The NY Times’ Gretchen Morgenson’s column ($) this past Sunday is entitled “Will Other Mortgage Dominoes Fall?”, in which Morgenson explores the current downturn in the subprime mortgage market.
As a result of the increasing default rate in subprime mortgages, Morgenson observes that the mortgage-backed securities that many institutional investors purchased may be riskier than they seemed at the time that the investors bought them. Consequently, she notes that those securities may not be worth as much as the investors want them to be worth and that they may sell them. If that happens, Morgenson rightly points out that the market for new mortgage-backed securities may get tougher and there may not be as much cheap mortgage money around for homebuyers, particularly low-income ones.
What I’m trying to figure out is what’s wrong with any of that? Isn’t that precisely the way markets work? Isn’t it good that many low-income or high-credit risk folks have been able to enjoy the benefits of home ownership? Yes, it’s too bad for those low-income folks who weren’t able to take advantage of the cheap subprime mortagages, but isn’t it good that investment vehicles that securitized subprime mortgages with pools of higher grade mortgages shifted part of the risk of those low-grade mortgages to investors who can better absorb the risk? And isn’t it more likely that the downturn in subprime mortgages will be less severe as a result of the hedging of risk that occurs through such securitization?
In other words, what’s Morgenson’s point in the article? Perhaps Larry Ribstein knows?
Monthly Archives: February 2007
It’s Black Rhino by a nose!
Although I find the NBA All-Star game and related activities excrutiatingly boring, I must admit that the challenge race (see video below) between former NBA great Charles Barkley and 67 year old, veteran NBA referee Dick Bavetta was pretty darn funny. Barkley — who weighed in at a stout 325 lbs. — had a classic line upon regaining his breath after winning the race. Checking out the $50,000 oversized check that signified the contribution being made to the Las Vegas Boys and Girls Club as a result of the race, Barkley — who has been known to spend some time at the Vegas betting tables — exclaimed proudly:
“We’re giving two blackjack hands to charity!”
Unfortunately, the video clip below doesn’t include the clever scene that TNT showed earlier in the evening of the stout Barkley “training” for the race by doing “situps” (moving only his head) while eating Krispy Kreme doughnuts.
Mississippi channels Venezuela
We all knew that it was just a matter of time before this would occur in Venezuela under Hugo Chavez’s dubious economic leadership.
But, as Ted Frank explains, how were we to know that Mississippi AG Jim Hood, plaintiff’s lawyer Dickie Scruggs and Senator Trent Lott would accomplish much the same thing in regard to insurance for the citizens of Mississippi? Or that AG Hood would take the preposterous position that the state can force State Farm Insurance Co. to continue to underwrite policies in the state (Larry Ribstein has more)?
Maybe Hood could persuade Chavez to underwrite some cheap insurance for Mississippi consumers?
Let’s not be too proud of ourselves
The Conglomerate’s Lisa Fairfax notes that the Chinese government has handed a death sentence to a businessman who apparently was running a sort of Ponzi scheme making wine, tea and medical potions from black ants, which are widely believed in China to have medicinal value in the treatment of such ailments as arthritis.
On the other hand, the U.S. government goes after two businessmen who pioneered the enormously valuable risk management of natural gas prices for producers and industrial consumers and prosecutes one to death and sentences the other to an effective life sentence.
Who would have ever imagined that Russian government would look the most reasonable in its sentencing of alleged business wrongdoers?
More on the outrage that is the Harris County Jail
Even as things change in Harris County government, the chronic problems of the Harris County Jail remain the same.
A Houston Chronicle review of state and county records reveals that from January 2001 through December 2006, at least 101 inmates ó an average of about 17 a year ó have died while in the custody of the Harris County Jail. In 2006 alone, after three consecutive years of failing to be in compliance with state standards, the jail recorded 22 in-custody deaths.
At the time of their deaths, at least 72 of the inmates ó more than 70 percent ó were awaiting court hearings and had yet to be convicted of the crimes that led to their incarceration.
Records and interviews show that almost one-third of the deaths involve questions of inadequate responses from guards and staff, failure by jail officials to provide inmates with essential medical and psychiatric care and medications, unsanitary conditions, and two allegations of physical abuse by guards.
In at least 13 cases, relatives or documents raise questions over whether inmates received needed medications prior to their deaths. Additionally, 11 of the deaths involve infections and illnesses suggesting sanitation problems. In 10 other cases, death reports suggest possible neglect, . . . [ . . .]
Prisoners also claim they have been forced to sleep on mattresses on cellblock floors ó sometimes next to toilets. They maintain that the crowded living conditions at the jail are ripe for disease and bacteria, particularly methicillin-resistant Staphylococcus aureus, or staph, a potentially lethal blood infection.
As a result, numerous inmates contend they have contracted staph infections while incarcerated. Jail records show that between January 2001 and April 2005, there were 60 medical quarantines at the jail. The records show at least two of the quarantines were related to staph infections. The causes of 11 other quarantines are not listed.
Apparently with the exception of the Harris County Commissioners, most everyone agrees that something needs to be done about the Harris County Jail. Yet, as has been the case for the almost 30 years now that I’ve been practicing law in Houston, while most everyone agrees, nothing ever gets done.
Government generally — and Harris County government in particular — is responsive to those constituencies that wield political power. Prisoners have no political power and are generally unpopular with those who do. Inasmuch as most voters never set foot in a jail and have no first-hand experience of the abysmal conditions, it is easy to understand why nothing is ever done about this outrage, at least from a political standpoint.
But that doesn’t make the condition of the Harris County Jail any easier to stomach. At a time when Governor Perry is bowing to the powerful political forces that want to build even more prisons, it’s high time that voters realize the scam that state and local politicians have foisted on them in bowing to the powerful political forces that support the endless cycle of building more and more prisons. The problem with the Harris County Jail is largely the result of too many non-violent or petty criminals being locked up there for too long. Until the politicians do the hard work necessary to reform the barbaric policies that have caused that condition, the jail problem is unlikely to change. Kudos to the Chronicle for keeping this problem on the frontburner. Charles Kuffner and Burnt Orange Report have more.
Missing in Baghdad
If there is only one newspaper article that you read this weekend, then make it this fascinating Wall Street Journal ($) article written by Sarmad Ali, an Iraqi-born student reporter for the Journal who somehow made his way from Iraq to Columbia University two years ago to study journalism. Ali had taught himself English while growing up in Baghdad during the turbulent period that included the Iraq-Iran War, Desert Storm in 1991 and the present Iraqi War.
The subject of the article is the desperate search of Ali’s family for their father, a car mechanic who was recently reported missing after a bombing in Baghdad. The story is not only a riveting first-hand account of how a normal Iraqi family deals with the civil strife that has become commonplace in Baghdad, but also an excellent example of why the U.S. should always keep its arms open for immigrants who seek to improve their lives. Columbia and the WSJ should be proud for helping make that happen for Ali.
Stros start playing pitch and catch
The Stros’ pitchers and catchers went through their first workout of Spring Training yesterday at the Stros’ complex in Kissimmee, Florida, so we had to endure the first article of the spring that suggests the horrifying reality that the eminently forgettable Wandy Rodriguez, arguably the worst starting pitcher in the National League over the past two seasons, may be in the Stros’ starting rotation come Opening Day. And it doesn’t help that Stros manager Phil Garner, who is not particularly astute in his job, rationalizes that Rodriguez has done well over the past couple of seasons because he has won more games that he should have given how poorly he has pitched.
At any rate, such disturbing thoughts provoke one to wonder whether future Hall of Famer Roger Clemens has one more partial season in his tank for the hometown club (Alyson Footer updates us on the current status)? The clever ESPN commercial below (which includes a quite young Keith Olbermann) reminds us that the same question was being asked about the remarkable Rocket over a decade ago. I suspect that he would answer the question much the same way today. Enjoy.
DOJ Throws in the Towel on Nigerian Barge Case
The Chronicle’s Kristen Hays reports on the news that was bubbling through the Houston legal community on Thursday afternoon — the Department of Justice has decided not to mount an appeal to the U.S. Supreme Court of the Fifth Circuit Court of Appeals’ decision vacating the convictions (see also here) of the four Merrill Lynch executives in the Enron-related travesty known as the Nigerian Barge case.
Although expected, the DOJ’s decision in the Nigerian Barge case reverberates through several other pending Enron-related cases.
The DOJ can retry three of the four former Merrill Lynch executives, but that would be petty by even the DOJ’s standards given the eviscerated nature of the original charges and the fact that each of the defendants has already spent a year of their lives in prison based on a prosecution that was based more on resentment than on true criminal conduct.
The Fifth Circuit’s now final decision in the barge case casts doubt on a substantial number of the charges upon which former Enron CEO Jeff Skilling was convicted, and dispositively blows away over 80% of the case against former Enron Broadband executive Kevin Howard.
In addition, the re-trials of Howard’s former co-defendants from the prosecution disaster that was the first Enron Broadband case are now in various states of disarray, as is the pressured plea deal of former mid-level Enron executive, Chris Calger.
And don’t forget the mess that is the DOJ’s case against the NatWest Three.
And this is the product of what the Wall Street Journal called “a good record overall?”
Look, this carnage is what happens when government is allowed to bastardize charges. In these cases, the prosecution abused the honest services charge that is supposed to pertain to bribery or kickback cases.
In the Enron-related criminal cases, the prosecutors misapplied the honest service charge to merely questionable business transactions in order to transform juror resentment of wealthy businesspeople into politically popular convictions.
The damage to the defendants, their careers and their families that this abuse of power has caused is bad enough. But the carnage to justice and respect for the rule of law is even more ominous. Does anyone really think that they could stand upright in the winds of such abusive governmental power if those winds turned toward them?
Criminalizing divorce
One of the areas of practice that I have developed over the years is defending parties in contempt of court proceedings. Those are never easy cases (don’t believe me? Read about this one), but some of the ugliest occur in the family courts where judges often will hold an ex-husband in contempt of court and jail him for failure to fulfill a support obligation.
According to this NY Times article, New York is experiencing a similar problem as family court judges in a number of cases there have used this supposedly rare sanction to punish ex-husbands. Although information on the number of these debtor prison-type cases is mostly anecdotal, it’s reasonably clear that the use of the contempt sanction in financial-inability-to-pay cases is a more widespread practice than it should be. As I’ve mentioned to more than a few divorce lawyers and family law court judges over the years, it’s particularly difficult for an ex-husband to generate income to pay his support or alimony obligations while he is cooling his heels in a local jail cell.
Tracking federal cases
Justia, the company that developed the popular Blawgsearch engine, has just introduced another outstanding search vehicle — a website that allows the user to track federal court cases in a number of different ways, including by date, state or party name.
The website taps into a database of recently filed federal district court civil cases and starts with a list of all of the cases, which then can be broken down by State/Court/Practice/Sub-Practice. You can subscribe to an RSS feed of all of the new cases that meet these criteria, or you can do a search and subscribe to an RSS fee of the search results. For example, you could track all of the federal court cases filed against a particular company as an RSS feed, or you could subscribe to just those that are filed in Texas. Whatever the search criteria, you can track new cases with an RSS feed.
Each case has an individual page with a link to the Pacer info page (you do need a subscription to access these documents at 8 cents per page) as well as Blog, News, Finance and Web searches on the party names. Not a bad way of picking up some quick informal discovery on the parties to litigation.
Justia has inputted over 300,000 case titles since January 1, 2006 and are now updating the database daily. The website is still in beta and Justia plans to add more functionality and editorial groupings of parties. But it’s pretty darn useful already. Give it a look.