Felix Salmon

After publishing my post this morning about the way disputes are resolved in HAMP, I went back and forth with Treasury a few times. And it turns out that there’s much more to it than the Homeownership Preservation Foundation — although finding out exactly how it all works is basically impossible unless you know someone at Treasury. Transparent this is not.

As far as I can make out, HPF runs something called the HOPE Hotline. The hotline then passes callers through to counselors who are not HPF employees, but rather employees of counseling organizations, all operating under the rubric of MHA Help. The counselors often work together with the homeowner when dealing with the servicer.

If MHA Help gets nowhere with the servicer, the case can be escalated one more level to something called the HAMP Solution Center, or HSC. You don’t need to be MHA Help to escalate to HSC: government offices can do it too and sometimes other third parties acting on behalf of the homeowner.

Here’s where things start getting a bit surreal, though. According to a 24-page MHA Supplemental Directive from November, an Escalated Case is just given back to the servicer to be decided all over again — essentially, it’s escalated all the way back to the very entity which was being complained about in the first place. The servicer is required, under MHA rules, to have lots of ducks in a row when it makes the decision on the escalated case and it needs to make its decision within 25 days. But it’s still up to the servicer to make the decision. And once the servicer has made that decision, the escalated case is considered resolved.

Which helps to put this chart in context:

The chart comes from this document and shows the amount of time that servicers actually take to resolve an escalated case. None of the privately-owned servicers (GMAC is state-owned) seem to be able to hit the 25-day requirement, with BofA being particularly bad. And the crazy thing is that these are all cases that the servicers have already made a decision on.  If they were remotely competent, they should just be able to revisit their existing paperwork and check to see that the decision made sense.

Effective February 1, it’s going to get a bit tougher for servicers: they’re going to have to provide the escalations staff with information relevant to the case at hand, like the numbers they’re using for debt and income and the correspondence they’ve received from the the borrower. Expect the numbers in the chart to start rising at that point.

But for the time being, the only check on the servicers is coming from Treasury’s compliance agents — who happen to be a group within Freddie Mac called “Making Home Affordable-Compliance” or MHA-C. The next compliance report is being released on Wednesday; the last one is here. (See slide 11.) MHA-C doesn’t look at every escalated case; instead it looks at a sample of 100 cases and does a “second look review”. Sometimes it agrees with the servicer’s decision, sometimes it disagrees and sometimes it can’t make up its mind:

Wells Fargo stands out here as being particularly bad, although the bank conspicuous by its absence is Bank of America. We’ll see how they do when the new report comes out; they got a pass on this one because they were too busy engaging in “other compliance activities” to do the second look reviews there.

As far as I can make out, the only time that an impartial third party will ever arbitrate a loan-mod decision is if you’re lucky enough to be picked as one of the sample of 100 in the MHA-C review. In that case, if MHA-C disagrees with the servicer, the servicer basically has to go back and do it again, until MHA-C is satisfied; in the meantime, it can’t foreclose on the property.

But the overwhelming majority of homeowners looking for a loan modification will never come anywhere near an MHA-C review. Indeed, more than 29,000 homeowners have been stuck in their “trial” modification programs for over a year, even though the trials aren’t supposed to last for more than three months.

The whole thing is a mess, and it’s incredibly opaque: there’s no website explaining how it all works in plain English, with the aim of guiding people through the escalation process. But with Treasury seemingly happy to let the servicers make all the decisions, and even staff the board of the main helpline, it’s hardly a surprise that the HAMP process has been so very frustrating for so many people.

There are basically two ways that the European crisis might end up resolving itself. Either the peripheral countries start defaulting, or else the eurozone becomes a fiscal union as well as monetary union. Both are politically unacceptable, of course. And George Soros, in a lucid column today, reckons that both might be in the cards:

The lack of a common treasury is now in the process of being remedied, first by a rescue package for Greece, then by creating a temporary emergency facility, and – the financial authorities being a little bit pregnant – eventually by establishing some permanent institution…

Structural changes may not be sufficient to provide the eurozone countries in need of rescue an escape route from their predicament. Additional measures, such as “haircuts” for holders of sovereign debt, may be needed.

Soros’s solution to the crisis involves recapitalizing the banks, and bringing them under a single European regulator. I like that idea—Europe’s banks have been far too leveraged for far too long, and Europe’s member states will always look forgivingly on their domestic institutions, setting off a regulatory race to the bottom. If a tough regulator can turn the banking systems in countries like Ireland and Spain into something strong and credible, that will help enormously in terms of reducing tail risk in the eurozone. And once that has happened, as Soros says, the banks should even be able to absorb a modest default from Greece or Portugal, and maybe even finance those countries’ recoveries.

When politics meets economics, politics always wins. Eurozone countries will only default when it’s in their political interest to do so; until then, some European institution or other will always be there, in extremis, to bail them out and provide the extra few billions needed to plug whatever budget gaps might be temporarily ineradicable. If you’re going to implement a fiscal union out of necessity that way, you might at least make a virtue of it by imposing a common set of banking standards at the same time.

On Saturday, Joe Nocera aimed a well-deserved broadside at Peter Wallison, one of the Republican commissioners seemingly doing their best to scupper the work of the Financial Crisis Inquiry Commission. He said that Wallison’s theory of the genesis of the financial crisis is “not, as they say, reality-based,” and noted Wallison’s idiosyncratic defense of his position:

Mr. Wallison said he had seen documents, not yet made public, as part of his work with the financial crisis commission that would prove that he’s right and I’m wrong. Well, we’ll see.

This is silly: if Wallison had smoking-gun documents proving Frannie’s culpability in the crisis, I’m pretty sure we’d've seen them by now. Nocera and his co-author, Bethany McLean, have done a lot of digging into Frannie, and for the time being I’ll trust Nocera that such documents simply don’t exist.

But Wallison isn’t giving up, and has responded today with a blog post entitled “Joe Nocera’s Hypocritical Attack.” He adduces no hypocrisy in what Nocera writes. But he does repeat that he has a super-secret stash of documents which will back up his case:

The primer that I and three of my Republican colleagues signed sought to outline the major issues that we thought the Commission should address. It was not a reply to or a dissent from the report of the Democratic majority, which is still a work in progress. It was issued on December 15 because that was the date on which, under the law that established the Commission, its report was supposed to be issued, and the primer was released in recognition of this statutory deadline…

In our conversation as he was writing this article, he told me that his reporting “has shown that Fannie Mae and Freddie Mac simply followed Wall Street” into buying subprime and other risky loans. I told him this was wrong—that as part of the Commission’s work I have seen internal documents from Fannie and Freddie that show this particular mantra of the left to be a myth. For a reporter, that would have been a signal to hold his fire—a warning that there were facts out there of which he was unaware. I was telling him he should wait and see what I might write in connection with the Commission’s report.

This isn’t even internally consistent. If Wallison wanted to release his report in time for the December 15 deadline, why wait until January, long after that deadline passes, to reveal these facts? More to the point, Nocera has researched the financial crisis in detail—to the point of publishing an entire book about it—and has a job, as a newspaper columnist, where he’s meant to publish his opinions on the causes of the crisis. There’s no way that he should hold off on doing so just because a Republican hack like Wallison hints that he might have new information.

Indeed, Wallison’s language here shows just how weak his smoking gun is likely to prove: note that he talks about “what I might write in connection with the Commission’s report.” The word “might” is weaselly enough; the word “I” is the biggest giveaway, however — since if there really were compelling new information here, “we” would surely be writing it up in the main body of the report, instead of shoving it off into a Wallison-penned addendum.

Still, it’ll be interesting to keep an eye on Wallison’s blog after the FCIC report is published. Maybe then he’ll come clean, and point out exactly what information he thinks will change Nocera’s mind.

American Banker’s Kate Berry uncovers a stunning factoid today: the nonprofit Homeownership Preservation Foundation, the official body charged with resolving disputes over HAMP modifications, was founded by ResCap and to this day is run by GMAC and other finance officials from within the mortgage industry.

No one involved even bothers to dispute the conflict of interest, one of many that have plagued the Treasury Department’s Home Affordable Modification Program, or Hamp.

“Because we’re supported by the industry, are we really working for the homeowner?” asked Bruce Paradis, the foundation’s chairman, who retired as CEO of ResCap in 2007…

The group has trained 200 counselors specifically to deal with complaints from borrowers who have been denied modifications. The foundation’s 888-number is now listed on every denial notice sent to borrowers turned down for Hamp…

The group does not track the outcome of its calls, so there is no way to know whether borrowers were inappropriately denied a modification or how many disputes with servicers were ultimately resolved in favor of the borrower…

Some industry experts have questioned why a nonprofit affiliated with servicers is receiving government funding to resolve disputes between borrowers and the same servicers who are denying modifications.

The only problem I have with this story is the degree to which HPF actually does what Berry says it does. Yes, HPF employs hundreds of counselors, and it tries to warn homeowners about loan-mod scams. But what I can’t find on the HPF website is anything about being an “ombudsman”, in the words of the American Banker headline, or having any official power to resolve disputes with lenders in favor of the borrower.

Either way, there’s a big problem here. If HPF doesn’t have dispute-resolution authority, someone should, and it’s not clear who that might be. And if HPF does have that authority, it’s not prominently advertising the fact — and it shouldn’t be governed by people within the lending industry. That would seem to be obvious, to everybody except Treasury, anyway.

Update: Kate Berry calls with more detail. Basically, calling what HPF does “dispute resolution” is a bit of a stretch — essentially all they can do is counsel homeowners whose requests for a loan modification have been denied, and attempt to get those borrowers onto the phone with the servicer to hear exactly why they were denied. Those attempts are not always successful.

The problem here is twofold. A lot of the blame must be laid at the feet of Treasury, which has failed to create any kind of dispute resolution process for HAMP. And then a bit more blame should accrue to HPF, which has failed to lobby Treasury to get the powers it needs to really stand up for homeowners against incompetent servicers.

It seems clear that Treasury gave this contract to HPF because they weren’t anti-servicer. But it also seems clear that so long as servicers are in charge of doing loan mods, and are providing what little policing there is themselves, HAMP is going to have no real enforcement mechanism.

The WSJ puts a lot of time and effort into its leders—those long, exhaustively-reported front-page exclusives about topics which might not be breaking news but which are still very important. So why is it that when a story is based on information found online, the WSJ still can’t seem to link to it? Today’s leder is a good one, about possible waste in the world of spinal surgery. But it could definitely do with a few hyperlinks:

Medtronic began releasing information about its payments to surgeons on its website in June, after coming under intense scrutiny from Sen. Charles Grassley (R., Iowa)…

Medtronic’s website shows that the company paid Dr. Vaccaro $1.28 million in royalties in the first three quarters of 2010…

Dr. Foley has had royalty-bearing agreements with Medtronic since 1996. The company paid him more than $27 million from 2001 to 2006, according to internal Medtronic documents reviewed by the Journal. On its website, the company discloses paying him another $13 million in royalties in the first three quarters of this year alone.

The failure to link to Medtronic’s website is part of what makes this story more confusing than it needs to be. There’s also a cryptic reference to a court ruling which is preventing the WSJ from printing everything it knows:

The Journal mined hospitals’ Medicare claims to see what proportion of fusions performed fall in this category. Due to a three-decade-old court ruling guarding the confidentiality of physician information, the paper is barred from disclosing what it found regarding the five Norton surgeons.

Critics of the court ruling and of the privacy policies of the federal Medicare program argue that making such information public would help taxpayers understand where their money is going, and potentially deter abusive or wasteful practices.

A couple of hyperlinks would be great here, too: which court ruling, exactly, are we talking about? And which critics? I’m sure their criticism is online, under their real names—so why not link to that criticism, rather than wave vaguely at it before moving on to something else?

The bigger problem is that the WSJ makes it very hard to separate two different stories. The first story is that Medicare is paying lots of money—$2.24 billion in 2008—for spinal surgeries, many of which might not be necessary or even desirable. The second story is that Medtronic is paying lots of money to a select group of surgeons who perform a lot of such surgeries.

The first story is reasonably clear, although it would have been helpful to compare Medicare with private-sector insurers: if everybody’s happily paying for these surgeries, then the problem doesn’t really lie with Medicare. The second story, however, is murkier. The WSJ is aggressive chasing it:

Corporate whistleblowers and congressional critics contend such arrangements—which are common in orthopedic surgery—amount to kickbacks to stoke sales of medical devices.

The official statements from both surgeons and Medtronic make the kickback allegations seem a bit of a stretch. But look how the WSJ follows those statements with an explicit reprise of the kickback theme:

Dr. Foley responded in an email that he doesn’t receive any royalties from Medtronic on devices he has contributed to when they are implanted in patients by himself, members of his practice or hospitals where he has admitting privileges.

Brian Henry, a spokesman for Medtronic, says the company applies that policy to all its collaborating surgeons, thereby eliminating the temptation for them to do more surgeries to earn more royalty income.

Two former Medtronic employees have alleged in separate whistleblower lawsuits that the royalty agreements are intended to disguise the fact that the payments the company makes to surgeons are really kickbacks for using Medtronic devices.

The paper says it “reviewed” a copy of one of the lawsuits—again, this is something it would be great for them to have posted. And more generally, it would be great to see some mathematics on the alleged kickbacks: how do the payments to surgeons compare to the profits that Medtronic makes from their work? Are the payments linked in any way to the number of surgeries they perform? What proportion of spinal surgeons get these payments? Is there evidence that surgeons getting paid by Medtronic use more Medtronic devices than their colleagues?

My gut feeling here is that Medtronic is quite deliberately paying large amounts of money to key spinal surgeons, who as a result become well-disposed towards the company and the kind of of surgery which involves its products. In turn, their enthusiasm spreads across their hospitals and their region as a whole, since these surgeons are senior, respected physicians who are emulated by their peers.

But that kind of thing is a kickback only in the most conceptual way: if the surgeons help to make a certain procedure more popular among their peers, then they’ll eventually get larger royalty checks. What I’m not seeing is any evidence that if certain surgeons funnel money to Medtronic by using Medtronic products in their operations, then some of that money ends up getting kicked back to them.

My larger problem with the WSJ story is that by concentrating on kickbacks and Medicare, it downplays the bigger picture—that surgeons around the country are getting paid millions of dollars by Medtronic and performing lots of unnecessary surgeries, with the cost coming out of everybody’s rapidly-rising health-insurance premiums. If there’s a scandal here, it would seem to be one endemic to the healthcare industry. I don’t understand why the WSJ would narrow its focus so specifically onto Medicare.

(Cross-posted at CJR)

Andrew Cuomo has decided, reports the WSJ, to file civil fraud charges against Ernst & Young in the waning days of his tenure as New York’s attorney general — news which has been received with delight by Yves Smith, on the grounds that it might strengthen a criminal case against Dick Fuld.

But what does this mean for E&Y, and for David Einhorn’s theory, as recounted to Andrew Ross Sorkin, that the government has held back on crisis-related prosecutions because of “an embedded belief that they did the wrong thing with Enron and with Arthur Andersen — the criminal prosecution, particularly of Andersen”?

One way of looking at the news is that Cuomo is stepping up where federal prosecutors fear to tread, and is filing the suit now precisely because he knows that if he doesn’t, the chances are that E&Y will suffer no consequences at all for the way that it signed off on Lehman’s books.

On the other hand, a civil fraud suit is not a criminal prosecution. Even if E&Y fights the charges and loses, it probably won’t find itself on the receiving end of the kind of criminal charges which brought down Andersen. Still, I’m sure that Cuomo’s office is doing nothing to downplay the contingent existential threat here, in its negotiations with E&Y.

So what happens once Cuomo moves to Albany? Will the U.S. attorney general, Eric Holder, pick up where he left off? It’s probably more likely that Cuomo’s successor, Eric Schneiderman, will take note of the way in which both Cuomo and his predecessor, Eliot Spitzer, used Wall Street prosecutions to boost their public profile in their quest to become governor. But in general, Cuomo seems to be by far the most zealous prosecutor out there. Without him, the number of crisis-related fraud charges is likely to dwindle sharply.

Ngrams! John Updike,Tom Wolfe,Gore Vidal,Thomas Pynchon; Richard Rorty FTW; crazy,sane; pleasure,pain; http,www,web; Bart,Barthes; prophet,profit; swing,miss; newfangled,avant garde; Bordeaux,Burgundy,red wine; adults,kids; sex,lies,videotape; Jesus,Christ; philosophy,religion; Mom,mom,Dad,dad; god,dog; heaven, hell; happy; oyster,lobster; Israel, Palestine; Lenin,Stalin,Mao; Goethe,Beethoven,Mozart; Beatles,Beethoven; France,Germany,India; Kennedy,Roosevelt; global, universal; USA,USSR; win,lose,draw

Julian Assange’s lawyers complaining that Guardian published leaked police files about him — Australian

Lionel Barber: Not as attractive as you might think — Charity Buzz

Joe ‘n’ Bethany on the FCIC fiasco — NYT, Slate

WaPo’s Paul Farhi has the story today of PFC Opinion Research, which is offering journalists $250 to talk on the phone for 25 minutes about their opinions of the oil and gas industry. News reporters might be supposed to keep their opinions out of their copy, but Farhi makes it very clear where he’s coming from on this front:

News reporters are supposed to keep their opinions out of their copy. They certainly aren’t supposed to sell them back to the people they cover.

Yet now there’s a hush-hush way for journalists to turn their innermost thoughts into cold hard cash. A New York research firm has been trolling Washington and other precincts in search of reporters willing to unburden themselves. For a price.

WaPo ran a poll alongside Farhi’s piece, which is currently running 64%-32% against Farhi, and in favor of those who see no ethical problem in journalists selling their opinions. My feeling is that if a journalist gets paid cash by a company they cover, that’s a conflict of interest. And many other journalists seem to think the same way:

[PFC director David] Leonard acknowledged that some would-be participants had turned down the offer on ethical grounds (and one said he would donate his fee to charity). As of Wednesday, six journalists had agreed to take part, leaving Leonard four short of his goal.

“It’s ironic that journalists depend on people to give them their opinions but aren’t as forthcoming with their own,” Leonard said. “It’s easier to get a congressman to participate.”

This is where the full-disclosure bit comes in: I was one of the people approached. In fact, I’m the journalist singled out as saying I would donate my fee to charity, which isn’t exactly right — I asked that the fee be sent directly to Doctors Without Borders, and not given to me at all. For one thing, I’m hardly shy with my opinions, and it doesn’t take $250 to get me to part with them: people can get them for free just by emailing me. So I felt that it would demonstrate an excess of self-regard to turn down the opportunity to raise $250 for Doctors Without Borders just by talking on the phone for 25 minutes. And it’s not like my opinions are secret, since, just like when I’m asked questions via email, I always reserve the right to blog them as well.

And so I got a phone call at 10:30 this morning from a chap named Mike Green, who said that we’d be talking about oil and gas, and that he would be recording the conversation and taking notes.

It rapidly became clear that this wasn’t some kind of push poll, like the one I got last year about Argentina: this was a genuine opinion poll, from people who wanted to know my opinion of the oil and gas industry in general, and of four companies in particular.

First I was asked to name a few oil and gas companies, and was asked, when I didn’t volunteer their names, whether I’d heard of Total and ConocoPhilips. Then the conversation moved on to BP: What’s the first thing you think of when you hear their name? Of course, I said the disaster in the Gulf.

Then the seven-point scale was introduced, which we’d use for most of the rest of the interview. On a seven-point scale, how well did I know BP as a company? How favorable is my opinion of it? And then the same questions for Chevron, ExxonMobil, and Shell.

After that, the questions got a bit weird and recondite. How likely would I be to support or recommend each of those four companies for an important project? To what extent does each one challenge conventional wisdom? Deliver practical solutions to industry issues? Minimize the impact of of its operations on the environment? Attract & develop talented employees? Recognize the importance of supporting local communities? Believe in and values people and their progress? Lead the industry in operational excellence? That sort of thing.

Green was unfazed when he asked me to rate on a seven-point scale the degree to which each of the four companies had a “collaborative and inclusive approach to solving challenges and issues”, and I told him that I couldn’t answer the question because it wasn’t in English and I had no idea what an “inclusive approach” might possibly mean.

Eventually, we got to the point at which the client became more obvious — the poll was coming from some kind of communications company, to help out with their communications strategy. Had I seen ads for oil and gas companies online? Outdoor posters or billboards? TV ads? Print ads? Which ads stood out the most?

Did I recognize any certain phrases? “Will you join us”. “Taking on the world’s toughest energy challenges”. “Let’s go”. “Beyond petroleum”. “Human energy”. Had I talked to these companies at conferences? Talked about them on blogs? Been to a gas station? Met with management? Had I heard of energybill.com? chevron.com? Willyoujoinus.com?

Finally, it became clear who the ultimate client was, with a series of questions about Chevron’s commnuications in particular. What did I think about those communications? Did they make me think that Chevron is a leader on energy issues? A straight talking company? Had they positively changed my opinion of Chevron? Made me think that Chevron is part of the solution? Did I recall seeing ads for Chevron?

After all that, it was just a matter of asking for my address — apparently the way that they’re proving that they’re sending the check is to make it out to Doctors Without Borders, but to send it to me at Reuters. Which is fine by me. The most annoying part of the whole thing was that it ended up taking more like 45 minutes than the promised 25 minutes.

As a general rule, my answers tended to be very low on the scale, across the board. I didn’t distinguish much between the four different oil companies, and I said that in the wake of the BP disaster, I strongly discount anything I hear from such companies. Before the disaster I guess I thought a bit more highly of BP than of its climate-change-denialist counterparts; now, I said, I just think that big oil companies are big oil companies.

I wasn’t very helpful on the communications front, although I did remember the “We Agree” prank. And since I’m a finance blogger and not an energy blogger, I didn’t know much about differences in the way the specific companies operate. I don’t know how useful my answers are going to turn out to be, but given how much time the interview took, I think the $250 payment is fair. God knows Chevron can afford it.

The biggest issue I have with all this is the secrecy involved If you talk to journalists, those conversations are likely to become public, so I can’t imagine they’ll be too upset about me revealing their identity. But now that I’ve done so, I doubt this project will really help Chevron’s public image: it just makes them look as though they’re trying to bribe journalists. And that can’t be a good thing.

Back in May, Nouriel Roubini held his book party at DBGB. He obviously likes the location, since in September he paid $5.5 million for the triplex penthouse upstairs. (EV Grieve has the photos of what is now the most expensive apartment ever sold in the East Village.)

It’s an interesting move, given what Roubini said back in 2006:

I’m bearish on the city. I live in Tribeca in a nice loft, and in four years, it’s increased 150 percent in value. That price appreciation doesn’t make sense. Now there are maybe twenty developments under construction in my neighborhood that are going to come to market in the next year. There’s going to be a huge glut. I see demand falling and supply going sharply up. So you’re going to see some pretty nasty price action…

It’s not as if there’s infinite wealth. There are thousands of new luxury units coming on the market, and the question is, who will buy them? If people start losing jobs, who can afford to pay 2, 3, 4, 5 million dollars?

Before it was sold, the apartment was offered for rent at $25,000 a month, which means we can plug the various numbers into the great NYT rent-vs-buy calculator. Roubini put down $2.5 million and took out a $3 million mortgage; I’m assuming he got a mortgage rate of 4.5%, that he can get a long-term return of 4% on his investments, that long-term inflation is 2%, and that his marginal tax rate is 40%.

Let’s say that Roubini is neither bullish nor bearish, and reckons that neither the price of the apartment nor the cost to rent it will change, going forwards. In that case, he seems to have made a bad decision:

(Incidentally, this assumes that common charges are $1,240 a month, which seems cheap to me; I reckon that in reality they’re likely to rise over time.)

If home prices have the “nasty fall” that Roubini predicted in 2006, things get much worse, of course. Let’s say they go down by 2% a year on average. In that case, even if the rent goes up by 1% a year, it’s still better to rent than to buy.

Basically, in order to make buying this place make economic sense over a 5-10 year time horizon, you need to be pretty bullish over the long term:

Of course, I’m sure that non-economic considerations came into play here. But if Roubini thought that the very idea of $5 million apartments is ludicrous and unsustainable, and that the value of this place is likely to fall by a seven-figure sum over the medium term, I can’t imagine that he would have made the decision to pay $5.5 million for it.

Is there such a thing as insider trading in things which aren’t remotely securities? On Monday, the NYT had a report headlined “Speculators Are Eager to Bet on Madoff Claims”, saying that hedge funds were bidding somewhere around 30 cents on the dollar. Meanwhile, Barbara Picower was coming to the end of months-long negotiations which culminated this morning in the announcement that she would return $7.2 billion for the benefit of those defrauded by Madoff.

The trustee has already recovered nearly $2 billion, and total investor losses are probably somewhere in the $20 billion range, which means we’re already up to 46 cents on the dollar, before any number of other suits are settled — $9 billion from HSBC, $6.5 billion from JP Morgan, $3.6 billion from Fairfield Greenwich, $2.5 billion from UBS, and so on. Those suits alone, if settled near par (as the Picower suit was), would bring recovery up to 154 cents on the dollar. Which would more than recover the money that investors put in to Madoff, even if it doesn’t come close to recovering the kind of money that they trusted they had.

But here’s the thing: what if Barbara Picower was talking to friends about the status of her negotiations with Irving Picard? There’s no reason why she shouldn’t do so — but if those conversations made their way to hedge funds interested in buying claims, that information could be very valuable. Given the new-found focus on prosecuting insider dealing, I wonder whether any trades made as a result of finding out that information might be suspect.

The Books Ngram Viewer is amazing, see eg this or this — Google Labs

Tyler Cowen’s advice for planning a wedding — MR

“From the standpoint of publicly funded art, the censors have won.” — NYRBlog

“The Corporation’s primary goal with respect to this transaction is to accelerate de-risking” — BusinessWire

Is it not possible that Citigroup hired Orszag to recover the Raifuku Maru, or become an international ghost hunter? — HuffPo

If you’re still eating industrially raised pork (or chicken or beef or fish for that matter) – get real — Bittman

Primack on Zipcar — Fortune

Let’s say I buy a $3,000 pair of handmade shoes but don’t have that kind of cash to hand, so I put them on my credit card. I then rack up another $2,000 in penalties and interest before I’ve paid them off. Then the total cost associated with my poor investment in footwear is $5,000. The credit card company bailed me out but charged through a lot of money for doing so, and the money is absolutely part of the total sum I end up paying for those shoes.

Weirdly, Jeffrey Goldstein, the under secretary for domestic finance at Treasury, doesn’t seem to think that way. Fannie and Freddie have already borrowed $151 billion from Treasury, and they’re set to borrow another $90 billion by the end of 2013. That’s hardly chump change. Yet Goldstein says, with a straight face, that “the GSEs have already absorbed the vast majority of costs associated with the poor investments they made during the housing boom”. His argument:

Under the baseline scenario, FHFA projects that $90 billion in additional draws will be necessary through 2013. But this is why accounting for dividends is important – $71 billion of those additional draws will be used to pay dividends back to Treasury. This means that nearly 90 percent of total GSE losses have already been absorbed, since these future draws will primarily be returned through dividend payments.

This just doesn’t make any sense to me. Every business has money coming in, from various sources, and money going out, to various sources. If at the end of the day you end up having to borrow $90 billion from Treasury, then that means the money going out exceeds the money coming in by $90 billion. Most of us would consider that a “loss”. But not Goldstein. The way he sees it, if $71 billion of the money-going-out is going to Treasury, then it doesn’t count towards the GSEs’ total loss. But why is Treasury special in that way? If the interest payments were going to anybody else, then they would count towards Frannie’s losses.

Goldstein is right that from Treasury’s point of view, the net amount of money being pumped in to the GSEs is decelerating, even if the total cost of the GSE bailout is still going up rather than down. And it’s probably nice to be getting $71 billion in dividend payments from the agencies, even if that money has to be turned around and sent straight back again. What’s more, to be fair to Treasury, if it just reduced the interest rate on its bailout funds, it could reduce the headline cost substantially, even if the actual net cost to taxpayers went up.

But in the context of a world where all the other bailouts — even AIG, amazingly — look set to be paid back in full, the fact that we’re still pumping billions of new dollars into Frannie only serves to underline how massive and disastrous the agencies’ failure was. I’m glad they’re still around to make their interest payments. But the only reason they’re still around is because Treasury has promised them unlimited funds — a promise which means they can never go bust, no matter how much money they end up losing.

The Fed’s swipe-fee proposals are out, and the market action in Visa and Mastercard — both of them are down more than 10 percent today — tells you everything you need to know. Basically, big card issuers won’t be able to charge more than 12 cents per transaction for debit-card purchases, and under one alternative their fees might be kept as low as 7 cents per transaction. That’s a massive reduction from the levels we’re seeing right now, which can range as high as 2 percent.

This is a victory for Dodd-Frank, a victory for consumers, and above all a victory for merchants over the financial-services industry. Assuming, that is, that the banks don’t find some way of killing, avoiding, or repealing it. Well done, Fed.

Re-remics are a regulatory arbitrage with negative economic value — you take a bunch of bonds , and then spend lots of money on bankers and lawyers and ratings agencies in order to transform them into other bonds. The financial-services industry gets lots of lovely fee income, which ultimately comes out of the pockets of the beneficial owners of those bonds. And no one makes out more handsomely than the ratings agencies, without whom none of this would be possible: it’s their precious triple-A ratings which make the arbitrage attractive in the first place.

The problem is that the ratings agencies, as we saw in the crisis, have no idea how to rate structured debt. And they also have no idea how to learn their lesson: the first big re-remic downgrades happened almost immediately, and then they just kept on trickling out — there were 224 in September, and another 129 have just arrived.

S&P is the big villain in this story, both rating and downgrading many more re-remics than anybody else. They emailed their press release to the FT, where Tracy Alloway reprints large chunks of it, but if you Google the headline on the release, the only way you can find it is by paying $100 to Alacra. Just because you’re releasing something to the press doesn’t mean you want it to be public, I guess, and neither does it mean that you want to talk about it:

“Our written statements are what we are providing,” Ed Sweeney, a spokesman for S&P, said in an e-mail. He declined to comment further and didn’t answer an e-mailed question about the principal balances of the securities under review.

The business of structured-finance ratings broke so badly during the financial crisis that it cannot easily be put back together again. The ratings agencies have no business rating structured bonds: they’ve proved that many, many times, and there’s zero indication that they’re any better at it now than they were before the crisis. Indeed, it might well be something which is impossible to do — these things are just too complex to be able to assign a risk-free rating to. Somebody should stop the ratings agencies from even trying.

Do finance types pay millions of dollars for art because of how good it is — or do they pay millions of dollars for art precisely because it costs millions of dollars? If there was any doubt before, you only need to listen to Lloyd Blankfein, talking about the art in his lobby:

Lloyd was overheard bragging to one extremely powerful hedge fund manager and renowned contemporary art collector (Richard Prince, Cindy Sherman, Andy Warhol among his acquisitions) to the penny what the canvas costs.

“Guess how much?” “Three?” “No.” “Four?” “No.” Blankfein flashes five fingers, says “Five….Five!” and breaks into a big wide grin.

You can only imagine how this went down with Julie Mehretu, the artist. “It took me a long time — six months or so — to decide I wanted to do this,” she told Calvin Tomkins earlier this year. “What would be the reason to make a painting for a financial institution?” The reason, in the end — or at least the stated reason — was the sheer acreage of space that Goldman was offering her: “I could never make a painting on this scale anywhere else”. Left unsaid was the obvious reason not to do it — that the painting would be reduced, just like everything else at Goldman Sachs, to a dollar amount.

Goldman, it’s clear, buys artists as much as it buys art (or buys regulators): remember how they coopted Ric Burns to make a puffy marketing documentary over which Goldman has editorial control. You can do that, when you have as much money as Goldman does. But increasingly I feel that when I buy art I want to buy unlimited editions or other work with no resale value. Because the art-as-luxury-object game has become completely disconnected, at this point, from the art-as-art game, and has become nothing but a pissing match between oligarchs to see who has the largest bankroll.