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Obama Administration To Shame Lenders That Don't Offer To Modify Mortgages

2009-11-30T16:57:00Z

Its signature foreclosure-prevention plan having definitively failed to actually help very many homeowners, the Obama administration today announced its new strategy to get balky lenders to the table: Nagging.

The U.S. government will start to publicly identify those companies that are failing to give troubled homeowners permanent loan modifications, and hound them daily to monitor their progress, the Treasury Department declared.

Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae "account liaisons" are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer's plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.

The Home Affordable Modification Program (HAMP) was launched in March to much fanfare as the administration's main response to a growing foreclosure problem. The government would provide cash incentives to mortgage servicers that reduced monthly payments for distressed homeowners, and that way those who were facing higher payments or lower incomes could stay in their homes.

But the program, which the administration refers to as "a primary focus of financial stability efforts," has been a disaster according to consumer advocates, economists, housing experts and government watchdogs. It does nothing for those who have lost their jobs, because they have too little income to qualify, and could make things even worse in the long run for those homeowners who owe more on their mortgage than their homes are worth, because the plan does not require principal reductions.

Furthermore, only a tiny proportion of the relatively few homeowners in the program have obtained permanent relief. As of Sept. 1, only 1,711 homeowners, or less than two percent of those who received a temporary modification under Obama's plan, ended up with a permanent fix, according to a report by the Elizabeth Warren-led Congressional Oversight Panel.

And yet, the plan has cost taxpayers about $27 billion so far.

Meanwhile, as many as 3.4 million homes are expected to enter foreclosure by year's end, with some experts estimating that next year will be even worse.

The administration's latest push -- shaming the mortgage companies -- is "certainly a step forward after six months of operation," says Alan White, a law professor at Valparaiso University who has written extensively on mortgages and foreclosures. "But it's not going to help by itself."

"It's a long-overdue step," he said. "At this point, the servicers are propped up in [many] different ways by the taxpayer -- HAMP isn't the only subsidy they're getting -- and if we're going to prop them up then they ought to achieve our public policy objective."

The four big banks are also the biggest servicers, he noted, and American taxpayers are the majority shareholders in three of them: Bank of America, Citigroup and Wells Fargo. "He who pays the piper should call the tune."

Others were even more critical. "The Obama administration's latest adjustments to its nine-month-old foreclosure prevention program do little but highlight the continued failure of lenders' voluntary efforts to stop the foreclosure crisis," Michael Calhoun, president of the Center for Responsible Lending (CRL), a consumer-advocacy group, said in a statement.

Consumers advocates have long said that the program is poorly managed and relies too heavily on mortgage servicers, whose interests are not necessarily aligned with those of homeowners. Economists and advocates point to principal reduction, for example, as perhaps the best way to achieve a permanent, sustainable modification. Lowering the total amount due -- particularly for those homeowners with negative equity -- could induce homeowners to keep up with their payments and stay in their homes.

But most servicers and banks are loath to reduce principal, particularly for those mortgages that have been securitized. Also, servicers' fees are based on the overall balance of the loan, so if the balance of the loan is reduced, then so are their fees.'

In the administration's plan, the servicers essentially call the shots, rather than the investors -- and yet they still don't want to participate.

One reason is that reducing the principal forces banks to recognize the losses on those loans. By not reducing the principal, the banks can essentially pretend that the loans may one day become current again. It's an accounting trick, consumer advocates say.

Yale economist John Geanakoplos is among those arguing that principal reduction is the best way to reduce foreclosures. By contrast, the administration simply requires that homeowners' monthly payments be lowered, which can happen either through an interest rate reduction, or by lengthening the term of the loan. If a bank turns a 30-year mortgage into a 40-year mortgage, for instance, the homeowner could see the monthly payments drop -- but with 10 years of extra interest, would actually end up owing more.

Spitzer Tells Howard Dean: Time To Call Wall St.'s Bluff On Executive Compensation (VIDEO)

2009-11-25T11:16:49Z

With public outrage over extravagant Wall Street pay packages still simmering, Eliot Spitzer, who pursued overpaid financiers as a prosecutor, went on "The Rachel Maddow Show" last night to discuss the issue.

In particular, Spitzer and guest host Howard Dean discussed the pushback from failed insurance giant AIG, as well as the Treasury, against the insistence by President Obama's pay czar that AIG cut compensation for executives. AIG and Treasury officials have been repeating the now-familiar argument, made by banks all over Wall Street, that cutting compensation would result in an exodus of executives from the company.

Spitzer's response: let them go:

There's an old saying, I think it was De Gaulle. 'The graveyards are filled with indispensable men.' The AIG folks who are saying they're indispensable - test them. I think it's time to call their bluff. Say to them, 'you want to leave? Go away. We will replace you at one third of the pay.' The entire structure of Wall Street pay is out of control.

A new study from Harvard, "Wages of Failure," will only serve to stoke public anger at Wall Street compensation as it concludes that "since 2000, the top five executives at each firm (Bear Stearns and Lehman Brothers) had received staggering amounts of cash bonuses and had sold mountains of stock." While the CEOs of these companies lost hundreds of millions in stock when the firm went belly up (Lehman Brothers) or was bailed out (Bear Stearns), they still retained massive compensation packages.

As one financial compensation expert put it: "They were rewarded hundreds of millions of dollars, and they got that reward for making catastrophic decisions."

Dean asked why, in light of the massive damage that banks have done to the lives of ordinary Americans, some of these executives are not in jail.

Spitzer replied, "Some of them should be"

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The Economist The Obama Administration Should Have Listened To

2009-11-12T09:53:23Z

Eight months ago, the Obama administration launched a plan to help troubled homeowners avoid foreclosure by providing $75 billion in taxpayer funds to banks and mortgage servicers. The money was intended to help three to four million homeowners by lowering their monthly payments, largely by cutting their interest rates.

The next day, a Yale economist and a colleague penned a New York Times op-ed arguing for a different approach.

Rather than cut interest rates, John D. Geanakoplos and Susan P. Koniak wrote, the government should reduce the overall amount owed on the mortgage -- the principal.

"The plan announced by the White House will not stop foreclosures because it concentrates on reducing interest payments, not reducing principal for those who owe more than their homes are worth. The plan wastes taxpayer money and won't fix the problem," they wrote.

The facts seem to be bearing this theory out. As many as 3.4 million homes are expected to enter foreclosure by year's end, with some experts estimating that next year will be even worse. As of Sept. 1, less than two percent of homeowners who received a temporary modification under Obama's plan ended up with a permanent fix. And so far, the plan has already cost taxpayers about $27 billion.

Only five of the 1,711 permanent modifications as of Sept. 1 involved a principal reduction -- in fact, most homeowners with a permanent fix ended up owing even more on their mortgage than they did before the modification.

For those who were already "underwater" on their mortgages, meaning they owed more on their mortgage than the house is worth, the move pushed them even further below the surface.

A recent Fed study confirmed that the Obama administration's plan could actually make matters worse for taxpayers when it comes to helping those homeowners underwater.

And a New York Times editorial Thursday morning concludes: "What is evident, now, is that at the current pace of modifications, and with the housing market coming under renewed pressure, the plan has little chance of making a meaningful dent in the crisis."

What to do? The Times says: "To help people with negative equity, the subsidies in the Obama plan should be redeployed so that they are used to modify loans by reducing the principal balance."

Geanakoplos, interviewed on Wednesday by the Huffington Post, says nearly a year has been wasted.

"I think the Obama administration has made a big mistake. The administration's plan went about as badly as I foresaw, possibly even worse," he says. "Things have been awful. They've barely modified any loans, and those they have haven't done any good."

"I don't fathom the logic of their plan," Geanakoplos says, looking back. "I can't figure out who it's going to help."

In that March op-ed, Geanakoplos and Koniak (a law professor at Boston University) proposed the following: a government-formed, taxpayer-funded plan that would focus on reducing principal for credit-impaired homeowners who were underwater in their mortgages. Total cost to the taxpayer: About 3 to 5 billion dollars over three years.

Here's how it would work:

The program would be limited at first to subprime and other nonprime borrowers who were current on their mortgages because a) you don't want to reward homeowners who have fallen behind on their payments, thus risking a situation where homeowners are incented to fall behind and b) homeowners with good credit typically value their high credit scores, thus are more likely to make regular payments and not become delinquent.

The plan would be administered by a staff of community bankers, who would be hired from the private sector. That's where the cost comes into play. These folks, who would be experienced in dealing with home mortgages and loan modifications, would be the ones looking at individual mortgages and trying to determine the best course of action. Under the administration's plan, mortgage servicers do the modifications. The results haven't been stellar.

A key to the plan was that the reduced principal would be less than the value of the house - so the homeowners would have equity again - but still greater than the note-holder could get simply by foreclosing. For example, suppose a couple took out a $280,000 mortgage when they bought their home, but the home's value dropped to $200,000. "Bondholders today anticipate making as little as $70,000 on a foreclosed home like that in our example," Geanakoplos and Koniak wrote, because foreclosed homes typically sell for a steep discount relative to other for-sale homes. So the principal would be reduced to somewhere between $200,000 and $70,000.

The net result would be that the homeowners, with newfound equity, would have increased motivation to stay in their homes, and the bondholders would be satisfied because they would maintain their income stream and wouldn't lose as much money as they would through foreclosure. Communities also would benefit, because there would be fewer foreclosures in the area, which means less blight, less houses for sale on the market, and less downward pressure on housing prices.

In referencing the provision in Obama's plan that pays mortgage servicers and bondholders for each successfully modified loan, Geanakoplos and Koniak wrote: "The taxpayers need not and should not be responsible for making up the difference between the payments due bondholders before a loan is modified, and those due after modification. Why? Because the bondholders and the banks, the ultimate beneficiaries of homeowner payments, will be better off if mortgages are modified correctly and foreclosures stopped. The government 'owes' them nothing more than that."

And Geanakoplos says the bondholders have already largely discounted the value of their subprime mortgage holdings. He should know; in addition to being an economist, he's a partner in a hedge fund that trades in mortgage-backed securities.

"Bondholders who actually have to mark their positions properly have them marked way down, anticipating that these borrowers will eventually default," he told the Huffington Post in an interview Wednesday. "So you wouldn't be costing the bondholders any money by lowering the principle -- they've already taken the losses....

"That's the whole point. That's the beauty of the plan," Geanakoplos says. "You'd be making the people absorb the loss who have already taken the loss."

Barney Frank Clashes With Ed Schultz Over Bank Bonuses: "Don't Condescend To Me" (VIDEO)

2009-11-09T18:34:58Z

MSNBC's Ed Schultz and Congressman Barney Frank (D-Ma.) clashed tonight over Congress's response, or lack of response, to the news that JPMorgan, Goldman Sachs and Morgan Stanley are distributing $30 billion in bonuses this year, a 60 percent increase on their bonus payments from last year.

The "newsflash" on the bonuses, according to Schultz, is that there is nothing Congress can do to stop it. Frank disagreed, saying Congress has a few tools at its disposal: "We can tax it. Let's not forget that."

Schultz argued that this misses the point because "we dished out billions of dollars to Wall Street and they're doing the bonus dance right now. That wasn't in the fine print, Barney, and you know that."

Frank took umbrage at this, pointedly telling Schultz not to "condescend to him." Schultz refused to back down:

Congressman, why can't you just admit that this was a serious misstep on the part of the Congress. You forked out billions of dollars to save the economy. I get all that, to get the structure back going again. But you didn't ask them any questions about how this is gonna go.

Frank insisted Schultz is wrong, and that if Congress passed the legislation pending to allow shareholders to vote on bonuses then they would veto these large payouts. The disagreement largely boils down to Schultz accusing Congress of being too lax with Wall Street and Frank defending the body's actions.

In October 2008, Frank advocated a freeze on Wall Street bonuses, reports Bloomberg.

"There should be a moratorium on bonuses," Frank said at the time. "They have a negative incentive effect because they are the ones that say if you take a risk and it pays off you get a big bonus," but if those risks cause losses "you don't lose anything."

Frank said the moratorium "ought to be for all firms," and that it should last "until [Wall Street] can get a better structure without that perverse incentive." He added that the freeze shouldn't be limited to those firms getting bailouts.

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At Goldman Sachs, It's Mostly $100 Million Days

2009-11-04T18:23:47Z

On three out of every five days this year, Wall Street's leading firm has made at least $100 million trading stocks and bonds, and creating and entering into derivatives contracts.

Out of 194 trading days through the end of September, Goldman Sachs earned at least $100 million from its trading division on 116 of them. The firm lost money from its trading activities on just one day during the three-month period ending in September, federal regulatory filings show. It made at least $50 million on four out of every five trading days.

The documents show just how much of a trading firm Goldman Sachs has become since the financial crisis mushroomed in September 2008. The firm generated about $4.5 billion in pre-tax earnings off trading and investments during the third quarter, compared to a $761 million loss in the same period last year.

Source: Zero Hedge

Income from other segments of the firm has dropped. Through the first nine months of the year, the firm earned about $1.3 billion off investment banking and managing assets for clients; during the same period last year the firm earned $3.7 billion from those same activities.

As the influential financial blog Zero Hedge puts it: "When a firm's trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, one can merely stand back and watch in awe."

Dylan Ratigan: Why Keep Geithner?

2009-11-02T07:45:12Z

A year ago it was revealed to the American people that our banking system is a legalized Ponzi scheme in which bank and insurance CEOs pay themselves billions of dollars in personal compensation to lend and insure assets with money they don't have to customers who can't pay back the loans.

In those dark days between the fall of Lehman Brothers and before the presidential election, we were often carried through that time by the small glimmer of hope that at least we would soon have a new leader who would hopefully fix this mess and punish those responsible.

Yet in the past 9 months, not only has the administration failed to fix anything, they have actually made things much worse for anyone who isn't a Wall Street banker. Therefore, we are past the point where anyone in power still gets the benefit of the doubt -- the process of taking back our country for all citizens must begin now.

This is why I think we must ask if U.S. Treasury Secretary Timothy Geithner is still the right person for the job. It has become clear recently that, back in his previous role as New York Federal Reserve Governor, he unnecessarily gave billions of dollars of US tax money to banks and insurance companies with few strings attached. And it is now becoming clear that his lack of meaningful action is helping many of these same banks steal more by legalizing their most economically dangerous, socially destructive and self-enriching practices.

Yesterday on NBC's Meet the Press, Secretary Geithner again endorsed House bank reform legislation that would allow, by my calculations, as much as 80%, or $475 trillion, of the bank's $600 trillion in crooked insurance schemes to still be held in secret. It was and is the secret risks held in this very market that led to our collapse in the first place, and that continue to pose massive future risk to the global economy.

Geithner also continued to employ the bankers' favorite and most ludicrous lie : that the taxpayer must somehow continue to pay executives at companies like AIG ungodly sums of money under the threat that, if we don't, somehow the taxpayer will never make their money back. Well let me tell you something, the taxpayer and our nation will never get back the lost wealth taken under these false circumstances and this colossal breach of fiduciary duty. The idea that we must somehow perpetuate this system with our tax money and the future wealth of our children goes against the very American ideal of failure, adaptation and innovation, not to mention of our democracy.

Also last week, the Treasury Secretary endorsed a piece of legislation that, instead of stopping a select few companies from profiting from the implicit taxpayer-guarantee of Too Big Too Fail, seeks to officially condone it. If the most prized skill in our society, economically, is the ability to lend and insure the most money without consequences, then our nation's people are doomed to lose everything in the world's largest ever betting parlor; and that is precisely the system this Treasury Secretary -- Tim Geithner -- is seeking to legalize and institutionalize in America today.

However, the smoking gun for Secretary Geithner comes from a recent Bloomberg FOIA disclosure regarding events from last November. It was then that New York Federal Reserve Governor Tim Geithner decided to deliver 100 cents on the dollar, in secret no less, to pay off the counter parties to the world's largest (and still un-investigated) insurance fraud -- AIG. This full payoff with taxpayer dollars was carried out by Geithner after AIG's bank customers, such as Goldman Sachs, Deutsche Bank and Societe Generale, had already previously agreed to taking as little as 40 cents on the dollar. Even after the GM autoworkers, bondholders and vendors all received a government-enforced haircut on their contracts, he still had the audacity to claim the "sanctity of contracts" in the dealings with these companies like AIG.

None of us were in the rooms when these decisions were made, so I don't pretend to know if Mr. Geithner was the one lone, sane voice of reason fighting against mysterious forces or the primary proponent. However, I fail to see the reasoning for why we continue to rely on those who were in the room when these horrendous decisions took place to be the same people that we choose to deal with their aftermath. There are just certain situations that are not suited for continuity. The best analogy I can think of is that it would be like asking Al Cowlings to spearhead the Nicole Brown Simpson murder investigation under the premise that he knows the layout and the "players" best.

The fact is that there are people who understand all of the intricacies of finance and policy as well as Secretary Geithner, but whose allegiances to the taxpayer are much clearer. People like Elizabeth Warren, Neil Barofsky, Rob Johnson, and Senator Maria Cantwell just to name a few.

To stop the theft from continuing, the most basic rules of capitalism need to be applied to our banks. And the future of our national wealth needs to be safeguarded by the US Government. The current custodian of America's wealth, Treasury Secretary Tim Geithner, is not doing a good job of either. The time for corrective action is now.

GMAC Asks For $2.8 Billion More In Taxpayer Money

2009-10-28T00:21:28Z

The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said. The latest infusion would come in the form of preferred stock. The government's 35.4% stake in the company could increase if existing shares eventually are converted into common equity.

Former Citigroup CEO Says Banks Shouldn't Mix With Wall Street

2009-10-23T15:19:16Z

A former CEO of Citigroup says there should be "some kind of separation" between commercial banking and investment activities, joining a growing list of financial luminaries advocating for the end of giant banks commonly referred to as "too big to fail."

John S. Reed, 70, served as chairman and CEO of Citicorp for 14 years from 1984 to 1998. After the company's 1998 merger with Travelers Group, Reed served as chairman and co-CEO for the next two years. He was forced out by the other co-CEO, Sanford I. Weill.

In a letter to the editor of the New York Times published Friday, Reed responds to a recent story detailing how Paul A. Volcker, the former Federal Reserve chairman who now heads President Obama's Economic Recovery Advisory Board, has largely been relegated to the sidelines as he embarks on what the Times refers to as a "quixotic journey" to "roll back the nation's commercial banks to an earlier era, when they were restricted to commercial banking and prohibited from engaging in risky Wall Street activities."

Reed writes:

As another older banker and one who has experienced both the pre- and post-Glass-Steagall world, I would agree with Paul A. Volcker (and also Mervyn King, governor of the Bank of England) that some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance makes sense.

This, in conjunction with more demanding capital requirements, would go a long way toward building a more robust financial sector.

The era to which the Times refers to ended in 1999 after Congress revoked the 1933 Glass-Steagall Act, the Great Depression-era law that banned commercial banks from underwriting stocks and bonds. The Senate voted 90-8 in favor of repeal. Though Citigroup was formed before the law was officially revoked, the company had the Federal Reserve and the Clinton administration's blessing to go ahead with the merger.

Reed has long been critical of the marriage of traditional commercial lending with investment operations, according to published reports.

Last year the Washington Post referred to him as "deeply skeptical of Wall Street financial engineering and committed to consumer banking and sound commercial underwriting."

In a 2003 profile, the New York Times said Reed was a "big name in corporate America who during a long career in commercial banking kept his distance from stock exchanges and brokerage houses -- and any of the scandals associated with that world."

Reed and Volcker are joined by Nobel laureate economist Joseph E. Stiglitz, a professor at Columbia University, in calling for at least a partial return of Glass-Steagall. What would that mean?

Per the Times:

The only viable solution, in the Volcker view, is to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies. Goldman Sachs could no longer be a bank holding company. It's a tall order, and to achieve it Congress would have to enact a modern-day version of the 1933 Glass-Steagall Act, which mandated separation.

Reed could not be immediately reached for comment.

Elizabeth Warren Speaks With Michael Moore (VIDEO): Exclusive Footage

2009-10-22T17:41:33Z

The House Financial Services Committee passed a watered-down version of the proposed Consumer Financial Protection Agency Thursday morning.

In the words of Financial Services chairman Barney Frank: "We have restricted the CFPA from what the administration proposed."

The CFPA is largely the idea of Elizabeth Warren, the Harvard law professor who serves as the chair of the Congressional Oversight Panel for the TARP program, and who has long advocated for stronger consumer protections.

The Huffington Post has been given exclusive video of a candid interview Warren gave to Michael Moore for his documentary "Capitalism: A Love Story," much of which never made it into the film. In it, she expresses her disappointment at the lack of accountability that has come with the massive bailout of Wall Street, and explains why the need for a strong Consumer Financial Protection Agency is so urgent.

The video is broken up into three clips below.

In the first clip, Warren delves into the ever more complex financial instruments that Wall Street has designed in order to continue to enlarge their profits at the expense of their own consumers. It is here that Warren explains why we need a robust CFPA:

Financial products, and they are products, just like toasters, are sold today with the most dangerous features embedded in them because that's what drives profitability. What's astonishing is that we let this happen. You can't buy a toaster in America that has a one in five chance of exploding. But you can buy a mortgage that has a one in five chance of exploding, and they don't even have to tell you about it... We have consumer protection for everything you touch, taste, smell, feel... But there is no equivalent for credit cards, for mortgages; there's nothing.

At one point Warren laments: "I teach contract law at Harvard Law School, and I can't understand my own credit card. No, I am not kidding you."

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In the second clip, Warren describes how "the very people who drove the car over the cliff have been instrumental in shaping how the American taxpayer was supposed to save it. In the past," she notes, "when you drove the car over a cliff, you lost your job." She criticized the government for not conducting a thorough and transparent investigation into the causes of the financial crisis, which is essential because "responsibility is not just about blame. Responsibility is about making sure we fix this and it will not happen again."

Warren also suspects any such investigation would have serious legal ramifications: "I was talking to someone who spent many years as a prosecutor, and he said when that much money disappears it's usually because somebody broke some laws somewhere."

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In the final clip Warren talks about what led her to Washington and what motivates her to continue her fight to protect the working class Americans. Her family is from a poor background, she relates, but they worked hard and succeeded, and then were sucked into the crisis along with much of the nation's middle class. "If the people who were directly affected, people whose lives have been wrecked by this, are not represented at the table, we won't get the right solutions," Warren says emotionally. "Yeah, we'll patch this up - and then in ten years it crashes again and it crashes again and it crashes again... My job is to be here for the people who just don't get a voice in this game. They've been shut out now for 30 years in this. It's to say no more."

Moore ends by professing his belief that the financial crisis and the ensuing solutions prove that not only is our current system immoral but also that it does not work. Warren grimaces but does not disagree directly with Moore. Instead she takes a different approach:

But we made up these rules. The rules are of men, of people. We pick what the rules are. The rules have not been written for ordinary families, for the people who actually do the work. We have to rewrite those rules.

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Spitzer: Don't Let The Feds, Banking Lobby Handcuff State Regulators (VIDEO)

2009-10-21T11:51:56Z

The House Financial Services Committee will vote today on whether to establish a Consumer Financial Protection Agency. Former New York Governor, and Attorney General, Eliot Spitzer warned that while this new federal agency is important, it must not come at the expense of handcuffing regulators at the state level, who have been more pro-active in investigating the banks than the feds.

Spitzer argued that the federal government would try to limit the power of the state regulators because of heavy influence from the banking lobby:

Because the banks don't want us looking into what they're doing. We were looking at subprime debt. That was the very issue where the banks went to the OCC, and the OCC went to court to stop us, and we had to fight for years in the courts for the power to look at subprime debt. Meanwhie we've seen what happened.

Spitzer and Ratigan also examined which key provisions need to be in the bill but are being fought by the bank lobby.

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Ratigan also interviewed TARP Inspector General Neil Barofsky on what the true cost of TARP will be, and whether the taxpayer will get their money back. Barofsky is not optimistic:

This idea that we're going to have a 17 percent return or a profit on the TARP is an incredibly unrealistic expectation. $50 billion to the mortgage modification program is not coming back. It's not coming back by design. Tens of billions of dollars to the auto industry - the administration itself acknowledges it's going to be a stretch to get that money back. Plus, uncertainty throughout the other TARP programs. We know that CIT is staggering on bankruptcy. If that goes down that's another $2.2 billion that's going to be lost. So while it's difficult to quantify the [true cost of TARP], I think we have to be more realistic about the likelihood of what it could be.

Barofsky also confirmed that banks like Goldman Sachs can continue to make massive and risky bets at the expense of the taxpayer because the banks still have access to very cheap loans from the government, who will no doubt bail them out if one of their huge bets goes south, because "there has not been meaningful regulatory reform in the financial system."

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Breast Cancer Awareness VIDEO: Watch Out For Misleading Pink Labels

2009-10-14T20:10:12Z

It's Breast Cancer Awareness month, and breast cancer is not the only thing you should be aware of. The next time you see pink packaging beckoning you from the shopping aisle, don't fall for it right away - sometimes, pink is just pink. According to a report by Wish TV, some products (especially cleaning supplies) just slap some pink on their packaging and a "Breast Cancer Awareness" emblem, but don't take it a step further by donating any proceeds. There's arguably nothing wrong with making people aware of Breast Cancer Awareness month. However, it's clearly a marketing ploy, as consumers understandably assume that a pink ribbon equals a donation. So instead of donating to the cause, the company actually capitalizes off of it.

Things are also ambiguous when it comes to companies that are making donations. Breast Cancer Action, the watchdog of the breast cancer movement, is a great resource for tracking down information such as: how much money is being donated per purchase, to what organization, and for what kind of research. The Better Business Bureau also issued a warning of fake pink ribbons and how to avoid being duped. A simple way of spotting products that definitely donate to the cause is by looking for the pink ribbon paired with a dot, which is the symbol for the Susan G. Komen for the Cure foundation.

Bottom line: Think before you buy pink.

One Company Responsible For Nearly Half Of All Permanent Mortgage Modifications

2009-10-13T11:20:21Z

Nearly half of the permanent home loan modifications under the government's plan to help troubled borrowers come from a single company that handles less than three percent of the eligible mortgages.

Ocwen Financial declared Monday that it was responsible for 45 percent of the 1,711 modifications that have become permanent after a three-month trial period under the Obama administration's $75 billion foreclosure prevention plan.

The rest of the mortgage servicers enrolled in the government's Making Home Affordable program -- including multi-billion dollar bailout recipients Bank of America, JPMorgan Chase, Wells Fargo and Citigroup -- converted just 948 trial modifications into permanent ones.

More than 72 percent of Ocwen's 1,058 borrowers who went through the trial process received a permanent reduction in monthly mortgage payments, the company says. The average for all servicers stood at a paltry 1.26 percent, according to a recent Congressional watchdog's report. Ocwen noticed its high conversion rate after being contacted by the Huffington Post.

For a company that has been dogged by allegations of improper conduct towards borrowers, the news is one of the few bright spots to emerge from an otherwise dreary report by the Congressional Oversight Panel (COP), the Elizabeth Warren-led body created last year to watch over the bailout.

"The crisis has made them look good," says Alan White, a law professor at Valparaiso University who has written extensively on mortgages and foreclosures. "[Ocwen] seems to have gotten ahead of the curve."

Meanwhile, JPMorgan Chase and Wells Fargo declined to reveal the number of trial home loan modifications under the government's program that have become permanent; Bank of America didn't respond to an e-mail seeking comment.

White suggests that the banks are reluctant to reveal the data because the number is embarrassingly low. He adds that the Treasury Department "should start firing the under-performing servicers and bidding their work out to the successful companies."

Based on company-provided figures, Ocwen appears to fall into that select group. Thus far, most of its temporary modifications are becoming permanent. And the rate at which its modified loans redefault after six months -- 24 percent -- is nearly half the rate of the entire industry, according to a report released by federal regulators last month.

But COP cautions that the permanent figures are "very preliminary." A spokeswoman for Treasury, Meg Reilly, says the sample size is not large enough to draw conclusions regarding conversion rates, since more than 95 percent of trial modifications have yet to reach the deadline for converting to final modifications, she adds.

Here's why: Permanent modifications under Obama's Home Affordable Modification Program (HAMP) first go through a three-month trial period. Since the COP and Ocwen figures are as of Sept. 1, that means that those permanent modifications entered the trial phase back in April and May. As of the end of May, 50,130 borrowers were in trial plans (there are now 500,000). The low number of permanent modifications is partly due to the fact that "the initial volume of HAMP trial modifications was quite low," the COP noted in its report.

Even at this preliminary stage, the low number of permanent modifications is still shockingly low. Warren's panel said it is "concerned about the low rate of conversion from trial to permanent modifications." Unless the rate increases "substantially... HAMP will come nowhere close to keeping up with foreclosures."

The panel's report discusses possible reasons behind the low conversion rate, including data reporting issues and the failure of borrowers to comply with the program, like making timely payments. One issue stands out: "the difficulties servicers have in assembling completed documentation on modifications commenced on a 'verbal' or 'no-doc' basis."

As the report points out, Treasury permits servicers to rely on a borrower's stated income in order to get them into a trial program. Full documentation is required for a permanent adjustment, but for those first three months a borrower doesn't need to prove income or debt levels, an ominous parallel to the lack of vetting applied to many mortgage borrowers during the housing boom.

Ocwen is different, says Paul Koches, general counsel and an executive vice president at the firm. The Florida-based mortgage servicer requires all documentation to be in place before putting a borrower in a trial modification, Koches says. It also requires the first month's payment (rather than setting up the plan, and then collecting modified payments for the next three months).

"We trust but verify. We don't do trial modifications until we're locked and loaded," Koches says.

The documentation requirement helps explain the firm's high conversion rate. Koches adds that it also is one of the main reasons behind their borrowers' comparatively low redefault rate. Having the paperwork in place before the trial plan starts also helps account for why so few of the firm's loans have been accepted into the trial program.

The firm views the Obama plan as a way to make money: Ocwen says modifications under the government's plan will generate more revenue for the firm than non-government-backed modifications, according to its latest quarterly filing with federal regulators. Servicers get a bonus when a borrower's trial plan becomes permanent, then additional bonuses during the next few years if the borrower stays in the program. And as more trial modifications become permanent in the next few months, Ocwen expects even higher revenues.

Since government-backed modifications are part of the Obama administration's $75 billion foreclosure prevention plan, Ocwen could get as much as $656 million from taxpayers for its modification efforts.

White of Valparaiso University adds that the firm, in contrast with its bigger competitors, may have already had the internal systems in place to turn temporary modifications into permanent ones. Ocwen specializes in subprime mortgages -- about 85 percent of the 300,000 loans it services are subprime -- which traditionally have higher delinquency and foreclosure rates. Because of that, the firm may have had experience in modifying loans, thus it was better prepared when the housing bubble burst.

Big banks like Wells Fargo and JPMorgan Chase, though, aren't used to modifying loans, White says, so now they're struggling to keep up. However, he adds, the housing bubble burst two years ago; the banks should have been at least partly ready for the onslaught of delinquent mortgages and loan modification requests.

White also brings up an interesting statistic. He looks at the 1,711 permanent modifications as mortgage loans that entered the trial phase by the end of May. At that point, there were 50,130 trial modifications. So according to White, a little more than three percent of trial modifications became permanent.

(Treasury and COP note that many of those temporary modifications may be in process of getting paperwork submitted in order for them to achieve permanent status. Treasury granted a two-month extension -- on top of the three-month trial -- for borrowers and servicers to get their documentation ready.)

Taking out Ocwen's numbers, the rest of the servicers in Obama's plan were responsible for just 948 permanent adjustments out of 49,072 trial modifications, or a temporary-to-permanent conversion rate of less than two percent.

Elizabeth Warren's panel said that permanent modifications that do not redefault will be key to preventing foreclosures -- HAMP's only goal. To make the point, the panel's report noted that in August there were more trial modifications than completed foreclosure sales.

"While this is cause for some measured optimism," the panel cautioned, "unless August trial modifications convert to permanent modifications at a rate of 80 percent, a far cry from current conversion rates, permanent modifications will not keep pace with completed foreclosure sales."

Pay Czar: AIG Executive Pay Crackdown Coming

2009-10-12T14:10:23Z

The Obama administration's pay tsar has indicated he will take a tough stance on executive pay at AIG, the state-controlled insurance group that sparked outrage over its bonus payments earlier this year.

Kenneth Feinberg, Obama's Pay Czar, Steered Citi Toward Phibro Sale

2009-10-09T15:26:37Z

NEW YORK/WASHINGTON (Reuters) -- The U.S. government's "pay czar" played a critical role in Citigroup's(C.N) decision to sell off its lucrative commodities trading business, Phibro, a source familiar with the matter said Friday.

Despite Housing Slump, Mortgage Lenders Making Record Profits From Fees

2009-10-08T08:22:50Z

Never ones to let an opportunity go unexploited, mortgage lenders are taking advantage of a market fueled by low interest rates and massive government subsidies to turn record profits. Their secret: The return of "junk fees."

The Mortgage Bankers Association recently announced that independent mortgage lenders made an average profit of about $1,100 per loan originated in the first quarter of the year, an astonishing 635 percent increase from the previous quarter.

Nine big mortgage lenders, representing about two-thirds of the market, made about $9.1 billion in the first six months of the year off loan originations, according to Inside Mortgage Finance, a leading trade publication that collects data from lenders. In 2008, those lenders made about $3.3 billion for the whole year.

Meanwhile, real estate agents, consumer advocates and mortgage researchers say consumers are paying more than ever in fees, typically tacked on at the end of the transaction. Though rarely more than a few thousand dollars, the fees, multiplied by every homeowner trying to refinance an existing mortgage and every prospective home buyer taking on a new one, can add up to billions in undeserved profits, experts say.

"There's been a return of fees -- originating fees, underwriting fees, processing fees -- fees you haven't seen in years," says Guy Cecala, publisher of Inside Mortgage Finance. "There are roughly 12 to 20 fees you wouldn't have seen as recently as two to three years ago. But lenders can charge them, so they're charging them.

"This is the greatest period in recent memory for generating income," he adds. The rate of profits per loan has nearly doubled from last year, according to Inside Mortgage Profitability, an Inside Mortgage Finance publication.

"You do wonder what's going on here," says House Financial Services Committee member Brad Miller (D-N.C.). "Is this a case of the mortgage industry making great profits, at a time when consumers are suffering, yelling the sky is falling when in fact they're doing quite well? I'm more concerned that the banks are misrepresenting the true picture."

Realtor Rose L. Harris, owner of Re/Max Elite Properties in Coral Gables, Fla., says she sees fees on every loan. "I see a lot of junk fees," she says. "Even for people who have really good credit and qualified down payments... they are being charged a lot of extra fees."

Cecala points to several factors behind the resurgence of fees. Among them: fewer lenders, which means less competition. Many of the biggest lenders have gone out of business. "Mortgage lending used to be very competitive," Cecala says. "There were lots of different players, and the competition kept prices low.... But now, if you want a loan you pretty much have to accept the lender's terms... You can't play them off one another."

Also, brokers no longer play such a big role in the mortgage industry. In 2005, brokers were responsible for 31 percent of all mortgages, Cecala says; in the second quarter of this year, they had 15 percent of the market. With fewer brokers demanding a piece of the pie, lenders are keeping more of the profit.

Then there's the issue of the massive government subsidies designed to spur lending, resulting in low interest rates for mortgages. With rates so low, lenders can tack on extra fees without it being as noticeable, Cecala says.

Ironically, the fact that government-supported mortgage giants Fannie Mae and Freddie Mac now back four out of every five new mortgage loans has made the process for lenders much easier.

"We live in an automated mortgage processing environment," Cecala says. He notes that Fannie- and Freddie-backed loans require little more than a few clicks of the mouse on the part of the lender. "If you type in Fannie or Freddie, the system will tell you whether it's a go or not," he says.

The Mortgage Bankers Association points out that much of its profit numbers were the result of refinancings of existing mortgages, thanks to low interest rates.

"Refinancings tend to be good for consumers because they often reduce their mortgage rate," MBA spokesperson Carolyn Kemp wrote in an e-mail. "The first quarter [of 2009] was a period of high refinancing volume so many consumers were taking advantage of lower interest rates."

Norma Garcia, a senior attorney with Consumers Union, calls attention to Bank of America's profits. The bank made about $3.3 billion off mortgage originations through June, and another $2.8 billion off servicing mortgages (essentially collecting payments), according to Inside Mortgage Profitability.

Garcia notes the bank's abysmal record at modifying troubled mortgages -- it has modified just seven percent of eligible loans under the government's $75 billion loan modification program -- and its bailout haul -- the federal government has committed $45 billion in taxpayer money to the bank.

"They're keeping the money for themselves," Garcia says. "Given the need for credit, is it fair for them to be making these profits?"

Were you recently hit with "junk fees" when buying or refinancing your home? The Huffington Post wants to hear from you. Please e-mail me your story at shahien [at] huffingtonpost [dot] com.

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Meredith Lopez: The Juban Princeling Turns One Year Old

2009-10-06T08:52:00Z

This Thursday, October 8, my son the Juban Princeling will turn one year old.

I know it's a cliche to say so, but I can't believe he's a year old already! It feels like just last week I was printing out fertility charts and plotting my basal body temperature and predicting my most fertile conception days. And now here I am with a toddler.

I remember that first home pregnancy test I took that came back negative. I remember the next test I took three days later that came back positive.

The Juban Princeling, back when he was but a
wee double pink line.

I remember the morning sickness and Husband running out a zillion times to fetch me whatever remedy I thought might work this time: raw ginger, lemons, Cheerios, dry toast, vitamin B, seasick wrist bands.

I remember the first time I threw up, in the bathroom of a cabaret club in Midtown where my brother Mr. Funny was doing stand-up.

I remember the emergency ultrasound at about 5 weeks because I was bleeding. Until that point I had only focused on my own misery and suffering from what seemed like every pregnancy side effect. The night before the ultrasound I cried my eyes out because suddenly I wanted this baby more than I had ever wanted anything in my whole life. And then the ultrasound the next morning. The white blob in the middle of the screen with the miniscule arm and leg buds, and that flashing light in the middle that was a heartbeat. The first time we saw our baby.

I remember flying down to Florida so Husband and I could tell our parents, in person and face to face, that they were going to be first-time grandparents. We used my friend Tia as our cover story, said she was having a party and I needed to be there. We handed my parents the first ultrasound photo and said, "Surprise!" Then we drove up to West Palm Beach and Husband handed his mother - widowed in 1998 (I never met my father-in-law) - a photo album with the ultrasound picture on the first page and said, "It's the first photo of your first grandchild."

I remember the first time I had to shop for maternity clothes. My mom came with me. My fitting room had a padded belly so I could see what the clothes would look like as I got bigger.

May 2008, about 16 weeks along.
I'm still trim and fit with just a cute little baby
bump. That'll change very, very soon.

I remember the first time I felt the Princeling kick me.

I remember the first time Husband felt the Princeling kick.

I remember the 20-week anatomy ultrasound. My mother-in-law was there. I remember the technician, who had been silently doing her job for 45 minutes, suddenly saying, without prelude or introduction or ceremony, "It's a boy!" Half an hour later I choked up on the phone to my parents in Miami when I told them, "You're going to have a grandson."

I remember every single person who got up to give me a seat on a bus or subway. And I definitely remember all those crowded buses and subways when no one got up for me, even when I was very large and very obviously pregnant. I remember riding home one evening with my co-worker, Southern Belle, who yelled in her thick Virginia accent at a car full of New York City subway riders, "I can't believe no one is getting up for a pregnant woman! I mean, LOOK at her!" At least half a dozen people stood up for us.

I remember the first time someone at work said, "Waddle waddle waddle!" as I walked by.

Husband and I the night before my
baby shower. I'm now bloated and swollen
and feel like the planet Jupiter. My mother
has wisely stopped answering my every
pregnancy-related complaint with, "But I
loved being pregnant with
you!" because she's afraid
I'll sit on her.

I remember my blood pressure dropping suddenly a few weeks before my due date, and I lost my vision and power of speech, even as I trained my replacement at work. The nurse at my doctor's office sent me to the hospital. What should have been a 10-minute cab ride took almost an hour because I worked two blocks from the United Nations, and the General Assembly was opening that day. My cab driver argued with a traffic cop that he was rushing a pregnant woman to the hospital, but the cop didn't care and redirected us.

I remember being scared and alone that day and waiting forever for the nurses to run their tests and the doctor to tell me what was going on. I thought I might be going into labor three weeks early. I hadn't told the husband any of this yet because he was in his first week at work and I didn't want him to worry. A nurse told me to move around on the gurney, so I did. I accidentally unplugged the fetal heart monitor and a nurse came rushing in because she thought my baby had gone into cardiac arrest, and she yelled at me. I was put on bed rest and never went back to work.

I remember getting a pedicure two days before my scheduled c-section. Blue toenails. Blue for boy.

I remember our parents all coming into town the night before the delivery. We went out to dinner. My last meal for a very long time, and my last before meeting my baby: veal Parmesan and penne pasta. I wondered if eating a baby animal was a bad omen the night before having my own baby.

I remember waking up at 5am on delivery day, showering, and putting on a full face of makeup. I wanted to look as pretty as possible when I met the baby face to face for the first time. He deserved a pretty mommy.

I remember waiting in the prep room.

And waiting.

And waiting.

And waiting.

Our scheduled delivery time came and went.

Finally went in. The husband had to wait just outside the OR.

I remember the spinal block. It took them four tries so that I wound up with a line of bruises down my lower back. Although I have a high pain threshold, by the fourth try I was crying and clutching a nurse. I kept asking for my husband.

I remember lying on the table and being prepped. As the doctor held the scalpel over my enormous belly she told a nurse to go get my husband. I asked him to hold my hand, but he couldn't find it under the piles and piles of blankets I had on and around my chest, arms, and head. So he held a few fingers he found.

We looked at each other.

I described the different sensations I was feeling.

Then I felt enormous pressure, all the way up into my head. My blood pressure spiked up and my face turned purple.

At 9:24am the doctor said, "As advertised, it's a boy!"

And I heard my son cry.

And for only the second time in my entire life, I was speechless. All I could say was, "Oh!" over and over again.

I remember that my husband was urged to follow a nurse as she took the baby to be cleaned and weighed and measured and footprinted and wrapped up in a blanket and hat. Then she brought him to me.

I remember the first time I saw the Princeling's face. He was even more beautiful than I had hoped he'd be. He was pink and squinty and covered with gunk, but he was absolutely perfect. I kissed him all over his face and told him over and over again how much I loved him. All the while the doctor sewed me up. I didn't feel a thing. My entire universe had shrunk down to the itty bitty bundle in my arms.

The Princeling and I at our first
official meeting out of the womb. "Hello,
my name is Mommy. I'll be your mother for
the rest of your life. Please keep that in
mind someday when you're a teenager
and you hate me."

I remember the doctor asking what his name was, and my husband officially giving the Princeling his full name, which we had not called him yet.

I remember as they finished me up a nurse asking me how I felt. All I could do was smile and mumble, "I have a baby!"

I remember that hours later my family came into my room. We had arranged ahead of time that my mother, as the mommy of the mommy, would get to hold the baby first. I don't remember, and didn't care, what order everyone else went next. We took photos of each grandparent and uncle and the baby's one aunt as he or she held him for the very first time. To a person the look on everyone's face is that of sheer, unconditional, genuine joy and wonder.

I remember the first diaper I changed and the first time I burped him and the first time he spit up on me and the first time I gave him a bath and the first time he and I were alone together. I remember the first song I ever sang him, while he was feeding on my breast.

I remember the first time he rolled from his tummy to his back, and vice versa. I remember the first time he smiled at me because he recognized me. I remember the first time he grasped something in his hands on purpose. I remember the first time he pushed himself up to sit. I remember his hair used to be darker, and now it's lighter.

January 20, 2009. The Princeling voted for
Obama, and now enjoys this historic inauguration.
"Yes we did, Mommy! I believe in change!"

And after all of that, I now have a toddler, with blond hair that's messy on top and curled into Shirley Temple ringlets at the back. He has enormous, bright grey-blue eyes, the same color as my dad's and brother's. Strangers on the street stop us to tell me how beautiful his eyes are. He was born an average size (7 lbs, 11 ounces, 20 1/2 inches long) but at his last checkup he was in the 85th percentile. He's bigger than almost every other baby his age, and some older toddlers, too. He crawls all over the place. He pulls himself up to stand and cruises along furniture. He sleeps through the night. He eats anything we put in front of him. He eats anything not nailed down! He laughs a lot. He likes to make jokes. He's sweet-tempered and nothing gets him down for long. He's like his dad that way. He's stubborn and understands the word "No!" though he doesn't always obey us when we say it. He's rough and tumble and likes to be held upside-down and thrown up into the air. Sometimes when I hold him he'll pitch himself backwards until I turn him upside-down. He chatters non-stop. He has favorite toys and books and songs. Physically he looks more like me; his personality is all his father. And even that is all his father, who also looks more like his mother but has his late father's personality.

As he turns one he still only has his two bottom teeth, which Uncle Funny has nicknamed "Slicer" and "Cut-Cut." He'll have his first haircut in a week and a half. He laughs hysterically at the words "brains," "eyeballs," "peaches," "poop," "feet," and "booger."

October 2009. Hiding under the dining
table, nibbling on a chair. Why not?

He has a mother and a father, two grandmothers, one grandfather, four great-grandparents, three uncles and one aunt, no first-cousins yet but five second-cousins, five great-aunts, two great-uncles, and more honorary aunties, uncles and cousins than anyone can count. He is surrounded by so much love from so many people that his life is positively overflowing with it.

He's my perfect little boy. And he's one year old now.

Mama loves you, Little Guy. More than you will ever know.

Dylan Ratigan: Americans Have Been Taken Hostage

2009-09-13T23:28:15Z

The American people have been taken hostage to a broken system.

It is a system that remains in place to this day.

A system where bank lobbyists have been spending in record numbers to make sure it stays that way.

A system that corrupts the most basic principles of competition and fair play, principles upon which this country was built.

It is a system that so far has forced the taxpayer to provide the banks with the use of $14 trillion from the Federal Reserve, much of the $7 trillion outstanding at the US Treasury and $2.3 trillion at the FDIC.

A system partially built by the very people who currently advise our President, run our Treasury Department and are charged with its reform.

And most stunningly -- it is a system that no one in our government has yet made any effort to fundamentally change.

Like health care, this is a referendum on our government's ability to function on behalf of the American people. Ask yourself how long you are willing to be held hostage? How long will you let our elected officials be the agents of those whose business it is to exploit our government and the American people at any cost?

As hostages -- was there any sum of money we wouldn't have given AIG?

Why did we pay Goldman Sachs and all the other banks 100 cents on the dollar for their contracts with AIG, using taxpayer money, while we forced GM and others to take massive payment cuts?

Why hasn't any of the bonus money paid to the CEOs that built this financial nuclear bomb been clawed back?

And more than anything else -- why does the US Congress refuse to outlaw the most anti-competitive structure known to our economy, one summed up as TOO BIG TOO FAIL?

It has become startlingly clear that we as a country, and I as a journalist, had made a grave error in affording those who built and ran those banks and insurance companies the honorable treatment of being called capitalists. When in fact the exact opposite was true, these people were more like vampires using the threat of Too Big Too Fail to hold us hostage and collect ongoing ransom from the US Government and the American taxpayer.

This was no unlucky accident. The massive spike in unemployment, the utter destruction of retirement wealth, the collapse in the value of our homes, the worst recession since the Great Depression all resulted directly from these actions.

Even with all that -- the only changes that have been made, have been made to prop up and hide the massive flaws on behalf of those who perpetuated them. Still utterly nothing has been done to disclose the flaws in this system, improve it or rebuild it.

Last fall was an awakening for me, as it was for many in our country.

And yet, our Congress has yet to open its eyes, much less do anything about it. In fact conditions have never been better for the banks or worse for the rest of us.

Why is this? Who does our Government work for? How much longer will we as Americans tolerate it? And what, if anything, can we do about it?

As we approach the anniversary of the bailouts for our banks and insurers -- and watch the multi-trillion taxpayer-funded programs at the Federal Reserve continue to support banks and subsidize their multibillion bonus pools, we must ask if our politicians represent the interests of America? Or those who would rob America of its money and its future?

As a country, we must demand that our politicians stop serving those whose business models are based on systemic theft and start serving those who seek to create value for others -- the workers, innovators and investors who have made this country great.

Pay For Execs At Bailed Out Banks 40% Higher Than Peers: Report

2009-09-02T09:05:50Z

The heads of the 20 banks that have received the biggest government bailouts were paid nearly 40 percent more last year than other CEOs, a study released today shows.

As Bloomberg noted in its piece, "average CEO pay was 430 times larger than for typical workers" and at nine of those 20 banks the value of stock options has soared $90 million this year, based on the study's examination of corporate proxy statements.

Collectively, those 20 banks have laid off more than 160,000 employees since the start of 2008, according to the study by the Institute for Policy Studies, a Washington, D.C.-based think tank. On average, those CEOs earned nearly $14 million last year; CEOs of Standard & Poor's 500 companies were paid an average of about $10 million in 2008.

The top five executives at those 20 banks collectively earned $3.2 billion from 2006 to 2008.

"Unfortunately, despite this new and broad consensus over the dangers inherent in excessive executive renumeration, the denizens of our nation's executive suites still go about their business with the same visions of compensation sugarplums that danced in their heads before last September," the authors wrote.

Read the study below.

EE09final -

Subprime Culprits Are Modifying Loans With Taxpayer Money: Center For Public Integrity

2009-08-26T09:42:51Z

Many of the lenders who helped fuel the subprime mortgage boom are now receiving billions in taxpayer money to modify those same loans, according to a new report by the Center for Public Integrity.

Countrywide Financial, formerly considered the nation's largest subprime lender, thus far is eligible to receive about $5.2 billion, according to Treasury Department data. The firm originated at least $97.2 billion in high-interest loans from 2005 to 2007, CPI reports.

Other companies eligible include subsidiaries of AIG, Lehman Brothers and Merrill Lynch. At least $70 billion in taxpayer money has been committed to helping AIG, according to figures compiled by ProPublica, a nonprofit investigative news organization. Lehman Brothers filed for bankruptcy last September, and Merrill Lynch was bought Bank of America last year.

The payouts are part of the Obama Administration's Making Home Affordable program, a $75 billion effort to reduce mortgage payments for struggling borrowers by providing mortgage servicers, lenders and investors with taxpayer subsidies. The plan commits to helping three to four million homeowners avoid foreclosure, provided they meet certain conditions. As of July 31, less than 9 percent of eligible delinquent borrowers had been helped. The Administration has asked mortgage servicers to double the number of home mortgage modifications by Nov. 1.

Up to $50 billion of the program's funds comes from TARP; the rest is provided by Fannie Mae and Freddie Mac. To put that into context, since the financial crisis began the government has committed a total of more than $172 billion in bailout funds to AIG, Bank of America and Citigroup.

Earlier this year CPI, a nonprofit investigative news organization, analyzed federal home mortgage data and produced a list of the 25 financial firms that originated the most high-interest mortgages from 2005 to 2007. For various data-related reasons, those mortgages are not technically "subprime", though many researchers - including CPI - use high-cost mortgages as a proxy for calculating subprime figures.

Comparing that list to the one produced by the Treasury Department, CPI noted that of the top 25 participants in the Making Home Affordable program, "at least 21 were heavily involved in the subprime lending industry."

Last year Countrywide agreed to put up about $8.4 billion to modify troubled home mortgages in a settlement reached with 11 state attorneys general. The states had sued alleging consumer fraud; it's the largest predatory-lending settlement in history.

As of July 31, Bank of America was servicing at least 800,000 delinquent mortgages eligible under the Administration's program; less than four percent of those had been helped.

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Officials Knew Of AIG Bonuses Months Before Scandal

2009-05-13T00:58:26Z

As American International Group chief executive Edward M. Liddy returns to Washington to face Congress today, new details are emerging about how long federal officials were aware of the company's recent bonus payments to its executives and of how inflammatory the payments could be.

Documents show that senior officials at the Federal Reserve Bank of New York received details about the bonuses more than five months before the firestorm erupted and were deeply engaged with AIG as well as outside lawyers, auditors and public relations firms about the potential controversy. But the New York Fed did not raise the alarm with the Obama administration until the end of February.

Are Taxpayers Bailing Out Troubled Banks Twice?

2009-05-09T23:56:17Z

The federal government is taking up the fight against credit card companies accused of taking advantage of consumers.

In taking aim at what he called "abuse that goes unpunished," President Obama has asked Congress to send him a bill by Memorial Day that prevents credit card companies from suddenly raising rates on everyday customers.

Roubini, Richardson: We Can't Subsidize Banks Forever

2009-05-05T12:11:17Z

Consider also recent bank risk-taking. The media has recently reported that Citigroup and Bank of America were buying up some of the AAA-tranches of nonprime mortgage-backed securities. Didn't the government provide insurance on portfolios of $300 billion and $118 billion on the very same stuff for Citi and BofA this past year? These securities are at the heart of the financial crisis and the core of the PPIP. If true, this is egregious behavior -- and it's incredible that there are no restrictions against it.

Liddy Letter: AIG Plans To Award Bonuses Even If Taken Over By US

2009-05-02T18:47:12Z

Even if the U.S. government were to entirely take over American International Group, company executives would still be able to collect bonuses at taxpayer expense, according to a letter from AIG CEO Ed Liddy to employees disclosed in the company's recent SEC report.

"As this special award is being made to a very select group of executives, I ask that you treat it as confidential," wrote Liddy. The letter is dated less than a week after the government first bailed the company out.

The letter assured the select group that "in the event the AIG entity that is your employer (the Company') experiences a Change in Control (e.g., consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the sale or other disposition of all or substantially all of the Company's assets to an entity that is not an affiliate of the Company), AIG guarantees the payment of the 2008 Special Cash Retention award on the dates and under the conditions specified above."

The United States is roughly a 79 percent owner of AIG, having pumped in some 170 billion in taxpayer dollars.

Elsewhere, the SEC filing reports that "AIG is working with the Department of the Treasury and NY Fed to establish a framework for further extending the period for earning retention awards and making them performance-based." (Now there's a crazy idea.)

Some of those in line to get bonuses have family in the right places, according to the filing. The daughter of top executive Edmund Tse, Ada K.H. Tse, is president and CEO of AIG Global Investment Corp. (Asia) Ltd. In 2008, she pocketed $400,000 in "retention awards" and $250,000 in a year-end bonus. She will be "eligible to receive an additional amount that has not yet been approved. Ms. Tse also will be eligible for retention payments in 2009 in the amount of approximately $600,000," reads the report.

Daniel Neuger is the son of another top executive, Win Neuger, and serves as "managing director of AIG Global Investment Corp. and AIG Global Asset Management Holdings Corp." He took in $75,000 in "retention awards" in 2008 and is on track for roughly $110,000 in 2009.

Liddy promised there was more to come. "I fully recognize the devastating loss of personal wealth you've suffered, and pledge to you my personal commitment to provide an opportunity for substantial wealth creation through a combination of cash and equity awards in the coming months and years," he wrote in the letter to employees outlining the bonus policy.

Liddy kept his word.

Read the full message:

Edward M. Liddy

September 22, 2008

[Recipient Address]

Dear ,

I'm pleased to award you a Special Cash Retention award of $[•], payable in two installments of $[•] and $[•], on or about December 31, 2008 and December 31, 2009. Additional terms of the award are set forth at the end of this letter.

I fully recognize the devastating loss of personal wealth you've suffered, and pledge to you my personal commitment to provide an opportunity for substantial wealth creation through a combination of cash and equity awards in the coming months and years.

I'm convinced that we can turn around AIG and restore the value, confidence, and trust that have been eroded by recent events. I need your renewed commitment, leadership and teamwork to accomplish this challenging task. The rewards for achieving the objective of paying off the revolver line of credit from the Fed could be substantial, and I intend to handsomely remunerate those who step up to the challenge and take AIG proudly into the future. I'm counting on you to work with me and our other leaders to take back the company from the federal government and regain our rightful place as one of the best companies in the world. In return, just know that you can count on me.

As this special award is being made to a very select group of executives, I ask that you treat it as confidential. Thank you again for your hard work and the sacrifice that you and your family have made for AIG.

Very sincerely,

Edward M. Liddy

Terms
Each installment is payable if you are employed with the company through the respective installment date. You also will receive these payments if your employment is terminated prior to December 31, 2009 for any reason other than Cause. (Cause is conduct involving fraud, intentional misconduct, gross negligence or material violation of AIG policy.)

Furthermore, in the event the AIG entity that is your employer (the "Company") experiences a Change in Control (e.g., consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the sale or other disposition of all or substantially all of the Company's assets to an entity that is not an affiliate of the Company), AIG guarantees the payment of the 2008 Special Cash Retention award on the dates and under the conditions specified above.

Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America

Martha St Jean: Black Women and the AIDS Crisis

2009-04-22T14:44:55Z

Every 9 1/2 minutes, someone in the U.S is infected with HIV. That is the premise of a campaign titled, "9 1/2 Minutes," launched by the Act Against AIDS Campaign.

April is STD Awareness Month. As the month draws to an end, I have composed this message to one group that should be paying close attention to what is going on in the world of sexually transmitted diseases: black women. To say STDs disproportionately affect black women would be a gross understatement.

Did you know that AIDS is the leading cause of death among black women aged 25-34? Besides men who have sex with men and bisexuals in the black community, black women are the most affected. Black women made up 35% of new infections among our racial group. As a racial group, this disease affects black women more than any other. According to the Centers for Disease Control and Prevention (CDC), the rate of occurrence or HIV incidence among black women is about 15 times as high as that of white women.

According to Dr. Kevin Fenton, director of the National Center for HIV/AIDS at the CDC, one in 30 black women will be diagnosed with HIV at some point in her lifetime. That is unacceptable. Here's another startling statistic, gonorrhea is 19 times higher in African-Americans as it is whites. Earlier this year, we found out that black girls 15-19 are disproportionately affected by chlamydia. This high rate of STD/STI transmission aids in facilitating HIV/AIDS infections; it is a domino effect.

Last year, I had the opportunity to attend the 17th Annual International AIDS conference held in Mexico City, Mexico. There, I sat down with Dr. Fenton and discussed AIDS and its ravaging affect in America. One of the things he told me in the interview was that the numbers, "should serve as a wakeup call to do more and do it faster."

I also spent some time in Washington D.C studying a variety of health topics. The one that was covered the most intensely was HIV/AIDS. I learned from people, including, Jonathan Zenilman, M.D., Chief-Infectious Diseases Division at Johns Hopkins Bayview Medical Center, that the District of Columbia has a major HIV/AIDS problem on its hands. How can the nation's capital have rates that compare to that of third world countries?

Therefore, it was not a shock when a report funded by the CDC and carried out by members of the George Washington University School of Health and Health Services concluded earlier this year that 3% of residents of D.C have HIV or AIDS. That 3% only includes residents who have been tested. When an illness effects 1% of a population that is considered a "generalized and severe" epidemic. The rates are higher than those in West Africa. Black women in D.C make up more than 25% of those living with the infection or disease.

In the report, "Left Behind - Black America: A Neglected Priority," released in August 2008 by the Black AIDS Institute, the United States was criticized for what the organization called a "timid and lethargic" response to the most serious health crisis facing black America. I interviewed Phill Wilson, the founder and executive director of the Black AIDS Institute and he told me that if black America were its own country it would be rank as number 16 in the global AIDS epidemic. When the White House and CDC announced the start of the "Act Against AIDS," it was a step in the right direction.

In a country where blacks make up only 12% of the population, we should not be making up 46% of the HIV/AIDS cases. Let us not fail our children, our community and ourselves. The situation is not irredeemable. The solution to this crisis begins at home. Let's start thinking about the social and cultural norms that may be driving this epidemic.

So today, I am urging black women to do more. Get tested; protect yourself. Women need to have a more intensified response to this killer. Let's not only count on governmental officials to take action. I urge you, my black sister friend to react to this threat as you would to an IED (improvised explosive device) killing your brother, father or son in the Iraqi war. Get as angry as you would at the random killings of our young black men by stray bullets in poverty stricken areas. Get the facts. Get upset and get mobilized.

Adam Lioz: Help! Dan Lost His Home

2009-04-08T13:16:21Z

I am submitting this post on behalf of Dan Smith, who I met through working with Brave New Foundation to address the housing crisis. Dan lost his home and is eager to fight back.

My name is Dan Smith, and I'm an electrician with IBEW Local 952 in Ventura, California. I lost my home because my mortgage broker lied to me about my interest rate. I'm working with Progressive Future to take on the Mortgage Bankers Association and urge Congress to save millions of homes. You can help by clicking here.

My wife and I sold the comfortable condo for which we had saved for years. We had figured out that we could afford to pay $2700 per month to share a bigger home with our one-year old daughter, with plans to have another child. Our third month, we got a bill for $3600--33% more than we signed up for. I called my broker and he said "didn't I tell you that you had a 'teaser rate' that would go up?" No, he hadn't told me. I was angry, but stuck -- whatever they'd buried in the fine print was threatening everything I'd worked for.

After selling my truck and camper, working 80-hour weeks, and struggling to pay the increased rate for 16 months, I lost my home, I was left with a mountain of debt, and I ended up declaring bankruptcy. I went in with a great credit score and a shot at the American dream. I ended up deep in debt, bankrupt, with my credit shot. You can view my full story here.

But, I'm not just sitting back. I'm working with Progressive Future to confront the Mortgage Bankers Association and help make sure other families like mine don't end up out on the street.

The House recently passed a bill -- at President Obama's request -- to allow bankruptcy judges to adjust the terms of troubled mortgages. Experts estimate this common-sense solution could save nearly 2 million homes -- and I know it could have saved mine.

The Senate will vote on the same provision soon, but the Mortgage Bankers -- the same people who got us into this mess -- are fighting it. They've spent nearly $20 million lobbying in Washington in the past decade, so they've got plenty of clout. Progressive Future is collecting petitions telling the Mortgage Bankers to "back off" and I'd like as many people to sign as possible.

Thanks for helping out...and I hope you never have to go through what my family has over this past year.