blimey, BBC discovered Guam

And here Guambat thought Magellan discovered Guam about 500 years ago. That is, until his Chamorro friends told him they discovered it about 4,000 years ago. Before Hawaii. Before New Zealand.

Fancy that.

Guam: The best place you never considered going to
It has a link to a few pictures, half of which are taken around Tumon Bay, which Guambat's burrow overlooks, but you might get a better gestalt view here.

The story unfortunately breaks the secret on the best all-day breakfast diner on Guam, where carbs and fats come by the scoopful, and generally praises the very down to earth Guam eating habits.

But, for eating, you need to look to that other guambat, k. santos, who blogs as The Scent of Green Bananas, whose post for 20110222 features the little eatery next door, Delmonico's. Guambat and the Mrs are regulars. Delmonico's serves up a tasty dish of fried peppers and oysters, made all the better after Chef Eddie added okra, at Guambat's suggestion.

Once here, youse may's well go on out to the rest of Micronesia.


Saturday, February 19, 2011

Oracle tries green persimmon effect

Over 50 years ago, Guambat spent one of his most valuable summers of his life on his great-uncle's farm in Western Tennessee. He chopped cotton, worked the plow horse, carted 'maters, pulled 'tators, shucked corn -- and learned you cain't whistle Dixie, or anything at all, after chomping down into a green persimmon.

This last lesson was one of seemingly hundreds learned that summer. It came about as Guambat and his uncle were traipsing through a wooded area. Guambat delighted in the free fruit market that was his uncle's farm, and usually he'd find stone fruit, apples, berries of many sorts, and the odd run-away strawberry or what not. On this occasion, he came across a tree with some lovely green fruit, one of which he plucked.

He asked his uncle what is was. "It's a persimmon" said he, "but folks like to call 'em pawpaws." What a lovely name either way, Guambat thought. Must taste as lovely.

"Are they good to eat?", he asked his uncle. "Delicious when they're ripe", says he. "But I bet you can't eat a bite of that one and then whistle me Dixie".

So young Guambat, being ever so plucky, and after finding so many good things to eat on a Tennessee farm, ever so fatter, chomped off a crackling nice chunk of green persimmon.

Not only could he not whistle Dixie, he could hardly form a word. Nary a pucker came to his lips.

Had Guambat had access to the web back then, and taken notice, he would have known that the old uncle was just playing another trick on his city-fied nephew. See, Pucker up, it's persimmon time in Tennessee! from Hillbilly Savants' blog:
I can remember my cousin Danny saying; “Oh, Tug, these persimmons are delicious, you’ve got to try one!” Then he held one up to his mouth and pretended to take a bite and acted like it was the best thing he had ever tasted in his life. Of course I, not wanting to look stupid in front of my hero cousin, took a big bite. If you have never bitten into a green persimmon before, you don’t know what you are missing. Or rather I should say you don’t want to know what you are missing! It takes no more than one bite into one to turn your mouth completely inside out. It has the similar effect of biting into a lemon, only worse! The first thing you want to do after trying one is to stick your tongue out and start slapping it. That is hard to do because your lips are now drawn into a frozen pucker, making this nearly impossible.
You need to read that article, because it is full of beautiful pictures of the fruit and other memories and uses of it.

And so what does all this home-spun humour have to do with Oracle? Well, Oracle is trying to trick the Federal government into making State Attorneys General take a great big bite of green persimmon. Oracle wants to stop the whistleblowers.

But first, for background, see this blog post for the context:
Government not most favored customer of Oracle.

Oracle Seeks to Bar U.S. From Giving States Whistleblower Data
Oracle, accused in a U.S. lawsuit of overcharging the government on software contracts worth $1 billion, will argue in a hearing in Alexandria that U.S. Magistrate Judge Thomas Jones should block the Justice Department from sharing confidential company information with state attorneys general.

Lawyers specializing in whistleblower cases said Oracle’s request to shield documents from state governments may be an attempt to limit the company’s liability, which some attorneys not involved in the case said could be as much as $1 billion in the U.S. lawsuit alone.

The lawsuit was filed under the False Claims Act in 2007 by Paul Frascella, a former Oracle employee, and joined by the Justice Department on July 29. The act lets citizens sue on behalf of the government and share in any recovery, while the government has the option of intervening in a case. The U.S. is seeking triple damages and can collect as much as $11,000 for each false billing.

Oracle is accused of inducing the General Services Administration, or GSA, to buy $1.08 billion in software from 1998 to 2006 by falsely representing that the government was receiving the same discounts as most-favored commercial customers. Oracle instead gave companies discounts of as much as 92 percent, while the government’s reductions ranged from 25 percent to 40 percent, the U.S. claims.

On Jan. 31, Oracle America Inc. agreed to pay $46 million to resolve claims that Sun Microsystems Inc., which merged with Oracle last year, paid kickbacks in an attempt to get government contracts and submitted false information to U.S. contracting officers.

The case is United States of America v. Oracle Corp., 07- cv-00529, U.S. District Court, Eastern District of Virginia (Alexandria).

You can get a direct link to that case, and a wealth of further information, by reading the whole Bloomberg article.

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Fannie closes doors on foreclosure law firms

Foreclosure law firm lays off nearly half of its staff, after losing Fannie Mae
A Hollywood [Florida] law firm that processes thousands of foreclosures for major lenders laid off almost half of its 568 employees Monday, days after the government-owned mortgage giant Fannie Mae pulled its files from the practice.

Monday's layoffs echoed the massive job cuts that the law office of David J. Stern and public-traded affiliate DJSP Enterprises instituted after Fannie Mae and Freddie Mac, the other federal mortgage guarantor, dumped them. Fannie and Freddie comprised the bulk of Stern's business. About 700 Stern employees lost their jobs, according to regulatory filings.

Lawyer held in contempt over 'fraud' in foreclosure filing
Miami-Dade Circuit Judge Maxine Cohen Lando expressed her displeasure Friday in a case that involved a property in Homestead with a $265,134 foreclosure judgment issued in July.

Lando said the so-called original note and original mortgage were filed months after the bank said those documents were lost.

"That in itself is a fraud upon the court," Lando wrote in an order to show cause as to why she should not hold Ben-Ezra & Katz attorneys in contempt.

But, she added, the action "pales in comparison" to the fact that the mortgage and note are to a different property in Lehigh Acres, and that the documents are improperly signed and notarized. Lando said her verbal contempt finding on Friday would be followed by a written order.

The judge dismissed the foreclosure case and banned the lender from refiling it.

See, The Ball and Chain of Title

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Wednesday, February 16, 2011

Bankruptcy judge makes MESS of MERS

Guambat has written before about MERS, an uncommon concoction of financial wizardry that simply ignored centuries of the common law of conveyance.

It was a scheme intended to grease the wheels of real estate mortgage securitization, by depriving local governments across the USA of the control (and revenues) of recording title, and along the way, depriving many mortgage debtors of their due process, and, perhaps, some lawyers of their licentious licenses.

In much the same manner that the credit implosion served as a reality check for the mark to model dreamers, a bankruptcy court has thrown a cold bucket of reality on Le MERS.

Merscorp Lacks Right to Transfer Mortgages, Judge Says
Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said.

“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”

Grossman said Select Portfolio had to show that U.S. Bank owned both the note and the mortgage, and there was no evidence that it held the note. The judge disagreed with Select Portfolio’s argument that U.S. Bank held the note because the note “follows” the mortgage, which it said U.S. Bank owned.

“By MERS’s own account, the note in this case was transferred among its members, while the mortgage remained in MERS’s name,” Grossman wrote. “MERS admits that the very foundation of its business model as described herein requires that the note and mortgage travel on divergent paths.”

A WSJ real estate blog elaborated:

U.S. Bankruptcy Judge Questions Legal Claims of MERS
At issue was whether U.S. Bank had legal standing to foreclose. The loan was originated by First Franklin in 2006 and MERS became an agent for First Franklin, which ultimately transferred the loan to Aurora Bank and later to U.S. Bank. Both of those banks are members of MERS, which allowed it to also act on behalf of those agents, according to MERS’s lawyers.

“By MERS account, it took no part in the assignment of the Note in this case, but merely provided a database which allowed its members to electronically self-report transfers of the Note,” wrote Judge Grossman. “[T]here is nothing in the record to prove that the Note in this case was transferred according to the process described above other than MERS’s representation that its computer database reflects that the Note was transferred to U.S. Bank.”

“The documentation provided to the Court in this case…is stunningly inconsistent with what the parties define as the fact of this case,” Judge Grossman wrote. The theory that MERS “can act as a ‘common agent’ for undisclosed principals is not support [sic] by the law.”

The opinion also rejected any argument that MERS’s reach was so broad and deep that it should receive favorable treatment from the judiciary:
The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law.

Laurence Platt, a banking industry attorney at K&L Gates in Washington, said the Agard case represented an “outlier that goes against years of decisions by New York courts that find assignments from MERS to be consistent with New York law.”

A spokeswoman for MERS also said that a separate decision on Friday by a U.S. Bankruptcy Court judge in Kansas had affirmed MERS’s ability to foreclose on behalf of Countrywide Financial Corp. In the case, the judge wrote that the court had received “uncontroverted evidence” that MERS was acting as an agent for Countrywide, allowing MERS to act on its behalf.

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Suite deal or abuse of process?

Payments to U.S. Rivals Let Chinese Furniture Makers Skirt Import-Duty Review (WSJ)
Each year since 2006, U.S. furniture "makers" have asked the Commerce Department to review the U.S. duties paid by Chinese manufacturers on imports of wooden bedroom furniture. Many Chinese firms, fearing a steep rise in duties, agreed within months each time to pay cash to their U.S. competitors in return for being removed from the review list.

"Everybody in the industry in the U.S. and China understands that these payments are clever shakedowns," said William Silverman, a lawyer representing U.S. furniture retailers, big importers of Chinese products, at an October hearing of the U.S. International Trade Commission.

Representatives of the furniture makers, including La-Z-Boy Inc. and Vaughan-Bassett Furniture Co., say the payments are legal. Late last month, those two companies and about 15 other U.S. furniture makers sought the latest review, listing 110 Chinese firms.

In a note included in a December ITC report, Commissioner Daniel Pearson said the settlements create "additional costs and distortions" in furniture trade, "with little evidence that these distortions have yielded any benefits to the industry overall, the U.S. consumer, or the U.S. taxpayer."

Commissioner Charlotte Lane said at the October hearing that she was "very, very troubled" by the settlements, adding: "I cannot figure out for the life of me how they are actually legal."

She might consider "abuse of process" to figure out if they are not.

Maybe if US furniture "makers" actually made furniture ...?

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Monday, February 14, 2011


Guambat learned a new word today from the erudite New York Times. Monopsony. It's "a single buyer with life-or-death power over its vendors".

Think government contracting. Think Pentagon. Read this article:

From Pentagon, a Buy Rating on Contractors
In economic terms, the Pentagon is a “ monopsony,” a single buyer with life-or-death power over its vendors. If the Pentagon wants the military industry to be healthy and profitable, it can pretty much ensure that outcome.

Monopsony or not, why should the Pentagon be talking up the stocks, even implicitly, of the companies it buys from? Why was Mr. Carter going out of his way to talk to investors and analysts? Didn’t he have more important things to do?

The answer, I eventually learned, has to do with something that happened a very long time ago, and goes under the category of “Be careful what you wish for.” Let’s just say that banking isn’t the only industry where the government has allowed a handful of companies to become too big to fail.
The article tells us that back in 1993, government officials invited defense industry executives to a "Last Supper" where they were told they would need to start merging to cut down on the costs of overhead being passed on to the government buyers.
The Last Supper has become part of the lore of the military industry — though partly that’s because Mr. Aspin’s prediction about tighter Pentagon budgets turned out to be so wrong. “On the day George W. Bush took office,” said Loren B. Thompson, a well-known military consultant, “defense spending was around $300 billion.”

Today it is more than double that amount, around $700 billion. The wars in Iraq and Afghanistan — not to mention the Pentagon’s voracious appetite for expensive weapons systems, and the lack of competition among the remaining contractors — have been a gold mine for the Big Five.

Not surprisingly, for most of the first decade of the 21st century, the stocks of these companies soared. But after peaking in 2008, they came crashing back to earth. Which, for the Pentagon, has turned out to be a problem. These companies need access to the capital markets, which is more difficult when their stocks are down. And the Pentagon simply can’t allow them get into serious financial difficulty; there are just too few of them. “What we can’t afford from the defense perspective is a sick industry,” said Jacques S. Gansler, a former procurement official for the Pentagon who teaches at the University of Maryland.

Recognizing that leaner times lay ahead, Defense Secretary Robert M. Gates made a speech last May acknowledging that Pentagon budgets were unlikely to rise substantially any time soon, and laid out a plan to create new efficiencies and increased competition among the companies.

taxpayers and shareholders are decidedly not in alignment: the tougher the Pentagon gets with its contractors, the better it is for taxpayers and the worse it is for shareholders. And yet it can’t get too tough, because if it is, the companies will start running into financial trouble, which means the stocks will sink even further and the companies will start to have trouble raising capital.

This is the bind created by the Last Supper.

Now can you see why the Pentagon has taken to talking up the industry to the investment community? With one side of its mouth, the Pentagon is saying it is going to be more tough-minded in its approach to military contractors than ever before. But with the other side of its mouth, it is telling investors not to worry: the profits will be there, no matter what.

The sidling up to investors actually began last October, when the deputy defense secretary, William J. Lynn III, held a private meeting for about a dozen Wall Street analysts, laying out the Pentagon’s cost-cutting plans in astonishing detail. Indeed, according to Reuters, which uncovered the meeting, the analysts were sworn to secrecy. Although this would seem to violate, at the least, the spirit of transparency that Americans expect of market participants, notes of the meeting became public only after Reuters exposed it. (A military consultant named James McAleese published his notes on his Web site a few days after the Reuters story broke.)

Whatever the ethics of this meeting — and the Pentagon insists that nothing new was divulged during the session — it appears to have had an effect. If you look at the stock charts of the Big Five, you’ll see that they all started to rise around October. Imagine that.

Guambat is reminded of another word: symbiosis.

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Friday, February 11, 2011

Support Our Troops? Nah, screw 'em

There is a US Federal law that offers certain legal protections to military personnel and their families against the usual rude intrusions of civilian life. It's called the The Servicemembers' Civil Relief Act. See this and this.

The Big Banks, which the troops seemingly protect don't always return the favor, or care about the law -- until, that is, they get caught. This is true, or so it seems, about JP Morgan and BofA, from the looks of these stories:

New Program to Help Military Homeowners, Bank of America Announces
I received an email last month from Sgt. Keith Oliver – a soldier currently deployed in Iraq. He told me that after Bank of America had reduced his payments for two years the bank suddenly came back and said he owed about $19,000 or else he would face foreclosure.

He kept calling the bank to explain he was deployed but Oliver said he bounced from one department to another until finally he contacted us at “GMA” to ask for help.

When we called Bank of America it quickly realized the error and fixed the situation with Oliver.

Bank of America announced this morning on “GMA” that it will help members of the military who have trouble meeting their mortgage payments by creating a new program to assist those active duty soldiers.

“What we’re going to do is set up a program of our own that allows us to reduce their principal if they get in trouble, extend their payments, bring their rates down,” Larry DiRita, a spokesman for Bank of America, said.

“Our goal is, look, if you are a military person, you are deployed, you don’t need to be worrying about your house. If you do find yourself in a distressed situation let us know and we will start working with you right away,” he told me.

Chase spends $2M to fix errors on military mortgages
Marine Capt. Jonathon Rowles, now assigned to South Korea, alleges Chase committed a number of violations, including failing to give the proper effective date of the interest rate reduction, repeatedly requiring him to re-apply for protections, and trying to collect on inaccurate account balances.

Rowles alleged that Chase Home Finance, a subsidiary of JPMorgan Chase, failed to reduce his interest rate to 6% on the effective date of his active-duty status and required him to re-apply for protections no less than four times a year after that. He also alleges that starting in April 2009, Chase tried to collect "an inaccurate account balance" resulting from "its own systemic errors in servicing the loan," according to the lawsuit, filed July 6 in U.S. District Court in Beaufort, S.C.

Chase has advertised itself as a military-friendly bank since at least 2005, when it began touting its Home Finance Military Mortgage program, which offers a discount on closing costs in home purchases or refinancing for military members and retirees.

Bank ends student loan deferrals for troops, then reverses decision
the bank was contacted by the wife of a soldier serving in Afghanistan, and she was told the bank decided in December to stop allowing active-duty troops to delay paying their student loans.

"They informed me that they are no longer deferring private student loans for active duty military personnel," said Kerri Napoli, whose husband, Army Pfc. Andrew Napoli, is now serving near Kandahar.

After repeated conversations with Chase, Napoli says she told the bank last month that she had contacted NBC News. The next day, she says, the bank told her it would grant her husband an exception to the new policy and defer his loan.

The bank also has had second thoughts about ending a program aimed at helping U.S. troops with their family finances. After NBC News contacted the bank about why it had stopped allowing deferred payments, a Chase official said that decision was being reversed and the program would be reinstated.

J.P. Morgan Apologizes for Military Foreclosures
A J.P. Morgan Chase & Co. executive, at a U.S. House hearing Wednesday, apologized for wrongly foreclosing on military families and overcharging thousands for mortgages, as lawmakers weigh whether new legislation is needed to help prevent military personnel from losing their homes and getting hit with high interest rates.

She said the company is embarrassed over the matter, and apologized for the bank's errors.

But lawmakers didn't sound satisfied. In a heated exchange, California Rep. Bob Filner, the top Democrat on the panel, made it clear he doesn't think an apology is enough.

"You broke the law. How are we going to hold you accountable?" Rep. Filner said. "Everything is impersonal. Nobody is ever responsible and yet these people's lives are turned upside down. You can't just apologize...and then, this is over."

Chase initially found it overcharged at least 4,000 military personnel in active service and took the homes of 14. However, Chase's testimony Wednesday shows the firm has now found more problems--it said it overcharged 4,500 active-duty military members and wrongly foreclosed on 18.

Lawmakers at the hearing voiced concern that Chase, a company that received funds from the government's 2008 financial-industry government rescue program, would have made such errors. They were also concerned that the problem could be rampant, with other banks overcharging military personnel and threatening to take their homes just as the federal government is trying to combat the nation's foreclosure crisis.

Banks reminded on military personnel protections
Holly Petraeus, wife of Gen. David H. Petraeus, the top American military commander in Afghanistan, pointed the firms to the Servicemembers Civil Relief Act, which limits the interest rates that banks can charge those in the military and prevents them from foreclosing on homes of active duty service members without a judge's expressed authorization and a formal hearing where the homeowner is represented.

The recently-tapped head of military issues for the new Consumer Financial Protection Bureau, sent a letter to the nation's 25 largest banks Tuesday urging them to comply "with important legal protections for military personnel."

Elizabeth Warren, the Harvard law professor helping to set up the new consumer watchdog, appointed Petraeus to the post early last month.
Chase's people are trying to spin the story down a few notches. Forget the harassment and foreclosures. There really isn't all that much money at issue here, is their subliminal message, reported the the WSJ article noted above:
Stephanie Mudick, executive vice president of J.P. Morgan's office of consumer practices, told the House Committee on Veterans' Affairs the bank has so far sent the 4,500 overcharged service members $2.4 million including interest, and the median payment has been $70 plus interest.
Chump change.

Chumps, indeed.

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