Wonkbook: Foreclosure mess gets criminal; liberal Dems rally behind Social Security; Arne Duncan's international school reform
The foreclosure mess just stopped being polite and started getting real. First, the Financial Fraud Enforcement Task Force is launching a criminal probe into whether banks and other companies misled federal authorities and violated mail or wire fraud statutes. Second, the New York Federal Reserve and a coalition of investors including Blackrock, Prudential, MetLife and Pimco are warning Bank of America to take back some of their crummier mortgages -- otherwise, the group will sue. That's not a group that's likely to waste its time in court for a lark. If they think their claim is actionable, it might well be -- and it would suggest that many of these claims might be actionable, and that the foreclosure mess might drift towards the worst-case scenarios rather than an easy resolution.
Welcome to Wonkbook.
Federal investigators have launched a criminal probe into the foreclosure mess, reports Zachary Goldfarb: "The Obama administration's Financial Fraud Enforcement Task Force is in the early stages of an investigation into whether banks and other companies that submitted flawed paperwork in state foreclosure proceedings may also have misled federal housing agencies, which now own or insure a majority of home loans, according to these sources. The task force, which includes investigators from the Justice Department, Department of Housing and Urban Development and other agencies, is also looking into whether the submission of flawed paperwork during the foreclosure process violated mail or wire fraud laws. Financial fraud cases often involve these statutes."
The NY Fed and private investors are pushing Bank of America to buy back badly documented mortgages, report Jia Lynn Yang and Steven Mufson: "If Bank of America refuses to comply, these investors could end up suing, a person familiar with the matter said. The demand from the New York Fed and other investors sets up an unusual and high-stakes confrontation, pitting an arm of the federal government against the country's biggest bank. It also illustrates conflicting policy priorities, because it could put the Fed at odds with a bank the Treasury Department has been helping through the financial crisis over the past two years."
Liberal Democrats are warning the fiscal commission to lay off Social Security, reports Simmi Aujla: http://politi.co/bbd40L
Education reform can only work if the US collaborates with other countries, writes Arne Duncan: "There is a paradox at the heart of the United States' efforts to bolster international competitiveness: to succeed in today's knowledge economy, the United States will have to become both more economically competitive and more collaborative. For too long, policymakers, lawmakers, and voters have treated competitiveness as a zero-sum game, in which another nation's gain is necessarily the United States' loss. In fact, enhancing educational achievement and economic viability -- at home and abroad -- is more a win-win game, one with enormous benefits for the world and for the United States."
College graduation rates are stagnant, reports Stephanie Banchero: "According to the American Council on Education, a Washington lobbying group, today's 25- to 34-year-olds are no better educated than their baby-boomer predecessors. About 37.5% of them held at least a two-year college degree in 2008, almost identical to the 37% of 45- to 64-year olds--roughly the baby-boom generation. People ages 35 to 44 have the highest attainment rate, at 39%. The lack of progress could be traced mainly to males and minorities, the report says, particularly Hispanics, who continued to lag behind previous generations in college attainment. Meanwhile, young women of all races are making generational progress."
Brit pop interlude: Primal Scream play "Movin' On Up".
Still to come:China may not let its currency appreciate; Lisa Jackson and the EPA will not have a fun year; federal workers are lobbying for greater retirement benefits; and a LEGO set that can build other LEGO sets.
China sent it a signal that it may not let its currency appreciate, report Tom Lauricella and Andrew Batson: "China's central bank announced it would raise key rates by a quarter percentage point, the first move since it cut rates in December 2008. While many investors had been expecting China to raise interest rates in coming months, the timing of the move was unexpected. It is viewed as the first in a series of interest rate increases...Some investors interpreted China's rate move as a sign the country might rein in a steady but gradual appreciation of its currency against the dollar seen recently. That's in part because a rising currency, like higher interest rates, serves as a brake on inflation--thus a rate increase means it wouldn't need to allow the currency to rise as quickly."
A Commodity Futures Trading Commission judge alleges the body is purposefully biased against complainants: http://wapo.st/cODJ1p
The foreclosure mess could lead more families to stop payments, reports Brady Dennis: "Although there are no statistics on how many homeowners are taking advantage of a foreclosure moratorium to avoid making monthly payments, some economists warn that this practice could become more common if a national freeze is put in place, as some lawmakers seek. This is called a 'moral hazard' - the notion that borrowers might decide to stop paying back what they owe or continue to withhold payment because they see no repercussions. Bartlett, a soft-spoken 29-year-old, said he feels no obligation to the bank that sold him a risky mortgage at the peak of the housing boom and then did little to help him keep his place once the bottom fell out of the market."
Bank of America disputes that many mortgages will need rescuing: http://wapo.st/cbUuyc
A probe shows US mortgage servicers vary wildly in quality, report Damian Paletta and David Wessel: "A four-month-long Obama administration probe into five of the country's largest mortgage servicers has discovered 'a significant variation' among their operations, with some servicers 'significantly worse than others' in how they handle home loans, U.S. Secretary of Housing and Urban Development Shaun Donovan said in an interview. Mr. Donovan wouldn't identify which companies were laggards in the HUD review, but he said the administration plans to make the results of its investigation public in the next few weeks. The White House's Financial Fraud Enforcement Task Force, which includes the Justice Department, is at the early stages of investigating the way mortgage companies handled their documents."
The Basel committee has agreed on liquidity rules for banks: http://bit.ly/aiK1tZ
Democrats are suffering due to voters' inability to recognize economic realities, writes Steven Pearlstein: "The dirty little secret is that most Americans don't really know what they think about the issues that so animate the political conversation in Washington, and what they think they know about them is often wrong. Most Americans still think that the bailouts of the banks, the auto companies and American International Group will wind up costing taxpayers hundreds of billions of dollars. In fact, the latest guess is that the government will come out even on the deal, and may even turn a profit. Many Americans think that the economic stimulus package has been a failure. In fact, the estimates from a wide range of experts say the stimulus has saved or created more than 3 million jobs."
The unemployment benefit system is nearing a crisis, reports John Maggs: "States, which have already raised employment taxes, will be forced to cut benefits even further next year without the kind of overhaul of unemployment insurance that has always seemed to slip off the congressional agenda, according to McDermott, who’s tried for years to modernize a program that has changed little since it was created in 1935. A stop-gap measure that allows states to borrow from the federal government interest free expires in January, and the debt will start growing sharply, hitting $65 billion in 2013, according to the Government Accountability Office."
Robot interlude: A LEGO printer than can assemble other LEGOs.
The EPA would become a punching bag in a GOP Congress, reports Robin Bravender: "Like other senior administration officials, Jackson can expect to be chained to a witness chair on Capitol Hill if Republicans win either chamber. There, they hope to make her defend policies the GOP contends are unpopular and anti-business. 'I think she’ll be very much in demand on the Hill, at times not of her choosing,' said a former staffer on the House Energy and Commerce Committee. 'It will diminish her free time, shall we say.'...Some of the animosity is personal: Republicans in both chambers and K Street attorneys say Jackson and her staff are too dismissive of opposing views and other stakeholders."
The Chamber of Commerce is distributing flyers urging kids to oppose energy regulation: http://politi.co/dz43Av
BP's money is transforming the Gulf, report David Fahrenthold and Kimberly Kindy: "The money has been welcomed as a lifeline. But it has made the coast feel like an open-air economic experiment: Some hardworking fishermen think it's in their best interest to be idle, losing market share they will need next year. And those who haven't been paid are looking for legal and illegal ways to work the system...Keeping up with that process is proving more difficult by the day. A few weeks ago, Feinberg's fund adopted new policies that paid claims faster and more generously. The result: The rate of new claims doubled, Feinberg said."
BP will waive its $75 million claim cap for some cases: http://wapo.st/94fwPh
An Energy Department program has succeeded in spurring green energy innovation, reports Matthew Wald: "A company that secured a Department of Energy grant to pursue a breakthrough idea in the manufacture of solar cells plans to announce on Tuesday that it has raised $20 million to commercialize its technique, which it says will reduce the price of solar panels by 40 percent. The company, 1366 Technologies of Lexington, Mass., has found a simpler way to produce the basic building block of solar cells: silicon wafers. It uses molten silicon to cast the wafers in their final form, six inches on one side and 200 microns thick, or about eight-thousandths of an inch."
Federal retirees want a one-year retirement benefit boost, reports Amy Goldstein: "It will be the second year in a row that benefits have not risen. The consecutive years without an increase are unprecedented since the mid-1970s, when the government began to adjust such payments automatically, based on the inflation rate. The largest group of people touched by the freeze are the nearly 54 million retired and other Americans who receive monthly Social Security checks. But the same formula that determines whether Social Security payments go up has ripple effects, affecting benefits for retired federal workers and for retired and disabled veterans, as well as former railroad workers."
The makeup of the House technology subcommittee could change considerably even if Democrats win: http://politi.co/9vSJiV
Health providers aren't up to date with genetic screening yet, writes Harold Pollack: http://bit.ly/9bDath
A radical plan could spur health care innovation, writes David Leonhardt: "The full costs of treatments would be covered for three years, which would still give companies an incentive to innovate. After three years, absent evidence that a treatment was better, Medicare would pay no more than it paid for equally effective treatments. Only $10,000 of the bill for proton therapy, for instance, would be covered. The blank checks would not go on forever. New treatments would bring a windfall only if they improved health. 'To me, this is the way you make the market work,' says Karen Davis, president of the Commonwealth Fund, a health research group. Recently, private insurance companies, including Aetna and Cigna, have begun experimenting with similar policies, notes Mark McClellan, the former head of Medicare."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Joe Raedle Photo.
| October 20, 2010; 6:45 AM ET
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