Following the 2008 crash, government enforcement action extracted $110 billion from lenders and other players over a variety of alleged sins relating to the rise and collapse of the mortgage bubble. Where did it go? Governments held on to a lot of it, a lot went to the government-sponsored Fannie and Freddie mortgage enterprises, favored “housing-related community groups” got some, some went to homeowners with mortgage struggles or to new low-interest loans. In New York, money is going to rebuild the Tappan Zee bridge and “the annual state fair is using bank-settlement money to build a new horse barn and stables.” But no one has kept track of where a lot of the money went, there being no overall effort to account for it. [Christina Rexrode and Emily Glazer, WSJ]
- Bernie Sanders still rants and raves about Glass-Steagall Act. Who will break the news to him? [Catherine Rampell/WaPo, P.M. Carpenter (Krugman, Pearlstein in accord with Rampell), earlier] “Hillary Clinton vows to go ‘well beyond’ Dodd-Frank” [Housing Wire via Kevin Funnell]
- “In the past, ‘financial institutions were unwilling, for relationship reasons, to litigate against each other…That has changed dramatically.'” [Daniel Fisher quoting New York attorney Brian Fraser]
- “Government Thinks You’re Too Dumb To Try Crowdfunding” [Ben Weingarten, The Federalist]
- “If every bank behaved like Abacus, the financial crisis wouldn’t have occurred.” So guess which bank got prosecuted [Jiayang Fan, The New Yorker back in October]
- Billions in free money for consumers, just by regulating credit card fees! Sorry, it’s not that simple [Todd Zywicki]
- “The war against cash”: government vs. the cash economy [Daniel Mitchell, Cato, first and second post]
- New IRS authority to secure revocation of passports should give pause to everyone concerned about American liberty [Investors Business Daily]
- “But the questions of fairness are real and seem to be bolstered by the S.E.C.’s win/loss record in its home court versus its performance in district courts.” [Gretchen Morgenson, New York Times, earlier here, etc.]
- With Greece as with subprime crisis, same regulators who messed up credit markets will probably ask for and get more power [Arnold Kling]
- “In fact an AIG-and-taxpayer bailout of Wall Street firms engineered by government officials and Wall Street professionals with deep and ignored conflicts of interest” [Lawrence Cunningham, National Interest via Bainbridge]
- CSR by way of SEC? “Disclosure Rules Are the Wrong Way to Push Social Change” [Thaya Knight, American Banker/Cato]
- “Supreme Court Blasts Maryland Taxman’s Double-Dipping” [Elizabeth BeShears, Heartland on this year’s Supreme Court decision in Comptroller v. Wynne, I’m quoted]
- Dodd-Frank: “Are State Regulators A Source of Systemic Risk?” [Mark Calabria, Cato]
- Feds’ latest round of mega-settlements against banks prompts usual demands to jail execs. Is it really that simple? [Scott Greenfield]
Hmmm, this doesn’t match the received account [Fernando Ferreira, Joseph Gyourko, “A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012”, National Bureau of Economic Research (NBER) Working Paper No. 21261, just out]:
Utilizing new panel micro data on the ownership sequences of all types of borrowers from 1997-2012 leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than a subprime, borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle, such as negative equity, completely account for the foreclosure propensity of prime borrowers relative to all-cash owners, and for three-quarters of the analogous subprime gap. Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.
More: Daniel Fisher.
- Skull and crossbones to follow: San Francisco pols decree health warnings on soft drink, Frappuccino billboards [Steve Chapman]
- Judge criticizes feds’ punitive handling of AIG rescue as unlawful, but says no damages are owed to Hank Greenberg [Bloomberg, Thaya Knight/Cato, Gideon Kanner who predicted outcome, W$J]
- Congress resisting Obama/HUD scheme to force communities to build low-income housing [Jonathan Nelson/Economics21, Marc Thiessen, Affirmatively Furthering Fair Housing or AFFH]
- California, following New York, proposes 50 hours of mandatory pro bono work for prospective lawyers [John McGinnis]
- Five part Renee Lettow Lerner series on historical role and present-day decay of juries [Volokh Conspiracy, introduction, parts one, two, three, four, five] Related: Mike Rappaport and follow-up on Seventh Amendment, Liberty and Law.
- Latest Scotland drunk-driving blood threshold: Drivers “warned that having ‘no alcohol at all’ is the only way to ensure they stay within the limit” [Independent via Christopher Snowdon]
- How not to argue for bail reform: Scott Greenfield vs. NYT op-ed writer [Simple Justice]
- SEC regs suppress small business capital formation and that’s a shame [Commissioner Daniel Gallagher via Bainbridge]
- Federally sponsored gripe site for financial institutions not likely to end well [Hester Peirce and Vera Soliman, Mercatus via Kevin Funnell]
- Alleged terror payments “routed through” sued bank also went through major New York banks, which shouldn’t be surprising [Fisher]
- Did mid-level managers in securitized mortgage finance know they were in a housing bubble but cynically go ahead? Evidence against [Cheng et al., American Economic Review via MR]
- Shareholder litigation: “New ‘loser pays’ standard could curb abusive lawsuits” [Examiner editorial] Delaware take note: corporate by-law changes that cut off fee-seeking opportunism deserve acclaim [Keith Paul Bishop via Bainbridge]
- NYT was hot on “Goldman Sachs manipulated aluminum market” allegations but judge wasn’t [Reuters, July 2013 NYT]
- CFPB might shrug off discrimination and retaliation charges, but many of the firms it regulates could not afford to [Hans Bader]
WSJ editorial this morning: “We hold no brief for Citi, which has been rescued three times by the feds…. [But] good luck finding a justification for [the $7 billion figure] in the settlement agreement. The number seems to have been pulled out of thin air since it’s unrelated to Citi’s mortgage-securities market share or any other metric we can see beyond having media impact.
“This week’s settlement includes $4 billion for the Treasury, roughly $500 million for the states and FDIC, and $2.5 billion for mortgage borrowers. That last category has become a fixture of recent government mortgage settlements, even though the premise of this case involves harm done to bond investors, not mortgage borrowers.” More: Bloomberg. And the settlement directs Citigroup to hire former Eric Holder associate Thomas Perrilli, now at Jenner & Block, for a monitorship that is likely to prove an extremely lucrative plum [Reynolds Holding, Alison Frankel] Also: Ira Stoll.
- Payday lenders sue federal agencies over Operation Choke Point [Bloomberg News, Business Journals, earlier; more, Funnell]
- Speaking of those lenders: “California Supreme Court to review ‘rent-a-tribe’ arrangement for payday lenders” [CL&P, more]
- “If someone starts trying to blame the Global Financial Crisis on ‘de-regulation’, you can stop reading…” [Lorenzo via Arnold Kling]
- Can we just admit that the feds’ real target in the Credit Suisse case was the bank’s customers? [ABA Journal]
- Maryland does not approve of Bitcoin [my Free State Notes via Kevin Funnell]
- Behind Halliburton v. Erica P. John Fund, SCOTUS’s big case on securities class actions, two lawprofs are jousting [Alison Frankel, Reuters, and there’s a Cato connection; earlier]
- For expats, FATCA raises “prospect of being discriminated against as an American for all things financial” [Peter Spiro/OJ; Sophia Yan, Money] More renounce U.S. citizenship [Yahoo] A Canada-based FATCA resource [Isaac Brock Society] Earlier here, etc.
The 2009 economic stimulus package promoted by President Obama included $5 billion to weatherize some 607,000 homes—with the goals of both spurring the economy and increasing energy efficiency. But the project was required to comply with a statute called the Davis-Bacon Act (signed into law by President Hoover in 1931), which provides that construction projects with federal funding must pay workers the “prevailing wage”—basically a union perk that costs taxpayers about 20 percent more than actual labor rates. This requirement comes with a mass of red tape; bureaucrats in the Labor Department must set wages, as a matter of law, for each category of construction worker in each of three thou- sand counties in America. There was no schedule for “weatherproofers.” So the Labor Department began a slow trudge of determining how much weatherproofers should be paid in Merced County, California; Monmouth County, New Jersey; and several thousand other counties. The stimulus plan had projected that California would weatherproof twenty-five hundred homes per month. At the end of 2009, the actual total was twelve.
- Divided D.C. Circuit panel partially overturns SEC conflict minerals law [Bainbridge, more, more, Adler, earlier]
- Dodd-Frank vs. small banks, cont’d [Todd Zywicki]
- A failing grade for new Financial Stability Oversight Council? [Louise Bennetts, Cato; Peter Wallison, AEI, on Prudential SIFI designation]
- Regulators’ “choke hold” effort to throttle online payday lending draws protests [Kevin Funnell, more, yet more]
- Securities litigation after Amgen: time to reassess the fraud on the market presumption [Richard Epstein, Cato Regulation mag (PDF)]
- House hearing on allegations of employee retaliation at CFPB [Free Beacon, Funnell, more]
- “How To Destroy The Stock Market In 8 Steps,” series of Marc Andreessen tweets [Business Insider] “The Growing Executive Compensation Advantage of Private Versus Public Companies” [Marc Hodak]