Dr. Lan Pham, a former senior staffer financial economist for the Congressional Budget Office, was fired from the organization for her attempts to quantify the economic implications of foreclosures and foreclosure fraud. The CBO rejected her analysis and even dismissed the notion that foreclosures cause a negative hit to the economy. The letter, from February 2011, was just released publicly today.
Pham made the allegations in a letter to Charles Grassley, the ranking member of the Senate Judiciary Committee. She said that her time at CBO, which barely lasted 3 months, made her doubt the accepted view that the body gives non-partisan, dispassionate analysis of economic and budgetary issues. Alternative viewpoints are “suppressed” and “questioned,” often by CBO Director Doug Elmendorf, according to Pham.
Specifically, Pham wrote repeatedly about banking and mortgage issues in October 2010, when issues of foreclosure fraud and robo-signing were first coming to light in the mainstream. “I was repeatedly pressured by the CBO Assistant Director, Deborah Lucas, in charge of the Financial Analysis Division not to write nor discuss issues in the banking sector and mortgage markets that might suggest weakness in these sectors and their consequences on the economy and households,” Pham alleges. Lucas sought to keep Pham’s writing out of the assessments of economic growth that CBO makes, and to suppress any public writing about the impact of mass foreclosures and the housing collapse.
Incredibly, Pham says that:
Statements could not be made attributing the decline in property revenues to foreclosures and the decline in home prices, which runs counter to common sense and the findings by the US Senate Joint Economic Committee of the US Congress.
Foreclosures had no impact on home prices (negative externalities, spillover effects). This runs counter to common sense, and a prominent national home price index by CoreLogic in the CBO’s key database subscription showing clearly the distressed homes component of the index worsens home price declines.
The decline in home prices had no impact on household wealth, which runs counter to common sense and the fact that the home is a significant asset or source of “wealth” for most households. According to the Federal Reserve, about $7 trillion in home equity evaporated in the housing collapse.
The emerging foreclosure fraud problems in September 2010 were due to media “sensationalism,” “the kind of event of the moment where we should be adding skepticism, not just repeating the hype in the press,” and discussing it “lacks judgment about what is important.”
Wow. Keep in mind that Pham is talking about the Congressional Budget Office, not some bank trade group or other entity that makes its money off disputing reality. The opinions and analyses of the CBO are taken as gospel in Washington and used to make public policy in Congress. And they simply had their heads in the sand when it came to the economic consequences of foreclosures and also the very real document fraud issues.
Pham goes on to explain how the foreclosure fraud issues were later proven true. Even at the time, October 2010, large banks were shutting down all their foreclosure operations because of robo-signing. So clearly, this was a problem with legitimate economic impact, not “media hype.” Pham has a facility with these issues, with the problem of MERS, with the potential for mass repurchases of mortgages in mortgage-backed security pools, with specific court rulings, with the role of the GSEs. “A discussion of these and other issues were not acceptable to CBO leadership,” Pham writes, “but unrealistic assumptions are encouraged and significant facts inconsistent with their predetermined views are overlooked.” She closes with the evidence available at the time, where she said that interest rates on mortgages would rise in late 2010, despite the Fed’s quantitative easing program. CBO disagreed, but rates did indeed go up (they’ve since dropped).
Structured finance lawyer Janet Takavoli responds:
Part of our financial system is the “support” network that surrounds it. The Congressional Budget Office (CBO) is one of the links in that network. Today’s top story involves the CBO and one of its former employees, Lan T. Pham, Ph.D., fired after writing about growing foreclosure problems due to robo-signing and the fact that the ownership of mortgage loans isn’t clear due to the shortcuts taken to serve the “securitization” process. This poses fatal flaws for securitization, since ownership of the loans is in doubt. Moreover, this has implications for systemic risk in the financial system.
This knowledge isn’t unique or new. What is new is that Dr. Pham brought this forward to the CBO and apparently this information is being suppressed and denied by the CBO and in congressional reports.
The release of this information should cause grave concern as to the legitimacy of CBO reports, and highlight the conspiracy of silence about foreclosure fraud issues, which official Washington simply does not want to deal with.




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Anyone who thinks the CBO is nonpartisan and gives dispassionate advice is delusional, since there’s only one political party on economics.
I got an email from Steve Clemons one morning this past week touting a conference later that day he was running with all the usual suspects. BIG names!! (Steve Clemons is a BIG name dropper.) In a fit of pique, I emailed back “Inside the beltway group think.” He took the time from what must have been a busy morning to ask if I wanted to be removed from the list, to which I responded “Sure.” He further emailed me to let me know he had done it. I think I hurt his feelings.
Everything is tailored to help, or at least not hurt, the interests of the banking and financial industry. Because that is who sits at the very top of the power heirarchy. Every piece of data you bring us corroborates that theory, David. We’ve either got to accept it, or tear it all down and replace it with something more rational and beneficial to regular people.
BTW, Pham should have known better if she’d been alert to the same group’s blindness to housing bubble to begin with.
Poor Stevie.
Thanks for the post DDay. You’re too kind when you state that the CBO ‘had their heads in the sand’. I think their heads were somewhere far stinkier.
eCAHN, what’s your take on current housing values? Has the collapse restored the market to an ‘honest’ level? I’ve been mulling this question over the last few weeks and think that prices now are pretty reflective of actual value, but I’d be interested in your take on it.
Confirms my belief.
No investigation of the Housing Bubble and the Liar’s loans that expanded the bubble because everyone is complicit. The Banks, Fannie & Freddie, Congress, the then When House and thus the Executive Branch, and the Fed.
as in: “We are all ok, don’t rock the boat”.
The cover up continues, look forward not backward, as if there were future crimes that could be prosecuted now (aka: Though Crimes).
I’d love to get an eMail dump. It would be a gold mine. Anonymous, where are you when we need you?
Think about what this means. From the get-go the Obama administration (and remember that when Pham worked at CBO it was still a Democratic Congress) believed that the real problem facing the US economy was a crisis of confidence, and that anything that might disturb that confidence would provoke a worse crash or at best prolong the current. So they suppressed any findings that might suggest that the banking system was fucked beyond repair. This has been done all down the line and is still being done. There are a lot of possible justifications. I vote for rank stupidity and the fact that Geithner believes that the banking sector is really the key to American prosperity.
It reminds me of that wonderful Fawltey Towers sketch: ‘don’t talk about the war!’
I can see why the CBO would not want bad news to get out. When bad news gets out people get depressed. When people get depressed, they go out to bars to drink. When they drink, they get horny. When they get horny they tend to want to have sex. When they want to have sex they will have sex with almost anybody. When they will have sex with anybody, they might have sex with somebody on “Jersey Shore”, like Snooki. When they have sex with Snooki, she could get pregnant. And when Snooki gets pregnant we further deplete to gene pool.
Don’t deplete the gene pool.
There is no “price” for houses. It is a complex amalgam of school district, cost, depreciation, condition, employment (or unemployment), consumers’ view of the risk of a mortgage and location.
And directly
affectedmanipulated by loan underwriting standards and interest rates.Elmendorf is a protege of Martin Feldstein.
Government cover-up of bank collusion? Isn’t that a crime? I realize the bnksters are above the law, but are their lackeys in Warshington equally immune?
Did Grassley release this letter? Just curious about how it became public.
Snooki is pregnant.
Or……. shorter, “Ignorance is bliss”. THAT could be the Obama administration’s reason for it’s “lack of transparency”. They don;t want us to lose confidence in our government or our bamking system.
Because, when youlose confidence in your government, you get depressed…well you know the rest.
Election year. Scandal. Grassley. You have to ask?
Lets’ nor forget the most important factor in home “pricing”….whether you sit over an old Indian burial site or cemetery.
They’re here……..
Great. Next time I want to buy a house I’ll ask the realtor what the value of
is. Thanks for clearing that up for me.
Absolultely. Hence the scenario being even MORE relevant.
When I did economics for a living, I actually, well, ya know, looked at the data and did analysis. Seems pretty quaint by current standards.
The simple answer to your Q is that I don’t know bc I don’t do analysis anymore. It’s one of those thankless tasks I made a New Year’s resolution to stop doing in the mid-90s.
Here’s some hints though, from my prior experience, that might allow a more casual observer to look for.
At turning points, more upward than the reverse, but often in both directions, there is a period of settling in, in this case bottoming. Look for that to happen first. I think I saw an item a couple of days ago about how home prices are rising in half the states. That MIGHT be a sign, except for the fact that the bubble & crash were geographically concentrated*, and iirc, those states, CA & NV, to name 2, still reported falling home prices.
Something else I would look for a signs that vultures are swooping in & picking off the carcass. I’ve seen a bit of reporting on that, but not much. Could be that it’s happening in large scale and reporting is being suppressed in the interests of not outing the vultures or perhaps home prices aren’t cheap enough for vultures yet. I don’t know.
*At the meet & greet part of an economics luncheon during the housing boom I picked up a conversation with someone I had not met before. She argued that since the housing bubble was concentrated in only a few places there would be no macroeconomic effect. She may have further argued (who can remember) that some other factor, like demographics or climate made those locations so desirable that the rapid rise in home prices was not a bubble, but rather caused by fundamental demand. I had to walk away before I called her a stupid dumbass jerk, or even perhaps succumbed to my desire to resort to physical violence, like scratching her eyes out.
David, I am disappointed with your one-sided reporting here. Do you have any proof these allegations are true other than the letter? Did you ask CBO for any comment? Did you go back and read their economic and budget reports issued at the time to see what assumptions they were using about the housing market? Or ask the CBO analysts responsible for housing to explain how the aftermath of the bubble is figuring into their forecasts? There is no evidence that you did. Instead you swallow her accusations whole and seem willing to impugn the reputation of an important agency based solely on the word of a disgruntled former employee with such a short tenure there.
BTW, I am not a CBO troll. I am often frustrated with their middle-of-the-road positions, but this is truly not fair.
Exactly. And when friends ask me how much I think my condo is worth, I say “zero” because I don’t have a buyer offering money (nor do I have it on the market for sale). When I review the property tax bills when they come twice a year I’m reminded that the reported value of the “land” and “structure” don’t include the many amenities within the HOA community where I live nor the location, location, location.
The CBO pulled their bullshit rulings on the “proper” role of government in healthcare straight out of their asses in order to support Obama’s gift to the insurance industry.
Anyone who thought the CBO was “non-partisan” after that event is simply delusional.
In my sub-division there are about a dozen homes that are vacant. They’ve all been bought by an investment group in Austin and are being offered for sale “by owner”, with owner financing. They are pricing the homes around $50-$60k above appraisal value.
Could be a sign. You know your area.
Good point.
Everyone knows reporters must be fair & balanced. So if someone says she is fired for advancing the evidence that the earth is round, it is the reporter’s duty to call a rep from the flat earth society and report their side too.
I have several friends in real estate. Here in Houston, albeit we are NOT average, home prices have bottomed out about 18% off from before. But we’ve got people moving here and homes ARE selling.
BTW, our rich are still rich and getting richer.
I bought my Manhattan co-op 20% off the bottom in the late 1970s. It was cheaper to buy than to rent, so there was no downside, even if prices fell further. Got pwned on my first bid, as I was young & unsure, it took me a year to recover. By that time prices had moved up the 20% and so I would have been quickly priced out if I hadn’t moved. In the year after I bought, prices doubled.
Sounds like your situation now.
BTW, when I bought everyone I talked to thought I was nuts, except for one person. Nuts bc “everyone knows Manhattan co-op prices only ever go down.” As they had for about 6-7 years. Remember Ford (that would be Prez Ford) to NYC: Fuck you?
Being a night cab driver in a small “wealth” town i see what goes on and what i see is not a desire for to fill the void with sex. It is to find the one who will fill the void. Our economy is about to make a big turn and the non informed can read the signs. We are seeing them fuck with our fish and the school enrollment is down for to folks moving away. Which puts the burden of funds on a smaller community. And the young who get pregnant leave for a future uncertaint. The land market here is something to watch if you are wealthy.
Protecting the 1% is a non-partisan task.
‘Data? We don’t need no stinking data!’
As to the vultures, they are circling but they will not land until there is clear evidence the economy is improving enough to support new home buying. Remember, these guys work with borrowed money, and even at close to zero percent, a basis point saved is a basis point earned. Plus, they do not want to risk holding stuff that will go down even more (though they should know by now that the government will bail them out at our expense).
This was a fairly common view back in the day. I think Krugman (and he’s owned up to it as a failure on his part) bought into that notion back in the day.
That’s what I think as a casual observer. On all your points, including the one about the vultures knowing that the USG will bail them out if they screw up.
I’d not known that about Krugman. I am not a fan of his. He’s replaced Friedman in my ‘nodding familiarity of the obvious’ while Friedman has fallen into the ‘no command of the obvious’ category.
“And they simply had their heads in the sand when it came to the economic consequences of foreclosures and also the very real document fraud issues.”
“…which official Washington simply does not want to deal with.”
I just can’t support the idea that they simply have their head in the sand. We know that Elizabeth Warren, William k Black and others have spoken with the key people in the Obama administration and that the administration has chosen to maintain protection for these crimes. There is no buried heads, there is willful disregard of the truth.
Furthermore, “does not want to deal” we can’t know. What we do know is that so far they have not done an investigation to determine the bottom line in regard to these banks, that they have not resolved the mers issue, and they have not arrested people from each of the 5 big banks engaged in publicly acknowledged illegal behavior. (robo signing at least and of course there is more.)
This is great reporting, but the reality is far more frightening than the words used in this diary.
Crimes have been committed against the American people. Real people have lost their homes in part due to fraud. There homes have not been replaced, restitution has not occurred. This is tantamount to stealing. No one has been arrested and there is no evidence that this behavior will be stopped.
Who owns the property of America? Do we even know for sure?
The feudal lords. Everyone else who thinks they own anything is living on borrowed time.
That’s exactly it.
My understanding is that MERS is so messed up that that was the reason they made no effort at the sort of resolution process that would sort the good mortgages from the bad and unwind all of the downstream derivative instruments.
But the casino always wins, eh.
I believe a lot of what Michael Olenick writes at nakedcapitalism.
Can’t link but his last post in January said 9.8 million shadow inventory.
Dr. Pham wrote her letter to the ranking Republican? Not to the majority’s chair? Did she send a copy to anyone else?
Since the entire bailout of 2008, and everything else since (Hamp, TARP, Dodd- Frank, etc.) was designed to protect the Big Banks from eating any losses on their bad bets, my best wild assed guess would be no, we haven’t seen the housing market hit bottom.
I have an answer to that.
I was recently asked to tour a prospective new home purchase with some friends. This was in an affluent suburb of Minneapolis. The house had been purchased decade ago for 450K. It was a typical 40 year old, 3 bdrm home in a “good” school district. The asking price was 840k. People were flocking to the Open House. Wages have not gone up in the last two decades, but home prices have quadrupled… not gone down despite the recession, because those who didn’t loose their jobs are clinging to their previous notions of reality. Houses are not put on the market, because no one wants to loose the value they perceived when the market was at it’s highest. Therefore the rare property that does get put out, can still find a few suckers to buy.
However, the idea that every house in a 50 year old suburb is worth close to a million dollars is RIDICULOUS! The average price of homes, should reflect the average income of the population. Until these two quantities align, house prices have not stabilized.
What should be obvious is: a few individual home owners bought low, and sold high in the boom. The home owners that bought high in the boom, should be screwed. And the home owners that bought low, and still think their homes should be valued at boom prices, WILL be in for a disappointment.
I think my friends will by the house. I told them what I believe to be true. They simply do not want to believe it. They said, “I think the house will hold it’s value”. Sigh.
LOL
Well said
I wish you had stayed on the mailing list of econ names for conference calls! – – I’d like to think your voice was in the room.
I was briefly on such a list in my world but they discovered my lack of clout years ago – and I never had the mentor/parentage/or even ability to play well with others in the sand box of the rich, so my departure from such lists was expected :-)
DD, Professor Wray of UMKS has been writing about this over here.
He has another similiar thread about what he calls “vampire-squids” and how they destroyed the housing industry and how they brought down our economy.
Peeps need to remember that Bush made everything political. That is how he would win. Since the CBO is now political, Obama needs to purge ranks. Driftglass and Bluegal (podcast) have been openly stating that the damage to the political environment may take a generation to fix. I am now starting to believe them.
I tend to think you’ve hit upon a key point. Housing prices are unrealistic and have not yet dropped to realistic values, but even more important (and a driver in this whole disaster) is housing prices were unrealistic ten or more years ago because real wages and salaries have been flat since the 70′s.
So if housing prices were allowed to drop to realistic levels, they expose the real issue in America – the 99% has been losing ground for a long, long time. Which would be further exposing the underlying, fundamental problems – the middle class is getting wiped out.
Instead Obama has taken the same basic plan as Bush (and why not, he’s letting the same people run it) which is to try like hell to re-inflate the housing bubble in some fashion. He cannot have a price attached to this debacle or any realistic discussion of the problems any more than he can discuss what a price we are all paying to bail out the banksters that caused this problem (I have seen totals on that from $4 trillion all the way to $29 trillion). The housing bubble economy was never an economy which was going to be good for the 99%,and was never worth saving much less trying to recreate, and that’s the real issue.
Professor Wray of
UMKSUMKC : )Slightly off topic, but related – an intelligent discussion of just how truly shitty the mortgage settlement is even ignoring the CBO non-analysis:
http://www.economicpopulist.org/content/change-our-system-property-rights-based-political-power
Watch the video. In it, they discuss that the settlement ALLOWS the banks to break the law from now on out.
Unf&*kingbelievable.
The vultures are alive and well. I noticed well over a year ago. First, my county ‘lis pendens’ registry had weird named LLC’s popping up and almost in equal numbers to big bank names.(I live in New Jersey, we had an open secret moratorium on f/c with the fraudulent forged documents). Then I noticed people like Bruce Rose (MBS bond Grand Daddy) in a lawsuit with Wilbur Ross (Great Grand Daddy of ‘value’ investing) these two vultures were in a (I have not seen any update on the lawsuit) grand royale lawsuit that really shows the new nadir in bond contracts at its finest. Rose managed (allegedly) to control enough junior sub debt to seniors and had a morgtage servicing company to artificially manipulate threshold bond covenants so his junior holdings would get paid out ahead of the senior debt. Really a masterpiece of bottom feeder behavior. I think if all the alleged behavior is true, Rose could easily win the rat race to the bottom of investing ethics and should be crowned publicly for his endeavors. en.
The vultures are alive and well. I noticed well over a year ago. First, my county ‘lis pendens’ registry had weird named LLC’s popping up and almost in equal numbers to big bank names.(I live in New Jersey, we had an open secret moratorium on f/c with the fraudulent forged documents). Then I noticed people like Bruce Rose (MBS bond Grand Daddy) in a lawsuit with Wilbur Ross (Great Grand Daddy of ‘value’ investing) these two vultures were in a (I have not seen any update on the lawsuit) grand royale lawsuit that really shows the new nadir in bond contracts at its finest. Rose managed (allegedly) to control enough junior sub debt to seniors and had a morgtage servicing company to artificially manipulate threshold bond covenants so his junior holdings would get paid out ahead of the senior debt. Really a masterpiece of bottom feeder behavior. I think if all the alleged behavior is true, Rose could easily win the rat race to the bottom of investing ethics and should be crowned publicly for his endeavors. endeavors.
Re: Geithner thinking the banking system is the key to the country’s propserity — Not so sure he thinks that, but he surely knows taking good care of it the key to his and his ilsl’s personal prosperity. Including, of course, Obama and anyone in his administration who can afford to play the Big Money games or land lucrative work post-administration.
We do know that Levin’s hearings resulted in findings which were considered reasonable proof of criminal acitivity. The report was handed off to Holder at Justice for further investigation and action.
That was about two years ago….
Crickets? No, far worse: That ghastly agreement between Big Banksters, DOJ, and the 49 state attorneys general.
I’ve been flummoxed for years, since the, oh, iirc, the mid-90′s at least, that the median house price was so far removed from the ability of the median income earner’s ability to pay for one. I figured no market could continue climbing when the customer base was being increasingly priced out of that market.
But, hey, I’m not a Wall Street player, bankster, politician, nor economist. Just an observer.
And now I’m looking at getting our from under the heavy property tax level here in Northern Suboonia NJ — and will probably not come out very well. As I’m retired on a fixed income, with some health issues making employment difficult to handle IF I could find a job, I will probably have to sell at the requirements of my situation, not based on any good time to sell….
And up in NY Cuomo the Younger was fighting to ensure new state hire would not have a fixed pension, but only 401K’s. Didn’t get all he wanted, but, as has been noted throughout the Big Sh$t Meltdown, both political parties are looking out for the One Percent, not we 99 Percenters. Especially not the lower income percentiles of the 99%.
“isls’s” should have been typed correctly as “ilk’s”
And I did try to correct the spelling, but must have mistyped again, and didn’t even really check it…Oooops.