Our Economy South Park Style

The new deal for our toxic economy.

Finally, the Treasury Department detailed a plan Monday to clear out approximately $1 trillion in toxic assets from the financial sector in a desperate effort to strengthen and encourage the banking sector to get them to lend again.

The hybrid public/private plan would have private investors and the Treasury put in equal amounts of money that would then be backed by a loan guarantee from the Federal Deposit Insurance Corp. to purchase toxic loans and mortgage-backed securities from the banks that hold them on their balance sheets.

Both the private investors and the taxpayers would supposedly gain from any profits if the assets eventually gain value which would only really happen if the mortgages are continued to be paid on. The taxpayer, of course, would take most of the downside risk. The private investors may be shielded a bit more.

The plan is considered the focal point in the government's strategy to get the US defunct financial system working on par again to provide the credit the economy needs. Since the credit crunch intensified in September, even more local jobs have been lost and the economy has contracted at the fastest pace in decades. In fact the toxic fallout from the U.S. banking crisis has spread around the globe.

The reason why the loans and mortgage-backed securities "assets" are considered "toxic" is because the market for them has dried up as home prices have plunged. The banking sector is adamantly unwilling to sell the loans and securities for pennies on the dollar, and investors, now poorer and wiser are very skittish about overpaying for assets that might become even more worthless than before.

Banks have raised the bar of lending and subsequently reduced their lending because their required capital is worth less than their creative accountants thought.

The Treasury plan is an attempt to give both the banks and potential buyers an incentive to come to a arrangement and make a deal.

The Treasury program has been eagerly anticipated for the past six weeks after Treasury Secretary Timothy Geithner's initial roll-out in early February was panned by the market.

The reaction was seemingly favourable since on Monday, Stocks jumped on Wall Street on optimism that Treasury Secretary Timothy Geithner's plan would work. Banks stocks in particular gained, go figure.

The plan offers "the best prospect for a financial recovery," said Lawrence Summers, top economic adviser to President Barack Obama. So when prospects are few and far between the best is subjective.

"The goal of this program is to restart the market for legacy securities, allowing banks and other financial institutions to free up capital and stimulate the extension of new credit," the Treasury said in a news release. The plan was designed "to make the most of taxpayer resources."

In a briefing for reporters, Geithner said private investors could take losses if the assets fall in price. He said an auction would determine the price paid for the assets.

The details announced Monday would cover purchases of whole loans held by banks. Details about purchasing mortgage-backed securities will be announced later, after further discussions with banks and potential investors.

Many analysts took a wait-and-see attitude on whether the plan would work.

"Unfortunately, we will not know until we see the program in actual operation," said Douglas Elliott, an expert on the bank crisis at the Brookings Institution, a middle-of-the-road think tank. "There are substantial reasons to be concerned that the program will fizzle or prove to be too expensive for the taxpayer, but there are also some grounds for hope."

One key stumbling block (and its a big one) is that the assets could already have lost 70% of their value, Elliot said.

Jeremy Siegel, a professor at the Wharton School of Business, said the plan would prove attractive to private investors because it was like a "call-option" on the toxic assets.

"If the asset values go below the purchase price, the Treasury is going to eat that loss. This plan is definitely going to work," Siegel said in a television interview.

Choose your Loan Modification...wisely.

The economy is in a conundrum. With home buyers losing value on their homes to a point where their homes are worth *more* than the loan amount that originally purchased them this gives home owners an incentive to seek out loan modifications on the original deal of the loan. These services are typically backed by a lawyer who is on some type of retainer by any institution in the business of "loan modification". This is a risky business as by and large it is unregulated due to the fact that, quite frankly this is new territory in our nations economy and our law makers are scrambling to create rules and regulations on par with ethical practices.

Legal council who's on retainer with a loan modification company can be construed as being on unstable ground, specifically because of the detachable relationship between the two entities. Any funny business that takes place, both entities the counsellor on retainer and the loan modification company can play the blame game off each other making a retaliating lawsuit difficult to coordinate well and could prolong any amicable legal settlement. The lawyer on retainer could blame the loan modification company for a number violations on its part shifting the blame on the loan modification company for informational inconsistencies not directly attributable to the lawyer in question. The loan modification company could blame the lawyer for not disclosing all their legal responsibilities, although this is unlikely. Lawyers have a tendency to cover their ASS-ets, quite well but even if they don't, by the time any resolution on a law suit not even related to the original expectations of the clients needs to re-modify their loan comes to fruition the home could be on the auction block and the client could be homeless and destitute.


Where a barrister who is a partner of a loan modification firm or directly apart of its staff can be construed as being more reliable since a lawyer is grafted into the loan modification companies resources and any misappropriation can be solely directed to the loan modification company and when the loan modification companies reputation suddenly becomes the lawyer's reputation, you can almost bank on the fact that loan modifications will be solidly negotiated, legally sound and hold to the expectations of the clients best interest.

Loan modification companies are not created equal. All will usually require a fee to be paid to initialise the work on the clients behalf, so it is important to make a proper investment of research when considering a loan modification service.

Salary History, Should you provide it?

Ah, the $60,000 question.

Combing through the job classifieds (both online and off), I see this from time to time. An absolute mandate to provide a Salary history or you will not be considered for the position.

In the age of information and more specifically the age of a down economy many employers hold this over many applicants to gleen a unfavourable advantage during the salary negotiation phase of a job interview.

In all the resources I have read on Salary Negotiation it has always been mentioned that compensation should never be discussed until a job offer has been extended to the candidate.

But more and more this is the first request that a recruiter always makes and what a employer from time to time will ask for.

This is a hard question to really ask if a job candidate should in fact provide a Salary History. It is impractical for a recruiter or an employer to mandate this request on pain of not even being considered for a interview for the position.

The real anomaly is this. If you provide a Salary history or expectation which is too high then you probably won't even be invited for an interview in the first place. A salary History or expectation that is too low might land you the interview but lock you into a low negotiating price point for the position.

A current theory is this tactic is used to weed out candidates whose price point are not in-line to the budget that the employer has in mind. If a employer is insistent to have this salary information first before any interview or any consideration for the said position, then logic would suggest that the employer is too fixed on seeing the candidate as a expense and not a investment to the companies bottom line.

This request for Salary history or expectation will often backfire on the employer as candidates that know their worth and the value of their skills will typically use this to weed out the employers who made the request in the first place deducing that they do not have a clear idea of what they are looking for (and hence do not understand the value of the skills they are requiring) or they are simply not interested in hiring quality candidates.

At the end of the day, when all of the cards are laid on the table and in play. It should be realised that the reality is you get what you pay for. Employers that will not even consider a candidate that does not provide Salary history or expectation should be heavily scrutinised by the candidate.

The reason is simple. The employer certainly has a budget in mind and that budget is most likely derived from market rates that are freely researchable by both a smart employer and a savvy candidate. Employers and candidates that either don't research these or are not aware of them will have a diminished capacity to fully understand the value of what both parties can provide for each other and until they do both can just be one big expense to the bottom line.

Loan Modifications, the new Economy?

So you are out of work. Behind on your mortgage payments and facing imminent foreclosure. You are about to be homeless...or worse be forced to live with your parents or in-laws.

What's a "home owner" whose home is really owned by the Bank to-do? Panic? Curse the Gods? Curse the last administration? Go to the casino and bet it all on black?

Well, unless you have a rich Uncle or a Angel in your back pocket you may have to deal with the "Certified" professionals that are ready to renegotiate your loan and save your home.

But what is the deal with these professionals with years of experience in foreclosure laws and negotiation techniques that call you (or you call them) to help the inevitability of losing your home. It is funny, that all of the sudden, every body is an expert on this subject.

So what do the experts do for you?

Well, this topic is clearly an important one and very much on every-bodies mind. The housing market has been seemingly inflated to the point where so much money was being made that no body really considered any practical accounting practices on balancing the books, or more specifically that the Adjustable Rates would in-fact fluctuate to the disadvantage of the home owner.

It was a shady deal then and is a shadier deal now. It borderlines criminal, but it is quite legal.

The current logic of Loan Modifications run like this. The banks or the lending institution wants to own your mortgage and not your home. A negotiator (typically a lawyer), will scrutinise the contract you have signed for ANY violation of law that they can use to leverage an amicable negotiation to the home owner's favour. Typically a request to lower your interest rate and put it in a fixed rate as opposed to an adjustable one.

Typically the account can be temporarily frozen until a arrangement can be negotiated and agreed upon by both parties. There is usually a "fee" attached to this "service". But the logic is that this "fee" is more favourable to doing nothing and spending more, damaging your credit, and most often losing your home if the original terms are not met.

Fees for this "service" often range from $3,000 and up often depending on the value of the home and the home owners ability to pay.

The legal territory for foreclosures and the negotiation for these foreclosures is quite new. Very few experts are truly experienced in this as this is new territory for everybody, including the current administration.

The only real advice I can give anyone is to really check out the people who claim to be experts. A few have been less than honest in what they are capable of doing so due diligence is always the order of the day. Always ask questions on any legalise they tell you and read (or get your lawyer to) any contract you are meant to sign. Be especially careful of disclosing your social security number to any 3rd party.

You may be afraid of the Marshal coming to your door with an eviction notice but do not let that fear rule your head. These are very uncertain times and no one is really that experienced so keep your thinking cap on and do not be afraid to ask for clarification on any of the services that are offered in this new Loan Modification Economy.

Kuhn on Kars?

Yes, yes this is still a legal and Poker blog. But sometimes we have to expand our horizons to learn new skills (whether we want to or not).

A few years back I got a killer deal on a 1998 Honda Civic DX. For a mere $300 dollars I was able to get a fully working well taken care of car all for the price of a single car payment. The catch (there is always a catch), it had over 400,000 miles on it.

It served me very well, a chariot that only required fuel an occasional oil change and monthly insurance payments and most recently a registration fee along with a mandatory smog check.

That is how it started.

Wanting to pass the smog test without a chance of failing, My brother (a certified Motorcycle mechanic), his buddy and myself installed a used but good Catalytic Converter to replace the old one. We replaced it and went to the Smog Check facility to take the smog test so we could get updated tags for the car.

Being that the tags were "bad" we needed to get this done or run the risk of having the car impounded by a gung ho CHP or Police agent who needed to make their quota.

The beginning of the week we paid the registration in full $200 and asked for an extension so we could have a few weeks to take care of the legal requirements to drive the car. Well the DMV required us to pay an additional $50 for this AND required that we failed the "smog check" first before this could be offered to us. This meant that the DMV would only allow one day of legal driving to get a smog check done.

Since we did not have the opportunity to fail the smog check *first* we were even unable to even pay the $50 for a 20 day extension in the first place. So we had to take our chances with the roving CHP and Police patrols just itching to satisfy their ticket and car auction quotas, after all in sunny California the land of eternal debt. I logically selected a Saturday to do this and for a week we had to drive "under the radar" back and forth (from Riverside to Orange County), to drop off and pick up our ride sharing crew.

When Saturday came, the smog check place was closed for the weekend so we lost the one and only "legal" day to do this. To make matters even worse, the car over heated and we blew a Head Gasket.

So what became of all this?

Well in addition to being an Accountant and Legal person. I became a novice mechanic.

TILA, HOEPA, RESPA

Hello everybody, well the loan modification biz is in full swing. It seems that the new US economy will be essentially redefining and reorganizing the debt of the everybody gets a home fiasco of a few years ago.

As such, being the legal eagle I will break down the crux of the laws that are the center of the universe for our new economy. Sigh, I guess its true what they say. They don't call it legal tender for nothing.
Here is a basic summary of the laws that are apart of this.

TILA was created to guarantee the accurate and meaningful disclosure of the true cost of credit, so that consumers can make informed decisions about borrowing. TILA provides that lenders are strictly liable for their failure to provide proper disclosures pursuant to the Act.

Under TILA, a creditor must accurately disclose the finance charge to the consumer, including certain charges imposed directly or indirectly by it as an incident to the extension of credit. A creditor must also disclose the amount financed to the consumer as well as the annual percentage rate to the consumer.

HOEPA is an amendment to TILA and offers further protections for high rate mortgages. A mortgage that is a credit transaction secured by the consumer’s principal dwelling and whose "total points and fees" exceed eight percent of the total loan amount is a high rate mortgage within the meaning of HOEPA.

Every creditor, when extending credit on a "high rate mortgage" as defined under the law and regulations, must provide, not less than three business days prior to the closing, specific disclosure of the annual percentage rate and the amount of the regular monthly payment, as well as the following disclosures in conspicuous type size:

You are not required to complete this agreement merely because you received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan.

A creditor, when extending credit on a high rate mortgage, may not enter into a mortgage that contains "terms [requiring that] a consumer pay a prepayment penalty for paying all or part of the principal before the date on which the principal is due." A creditor, when extending credit on a high rate mortgage, shall not engage in a pattern or practice of extending credit to consumers based on their collateral, without regard to the consumers’ repayment ability, including their current and expected income, current obligations and employment.

In the case of any consumer transaction in which a security interest is or will be retained or acquired in any property that is used as the principal dwelling of the person to whom the credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the transaction or delivery of the information and rescission forms required in this section together with a statement containing the material disclosures required, whichever is later, by notifying the creditor of her intention to do so. A debtor’s right to rescind lasts up until three years from the date of consummation of the transaction, transfer of all of the debtor’s interest in the property, or the sale of the property, whichever comes first, when the creditor fails to deliver to the debtor the required notice of the right to rescind or the required material disclosures. Upon receipt by the creditor of a debtor’s notice of rescission of the mortgage, the security interest in the loan is automatically void and the debtor’s obligation to pay finance and other charges is nullified.

If a creditor fails to comply with any requirement under 15 U.S.C. § 1601 et seq., the creditor is liable also for actual damages and statutory damages in the amount equal to:

a) twice the amount of any finance charge in connection with the transaction; or

b) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, statutory damages not less than $200.00 or greater than $2,000.00.

In a successful action against a creditor who fails to comply with any requirement, the creditor is liable also for the costs of the action and for a reasonable attorney’s fee as determined by the court.

Congress enacted RESPA in December, 1974 for the purpose of protecting consumers from "unnecessarily high settlement charges caused by certain abusive practices…" in the making of " federally related mortgage loans,"

Amoung other things RESPA prohibits kickbacks and referral fees: "No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding oral or otherwise, that business incident to or part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." RESPA also prohibits unearned fees: "No person shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed." RESPA requires that the lender provide to the borrower a settlement statement which shall "conspicuously and clearly itemize all charges imposed upon the borrower…in connection with the settlement." 12 U.S.C. § 2603(a).

RESPA requires that the lender and mortgage broker provide to the borrower "a good faith estimate of the amount or range of charges for specific settlement services the borrower is likely to incur in connection with the settlement." The term "settlement services" includes "any service provided in connection with a real estate settlement including, but not limited to…the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans)."

Any person who violates the provisions of RESPA is liable for treble damages, costs, and reasonable attorneys’ fees.

Whew, this was a mouth full, but I think it gives a basic explanation of the details of these ancillary laws.

Legal "Apprenticeship"? Who is school'in who?

Well all things being equal, some new revelations were revealed to me of Bull-Shit firewalls to obtain California BAR qualification status. Now it seems that one has to not only have a "read the law" apprenticeship with a Judge or Attorney, but this has to be for at least 4 years?!? In addition I need to take the "Baby Bar" before the actual Bar in California. I call Bullshit, and a time to get my Lawyer brain thinking on how I will be able to take the California BAR and become legally certified before 2010.

Regardless, I am still looking to take the Bar in the 3rd week in July of 2009. I am going to be seeking legal sponsorship in other, not so red taped, states (Nevada, Washington, Oregon, Tennessee?). There is a loop hole that will allow an attorney from another state could take the main California BAR without being gimped into a 4 year apprentice bondage for a qualifying Judge or Attorney. In theory, if I could gain legal sponsorship in another state, before the 3rd week in July of 2009, I could just take the BAR directly and become a California certified Lawyer before the start of 2010.

Mission Accomplished, and I saved myself 3 years of indentured servitude requirement of the "reading the law" clause to qualify to take the California BAR

I am thinking knowledge of the Multi state BAR will be applicable in most other states. I would be interested to finding out the different criminal statutes in varying states. I am drilling down on foreclosure law for some prospects I have in San Diego, but going to study tort law and get that down cold.

Contracts for the "pack" have been few in coming, I did the books for the partners and we started brainstorming. We decided on a wait and see approach, focus on my BAR and Poker and look for business prospects.

Credit Check for Jobs, Check them out first.

During one of my job searches, I got a response from a potential employer (TBQ Consulting) who informed me that I passed their screening requirements and needed me to provide them with my credit report so they could "verify" my past employment.


They provided a link to their web site and they recommended me to another link to actually retrieve my credit report.

Of course, I did my due diligence and followed the link to their main website (which was basically a splash page, with all links directed back to their main page). I also followed the recommended credit reporting link they sent me.

My initial investigations suggested that this was a scam and more importantly brought up a very important point. Is it wise to even give out this data to prospective (but unknown) employers?

Even assuming that these employers where on the up and up, and legit. Even if they were required by law to do a criminal/credit/background check before hiring and a new employee being exposed to the companies client's sensitive financial and/or legal data. Is there a better way of providing a criminal/credit/background check without actually releasing personal and sensitive data to an unknown company?

This is a tricky situation for a job seeker.

On the one hand, the company one is applying for my have a legitimate and a legal reason for doing this. Especially in the financial and legal sector of the job market.

On the other hand, while the company may be legitimate (or not), one is still providing personal data to a largely unknown entity and unknown employees of that entity.

This is difficult for me to really assess, my only thoughts on this is for a prospective employee to find a trusted 3rd party (unbiased) source to do a criminal/credit/background check on their behalf and allow the employer to review the specific selected information that is absolutely required to legally authenticate oneself for the job in question. Just a criminal check in the case of a legal job. Just a selected credit check, a FICO score, bankruptcies, but not a list of residences in the case of a banking or financial job.

To me its not really about being "deceptive" just "selective" on how personal information is allocated to the world. In these high-tech times, information is very fluid. Restricting some information that is not relevant to the legal requirements of that job is just being prudent, especially when Identity Theft can be implemented so easily by a perpetrator but takes many years and many more dollars to correct.

Of course the best advise is not to release any personal data. The next best advise is to be extremely selective of the personal data one releases and the time one releases such data. For example, never give out your Social Security Number to anyone other than the IRS and the HR department of a employer only after you have been hired and not before.

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Happy New Year

Well I played a $3-$6 cash game with $50 at Soboba Casino. The play was a wash, but I was solid until Soboba put $100 in the pot in addition to our own blinds and bets.

To my credit I held a K4 unsuited paired a 4 on the flop, the turn and the river
K 4J J3

With at least a hand (a pair of 4) I stayed in, with 2 other players, but in the end they split the total pot of over $250 ($125 per participant), I got none of it.

My game went downhill from there, I busted out with a pair of A with my AQ suited clubs to a set of 8 8 8.