Saturday, July 07, 2012

How Wall Street Scams Counties Into Bankruptcy - Bloomberg

How Wall Street Scams Counties Into Bankruptcy - Bloomberg

For some reason, Wall Street never seems to get the message that bribing government officials -- and paying each other off - - to get access to lucrative municipal-bond underwriting business is illegal. Wall Street has never learned this lesson because the miniscule price it ends up having to pay for misbehaving has absolutely no deterrent value whatsoever.
This piece then goes on to summarize some of the catastrophes that have occurred to date.

Friday, July 06, 2012

Matt Taibbi: Criminal convictions for municipal bond rigging

The Scam Wall Street Learned From the Mafia | Politics News | Rolling Stone

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. 
These three defendants were convicted.  And the US press covers the latest celebrity divorce. If you would like to read more about how this hurt municipalities, see Taibbi's follow up here.

Thursday, July 05, 2012

Report: Countrywide won influence with discounts - Businessweek

Report: Countrywide won influence with discounts - Businessweek
WASHINGTON (AP) — The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report...Among those who received loan discounts from Countrywide, the report said, were:

-Former Senate Banking Committee Chairman Christopher Dodd, D-Conn.

-Senate Budget Committee Chairman Kent Conrad, D-N.D.

-Mary Jane Collipriest, who was communications director for former Sen. Robert Bennett, R-Utah, then a member of the Banking Committee. The report said Dodd referred Collipriest to Countrywide's VIP unit. Dodd, when commenting on his own loans, has said he was unaware of the discount program.

-Rep. Howard "Buck" McKeon, R-Calif., chairman of the House Armed Services Committee.

-Rep. Edolphus Towns, D-N.Y., former chairman of the Oversight Committee. Towns issued the first subpoena to Bank of America for Countrywide documents, and current Chairman Darrell Issa, R-Calif., subpoenaed more documents. The committee said that in responding to the Towns subpoena, Bank of America left out documents related to Towns' loan.

-Rep. Elton Gallegly, R-Calif.

-Top staff members of the House Financial Services Committee.

-A staff member of Rep. Ruben Hinojosa, D-Texas, a member of the Financial Services Committee.

-Former Rep. Tom Campbell, R-Calif.

-Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros; and former Health and Human Services Secretary Donna Shalala. The VIP unit processed Cisneros' loan after he joined Fannie's board of directors.

-Rep. Pete Sessions, R-Texas, was an exception. He told the VIP unit not to give him a discount, and he did not receive one.

-Former Fannie Mae heads James Johnson, Daniel Mudd and Franklin Raines. Countrywide took a loss on Mudd's loan. Fannie employees were the most frequent recipients of VIP loans. Johnson received a discount after Mozilo waived problems with his credit rating.
No comment. Res ipsa loquitur.

Firing of Hallandale Beach lifeguard prompts outcry and review - South Florida

Firing of Hallandale Beach lifeguard prompts outcry and review - South Florida

Executives of an aquatics company will review whether the firm was justified in firing a Hallandale Beach lifeguard earlier this week for leaving his zone to help rescue a nearby swimmer. The dismissal prompted a media firestorm and an outpouring of public support for the guard, 21-year-old Tomas Lopez of Davie. Jeff Ellis Management, the Orlando-area company under contract with Hallandale Beach since 2003 to provide lifeguards at two public beaches, announced Wednesday that it would immediately interview the managers and workers involved in the incident to determine whether any safety protocols were violated...The city said it would await the results of the company's inquiry, which Ellis said should be complete by Friday. City spokesman Peter Dobens said the agreement for the protected areas of the beach calls for four lifeguards and one supervisor to be on duty simultaneously, per shift. "The city doesn't provide lifeguards in front of the condominiums up and down the beach," Dobens said. Emergency service personnel, however, respond whenever summoned.
For those who still don't understand the difference between public provision of local services and privatization, read this.  The City of Hallandale Beach has contracted out lifeguard services (or some contractually-defined simulacrum thereof) to Jeff Ellis Management. One of their lifeguards did CPR (or otherwise rendered aid) on a man who had already been pulled from the water by others after apparently getting in trouble outside the area that the contract covers. His company fired him. The city is mumbling PR nonsense about awaiting the results of the grand investigation by the company, which translates into "Wait and see how bad the media firestorm is and act accordingly."  This young man knew what needed to be done and he did it, because he is a lifeguard. Unfortunately, he works for a private company instead of a government.

This underscores a very important point about privatization.  Sometimes privatization works just fine in terms of cost-effectiveness.  But some services should not be privatized at all, ever, because they require split-second decisions, dedication to the welfare of others, and tasks that can't be clearly specified in advance.  It seems to me that most jobs that involve risking your own life to save the lives of others are in that category. There's no reason you need to have public employees on staff to paint city hall, because contracting it out is easy and will work just fine.  But how about contracting out police services to a private security company?  Maybe that's fine for checking IDs at the front gate of the condo development, but when it comes to serious police work, I want a dedicated public servant between me and the real bad guys.  I'd say the same thing about lifeguards.  These are people who might have to dive into a rip tide to pull a drowning swimmer ashore and keep him alive until the paramedics arrive. I don't want them to be reading the fine print in their contract before they decide what to do.

And of course there is a great irony here. The city's private contractor fired Lopez for rendering aid to somebody who was drowning at a private beach in front of a condominium project, where it was "swim at your own risk."  Apparently the condo association didn't pay for its own private lifeguard services.  If you want the services of a Jeff Ellis lifeguard, condo dwellers, you have to pay for them. Those are the rules in privatopia.

States Steal Federal Foreclosure Funds at Their Own Peril - Bloomberg

States Steal Federal Foreclosure Funds at Their Own Peril - Bloomberg

The U.S. housing market is showing tentative signs of life as demand for new homes and housing prices begin to rise in some areas.
Yet pitfalls remain, including about 12 million borrowers who still owe more on their “underwater” mortgages than their homes are worth. To help some of those people, the recent $25 billion national mortgage settlement required five large banks to pay states $2.5 billion for foreclosure prevention and other housing-related efforts.
Here’s the problem: many states -- including some hardest hit by the housing bust -- are diverting more than $1 billion of that settlement money to fill budget gaps, fund public universities and even bankroll litigation against defective Chinese drywall, according to a Bloomberg Government report. In doing so, states are robbing troubled borrowers of assistance and jeopardizing their housing recoveries in the process.
As this opinion piece observes, it is easy to understand why some states are doing this--they have huge budget imbalances that they have to fix. But the housing market is one of the mainsprings of the economy, and it needs to recover. Pilfering the mortgage settlement money is a short term strategy that retards the long term recovery.

Wednesday, July 04, 2012

Monroe Township ordinance to change homeowners association regulations |

Monroe Township ordinance to change homeowners association regulations |

MONROE TWP. — The township council will vote on amendments to an ordinance this month that will require new residential developments with more than 100 homes to create homeowners associations.
The zoning ordinance also requires developers of residential neighborhoods with less than 100 homes to post a basin maintenance fee to contribute toward the upkeep costs of the basins and open space when the land is turned over to the township, according to Dawn Farrell, Monroe’s administrative clerk.
The township must maintain open space and retention basin land in developments without associations. Already, the work in the 38 developments without the groups has become a burden on municipal resources, Farrell said.
A zoning law created a decade ago required all developments, regardless of the number of homes, to establish homeowners associations (HOAs).
“However, it has come to light that smaller developments may not be able to sustain a HOA,” Farrell said Wednesday.
And there you have two things of note. First, ten years ago, Monroe Twp., NJ, started requiring that all new residential developments have HOAs, no matter how small they were. I have been emphasizing this widespread policy for many years--it completely undercuts the bogus argument that CIDs are a response to consumer demand. They are a way for developers and cities to make money.   Second, they have now figured out that  small HOA-run developments are not sustainable. The fragility of small HOAs, and many large ones, is undeniable, but it pales in comparison to the fiscal nightmare that thousands of condominium associations are facing.

Update 7/5/12: I have permission to include some comments from the person who sent me this link:

"I was looking at an article that related to the recent free speech case when I came across this additional article from the same news source.  Admittedly the article is about a year old, however, I think it shows several things of interest:

1)  HOAs are being mandated by local government

2)  HOAs are being mandated in order to relieve the local government from the costs of maintenance AND to create additional revenue in the form of ad valorem taxes since the property is owned by a corporation rather than by governmental entities.  In other words, more support for the proposition that HOAs are imposed out of government mandate rather than some "choice" of the homeowners.  So much for the claim that numerosity implies popularity.  I always said that numerosity doesn't equate to popularity whether you are talking about cockroaches, epidemics, or HOAs.

3)  Local government realizes that HOAs are often unsustainable

4)  Most of the argument raised by local government is ridiculous.  Academically why would it matter how many homes are in the subdivision when it comes to who should have responsibility for maintenance?  Either the obligation to maintain is a local government responsibility or it is not.  The people in these subdivisions are paying taxes too."

Tuesday, July 03, 2012

California Passes Significant Protections Against Illegal Foreclosure Processes | FDL News Desk

California Passes Significant Protections Against Illegal Foreclosure Processes | FDL News Desk
"Pressured by a coalition of activists and state Attorney General Kamala Harris, the California legislature completed a months-long project yesterday to significantly improve its foreclosure process.  The measure gives homeowners a new right to sue over fraudulent practices, ends dual tracking – where servicers process foreclosures while negotiating loan modifications – and extends a single point of contact at all borrowers. The state Assembly passed the companion bills by 53-25, with the Senate passing by 25-13."
This is the most aggressive mortgage foreclosure reform bill so far. I think I have the right one here--A. B. 278..
See more detail on this at the Center for Responsible Lending.

Monday, July 02, 2012

Homeowner threatened after HOA Hall of Shame report -

Homeowner threatened after HOA Hall of Shame report -

""We got our first letter from the HOA about two days after we purchased the house," Steve says.

What started out as a series of notices of violation for -- among other things -- the particular shade of white that Steve and Jen chose to paint their garage door and their front door has escalated into threats of violence. 

In fact, it's gotten to the point where they've had to install security cameras at their own front door.

It all follows a Contact 13 HOA Hall of Shame report in May on Appaloosa Canyon."
Thanks to Rodney Gray for the link.

Probation Fees Multiply as Companies Profit -

Probation Fees Multiply as Companies Profit -
"'With so many towns economically strapped, there is growing pressure on the courts to bring in money rather than mete out justice,” said Lisa W. Borden, a partner in Baker, Donelson, Bearman, Caldwell & Berkowitz, a large law firm in Birmingham, Ala., who has spent a great deal of time on the issue. “The companies they hire are aggressive. Those arrested are not told about the right to counsel or asked whether they are indigent or offered an alternative to fines and jail. There are real constitutional issues at stake.'"
Good article exposing the way privatization arrangements with "private probation companies" are being implemented in ways that soak people for huge fines and even jail--the modern equivalent of debtors' prison.

"Occupy" your own home: A victory for free speech in New Jersey |

"Occupy" your own home: A victory for free speech in New Jersey |
"Of the 314,000 such communities in the United States, the overwhelming majority have restrictive covenants in their master deeds that sharply limit the free speech rights of residents in ways which no public government could. For example, unless you live in California, which has a state statute providing otherwise, you are almost certainly prohibited from placing a political sign in the window of your home, just as were the citizens of Ladue until the Supreme Court ruled otherwise.
Now, the New Jersey Supreme Court has stepped in to provide some relief, at least for residents of this state — and maybe offer the road to reform in other states, as well.
In a case involving the Mazdabrook Commons community in Parsippany, the state’s high court ruled that such a prohibition on political signs in a homeowner’s window violated the state constitution."
This is a great op-ed by Frank Askin of Rutgers Law School, who successfully challenged the actions of Mazdabrook Commons before the New Jersey Supreme Court.

These Condo-Owners Had Their Properties Stolen By Local Developers - Business Insider

These Condo-Owners Had Their Properties Stolen By Local Developers - Business Insider

"By buying the 89 percent of the units at the foreclosure sale last year, [Timochenko] acquired all of the units and all of the votes he needed to approve a termination," explains Tom Beaver, an attorney whom some of the unit owners turned to for help.

Here's the rub: Under Section 3220 of the Pennsylvania Uniform Condominium Act, when a condominium is dissolved, the condo association can put the entire condominium up for sale, regardless of who owns the individual units. So in acquiring control of the condo association, Water Polo I also gained the right to sell Fusco's home.
Here is a detailed explanation of the Deep Path condominium situation that I posted on below, noting that there had to be more to the story, and there is.  You can read the statute at the link. Pennsylvania is one of the thirteen states that have adopted the Uniform Condominium Act of 1980. Section 2-118 of that Act is now Section 3220 of the Pennsylvania Uniform Condominium Act. Section 3220 is the code section that Timochenko used to accomplish this.

update: in answer to a question posed in a comment, here is the full list of states that adopted the Uniform Condominium Act of 1980:

ActCondominium Act
OriginCompleted by the Uniform Law Commissioners in 1977, and amended in 1980.
DescriptionUCA contains comprehensive provisions for creation, management, and termination of condominium associations, including point-of-sale consumer protection.
American Bar Association

EnactmentsAlabama, Kentucky, Maine, Minnesota, Missouri, Nebraska, New Mexico, Pennsylvania, Rhode Island, Texas, Virginia, Washington, West Virginia
2012 Introductions
Staff Liason(s)Kieran Marion

Sunday, July 01, 2012

South Floridians turn to roommates to help them pay bills - South Florida

South Floridians turn to roommates to help them pay bills - South Florida "It's definitely on the uptick," agreed Dan Ross, owner of the national RoommateExpress website that has noticed South Florida becoming one of the top areas in the nation for homeowners renting out rooms. The other hot spots for roommates — the Phoenix, Las Vegas and Tampa-St. Petersburg metro areas — also are having to dig themselves out of a housing bust that left thousands scrambling to find a new place to live or else find new income to keep their homes from being foreclosed, he said.
Notice these hot spots for taking on roomers are the heart of Privatopia.