BofA: Bailouts Front Door, Back Door and the Prosecutors Who Have Come Knocking

Finally!  Someone takes on the Big Bankers and their foreclosure policies, the Nevada Attorney General :  “Cortez Masto wants to revoke a 2009 settlement with BofA over loan abuses involving its Countrywide Financial Corp., saying the bank has violated its terms. She claims the banking giant has harmed homeowners by failing to modify their mortgages and maliciously deceived some by telling them their loans would be modified, then foreclosing on them. BofA denies the allegations.”  [LVSun]

Among the problems with Bank of America’s procedures: Poor training for personnel dealing with customers, Limiting the time personnel could spend with customers, Requiring repeated and unnecessary resubmission of various kinds of documentation.  The practice which appears the most egregious is that of telling a customer that the mortgage modification process was underway, collecting the payments — and then foreclosing anyway.

This isn’t the only litigation facing Bank of America and its assumption of Countrywide Financial’s highly questionable loans.   It seems Countrywide routinely held on to documentation for its mortgages including the original notes.  If true, then litigation in New Jersey could reveal that while BofA thought the mortgages had been securitized — approximately 96% were supposed to be — BofA may be on the hook for these. BofA’s other problem is that if the securities were supposed to be “mortgage backed” and aren’t, then investors can force BofA to buy them back.   [DailyFinance]

Problems such as the November 2010 New Jersey litigation have multiplied.  The decision by former BofA CEO Kenneth Lewis to purchase Countrywide for $4.2 billion is still creating problems.  BofA posted a second straight quarterly loss in January 2011 resulting from its writedowns of mortgage losses.  [Reuters]  The problems were supposed to have been mitigated in 2009, but that may not necessarily be the case.

The “common wisdom” was that after the Housing Bubble burst and the Credit Crunch began banks were much tighter with their lending, their underwriting standards were better, and their mortgage products were improved.  Not. So. Fast.  There is evidence to the contrary.

“Bank of America was the second largest mortgage lender in 2009, behind Wells Fargo. Its volume was up 116% over the previous year. Meanwhile, Citigroup and JP Morgan were pulling back, allowing the size of their mortgage business to shrink. “  [CNBC]  There was about $2 trillion in mortgages written in 2009, and obviously that isn’t all that far below the 2007 Bubble Level of $2.4 trillion.   CNBC’s Jon Carney summed up the situation: “Bank of America is probably still screwed.”

By June 2011 Bank of America was looking at $27 billion in mortgage losses by 2013, and this figure didn’t include the $46 billion the Bank had already absorbed.  Worse still, federal investigators were noticing that Bank of America was “purposely dragging its feet” when it came to disclosing its foreclosure practices and policies.  HUD officials found that the Bank of America was refusing to allow its employees to discuss the foreclosure processes, and the Attorneys General in New York and California were launching their own investigations.   [Forbes]

As of August 30, 2011 Bancorp was suing Bank of America:

“The lawsuit, which was filed in New York on Monday, claims Countrywide sold U.S. Bancorp a pool of over 4,000 loans originally valued at $1.75 billion. U.S. Bancorp claims Countrywide ignored its own mortgage underwriting guidelines when issuing those loans.

According to the complaint, Countrywide agreed to repurchase loans within 90 days if any of the statements made in the loan contract wound up being untrue. Those statements included an assertion that the loans complied with the bank’s underwriting guidelines.”

US Bancorp is asking that Countrywide/BofA repurchase the mortgages in this “pool.”

Thus Bank of America is in a double bind.  On one hand, it can try to mitigate its losses by foreclosing on the toxic mortgages (and get itself in trouble with federal and state entities for failing to properly assist homeowners in the process) and on the other, it must find a way to satisfy those who bought the Countrywide mortgage “pools,” investors who thought they were purchasing securitized assets based on authentic mortgage underwriting guidelines.

That Big Deal on January 11, 2008 in which Bank of America paid $4 billion for Countrywide [CNN] now gives every appearance of being a Big Bust.   But, CEO Lewis was confident at the time:

“Bank of America Chairman and CEO Kenneth Lewis suggested he was aware of the troubles that his firm was taking on, but said acquiring Countrywide was a “rare opportunity” for his company.  “Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation’s premier lender to consumers,” Lewis said in a statement.”

The bloom was off the rose by September 2009 when Lewis announced he was retiring as CEO of Bank of America.  [HuffPo]  Lewis had been earning a $1.5 million annual salary from BofA until October 2009 when he announced he would not accept a salary for his remaining tenure.  However, the “zero” didn’t include the $53 million in pension benefits and the $69 million in stock options which were also part of his final compensation package.  [CNN]

Bank of America was allocated $45 billion in initial “bailout funding,” [BBC] and the bank was allowed to sell some $73 billion in toxic mortgages to Fannie/Freddie for $500 million.  [TheStreet]  As for Angelo Mozilo, the individual who “cooked” up the mortgages for Countrywide — he was allowed to cut a deal with the SEC and prosecution was dropped.  [DailyFinance]  Yves Smith at Naked Capitalism provides more background on this aspect of the Countrywide debacle.  How was Mozilo’s fraud not prosecutable?   Among the answers, “secondary liability:”

“Legislators also need to restore secondary liability. Attentive readers may recall that a Supreme Court decision in 1994 disallowed suits against advisors like accountants and lawyers for aiding and abetting frauds. In other words, a plaintiff could only file a claim against the party that had fleeced him; he could not seek recourse against those who had made the fraud possible, say, accounting firms that prepared misleading financial statements. That 1994 decision flew in the face of sixty years of court decisions, practices in criminal law (the guy who drives the car for a bank robber is an accessory), and common sense. Reinstituting secondary liability would make it more difficult to engage in shoddy practices.”  [NC]

So, Lewis took home his compensation package and Mozilo escaped prosecution,  keeping the $132 million he “earned” in 2007.

Meanwhile back in the neighborhoods,  Bank of America is still trying to foreclose on the toxic (Countrywide) mortgages by any means available and homeowners in Nevada and elsewhere are being asked to submit and resubmit documentation as the foreclosure procedure drags on.

PS: Please don’t try to convince me that Mozilo and Lewis are “job creators.”

>The Tale Of The TARP

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Congressman Dean Heller (R-NV2) is fond of citing his opposition to the TARP program to recapitalize the U.S. financial sector in the wake of the housing bubble collapse.  Continued opposition to the TARP program requires several inelegant moves and invites at least an equal number of questions.

The first dance step is usually an avoidance of alternatives. However, the question remains: What would the TARP opponent have done differently at the time? Having created a deregulated shadow system in which massive amounts of leverage had been applied to a decreasing valuation of assets, the banks were going under. They were going under so quickly that by the middle of September 2008 there were very real and justified fears that money market accounts were going to join the spiral into oblivion. It was all well and good to spout “Let Them Go Bankrupt” at the time, but the crucial point was that when speaking of “them” the critics were talking about the whole banking sector. Those who aren’t sure about this prospect should go back and take a look at the stock market in the immediate aftermath of the Lehman Brothers debacle.

The second maneuver tripping the light fantastic is to muddle the numbers. For example, critics are fond of charging that TARP reviews discount other costs to the government in the process of protecting the financial interests of the nation.  The AIG portion of the program has been a favorite whipping boy. Opponents of the TARP funding are quick to cite the SIGTARP study which indicated higher than expected costs, however this raises yet another question: How was the Treasury Department supposed to audit the AIG or any other portion of the program?  “SIGTARP, however, incorrectly claims that our report is inconsistent with TARP’s audited financial results from March 2010. And in doing so, SIGTARP seems to be arguing that when Treasury conducts any evaluation of the cost of its investment in AIG, it should pretend that the company’s exit strategy was never announced.  “SIGTARP’s analysis seems to be stuck in a time warp if they believe that we should ignore AIG’s exit strategy in evaluating our investment in that company. Moreover, they demonstrate a fundamental misunderstanding of the difference between audited financial results – which are backward looking and represent a snapshot in time – and forward-looking valuations of future profits, such as Treasury’s recent report.” [WH] (emphasis added)

Closely related to the Muddled Numbers argument, is the contention that somehow the numbers were astronomical. Hyperbole surrounded any discussion of TARP costs, it was the most expensive ever dearest highest number in the entire whole wide world since Dinosaurs stomped the land. Hardly so. “An IMF study found that the average net fiscal cost of resolving roughly 40 banking crises since 1970 was 13 percent of GDP.  The GAO estimates that the cost of the U.S. Savings and Loan Crisis was 2.4 percent of GDP.  By contrast, the direct fiscal cost of all our interventions, including the actions of the Federal Reserve, the FDIC, and our efforts to support Fannie and Freddie, is likely to be less than 1 percent of GDP.” [DoTreas]  Surely 1% of our GDP wasn’t too great a price to pay for stabilizing our financial markets? And, by the way — the program has cost $25 billion, not the $700 billion first estimated.

The third terpsichorean move is to adopt the mantra “When In Doubt Flog Fannie and Freddie!“  This element combines the Wall Street Wish List item (Let us take over the entire secondary mortgage market) with Tea Party variations on a libertarian theme. The combination generates lovely sound bites, but obfuscates the real issues. Thus the question remains: How is the money being repaid? The answer is that this story has a happy ending, whether the critics want to admit it or not.

The Wall Street Journal continues to beat this drum, and got a direct response from the Treasury Department: “The op-ed notes that the cost of rescuing Fannie and Freddie was a major component of overall cost of combating the crisis, but this cost has also been decreasing, not increasing. In fact, it fell in each of the last two quarters as those institutions continue to pay dividends back to taxpayers. And the Office of Management and Budget forecasts that, over the next 10 years, the cost of rescuing Fannie and Freddie will decline from $134 billion today to a total of $73 billion – a decrease of $61 billion or 45 percent.” 

Fourth on the list of dance steps is a pirouette into sloganeering: Too Big To Fail. The fact that this is now only tangentially related to TARP is ignored, as is the fact the the Dodd-Frank legislation provides for a process by which banks that are so large that their failure poses a systemic risk can wind-down into bankruptcy without sucking the entire financial sector along with them. [Treas] So, as of now: Who is too big to fail?  No one. The key phrase in the Dodd-Frank bill is “orderly liquidation.”*  If the FDIC, the Treasury, and the FED believe that the failure of a bank would create systemic risk, then the “orderly liquidation” process begins. Those wishing to consult the step by step process by which this alternative form of bankruptcy takes place should consult the WestLaw/Reuters summation of the provisions. *Evidently, bankers don’t like the word bankruptcy applied to themselves, so the law allows them to be Orderly Liquidated; a distinction without a real difference.

References and additional information:
How Dodd-Frank Orderly Liquidation Regime Works, WestLaw Thomson/Reuters February 2011
Fact Check on TARP, Department of the Treasury, WSJ edition
The Facts on AIG, White House, October 2010
The Bail Outs Worked, USA Today October 2010
Dividends From Fannie and Freedie Surpass Aid, NYT November 5, 2010
Testimony to Senate Oversight Panel, Timothy G. Massad, (pdf) March 4, 2011
TARP worked Updated, Reuters March 4, 2011
Oversight Panel Grudgingly Admits TARP worked, New York Magazine, December 9, 2009
Treasury: Bailout will cost 85% less than expected, Daily Finance, October 5, 2010

>Nevada 3 – Arizona O: House Passes S. 386 Fraud Enforcement and Recovery Act

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All three members of the Nevada Congressional delegation (Berkley, Titus, Heller) voted in favor of S 386, the Fraud Enforcement and Recovery Act, which passed the House of Representatives on a 367-59 vote. [roll call 235] Nevada Senators Reid and Ensign voted in favor of passage when the bill was voted on in the Senate on April 28, 2009. [GovTrack]

The bill extends the prohibition against making false statements in a mortgage application to agents and employees of mortgage lending businesses. It also applies the prohibition against defrauding the government to fraudulent activities involving the TARP program, the stimulus plan, recovery, or rescue plan. The measure expands securities fraud provisions to cover fraud involving options and commodity futures. Also expanded, the prohibition of money movement outside the United States to avoid the payment of taxes. [CRS] So, who would oppose these provisions? All three members of the Arizona Congressional delegation – Flake, Franks, and Shadegg.

They were joined in opposition by Representatives Bachmann, Boehner, Dreier, Foxx, Hensarling, McHenry, Pence, and Young (AK) among other members of the GOP. No Democratic Party members of the House voted against the bill, although Rep. Grayson responded “present.” [roll call 235]

House Speaker Nancy Pelosi (D-CA) said of the bill’s passage: “This bill takes action now to protect taxpayers by giving the Justice Department more tools to fight possible fraud in the use of TARP and economic recovery funds and in mortgage markets. Congress must protect taxpayers against future fraud that exploits economic assistance initiatives that are intended to restore and rebuild our economy.” [gavel]

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>Is this how bankers get to be so popular? Bank of Nevada buys Security Savings Bank Assets

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Had it not been for the header, the announcement from the Nevada Financial Institutions Division last Friday would have been barely a page long: “Security Savings Bank taken over by Financial Institutions Division; FDIC appointed as receiver. [BusNV.gov] Depositors will be insured up to $250,000 by the FDIC, and all non-brokered deposits of SSB will be assumed by the Bank of Nevada. National news sources report this is the 16^th bank closure in 2009, and the 41^st since the beginning of the credit meltdown. [Failed Bank List] Security Saving Bank had $238.3 million in assets and $175.2 million in deposits as of December 31^st. The Bank of Nevada agreed to purchase $113.5 million of the failed bank’s assets. [MrktWtch] The Bank of Nevada did not pay a premium for the purchase. [FDIC]

When the Security Savings Bank branches re-open on Monday, March 2, 2009 they will do so as branches of the Bank of Nevada. Non-brokered deposit accounts will be insured separately from all other accounts at the Bank of Nevada for the next six months. [FDIC] This might be good news for those who checked on the Bank of Nevada’s rating as of September, 2008. Bank of Nevada’s earnings were “substantially below average” in terms of return on equity, and “below average” in the “level of non-interest income” category. BofN was “well below standard” in the overhead category. This was partially balanced by a relatively low “non-performing asset ratio” of 8.46, and loss reserve coverage of 166.68 “much better than normal.” The Bank had a “moderate” balance sheet liquidity score, but seemed heavy on “purchased liabilities.” [BankRate]

The Bank of Nevada is owned by the Western Alliance Bancorporation, which received $140 million in TARP funds in December 2008. [TCS] It would be interesting to know if the Bank of Nevada used any of its portion of the $140 million granted to its holding company [ProPub] to buy up the assets of the failed Security Savings Bank? Are taxpayers subsidizing (via the good offices of TARP I) the purchase of its assets by another bank?

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>Technical Difficulties and Difficult Technicalities

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There comes a time when it’s no longer feasible to keep repairing an antique piece of equipment like the computer I’m using at the present. Therefore, posting from the furthest reaches of northern Nevada may be very light (to non-existent) while I get this little overworked and under-performing computer replaced. It can retire to doing the light accounting and word processing tasks that were the reason for its purchase in the first place, and leave the Big Boy Internet stuff to a ‘heavier’ weight, newer, and faster model. Frankly, I’m a little surprised I haven’t destroyed this little beast already. Bless his little processor, he has endured all manner of abuse.

Is anyone surprised that the first tranch of the bailout funding for banks hasn’t yielded more loans in Nevada? [LVSun] And, Elsewhere? One might guess this is what happens when those “onerous regulatory burdens” aren’t attached to federal funding of financial institutions? No, we ought not push banks into making questionable loans, but the premise from the bank analyst cited in the article is a classic example of hindsight. The TARP funds were authorized, according to Bush, Bernanke, and Paulson, in order to “thaw” the frozen credit market. The capitalization motive was only announced AFTER it was determined that no one could figure out how to value the toxic assets on the books.

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>Bell Mares and Busts: The Market, The Mess, and the Oversight Panel Recommendations

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Of course, this is old news by now, but worth repeating: Nevada’s unemployment rate is currently standing at 9.1% statewide, 9.1% in the Reno-Sparks MSA, 9.4% in the Carson City area, and 4.9% in the Elko, NV micro area. [DETR] Obviously, the first noticeable thing is that the trend line shows Nevada’s unemployment rate increasing faster than the national rate since last spring. Secondly, the state’s unemployment rate has accelerated faster than the national rate since last summer. No surprise here, the housing market crash left many workers in the lurch. During 2008 it seemed that the unemployment rates were going to trend higher in southern Nevada than in northern counties. However as the December numbers indicate, this is not the case.

Nevada job growth is down 32.1% overall and was down 2.5% from November. Construction is down 19.4%, Financial Activity job growth down 3.5%, Professional and Business Services down 5.3%, Leisure and Hospitality down 6.9%, Casino and Gaming job growth off 7.6%. [DETR] Put these all together with other sectors of the Nevada economy and we have a 68.6% increase in the unemployment rate, which stood at 5.2% this time last year. [DETR]

The ultimate neo-Hooverite solution to this dismal set of statistics is that “the market” will work everything out in the end, and government should take no action to ameliorate the current, transitory, situation. What no one ever bothers to explain is precisely he or she means by “the market.” Some amorphous mass of collective behavior by unspecified operators is assumed to be the source of the solution, reversing the decline of purchasing power, and augmenting the growth of demand for goods and services. If ever there were a ‘faith based’ economic theory – this is it.

The neo-Hooverites must have their own secular economic form of prayer: “Our Markets, which are Unknowable, Hallowed Be Thy Transactions, Thy Economy Come, Thy Will Be Done, on Main Street as it is in the Ether.” The ideological problem with this perspective is that it’s little more than a rationalization and justification for herd behavior, with little or no attention spared for answering the question: Who is leading the herd? This question, in turn, leads us directly to the self-anointed herd leaders and their motivation.

Wall Street Wizards?

While everyone’s attention has been focused on the obscene $18.4 billion in executive bonuses recently paid to Wall Street securities management, and the outflow of tax dollars to subsidize corporate jets, dividends, and compensation, the part of the NY Comptroller’s report that has not received all that much scrutiny informs us that at the beginning of 2008 there were seven major financial firms headquartered in New York City, and that of these two have been swallowed up by other companies, one collapsed in a heap of toxic assets, and two re-organized themselves into more carefully regulated commercial banks. Employment in the securities industry in New York City fell from 187,000 in October 2007 to 168,600 in December 2008. [NYCompt] Were these the herd leaders of the “market?” Are we to believe that the same people who created the situation in which there was a 10.2% employment decline in their very own economic sector are the ones to whom we should be listening today?

Worse still, because they fouled their own nest, the average bonus declined 36.7% to $112,000 in 2008, resulting in about a $1 billion reduction of personal income tax revenues for the state of New York, and an additional $275 million decline for New York City. However, all is not lost for these self anointed bell mares, the Comptroller’s report does not include stock options that have not yet been exercised. Timing is everything.

These bell mares may, indeed, follow the path outlined by the neo-Hooverites toward more self control after eliminating in their own hay, but this doesn’t do anything toward mitigating the mess they’ve made for other people while they learned their painful lesson: Greed is not good, and there’s a reason it was one of the Seven Deadly Sins. But, if these people don’t constitute the ‘Market,” then who does?

Jack Built Houses?

Were the herd leaders members of the housing developers contingent who over-developed, over-built, and over-leveraged their business operations? Are we to look to those whose actions precipitated a continuing downward spiral of declining home prices and accelerated foreclosures. [MSNBC] We are supposed to be assuaged by the declining inventory of homes for sale, and the low interest rates for home mortgages. However, people who are unemployed don’t qualify for mortgages at any rate, for homes at any price.

Two years ago Toll Brothers Construction, a builder of luxury homes, sold its stock for about $35 per share, today’s price? $17.06. [YahFin] Pulte Homes Inc’s stock was also selling for approximately $35 per share two years ago, and the latest price posted is now $10.27. [YahFin] Were the corporate executives of the housing construction sector those who constituted leaders in the housing ‘market?’ If so, they have some explaining to do as the 30 year fixed mortgage rate falls to 5.48% and the Federal Reserve is tossing in everything but (or perhaps including) the kitchen sink to keep key interest rates near 0%. [CNN] So, how many construction workers had to be laid off before the titans of the housing industry got the message that “Avaritia mala est?”

The Bureau of Labor Statistics reports that the unemployment rate in the construction sector increased from 9.9% in September 2008 to an alarming 15.3% in December. Mass layoff “events” increased from 144 in September 2008 to 544 in December, and initial claims for unemployment benefits by construction workers climbed from 10,763 in September 2008 to 40,579 by December. [BLS] The construction industry alone accounted for 16% of the mass layoffs, and 12% of associated initial unemployment claims during December 2008. [BLS] Surely, those who created the situation these statistics describe aren’t the ones to whom we should be listening about ‘market’ forces alleviating the current economic catastrophe.

Vox Populi, Vox Dei?

Since the self anointed bell mares of Wall Street and the Housing Sector haven’t shown themselves worthy of leading our economic institutions into anything other than the nearest conveniently located bog, perhaps it’s about time to put more faith in the Little People? This isn’t to argue the necessity of a government “5 Year Plan” form of directed economy, but to assert that the “free-enterprise-pure capitalism-unregulated-market” philosophy is just as bankrupt as Enron and Lehman Brothers.

Just as the medieval church controlled the behavior of its communicants by constructing a framework delineating mortal and venial sins, our Government of the People, by the People, and for the People can as easily impose some restrictions on the activities of those who would participate in, or even seek to lead, our economic communion. (Imagining the Interdiction of John Thain is a pleasant exercise.) The recent report released by the Congressional TARP Oversight Panel [COP-TARP] provides some recommendations compatible with this argument.

The Oversight Panel listed eight recommendations: (1) Identify and regulate financial institutions that pose systemic risk; (2) Limit excessive leverage; (3) Increase supervision of the shadow financial system; (4) Create a new system of federal and state regulation of mortgages and other consumer credit products; (5) Create executive pay structures that discourage excessive risk taking; (6) Reform the credit rating system; (7) Make establishing a global financial regulatory floor a U.S. diplomatic priority; and perhaps most importantly (8) Plan for the next crisis. These reforms ought to be put in statute in order to better control the tendencies of our Industrial Captains towards “luxuria, gula, avaritia, acedia, ira, invidia, et superbia.” BEFORE they do it again.

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>Overnight Express: Quis Custodiet Ipsos Custodes, etc.

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Nevada Headlines: “Expert: Nevada Mountain (Mt. Tenabo) has been mined for years” [SFC] “Western Shoshone protest Nevada gold mine” [MSNBC] “Governor Gibbons tells Ely ‘tomorrow has caught up with Nevada’” [Ely Times] “Coal fired plant challenged, endorsed” [SJMN] “Big Nevada power line proposed” [SFC]

Equal pay for equal work: Since they can’t very well come out and say they are against equal pay for their wives, daughters, mothers, and aunts, members of the Republican Party in the Senate are gathering to discuss their opposition to the Lily Ledbetter bill because, “it’s the Democrats’ trial lawyer bailout bill…” [TPMDC] Nothing like continuing to take their cues directly from the American Enterprise Institute? Democratic leaders are viewing the debate as a test of Republican obstructionism. If the GOP tries to score political points by introducing non-germane amendments, they’ll be shut out. So far Republicans have introduced two amendments, both on topic. [HuffPo] According to the Senate Calendar, the S. 181, the Ledbetter Bill, will be taken up after Morning Business tomorrow, with 60 minutes for debate prior to a vote on the Hutchison Amendment (No. 25).

Covering the TARP: The House agreed to amendments to the TARP reform bill (H.R. 384) from Rep. Frank (D-MA), Rep. Murphy (D-PA), and Rep. Hinchey (D-NY) and agreed to the final passage of the bill 260-166, with 7 not voting. Representative Berkley (D-NV1) and Representative Titus (D-NV3) voted in favor of the bill; Congressman Heller (R-NV2) voted in opposition. [roll call 26] Related articles: “TARP – the Sequel, … debate over how to spend the second $350 billion of the government rescue program, this time distressed homeowners may get help” [BusWeek] “House passes TARP reform bill” [WashInd] “No easy answers as Obama team faces banking crisis” [IHT]

Quis custodiet ipsos custodes? “Cox calls it quits” (SEC) [CompWk] [NYT] President Obama has appointed Elisse Walter as acting chairman. “Suspected NYSE insider trading rose in 2008” [Reuters] “Great Britain: FSA will look wider, starting with banks’ risks, Turner says” [Blmbrg] “Law professors think Fed should monitor systemic risk” [WSJ] GAO Testimony “A Framework for crafting and assessing proposals to modernize the outdated U.S. financial regulatory system” (pdf) And, then there’s Rush Limbaugh whose latest greatest fear is that the reversion of policy on the application of the Freedom of Information Act will allow more journalists and analysts to hold members of the Bush Administration accountable for their actions. The radio comedian seems to have decided that gathering and sharing information is “un-American.” [TP] To top it all off, the warrantless wiretapping of the rest of us by the Bush Administration? It was worse than we might have thought. [Dkos]

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>Overnight Express: Under the Radar News Roundup

>Assembled Wisdom: The Lily Ledbetter Fair Pay Act of 2009 moved a step closer to passing the Senate when a Republican filibuster was broken on a 72-23 vote. Senator Harry Reid (D-NV) voted in favor of the motion to invoke cloture on the Motion to Proceed to S. 181; Senator John Ensign voted “no.” [roll call 4]

S.22, the bill to designate lands in the National Wilderness Preservation System, and to authorize programs in the Departments of Interior and Agriculture passed on a 73-21 vote, with Senator Reid voting in favor and Senator Ensign opposed. [roll call 3]

It seems a little sad that after all these years, the House of Representatives would feel it necessary to enact a rules change requiring each standing committee to hold periodic hearings on the topic of waste, fraud, abuse or mismanagement in government programs which that committee authorizes, but enact it they did. The House voted 423-0, with 11 not voting, to approve such a rule. [roll call 18]

Congressman Dean Heller (R-NV2) has a kindred spirit in Iowa 5th District Rep. Steve King, who called the authorization of the SCHIP program, a “victory for illegal immigrants and wealthy families.” [IowaIndp] When did earning $40,000 a year put a family in the “wealthy” category?

While the Congress continues to debate the TARP program, someone should be reading a recent GAO Report: Financial Regulation – A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System.

The Federal Election Commission has made the “Comments received – Notice of Public Hearing on Agency Procedures and Processes” available online. The comments from OMBWatch are available in PDF format, as are comments from the Sunlight Foundation. The Sunlight Foundation again makes its case for improved electronic filing procedures, and it would be nice if Senator Ensign would give up his ill advised opposition to electronic filing for Senate races. [Sunlight]

Economic news: “Senate releases second half of bailout fund” [IHT] “U.S. to inject $20 billion in Bank of America” [IHT] “Toyota cuts North American production” [Reuters] “Consumer prices in U.S. probably posted first annual decrease since 1954″ [Blmbrg] “Freddie Mac eviction plans continue during moratorium” [Blmbrg] “Fannie and Freddie force borrowers to waive legal rights: Housing advocates, Congressional leaders call practice abusive” [WashIndp] “Intel Q4 profit plummets 90% meets forecast” [Wired]

Cleaning Up After the Elephants: “New Pentagon rule tightens revolving door: Pentagon officials who participate in costly acquisitions will now need written approval from an agency ethics officers before taking a job with a Defense Department contractor” [Gov Exec] “Eric Holder: Waterboarding is torture” [ChiTrib] “Democrats sneak Net Neutrality rules into stimulus bill” [CNET] “Gitmo database details 799 prisoner’s cases” [ProPub]

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>SCHIP on House Docket Next Week: What will be Heller’s excuse this time?

>Next week may very well be an uneasy one for Congressman Dean Heller (R-NV2). Three items are due for consideration on January 14th with which the Nevada Republican may be uncomfortable. [WklyLdr] First, there is H.Res. 40 which amends the Rules of the House to require each and every standing committee to hold periodic hearings on waste, fraud, abuse, or mismanagement in Government programs. A person could ask, why didn’t this come up in the 110th, or in the GOP controlled 109th? Be that as it may, the resolution is coming up now, and those truly interested in Congressional oversight will be supporting the measure.

Two other pieces of legislation could be a problem for Congressman Heller. The Children’s Health Insurance Program Reauthorization Act of 2009 is due up on Wednesday. This would be the self-same SCHIP legislation Congressman Heller opposed during the 110th because (1) it might lead to illegal immigrants receiving services; even though the bill specifically excluded illegal alien participation; and (2) it was for poor people; in spite of the fact that the original legislation was intended to help working families; and (3) perhaps passage would mean that some insurance agent somewhere in the nation might be deprived of the commission for selling health insurance? At any rate, it’s perfectly predictable that Congressman Heller will find some new (or resurrect some old) excuse for voting against this worthwhile and popular program.

It’s also predictable that Representative Berkley (D-NV1) and Representative Titus (D-NV3) will support this bill to assist working families.

The Financial Services Committee, on which Heller has a seat, is bringing H.R. 384 up for consideration on January 14th as well, titled “The TARP reform and Accountability Act.” Committee chairman Barney Frank’s (D-NY) bill would require the Treasury Department to develop a program to stimulate demand for home purchases and lower property inventories by making affordable mortgages available for qualified buyers through interest rate buydowns. The TARP legislation would be amended to add processes to reduce foreclosures, strenghten accountability, and close loopholes. Under the bill’s terms the Treasury Department could “consider the impact of areas with the highest inventories of foreclosed properties.” Using the second portion of the TARP money would be conditioned upon the allocation of $50 billion for foreclosure mitigation, and would apply solely to owner-occupied residences. The bill also calls for liability protection for loan servicers who engage in loan modifications. Treasury could also provide support for commercial real estate loans and commercial mortgage-backed securities. [PRwire]

Congressman Heller, who made much of his opposition to the original TARP legislation during the last campaign season, may want to give serious consideration to supporting this bill, especially as it deals directly with problems closely associated with the Nevada real estate market – a high foreclosure rate, a relatively high level of unsold inventory, and the related “impact” on the local market.

Contact links for Nevada’s delegation in the House of Representatives are located in the DB sidebar in case any reader might wish to contact Congressman Heller on behalf of the SCHIP and TARP reform measures. A person might also want to thank Representatives Berkley and Titus for their votes in favor of equal and fair pay for women in the workforce.
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>If it’s the Season of Giving, Why aren’t the CEO’s being generous with anyone but themselves?

>A holiday season suggestion for Senator John Ensign (R-NV) and the other members of the “Bankruptcy is Good Club:” If the United Autoworkers are going to have to renegotiate contracts not due for reconsideration until 2011, then let us have the CEO’s of the American automobile manufacturing companies renegotiate their contracts with their boards of directors? If we’d really like to be competitive with European and Japanese counterparts then this ought to take into consideration that by 2007 the average pay for a CEO in Europe was 22 times that of their average employees, in Japan a CEO earned 17 times that of their average employee, but in the U.S. the average S&P 500 CEO was earning 350 times that of the average worker. [DKos]

At General Motors, Mr. G. Richard Wagoner, Jr. pay is a tidy $3.36 million. The COO is paid $2.31 million, and the VP of Global Product Development receives $2.31 million. The Executive VP for Global Powertrain and Global Quality is compensated to the tune of $1.29 million. The Group VP of Global Manufacturing receives $1.41 million. [YahFin]

Ford pays Mr. Alan G. Mulally, its CEO, $9 million, the Executive VP is inked in for $2.86 million, and the CFO gets $3.12 million. [YahFin] About the time the executive pay packages for Ford’s top management were revealed, and while the company was losing money, Ford announced bonus to rank and file employees to prevent “ill will.” [WSJ]

As a privately held company, Chrysler doesn’t publish executive compensation figures. Its CEO has said he would be willing to accept a $1.00 annual salary in order to have his company qualify for federally guaranteed loans, however this should be contrasted with the $30 million Chrysler is paying out in “retention bonuses” to keep its top executives. [USAT]

Interesting, isn’t it, Chrysler wasn’t willing to replicate its concern for retaining top employees at the Kenosha, WI plant it will be closing on December 23? [NYT] Nor did Chrysler feel the need to offer “retention bonuses” to the workers at the Newark, NJ plant which will be shut down a year ahead of schedule, in addition to the 136 workers at the Lear Plant which manufactures seats for the Dodge Durango. [ABCPhila]

Prior to a recent policy change, Ford was equally willing to incentivize executive retention by offering future stock options and stock awards based on performance goals. In 2006 the company paid out “retention settlement” money to its Executive VP and its current and former chief financial officers. [DFP]

Precious little wonder that Congressional legislation for the Big Three bailout capped executive salaries at $250,000. The actions taken by President Bush to have the federal government subsidize loans to the Big Three requires limitations on executive compensation and the sale of corporate jets. [SPI] So, what are the limits supposed to be on executive compensation?

According to the term sheet released for General Motors, “The relevant companies shall be subject to the executive compensation and corporate governance requirements of Section 111(b) of the EESA, and the UST’s guidelines that carry out the provisions of such subsection for systemically significant failing institutions as set forth in Notice 2008-PSSFI. [...] The relevant companies shall comply in all respects with the limits on annual executive compensation deductibles imposed by Section 162(m)(5) of the 1986 Internal Revenue Code. The Notice reduces the $1 million deductibility limit to $500,000.

All discussions of executive compensation for the automakers should also incorporate some consideration of how those TARP funds have been utilized in the financial sector, and this headline ought to give some of the Republican caucus some concern, “AP Study Finds $1.6 billion went to bailed out bank execs: on verge of failure, bank executives collected financial bonanzas” [TPM] The benefits included cash, stock options, company jets, chauffers, home security, country club memberships, and professional money management. “The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.” One positive impact of the dressing down the Detroit executives received from the Congress may be the increasing number of corporate jets for sale. TPM provides a list of the banking institutions and their past records with flying very friendly skies.

If the UAW is being asked to accept stock in lieu of cash for the employees health and retirement systems, then it might behoove the Congress to require that all corporations receiving TARP funding and loan guarantees be required to bid farewell to the over-priced era of the Golden CEO, and drop such perks as private flights, country club dues, home security systems, chauffeured vehicles, and similar benefits; at least until someone can explain why workers on the factory floor who actually MAKE the products aren’t worthy of personal security and a day at the golf course — or even their jobs.
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