We Have Been Sent To The Minors

I work in the private practice of law dealing daily with the economic realities of average people who have average problems and with those who have extraordinary financial problems. Having had the responsibility for the investment of as much as $145M, I continue to pay attention to the financial markets on a daily basis. This posting is to try to explain what has happened in the lowering of the credit rating of the Country's "sovereign" debt (meaning money the Country itself has borrowed - think Treasury Bonds) from AAA to AA+. Just like in baseball, we have been sent down to the minors.

By now, the entire world, knows that the United States has lost some of its credit-worthiness. Standard and Poors, known better by "S&P", in its role as a debt rating agency (a company that determines what debt is safe for investment and what is risky and how risky). The fact that the other two major raters have not taken any action "against" the U.S.'s risk seems to be of no importance.

In the world of investments PERCEPTION IS REALITY. That's true in many areas of life but especially in this one

The downgrade was apparently caused not by economic factors but rather the dithering of the Congress in deciding to do anything about the debt-ceiling and deficit reduction. With the complete polarization of the 2 ½ parties currently "in charge", little was done to address the systemic problem of our growing debt and its root causes.

It's easy to state that the Obama administration did or didn't do this or that, or that Bush allowed deregulation to go too far (think SEC and securitization). But, in reality should that have affected the credit worthiness "rating" of the sovereign debt of the U.S.? Probably NOT.

The Congress, through a myriad of laws and regulations wanted/tried to rein-in the Rating Agencies and hold them accountable for the financial meltdown. Remember it was these same agencies that rated Mortgage Backed Securities as AAA paper. That they were/are paid by the "investment banks" who did the securities to sell bonds to make $$billions has escaped the review of the markets now in panic over our AA+ rating. Rather than this being an assault on the problem with our deficits and trade imbalance, it seems more like S&P trying to exert enough pressure to get Congress here, and Parliaments in the EU to back off assigning liability to Credit Rating Agencies.

S&P was the only agency to downgrade. S&P was the agency most involved in giving the "seal of approval" to the MBS and CMBS bonds. S&P stands to be the biggest target if liability is established for the incorrect/negligent/disregard for underwriting standards rating of those bonds. It's worth repeating that the securities firms securitizing the loans and selling them for huge profits paid the rating agencies large fees to rate the bonds.

Michael Shemi wrote an excellent column in the August 4, 2011 edition of American Banker's blog "BANK THINK" ( http://tinyurl.com/3s4tn7n ) where he discusses the moves to lessen the restraints and assignment of liability to and on the credit rating agencies. As he put it "Lastly, the continuing crises surrounding sovereign debts and national deficits from Greece to Portugal to the United States are affording rating agencies another opportunity to boost their own importance. By threatening the imminent downgrade of the ratings for these countries, the rating agencies keep their names in the news and constantly rattle the chains of issuers, regulators, and investors."

Of note is the matter of the probable divestiture of S&P by McGraw-Hill which owns it - "spin-off" because of S&P's enormous profitability. It needs publicity. It needs a crisis to show its importance and absolute need.

The U.S. economy has problems but also the capacity to overcome those issues if Congress can stop the "Texas steel cage death fight" over ideology". It's almost as if each political party and each faction thereof wants credit for causing the next recession. The rating agencies need to be held accountable - but so does Congress; and so do WE the people. We desparately need a coherent plan to reduce the deficit over the next decade by $4trillion and then another $10trillion in the decade following. Budget cuts? Social Security cuts? NO!! Tax reform - so rich folks pay a share commensurate with their annual income. Raise the age for Social Security benefits starting in "X" years - maybe from 62 (early)and 65/6 (regular-full) to 63 and 67/8 respectively.

If the WORLD saw us with a plan to eliminate the deficit totally in 20 years with a big push in the first 10, all would be well again.

Author's Copyright by Richard Isacoff, Esq, August 2011

rii@isacofflaw.com
http://www.isacofflaw.com

We Got A Credit Line Increase

The Country is Saved. We Won't Default. We Won't Need the EU to Bail US Out! Hooray!!!

As I noted in a Tweet, if the U.S. defaulted and ended up in Bankruptcy, who would be the Trustee, the guardian of creditors like China? Luxembourg???

The entire situation is ridiculous. But, it wasn't so far-fetched (a default). Everyone was buying gold and platinum and silver and... As posted here earlier "How Many Grams of Fat Are There In An Ounce of Gold?", the idea being that gold is only worth what someone will trade for it. Well, we will not have to worry about that anymore. The Congress, meaning the Democrats, Republicans, and Tea Partyists, in both the House of Representatives and in the Senate, and the President have come up with the master-plan to avoid not being able to borrow. The amount the United States can borrow will be increased.

Foolish as it appeared (because of all of the 2012 election campaigning and "holier than thou" Tea Party drinkers; I mean why have a Tea Party and drink coffee? But they did forget the crumpets!), there was exposed a huge problem with our financial system.

Some basics and answers to questions:

1. How could we run out of money to pay bills? Well, we already have. We have used the equivalent of an home equity loan to get money for all of our annual needs. The difference is that we "sell" Treasury Bonds. That is a nice way of stating that we will agree to pay "X"% interest if someone/country lends us money. Granted the amounts are larger than you would need for siding on your house, but the concept is identical. The "Treasury Bonds" that you hear/read about are nothing more than IOUs given to whoever buys the bond.

2. What is the Debt Ceiling and how high is it. It is $14.7 trillion; that is $14,700,000,000,000. It is the amount the Country is allowed to "borrow" from other countries and "all of us". It is a constitutional matter. The Congress has to agree on the amount and then get the President's approval for the MAXIMUM amount of our loans. Congress is acting like a Bank's Loan Committee deciding whether the Bank's Customer (the Country) can repay it's loan.

Were did all of the money go? No one knows for sure and no one, even the GAO (General Accounting Office) can trace it. But we know that we spent money on several wars (2 still on-going); we STOPPED a world-wide depression by enacting the "Stimulus" packages; our States, cities and towns had their tax revenue supplemented by some of that $14.7T for schools, bridges, roads, housing (especially for the elderly); the world wide stock and securities markets did not crash because we paid to offset losses -AIG, Lehman, Ford, Chrysler, GM et al.

IN REALITY, WE SPENT MORE THAN WE EARNED. Tax revenues were too low, the wars were/still are sooo expensive, and we have been spending like we could just print more money (oops, we can and did!)

3. What is the "Deficit" - over-simplified but not by much - just as in any household, or business, the deficit is the NEGATIVE difference between what we spend and what we earn. The trade deficit is a bit different - that is the NEGATIVE difference between what we sell to foreign countries and what we buy from them. For a long time we have bought more than we have sold. WE ARE A NATION OF CONSUMERS.

Coupled with our penchant for buying is the fact that our "DOLLAR" has been strong for a long time in comparison to other countries' money. Simpler - our dollar was based on a stronger economy; more output and capability of manufacturing, inventing, building more than nearly all other countries. We were perceived as having the ability to produce 10, 15, 20, 50% MORE IF WE WANTED TO, AT ANY TIME - like right after the start of WWII. Doesn't do much good if no one is buying!

4. Why did it take so long to set a new limit? POLITICS - RE-ELECTION in 2012. That simple? YES. That doesn't mean that some of the 535 people in Congress did not really believe that our "bill" to others will cause the ruination of the Country. It could, but most likely won't. As these things are measured, we have a bill that is 62% of our Annual GROSS DOMESTIC PRODUCT(GDP). That means that we OWE 2/3 of our county's TOTAL output of goods and services for a year.

Just think about paying 62% of your net/take home income for loans. That doesn't take into account food, utilities, cable, gasoline etc - all of the things that are monthly or annual expenses. For the Country, it's like only having 1/3 of the total amount the United States collects, for the payment of Medicaid, Food Stamps, Unemployment, Military pay, other government employees' pay, expenses for things like the Gulp/BP clean-up, and all other programs big and small.

Maybe now our elected officials can get back to business of running the Country - maybe they need a lesson in accounting - Remember Debits on the Left, Credits on the Right. Debits by the Window, Credits by the Door (from Accounting 101). OR we could buy 535 calculators and copies of Quicken

Author's Copyright by Richard I Isacoff, Esq, August 2011

rii@isacofflaw.com
http://www.isacofflaw.com

Housing for the Homeless, Inc. (in organization)

The other day, I responded to a comment on Twitter from a knowledgeable mortgage financing friend regarding the current housing situation vis a vis foreclosures. His view is that the "market should find its own level" ; that the Federal Government should not interfere with modification programs, the EHLP program etc.

After some thought, I must agree with him. If the pace of foreclosures returns to normal (once the robo-whatever is done and docs are corrected) and evictions follow promptly, there will be plenty of Housing For The Homeless. There will be no need to build new shelters. Mortgagees can just allow cities to house "The Homeless" in these abandoned/emptied OREO properties. The cities would pay but only by not taxing the mortgagee/foreclosing entity. If the mortgagee does not incur this liability by recording a deed, then more properties will be formally owned by the entity which won the foreclosure sale bid.

Now, one might ask,"Why should the homeless get to live in someone else's house when the someone else just got evicted and became HOMELESS?" Answer: "Well, that's the market finding its level!!!". Further, the new homeless family can move into another "victim's" house as he/they get thrown out! See, that way no one can complain - except "The Investors".

This is the shadowy group (Goldman, Lehman, Bear Stearns, Countrywide, JPMorgan et al) which created the securitizations of the mortgages, and sold and/or bought (and hedged) the resulting "bonds". They are the folks who took a mortgage, put it together with 3000 others, released all of the originating banks/mortgage companies from all liability, and sold pieces of the pool of mortgages as "Mortgage-Backed Security" shares/participations.

A solution to the matter of getting the investors paid during the OREO stage, would be to have the "Newly Homeless" receive a minimum wage pay (because they are out of work which is why they lost the house to start with) to remove all of the black mold that develops in uninhabited housing. To be fair, some of it isn't Black Mold of the bad kind but just regular garden variety MOLD.

So we have the solution:
1. Increase the pace of foreclosures to create Housing for the Homeless
2. Hire the homeless, now in a home, to remove mold
3. This helps the national unemployment problem so there should be some federal money for job creation, which can be paid to the investors as rent from the Homeless
4. The homeless move in, shopping carts, kids and all, and the streets look better, so new companies will move into the formerly empty urban areas because the former homeless have homes and a paycheck
5. The suits against the foreclosing mortgagees should slow, because, the family which just got evicted can move into another family's newly vacant home AND get paid.

The market will find its level. Hopefully it will be above the water table.

Author's Copyright by Richard I. Isacoff, Esq, July, 2011

rii@isacofflaw.com
http://www.isacofflaw.com

Brief Recap of Major Financial Issues

There used to be a TV show, weekly, called appropriately "THAT WAS THE WEEK THAT WAS". It provided a satirical review of the weeks happenings - especially politics. Kind of like a fast paced, hit-a-run version of John Stewart. Actually, "The Daily Show" is a modern day iteration. This Is The Month That Was:

FORECLOSURES
1. Foreclosures still moving at a brisk pace. Some slowing but due to paperwork issues. The mortgage servicers, led by the Mortgage Backed Security Investors, want to foreclose, and actually do so, even when they do not have the legal rights. IT GOES LIKE THIS :
a. You get a loan from the "We Saw You Coming Mortgage Company"
b. The mortgage company has already sold the loan to a large bank
c. The holder of the mortgage only (not the note, the I.O.U.) is company called MERS, short for Mortgage Electronic Registration System. This is mortgage industry registry to avoid recording mortgage transfers
d. The loan is "sold" into a Pool of 3000 other loans paying the Bank for its investment in your mortgage. The Bank now has no risk - this explains why no one cared about loan quality and why there were bizarre loan products like the "Pick-A-Payment"

e. The pool is sold as a BOND - just like a corporate bond- where investors buy $10,000 or maybe $1mil of the total which can be $2billion+ The reason to purchase is to get a higher than bank savings account interest return without much risk (good luck!)
f. If a borrower falls behind in payments, the manager of the pool of loans (called the investor) decides whether to modify the loan or not
g. The Fed Gov't set up the Making Home Affordable program to help homeowner get modifications but DID NOT REQUIRE ANY LENDER/INVESTOR MAKE ANY MODIFICATIONS

CONSUMER PROTECTION

1. There was a Consumer Finance Protection Board established so one agency can "ride-herd" as a REGULATOR to be certain that consumers don't get swindled. Here's where that is:

a. The CFPB is to stop "Predatory Lending practices", credit cards that have hidden fees (like the 0% interest for 1 year including balance transfer except for the 4% or 5% fee, not interest on the transfer)-see last posting for full explanation, and excessive fees to Banks for using a debit card.
b. The Republicans in the Senate have vowed to refuse to allow the appointment of ANYONE to the top spot at the CFPB unless the powers are reduced and there is a committee running it

2. Banks are lobbying to reverse the Law that will limit how much they can charge the merchants for each customer use of a debit card. Right now if you buy a $2.00 coffee and "swipe" your debit card to pay for the coffee, the store might get charged $0.40. No wonder prices for small items like coffee and hamburgers are so high

JOBS
1. Jobs are still being created, 50,000 this past month but that is only 1.2% of the unemployed
a. No real manufacturing starts to create jobs
b. Housing market dead - too many foreclosed and repossessed homes to let prices rise so no one can sell, Banks own too many houses, no reason to build a new house hoping someone will buy it
c. Mortgages are extremely difficult to get so even if you want to buy, who will lend you the money. No building-No Jobs.
d. Outsourcing to other countries bigger than ever

ECONOMY

1. Economy is not defined as how much we are earning or how much things cost or how confident consumers/businesses are feeling

a. Economy is the system to move goods and services. Essentially how will supply and demand is working
b. Economics is the study of the economy - not a science and there are as many theories as there are people studying the economy, therefore being Economists. So when you hear about "The Top Government Economist said that..." it's just his opinion. It is not a real science. It's a social science based on opinions and theories

2. Our trade imbalance grew. This is the measure of how much we import versus export. We import much more than we export.

a. The trade imbalance affects the value of our Dollar as compared to other countries currency
b. Things got better with Japan because few cars are being imported due to the disasters that hit Japan
c. Things got worse with China - they buy a fraction for us of what we buy from them.

That's just a brief round-up of 4 topics of concern to us all

Oh, I almost forgot - there is the Federal Debt Ceiling -that is the maximum amount the Government can borrow. We will be "MAXED OUT" by August. Raising that limit is also being held-up by Congress. If it doesn't get raised, we end up defaulting on our loans (payment of interest and principal on such things as Treasury Bonds. Then the value of the dollar compared to other currencies will drop by 25%-35% OR MORE immediately. Think things cost are expensive now? How about $7/gallon gas or a $40,000 Base Model Toyota

Author's Copyright by Richard I. Isacoff, Esq, June 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

Interest Free Credit Cards? Remember P.T. Barnum!

Credit Card companies have a new pitch - "0% Interest on Balance Purchases & Transfers Until XX/1/2012". The idea is to give you credit, with no interest on the outstanding balance for 12 months. And, as an added bonus, the offering company will even take your balance, on which you are being charged 20% from another card, and let you move it, AT NO INTEREST, for the same period. Sounds too good to be true? It is!!

First, all of these offers looked at closely, contain a "nominal" fee for making the balance transfer - like 5% of the amount of the transfer. That is a one time immediate capture fee, meaning they get paid by increasing your balance by that 5%. One could say that it's still a bargain because it's only 5% instead of 20%. However, if you pay the entire balance off in 3 months, you paid a rate of 20% annualized, versus paying the old card 20% balance off in 3 months which has the same effective rate. Well, same rate so you are no worse off than if you kept the old card. WRONG!

That 5% fee get added to your principal balance because it's a fee, not interest. So, instead of paying interest on $5,000 (which is the amount transferred in this example) you pay interest on $5,250. But you might retort and say, "Hey, I am not paying any interest on balance transfers so I was no worse off, and if I keep the money for the year, I am much better off - 0% on $5,250 versus 20% on $5000". Yes, that's true - well sort of true. You will be paying whatever the interest rate is on cash advances on the $250 "fee" which is a cash advance. However, like they say in the infomercials "BUT WAIT, THERE'S MORE!".

If by some chance you do not pay the entire balance, transfers from other cars and purchases made during the "introductory period" ending on XX/1/2012, the entire balance AND DEFERRED INTEREST, the amount of interest that the $5,000 would have earned the card issuer for the entire year, becomes part of the balance and you are subject to the regular interest rate which can be, SURPRISE, 20%! Even if you pay the $5,000 transfer amount back in full, if you don't also pay the $250 "fee" you will be charged an amount equal to the interest on all of the $5,000.

So if the regular rate is 20%, you will now have an additional bill of $1,000, which you will pay 20% for until that is paid in full. Actually, if there is $1.00 outstanding on your bill at the end of the introductory period, you will find your next bill has $1,000 added to the $1.00 that was missed in your previous payment.

Outrageous, but perfectly legal. When the Credit Card Act was passed last year, it took 5 seconds for the card issuers to find a way to keep there profits high. This is one way. Oh, and as an added treat, this scenario applies to most of the retailers, like electronics stores and appliance stores and any "big ticket item" stores - "Buy now and pay no interest for 1 full year!". When that "1 full year" is up, if you haven't paid the balance in full, expect all of that deferred interest to hit you on the bill you get in the 13th month.

The FDIC has a great website that will take you through this and a dozen other ways cards can haunt you now, even more than before.

http://www.fdic.gov/consumers/consumer/news/cnspr10/new_realities.html

Look, credit is fine; credit cards are useful and sometimes necessary, especially in emergencies. JUST KNOW THE RULES! Read ALL of the mail - even the stuff that looks like junk mail - there may be a hidden $1,000 charge in that envelope.

Author's Copyright by Richard I. Isacoff, Esq., May 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

Bigger & Fewer: "Banks" Rule

There is a new mosaic, or one that was just not recognized, developing in the Economy, and somewhat specifically in the mortgage area. Banks, systematically getting bigger and bigger, and fewer and fewer, are dictating the rules.

The Big 4 (or 4 1/2) BANKS have made it clear through their elected, and properly paid for members of Congress (politely referred to as "Lobbying"), that they do not want Elizabeth Warren to head the Consumer Financial Protection Board (CFPB) but in case she gets there (during a recess appointment), they want to emasculate (no offense Prof/Dr/Atty Warren) the agency first. The argument or rationalization: No agency should have the authority to enforce existing regulations that affect consumers or pass new regulations to fix really bad problems that hurt the economy as a whole. Even Hemp has more supporters than HAMP!

The same interests have been keeping Congress itself where it is possible, from passing enacting legislation that would force mortgage modifications and punish those who knowingly created, hyped and sold securities that they themselves bet against (hedges). These "Security Instruments", known as Mortgage Backed Securities and more generally categorized as Collateralized Debt Obligations were the mainstay of Lehman Brothers' (remember them?) profits; oh, and don't forget about Goldman Sachs! The play was that if enough mortgages were written, there would be enough good ones to overcome the bad ones: Quantity always wins but only if you are the creator/seller! As Phil McGraw, PhD, better known as "Dr. Phil" says "Well, how's that workin' for you now?" NOT SO WELL DOC!!!!

Wells Fargo is in Court in Tennessee and Maryland trying to avoid being convicted of "Reverse Redlining", the pernicious practice that promised lower income and less educated/sophisticated borrowers, usually minorities, the AMERICAN DREAM - Home Ownership but lied and cheated to make the sale. "Mrs. Jones, the payments will only be $300 per month - for the first month then the rate will equal the 6 month rate of the percentage, the denominator of which is 100 and the numerator is 10 plus no greater than 7% nor any less than 7%,. and, Mrs. Jones, that rate will be in place until the first change date after which the loan will float to the regular level for this type of loan".

"Don't worry Mrs Jones, we at "Fast Talking Mortgage" would never steer you wrong. Just check our rating at the BBB. Here is the telephone number 1-800-waitforever; and if you have any problem with the loan, one of our Loan Specialty Team (for borrowers who complain), will assist you - that telephone number is 1-877-waitforever". If it wasn't so real and so devastating, that kind of "pitch" would make a great Saturday Night Live spoof. People struggling to pay rent are told they can own a home; and then they end up on the street.

The Banks have uniformly maintained that the laws do not apply to them - state vs federal - and even if they do, the banks didn't make the loans, they are just the Trustee or manager or they sold the loan and had just acted as an intermediary, owning the loan for mere seconds. What's worse is that they have all of the money in the world (well not really but more than any Plaintiff does) and are willing to spend ten (10) times the amount needed to fix the problem in order to justify their actions.

In all seriousness, what can be more despicable than convincing low income struggling families that they can buy a home of their own, when the game is just to make a sale of a mortgage and not care whether it's affordable. In fact, most of these loans were granted where the Loan Originator knew the loan would adjust to a point where the borrower would not be able to make the payments. Once again, no one cared. No entity was "on the risk". No bank or mortgage company would lose $0.05, because the loans were sold into a pool - securitized with 2,500 other loans. Again, the thought was that quantity made up for quality and if not, so what! No one loses, except the homeowners and, as we have seen, the Economy.

Add to the mortgage mess - we have the "Interchange Rate" debate. Regulators (formerly called "Revenooers") are trying to force the price charged for each "swipe"/use of a credit or debit card down from an average of $0.44 to $0.12, at least for the big 4 1/2. That is a huge drop in Bank revenue but also a huge drop in what merchants, and therefore consumers, pay for use of the debit card. Folding money looks better every day. Maybe we should all buy stock in Crane & Co., the company that makes the paper for U.S. money.

Group 4 1/2 are fighting the change mightily as they stand to lose $hundreds of millions if the change takes place.

We can then move to the issues about whether a Bank,the kind where you can go and open a checking or savings account, should be allowed to directly make loans and Securitize pools of Loans themselves, avoiding the middleman. In 1974 we had 14,000 banks in the country. By 2017 the count is expected to be 2,500. If you realize that this represents 50 banks for each state, they "Hometown Bank" is dead. Even now, in a city like Pittsfield, MA which has a population of 40,000+/-, a merger of TWO (2) Savings Banks is taking place (thank you FDIC) - the rub is between them they have nearly 50% of the deposits in the entire County. The next largest entity is a Federal Credit Union.

Bigger isn't better, it's just bigger. And, bigger means more power - a greater ability to force laws on or off the books through trade organizations and their lobbyists. Is big bad? Not conceptually; but in practice?. As of Friday 5/06/2011, the ABA (American Bankers Ass'n) seemed to have changed its position regarding Elizabeth Warren and will support the nomination. The CEOs of Group 4 1/2 must be furious. Congress, especially the GOP side, is forcing a "recess appointment" .

There is no easy, or even difficult, answer to this issue. The consolidation of the Financial Services Industry is moving faster and faster. The was a time, not so long ago, when Banks and Insurance companies and Stock Brokerages all had to be separate. Now we have one stop financial shopping. Convenient, maybe. Dangerous - ABSOLUTELY

Author's Copyright by Richard I Isacoff, Esq, May, 2011

rii@isacofflaw.com
http://www.isacofflaw.com

Chicken Little Was Right!!

THIS IS ABOUT THE AMAZON EC2 "CLOUD" CRASH - OFF-TOPIC? MAYBE NOT)

From the perspective of a law office, discovering that Amazon’s EC2 had crashed at 3:30am PDT and was not back at 100% 24 hours later was more than disturbing news. While Amazon and the sites like REDDIT were most directly affected Thursday, that is only because "Cloud Computing" is still in its infancy - or is it?

The move from an office based server environment to fully hosted services is a major change for any business entity. But, where the nature of the industry is change adverse, and where technology is sometimes viewed as a necessary evil (with evil being the dominant theme), losing control of any part of day to day operations is traumatic. Even the term "Cloud Computing" is off-putting to many who thought that navigating Al Gore's Internet was the worst they'd have to learn. The lack of understanding of how this "new technology" works is what makes it frightening. Hearing or reading about Amazon's Cloud crashing is reason enough not to move in that direction; if Amazon cannot make things work, who can, and how can any of it be trusted?

Law offices depend on huge quantities of coherent and painstakingly constructed information Even small firms that have 100 cases in some stage of being open need instant availability of client and case information. Client names, telephone numbers, and e-mail addresses, and the all-important docket/calendaring system for deadlines that can mean the saving or loss of a house, a default in a Court that can win or lose a client his/her business, or missing a deadline that gets an attorney sanctioned, are just a few of the needs for information. Combine the framework with the substantive matters like research, correspondence, and records of past conversations, and one can grasp the need for always-up data systems in law offices.

That 99.99% up-time is what The Cloud has promised. For small offices keeping the one server and workstations with outside "call-them-when needed IT professionals", or even the medium sized firm that has 100 users and a full-time network administrator, IT guru, and part-time billing specialist, out-sourcing is being touted. Without that move, the server will crash, there will be no current backup and everything will stop dead. We, The Cloud Gods will avoid any of that from happening. Trust us!

While this is being written, there are a few Cloud based law office "suites" that combine most of the IT elements a law office needs. One good suite being offered to hundreds of attorneys, as an incentive to join a very good legal network of attorneys who try to help people and businesses, was off-line all day and evening Thursday 4/21/11. It had just a single web page that stated in part, "we are in good company" as it tried to reassure member lawyers that the data was intact and that "as soon as whatever happened is fixed" the system will be back running. The setback to Cloud computing for small and medium sized law offices may be enormous. All of the worst fears came true. The lack of control allowed the sky to fall, metaphorically at least.

The knee-jerk reaction of the attorneys, who had no way to contact a client, could not look at the calendar for the day and tomorrow, and could not even finish the research project they had spent 90 hours on because all of the research notes were on Cloud based applications and data files, may well be to retreat. Back to the small server and workstations hoping that the new Dell or HP machines will still have Windows XP and not 7, and that the new server will still run 2003. At least they knew what to expect and they controlled it. It was right there in the back room and the IT guy could come in and fix it. And further, these lawyers will convince themselves that the law was meant to be read and written on paper and put in locking cabinets.

Very, very seriously, there will be the bankruptcy that didn't get filed in time to save a house, and the Court date that will be missed tomorrow to show-up for the collections case that means meeting payroll for the client or not. Some offices will lose clients, some associates will be fired for convincing the Partners to move to the "new" technology, and many computer sales types will have a windfall. But make no mistake, dependency full off-premises hosted services will take longer to sell to all of the attorneys who lost a day of up-time and the next year of sleep.

Oh, and the punch line - migrating up was a snap. Migrating down - NOT SO EASY.

Author's Copyright by Richard I. Isacoff, Esq., April 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

The Debt Ceiling: What Is It (and why do we care)?

As Congress argues over what to argue about, they are avoiding dealing with THE major financial issue that needs to be resolved now - not in 15 or 20 years. The Federal Debt ceiling, the total amount of money the Country is allowed to borrow as authorized by Congress. Currently it is $14.3 TRILLION and analysts predict that we have until July, at the latest, before we are MAXED OUT.

I use the term "Maxed Out" because it is a concept with which most consumers have dealt. Well, perhaps not with that much money, but the financial reality is the same: No More Available Credit. In consumer circles it happens when your no longer have any available credit on any credit card to make payments on the other credit cards. In Nations' budgets, at least where there is a body that manages finances, countries sell bonds - here, most commonly Treasury Bonds.

Buyers of these bonds are promised, by the Government, a certain rate of interest and payments at certain dates. Well, where the issuing country has more debt that cash coming in (taxes, tariffs, fees, leases, sales of rights to drill/mine/grab oil etc), that country has to sell more bonds to pay the interest owed on the earlier ones which were issued. Striking similarity to the credit card example above; borrowing to pay interest on borrowing.

Here is the difficult part - Congress has to approve additional borrowing - borrowing beyond that which they approved in the last round of borrowing authorizations. If we do not borrow more and cannot pay the interest when it becomes due and we default/fail to pay, the world economy will go into a tailspin. We have been the single country that the world turns to for stability - yes, even after the 2008 meltdown. If we default, the 2008 to present recession will seem like the "good old days" (why were any old days good?).

The issue before Congress, which the Federal Reserve and Treasury have to explain to them, is that we need to borrow more - a lot more; and, the lack of a decision on this matter is already starting to enter the "markets". There is no question that $14.3 Trillion is an overwhelming figure but when measured against the potential growth in our economy and growth of the country, it becomes manageable over time if we avoid spending too much more than we earn. Just like any household budget.

Unfortunately, one party wants to show the other that it stands for "deficit reduction" and will slash spending to fix the problem fast. The other party wants to fix it slower and not slash as much for fear of stopping the "recovery" and growth of the economy. Too many budget cuts and reductions in spending will leave the country with a more dismal future with regards to medical insurance, education, roads, etc. AND MIGHT STOP ECONOMIC GROWTH. Not beginning to balance the budget and to lessen the borrowing will put the country in a hole from which Alice (the Wonderland/Looking Glass Alice) couldn't get out.

We might wish to believe that Congress will compromise in time and everything will be fine, just as before. Maybe but maybe not. Members of both Houses are so locked into the mindset that compromise means the "other guy" won and that we must stand true to our core beliefs (pullease), that they might wait too long. Not to the point where we default, but to the brink where other countries and industry thinks we might actually default THIS TIME.

Jobs -gone. Savings - gone. Inflation or deflation - huge. Depression - there won't be enough business left to employ anyone. Gold (why I do not grasp) - to Jupiter We won't be able to borrow - sell bonds. There will be no lending going on in this country (or most others). Companies will just close their doors. No one will be able to buy anything not made here because our dollar won't be worth anything anywhere.

Why do we play the game? To get re-elected? Or to fix a problem, that took 40 years to create, in 12 months? To be sure that whoever is running a failed country is of the correct ideology? Well - you get the idea!!

Author's Copyright by Richard I. Isacoff, Esq., April, 2011

rii@isacofflaw.com
http://www.isacofflaw.com
Twitter: @riisacoff

The Theory of Money - (Part 2 of March 7th Posting)

(From the March 7, 2011 posting for background)

[How much is GOLD worth? Or even more basic, why is gold worth anything? Why does the Pound Sterling or the Euro or the U.S. or Canadian Dollars have value? Only because "we" say so!

The above statement is an over-simplification of a complex, and seldom discussed matter of economics - THE THEORY OF MONEY. Think of this concept: Money, regardless of country, and so-called "precious metals", have value only because the people of the world say they do. In reality, what we call money is a short-hand and efficient method of barter. After all, we use money to get ("buy") something of value from someone else.]

(Now the new information)

If money is worth only what we agree it's worth, then we could declare all money worthless, right? NO! This is because, as mentioned in the March 7th posting, whatever we use to exchange goods and services, without literally trading the bushel of corn for a pair of shoes, or 5 bushels of wheat for one pig, is a shorthand method of keeping track. I want your shoes that you will trade for 1 bushel of corn. I have none but Sally has corn. I just have wheat. Sally will trade her corn for my wheat; I trade her my wheat for her corn and trade with you, giving you my (originally Sally's) corn for your shoes. Now each of the three of us has what we want. I have shoes, you have corn and Sally has wheat.

BUT what if I want your shoes; you want Sally's corn; Sally wants Pete's painting; Pete wants George's work as a plumber; and George wants my wheat. It will all work out but it would take a week just to move goods and perform services, when all I wanted was a pair of shoes. Money, a universally accepted product/commodity/service "stand-in" makes it all very simple. We agree that (1) unit of this thing called "money" will trade-for (is worth) 1/10th bushel of corn, and that (4) units are needed to trade for the shoes, and that one hour of plumbing time will "cost" (5) units, and so on. We have created money as we know it.

Now, just imagine trying to work out the trade value of every good and service we use in this country. How do we establish the price in these units? By agreement. Essentially, we give everything a trade-value of "X" units, just as is shown above. When we are not certain, we guess. If we are right, the trade is completed - 23 units for a set of 4 chairs. If we are wrong, the chairs will be 30 units, or maybe only 21 units. IT'S ALL MADE UP! Until the majority of unit users say NO to the exchange, everything works fine.

Just keep in mind that MONEY IS WORTH WHAT ALL USERS OF THAT KIND OF MONEY AGREE TO. No More, No Less

As we look at financial markets, as we hear about the "strong Yen" or the "weak dollar" or even issues of inflation the explanation gets much more complicated.

Be patient: we will get to it a little at a time!

Author's Copyright by Richard I Isacoff, Esq, March 2011

rii@isacofflaw.com

http://www.isacofflw.com/

Foreclosures Down? Not Really!

RealtyTrac, the company that tracks foreclosures (state by state) and gives national figures, reports that foreclosures, meaning homeowners getting a foreclosure notice, is at a 26 month low - ONLY 225,101, down nearly 14% (http://www.realtytrac.com/home/).
Reading and digesting the information further one discovers that the reduction is not due to fewer defaults by borrowers, or lenders/servicers having less work , but rather it is due to IMPROPER FORECLOSURE PROCEDURES.

For months it has been known that some of the largest servicers have been using so-called "robo-signers", unauthorized personnel signing assignments of mortgages and notes, and foreclosure documents. Also, as the suit by States' AGs shows, in their 27 page report, what has to be done to fix the problem. While the servicers have rebelled and are using all tools available to stop regulations, even BofA, the biggest, has made modest changes - like giving returning service members modifications and even PRINCIPAL REDUCTIONS.

The battle is getting so fierce that Sen. Richard Shelby (R), the senior Republican on the Senate Banking Committee has said that the report is a "regulatory shakedown" being conducted to "advance the administration's political agenda" (American Banker 3/9/11 )

Taking the battle over the "mortgage crisis" even further is a letter, being circulated by House Republicans to Treas. Sec'y Timothy Geithner, that calls into questions most of the report's/settlement proposal's recommendations (http://tinyurl.com/4byflk4).

So what is the "TRUTH"? Is the rate of foreclosures falling? Yes, in so far as the "foreclosers" have had to stop or be sued by all 50 states (again) and won't start again in earnerst until they get the paperwork and process straightened out. But, the rate of defaults and the "right to foreclose" have continued to climb. If RealtyTrac counted all of the refilings for corrected documentation, there would have been an increase of 30%!

The future looks bright for auctioneers, dim for homeowners with the current climate.

(Follow the link to RealtyTrac's 3 minute video report on foreclosure activity: http://www.youtube.com/watch?v=wqsyJNy9ppI

Author's Copyright by Richard I. Isacoff, Esq, March 2011
rii@isacofflaw.com
http://www.isacofflaw.com/

How Many Grams of Fat In An Ounce Of Gold?

How much is GOLD worth? Or even more basic, why is gold worth anything? Why does the Pound Sterling or the Euro or the U.S. or Canadian Dollars have value? Only because "we" say so!

The above statement is an over-simplification of a complex, and seldom discussed matter of economics - THE THEORY OF MONEY. Think of this concept: Money, regardless of country, and so-called "precious metals", have value only because the people of the world say they do. In reality, what we call money is a short-hand and efficient method of barter. After all, we use money to get ("buy") something of value from someone else.

There was a time, not all that long ago, when if someone wanted a pair of shoes, that person would trade a cobbler a bushel of corn or wheat or maybe 5 chickens. The person would get new shoes, and the cobbler would eat. Fair trade! At some point, people got tired of carrying bales of hay, sacks of corn, homemade wines/beers to the shoe maker or the dress maker. There was the thought that if there was something everyone wanted, then that item could be used to exchange goods and services. Thus enter GOLD.

Why gold? Don't really know. It can be pretty and it doesn't get corroded or corrode other things so it has use in electrical parts, and jewelry, and it can be pretty but it is prized well beyond its actual use. Here is the point - Assume you are on an island with no food but plenty of gold; gold is everywhere. FOOD is nowhere. Which has more value? Let's go off the island and into many parts of the world where food is scarce, where even gold can't buy food because there isn't any. Which has more value. How much gold would you trade to have enough food?

From the use of GOLD or diamonds or other things found in nature, we created an artificial "product" with which to barter - to exchange goods and services; we call it MONEY. It only has value if a certain number of "money" (dollars, rupees, rubles,euros, pounds etc) will be accepted in exchange for goods, like food. And, the real value is determined by how much food, clothing, steel, etc. each amount of money will "buy" (be accepted for the exchange).

Okay - this is the stuff that will put you to sleep anytime but the point is that, with the current economic situation, the price of GOLD has soared meaning that one ounce of gold will buy more whatevers than it would before the crisis; actually twice as many. Why? Because people want GOLD. Irrationally, there is the thought that gold is inherently valuable - that it is worth a great deal just by being itself.

What if, just what if, we rejected GOLD having a special value; said it was a rock, nothing more. If everyone agreed, then it would become worth no more than a regular old rock you find in the woods or elsewhere on the land or in the sea. GOLD is only valuable because people have decided, without even thinking about it, that GOLD is special; not just pretty, but special.

When the conversation shifts to why the U S Dollar is worth something more than the Crane Mfg paper it's printed on, we enter the world of monetary economics. Here, the value, the amount of corn or wheat or oil a United States Dollar will buy, is actually based on the U.S.'s ability to produce goods, manufacture, assemble, produce metals from raw materials like rocks, make silicon chips for computers from sand. Add to the mix, the country's ability to defend itself and others, the technological abilities of the nation etc. In other words, the total production of the country in an agreed upon period of time.

The only point to carry away from this posting is that "money" has no real value, nor does gold. It is only worth what people say it is. Does that mean that all gold should be discarded - NO! At least not until the world agrees it's just a pretty rock.

More next time.

Author's Copyright by Richard I. Isacoff, Esq, March 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

Legacy Assets - Not Much Of An Inheritence

The Wall Street Journal in its February 5-6, 2011 edition had an article by David Benoit, entitled "BofA Sets Mortgage Cleanup Unit". The article about Bank of America was in the middle of the "B" section and drew little attention. In fact, there was no follow-up in the WSJ nor was it reported in the rest of the press. Certainly it did not make the nightly news nor the newscasts on the radio.

Okay, what did the title mean? Was BofA establishing a department of custodians/cleaners, or maybe street sweepers? Nothing that community minded. What BofA did was to establish a Business Unit to "monitor the Bank's 1.3 million delinquent loans". In addition, it will deal with foreclosures and INVESTORS wanting their money back for the bad loans in the Mortgage Backed Securities they purchased. The unit is named the "Legacy Asset Servicing" group.

Legacy, as in an inheritance? - well not really. Legacy as in " this is what we got stuck with when we bought Countrywide and made our own bad loans". A bit of math here - 1.3 million loans, averaging $100,000 each totals $130 BILLION of delinquent loans, and here delinquent does not mean 30 days late, but, rather, seriously late - nearing foreclosure.

There are 55,000 employees in this unit. BofA hopes to reduce the number to 35,000. Sounds great for BofA, but the reduction is only from eliminating redundant operations so BofA profits increase. What's another 20,000 unemployed workers matter? Harsh assessment - yes. But, we now have $130 billion in loans (1.3 million loans) where people may have their homes foreclosed.

Because of these loans, BofA's mortgage groups lost nearly $9 billion in 2010 and had to reserve, put in escrow and promise not to spend, another $4.1 billion. If the investors get their way, and force BofA to buy back the bad loans in the MBS the investors bought, it is reported that BofA could lose another $10 billion. What is staggering is that, while stockholders might not be thrilled and some executives might get fired, the $10 billion will be only inconvenient for the Bank. That should give you an idea of the size of the Bank.

What the article does not state, and what is not being reported, is the tens of thousands of homeowners who will be losing their homes. Do some "deserve" it for not paying the bills because of frivolous spending, or because they used the house as an ATM by constantly refinancing until payments were impossible? SURE! But the majority of homeowners facing foreclosure are victims of job loss, illness, mortgage sales people who outright lied and falsified documents (of that I have first hand knowledge), and the general economic collapse.

If this Legacy Asset Servicing group really takes charge of all of these loans, there is at least some hope that through regulatory oversight, private lawsuits, federal legislation (don't count on that one), and the new Consumer Finance Protection agency, there can be an examination of these loans - maybe to stop foreclosures and force modifications. Nowhere in the story is there even the hint of BofA taking steps to help homeowners with modification; to change its own policy of "if we don't have the documents and recognize that we do, you will lose you home".

The investors want their money back. Why should they get it? The level of sophistication of these "investors" equals that of the Chairman of the Federal Reserve. Many of them packaged the loans and some created the Mortgage Backed Security product. Why should they just demand their money and get it. Yes, they have a contract that protects them - HOMEOWNERS DO NOT!!

Bank of America is only the biggest of the entities taking this kind of action. Every "Bank" with a large mortgage portfolio, or those who sold loans into what became Mortgage-Backed Securities are doing the same. The fear is that all of the investors who lost, or may lose, money (it may just be the income stream from the investments) will demand that the Banks who sold these "toxic" loans repurchase them, ridding the potential losses from the securities, thereby protecting the investors. The irony here is that the Investors created the monster that is now threatening to "gobble them up" in losses.

Is there anything wrong with centralizing the work with defaulted loans. NO! It's the right way to process the work. BUT if this is being done to streamline the foreclosure process, and to mollify investors so they get their money back (why can the rest of us buy an investment that has a guaranty that you can never lose money), the entire SYSTEM must be revamped.

Record 2.9 million Foreclosures; Investors Want Money

There were two "complimentary" articles yesterday - one in American Banker, entitled "MBS Trustees Push JPMorgan Chase for Access to Loan Files", the other from RealtyTrac's Agent Advocate newsletter announcing, "Record 2.9 million U.S. Properties Receive Foreclosure Filings in 2010...". It seems that the Trustees of the Mortgage-Backed Securities ("MBS") are demanding loan files from servicers, looking for bad underwriting, false documents, missing documents, but most importantly trying to force the MBS servicers/originators to "repurchase" or "buy-back" bad loans in the varying securitization pools that comprise the MBS.

It is all too common at this time to see a mortgage loan owned by "Deutsche Bank as Trustee for the ABC Mortgage Funding Trust Series 2005-34", with the loan serviced by some other company, like Saxon, or OCWEN, or AHMSI (America Home Mortgage Sevicing Inc), or JPMorgan Chase or....

What does this mean? Maybe the right to get a loan modification!!! The details are a bit confusing, but bear with me please.

Jeff Horwitz in his article in the American Banker states "They've (the Trustees) been called "braindead", "negligent", and "otiose"" (this rather obscure word simply means ineffective, worthless, or superfluous). He goes on however to state that it might be the Trustees which have the ability to force Servicers to repurchase the bad loans.

In an unusual legal twist, because of Washington Mutual Bank's ("WAMU") insolvency and momentary receivership (federal control during paper signing), Deutsche Bank as the Trustee, assumed the responsibilities of the Servicer, WAMU, which had breached the 30o+ page contract, detailing who does what and how much everyone is paid. The agreement is called the "Pooling and Servicing Agreement" or "PSA". In another case, Wells Fargo has sued EMC Mortgage, another servicer, for failing to turnover documents.

For homeowners, with a mortgage from WAMU or where they serviced a loan which was part of an MBS, this may give them a party to sue to get a loan modification. In short, the Making Home Affordable Program and HAMP do not give mortgagors/homeowners a right to sue. Now however, with Deutsche Bank taking the dual role of Trustee and Servicer and getting all of the responsibilities that goes along with both positions, it is quite possible that Courts will recognize the borrowers right to sue under what is called a "Third-Party Beneficiary" theory.

This theory states that if two parties make a contract to benefit a third party, that third party has a right to sue to enforce the contract, even though the third party did not sign the contract. Here, while HAMP may not give that status to homeowners, it does allow the parties to sue each other. When one of the parties to the contract takes on multiple roles, the protections that each party has may disappear. Basically, you cannot indemnify yourself or get insurance for your own actions.

Perhaps, even more direct would be the right to sue Deutsche Bank, in its capacity as Trustee and Servicer, under the premise that it now, due to its servicing role and assumption of liabilities, has a duty to the borrower, that it is acting for the Investors and the Borrowers.

The other article, from RealtyTrac which tracks foreclosures throughout the country, discusses the record number of foreclosures; 2.9 million!! Many of these foreclosure filings could have been avoided if modifications were granted. Remember, individual homeowners have not had a right to sue to enforce the HAMP modification program, and HSBC/Household/Beneficial does not participate at all. Just think about the situation if 15% of the 2.9 million foreclosures were modified loans instead - that would have been 435,000 non-foreclosures (almost 2 months worth of filings).

Hopefully, the information above is understandable and of use. Please contact us if you have questions -e-mail is best.

Author's Copyright by Richard I. Isacoff, Esq, February 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

The Greatest Depression? Ask Rep. Neugebauer (R-TX)

Rep Randy Neugebauer, Chairman, House Financial Services Oversight Subcommittee, said it is time for the government to admit its foreclosure prevention efforts are a failure and should be shut down. The Texas Republican said such programs are counterproductive and are preventing the housing market from bottoming out, which is necessary before recovery can begin. (1/24/2011 from the American Banker)

Now, there is a real solution to the foreclosure crisis! Bite the bullet - displace hundreds of thousands of homeowners, let the inventory of bank-owned properties (OREO) sky-rocket, let the housing market drop bottomless and that will allow us to have an economic recovery. The sad part about Rep. Neugebauer's assertion is that he may be right in the long-term, but at what IMMEDIATE & CURRENT COST!

The program is not working - no news there. Why? Because the government regulators and policy makers do not want to to tackle the "investment banks" and the "investors" in mortgage-backed securities ("MBS")to tell them they WILL modify loans. At this time, no one can order a lender, mortgage servicer, investor, Pool Trustee, or any one else that it/she/he MUST modify a loan.

Everything is voluntary and the decision makers are in a position that they cannot lose. even if the market "bottoms out" as the Rep. from TX suggests it should. The Sponsors of the MBSs and the investment banks that put the packages together and sold them have already been paid or are so high up the MBS hierarchy of payees, that unless the value of every mortgage in the pool of mortgages becomes utterly worthless (no value at all to the houses securing the mortgages which comprise the MBS), THEY WILL GET PAID.

From an "economic" point of view (see the 1/13/11 posting), the Rep. makes sense. From a financial point of view it does not. From a human point of view it would be "The Nightmare from Wall Street". Remember "economics" is the study of an economy which is merely a system to deal with supply and demand. The concepts are simple but the implications are not. This is a case where the theory is great and accurate in its long-term view. But, getting from here (where/when we need modifications and for the Government to help all of us struggle through the mess) to there (where the market, the economy can correct itself) is a 20 year span.

Perhaps the Rep. has not taken into account the mass disruption of the pensions which hold funds that hold mortgage-backed securities. Or maybe he has forgotten that if there is no confidence in the value of the MBS, which is really set by its stability and ability to pay the return it's promised, the value will drop to $0 or something close to it. In reality, the houses that would be lost in foreclosure will retain significant value, even if that is only 20% or 30% of the mortgage balance. When the next generation comes along, it will be able to buy a vacant house for 40 cents on the dollar from what was owed on the mortgage. What will it cost the current homeowners on a nationwide basis?

Factor in those who lose houses to foreclosure and then the rest of the homeowners, from low-income to upper-middle class income, who manage to keep a house now worth half (1/2) of what's owed, and you have a "financial" (not economic") crisis. The economy will have way to much supply, and literally no demand for years.

Recession? Nah, the Greatest Depression

Author's Copyright by Richard I. Isacoff, Esq, January, 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

Economy Getting Better? What Do You Have In Your Wallet?

The latest news and business reports say that "the economy is improving. All economic indicators show..." If that is true, and not just hype, as the commercial for a credit card asks, "What do you have in your wallet?"

How can the jobless rate waiver between 9.8% and 9.5% and there be more than 450 unemployed persons (still receiving unemployment or registering at an unemployment office) for every job opening, if the economy is improving?

Well, WHAT IS THE ECONOMY? What does "THE ECONOMY" mean? The "hard and cold" definition is simply the management of resources of a community, region, country, etc. Put in other terms, it is a system of producing, distributing, and consuming wealth. Perhaps this definition would be better - "economy encompasses everything related to the production and consumption of goods and services in an area" (pick the size -city, state,country,world etc).

Economic purists would probably prefer "the system for the production (or acquisition), and allocation of limited resources". Put simply the Management of "SUPPLY AND DEMAND".

So, when you hear, "the economy is improving", all that means is that the system of managing goods and services, including such items as commodities (wheat, gold, orange crop (really)), "stuff" like cars and their production, houses both new and existing, is getting under control. Supply and demand for whatever is being managed better. There is no one person, nor any government agencies in charge of managing all of that. Entities like the Federal Reserve, the Treasury, Congress, and BUSINESS, each and all control parts of the management.

So, "THE ECONOMY IS IMPROVING" has little immediate change for individuals. "Things" are getting better (managed better) but that has no affect for you or me. Maybe in 5 or 10 or 20 years, but not NOW.

Oh, and "The ECONOMISTS SAY that ..." Who are the ECONOMISTS. They are people or groups of people who study ECONOMICS which is the study of the ECONOMY.

ECONOMICS is a SOCIAL SCIENCE, (not science like chemistry, or physics, or biology) that studies the economy. Adam Smith in his 1776 publication "The Wealth of Nations" described the economy as a self regulating market system that adjusts to fulfill the needs of the populace - from his point of view, LAND, LABOR, and CAPITAL are the three factors/components contributing to a nation's wealth. Because of the competition to use the limited resources of a country/area/town , those with money will buy the resources and use them profitably which will result in a balance of all uses so the owner will get the biggest return. Smith's concept goes on to argue that it is in the owner of the capital to use it for the public good in order to get the best return.

Okay, so the Economy is getting better means that the government has a better understanding of what went wrong and an idea of how to fix it. Fixing it means that a balance will be reached between supply and demand. There will be no glut of houses for sale, nor high unemployment, because there will be a demand for goods and services, because people will be working to provide goods and services. Sounds like a circular argument. It is, but each time you go around, you move up just a little bit.

Look, in simple terms, the "economy" tanked when everyone realized that there was no true value in certain stocks and bonds - that they were being bought and sold based on assumptions that were wrong. In essence, the little boy cried out, "Mommy, the emperor has no clothes". The end of the world? NO! The end of what was thought to be a managed system of supply and demand? YES!

The economy is getting better - government is regaining control over the supply and demand and production and distribution of good and services. It will take time and no one knows how much time.

The question for PEOPLE is not about the economy, it is about "IS MY MONEY SITUATION GETTING BETTER OR WORSE?"

Author's Copyright by Richard I. Isacoff, Esq., January 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

The Power To Heal

I strongly believe that the role of lawyers as it affects society in law itself and finance has been corrupted. The corruption comes from greed and ego - not just on the part of the lawyer, but also on the part of the client. Lawyers should calm the waters not create a tsunami! The words of the President of the Mass. Bar Assoc. speak more eloquently than I ever could:

PRESIDENT'S VIEW
by Edward W McIntyre (immediate Past-President, Massachusetts Bar Association), May 2009

Simply defined, therapeu­tic jurisprudence is the use of social sciences to examine how the law im­pacts the well-being of those it serves.As a profession, we may underestimate our ability to calm a situation.

"The mere presence of a lawyer can bring comfort and solace to a person in need of help," according to American Bar Association Past President Dennis W. Ar­cher. "Knowing that, we can positively af­fect change in what may otherwise be a difficult, adversarial situation."
Is our potential ability to heal an other­wise conflicted situation compatible with our primary duties as advisors, advocates and counselors?

Florida Coastal School of Law Professor Susan Daicoff believes so. She writes, "Law as a healing profession has great transformational potential...It could make the legal system a more inspiring, humane, and hospitable place for clients, lawyers, judges, and indeed society as a whole."

The late Warren E. Burger, former chief justice of the U.S. Supreme Court, echoed the concept while speaking at the 1983 ABA Midyear Meeting —"the original role of lawyers was healing social con­flict." He went on to urge the profession to return to and embrace that role again. Revisiting that theme a year later, Burg­er said, "The entire legal profession ... has become so mesmerized with the stimula­tion of the courtroom contest that we tend to forget that we ought to be healers of conflict .... Trial by adversarial contest must in time go the way of the ancient tri­al by battle and blood .... Our system has become too costly, too painful, too ­destructive, and too inefficient for truly civi­lized people."

Taking Burger's sentiments even fur­ther, former dean of Notre Dame Law School David Link has observed the law to be one of the great healing professions alongside the clergy and medi­cine.

Last fall (2009), at the University of Windsor Eleventh Collo­quim on the Legal Profession, Archer said, "On an indi­vidual level, if we approach our life's work as healers, if we reorient our thinking to take advantage of the power of healing, we can do much good for our clients and oth­ers." The approach Archer mentions is timeless.

To argument and criticism, Abra­ham Lincoln would respond with commendation rather than confronta­tion. Critics and opponents ultimately, came to value his open, non-defen­sive language as he sought to heal the nation. In his lecture notes, Lincoln defined his understanding of the calling of a lawyer. "Per­suade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses, and waste of time. As a peace­maker the lawyer has a superior opportunity of being a good man. There will still be business enough."

According to Ronald C. White Jr., in A. Lincoln, Lin­coln understood his role as a lawyer to be a mediator and recognized that while at first glance a dispute seemed to be between two persons it almost always involved the whole community. He would urge his clients to settle because he knew these people had to go on living together in their communities, after they had their day in court. Even when dealing with corporations, such as the powerful Central Illinois Railroad, Lincoln looked to be the media­tor.

In modern times, healing and mediation are embodied in an evolving "therapeutic jurisprudence" movement. Simply defined, therapeutic jurisprudence is the use of so­cial sciences to examine how the law impacts the well-be­ing of those it serves. Professor Bruce Winick, a scholar of therapeutic juris­prudence encourages attorneys to see themselves as therapeutic agents. "Lawyers should seek to apply an ethic of care in their .practices, and the profession should teach this to subsequent generations."

In 2000, the Conference of Chief Justices and the Conference of State Court Administrators joined the lawyer-as-healer discussion with joint resolutions centered on uncon­ventional processes to address complex social issues and problems; a focus on remedies; and the benefits of thera­peutic jurisprudence.

Currently, therapeutic efforts are being applied in ex­perimental pilots. Two involve domestic relations pro­ceedings and the use of non-adversarial language in fil­ings and pleadings.

Applying these thoughtful and wise principles more broadly in earnest today may help bring about Chief Jus­tice Burger's vision of legal professionals as "healers of conflict." (All emphasis by R. Isacoff)

Author's Copyright (as applicable) by Richard I Isacoff, Esq, December 2010

rii@isacofflaw.com

http://www.isacofflaw.com/

Banks, Foreclosures, and Deceit

In his article, in the Tuesday November 15th edition of the New York Times, about foreclosures, David Streitfield discloses the Banking/Mortgage industry’s callousness to the plight of homeowners across the country. Mr. Streitfield writes, referring to Bank of America and JPMorgan Chase "Both have maintained whatever missteps their personnel might have made... No one lost their house who should not have, the banks say". This arrogance is why we cannot fix the mortgage problem. Why did the homeowners end up in foreclosure? Perhaps the Banks and lenders did not follow the LAW about mortgage lending; so by their logic the mortgages should be discharged.

The technicalities that the Banks dismiss are the basis for the protection of property rights. If the foreclosure documents are forged or unverified, the Banks have no way to know if the borrower should have been foreclosed against. This is akin to law enforcement saying that the Miranda warnings given to suspects are not needed because the person would not have been arrested if he/she was not guilty. The same Banks, a mere 2 years ago, argued that they needed federal help to survive, while they really needed help to build profits. Can we hold them to the same standard in dealing with the substance of modifications - that they must grant a modification because the homeowner should have kept his/her house anyway, job loss and bad lending aside?

On the same day, the Times ran another article about the fact that Bank of America, the largest holder of mortgages, has the lowest percentage of Making Home Affordable or HAMP modifications, among the 5 major mortgage servicers/lenders. Maybe there is a mere technicality that will allow some Federal agency to force the mammoth B of A to follow the program in place for modifications, instead of arbitrarily denying such relief just because to paraphrase the Banks, No one will lose their house who doesn't deserve to lose it!

Author's Copyright by Richard I. Isacoff, Esq, November 2010

rii@isacofflaw.com

http://www.isacofflaw.com/

HAMP: "You Probably Think This LAW Is About YOU!"

This posting's title, with apologies to Carly Simon who wrote and sung Billboard's 72nd most popular song ever, is appropriate if any of us think that the Mortgage Modification issues and Programs, like HAMP, are about us; they are all about the Servicers/Lenders and the INVESTORS of the ubiquitous Mortgage-Backed Securities ("MBS").

The program, which has no teeth for enforcement by any entity (Treasury, FDIC, Federal Reserve, etc.) was established to protect the INVESTMENT pools of securitized mortgages. This means simply that the mortgage and investment communities refused to permit any government force-down of a program that might hurt "ROI" or "Return on Investment", or more crudely put, the PROFITS and INCOME made by the owners of these mortgage pools, and by the Goldman Sachs and Lehman Brothers of the world - the people who brought us the "great meltdown"

In fairness, the whole idea behind putting a large number of mortgages together, computing the average interest rate to be paid by homeowners, while at the same time calculating the expected or historical number of "bad" (non-paying) loans, was to enlarge the market of home ownership. By putting the mortgages into securities, all of the mortgage originators, brokers, lenders, banks, mortgage companies, who made these mortgage loans were "off the hook".

As stated in earlier posts, only the investors had anything to lose and they had done their homework. They figured out how much to pay for $1 billion of what became a BOND secured by home mortgages. What could be safer? Based on past experience, the Depression aside, the answer was Nothing Could Be Safer! Or maybe not!!!

During the early musings about what to do as the market was plummeting, and Mortgage-Backed Securities were being valued at $0 - high figures of 40% of face value, there were many theories put forth as to "What Do We Do Now?". One of those concepts was to have Congress and the Supreme Court declare that the contract making up these pools of mortgages, could be broken, for the sake of national security. Remember, our financial stability was gone and the markets were in free-fall.

Rejecting that idea, and rather than one of the Federal Government's arms publicly insuring that no MBS would drop below 70% of face value because the Federal Government would guaranty the FIRST 30% of losses which would have stopped the spiral down, the free-market system functioned as it is designed to do, and we ended up with the mess we are in currently regarding FORECLOSURES!!

The Making Home Affordable ("MHA") program which gave birth to "HAMP" really was a deal with the mortgage and securities industries. The program is about making sure that profits stay high enough to continue to attract buyers of MBS. The way to accomplish that goal is to NOT make modifications that will hurt the INVESTOR - Homeowners be damned. 9%-10% unemployment is no excuse for defaulting on your mortgage payment. If you can catch up fast enough you get to keep your house. If not, well, the house goes to sale at auction -but you can't bid -HA! Gotcha!

Realize that the reason the rules do not help most of the homeowners applying for modifications, or foolishly, a principal write-down, is that they are not supposed to. The rules are there, as written, to protect investors. Well, YES and NO!. If the investors take significant losses, the spiral down starts again and soon a family homestead will consist of two large tents.

Author's Copyright by Richard I. Isacoff, Esq

http://www.isacofflaw.com/

rii@isacofflaw.com