moving slowly and implacably.
Two very important things to remember as the robo-signing scandal morphs into something more interesting and systemically threatening.
First, we are only in the earliest stages of the unfolding of this situation. It's too early to tell what we are dealing with. The problem may have been brewing for some time (and with benefit of hindsight it may come to be regarded as having been inevitable). But until the large servicers started voluntarily suspending foreclosures the situation didn't occupy that much bandwidth. It was possible to assume that lenders had simply adapted to the subprime market and underwater houses the aggressive repo techniques they'd always used to grab cars securing bad car loans and the furniture involved in various tawdry lease to buy schemes.
The shock of the public announcements that the country's largest mortgage servicers were suspending foreclosures grabbed public attention. It made the Daily Show. Unfortunately, as a culture we've become addicted to the idea that everything should be resolved in a 30 or 60 minute media window, or over the course of a week (the length of a made-for-TV mini-series), or (at the longest) a viewing season.
So far, not one aspect of the financial crisis has conformed to those dramatic dictates. Don't expect this one to, either.
The second is like unto it. This situation does not lend itself to quantification. We've developed a taste in this country for measuring, quantifying, modelling the impact of a development or a decision on (you chose) a divisional P&L statement, an investment portfolio, a tranche is a securitization, etc. The important decisions in that process were always veiled in the model's assumptions or the financial statements footnotes. But not worry. Those things didn't lend themselves to sound-bite treatment, anyway.
What's happening--foreclosure gate--presents a legal, regulatory, management and operational set of issues, and their interplay that defy prediction, much less forecasting, modelling or quantifying for purposes of throwing a number up on a trading screen, modelling impacts on tranches of differeing seniorities of changes in cash flow projections or determining the adequacy of a litigation reserve. Unfortunately, there's a reason they call them talking heads, not thinking heads.
That idea that a non-trivial part of the operations of too big to fail financial institutions have involved recurring violations of law, and that those operations cannot as currently configured by conducted without those legal violations is something to think about. It requires more than a knee jerk reaction.
If spending that time gives industry apologists, shills and lobbyists time to regroup, that is a cost of how things work. It also gives time to determine whether some of these institutions should be indicted, and at what organizational levels.
Schedule for Week of May 28, 2017
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