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Alan Grayson Demands Capital Buffer At TBTFs To Absorb Title Insurance Liabilities, Asks For New Stress Test
When two weeks ago we highlighted the news that key title insurers such as Fidelity National are demanding indemnity and warranty from banks, we asked "what happens if the bank is once again caught to be, gulp, lying?
Who foots the bill then? Why the buyer of course. All this does is to
remove the liability from companies like Fidelity National and puts it
back to BofA, which is already so much underwater it has no chance of
really getting out without TARP, contrarian Goldman propaganda
notwithstanding." And while our speculation provided amusement to some of the more (vastly so) polemic elements in the blogosphere, it appears that Alan Grayson took this development seriously, and sent a letter to Geithner demand that a special capital buffer be established at the TBTFs, to absorb any and all losses that will arise from foreclosuregate (especially since earlier today it was made clear that certain banks such as First Horizon don't have any provision for putbacks). In Grayson's words: "Recently, Bank of America struck a deal with Fidelity National Title Insurance to indemnify the title insurer should legal problems with foreclosures create unanticipated title liability. Title insurers are clearly worried that they may face higher legal and policy costs if foreclosures are reversed, or should legal ambiguity cloud titles they already have insured...Since title insurers have in some cases just refused to insure this market, someone must pay for the liability these insurers have refused to incur. Both banks and regulators are claiming that the problems are simply process-oriented document errors that aren't really causing harm to the public at large. I suspect that no one really knows the extent of the problem, or the potential liability.With that in mind, it would seem prudent to require additional capital buffers for systemically significant institutions until the extent of the foreclosure fraud crisis is understood." We wholeheartedly agree with Grayson.
Full Grayson letter to Geithner and the Financial Stability Oversight counsel (pdf):
Dear Secretary Geithner and members of the Financial Stability Oversight Council,
I'm writing concerning the foreclosure fraud crisis and the resulting potential need for a special capital buffer for large systemically significant institutions. I'm particularly worried about the title insurance market, and attempts to lay off title liability onto large banks without corresponding changes in capital requirements.
Recently, Bank of America struck a deal with Fidelity National Title Insurance to indemnify the title insurer should legal problems with foreclosures create unanticipated title liability. Title insurers are clearly worried that they may face higher legal and policy costs if foreclosures are reversed, or should legal ambiguity cloud titles they already have insured. Bank of America's deal with Fidelity may be necessary to help keep the housing market functioning. Since title insurers have in some cases just refused to insure this market, someone must pay for the liability these insurers have refused to incur.
The extent of this liability is unclear. On October 8, Bank of America CEO Brian Moynihan told the public and investors that, despite the self-imposed foreclosure moratorium, his bank had not "found any foreclosure problems". He said, explaining the foreclosure moratorium, that "[w]hat we're trying to do is clear the air and say we'll go back and check our work one more time." The bank's SEC Form 8-K reinforced these comments. Yet two weeks later, the Wall Street Journal just reported that Bank of America, in reviewing 102,000 cases of problematic foreclosures, found problems "in 10 to 25 out of the first several hundred foreclosures it examined."
Both banks and regulators are claiming that the problems are simply process-oriented document errors that aren't really causing harm to the public at large. I suspect that no one really knows the extent of the problem, or the potential liability. What we do know is that title insurers are demanding indemnification.
With that in mind, it would seem prudent to require additional capital buffers for systemically significant institutions until the extent of the foreclosure fraud crisis is understood, or until title insurers decide that they no longer need indemnification for increased risk. It may also be useful to conduct a new round of stress tests to determine the resilience of the financial system with respect to these serious problems.
Regards,
Alan Grayson
Member of Congress
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Epic.Grayson is so right on this.....but how much money will be needed?
I think a cubic mile should be enough.
How much remains to be seen, but we know enough to recognize that additional provisioning cannot be avoided . . . meaning that only companies allowing employees to sack corporate assets for private gain--at the risk of the very survival of the firms--will be paying out $144B in bonuses.
the banks don't have to worry about alan....they will take him out today. i read somewhere more money has been spent against him than any other person in congress.
wonder where it came from?
duh.
Still has until Jan 1st 00:00
I have an idea. Let a disinterested party conduct the stress tests, from design on down to implementation and grading.
Hasn't Chris Whalen already done this?
What is his interest? Selling quality information.
Already gathered and processed.
I have an idea. Let a disinterested party conduct the stress tests, from design on down to implementation and grading. I'd be happy to do it.
I'd like to see you get the job, Reggie. At least I'd have some confidence in the results!
I hope somebody has the balls to pick up the torch on this issue.
Now let me say this: I SURE AM GLAD THAT THIS FUCKING ASSHOLE HAS BEEN DEFEATED AND WILL NOT BE RETURNING FOR ANOTHER TERM!!!
Pleeeeze....the banksters have long since overcome such trivialities as truth and the rule of law in their pursuit of $$$. Why regress?
Respectfully disagree. The trenches in the foreclosuregate war are the courts, which are increasingly honing in on the central issue, namely, that foreclosing parties simply lack standing. As Judges Rakoff, Preska, and Boyko--just to name a few federal jurists--have demonstrated, the rule of law still has a pulse.
I'm all for Alan Grayson's efforts, as well as those of 50 state AG's, but in the end they are mere window-dressing. Keep your eye on the trenches.
I wish I could just say I don't want to cover this policy or hold up my end of a contract when, later discovery shows I didn't do my due diligence. I could just say too bad I'm not responsible.
What a bunch of pieces of shit. Remembering a Bush quote " We are a land of laws." The average US citizen will rise up when gas is 10.00 per gallon and they don't have money to pay the cable bill or buy food or heat or cool their house, let alone pay the taxes and mortgages. Thanks Govt officials and regulators for letting the people down your all pieced of shit. Now let me tell you how I really feel.
..sometimes you gotta break the laws to save the laws.. we're so far off the edge of the cliff that we're just hovering like wile coyote not realizing yet that the ground is gone.
deleted / computer malfunction
wish he'd team up with DYLAN & fix this mess !
The fact that we have seen only a few credible estimates of
possible put-back based losses is telling in itself.
One wonders if Grayson is daring Geither to make
a "subprime is contained" type comment and make even
the CNBC crowd see how little Geither understands.
This is nice.. create more funds to backstop more bad debts which resulted from fraudulent conveyance.. it just flows so nicely from one crisis to the next.. so where do the banks get the money to create these reserve funds, the taxpayer ? Undoubtedly.. they're on life support now due to Fed easing.
at what point do the bank stock and bond holders get wiped out? as "capitalism" would have it done? what a laughable sham of tears.
Does $144B budgeted for Wall Street bonuses ring a bell?
Any minute Bammy is going to get on the horn and tell Grayson to shut up and play Bammy ball.
Hopefully Grayson realizes that he has a future in politics and "Bammy" has none.
grayson is nothing but fed-alistic satan spawn
Alan Grayson better work fast because come January, he'll be looking for a new job.
Grayson is seemingly the only one in Congress trying to pierce this puss-filled criminal ponzi blister on all our houses.
and, as noted above, will be looking for work next year. the resurgent republican party as the voice of the people. what a great two party system we have.
Its hard to believe that one of the key guys who fought against all this corruption is about to get voted out. What a shame !
Gotta give props to the GOP.
Use corporate funding to pin this mess (caused by corporate greed) on Obama, Pelosi, and Reid... and the good little soldiers (voting "the bums out") line up for the slaughter... another round of deregulation, rape, pillage, and bail-outs.
Hey, but let's look on the bright side... at least they can't put Palin in charge... yet.
Too bad he didn't concern himself with these matters until it was pretty clear he was in a tight race. It's too late now.
Grayson is just positioning himself for 2012. He points out obvious problems, suggests reasonable solutions, knowing full well that nothing will be done. The problems will get worse and in two years he will rise from the ashes and point out that he 'had the answers' but didn't get elected. If he wins he'll go back to being a minor player in acrimonious partisan politics and blame the Republicans for blocking everything.
Grayson is saying the things that need to be said - only because he's up against the wall. Let's not assign too much virtue to desperation.
Seems you know very little about Mr Grayson... he is a very rich man who cares about what's happening to the little guy... he fights for them, and against the banksters responsible for this mess... I guess you just see the headlines on the theatrics.
He doesn't care if he loses his job... he'll get by.
Ladies and Gentlemen;
I regret to inform you that tomorrow at midnight EST Tas Grayson is out of a job. Anyone who dares speaks truth to the banks and chairman Bernanke (power) is assisinated. So it is with Mr. Grayson. I regret this deeply. I gave for me what is a substantial amount of money to his campaign. He had a fundraising of nearly 3:1 over his opponent and still lost. Damn the citizens of Orlando. May a curse descend upon them. Let them rot in hell on Earth for this poor decision but this is the decision that they have made.
Unfortunately, Grayson secured his political future not by actions such as this but rather by playing hyper-partisan politics, making utterly rediculous statements, and generally making an ass out of himself at every opportunity in front of a camera or microphone. In other words, he blew it and has no one to blame but himself.
they aren't the brightest folks in orlando, plus you've got a serious sprinkling of old people...
people rove has sufficiently scared into line...
people who love sara palin.
that says it all.....
they live in disneyland...figuratively and literally.
Disney World *
The last sentence was the kicker. I spit up my dose of 1am coffee here.
"It may also be useful to conduct at new round of stress tests......."
How about we skip the stress tests and try resolution authority.
This is worthy of it's own thread on ZeroHedge, since it is relevant to FL-08 and Loonybin Grayson I'll post a link here:
http://hr.cch.com/news/uiss/110210a.asp
Obongocare. Your hero Alan Grayson voted for it.
Eat rocks dickhead. If Alan Grayson doesn't make a cotribution in your eyes who would? Sarah Palin? You're lower than whale shit.
Grayson's a buffoon and deserves to lose.
Why is everyone so fascinated about Obama's Pair?
cause he plays "wipeout" so well on them?
Private Mortgage Insurance - lender's mortgage insurance - $60 paid per $100,000 loaned?! Where are the claims?
I am a little curious about this topic WRT the whole foreclosure deal. I never hear about PMI covering any of the bank "losses" on defaulted mortgages. For how many years were how many folks forced to pay into the PMI scam and now that there seems to be a Katrina like event - where did all those premiums go to and what got covered? Who is the principal PMI underwriter - Buffet? It seems to me that the risk of defaulting could have covered a dose of all those originally under 20% of equity, but think of the decades of money spent down that rat hole and now nothing - only to have QE2 pay par for distressed securities that may in fact have been made whole by PMI claims.
Banks may be getting paid back 4-5 times over by; the borrower, the secondary market, the MBSx2-3, the PMI claim, the OREO and now comes the American taxpayer with the Fed's gun to our head.
Meanwhile, your kids are going to be eating cat food and inhaling DU in some far-away land.
Lets all make a plan.
If you see anybody wearing a suit and tie by 2012 - shoot'em.
Any Corporate smart-ass bag-man on TV telling you everything is green shoots, well ...
PMI is mostly done for jumbo's and other mortgages that FHA can't do. PMI covers a percentage of loss between the loan principle and the actual amount recovered in a foreclosure sale. So, up until now, it was rare that there would even be a claim, let alone a substantial one. Housing after all is real property, and for a long while, the purchaser had a good chunk of skin in the game. Funny what happens when you throw tradition out the window, huh?
PMI is mostly done for jumbo's and other mortgages that FHA can't do.
I may be wrong here, but weren't the MI's really geared up to handle the push to home ownership by enabling Fanny & Freddie to do paper that had >80% LTV? This is also the primary reason the MI's are essentially insolvent, or would be if they actually had to pay their claims. MI is a shell game primarily used to keep the government money flowing into the RRE sector, and not just or probably mostly jumbos.
PMI is built into FHA loans. All FHA loans pay PMI.
PMI is connected to low down payment and or low credit score loans. Saying all FHA loans have built in PMI is innacurate. Unless you are calling the backing of FHA by the USG PMI.
YESSS! More stressless tests! We need more studies and commisions and stuff!
Ummm...FASB, and the SEC say that this MUST be done, it must be documented why the reserves are there, and the ammounts must be a good faith estimate of losses.
I got me an idear! Instead of more bureaucratic ass grabbing, someone just enforce the damned rules on the books?
Naw...
Well, now that halloween is passed I am assuming he can shave the Go-T Beard Hybrid.
Unless he is a San Francisco Giants fan, in which case he can now shave the Go-T Beard Hybrid.
Yes, I am sure that is his real hair color unless it is tar from the gulf hitting Orlando.
+1. He looks at present like he could start his own whacky religion, which may or may not involve some form of evil. The beardmo must go.
He grew the duster to vaccum up the "crumbs" in Barney Frank's crotch.
fear the beard!
I wonder how small that chin is under The Beard.
At least he has his natural skin color- as opposed to orange-boy Boehner.
Really, is he covering up jaundice with an even weirder color?
now, now. remember: the two parties are a scam to keep the sheep from noticing the slaughterhouse. you both feel the passion of ideas but almost universally they don't; the thing they care about is if they win elections and get to pull the power levers, bag the hot stuff and then get rich as lobbyists, etc.
+1. Why else would some of these guys who already have millions of dollars pump thier own money into the game if they didn't think they would make it back somehow in the future? Certainly not on salary of course. It's all about power and influence. Crony capitalism at it's finest.
Grayson's da man. You know he's doing the right thing when articles like this come out:-
http://www.newsweek.com/2010/10/24/america-s-worst-politician.html
got no love for any politician, but isn't Newsweek supposed to be news? Like, isn't journalism supposed to be unbiased and truthful? Maybe that is some op-ed piece, but it is delivered under the name of "news" which in itself if misleading. Really, I would care if Webster or Grayson was the target... it is that the author HAS a target. That is nothing but another attack ad.
why do some people dont like Grayson....his youtube videos have been very successfull in educating the people about the FED
Because though he's been spot-on for the most part about the financial mess and the Fed on literally every other issue (gubermint spending in general, BarryCare, etc.) he sucks eggs.
There will be some quick lame duck session, or early next term crap that will create a federally insured MI program rendering the issues discussed in the letter irrelevant. Gotta keep the illusion of propriety going at all costs. Plus there is the added benefit that the MI's open access to the docs would then be completely in house. Much easier to control the variety of security implications that way.
And the party continues to roll.
Hey look, if asked my opinion on Taz and given a choice between genius and whack job, I have to favor choice 2. However, it appears certain he is at least not paid off by the banksters and is the only dickweed in the cesspool of US congress who is asking these questions. I am willing to cut him some slack. Anyone know if he is Pepe and Alfie's paid bitch? If so, this run at the banksters is not some con job and he could well be back for another term.
Alan Grayson is a socialist moron, and will be unemployed as of 1-Jan. What Alan Grayson has to say or think about anything is as important as a rat's fart.
yep.
Such a shame Grayson waited until last few weeks to start to 'care' about his constituents.
thankfully that marxist scum Grayson will only be around for another couple of months. See ya libtard!!
Grayson sees the writing on the wall folks. But, like any other politician, can't do much about it without commiting political suicide. They system is captured. Both parties are captured. Grayson's letters, to me, are like "told you so" documents to be revisited at some point later on. Cards to be played later.
Effectively, this whole foreclosuregate thing has brought to the attention of the banks, Fed and administration that in fact there is armed financial nuke in the room. It is most likely going to detonate - and far too complex to be disarmed. So, what is left to do... buy time of course! Try to build something to contain the blast - absorb it's energy - or even lessen the energy of the blast or direct the blast.
Gray so n Good riddance!! Nihilist muckraker.
actually the "facts of the case" are brutally simple, stated in the article and not presented correctly in the comment section: "these are just processing issues." End of story. "Civil Rights" issues are messy and, ultimately, never really resolved. We're talking actual property here of course and unfortunately not "real discrimination." Hence..."the banks will be the owners." How else will the banks themselves be able to continue to borrow so THEY can meet payroll? Needless to say "no one asks who pays the taxes." That's because "no one does."
Love the picture of Grayson - "El Diablo"
Grayson will probably not get re-elected but I give him credit for trying to pierce the Fed,TBTF and their cronies on Capitol Hill. Crooks never like to be exposed.
Grayson,
Please explain how banks are going to set aside any additional reserves when they cannot pay the basic FDIC premiums? Exactly where do you propose this buffer comes from and, if a federal source, please explain the consequence to our credit with other nations, tax levels, debt ceiling, and future generations.
In short, please quit grandstanding for issues with no solution, it makes you look cheap (fletch). If you are indeed sincere about the issue, then please just call for the end of the TBTF (and the dollar) instead of a mickeymouse, roundabout, plan. Thank you.
Your pal,
Mario Poffo
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