Loose Ends... Vol. LXVI

I have saved a few articles in my Google Reader which I had thought about using as writing inspiration. Alas, it's time to clean them out with some short commentary. All three articles tonight come from the great financial blog, naked capitalism.

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This first entry comes from Edward Harrison of Credit Writedowns by way of naked capitalism. Harrison lays out many facts of the current economic climate and argues that we are in a depression - not a recovery from a recession. I have to agree with Harrison. While we will likely have a technical recovery in GDP growth in the third quarter, which will be announced later this week, the structural issues of debt in the economy still remain.

I like Harrison, respect his depth of knowledge, and usually agree with him. He generally has a libertarian view on things; however, he has called for more government intervention over the last year. To note from his blog:

From an ideological perspective, I would call myself a libertarian realist. I am a firm believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Often government intervention and oversight is not just wanted but warranted.

I highly recommend this article, but be warned; it is long. This also was one of my first exposures to "chartalism" - a macroeconomic theory which seeks to explain monetary phenomenon by way of a relationship between private savings, government spending, and the country's balance of trade. It's interesting - more in a future article on monetary theory.

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Yves Smith published this next article a couple weeks ago regarding the AIG bonus payouts. Two days later, Neil Barofsky of SIGTARP issued the latest audit report on AIG compensation. From the report (page 13):

... According to AIG officials, individual awards paid in March 2009 ranged from $700 for one File Administrator to more than $4 million for one Executive Vice President... $7,700 was awarded to one Kitchen Assistant... Distribution of the remaining $198 million is expected in March 2010...

Awesome - our bailout dollars at work. "Pay Czar" Kenneth Feinberg ordered significant reduction in pay at several bailed out companies earlier this week. I'm basically for this. These companies only exist due to the taxpayer largess. They can be told what to do.

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We turn back to an Edward Harrison post for the last entry of the night. This article highlights some key decisions happening in the courts regarding mortgage foreclosures. There are a lot of good links in this one to other bloggers who are picking up on the story.

The very interesting decision by the court (in one particular case) is that the bank which claims to hold the mortgage has not met the burden of proof to show this is actually the case. When one receives a loan to purchase a house, the mortgage is actually the security against the loan. The proliferation of securitization has transferred mortgages from one party to another over and over again. When the borrower stops making payments, the mortgage holder moves to foreclose on the property. Increasingly, the mortgage holders have been unable to prove that they actually legally hold the mortgage since the securitization process has been sloppy - at least in terms of following all the necessary and required processes for such a transfer.

Very interesting stuff... could we be seeing the beginning of a massive debtor's revolt?