Relevant and even prescient commentary on news, politics and the economy.

Why Does Abu Dhabi Own All of Chicago’s Parking Meters?

Atlantic Wire has a post based on Matt Taibbi’s book America on sale, Griftopia. There are a number of considerations to be drawn from this deal, but the head spins with possiblities. When visiting my son in Chicago this year he told me of the changes on the practical side…charges from 7 AM to 9 PM, no holiday parking waivers, no merchant holidays, rates raised 400% as a first step increase…

Why Does Abu Dhabi Own All of Chicago’s Parking Meters?
By Max Fisher

The city of Chicago has 36,000 parking meters. In 2008, it sold them on a 75 year lease for over one billion dollars. The buyers were led by Morgan Stanley. But as Matt Taibbi reports in his forthcoming book Griftopia, previewed in Rolling Stone, the state-owned investment arm of Abu Dhabi ended up owning a large share — possibility a controlling majority — in Chicago’s parking meter system.

It was December 1, 2008. That morning would be the first time that the Chicago City Council would be formally notified that Mayor Richard Daley had struck a deal with Morgan Stanley to lease all of Chicago’s parking meters for seventy-five years. The final amount of the bid was $1,156,500,000, a lump sum to be paid to the city of Chicago for seventy-five years’ worth of parking meter revenue.

He then gave them the details: he had arranged a lease deal with Morgan Stanley, which put together a consortium of investors which in turn put a newly created company called Chicago Parking Meters LLC in charge of the city’s meters. There was no mention of who the investors were or who the other bidders might have been. … The council at this time has no idea who’s actually behind the deal. “We were never informed,” says Hairston. “Not even later.”
But while the City of Chicago was deliberating on whether to sell their parking meter system to Morgan Stanley–which they ultimately decided to do–the Wall Street megabank was making plans to offload the parking meters to a third party.
Taibbi calls this a “bait and switch” pulled by Morgan Stanley on Chicago. He explains why this is about more than just parking meters. Now if city officials want to do anything that might disrupt parking meter revenue — let’s say close down parking for a street festival or parade — they need to get the approval of those meters’ shadowy, foreign owners. They also need approval to change parking hours or fees. The new ownership has already made unwelcome changes, ending the previous policy of allowing free parking on holidays. But not only did Chicago cede the operation of an entire segment of the city to mysterious private investors -…

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Wall St. as tax collectors

New Tax Man at Huffington Post points us to a growing trend:

Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.

The Wall Street investors, which include Bank of America and JPMorgan Chase & Co., have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found.

In many cases, the banks and hedge funds created new companies to do their bidding. They gave the companies obscure, even whimsical names and used post office boxes as their addresses, masking Wall Street’s dominant new role as a surrogate tax collector.

In exchange for paying overdue real estate taxes, the investors gain legal powers from local governments to collect the debt and levy fees. At first, property owners may owe little more than a few hundred dollars, only to find their bills soaring into the thousands. In some jurisdictions, the new Wall Street tax collectors also chase debtors over other small bills, such as for water, sewer and sidewalk repair.

The Big Business Wall Street Won’t Discuss Full VideoSome states allow the investors to tack on as much as 18 percent interest and a passel of legal fees and other charges. When property owners fail to make full payment, the investors can sue to foreclose – in some states within as little as six months.

And anatomy of a tax sale describes the 17 LLCs traced back to one hedge fund:

Fortress Investment Group, a hedge fund led by former Fannie May chief Daniel Mudd, emerged as the largest purchaser in the Pinellas tax lien sale, though it never used its own name to bid. The hedge fund spent about $12 million buying nearly 20 percent of the county’s liens. It bought them using 17 different “limited liability companies,” or LLC’s, that trace back to its Manhattan headquarters.

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State antiquated property registration cause of foreclosuregate? WAPO says yes?

A Washington Post editorial suggests the meme that deliquencies are the main concern for us to consider instead of ownership issues that are more fundamental and problematic. But the author also suggests the states are at fault for their antiquated registration system…

To be sure, the revelations of “robo-signing” and other sloppy or unlawful methods are disturbing. There are big lessons to be learned, especially about how mass securitization of poorly underwritten home loans may have swamped the states’ antiquated, cumbersome property registration and foreclosure procedures. It is also true that the scandal underscores the failure of the Obama administration’s efforts to prevent foreclosures.

But what matters most is whether the misconduct caused large numbers of people to lose homes they otherwise could have kept. And so far, officials have found no evidence of that. This is logical. The robo-signed affidavits at issue were part of a technical review of documents, not the actual determination of a borrower’s delinquency. By the time robo-signers put pen to paper, default had been well established. An ironic consequence of diverting staff to fixing affidavits now is that it leaves fewer people to modify salvageable loans.

I had to recheck the date of the piece, which is this Monday Oct. 18, 2010. Banks have suggested there are only technical glitches for mostly foreclosure procedures, but to simply bypass documenting property ownership without asking anyone is okay? Stay tuned for new slogans.

Robert at Robert’s Stochastic Thoughts says it more forthrightly:

They have decided that the time derivative (not the level) of house prices is more important than the principle that claims to own something should not be accepted without evidence.

They have the idea that the foreclosure mess is a bad thing and not good because it slows foreclosures (OK) and therefore we should just ignore massive widespread perjury and accept any banks claim to own a house just on their say so (and robosign so).

They assert that property titles are “antiquated.” Lenin thought the same and it didn’t work out so well.

All that is sacred is profaned all that is solid melts into CDOs of RMBS.

Update: How many times can a mortgage be sold? See Naked Capitalism for one answer.

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Obama Administration Foolishness, Part 2

I took a couple of days to let life interfere with blogging, but none of the standard politics/economics bloggers seems to have highlighted this note from the Lex column of last Wednesday’s (13 October 2010) FT (again, no link; feel free to provide in comments) under the heading “Defence M&A”:

Lockheed has two small services businesses on the block. [These] in particular appear vulnerable as Robert Gates, secretary of defence, looks for back-office savings to fund operational spending.

That’s pretty much a fair description of the reason for the existence of MERS.* If there is an area of the U.S. economy that it is more corrupt has poorer incentive-alignment than FIRE, it is Defense Spending.  Mr. Gates’s willingness to encourage that by removing processing controls does not bode well for long-term budgetary value.


*Well, the other reason, after tax evasion.

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Obama Administration Foolishness, Part 1

When the question is asked whether the Obama Administration are fools or liars—and a certain Chicago mayoral candidate is often nominated as both—you can be certain discussion of “the public option” will come up.

It doesn’t come up directly in today’s FT (page 4 of the print edition; no link; I get the paper edition, and there’s no relationship between the two*), but it certainly abides in the plan put forth by Paul Ryan (R-Innumeracy) to de-reform health care reform:

Congressman Paul Ryan…says he believes an arcane budgetary procedure known as reconciliation could be a vital tool for his party to scale back funding for some of the administration’s policies. Under congressional rules, bills passed under reconciliation—which must be related to budgetary issues—need only 51 votes to pass in the Senate.

It’s that self-same “arcane budgetary procedure ” that provided an opportunity to pass an initial health care reform bill with “the public option.” Strangely—feel free to Google for evidence—the Republican opposition to using reconciliation was varied and loud.  Now, it’s about to be their touchstone for dealing with health care budgeting.

Glenn Greenwald and D-Day have made the case that the Obama Administration were liars, not fools, when they declared they couldn’t pass the public option during the reconciliation process.  On the off chance we still believe they were only fools, it will be interesting—or, for some of us, horrifying—to see their reaction to an open declaration that the reconciliation process is fair game when used to reach Republican goals.

*If anyone in comments provides the link, I’ll add it.

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Industrial production is clearly slowing as total output and manufacturing output fell 0.2% in September– the difference between total and manufacturing output is utilities and mining and mining includes oil and gas production. The slowdown was widespread as output of oil dirlling and the information technology sectors both fell. About the only increase was an expansion of auto and light truck production from 7.75 to 7.84 million units. As the chart below shows after rebounding strongly in the early stage of the recovery industrial output is starting to closely followed the pattern displayed in weak recoveries.
My estimate of monthly productivity growth in manufacturing is also weakening sharply as the smoothed year over growth has slowed to 3.4% versus a peak rate of 9.0% in January of this year. Moreover, the smoothed three month growth rate and the unsmoothed monthly increase of only 0.1% in September implies that the slowing of productivity growth is not quickly reversing. Weaker productivity growth is bad for profits growth that historically leads income and employment growth. Weak productivity could imply that manufacturing employment growth was improving. However, the index of manufacturing aggregate hours worked peaked in May at 78.0 as compared to its September reading of 77.3. So on balance, prospects for continued manufacturing employment growth do not look encouraging.

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Why the Correlation Between Top Marginal Rates and Real Economic Growth is Positive

by Mike Kimel

Discouraging Greg Mankiw From Working Would be Good for the Economy, Part 2: Why the Correlation Between Top Marginal Rates and Real Economic Growth is PositiveCross posted at the Presimetrics blog.

I had a post the other day noting that the correlation between top marginal rates and real GDP per capita is positive. Depending on how you look at it (i.e., growth over several years, growth over one year, going back to 1929, focusing only on the period since Reagan took office, etc) that correlation might be small or it might go above 50%, but it is positive. That is to say, higher top marginal income tax rates have not caused with slower real economic growth in this country. Not the message you’ll get from most economists, but the data says what the data says, and where economists disagree with the data, its a sign that something is seriously wrong with the profession, not the data. (Note – the post appeared at the Presimetrics blog and at Angry Bear, and was in response to an op ed piece by Greg Mankiw noting that higher marginal income tax rates would dissuade him from working.)

Now, in that post I didn’t explain why higher top marginal income tax rates haven’t reduced growth, and may have, at times, dare I say it, actually been a force for faster real economic growth. So I’m going to cover that here.

To start with, there is no question that if you tax someone’s efforts enough, they will reduce their efforts. Any answer that is true will have to be consistent with both that statement and the facts (i.e., the positive correlation between top marginal income tax rates and real GDP per capita growth). I can think of several such answers, and I believe all are true to some extent. Now, before I lay out these answers, there is something I should note. I’ve listed these answers in order, from more believable and less important to less believable and more important. The reason I think most people will find the most relevant explanations most believable is that they don’t quite believe that pesky fact, that the correlation between top marginal income tax rates and real GDP per capita is positive. With that warning, here goes:

1. Top marginal tax rates are simply not high enough to induce people who pay it to reduce their efforts. That’s an answer a number of bloggers (Mark Thoma is a good example) gave in response to Mankiw; raising the top marginal tax rate from 35% to 39.6% shouldn’t change Mankiw’s behavior much at all as the difference probably amounts to peanuts for Mankiw. That may be true, but it does nothing to explain why growth rates were highest during periods when marginal tax rates were in the 70% range and up.

2. Dissuading people from putting in certain efforts doesn’t prevent others from putting in the same efforts. Linda Beale is one of several bloggers to note that others might happily step in to do Mankiw’s job should he choose. I’m sure this is not what Linda Beale had in mind when she wrote it, but finding people willing to give policy advice that contradicts the known facts and results in sub-part growth shouldn’t be all that difficult, frankly.

3. Rising top marginal tax rates may dissuade some people from working, but generally won’t dissuade those doing productive work. This is related to explanation 2, but it is subtly and importantly different. Simply put, most people are easily replaceable. Charles De Gaulle famously said “The cemeteries of the world are full of indispensable men.” By that, I imagine he meant that in general, most people are easily replaceable. That holds even for folks who are deemed irreplaceable; I suspect if you replaced almost everyone working for the Fortune 100 or the Ivy League tomorrow, the change would be un-noticeable pretty quickly. (An exception appears below.) Now, there are some people that genuinely are irreplaceable, that genuinely do change things, but there aren’t many of these people, and beyond a certain point, they aren’t motivated by money. Heck, most of them don’t end up all that wealthy despite being irreplaceable, and those few unique innovators that do accumulate vast fortunes (Steve Jobs would probably be an example) would happily do what they as long as they were making enough to meet some relatively basic needs. The few people who can’t be replaced if they upped and quit because the big bad gubmint raised their taxes aren’t the sort of people to go Galt in the first place.

4. A substantial percentage (and no, I don’t know what percentage that is) of people who are motivated enough by money that they might reduce their output in the face of even small changes to the top marginal rates are engaged in activities that are not good for society. For example, they might be Harvard professors who peddle theories that are 180 degrees opposed to reality. Or perhaps they develop or implement financial instruments that help bring down the world economy. There is a bit of a self-selection bias at play; people who care enough about money to become homo universitus of chicagus are also the kind of people willing to generate massive negative externalities with nary a thought to the victims (except perhaps to call them “losers”). Loss of their services is to be encouraged, not decried.

5. At the margin, the gov’t can be more efficient with resources than many people whose needs are sated. The primary motivation for such folks may be not risking what they accumulated and paying as little in taxes as possible. The result, in many cases, is paying vast sums to accountants and keeping the money parked or hidden rather than in productive use.

Anyhow, that’s what I came up. Your thoughts?

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There’s no way out of here

by Dale Coberly
An Op-ed

There’s no way out of here said the Joker to the Thief
… or is there?

This essay grew by strange turns from an argument I was having with another Bear, with whom I agree about all important things.

A long time ago I went with some civil rights workers to visit a migrant labor camp for sugar harvesters near Belleglade and Pahokee in way south Florida by the Everglades.

What I saw there left no doubt that these people were underpaid and treated badly, and that there was a dangerous level of race-based hate among the poor whites in the neighborhood.

But what we saw there could be understood in another way.

The farmer-supplied “rest rooms” were non functional and the sinks were filled with feces.

Almost all of the farmer-supplied “housing” was filthy with the filth of poverty.

But one young woman showed us her home, and it was cleaner and better kept than my own home.

So I wondered why ALL the houses could not at least be kept clean. And why the community rest rooms had to be so filthy. Even poor people ought to be able to manage public sanitation..even if its only a trench dug new each day and covered “as you go.”

And this is why I don’t think the answer to “poverty” is welfare checks alone.

What I think these people needed was someone to help organize the community to at least manage public sanitation, and negotiations with the farmer to maintain his own facilities in return for a reasonable level of care on the part of the tenants.

I think they needed someone to know enough about their lives to be able to, for example, help the woman who cleaned her house find a way to better her lot in life.

And they needed someone they could bring complaints of oppression and abuse… someone who would take them seriously and act on them. By negotiation if possible, by police action if needed.

Does any of this apply to “inner cities” or inner city schools? I think it does. “Liberals” cannot just throw tax transfers at people and expect magical results. Every community succeeds according to how well it is organized to meet the challenges it faces. The government… which has a critical interest in “solving” the poverty problem… needs to invest in community organization which will enable the people to solve their own problems… from repairing the schools, to monitoring how school taxes are spent.

I don’t know if this is already being done. But I don’t hear about it, and I should if it is. If the big O was a “community organizer,” what did he organize? What did they achieve?

And, oh yes, what ARE they teaching in the schools nowadays?

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Request for original mortgage note and additional information

Hat tip comments in Economic Populist:

Where is the note offers a way to check on your house!

Request for original mortgage note and additional information

To whom it may concern:

This is a qualified written request under Section 6 of the Real Estate Settlement Procedures Act (RESPA). I own the property at the address listed above, and your bank services my mortgage.

Over the last several weeks there have been many stories documenting the problem that banks are foreclosing on homes without proof that they own the loan. I have learned that in many cases, banks like yours do not even know who owns the loans you service. Employees at several leading banks have admitted to rubber stamping tens of thousands of foreclosures every month, without even checking to make sure that the bank had a legal right to proceed with foreclosure. In some cases, banks allegedly falsified mortgage documents to cover up their mistakes. There have been reports of two banks trying to foreclose on the same home, banks foreclosing on homeowners who were current on their payments, and even of a bank foreclosing on a home where the homeowner had never taken out a mortgage to begin with. This is not merely a “technical problem”–it is the difference between having a warm bed at night and being out on the street.

To protect myself and my family, I need to know who owns my mortgage. Within sixty days, I would like to know the name, address, and phone number of the bank or investor that owns my mortgage. Furthermore, in light of the recent allegations of foreclosure fraud, I demand to see the original mortgage note proving ownership over my home loan. If you fail to produce a mortgage note proving that you have a right to collect my mortgage payments, I will be forced to consider all options available to me to ensure that my family and my home are protected.

I ask that I receive my response in writing. I understand that under Section 6 of RESPA you are legally required to acknowledge my request within twenty business days and must try to resolve the issue within sixty days.

Thank you for your attention to this matter.

And follow up by Michael Collins at Economic Populist on the states attorney general responses to the MERS record keeping versus municiple/county titles to property is worth a read.

Also see Denninger’s piece on a an alternative to a general suspension of foreclsure activity, and a way to address concerns on proper ‘title to property’ for any house owner. Remember that while chances are small, there is at least one owner with NO mortgage who wound up in foreclosure proceedings.

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Health Care thoughts: Leave the gun, take the cannolis

Tom aka Rusty Rustbelt

Health Care: Leave the gun, take the cannolis

A few months ago I posted about the changing face of health care fraud, and especially about fraud committed by non-providers – such as non-existent durable medical equipment shops.

These groups often combine computer hacking, identity theft and bill-and-run phony front offices.

Today (13th) the federal government arrest 73 people charged with racketeering for creating more than 100 phony clinics in more than a dozen states and billing Medicare and Medicaid something like $163 million. The crooks, allegedly with an Armenian “godfather” in charge, stole the identities of both doctors and patients before blitzing the feds with phony billings from non-existent clinics. The “godfather” is in lockup today.

Meanwhile the feds are auditing legitimate providers with contract auditors and cranking up requirements for compliance work. Maybe the feds should pay more attention to internal controls before paying crooks?

Tom aka Rusty Rustbelt

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