Podcast: European Debt, a Tax Plan and General Motors

It’s been a difficult three months for the financial markets, and the global economy is weak. Unfortunately, more problems are probably on the way.

A resolution of the Greek financial crisis is not in sight. Approval of new powers for a stopgap bailout fund depends on the approval of all 17 members of the euro zone, and Finland, Germany and Austria all gave a thumbs-up in the last several days, as I write in the Strategies column in Sunday Business. But in a conversation in the new Weekend Business podcast, Floyd Norris says that many other countries still need to vote, and that even if they approve the strengthening of the fund, further remedies for Greece — requiring many further votes — will undoubtedly be required. The global economy, meanwhile, appears to be losing steam.

The United States has not come up with a solution for its fiscal problems yet, and many Republicans in Congress are opposed to raising taxes. In a separate conversation, and in the Economic View column in Sunday Business, Tyler Cowen, the George Mason University economist, says that a tax increase is inevitable sooner or later. If it doesn’t come as part of a “grand bargain” to reduce the deficit, he says, it will be forced on the United States later on — so it’s best to try to come up with a reasonable solution now.

And in his new book, “Once Upon a Car,” Bill Vlasic says G.M.’s plight in 2008 was so serious that it contemplated a merger with its cross-town rival, Ford. That merger didn’t take place, of course, but in a conversation with David Gillen, he says that it was actually proposed in a meeting between the leaders of the two companies. An article adapted from Mr. Vlasic’s book appears on the cover of Sunday Business.

You can find specific segments of the podcast at these junctures: Floyd Norris (30:27); news headlines (18:47); Bill Vlasic on G.M. (14:45); Tyler Cowen (6:50); the week ahead (1:30).

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

California breaks from 50-state probe into mortgage lenders [Updated]

 

California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation's biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation's five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, Harris told The Times on Friday.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street's role in the mortgage meltdown, Harris said.

“It has been  a process of negotiating and sitting at a table in good faith, but ultimately I have decided that we have to go our own course and take an independent path. And that decision is because we need to bring relief to Californians that is equal to the pain California experienced, and what is being negotiated now is insufficient," Harris told The Times in an interview.

Harris delivered the news in a letter sent Friday to Iowa Atty. Gen. Tom Miller, who has been leading the 50-state coalition.

[Updated 5:36 p.m.: Iowa Atty. Gen. Tom Miller, who has been leading the negotiations, vowed to press on.

“California has been an important part of our team and has made a significant contribution to this case,” Miller said in a statement. “However, the multistate effort is pressing forward and we fully expect to reach a settlement with the banks.”]

The removal of California from the discussions is a major blow to fraying efforts by the coalition, which has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.

“This whole concept of a settlement on foreclosure abuse is probably dead,” said Christopher Whalen, the founder of Institutional Risk Analytics. “Nobody in their right mind is going to opt into a settlement right now.”

For California homeowners, the move means the probable end of an opportunity for relatively quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed.

Harris has faced increasing pressure in recent weeks from inside and outside the state to reject any deal that was considered too weak, particularly as the foreclosure crisis in the Golden State appears to be worsening.

Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.

In rejecting the 50-state talks, California also widens the riff among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.

New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown -– focusing on the efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has been highly critical of the proposed 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.

A spokesman for Schneiderman, Danny Kanner, welcomed Harris's move.

“Attorney General Schneiderman looks forward to his continued work with Attorney General Harris and his other state and federal counterparts to ensure those responsible for the mortgage crisis are held accountable and homeowners who are suffering receive meaningful relief,” said Kanner.

RELATED:

New-home slump keeping door shut on U.S. recovery

Kamala Harris a key player in settlement over mortgage crisis

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo and Nathaniel Popper

Photo: California Atty. Gen. Kamala Harris speaks at a news conference in May to announce the creation of the California Attorney General's Mortgage Fraud Strike Force. At left is Los Angeles Mayor Antonio Villaraigosa. Credit: Mel Melcon / Los Angeles Times

[Updated] Citibank slaps customers with $15 monthly fee for checking

Another day, another new bank fee.

As the uproar swelled over Bank of America Corp.'s planned $5 monthly charge for debit cards, megabank rival Citigroup Inc. was telling checking accounts holders that it would sock them with a $15 a month fee unless they maintain a balance above $6,000.

Customers such as Cheryl Holt of Burbank were complaining to The Times about the letters they received this week from Citibank, Citigroup’s retail arm. Holt said she opened the envelope and was confronted by what she called an "absurd salutation."

"Customers like you have told us that what they want from their banks are simple options and great rewards," the giant New York bank said. "We heard you and are writing to let you know that we are making some changes to your EZ Checking Package."

The demand for $15 a month -- $180 a year -- for a checking account sent Holt out Friday morning on a quest for free checking, an endangered service as big banks, awash in deposits, raise fees and cut costs to keep their profits up despite the sluggish economy.

"I’m on my way out the door right now," Holt wrote in an email to The Times, "off to start a new account at my nearest credit union.

"Should have done it years ago!"

Citi representatives didn’t immediately return a call for comment.

UPDATE: A Citibank spokeswoman said customers can avoid the fee by opting for a “basic” checking account, having at least one direct deposit made into it each month, and making at least one automated bill payment from the account monthly.

RELATED:

At many big banks, no more free checking

Bank deposits soar despite rock-bottom interest rates

 Dumping your big bank? How to choose a new one

-- E. Scott Reckard

 

Homeowner advocates laud Harris for break with mortgage settlement

Advocates for homeowners in California applauded California Atty. Gen. Kamala Harris' decision to bow out of talks aimed at reaching a national foreclosure settlement with the nation's biggest banks.

Harris has said that the proposed settlement, the product of nearly 11 months of negotiations, let the banks off too easily. She has said that her office will conduct a more rigorous investigation.

“She stayed at the table on the settlement as long as was reasonable,” said Brian Heller de Leon, a representative of PICO California, an advocacy group for homeowners. “It became clear that there was no longer a reasonable path for California to stay in these negotiations.”

Heller de Leon said the proposed settlement would only have helped a tiny minority of California homeowners.

Harris has recently come under pressure from politicians and progressive groups inside and outside the state who wanted her to reject the settlement that was being discussed by the banks and the committee of state attorneys general.

Richard Hopson, chairman of the Alliance of Californians for Community Empowerment, said Friday that "a thorough investigation" is needed.

"We applaud Attorney General Harris for pulling out of this proposed 'settlement,' " Hopson said in a statement. "The banks need to pay for what they have done."

Meanwhile, Iowa Atty. Gen. Tom Miller, who has been leading the national negotiations, vowed to press on for a settlement without Harris.

His statement:

California has been an important part of our team and has made a significant contribution to this case. However, the multistate effort is pressing forward and we fully expect to reach a settlement with the banks. This multistate is about foreclosures and mortgage servicing abuse, and we are 100% focused on providing relief to homeowners while it can still make a difference and save homes from foreclosure. Providing relief after the foreclosure crisis is over would be a hollow victory indeed. Individual states are situated differently and after a settlement is reached it will be provided to all 50 states so that each Attorney General can make a decision on whether or not to join.

RELATED:

California bows out of probe of mortgage lenders

Kamala Harris a key player in settlement over mortgage crisis

Kamala Harris explains decision to exit mortgage settlement talks

-- Nathaniel Popper

Kamala Harris explains decision to exit mortgage settlement talks

California Atty. Gen. Kamala Harris just announced that she is bowing out of national efforts to reach a settlement with banks over their handling of mortgage foreclosures. 

She delivered the news to Iowa Atty. Gen. Tom Miller, who has been leading the efforts.

Read the letter: "There now exists a proposed settlement that is inadequate for California homeowners"

RELATED:

California bows out of probe of mortgage lenders

Kamala Harris a key player in settlement over mortgage crisis

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo and Nathaniel Popper

Stocks plunge again to finish worst quarter since 2008

The reality of a debt-heavy global economy stuck in low gear hit home in the last three months, driving U.S. stocks to their worst quarterly loss since the 2008 financial crisis.

On Friday, share prices ended mostly lower around the globe, heaping more misery on equity investors battered by growing doubts about the economic outlook. The Dow Jones industrial average slumped 240.60 points, or 2.2%, to close the quarter at 10,913.38.

The 30-stock Dow lost 12.1% in the three months. And that was pretty much the good news: The biggest stocks held up much better than the rest of the market.

The broader Standard & Poor’s 500 index, a benchmark for many 401(k) retirement accounts, fell 2.5% on Friday and 14.3% for the quarter. It was the biggest decline since the index crashed 22.6% in the fourth quarter of 2008.

Market losses generally were worse overseas, particularly in Europe, as the continent’s government-debt crisis raged on. The average European blue-chip stock tumbled 17.4% for the three months. The Hong Kong market plunged 21.5% and Brazilian shares lost 16.2%.

And in another blow to investor confidence, the asset many people had viewed as a haven -- gold -- was pummeled in the final few weeks of the quarter amid a steep decline in commodities in general. The yellow metal slid from nearly $1,900 an ounce in late August to end Friday at $1,620.

As commodities fell further on Friday, U.S. crude oil dropped $2.94 to $79.20 a barrel, a new 52-week low. That should be good for consumers -- unless it's a sign that demand for raw materials is ebbing because of a deeper slowdown in global growth.

The two hiding places that actually lived up to that billing this quarter: cash and high-quality bonds, particularly U.S. government debt.

On Friday, investors jumped back into Treasury bonds as stocks slumped. The 10-year T-note yield fell to 1.90%, down from 2.00% on Thursday and down from 3.16% on June 30.

But with Treasury yields near generational lows, they aren’t offering investors much incentive to buy at this point. Wall Street’s remaining cadre of stock bulls argues that equities are cheap. And they may be right -- if the bottom isn’t about to fall out of the economy.

That's setting up for another potentially wild market ride in October. More evidence of economic weakness could trigger a new selling wave. Better economic data, on the other hand, could bring a torrent of cash in from the sidelines.

“Once you break either way I think it’s going to be pretty dramatic,” said Bill Strazzullo, market strategist at Bell Curve Trading in Freehold, N.J.

Just what everyone was looking forward to: more insane volatility.

RELATED:

Small investors feel -- what else? -- gloomy

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-- Tom Petruno

Photo: One of the signs of protesters who have been camping out near Wall Street this week to rail against corporate interests. Credit: Mario Tama / Getty Images

California breaks from 50-state probe into mortgage lenders

California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation's biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation's five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, a person familiar with the matter said.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street's role in the mortgage meltdown, the person said.

The removal of California from the discussions is a major blow to fraying efforts by the 50-state coalition that has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.

For California homeowners, the move means that gone is the chance for quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed, affecting hundreds of thousands of Californians facing the loss of their homes.

But Harris has faced increasing pressure in recent weeks from inside and outside the state to reject any deal that was considered too weak, particularly as the foreclosure crisis in the Golden State appears to be worsening.

Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.

In rejecting the 50-state talks, California also widens the riff among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.

New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown -– focusing on the efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has been highly critical of the proposed 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.

RELATED:

New-home slump keeping door shut on U.S. recovery

White House forecasts high unemployment through 2012

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo and Nathaniel Popper

Photo: California Atty. Gen. Kamala Harris speaks at a news conference to announce the creation of the California Attorney General's Mortgage Fraud Strike Force. Credit: Mel Melcon / Los Angeles Times