By Deena Stryker
August 24, 2011 "Dailykos" - -An Italian radio program's story about Iceland’s on-going revolution is a stunning example of how little our media tells us about the rest of the world. Americans may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt. The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.
As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example. Here's why:
Five years of a pure neo-liberal regime had made Iceland, (population 320 thousand, no army), one of the richest countries in the world. In 2003 all the country’s banks were privatized, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many English and Dutch small investors. But as investments grew, so did the banks’ foreign debt. In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent. The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro. At the end of the year Iceland declared bankruptcy.
Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain.
Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The FMI and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.
Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.
What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.
Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country. As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF. The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North. But if we had accepted, we would have become the Haiti of the North.” (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)
In the March 2010 referendum, 93% voted against repayment of the debt. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.
But Icelanders didn't stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. (The one in use had been written when Iceland gained its independence from Denmark, in 1918, the only difference with the Danish constitution being that the word ‘president’ replaced the word ‘king’.)
To write the new constitution, the people of Iceland elected twenty-five citizens from among 522 adults not belonging to any political party but recommended by at least thirty citizens. This document was not the work of a handful of politicians, but was written on the internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.
Some readers will remember that Iceland’s ninth century agrarian collapse was featured in Jared Diamond’s book by the same name. Today, that country is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution. And those of Italy, Spain and Portugal are facing the same threat.
They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.
That’s why it is not in the news anymore.
Friday, August 26, 2011
Millions of Jobless Americans Filing For Disability To Get Food, Medicine
Social Security is in “trouble” because wealthy people aren’t required by the government to actually pay their share into the national program, and also because Congress has been “borrowing” billions of dollars that working people have paid into the program so that they might not have to starve or die of common illnesses once they’re chewed up and spit out by the capitalist system. But there’s another part of Social Security that’s running out of money even faster than the old age pensions, because a record number of discarded workers are now claiming disability payments and Supplemental Security Income — 3.3 million unwanted laborers will file for the last-ditch payments this year alone, and nearly 14 million currently receive the monthly stipends and early Medicare coverage. The money isn’t much, and is based on either your actual paycheck contributions or limited to an average $500 a month for SSI, but it’s “better” than the American alternative, which is pretending to rob a bank so you can get food and medical care in prison. To get disability or SSI, the applicants must go through a lengthy process of ritualized refusals and humiliation: Two-thirds of applicants are turned down, and many legitimately disabled workers are forced to go through two years of appeals and hire vulture law firms to finally get the paltry benefits. But the focus of the federal government is always on “cracking down” on people who aren’t really horrifically disabled enough to get a government check, because it’s certainly not enough to simply be an unwanted factory worker in her fifties who entertains fancy dreams of not being homeless after her extended unemployment benefits run out after her fourth layoff. Morally, it’s always better to catch the miscreant buying forties with his SSI rather than, say, the biggest corporations in the world not paying a nickel in taxes.
The Associated Press reports from Washington:
Anyway, Disability and SSI are now scheduled to begin scaling back benefits over the next five years, when the programs as currently funded will only be able to pay 85% of what’s promised. So that $500 payment will go down to $425 a month, at first, but it should be gradual enough that the poors won’t hardly notice when it’s down to $100 a month and even the Pay-Chex shop next to the liquor store and the pawn shop won’t cash it. [AP]
The Associated Press reports from Washington:
Claims for disability benefits typically increase in a bad economy because many disabled people get laid off and can’t find a new job. This year, about 3.3 million people are expected to apply for federal disability benefits. That’s 700,000 more than in 2008 and 1 million more than a decade ago.So it’s kind of like the Lotto! Except instead of paying money you can’t afford down at the corner market for a chance in hell at a million dollars — because that statistical impossibility is literally the only way out of the hole you’ve been intentionally pushed down — you promise a boiler room full of fourth-rate sharks a share of your disability check in exchange for them filing enough papers to finally get you approved. Win win?
“It’s primarily economic desperation,” Social Security Commissioner Michael Astrue said in an interview. “People on the margins who get bad news in terms of a layoff and have no other place to go and they take a shot at disability.”
Anyway, Disability and SSI are now scheduled to begin scaling back benefits over the next five years, when the programs as currently funded will only be able to pay 85% of what’s promised. So that $500 payment will go down to $425 a month, at first, but it should be gradual enough that the poors won’t hardly notice when it’s down to $100 a month and even the Pay-Chex shop next to the liquor store and the pawn shop won’t cash it. [AP]
CME Increases Gold Margin Requirements By 27%
SAN FRANCISC0 (MarketWatch) -- The CME Group Inc., the parent company of the main metals and energy exchanges in the U.S., on Wednesday announced an increase in margin requirements to trade gold. The money needed to trade gold contracts increased 27%. Initial margin requirements rose to $9,450 from $7,425 per 100-ounce contract; maintenance margin requirements rose to $7,000 from $5,500, both effective as of the close of trading on Thursday. The CME had increased margins for gold two weeks ago by 22%.
CME letter follows.
CME letter follows.
11-300
TO:
FROM:
Clearing Member Firms
Chief Financial Officers
Back Office Managers
Margin Managers
SUBJECT:
DATE:
Wednesday, August 24, 2011
To receive advanced notification of Performance Bond (margin) changes, through our free automated mailing list, go to
The rates will be effective after the close of business on
and subscribe to the Performance Bond Rates Advisory Notice listserver.
Current rates as of:
Wednesday, August 24, 2011.
Thursday, August 25, 2011.
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago MercantileExchange Inc., Clearing House Risk Management staff approved the performance bond requirements for thefollowing products listed below.
CME Clearing
Performance Bond Requirements
SPAN MINIMUM PERFORMANCE BOND REQUIREMENTS
Outright Rates
NewMaintenance
CurrentMaintenance
CurrentInitial
New Initial
ISO
Change
Rate Type
Description
CC
METALS - Outright Rates
E-MINI GOLD FUTURES (8Q)
Spec
Increase
USD
2,450
1,815
3,119
2,310
Tier 18Q
Hedge/Member
Increase
USD
1,815
1,815
2,310
2,310
Tier 18Q
Spec
Increase
USD
2,450
1,815
3,119
2,310
Tier 28Q
Hedge/Member
Increase
USD
1,815
1,815
2,310
2,310
Tier 28Q
Spec
Increase
USD
2,450
1,815
3,119
2,310
Tier 38Q
Hedge/Member
Increase
USD
1,815
1,815
2,310
2,310
Tier 38Q
Spec
Increase
USD
2,450
1,815
3,119
2,310
Tier 48Q
Hedge/Member
Increase
USD
1,815
1,815
2,310
2,310
Tier 48Q
10 TROY OZ GOLD FUTURES (MGC)
Spec
Increase
USD
743
550
945
700
Tier 1MGC
Hedge/Member
Increase
USD
550
550
700
700
Tier 1MGC
Spec
Increase
USD
743
550
945
700
Tier 2MGC
Hedge/Member
Increase
USD
550
550
700
700
Tier 2MGC
Spec
Increase
USD
743
550
945
700
Tier 3MGC
Hedge/Member
Increase
USD
550
550
700
700
Tier 3MGC
Spec
Increase
USD
743
550
945
700
Tier 4MGC
Hedge/Member
Increase
USD
550
550
700
700
Tier 4MGC
COMEX 100 GOLD FUTURES (GC)
Spec
Increase
USD
7,425
5,500
9,450
7,000
Tier 1GC
Hedge/Member
Increase
USD
5,500
5,500
7,000
7,000
Tier 1GC
Spec
Increase
USD
7,425
5,500
9,450
7,000
Tier 2GC
Hedge/Member
Increase
USD
5,500
5,500
7,000
7,000
Tier 2GC
Spec
Increase
USD
7,425
5,500
9,450
7,000
Tier 3GC
Hedge/Member
Increase
USD
5,500
5,500
7,000
7,000
Tier 3GC
Spec
Increase
USD
7,425
5,500
9,450
7,000
Tier 4GC
Hedge/Member
Increase
USD
5,500
5,500
7,000
7,000
Tier 4GC
Page 2 of 3
8/24/2011
20 South Wacker Drive Chicago, IL 60606 Ph.: (312) 648-3888 Fax: (312) 930-3187 cmegroup.com
SPAN MINIMUM PERFORMANCE BOND REQUIREMENTS
Outright Rates
NewMaintenance
CurrentMaintenance
CurrentInitial
New Initial
ISO
Change
Rate Type
Description
CC
COMEX MINY GOLD FUTURES (QO)
Spec
Increase
USD
3,713
2,750
4,725
3,500
Tier 1QO
Hedge/Member
Increase
USD
2,750
2,750
3,500
3,500
Tier 1QO
Spec
Increase
USD
3,713
2,750
4,725
3,500
Tier 2QO
Hedge/Member
Increase
USD
2,750
2,750
3,500
3,500
Tier 2QO
Spec
Increase
USD
3,713
2,750
4,725
3,500
Tier 3QO
Hedge/Member
Increase
USD
2,750
2,750
3,500
3,500
Tier 3QO
Spec
Increase
USD
3,713
2,750
4,725
3,500
Tier 4QO
Hedge/Member
Increase
USD
2,750
2,750
3,500
3,500
Tier 4QO
Page 3 of 3
8/24/2011
20 South Wacker Drive Chicago, IL 60606 Ph.: (312) 648-3888 Fax: (312) 930-3187 cmegroup.com
"Ron Paul Picks Up Steam Despite Minimal Media Coverage"
Watch Ron Paul on 12160 Fox Business Stream 7PM Eastern
Tue Aug 23 21:09:05 PDT 2011
Ron Paul picks up steam despite minimal media coverage
U.S. Rep. Ron Paul, R-Texas, is holding his own in the presidential race. Recent successes have raised his profile despite a skeptical media. view full article
Fear Mania Comes to Gold
Casey Research
Is the mania here?
When most investors hear the word “mania” they think of a runaway market induced by greed. You know, that animal-like instinct we all occasionally feel, the one promising riches from a market on a rip-roaring tear.
Gold is up 28% since July 1, a mostly one-way rocket ride that’s transpired in just 36 trading days. It’s up 35% year-to-date, and it’s still summer. But it isn’t greed driving our runaway gold price.
Welcome to the Fear Mania.
Pick your headline – the downgrade of US debt, solvency concerns with European banks, the sudden negative outlook for the global economy, or crashing stock markets. While none of those are exactly shocking developments to most readers here, it caught much of mainstream off-guard, driving them to safe havens. Gold has responded.
Here’s some evidence that we’re in a fear mania. First, as economic fears suddenly took a turn for the worse, investors didn’t rush into stocks. They didn’t even really pursue other precious metals.
Here’s a look at how the four primary precious metals have performed as fear in the marketplace increased. Notice how the returns shifted as the gloom ratcheted up.
What Metal Performs Best in a High Fear Environment?
| Asset | YTD Return | Return From April 1 | Return From June 1 | Return From August 1 |
| Gold | 35.0% | 31.9% | 23.5% | 16.6% |
| Silver | 42.7% | 15.4% | 13.1% | 10.3% |
| Platinum | 8.3% | 7.2% | 4.0% | 6.9% |
| Palladium | -4.5% | -0.7% | -2.1% | -7.6% |
Prices through August 22
Since industrial and jewelry uses comprise roughly 93% of all demand for both platinum and palladium, a reasonably positive economic outlook is required for these metals to perform their best. We don’t have that right now, and when a strong economy will return is highly debatable.
Silver started the year with a bang – but even it lagged gold as negative economic news made bigger headlines. Industrial use alone comprises 52% of all demand for silver, so it, too, is vulnerable in a slowing economy. (The price will soar again, though, as we’ve seen the past few days, when bad economic news leaves the front page and investors once again pursue it as an alternative currency.)
There are more clues we’re in a fear mania. Many U.S. investors don’t realize this, but only 8% of bullion and jewelry demand comes from North America. A full 92% of the critical drivers of physical demand originate elsewhere. Gold in these countries (China, India, Vietnam, Indonesia, South Korea, Thailand, etc.) has been intertwined in culture, religion, and economy for 2,000 years. We can thus garner hints about the gold market from these regions, where the metal is a longstanding and ingrained part of the financial makeup.
First, are they pulling back on their purchases in light of rocketing prices? Or perhaps even selling to grab a profit? The World Gold Council reported last week that “signs of strength in the market remain concentrated in India and China… It is quite hard to see what is going to dent strength of demand at the moment.” And this from the UK: “Even at these elevated price levels, interest in physical gold remains excellent,” said Ross Norman, CEO of Sharps Pixley.
A second clue from this large group comes from scrap sales. One would think now is the optimal time to cash in your old gold jewelry, with prices reaching such unexpected highs. So scrap sales are up, right?
From the Wall Street Journal yesterday: “Scrap sales are down by 50%-60%. People are feeling that gold is the only safe place left for investments,” said Pawan Chokshi, an Ahmedabad-based bullion dealer. “There are hardly any scrap sales happening and I think that’s a phenomenon cutting across India. Even at these prices, people are feeling that it’s better to invest in gold rather than sell their old gold.”
Martin Grubb of the WGC said this to Reuters last week: “The price elasticity of recycling seems to be changing. Normally, you would see a lot of recycled gold coming back into the market at such a high gold price – but recycling was very muted in the second quarter, and so far the evidence is that there isn’t a lot of recycling coming back now, either.”
And last, don’t forget central banks. South Korea just disclosed a big bullion purchase, buying 25 tonnes last week, more than doubling its holdings. Mexico, Russia, and Thailand have already been major buyers this year. In fact, year-to-date, governments have almost tripled their net gold purchases over 2010, increasing their holdings by 203.5 tonnes this year, up from a 76-tonne rise last year.
Central banks have “fiat fear” and are diversifying their reserves away from the dollar and other afflicted currencies. And this is not a trend that will change on a dime, as most of these countries have a tiny percentage of their reserves denominated in gold. They’ll be buying for quite some time. Remember, they were net sellers of gold for 23 years, becoming buyers just last year.
The bottom line is that gold is doing exactly what it’s supposed to do. Global fear is high, and these are the exact circumstances where gold fulfills its ultimate role.
There are direct investment implications here. First, if you believe there is further shock-and-awe type bad news ahead, you’ll want to favor gold over most other assets and even other metals. Second, prices in a mania tend to go higher and further than what most expect. I certainly wouldn’t chase it here, but I wouldn’t be without some exposure either. Last, high levels of fear also increase volatility. Expect big swings in gold going forward, and that includes corrections. The next one could be a doozy.
In the big picture, think about this: The relentless rise we’re witnessing is just the beginning. We haven’t even hit an inflation-adjusted price from 1980 yet; we’re at least 21% away from that, and that’s assuming the government measures inflation correctly. Here’s an excellent video demonstrating that we’re not yet in a bubble; it also shows just how high the price could climb.
You might not think the price will fetch the high four-digits in this Fear Mania. But don’t forget what comes next.
The Greed Mania.
[Owning physical gold is good protection from the sinking value of the US dollar; investing in the right gold miners can yield even higher returns. BIG GOLD focuses on the larger miners that have strong profit potential, and will help you build your wealth. Give it a ninety-day risk-free trial.]
Silver started the year with a bang – but even it lagged gold as negative economic news made bigger headlines. Industrial use alone comprises 52% of all demand for silver, so it, too, is vulnerable in a slowing economy. (The price will soar again, though, as we’ve seen the past few days, when bad economic news leaves the front page and investors once again pursue it as an alternative currency.)
There are more clues we’re in a fear mania. Many U.S. investors don’t realize this, but only 8% of bullion and jewelry demand comes from North America. A full 92% of the critical drivers of physical demand originate elsewhere. Gold in these countries (China, India, Vietnam, Indonesia, South Korea, Thailand, etc.) has been intertwined in culture, religion, and economy for 2,000 years. We can thus garner hints about the gold market from these regions, where the metal is a longstanding and ingrained part of the financial makeup.
First, are they pulling back on their purchases in light of rocketing prices? Or perhaps even selling to grab a profit? The World Gold Council reported last week that “signs of strength in the market remain concentrated in India and China… It is quite hard to see what is going to dent strength of demand at the moment.” And this from the UK: “Even at these elevated price levels, interest in physical gold remains excellent,” said Ross Norman, CEO of Sharps Pixley.
A second clue from this large group comes from scrap sales. One would think now is the optimal time to cash in your old gold jewelry, with prices reaching such unexpected highs. So scrap sales are up, right?
From the Wall Street Journal yesterday: “Scrap sales are down by 50%-60%. People are feeling that gold is the only safe place left for investments,” said Pawan Chokshi, an Ahmedabad-based bullion dealer. “There are hardly any scrap sales happening and I think that’s a phenomenon cutting across India. Even at these prices, people are feeling that it’s better to invest in gold rather than sell their old gold.”According to Grubb, these regions have adjusted to the current price environment and expect the upward price trend to continue. If fear were muted, scrap sales would be rising at these price levels, not falling dramatically.
Central banks have “fiat fear” and are diversifying their reserves away from the dollar and other afflicted currencies. And this is not a trend that will change on a dime, as most of these countries have a tiny percentage of their reserves denominated in gold. They’ll be buying for quite some time. Remember, they were net sellers of gold for 23 years, becoming buyers just last year.
The bottom line is that gold is doing exactly what it’s supposed to do. Global fear is high, and these are the exact circumstances where gold fulfills its ultimate role.
There are direct investment implications here. First, if you believe there is further shock-and-awe type bad news ahead, you’ll want to favor gold over most other assets and even other metals. Second, prices in a mania tend to go higher and further than what most expect. I certainly wouldn’t chase it here, but I wouldn’t be without some exposure either. Last, high levels of fear also increase volatility. Expect big swings in gold going forward, and that includes corrections. The next one could be a doozy.
In the big picture, think about this: The relentless rise we’re witnessing is just the beginning. We haven’t even hit an inflation-adjusted price from 1980 yet; we’re at least 21% away from that, and that’s assuming the government measures inflation correctly. Here’s an excellent video demonstrating that we’re not yet in a bubble; it also shows just how high the price could climb.
You might not think the price will fetch the high four-digits in this Fear Mania. But don’t forget what comes next.
The Greed Mania.
[Owning physical gold is good protection from the sinking value of the US dollar; investing in the right gold miners can yield even higher returns. BIG GOLD focuses on the larger miners that have strong profit potential, and will help you build your wealth. Give it a ninety-day risk-free trial.]
New York Removed From Leadership Role in Bank Foreclosure Settlement Talks
New York Attorney General Eric Schneiderman was removed from a leadership role in negotiating a nationwide foreclosure settlement with U.S. banks because his office “actively worked to undermine” the effort, a state official said.
Schneiderman, who doesn’t want a settlement to bar further investigations of mortgage practices by individual states, was removed from the executive committee of state officials working on the deal, Iowa Attorney General Tom Miller said yesterday in a statement.
“New York has actively worked to undermine the very same multistate group that it had spent the previous nine months working very closely with,” said Miller, who is leading the state group. For a member of the executive committee, that “simply doesn’t make sense, is unprecedented and is unacceptable,” Miller said.
Attorneys general from all 50 states last year announced their investigation into bank foreclosure practices after reports that faulty documents were being used to seize homes. Since then, a group of attorneys general and officials from federal agencies, including the Justice Department, have been negotiating a settlement with the five largest mortgage servicers in the U.S.
Government officials are seeking an agreement that provides funding for writedowns on mortgage loans for borrowers and sets standards for how the banks service loans, interact with borrowers and conduct foreclosures, according to terms proposed in March.
Several attorneys general, including Schneiderman, have criticized any possible settlement that would protect banks from state investigations by providing the lenders with broad releases from liability. Those probes include the bundling of mortgage loans into securities.
The companies involved in the talks are Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Wells Fargo & Co. (WFC) and Ally Financial Inc.
Separately from the settlement talks, Schneiderman has asked a New York judge to reject Bank of America’s proposed $8.5 billion mortgage-bond settlement with investors, a deal he called unfair.
The attorney general accused Bank of New York Mellon Corp. (BK) of violating state law in its role as trustee for the mortgage- securitization trusts that are covered by the agreement, and he said he has potential claims against Bank of America.
Bank of New York has called Schneiderman’s allegations “baseless” and said it would fight the claims.
“Ongoing investigations by attorneys general cannot be shut down by efforts to settle quickly and those responsible must be held accountable,” Kanner said. “While it is Attorney General Miller’s prerogative to remove us from the executive committee, we will continue to be an active voice on these issues as a part of the 50-state coalition and in other forums.”
Schneiderman has raised “important and legitimate concerns” about the scope of the liability releases demanded by the banks, Delaware’s Biden said yesterday in a statement.
“I believe that the events leading up to the mortgage crisis must be fully investigated, including origination and securitization practices, before any broad immunity is granted -- the American people deserve an investigation,” Biden said.
Greenwood declined to elaborate on how Miller thought Schneiderman has undermined the state group.
“It has not been helpful to have a member of our executive committee undermining our effort, and therefore Attorney General Miller made his decision,” Greenwood said in a phone interview. “We are moving forward with our committee, and our efforts continue.”
To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net
Schneiderman, who doesn’t want a settlement to bar further investigations of mortgage practices by individual states, was removed from the executive committee of state officials working on the deal, Iowa Attorney General Tom Miller said yesterday in a statement.
“New York has actively worked to undermine the very same multistate group that it had spent the previous nine months working very closely with,” said Miller, who is leading the state group. For a member of the executive committee, that “simply doesn’t make sense, is unprecedented and is unacceptable,” Miller said.
Attorneys general from all 50 states last year announced their investigation into bank foreclosure practices after reports that faulty documents were being used to seize homes. Since then, a group of attorneys general and officials from federal agencies, including the Justice Department, have been negotiating a settlement with the five largest mortgage servicers in the U.S.
Government officials are seeking an agreement that provides funding for writedowns on mortgage loans for borrowers and sets standards for how the banks service loans, interact with borrowers and conduct foreclosures, according to terms proposed in March.
Negotiation Leaders
An executive committee of 13 attorneys general, not including Schneiderman, and two state banking regulators is leading negotiations on behalf of all 50 states, said Geoff Greenwood, Miller’s spokesman. The executive committee has a smaller committee that negotiates directly with the banks, he said.Several attorneys general, including Schneiderman, have criticized any possible settlement that would protect banks from state investigations by providing the lenders with broad releases from liability. Those probes include the bundling of mortgage loans into securities.
Other States
The attorneys general who want to continue their own probes after an agreement include Martha Coakley in Massachusetts, Delaware’s Beau Biden and Catherine Cortez Masto in Nevada. Delaware is also a member of the executive committee.The companies involved in the talks are Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Wells Fargo & Co. (WFC) and Ally Financial Inc.
Separately from the settlement talks, Schneiderman has asked a New York judge to reject Bank of America’s proposed $8.5 billion mortgage-bond settlement with investors, a deal he called unfair.
The attorney general accused Bank of New York Mellon Corp. (BK) of violating state law in its role as trustee for the mortgage- securitization trusts that are covered by the agreement, and he said he has potential claims against Bank of America.
Bank of New York has called Schneiderman’s allegations “baseless” and said it would fight the claims.
‘Active Voice’
Schneiderman is committed to a settlement that provides relief to homeowners and allows the housing market to recover, and he will work with state and federal officials to achieve those goals, his spokesman Danny Kanner said in an e-mailed statement.“Ongoing investigations by attorneys general cannot be shut down by efforts to settle quickly and those responsible must be held accountable,” Kanner said. “While it is Attorney General Miller’s prerogative to remove us from the executive committee, we will continue to be an active voice on these issues as a part of the 50-state coalition and in other forums.”
Schneiderman has raised “important and legitimate concerns” about the scope of the liability releases demanded by the banks, Delaware’s Biden said yesterday in a statement.
“I believe that the events leading up to the mortgage crisis must be fully investigated, including origination and securitization practices, before any broad immunity is granted -- the American people deserve an investigation,” Biden said.
Greenwood declined to elaborate on how Miller thought Schneiderman has undermined the state group.
“It has not been helpful to have a member of our executive committee undermining our effort, and therefore Attorney General Miller made his decision,” Greenwood said in a phone interview. “We are moving forward with our committee, and our efforts continue.”
To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net
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