Posts filed under “Crony Capitalists”
Dysfunction Is Limiting U.S. Position Abroad, Observers Say; ‘Sadness From Our Trading Partners’ click for ginormous graphic Source: WSJ Here is the problem with using the debt ceiling as a negotiating tactic: It does permanent, long lasting damage to the reputation of the US, and hastens the day when the US Dollar is…Read More
In 2011, I posed the question “Is McKinsey & Co. the Root of All Evil ?” This was not a tongue-in-cheek query, but rather, a look at how so many recent disasters traced their origins back to McKinsey & Co. Which brings us to the latest issue negatively affecting the United States, skyrocketing CEO pay…Read More
Goldman Sachs bets on the future price of aluminum while simultaneously goosing the future price of aluminum by creating a supply bottleneck in its aluminum warehouse.
John Oliver’s Arcane Details of Boron-Group Metals Pricing Update
One of my pet peeves is the way that insiders — whether corporate CEOs, hedge fund managers, or elected politicos — capture compensation (or credit) for normal cyclical gains they had little or nothing to do with. This is the approach favored by the Crony Capitalists — those people pretending to be free market participants,…Read More
Fannie & Freddie have finally begun to investigate the self-dealing and often fraudulent practice of Force-Placed Insurance. Both the New York State Insurance Regulator and the Consumer Financial Protection Bureau have been way ahead of the GSEs on this.
For those of you who may be unfamiliar with Force-Placed Insurance, it is an optional bank insurance product that sometimes gets forcibly jammed down the throats of home owners and mortgage investors at grossly inflated prices. As Jeff Horowitz detailed in 2010 (Losses from Force-Placed Insurance Are Beginning to Rankle Investors), most of the fees, commissions and revenues from this “product” went straight back to the banks holding the related mortgage, typically to wholly owned subsidiaries.
It was an abusive practice, and in quite a few instances, the additional costs actually tipped homeowners into foreclosure.
Here’s the WSJ:
“The Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) plans to file a notice Tuesday to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance . . .
Forced policies have boomed in the wake of the housing bust, as many homeowners struggled to keep up with mortgage payments. Some borrowers may try to save money by dropping the original standard coverage, only to be hit by policies with premiums that are typically at least twice as expensive as voluntary insurance, and sometimes cost as much as 10 times more. Nearly six million such policies have been written since 2009, insurance industry data indicate. Consumers are free at any point to replace a force-placed policy with one of their own choosing.”
The Consumer Financial Protection Bureau has issued new rules on this, but the real action seems to be the variety of civil suits from investors; additionally, New York State just reached a settlement with forced-placed insurer Assurant, including a $14 million penalty, and a long list of practice changes (after the jump). If it were up to me, I would have insisted on profit disgorgement and jail time for the CEO (But I am “unreasonable”).
Hopefully, this is the first of many . . .
Latest Mortgage Scandal: Force-Placed Insurance (November 10th, 2010)
Rule of Law: Banker Criminality Demands Prosecution (May 20th, 2011)
A modern Pecora Commission could right Wall Street wrongs (February 5th, 2012)
U.S. Cracks Down on ‘Forced’ Insurance
ALAN ZIBEL And LESLIE SCISM
WSJ, March 25, 2013
Losses from Force-Placed Insurance Are Beginning to Rankle Investors
Amaerican Banker, NOV 9, 2010