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Economic News

SEC Files Fraud Charges on Former Subprime Lenders



Rocky road for lender

monopolyAfter several treacherous years in the mortgage industry, a shining example of how the subprime market crashed is New Century Financial Corp who as recently as 2007 had over 7,000 employees and employed Bob Villa as a spokesperson and was a substantial NASCAR sponsor. New Century was at one point one of the largest lenders to those with credit challenges but where they went wrong is when the company began allegedly fudging their numbers for investors.

The now bankrupt lender, New Century has been investigated by the SEC for some time now and the most recent filings come in the form of the SEC seeking civil penalties and disgorgement of funds from the defendants, former CEO Brad Morrice, former CFO Patti Dodge and former Controller David Kenneally.

Is this the Obama Administration seeking to set things right and imply accountability or is it too little too late?

Mortgage Planner James Barath said, “as with anything in life, it is always easier to point the finger than to take responsibility. Because of their failure to recognize the underlying issues that resulted to the financial meltdown the SEC has been under duress by Congress and the general public to right the errors of their oversight.”

Although New Century doesn’t have a pretty record (read more about them here), is this a case of politics or is the SEC doing their job and cleaning up fraud?

Lani is the Chief Operating Officer at The American Genius - she has co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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  1. Brandie Young

    December 8, 2009 at 12:21 am

    I don’t get it. What’s the point? You can’t really point the blame squarely at one person within the organization. And, just what is the suit trying to accomplish? Call me obtuse (it’s ok, do it) but I just don’t get all the focus in the rear view mirror.

  2. Benn Rosales

    December 8, 2009 at 12:37 am

    Brandie, I say let them all get away with murder until you prosecute those in Washington that failed to correct the problem when they were warned. They’re starting at the bottom, because no one will remember the top when the good times are here again.

  3. Brandie Young

    December 8, 2009 at 12:52 am

    Yeah, Benn – but to be prudent, wouldn’t they need to prosecute all the way up the value chain? Weren’t they responding to demand, i.e. developing product to be sold as was demanded by investors? Where oh where are the lawsuits on the rating agencies? Just an over-simpllified thought …

    • Benn Rosales

      December 8, 2009 at 1:35 am

      seriously? you’re an executive, in fact a high level one, sh*t always rolled down hill in my executive days, and as far as I’m aware, they still do. In this case, sh*t is defying the laws of gravity as it seems to have completely bypassed Washington.

  4. Matt Heaton

    December 8, 2009 at 12:55 am

    Both, the SEC doing their jobs and political. What New Century was doing was clearly fraudulent, illegal, and they should have been shut down long before they blew sky high. The SEC and many other regulatory agencies were simply not doing their jobs.

    I think it’s important to go back and not only prosecute the criminals but seriously overhaul the regulatory agencies (including booting a lot of high ranking people that were not doing their job) In some cases I think there are people in Washington that may have acted in a criminally negligent way and that should be investigated too. There was no shortage of warnings given to the regulator agencies about wide spread fraud being committed.

    If you don’t look at what went wrong, and enforce the laws you will just see the same thing happen again. That’s one of the key problems with the S&L crisis, was that with the exception of a few scape goats most of the fraudsters were not prosecuted. Guess what many of them were back and central players in this financial crisis.

  5. Matt Heaton

    December 8, 2009 at 12:59 am

    “Where oh where are the lawsuits on the rating agencies?”

    There more than enough evidence just in public record for a RICO indictments against the many of the ratings agencies, investment banks and subprime lenders. It will never happen because it would result is some very high profile people in DC going down for their involvement in the whole thing too.

  6. Benn Rosales

    December 8, 2009 at 1:37 am

    Matt, you’re preaching and I love it. Where do I become a member of your Church of the Consumer?!

  7. Benn Rosales

    December 8, 2009 at 1:39 am

    BTW! Bernie Madoff ain’t got nothing on the trillions this has cost tax payers! Neglegent doesn’t describe it, it’s capital murder of the economy.

  8. Brandie Young

    December 8, 2009 at 4:35 pm

    Wow, Matt. Awesome comments. Seems we will have plenty to chat about …

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?



NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<


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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.



young executives

job openings

Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.


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Economic News

Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.



gas tax


Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.


Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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