Thursday, May 30, 2013

The Biggest Price-Fixing Scandal Ever

Everything Is Rigged:
The Biggest Price-Fixing Scandal Ever

The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything. You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.
It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.
The Scam Wall Street Learned From the Mafia
Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.
"It's a double conspiracy," says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. "It's the height of criminality."
The bad news didn't stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. "Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry," CFTC Commissioner Bart Chilton said.
But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants' incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.
"A farce," was one antitrust lawyer's response to the eyebrow-raising dismissal.
"Incredible," says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.
All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation's GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it's increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.
If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it's no secret. You can stare right at it, anytime you want.

The banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure.
Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolving-door legal system, and what you get is unstoppable corruption.
Every morning, 18 of the world's biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the "Libor panel," and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures.
Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps.
Gangster Bankers Broke Every Law in the Book
Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the "Libor submitters") and asking them to fudge the numbers. Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off.
Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:
SWISS FRANC TRADER: can u put 6m swiss libor in low pls?...
SWSISS FRANC TRADER: ive got some sushi rolls from yesterday?...
PRIMARY SUBMITTER: ok low 6m, just for u
SWISS FRANC TRADER: wooooooohooooooo. . . thatd be awesome
Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it's hard to imagine an image that better captures the moral insanity of the modern financial-services sector.
Hundreds of similar exchanges were uncovered when regulators like Britain's Financial Services Authority and the U.S. Justice Department started burrowing into the befouled entrails of Libor. The documentary evidence of anti-competitive manipulation they found was so overwhelming that, to read it, one almost becomes embarrassed for the banks. "It's just amazing how Libor fixing can make you that much money," chirped one yen trader. "Pure manipulation going on," wrote another.
Yet despite so many instances of at least attempted manipulation, the banks mostly skated. Barclays got off with a relatively minor fine in the $450 million range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give up $615 million. Apart from a few low-level flunkies overseas, no individual involved in this scam that impacted nearly everyone in the industrialized world was even threatened with criminal prosecution.
Two of America's top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it's dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to "collateral consequences" in the economy.
The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation. Instead, it flowed mindlessly into government coffers. So it was left to towns and cities like Baltimore (which lost money due to fluctuations in their municipal investments caused by Libor movements), pensions like the New Britain, Connecticut, Firefighters' and Police Benefit Fund, and other foundations – and even individuals (billionaire real-estate developer Sheldon Solow, who filed his own suit in February, claims that his company lost $450 million because of Libor manipulation) – to sue the banks for damages.
One of the biggest Libor suits was proceeding on schedule when, early in March, an army of superstar lawyers working on behalf of the banks descended upon federal judge Naomi Buchwald in the Southern District of New York to argue an extraordinary motion to dismiss. The banks' legal dream team drew from heavyweight Beltway-connected firms like Boies Schiller (you remember David Boies represented Al Gore), Davis Polk (home of top ex-regulators like former SEC enforcement chief Linda Thomsen) and Covington & Burling, the onetime private-practice home of both Holder and Breuer.
The presence of Covington & Burling in the suit – representing, of all companies, Citigroup, the former employer of current Treasury Secretary Jack Lew – was particularly galling. Right as the Libor case was being dismissed, the firm had hired none other than Lanny Breuer, the same Lanny Breuer who, just a few months before, was the assistant attorney general who had balked at criminally prosecuting UBS over Libor because, he said, "Our goal here is not to destroy a major financial institution."
In any case, this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments. Robert Wise of Davis Polk, representing Bank of America, told Buchwald that the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive. "It is essential to our argument that this is not a competitive process," he said. "The banks do not compete with one another in the submission of Libor."

If you squint incredibly hard and look at the issue through a mirror, maybe while standing on your head, you can sort of see what Wise is saying. In a very theoretical, technical sense, the actual process by which banks submit Libor data – 18 geeks sending numbers to the British Bankers' Association offices in London once every morning – is not competitive per se.
But these numbers are supposed to reflect interbank-loan prices derived in a real, competitive market. Saying the Libor submission process is not competitive is sort of like pointing out that bank robbers obeyed the speed limit on the way to the heist. It's the silliest kind of legal sophistry.
But Wise eventually outdid even that argument, essentially saying that while the banks may have lied to or cheated their customers, they weren't guilty of the particular crime of antitrust collusion. This is like the old joke about the lawyer who gets up in court and claims his client had to be innocent, because his client was committing a crime in a different state at the time of the offense.
"The plaintiffs, I believe, are confusing a claim of being perhaps deceived," he said, "with a claim for harm to competition."
Judge Buchwald swallowed this lunatic argument whole and dismissed most of the case. Libor, she said, was a "cooperative endeavor" that was "never intended to be competitive." Her decision "does not reflect the reality of this business, where all of these banks were acting as competitors throughout the process," said the antitrust lawyer Sokol. Buchwald made this ruling despite the fact that both the U.S. and British governments had already settled with three banks for billions of dollars for improper manipulation, manipulation that these companies admitted to in their settlements.
Michael Hausfeld of Hausfeld LLP, one of the lead lawyers for the plaintiffs in this Libor suit, declined to comment specifically on the dismissal. But he did talk about the significance of the Libor case and other manipulation cases now in the pipeline.
"It's now evident that there is a ubiquitous culture among the banks to collude and cheat their customers as many times as they can in as many forms as they can conceive," he said. "And that's not just surmising. This is just based upon what they've been caught at."
Greenberger says the lack of serious consequences for the Libor scandal has only made other kinds of manipulation more inevitable. "There's no therapy like sending those who are used to wearing Gucci shoes to jail," he says. "But when the attorney general says, 'I don't want to indict people,' it's the Wild West. There's no law."
The problem is, a number of markets feature the same infrastructural weakness that failed in the Libor mess. In the case of interest-rate swaps and the ISDAfix benchmark, the system is very similar to Libor, although the investigation into these markets reportedly focuses on some different types of improprieties.
Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn't that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you've got the basic idea of an interest-rate swap.
In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to "swap" that loan to a more predictable fixed rate. In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.
Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix's U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.
And here's what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company's office in Jersey City, New Jersey. Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated. Oliver Wyman is the same company that the British Bankers' Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.
"It's obviously reminiscent of the Libor manipulation issue," Darrell Duffie, a finance professor at Stanford University, told reporters. "People may have been naive that simply reporting these rates was enough to avoid manipulation."
And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they're paying the real price for swaps or a price being manipulated by bank insiders for profit. Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it's also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some state-pension annuities.
So although it's not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.
"How is some municipality in Cleveland or wherever going to know if it's getting ripped off?" asks Michael Masters of Masters Capital Management, a fund manager who has long been an advocate of greater transparency in the derivatives world. "The answer is, they won't know."
Worse still, the CFTC investigation apparently isn't limited to possible manipulation of swap prices by monkeying around with ISDAfix. According to reports, the commission is also looking at whether or not employees at ICAP may have intentionally delayed publication of swap prices, which in theory could give someone (bankers, cough, cough) a chance to trade ahead of the information.
Swap prices are published when ICAP employees manually enter the data on a computer screen called "19901." Some 6,000 customers subscribe to a service that allows them to access the data appearing on the 19901 screen.
The key here is that unlike a more transparent, regulated market like the New York Stock Exchange, where the results of stock trades are computed more or less instantly and everyone in theory can immediately see the impact of trading on the prices of stocks, in the swap market the whole world is dependent upon a handful of brokers quickly and honestly entering data about trades by hand into a computer terminal.
Any delay in entering price data would provide the banks involved in the transactions with a rare opportunity to trade ahead of the information. One way to imagine it would be to picture a racetrack where a giant curtain is pulled over the track as the horses come down the stretch – and the gallery is only told two minutes later which horse actually won. Anyone on the right side of the curtain could make a lot of smart bets before the audience saw the results of the race.

At ICAP, the interest-rate swap desk, and the 19901 screen, were reportedly controlled by a small group of 20 or so brokers, some of whom were making millions of dollars. These brokers made so much money for themselves the unit was nicknamed "Treasure Island."
Already, there are some reports that brokers of Treasure Island did create such intentional delays. Bloomberg interviewed a former broker who claims that he watched ICAP brokers delay the reporting of swap prices. "That allows dealers to tell the brokers to delay putting trades into the system instead of in real time," Bloomberg wrote, noting the former broker had "witnessed such activity firsthand." An ICAP spokesman has no comment on the story, though the company has released a statement saying that it is "cooperating" with the CFTC's inquiry and that it "maintains policies that prohibit" the improper behavior alleged in news reports.
The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. "It's almost hilarious in the irony," says David Frenk, director of research for Better Markets, a financial-reform advocacy group, "that they called it ISDAfix."
After scandals involving libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation? The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we're forced to trust.
"In all the over-the-counter markets, you don't really have pricing except by a bunch of guys getting together," Masters notes glumly.
That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it. The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.
All of these benchmarks based on voluntary reporting are now being looked at by regulators around the world, and God knows what they'll find. The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. "In general," it wrote, "those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion."
Translation: When prices are set by companies that can profit by manipulating them, we're fucked.
"You name it," says Frenk. "Any of these benchmarks is a possibility for corruption."
The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it. It's not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever's in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it's only just coming into view.

Wednesday, May 29, 2013

Lets meet Whistleblower Karen Hudes

WASHINGTON, DC – MARCH 23: U.S. President Barack Obama announces the nomination of Dartmouth College President Jim Yong Kim (2nd L) for president of the World Bank, as Secretary of State Hillary Clinton (L) looks on March 23, 2012 in Washington, DC. Kim, who is seen as a surprise pick, is a Korean born physician that is reportedly prominent in global health circles.
By Avalon 
May 24, 2013

“When you turn on the television, whatever you’re watching has been filtered by those people!

So, we don’t have a Democracy here.

… my story is about being very close to Martial Law”

In one of the most significant interviews on International Finance and Banking, Karen Hudes, Former World Bank Attorney, talks about her experience working for the World Bank. Her actions to report on corruption at the World Bank led to her termination in 2007. Since then, she has been trying to get her story out to the public.
Although this story is complex, a few great points are listed in an article authored by Karen Hudes (with Jim Fetzer) at titled,The World Bank: Rejecting “The Rule of Law”
During the World Bank and IMF Annual Meetings last October, with her encouragement, the Development Committee informed President Jim Yong Kim of the need for “a more open, transparent and accountable World Bank Group.”  The reasons that motivated that request included the following series of disturbing developments:
During her research of The World Bank, she discovered that there are 43,000 Trans-National Corporations that control nearly everything and that these corporations are merged together into Conglomerate – a Super Entity. This fact translates into the recent  LIBOR Scandal.
Confirming what one sees in the world in terms of a coordinated plan to control all finance, Karen explains that this Super Entity controls 40% of the Net Worth of Publically Traded Corporations and 60% of the Net Earnings on the Capital Markets through their Interlocking Directorships.
Also, as many in the Alternative Media have known for years, there exists a  Mainstream Media Cover–Up of most criminality and corruption, including the 9/11 WTC Terrorist Attack on September 11, 2001, the Benghazi 9/11 Assassination of Ambassador Stevens, the Death of Seal Team 6 in retaliation for their knowledge of the Fake Bin Laden Killing, the Boston Marathon Bombing False-Flag and other recent events including the IRS Scandal that is unfolding now.
Whistleblower Karen Hudes [Pt.1] Corruption / World Bank Exposed 
Published on May 24, 2013 – 158 views on May 24, 2013 @ 4:00pm
Whistleblower Karen Hudes [Pt.1]

Corruption / World Bank Exposed
Interview –

Karen Hudes –
Excerpting from the same article by Karen Hudes (with Jim Fetzer) The World Bank: Rejecting “The Rule of Law” adds more details to this emerging story:

Where things stand -

Dr. Jim Yong Kim, President of the World Bank, has refused to tackle the corruption.  He has even had me locked out of the World Bank’s headquarters.  On March 19, 2013, I reported to the World Bank, informing Allied Barton’s security personnel that I was duly reinstated by the shareholders of the World Bank.  Allied Barton illegally denied me a security badge.  An Allied Barton officer raised his voice to me.
The World Bank, under Dr. Kim’s presidency, called the DC police on a legal officer of the World Bank whose reinstatement was necessary in order to qualify for the US contribution to the World Bank’s capital increase. Notwithstanding that the World Bank refused to confirm any request to the police in writing in an attempt to evade accountability, I left the premises at the request of the DC police.  However, I did report to the 2nd District Precinct that the DC police had been derelict in their duties.
Republicans and Democrats in Congress have tried to expose the corruption to the American public by calling for an inquiry by the Government Accountability Office.  Congress has attempted to fight the corruption by refusing to disburse the World Bank capital increase until there is substantial progress in eliminating the effects of retaliation against whistleblowers who disclosed illegality and corruption.  The UK and EU Parliaments have also published testimony and held hearings on the corruption.
The World Bank has attempted to intimidate the World Bank’s Board members, which violates federal, state, and international securities laws.  Fortunately, a team of whistleblowers disclosed this corruption and lawlessness to state governors, attorneys general, and chief justices of state supreme courts.  State authorities, together with NATO and other allies, are attempting to prevent this corruption from lowering the US credit rating and causing a currency war between nations.
The situation in Cyprus appears to be growing increasingly more serious. The prospects for the World Bank itself are also increasingly in jeopardy, where Brazil, Russia, India, China and South Africa (the BRICS nations) are planning to create their own alternative World Bank. These consequences might well have been avoided had President Kim adhered to the principles of the rule of law, reinstated me and implemented appropriate accounting procedures.  That he has done none of these, alas, remains a cause of grave concern, where his past performance in relation to JFK is anything but reassuring.


Karen Hudes – World Bank Stakeholders
The World Bank: Rejecting “The Rule of Law”
Karen Hudes – Blowing the Whistle on the World Bank
The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to poor countries. It is the largest and most famous development bank in the world and is an observer at the United Nations Development Group.[2] The bank is based in Washington, D.C. and provided around $30 billion in loans and assistance to “developing” and transition countries in 2012.[3] The bank’s mission is to reduce poverty.[4]
Paul Dundes Wolfowitz (born December 22, 1943) is a former United States Ambassador to Indonesia, U.S. Deputy Secretary of Defense, President of the World Bank, and former dean of the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University. He is currently a visiting scholar at the American Enterprise Institute, working on issues of international economic development, Africa and public-private partnerships,[2] and chairman of the US-Taiwan Business Council.[3]


The views expressed in articles are the sole responsibility of the author(s) and do not necessarily reflect those of the will not be held responsible or liable for any inaccurate or incorrect statements contained in articles. reserves the right to remove articles from the website.

Avalon is an Investigative Journalist and Strategist working for

Tuesday, May 28, 2013

Mortgage pact abuses

 Abusive lending practices revealed during the foreclosure crisis led to new rules designed to protect struggling homeowners. New guidelines are sometimes being violated, Attorney General Jack Conway said last week, adding consumers should stay on alert.
The rules are complex — there are 320 guidelines agreed to by five mortgage banks as part of banking reforms that include the $25 billion National Mortgage Settlement — so if you are fighting foreclosure or seeking better terms for a loan, consumer advocates say you should educate yourself about your rights.
“People who are in danger need to know this information,” said Brian Tucker. “These rules can help buy you time.”
New federal rules make sense to Tucker. The steelworker was unemployed with a broken leg when he asked JPMorgan Chase to lower the mortgage payment on his Valley Station home in 2009. The application process stretched over a year, during which Tucker found a job but was still struggling to pay his bills. Before long, Tucker was talking to one arm of the bank still processing his new loan application while also being served with a foreclosure notice by the bank’s collection department.
Now it is illegal for banks to pursue foreclosure while a homeowner is working in good faith to pursue a lower payment via a home loan modification.
“We worked very hard to keep this customer in his home,” Chase spokeswoman Amy Bonitatibus said Thursday. Citing bank privacy policy, she declined further comment on Tucker’s account.
Chase is one of the country’s five largest mortgage banks subject to the new rules. In settling, the banks admitted they violated the law by hastily pursuing foreclosures without verifying facts were correct. They also acknowledged they “routinely” signed foreclosure-related documents outside the presence of a notary public.
Under the new rules, struggling homeowners are supposed to find it easier to seek lower mortgage payments by applying for a loan modification, with clearer guidelines on how much time they have to submit, correct and respond to bank documents. So far, 1,757 Kentucky homeowners who endured foreclosure have received more than $61.1 million in settlement checks or loan modification relief from the five banks — Chase, Ally/GMAC, Citi, Bank of America and Wells Fargo — Attorney General Jack Conway said Tuesday. The deadline has passed for homeowners who lost their homes to foreclosure between 2008 and 2011 to apply for compensation.
But Conway said there is growing concern from states that some of the banks, which make and service 60 percent of all mortgage loans, are not abiding by new rules that give consumers time to try to save their home.
“There have been complaints from consumers that servicers are not meeting their obligations under the settlement,” Conway said. “We are aware of the concerns and are collaborating with other attorneys general about the best way to resolve these complaints to ensure that consumers receive the relief entitled to them.”
New York Attorney General Eric T. Schneiderman recently announced he will file a federal lawsuit accusing Bank of America and Wells Fargo of “repeated and persistent failure to comply” with the new standards.
Whether Kentucky will join that fight remains unclear. Conway said Tuesday his office is fielding similar complaints from homeowners, and he is conferring with attorney general colleagues on whether similar legal action is required.
Bank of America spokesman Richard Simon, responding to the threat of litigation by New York, praised the settlement and said the bank is working to address customer service problems. “This agreement has been good for New York, and we continue using these beneficial programs to assist troubled homeowners in New York and nationally,” he said.
JPMorgan Chase “is complying with every one of the 320 guidelines,” Bonitatibus said. “So far, we have helped 126,000 homeowners stay in their homes.”
Consumers’ new rights include specific time standards. Banks are required to provide borrowers with written notice they have received a loan modification application within three business days of getting it. Banks are also required to notify borrowers of missing documents or deficiencies in their loan modification application in five business days. Banks must give borrowers 30 days to correct problems or submit missing documents.
Banks must have a single point of contact to coordinate communication with a homeowner. And banks must explain in plain language in monthly statements what legal and interest charges are being racked up, and will be due to save the home if the application fails.
The new “servicing standards” have been in place more than a year, having been finalized with the U.S. Department of Justice in early 2012.
Tucker’s odyssey began in 2009 when Chase offered him a loan modification application for the home he bought in 1996 for $50,000. At the time, banks widely marketed loan modifications, under pressure from the federal “Making Home Affordable”
The bank gave Tucker a lower monthly “trial payment” while his application was being considered, reducing his $450 regular monthly payment to around $325. While he made the lower payment, Tucker said he did not know he would be on the hook for his old monthly payment if his loan modification application did not succeed.
The process dragged on for a year, during which the bank claimed his documents were lost several times, leading to faxing and re-faxing previously mailed items, Tucker said. Meanwhile, he found work assembling washers at GE’s Appliance Park for $13 per hour, half his former rate as a union ironworker.
Foreclosure proceedings began, with a Jefferson County sheriff’s deputy serving notice on his front porch, he said. By September 2010, the bank declared his application had been rejected. To save his home, Tucker was informed he would have to reinstate his former mortgage. That totaled a year’s worth of partial mortgage payments and legal fees, all due within 10 days.
 In a scramble, Tucker said, he saved his home by seeking emergency loans from loved ones. The loan’s back due amount, and late fees, came to $5,799 in with bank legal fees bringing the total to $8,000.
“I have dealt with loan sharks more forgiving than these people,” Tucker said. He declined to identify how much money he received, but said it “is a fraction” of the $8,000 required to save his Grafton Hall Road ranch.
Although Tucker did not lose his home, he still won compensation via the Independent Foreclosure Review. That federal program was designed to assist homeowners who suffered financial injury during a foreclosure process in 2009 and 2010, but held onto their homes. The deadline for that relief has passed for most lenders, excepts a handful of banks including GMAC Mortgage.
Foreclosure remains a local threat as wages retreat. One in five local homeowners is still vulnerable to defaulting on a mortgage, according to “Louisville’s Foreclosure Recovery,” a March 2012 report by the nonprofit Metropolitan Housing Coalition.
Incomes are falling in Louisville as many laid-off workers find employment, but often not at lower pay rates than before. Median income per capita is estimated at $42,500 in this year, down 5.2 percent from $44,833 in 2012, according to the latest guidelines for greater Louisville from the federal Department of Housing and Urban Development.
Catastrophic health crises, job loss and divorce continue to be leading causes of consistent foreclosure problems in the region, according to Christie J. McCravy, a spokeswoman for the Louisville Urban League.
By late May, 1,872 mortgage lenders had initiated foreclosure proceedings, an annual rate similar to the foreclosure pace in 2011 and 2012, according to Jefferson Circuit Court. There is evidence, however, that new lending guidelines are being adopted by the finance industry as a result of the National Mortgage Settlement and Independent Foreclosure Review.
 As proof, there is evidence mortgage banks are slowing down in the race to sell homes on the block. In 2011 and 2012, 40 percent and 41 percent, respectively, of all foreclosure cases were canceled or withdrawn by lenders in Louisville. So far this year, the foreclosure cancellation rate is running at 51 percent.
The reduced percentage of homes actually sold in a foreclosure auction suggests banks “are holding off on moving for judgments,” Jefferson County Master Commissioner Edith Halbleib said Thursday.
Consumers can navigate changing mortgage industry standards best via certified, nonprofit housing counselors at agencies like the Louisville Urban League, the Housing Partnership and the Legal Aid Society, housing advocates say.
Home borrowers and homeowners seeking to modify a mortgage “need someone who knows their way around,” said Cathy Hinko, executive director of the Metropolitan Housing Coalition. “Barriers are huge, and having someone walk you through it is really important.”

AG Eric Holder pay attention!

Despite the pronouncements by Eric Holder, the chief law enforcement officer of the United States, and the obvious reticence of the Securities and Exchange Commission, the vast majority of securities attorneys believe that the banks were (a) trading on inside information and (b) committing securities fraud when they funded and then traded on mortgages that were too toxic to ever succeed.
The first, trading on inside information, is regularly prosecuted by the justice department and the SEC. It is why Martha Stewart went to jail in rather flimsy evidence. The catch, justice and the SEC say is that this only applies to securities and the 1998 act signed into law by Clinton makes mortgage bonds and hedges on mortgage bonds NOT securities. It also makes the insurance paid on the mortgage bonds NOT insurance. This is despite the fact that the instruments meet every definition of securities and both the insurance contracts and credit default swaps appear to meet every definition of insurance. But the law passed by Congress in 1998 says otherwise, so how can we prosecute?
The second, securities fraud meets the same obstacle they say because they can't accuse anyone of committing fraud in the issuance or trading of securities when the law says there were no securities.
So goes the spin coming from Wall Street and as long as law enforcement in each state and the DOJ keeps listening to Wall Street and their lawyers, they will keep arriving at the same mistaken conclusion.
If Wall Street had in fact followed the plan of securitization set forth in their prospectuses and pooling and servicing agreements, assignment and assumption agreements and various other instruments that were created to build the infrastructure of securitization of debt --- including but not limited to mortgages, credit cards, auto loans, student loans etc. --- then Wall Street would be right and the justice department and the SEC might be stuck in the mud created by the 1998 law. But that isn't what happened and therefore the premise behind the apparent immunity of Wall Street Banks and bankers is actually an illusion.
Starting with the issuance of the mortgage bonds, most of them were issued before any mortgage was originated or acquired by anyone. In fact, the list attached to the prospectus for the mortgage bonds said so --- stating that the spreadsheet or list attached was by example only, that these mortgages do not exist but would be soon be replaced with real mortgages acquired pursuant to the enabling documents for the creation of the REMIC "trust." But that is not what happened either.
In no way did the Banks follow the terms of the prospectus, PSA, assignment and assumption agreements or anything else. Instead what they really did was create the illusion of a securitization scheme that covered up the reality of a PONZI scheme, the hallmark of which is that it collapses when investors stop buying the bogus securities and more investors want their money out than those wishing to put money into the scheme. There was no reason for the entire system to collapse other than the fact that Wall Street planned and bet on the collapse, thus making money coming and going and draining the lifeblood of capital worldwide out of economies and marketplaces that depended upon the continued flow of capital.
The creation of the REMIC "trust" was a sham. It was never formalized, never funded and never acquired any mortgages. hence any "exempt" securities issued by it were not the kind intended by the Act signed into law in 1998. It was not a mortgage-backed security, or credit backed security, it was an illusion designed to defraud anyone who invested in them. The purpose of issuing the mortgage bonds was not to fund and acquire mortgages but rather to steal as much money out of the flow as possible while covering their tracks with some of the money ending up on the closing table for newly originated or previously originated bundles of mortgages that were to be acquired. That isn't what happened either.
Wall Street bankers put the money from investors into their own private piggy bank and then funded and acquired mortgages with only part of the money while they made false "proprietary trades" in the "mortgage bonds" that made it look like they were trading geniuses making money hand over fist while the rest of the world saw their wealth decline by as much as 60%-70%. The funding for debt came not from the unfunded REMIC "trusts" but from the investment banker who was merely an intermediary depository institution which unlawfully was playing with investor money. The actual instruments upon which Wall Street relies to justify its actions is the prospectus, the PSA, and the Master Servicing agreement --- each of which was used to sell the investors on letting go of their money in exchange for the promises and conditions contained in the exotic agreements containing numerous conflicting clauses.
Thus the conclusion is that since the mortgage bonds were issued by an unfunded and probably nonexistent entity, the investors had "bought" an interest in an incoherent series of agreements that together constituted a security or, in the alternative, that there was no security and the investors were simply duped into parting with their money which is fraud, pure and simple.
I would say that investors acquired certain passive rights to the instruments used, with the exception of the bogus mortgage bonds that were usually worthless pieces of paper or entries on a log. In my opinion the issuance of the prospectus was the issuance of a security. The issuance of the PSA was the issuance of a security, And the issuance of the other agreements in the illusory securitization chain may also have been the issuance of a security. If cows can be securities, then written instruments that were used to secure passive investments are certainly securities. The exemption for mortgage bonds doesn't apply because neither the mortgage bond nor the REMIC "trust" were ever funded or used --- except in furtherance of their fraud when they claimed losses due to mortgage defaults and obtained federal bailouts, insurance and proceeds of credit default swaps.
The loan closings, like the funding of the "investments" was similarly diverted away from the investor and toward the intermediaries so that they could trade on the appearance of ownership of the loans in the form of selling bundles of loans that were not even close to being properly described in the paperwork --- although the paperwork often looked as though it was all proper.
The trading, hedging and insuring of investments that were not only destined by actually planned to fail was trading on inside information. The Banks knew very well that the triple A rating of the mortgage bonds was a sham because the mortgage bonds were worthless. What they were really trading in was the ownership of the loans which they knew were falsely represented on the note and mortgage. They thus converted the issuance of the promissory note signed by the borrower into a security under flase pretenses because the payee on the note and the secured party on the mortgage never completed the transaction, to wit: they never funded the loan and they made sure that the terms of repayment on the promissory note did not match up with the terms of repayment set forth in the prospectus, which was the real security.
Knowing from the start that they had the power (through the powers conferred on the Master Servicer) to pull the rug out from under the "investments" they traded with a vengeance hedging and selling as many times as they could based upon the same alleged loans that were in fact funded directly by and therefor owned by the investors directly (because the REMIC was ignored and so was the source of funding at the alleged loan closing).
Being the sole source of the real information on the legality, quality and quantity of these nonexistent investments in mortgage bonds, the Wall Street banks, their management, and their affiliates were committing both violation of the insider trading rule and the securities fraud rule ( as well as various other common law and statutory prohibitions and crimes relating to deceptive practices in the sale of securities). By definition and applying the facts rather than the spin, the Banks a have committed numerous crimes and the bankers should be held accountable. Let's not forget that by this time in the S&L scandal more than 800 people were sent to jail despite various attempts to mitigate the severity of their trespass and trampling on the rights of investors and depositors.
Failure to prosecute, while the statute of limitations is running out, is taking the rule of law and turning it on its head. The Obama administration has an obligation to hold these people accountable not only because violations of law should be prosecuted but to provide some deterrence from a recurrence or even escalation of the illegal practices foisted upon institutions, taxpayers and consumers around the world. Ample evidence exists that the Banks, emboldened by the lack of prosecutions, have re-started their engines and are indeed in the process of doing it again.
Think about it, where would a company get the money to have a multimedia advertising campaign blanketing areas of the the Country when the return on investment, according to them is only 2.5%? Between marketing, advertising, processing, and administrative costs, pus a reserve for defaults, they are either running a going out of business strategy or there is something else at work.
And if the transactions were legitimate why do the numbers of foreclosures drop like stones in those states that require proof of payment, proof of loss, and proof of ownership? why have we not seen a single canceled check or wire transfer receipt that corroborates the spin from Wall Street? Where is the real money in this scheme?
Foreclosure Victims Protesting Wall Street Impunity Outside DOJ Arrested, Tasered
Watch out. The mortgage securities market is at it again.
West Sacramento homeowner uses new state law to stop foreclosure
The Foreclosure Fraud Prevention Act: A.G. Schneiderman Commends Assembly for Passing Foreclosure Relief Bills
Where did the California foreclosures go? Level of foreclosures sales dramatically down. Foreclosure legislation and bank processing. Subsidizing investor purchases via HAFA.
Wasted wealth – The ongoing foreclosure crisis that never had to happen - The Hill's Congress Blog



Monday, May 27, 2013

This Bank theft is happening now

This is happening now to this woman Joann Kennedy in PA.

Please lets help her, seeings how her own elected officials have failed.
This is a picture of my home  it's legal address is 4293 first Terrace, Bangor PA  --  the fake address is the 4293 Hillendale road address  this property address is located in the Hess cornfield off of TR 713.   The Hess farm is very big over 100 acres and been in the Hess family for over 200 years.   What has happened  is that Wells Fargo  submitted a Wells Fargo note  to
This is a picture of my home  it's legal address is 4293 first Terrace, Bangor PA  --  the fake address is the 4293 Hillendale road address  this property address is located in the Hess cornfield off of TR 713.   The Hess farm is very big over 100 acres and been in the Hess family for over 200 years.   What has happened  is that Wells Fargo  submitted a Wells Fargo note  to Fannie Mae  in 2005  with this address  4293 Hillendale Road (Public records manipulation... and my husband's signature.  My husband died in 1998   --  id theft.  I am wondering  if  the mortgage crisis perpetrated by these greedy banksters  have   devised a twisted form  of the straw purchase.  Taking  a note,  fraudulently prepared or not (highly unlikely) swapping it for gains/commissions  in the secularization trust pools  and then tanking the homeowner  and destroying the credit rating  and stealing the house still while  holding on to the investment.  Matt Weidner explains  when does a non-negotiable instrument  become a negotiable security.....  albeit the same mortgage note?
This above scenario has just happened to me.  And when I have brought it to the attention of the DOJ,  the PA AG,  the FHFA OIG,  elected federal congress people  and state agencies I was ignored,  threatened by PA STATE Police in Belfast,  my home has been broken into 3 times while I was at work  I have nothing now  nothing  all stolen with no paperwork   just recently  this Saturday.  May 25, 2013.  
  in 2005  with this address  4293 Hillendale Road (Public records manipulation... and my husband's signature.  My husband died in 1998   --  id theft.  I am wondering  if  the mortgage crisis perpetrated by these greedy banksters  have   devised a twisted form  of the straw purchase.  Taking  a note,  fraudulently prepared or not (highly unlikely) swapping it for gains/commissions  in the secularization trust pools  and then tanking the homeowner  and destroying the credit rating  and stealing the house still while  holding on to the investment.  Matt Weidner explains  when does a non-negotiable instrument  become a negotiable security.....  albeit the same mortgage note?
This above scenario has just happened to me.  And when I have brought it to the attention of the DOJ,  the PA AG,  the FHFA OIG,  elected federal congress people  and state agencies I was ignored,  threatened by PA STATE Police in Belfast,  my home has been broken into 3 times while I was at work  I have nothing now  nothing  all stolen with no paperwork   just recently  this Saturday.  May 25, 2013.  

I will post more as this goes -- lets write to the PA GOV and PA AG to help stop this abuse.

Sunday, May 26, 2013

America Lost: A salute to our Goverment officials

America Lost: A salute to our Goverment officials: To our Government officials who are suppose to watch over us and not their pockets.. we salute you .. WASHINGTON — Bank lobbyists are...

A salute to our Goverment officials

To our Government officials who are suppose to watch over us and not their pockets.. we salute you ..

WASHINGTON — Bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations. Instead, the lobbyists are helping to write it themselves.
One bill that sailed through the House Financial Services Committee this month — over the objections of the Treasury Department — was essentially Citigroup’s, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation.
In a sign of Wall Street’s resurgent influence in Washington, Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word. (Lawmakers changed two words to make them plural.)

The lobbying campaign shows how, three years after Congress passed the most comprehensive overhaul of regulation since the Depression, Wall Street is finding Washington a friendlier place.
The cordial relations now include a growing number of Democrats in both the House and the Senate, whose support the banks need if they want to roll back parts of the 2010 financial overhaul, known as Dodd-Frank.
This legislative push is a second front, with Wall Street’s other battle being waged against regulators who are drafting detailed rules allowing them to enforce the law.
And as its lobbying campaign steps up, the financial industry has doubled its already considerable giving to political causes. The lawmakers who this month supported the bills championed by Wall Street received twice as much in contributions from financial institutions compared with those who opposed them, according to an analysis of campaign finance records performed by MapLight, a nonprofit group.
In recent weeks, Wall Street groups also held fund-raisers for lawmakers who co-sponsored the bills. At one dinner Wednesday night, corporate executives and lobbyists paid up to $2,500 to dine in a private room of a Greek restaurant just blocks from the Capitol with Representative Sean Patrick Maloney, Democrat of New York, a co-sponsor of the bill championed by Citigroup.
Industry officials acknowledged that they played a role in drafting the legislation, but argued that the practice was common in Washington. Some of the changes, they say, have gained wide support, including from Ben S. Bernanke, the Federal Reserve chairman. The changes, they added, were in an effort to reach a compromise over the bills, not to undermine Dodd-Frank.
“We will provide input if we see a bill and it is something we have interest in,” said Kenneth E. Bentsen Jr., a former lawmaker turned Wall Street lobbyist, who now serves as president of the Securities Industry and Financial Markets Association, or Sifma.
The close ties hardly surprise Wall Street critics, who have long warned that the banks — whose small armies of lobbyists include dozens of former Capitol Hill aides — possess outsize influence in Washington.
“The huge machinery of Wall Street information and analysis skews the thinking of Congress,” said Jeff Connaughton, who has been both a lobbyist and Congressional staff member.
Lawmakers who supported the industry-backed bills said they did so because the effort was in the public interest. Yet some agreed that the relationship with corporate groups was at times uncomfortable.
“I won’t dispute for one second the problems of a system that demands immense amount of fund-raisers by its legislators,” said Representative Jim Himes, a third-term Democrat of Connecticut, who supported the recent industry-backed bills and leads the party’s fund-raising effort in the House. A member of the Financial Services Committee and a former banker at Goldman Sachs, he is one of the top recipients of Wall Street donations. “It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption. It’s unfortunately the world we live in.”
The passage of the Dodd-Frank Act, which took aim at culprits of the financial crisis like lax mortgage lending and the $700 trillion derivatives market, ushered in a new phase of Wall Street lobbying. Over the last three years, bank lobbyists have blitzed the regulatory agencies writing rules under Dodd-Frank, chipping away at some regulations.
But the industry lobbyists also realized that Congress can play a critical role in the campaign to mute Dodd-Frank.
The House Financial Services Committee has been a natural target. Not only is it controlled by Republicans, who had opposed Dodd-Frank, but freshmen lawmakers are often appointed to the unusually large committee because it is seen as a helpful base from which they can raise campaign funds.
For Wall Street, the committee is a place to push back against Dodd-Frank. When banks and other corporations, for example, feared that regulators would demand new scrutiny of derivatives trades, they appealed to the committee. At the time, regulators were completing Dodd-Frank’s overhaul of derivatives, contracts that allow companies to either speculate in the markets or protect against risk. Derivatives had pushed the insurance giant American International Group to the brink of collapse in 2008. The question was whether regulators would exempt certain in-house derivatives trades between affiliates of big banks.
As the House committee was drafting a bill that would force regulators to exempt many such trades, corporate lawyers like Michael Bopp weighed in with their suggested changes, according to e-mails reviewed by The Times. At one point, when a House aide sent a potential compromise to Mr. Bopp, he replied with additional tweaks.
In an interview, Mr. Bopp explained that he drafted the proposal at the request of Congressional aides, who expressed broad support for the change. The proposal, he explained, was a “compromise” that was actually designed to “limit the scope” of the exemption.
“Everyone on the Hill wanted this bill, but they wanted to make sure it wasn’t subject to abuse,” said Mr. Bopp, a partner at the law firm Gibson, Dunn who was representing a coalition of nonfinancial corporations that use derivatives to hedge their risk.
Ultimately, the committee inserted every word of Mr. Bopp’s suggestion into a 2012 version of the bill that passed the House, save for a slight change in phrasing. A later iteration of the bill, passed by the House committee earlier this month, also included some of the same wording.
And when federal regulators in April released a rule governing such trades, it was significantly less demanding than the industry had feared, a decision that the industry partly attributed to pressure stemming from Capitol Hill.
Citigroup and other major banks used a similar approach on another derivatives bill. Under Dodd-Frank, banks must push some derivatives trading into separate units that are not backed by the government’s insurance fund. The goal was to isolate this risky trading.
The provision exempted many derivatives from the requirement, but some Republicans proposed striking the so-called push out provision altogether. After objections were raised about the Republican plan, Citigroup lobbyists sent around the bank’s own compromise proposal that simply exempted a wider array of derivatives. That recommendation, put forth in late 2011, was largely part of the bill approved by the House committee on May 7 and is now pending before both the Senate and the House.
Citigroup executives said the change they advocated was good for the financial system, not just the bank.
“This view is shared not just by the industry but from leaders such as Federal Reserve Chairman Ben Bernanke,” said Molly Millerwise Meiners, a Citigroup spokeswoman.
Industry executives said that the changes — which were drafted in consultation with other major industry banks — will make the financial system more secure, as the derivatives trading that takes place inside the bank is subject to much greater scrutiny.
Representative Maxine Waters, the ranking Democrat on the Financial Services Committee, was among the few Democrats opposing the change, echoing the concerns of consumer groups.
“The bill restores the public subsidy to exotic Wall Street activities,” said Marcus Stanley, the policy director of Americans for Financial Reform, a nonprofit group.
But most of the Democrats on the committee, along with 31 Republicans, came to the industry’s defense, including the seven freshmen Democrats — most of whom have started to receive donations this year from political action committees of Goldman Sachs, Wells Fargo and other financial institutions, records show.
Six days after the vote, several freshmen Democrats were in New York to meet with bank executives, a tour organized by Representative Joe Crowley, who helps lead the House Democrats’ fund-raising committee. The trip was planned before the votes, and was not a fund-raiser, but it gave the lawmakers a chance to meet with Wall Street’s elite.
In addition to a tour of Goldman’s Lower Manhattan headquarters, and a meeting with Lloyd C. Blankfein, the bank’s chief executive, the lawmakers went to JPMorgan’s Park Avenue office. There, they chatted with Jamie Dimon, the bank’s chief, about Dodd-Frank and immigration reform.
The bank chief also delivered something of a pep talk.
“America has the widest, deepest and most transparent capital markets in the world,” he said. “Washington has been dealt a good hand.”
Eric Lipton reported from Washington, and Ben Protess from New York.

Friday, May 24, 2013

What this country needs to get its act together

 Almost a century ago Thomas Marshall, Woodrow Wilson's Vice President, got tired of listening to senators blather on about the nation's needs and uttered the words that made him immortal: "What this country needs is a good five-cent cigar." Today, with 24/7 blathering as our national political pastime, let me adapt Marshall's 1917 remark: What this country needs to get its act together is a good five-alarm financial crisis.

I mean, look around. Except for the Federal Reserve, which has consistently tried to help the economy, misguided though some of its actions may be, about the only real changes our government has made since the onset of the financial crisis were induced by fear. The Troubled Asset Relief Program, which played a vital role in restoring confidence and stability to the financial system, was passed only because the House's rejection of it on Sept. 28, 2008, set off a 778-point plummet in the Dow. That scared the House into reversing itself.

The only parts of the budget sequester -- an exercise in economic idiocy -- that have been modified are the FAA's cutbacks that caused air-travel delays bad enough to scare politicians into action and the food inspectors who were rescued after the meat and poultry industry spoke out in support of them. The sequester, remember, was a doomsday device created to resolve the debt-ceiling crisis in 2011, on the assumption that sequestration was so stupid and damaging that people would do anything to keep it at bay. Yet here it is.

Now, for the third time in two years, we're dealing with a debt-ceiling drama. The previous two times Republicans played this game -- the summer of 2011 and year-end 2012 -- they damaged the country's financial credibility for no discernible gain to themselves. Why they think the third time will be the charm is beyond me. I blame the Republicans (my former party) more than I blame the Democrats (my previous former party) for our national gridlock. But the Democrats are no prizes either.

Take the budget deficit, which is shrinking rapidly. Many Democrats are declaring victory, saying that everything is heading in the right direction; there's no need to cut the growth of Social Security, Medicare, and Medicaid; it's all under control. But if you read the nonpartisan Congressional Budget Office's recent analysis, you see that everything is far from fine for the long term.

Part of the deficit decline comes from the higher tax rates that went into effect this year, and part from the economy's growth. But a good part of the shrinkage is from one-time items that will disappear, such as an increase in this year's income-tax collections because companies accelerated some 2013 dividends and bonuses into last year so recipients could avoid the Jan. 1 tax increases. Another factor is the lower-than-previously-projected interest rates on the national debt. But they won't last indefinitely, because the Fed has already begun warning markets of future rate increases.

I had expected our leaders to have rational conversations after the poisonous 2012 elections were over. I was naive. The Democrats, scenting blood, pretended to reach out to Republicans, but really didn't. Now, smelling blood over Benghazi, the IRS, and media phone records, Republicans aren't even pretending to be playing nice.

Calm down, you say. Stocks are at all-time highs, house prices have recovered, and corporate profits are strong. What could possibly cause a crisis?

For starters, we still have too-big-to-fail banks that depend on short-term financial markets, which could dry up in an instant, as in 2008-09. Some, including my Fortune colleague Sheila Bair, think the government now has the tools to deal with this. I respectfully disagree.

The debt-ceiling question, supposedly on hold until September, has disaster potential too. If we slip over the brink this time, it could spook foreign buyers, run interest rates way up, run stocks down, and spark a financial panic.

I don't want to see a crisis, and I hope our alleged leaders, who aren't stupid, bestir themselves before one strikes. But I sure wouldn't count on it. Too bad for them. Too bad for us.

Watch out. The mortgage securities market is at it again.

Once upon a time, hardly anyone defaulted on a mortgage. Bankers made sure that their borrowers had mortgages they could afford, because if they didn't, the bank would suffer a loss. Lenders were highly motivated to keep homeowners in their castles. Then, early last decade, mortgage securitization exploded on the scene, disrupting the fairy tale. Big, ugly giants with names like Countrywide Financial and New Century packaged huge pools of mortgages, sliced them up into securities, and sold them to investors, who now bore the risk if the loans defaulted. Because the mortgage bundlers -- or "securitizers" -- were paid upfront, they had powerful incentives to generate as much volume as possible, with little regard to whether homeowners could afford the loans. "I'll be gone, you'll be gone" or "IBG/YBG" became their mantra. They pushed loans whose interest rates would later spike, and of course, the infamous NINJAs -- mortgages that required no income, no job, and no assets. Yield-hungry investors snapped them up. And as we all know, this story did not end happily: Millions of mortgages defaulted, leading to the worst financial crisis since the Great Depression and a still-struggling economy.


We thought the Dodd-Frank financial-reform law fixed all this by requiring securitizers to keep some skin in the game. Under the law, for every dollar of loss suffered by mortgage-backed securities investors, at least 5¢ must be borne by those who securitized the mortgages. In that way, the law aligns the interests of borrowers, securitizers, and investors in making sure mortgage loans are affordable and sustainable over time. Unfortunately, in an effort to get the 60 votes needed under Senate rules to move Dodd-Frank forward, the bill's sponsors agreed to make a limited exception to the skin-in-the-game requirement. The law exempted loans meeting standards so tight that there was little, if any, chance they would default. But as it turns out, that wasn't good enough for the financial and housing industries. They are now arguing for regulatory changes that would allow this exception to swallow the rule. Enlisting the aid of several affordable-housing advocates, they have argued that making securitizers retain risk will lead to higher mortgage rates, hurting low-income families who can't meet tough mortgage standards. Instead, they say, loan bundlers shouldn't have to retain any risk if the loans they securitize meet the basic lending standards set by the Consumer Financial Protection Bureau. Those standards, however, focus on consumer protection, not on system stability. They address the most egregious pre-crisis lending practices, such as failure to document income, but they include no down payment requirement and permit total mortgage and other debt payments to reach a whopping 43% of pretax income. (The industry standard was closer to 35% before the subprime craze.) Virtually all mortgages being originated today already meet those standards.
MORE: This country needs another financial crisis
Obviously, having to bear 5% of the losses on defaulting loans will increase securitizers' funding costs. But those costs will be offset by the benefits of imposing some financial accountability on them to make sure mortgages carry terms that are affordable. We saw the disastrous results of IBG/YBG when mortgage bundlers could walk away from the loans they securitized. And far from helping low-income families, they gouged less sophisticated borrowers with mortgages carrying steep rates and fees because those loans commanded bigger upfront payments when securitized and sold to investors.



Instead of loosening standards to appease the industry, regulators should make it virtually impossible for securitizers to escape having skin in the game. The consumer bureau's lending standards are helpful, but financial accountability can be a much more powerful tool to discourage irresponsible lending. Securitization's skewed incentives transformed home ownership from the American dream to a Brothers Grimm nightmare. We need to make sure it never happens again.
Sheila Bair is former chair of the FDIC. Barney Frank is the former chairman of the House Financial Services Committee and co-author of the Dodd-Frank Act.
This story is from the June 10, 2013 issue of Fortune. To top of page

So it begins again.. just as I stated over and over.. Karma cannot be outrun.  The ones who will be targeted again will be the desperate low income homeowners and borrowers .




Time to fight is now

Banks Hedging Their Bets on Wrongful Foreclosures by Neil Garfield The need for continuing pressure on state and federal legislators who are relentlessly pursued by Bank lobbyists has never been greater. Anyone who cares about the state of our economy and the state of our justice system needs to be writing and calling state and federal legislators as well as state and federal agencies to oppose these naked attempts to seal the deal against the homeowners. Anyone who thinks that our falling bridges and decaying infrastructure is going to be fixed without fixing housing is dreaming. Both the tax revenue and the potential for private investment are severely diminished by the failure of this government and governments around the world to take actual control of the situation, return wealth to those from whom wealth was stolen, and recover taxes from those who have failed to report and pay taxes on transactions that were conducted in the United States but never reported in any detail as to the method utilized to create "off balance sheet" and "offshore" transactions. Michigan homeowners in foreclosure would have less time to save, sell home under new proposal In Michigan the proposal put forth by the banks would extend the time that borrowers could contest an impending foreclosure but shorten the time that borrowers could attack a wrongful foreclosure seeking monetary damages or to overturn the fraudulent auction sale awarded to a party who submitted a credit bid but who was not a creditor. It is a tacit admission by the banks that they are doing well before a foreclosure judgment is entered but they are afraid of the consequences after the sale. The fact that they were not a creditor obviously also brings in the issues of jurisdictional standing and whether they have any potential rights to initiate foreclosure. The confusion here is closed by rulings in many states which seem to indicate that almost anyone can initiate a foreclosure proceeding. The mistake made by both pro se litigants and attorneys for homeowners is that they concede the rest of the case once a decision is made that a non-creditor can initiate foreclosure proceedings. In the initial phase of litigation those early motions will obviously have an effect on the momentum of the case in favor of either the banks or the borrowers. But the fact remains that if the party initiating the foreclosure was doing so in a representative capacity, or if they were doing so in their own name lacking any history or facts supporting their assertions of being a "holder" then the point needs to be made to the court that there is no creditor based upon any evidence in the court record who can submit a credit bid. The court is presented then with the choice of either dismissing the case because of lack of jurisdiction over the subject matter and potentially lack of jurisdiction over the parties or entering a final order or judgment allowing the foreclosure to proceed but stipulating that the party conducting the auction may not accept a credit bid in the absence of uncontested proof of payment, proof of loss and proof of ownership of the loan receivable. This step has less far been ignored in nearly all cases of foreclosure litigation throughout the country. It is time to invoke it. The initiative in Michigan reflects the tacit admission of the banks that while they can still easily prevail in pre-judgment motions, they are highly vulnerable to enormous liabilities after the sale of the property at auction or at a closing table. The fact remains that they must show a canceled check, wire transfer receipts, ACH confirmation or check 21 confirmation in order to establish the loss; in addition, they must show the same facts for each and every predecessor in the alleged securitization chain which we already know has been falsely presented. By hammering on the money trail, you will be educating the judge as to the difference between the actual transactions in which money was exchanged or in which consideration was exchanged and the paper documents that refer to transactions which never actually occurred. Each transaction requires, for enforcement, and offer, acceptance and consideration. If you closely examine the documents used by the banks in the falsely presented securitization chain you might find an offer but you probably won't find acceptance and you definitely won't find consideration. The same holds true in the origination of the loan wherein the designated payee and secured party had nothing to do with the funding of the original loan. It is all smoke and mirrors. The point needs to be made that if the judge is all fired up about whether or not the borrower made payments that the attorney representing the homeowner agrees that payments are an important issue which is why he is requiring the other side to present proof of their payments to creditors and their receipt of payments from parties other than the borrower. Your argument is obviously that either payments matter where they don't. It should be pointed out to the judge that a double standard is being applied if the borrower's payments are at issue but the so-called lenders' payments and receipts are out of bounds. The point should also be made that rather than arguing about it, if there was no defect in the money trail and if there was therefore complete compliance between the money trail in the document trail, the party initiating foreclosure should be more than anxious to display the canceled check and end the debate. JPMorgan exposed: Company found guilty of masterminding 'manipulative schemes' Wasted wealth – The ongoing foreclosure crisis that never had to happen - The Hill's Congress Blog Negative Home Equity Still Plagues 13 Million Mortgage Loans Jon Stewart Tears Apart Obama, DOJ For Prosecuting Whistleblowers And Potheads But Not Bankers How Many People Have Lost Their Homes? US Home Foreclosures are Comparable to the Great Depression As Of This Moment Ben Bernanke Own 30.5% Of The US Treasury Market... And Will Own All By 2018