Senators Ask Why JPMorgan Execs Won't Be Punished

Senators Ask Why JPMorgan Execs Won't Be Punished For Involvement In FERC Investigation 

 

US Senator Elizabeth Warren ,D-MA, speaks at a press conference April 16, 2013 in Boston, Massachusetts, in the aftermath of two explosions that struck near the finish line of the Boston Marathon April 15. The number of casualties in a Monday's bombings at the Boston marathon has risen to 176, police said Tuesday. Three people were killed. AFP PHOTO/Stan HONDA (Photo credit should read STAN

WASHINGTON (Reuters) - Two Democratic Senators on Wednesday asked U.S. energy regulators for more details on how terms of a settlement were reached on alleged power market manipulation in California and the Midwest by a unit of JPMorgan Chase & Co.
In a letter to the head of the Federal Energy Regulatory Commission (FERC), Elizabeth Warren and Edward Markey, both of Massachusetts, questioned whether the settlement announced on Tuesday included "adequate refunds to defrauded ratepayers."
They also asked FERC why certain JPMorgan executives "who sought to impede the commission's investigation" will not be punished.

 

Banc of America Capital Management, LLC, et al.

07/31/2013 02:25 PM EDT

Order Directing Disbursement of Fair Fund

Guess who is going to distribute it? None other than Deutsche Bank !!


http://www.sec.gov/litigation/admin/2013/34-70082.pdf

Another great post by Neil Garfield

Perils of Pooling: OneWest

by Neil Garfield

Apparently my article yesterday hit a nerve. NO I wasn't saying that the only problems were with BofA and Chase. OneWest is another example. Keep in mind that the sole source of information to regulators and the courts are the ONLY people who understand mergers and acquisitions. So it is a little like one of those TV shows where the only way they can get an arrest and conviction is for the perpetrator or suspect to confess. In this case, they "confess" all kinds of things to gain credibility and then lead the agencies and judicial system down a rabbit hole which is now a well trodden path. So many people have gone down that hole that most people that is the way to get to the truth. It isn't. It is part of a carefully constructed series of complex conflicting lies designed carefully by some very smart lawyers who understand not just the law but the way the law works. The latter is how they are getting away with it.

Back to OneWest, which we have detailed in the past.

The FDIC has posted the agreement at http://www.fdic.gov/about/freedom/IndyMacMasterPurchaseAgrmt.pdf

OneWest was created almost literally overnight (actually over a weekend) by some highly placed players from Wall Street. There is an 80% loss sharing arrangement with the FDIC and yes, there appears to be some grey area about ownership of the loans because of that loss sharing agreement. But the evidence of a transaction in which the loans were actually purchased by a brand new entity that was essentially unfunded is completely absent. And that is because OneWest and Deutsch take the position that the loans were securitized despite IndyMac's assurances to the contrary. The only loans in which OneWest appears to be a player are those in which the loan was subject to (false) claims of securitization. No money went to the trustee, no money went to the trust, no assets went into the pool because the REMIC asset pool lacked the funding to purchase any assets.

Add to that a few facts. Deutsch is usually the "trustee"of the REMIC asset pool, but Reynaldo Reyes says he has nothing to do. He has no trust accounts and makes no decisions and performs no actions. Sound familiar. I have him on tape and his deposition has already been taken and publicized on the internet by others. Reyes says the whole arrangement is "counter-intuitive" (a very creative way of saying it is a lie). It is up to the servicer (OneWest) to decide what loans are subject to modification, mediation or even reinstatement. It is up to the servicer as to when to foreclose. And the servicer here is OneWest while the Master Servicer appears to be the investment banking arm of Deutsch, although I do not have that confirmed.

The way Reyes speaks about it the whole thing ALMOST makes sense. That is, until you start thinking about it. If Deutsch Bank has an extensive trust subsidiary, which it does, then why is a VP of asset management in control of the trust operations of the REMIC asset pools. Answer: because there are no funded trusts and there are no asset pools with assets. Hence any statement by OneWest that it is the owner of the loan is untrue as is the allegation that Deutsch is the trustee because all trustee duties have been delegated to the servicer. That leaves the investor with an empty box for an asset pool and no trustee or manager or even an agent to to actually know what is going on or who is monitoring their money and investments.

Note that like BOfA using Red Oak Merger Corp., there is the creation of a fictional entity that was not used by the name of, no kidding, "Holdco." This is to shield OneWest from certain liabilities as a lender. Legally it doesn't work that way but practically it generally does work that way because judges listen to bank lawyers to tell them what all this means. That is like asking a 1st degree murder defendant to explain to the jury the meaning of reasonable doubt.

Now be careful here because there is a "loan sale" agreement referenced in the package posted by the FDIC. But it refers to an exhibit F. There is no exhibit F and like the ambiguous agreements with the FDIC in Countrywide and Washington mutual, there are words there, but they don't really say anything. Suffice it to say that despite some fabricated documents to the contrary, there is no evidence I have seen that any loan  receivable was transferred to or from a REMIC asset pool, Indy-mac, or Hold-co.

These people were not stupid and they are not idiots. And their lawyers are pretty smart too. They know that with the presumption of a funded loan in existence, the banks could pretty much get away with saying anything they wanted about the ownership, the identity of the creditor and the ability to make a credit bid at the auction of a property that should never have been foreclosed in the first instance --- and certainly not by these people.

But if you dig just a little deeper you will see that the banks are represented to the regulatory authorities that they own the bonds (not true because the bonds were created and issued to specific investors who bought them); thus they include the bonds as significant items on their balance sheet which allows them to be called mega banks or too big to fail when in fact they have a tiny fraction of the reserve requirements of the Federal Reserve which follows the Basel accords.

Then when you turn your head and peak into courtrooms you find the same banks claiming ownership of the loan receivable, which was created when the funding occurred at the "closing" of the loan. They know they are taking inconsistent positions but most judges lack the sophistication to pinpoint the inconsistency. And that is how 5 million people lost their homes.

On the one hand the banks are claiming there was no fraud in the issuance of mortgage backed bonds by a REMIC asset pool formed as a trust. In fact, they say the loans were transferred into the REMIC asset pool. Which means that ownership of the mortgage bonds is ownership of the loans --- at least that is what the paperwork shows that was used to sell pension funds on buying these worthless bogus bonds. Then they turn around and come to court as the "holder" and get a foreclosure sale in which the bank submits the credit bid and buys the property without spending one dime. What they have done is, in lay terms, offered the debt to pay for the property. But the debt, according to the same people is owned by the investors or the REMIC trust, not the banks.

Then they turn to the insurers and counterparties on credit default swaps, and the Federal reserve that is buying these bonds and they say that the banks own the bonds, have an insurable interest, and should receive the proceeds of payments instead of the investors who actually put up the money. And then they say in court that the account receivable is unpaid, there is a default, and therefore the home should be foreclosed. What they have done is create a chaotic complex of lies and turn it into an illusion that changes colors and density depending upon whom the banks are talking with.

There is no default on the account receivable if the account was paid, regardless of who paid it --- as long as it was really paid to either the owner of the loan receivable or the authorized agent of the owner (i.e., the investor/lender). And so it is paid. And if paid, there can be no action on the note because the loan receivable has been satisfied. There can be no action on the mortgage because it was never a perfected lien and because the loan receivable was extinguished by PAYMENT. You can't use the mortgage to enforce the note which is evidence for enforcement of a debt when the debt no longer exists.

Judges are confused. The borrower must owe money to someone so why not simply enter judgment and let the creditors sort it out amongst themselves. The answer is because that is not the rule of law and if a creditor has a claim against the borrower it should be brought by that creditor not some stranger to the transaction whose actions are stripping the real creditor of lien rights and collection rights over the debt. What the courts are doing, by analogy, is saying that you must have killed someone when you fired that gun so we will dispense with evidence and a jury and proceed to sentencing. We will let the people in the crowd decide who is the victim who can bring a wrongful death action against you even if we don't even know when the gun was fired and who pulled the trigger. In the meanwhile you are sentenced to death or life in prison under our rocket docket for murders of unknown persons.

The never ending lie

Perils of Pooling

by Neil Garfield

We hold these truths to be self evident: that Chase never acquired any loans from Washington Mutual and that Bank of America never required any loans from Countrywide.  A review of the merger documents approved by the FDIC reveals that neither Chase nor Bank of America wanted to assume any liabilities in connection with the lending operations of Washington Mutual or Countrywide, or Long Beach Mortgage ,respectively. The loans were expressly left out of the agreement which is available for everyone to see on the FDIC website in the reading room.

With the exception of a few instances in which the court pointed out that Chase only acquired servicing rights and that Bank of America may not have acquired any rights, judges have been rubber-stamping foreclosures initiated by Bank of America (or entities controlled by Bank of America like Recontrust) under the assumption that Bank of America must be the owner of the Countrywide mortgages. The same is true  for judges who have been rubber-stamping foreclosures initiated by Chase under the assumption that Chase must be the owner of the Washington Mutual mortgages,and  Long Beach Mortgage. After all, if they don't own the mortgages then who does? The answer is that in nearly all cases either BofA nor Countrywide and neither Chase nor WAMU, nor Long Beach Mortgage, owned the loans and their financial statements prove it.

Not only have the judges been rubber-stamping the foreclosures and participating in a scheme that is correcting our title records nationwide, the entry of judgment against the borrower and for Bank of America or for Chase completes the theft of the investors money that was used for exorbitant fees, profits and bonuses and then finally for the funding of the origination or acquisition of loans. The fact that the REMIC trust was ignored in both form and content has also been the subject of the defective rulings from the bench.  Not only have the courts ruled against the borrowers and for the banks, they have even ruled against the presentation of evidence that would have shown that the investors were being stripped of their expected lien rights and then stripped again on their expected return of principal and interest, and then barred by collateral estoppel from ever bringing it up.

Since most of the foreclosures have emanated from Bank of America and Chase it is a fair assumption that most of the foreclosure sales were void because no valid bid was received in exchange for the deed. The property is still owned by the original homeowner In any case where a credit bid was submitted by Bank of America or Chase on any loan in which either Countrywide Mortgage or Washington Mutual,or Long Beach Mortgage was involved. I might add that the Federal Reserve in New York is completely aware of these facts and is steadfastly refusing to reveal the truth to the public or even to the homeowners whose homes were illegally and wrongfully foreclosed by Bank of America and Chase for a loan where both Bank of America and Chase and their chain of affiliates had been paid multiple times on a loan receivable account owned by the source of the funds, to wit: the investors who thought they were buying mortgage bonds from a funded legally organized REMIC trust.

CAVEAT:  The courts are mainly concerned with finality. In many states there may be a statute of limitations to challenge a void deed from an auction sale. Check with an attorney who is licensed in the jurisdiction in which your property is located before you take any action or make any decision.

It seems crazy to think that someone could apply for a loan and get the benefits of funding without ever being required to pay it back to the lender.  But that is exactly what is happening as a result of defective court decisions.  The lender consists of a group of investors including pension funds that are now underfunded as a result of the civil and possibly criminal theft of funds by Bank of America and Chase or the investment firms acquired by them.

Homeowners are being forced to pay Bank of America and Chase rather than the investors who actually advanced the funds. Bank of America and Chase actively interfere and Stonewall whenever a borrower or an investor seeks to peek under the hood to see what is in the box. There is nothing in the box. The deal was always between the investors and homeowners. The bank's lied. They pretended that they were the lenders when in fact there were only the intermediaries. The result was that all the payments received from borrowers, government, the federal reserve, insurers, guarantors, co-obligors, and counterparties on credit  default swaps went to the accounts of Bank of America and Chase rather than to the investors.

 By holding back the money, Bank of America and Chase, just like other banks created the illusion of a default and since they had created the illusion of ownership of the default they took the money instead of handing it over to the investors. You read the lawsuits that have been filed by  investors against the investment banks that sold them worthless mortgage bonds issued by an empty asset pool you will see that they allege affirmatively that the notes and mortgages are unenforceable.

That makes it unanimous! Both the lender and the borrower agree that the documentation is defective and unenforceable. Both the lender and the borrower agree that the lender should get paid.  And both the lender and the borrower agree that the lender is entitled to be paid only once for the money advanced by the lender.  And both the lender and the borrower agree that the banks are holding trillions of dollars in money that should have been used to pay off the account receivable owned by the investors.

With the lender paid off or where the account receivable has been reduced by payments to the banks who were acting as agents of the investors but breaching their duties to the investors, the amount payable by the homeowner as a borrower would be correspondingly reduced or eliminated. In fact, under the requirements of the federal truth in lending act, the overpayment is due to the borrower for failure to disclose the true facts of the transaction. In fact, under federal law, treble damages, legal interest, attorneys fees and costs probably also apply.

Collateral Damage: QE3 and the Shadow Banking System

The federal reserve gets the money from foreclosure fraud and the banks , plus the SEC who gets the money which goes to the Federal Reserve, all off OUR backs and the fraud perpetrated on US . Its the people who should of gotten this money back, its us it happen to! It's because of US you have that money!  Now their using money to fund hedge funds shadow banking off these same mortgages , they claimed were fraud! Where is our Justice? Give us our notes and homes back!

 July 30, 2013 ·

Collateral Damage: QE3 and the Shadow Banking System

by WashingtonsBlog

Guest post by Ellen Brown, http://www.WebofDebt.com.
Rather than expanding the money supply, quantitative easing (QE) has actually caused it to shrink by sucking up the collateral needed by the shadow banking system to create credit. The “failure” of QE has prompted the Bank for International Settlements to urge the Fed to shirk its mandate to pursue full employment, but the sort of QE that could fulfill that mandate has not yet been tried.
Ben Bernanke’s May 29th speech signaling the beginning of the end of QE3 provoked a “taper tantrum” that wiped about $3 trillion from global equity markets – this from the mere suggestion that the Fed would moderate its pace of asset purchases, and that if the economy continues to improve, it might stop QE3 altogether by mid-2014. The Fed is currently buying $85 billion in US Treasuries and mortgage-backed securities per month.
The Fed Chairman then went into damage control mode, assuring investors that the central bank would “continue to implement highly accommodative monetary policy” (meaning interest rates would not change) and that tapering was contingent on conditions that look unlikely this year. The only thing now likely to be tapered in 2013 is the Fed’s growth forecast.
It is a neoliberal maxim that “the market is always right,” but as former World Bank chief economist Joseph Stiglitz demonstrated, the maxim only holds when the market has perfect information. The market may be misinformed about QE, what it achieves, and what harm it can do. Getting more purchasing power into the economy could work; but QE as currently practiced may be having the opposite effect.

Unintended Consequences

The popular perception is that QE stimulates the economy by increasing bank reserves, which increase the money supply through a multiplier effect.  But as shown earlier here, QE is just an asset swap – assets for cash reserves that never leave bank balance sheets. As University of Chicago Professor John Cochrane put it in a May 23^rd blog:

QE is just a huge open market operation. The Fed buys Treasury securities and issues bank reserves instead. Why does this do anything? Why isn’t this like trading some red M&Ms for some green M&Ms and expecting it to affect your weight? . . .
[W]e have $3 trillion or so [in] bank reserves. Bank reserves can only be used by banks, so they don’t do much good for the rest of us. While the reserves may not do much for the economy, the Treasuries they remove from it are in high demand.

Cochrane discusses a May 23rd Wall Street Journal article by Andy Kessler titled “The Fed Squeezes the Shadow-Banking System,” in which Kessler argued that QE3 has backfired. Rather than stimulating the economy by expanding the money supply, it has contracted the money supply by removing the collateral needed by the shadow banking system. The shadow system creates about half the credit available to the economy but remains unregulated because it does not involve traditional bank deposits. It includes hedge funds, money market funds, structured investment vehicles, investment banks, and even commercial banks, to the extent that they engage in non-deposit-based credit creation.
Kessler wrote:

[T]he Federal Reserve’s policy—to stimulate lending and the economy by buying Treasurys—is creating a shortage of safe collateral, the very thing needed to create credit in the shadow banking system for the private economy. The quantitative easing policy appears self-defeating, perversely keeping economic growth slower and jobs scarcer.

That explains what he calls the great economic paradox of our time:

Despite the Federal Reserve’s vast, 4½-year program of quantitative easing, the economy is still weak, with unemployment still high and labor-force participation down. And with all the money pumped into the economy, why is there no runaway inflation? . . .
The explanation lies in the distortion that Federal Reserve policy has inflicted on something most Americans have never heard of: “repos,” or repurchase agreements, which are part of the equally mysterious but vital “shadow banking system.”
The way money and credit are created in the economy has changed over the past 30 years. Throw away your textbook.

Fractional Reserve Lending Without the Reserves

The post-textbook form of money creation to which Kessler refers was explained in a July 2012 article by IMF researcher Manmohan Singh titled “The (Other) Deleveraging: What Economists Need to Know About the Modern Money Creation Process.” He wrote:

In the simple textbook view, savers deposit their money with banks and banks make loans to investors . . . . The textbook view, however, is no longer a sufficient description of the credit creation process. A great deal of credit is created through so-called “collateral chains.”
We start from two principles: credit creation is money creation, and short-term credit is generally extended by private agents against collateral. Money creation and collateral are thus joined at the hip, so to speak. In the traditional money creation process, collateral consists of central bank reserves; in the modern private money creation process, collateral is in the eye of the beholder.

Like the reserves in conventional fractional reserve lending, collateral can be re-used (or rehypothecated) several times over. Singh gives the example of a US Treasury bond used by a hedge fund to get financing from Goldman Sachs. The same collateral is used by Goldman to pay Credit Suisse on a derivative position. Then Credit Suisse passes the US Treasury bond to a money market fund that will hold it for a short time or until maturity.
Singh states that at the end of 2007, about $3.4 trillion in “primary source” collateral was turned into about $10 trillion in pledged collateral – a multiplier of about three. By comparison, the US M2 money supply (the credit-money created by banks via fractional reserve lending) was only about $7 trillion in 2007.  Thus credit-creation-via-collateral-chains is a major source of credit in today’s financial system.

Exiting Without Panicking the Markets

The shadow banking system is controversial. It funds derivatives and other speculative ventures that may harm the real, producing economy or put it at greater risk. But the shadow system is also a source of credit for many businesses that would otherwise be priced out of the credit market, and for such things as credit cards that we have come to rely on. And whether we approve of the shadow system or not, depriving it of collateral could create mayhem in the markets. According to the Treasury Borrowing Advisory Committee of the Securities and Financial Markets Association, the shadow system could be short as much as $11.2 trillion in collateral under stressed market conditions. That means that if every collateral claimant tried to grab its collateral in a Lehman-like run, the whole fragile Ponzi scheme could collapse.
That alone is reason for the Fed to prevent “taper tantrums” and keep the market pacified. But the Fed is under pressure from the Swiss-based Bank for International Settlements, which has been admonishing central banks to back off from their asset-buying ventures.

An Excuse to Abandon the Fed’s Mandate of Full Employment?

 The BIS said in its annual report in June:

Six years have passed since the eruption of the global financial crisis, yet robust, self-sustaining, well balanced growth still eludes the global economy. . . .
Central banks cannot do more without compounding the risks they have already created. . . . [They must] encourage needed adjustments rather than retard them with near-zero interest rates and purchases of ever-larger quantities of government securities. . . .
Delivering further extraordinary monetary stimulus is becoming increasingly perilous, as the balance between its benefits and costs is shifting.
Monetary stimulus alone cannot provide the answer because the roots of the problem are not monetary. Hence, central banks must manage a return to their stabilization role, allowing others to do the hard but essential work of adjustment.

For “adjustment,” read “structural adjustment” – imposing austerity measures on the people in order to balance federal budgets and pay off national debts. The Fed has a dual mandate to achieve full employment and price stability. QE was supposed to encourage employment by getting money into the economy, stimulating demand and productivity. But that approach is now to be abandoned, because “the roots of the problem are not monetary.”
So concludes the BIS, but the failure may not be in the theory but the execution of QE. Businesses still need demand before they can hire, which means they need customers with money to spend. QE has not gotten new money into the real economy but has trapped it on bank balance sheets. A true Bernanke-style helicopter drop, raining money down on the people, has not yet been tried.

How Monetary Policy Could Stimulate Employment

The Fed could avoid collateral damage to the shadow banking system without curtailing its quantitative easing program by taking the novel approach of directing its QE fire hose into the real market.
One possibility would be to buy up $1 trillion in student debt and refinance it at 0.75%, the interest rate the Fed gives to banks. A proposal along those lines is Elizabeth Warren’s student loan bill, which has received a groundswell of support including from many colleges and universities.
Another alternative might be to make loans to state and local governments at 0.75%, something that might have prevented the recent bankruptcy of Detroit, once the nation’s fourth-largest city. Yet another alternative might be to pour QE money into an infrastructure bank that funds New Deal-style rebuilding.
The Federal Reserve Act might have to be modified, but what Congress has wrought it can change.  The possibilities are limited only by the imaginations and courage of our congressional representatives.

NO MORE GAMES, WE WANT OUR NOTES

Federal indictments need to come down, this has now gone on long enough. They should all be jailed, and people should get their homes bought and paid for. After the tax bailouts, and the rest of the abuse, all these homes are bought and paid for by the people of this country. 

No more deals, no more handouts, it's time the people of this country get relief. Hand over our notes , we have bought and paid for them by your abuse, in the courts and our tax dollars!  Its now our turn!

The only way this country is gonna bounce back is to give the people their homes back.  The money its cost tax payers for this bullshit, has given us the right to demand our notes from these banks. You were bought and paid for by :

THE UNITED STATES TAX PAYERS  !

Lets demand congress and our elected officials to give us our homes back. Your petty pay outs is not gonna work or your bounced checks . We want our homes, and its time you pay up! We have given all were gonna give. 


NO MORE BAIL OUTS FOR BANKS.. ITS TIME TO BAIL OUT HOMEOWNERS! 

WE WANT OUR NOTES BACK PAID IN FULL!!

 

MF Global Files Lawsuit Against 11 Banks

• Let all the crooks stew in the same pot.  It's now time for federal indictments to come down, and people need to go to jail.. ALL of them!
• Updated July 30, 2013, 11:01 a.m. ET

An affiliate of MF Global Holdings Ltd. filed a lawsuit alleging 11 banks engaged in anticompetive practices in the $25 trillion credit-default swaps market, including preventing the company from becoming a clearing broker for swaps.
MF Global Capital LLC, an arm of the collapsed broker managed by a board liquidating the company, filed a lawsuit in U.S. District Court for the Northern District of Illinois late Thursday alleging the banks "restrained competition" in the lucrative CDS market.
MF Global's move is the third lawsuit filed in the U.S. claiming banks controlled the swaps market inappropriately. It is also the latest sign that companies who say they were hamstrung by banks dominating the market are growing into a credible threat for Wall Street firms still reeling from litigation on everything from mortgage bonds to manipulation of a key interest rate benchmark, Libor, or the London Interbank Offered Rate.
The banks named in the suit were: Bank of America Corp. BAC +0.17% (BAC), Barclays BARC.LN -5.74% PLC (BARC.LN, BCS), BNP Paribas SA BNP.FR -0.76% (BNP.FR, BNPQY), Citigroup Inc. C +0.35% (C), Credit Suisse Group AG CSGN.VX -0.18% (CS, CSGN.VX), Deutsche Bank AG DBK.XE -3.91% (DBK.XE, DB), Goldman Sachs Group Inc. GS +0.31% (GS), HSBC Holdings HSBA.LN +1.07% Plc (HBC, HSBA.LN), Morgan Stanley MS -0.16% (MS), Royal Bank of Scotland Group RBS.LN -2.52% PLC (RBS.LN, RBS) and UBS AG UBSN.VX +2.31% (UBS, UBSN.VX).
J.P. Morgan Chase JPM -0.30% & Co. (JPM) was named as a "co-conspirator" in the complaint. The lawsuit separately named as defendants the International Swaps and Derivatives Association, a trade group for swaps, and Markit Group Ltd, a financial data provider for CDS, which is co-owned by several banks.
ISDA has previously said it believes the allegations in CDS lawsuits are "without merit and that ISDA acted properly at all times."
Spokespeople for Citigroup, Morgan Stanley, and RBS declined to comment. The other banks did not immediately return requests for comment.
The failed broker's lawsuit is seeking treble damages and an injunction for what it claims were attempts by banks to prevent it from becoming a clearing broker for CDS. It also says the actions of the banks caused customers to be overcharged in their trades by paying "inflated" prices that "cushion the profits" of the defendants. The complaint says the amount of damage done by dealers to plaintiffs is "in the tens of billions of dollars."
MF Global, which filed for bankruptcy in December 2011, participated in the CDS market both as a derivatives broker and as a customer purchasing CDS, the lawsuit said. The lawsuit is overseen by a panel managing MF Global's liquidation.
The MF Global case may be consolidated with others, where a single judge will hear the various complaints filed, according to a person familiar with the matter.
The suit echoes similar complaint filed in Illinois. In mid-July three Danish pension funds and their investment management company alleged anti-trust violations in the CDS market. In May, the Sheet Metal Workers Local No. 33 Cleveland Pension Plan also alleged anticompetitive practices in CDS. That lawsuit was amended to include additional information earlier this month.

Here we go again!!

US files civil charges against former MF Global CEO Jon Corzine

By Gabriel Black
20 July 2013 

 

Last month, the US Commodity Futures Trading Commission (CFTC) filed a civil lawsuit against Jon Corzine, the ex-chief of MF Global, for “failing to properly supervise” employees who used nearly a billion dollars from customers’ accounts to cover the firm’s bad debts.

Corzine personifies the politically incestuous relationship between Wall Street and the Democratic Party. A former CEO of Goldman Sachs, he went from Wall Street to Washington, using millions of dollars of his own fortune to win election as US senator from New Jersey in 2000 and repeating the process to become governor of New Jersey in 2006.
A major fundraiser for Barack Obama’s election campaign in 2008, Corzine was defeated in his bid for a second term as New Jersey governor by right-wing Republican Chris Christie due largely to Corzine’s attacks on state employees. He moved on to become CEO of Wall Street brokerage firm MF Global in 2010.
Under Corzine, MF Global lost billions of dollars betting on European government bonds. By October 2011, the firm was unraveling and it filed for Chapter 11 bankruptcy protection on October 31. It quickly emerged that some $1 billion in clients’ money was missing, widely believed to have been stolen by MF Global management to meet demands from the firm’s Wall Street creditors.
The $41 billion bankruptcy of MF Global was the eighth largest in US history and the biggest Wall Street collapse since the 2008 implosion of Lehman Brothers.
The CFTC civil suit against Corzine was filed in federal court in New York. The complaint also lists the assistant treasurer of the firm, Edith O’Brien, as a defendant.
MF Global and its parent firm have both made settlements with the CFTC. If O’Brien or Corzine are found guilty, they will rescind pay and incur fines.
In keeping with the policy of the Obama administration of refusing to criminally prosecute banks and top bank executives involved in defrauding investors, clients and the general public, Corzine faces no criminal charges.
After a ten-month investigation, the Justice Department last year dropped a criminal probe of MF Global and Corzine, declaring there was not enough evidence to indict the banker/politician. In the civil suit filed last month, moreover, Corzine is not being charged with misappropriating customers’ money, but only failing to properly supervise subordinates such as the firm’s treasurer, Edith O’Brien.
There is a stark disconnect between the descriptions of MF Global wrongdoing and the role of Corzine in the lawsuit filed by CFTC enforcement chief David Meister and the kid gloves treatment the CFTC is giving the former CEO. The suit seems, moreover, to undermine the Justice Department’s claim to have insufficient evidence to prosecute Corzine.
According to Meister, “thousands of customers were harmed, and customer fund protection laws were violated on a scale never previously seen in the US futures markets.” The suit states further: “Corzine bears responsibility for MF Global’s unlawful acts … He [Corzine] held and exercised direct or indirect control over MF Global … and either did not act in good faith or knowingly induced these violations.”
The suit cites telephone calls and other communications that point to Corzine’s direct role in misappropriating customer funds.
In a phone call just four days before the firm collapsed, Corzine told an employee “to strategize how they could use customer segregated funds to induce [JPMorgan Chase] to clear MF Global’s trades more quickly.” The employee objected, “but that’s cash seg for clients—it has nothing to do with greasing our wheels for Chase to move.” To which Corzine replied: “I understand, but you put it in a tri-party, and then once the securities have started moving, then you move it back to the um… this is the same thing we did last night, they left it in the tri-party, the seg money.”
At another point, the suit cites the treasurer of the company as saying, “We have to tell Jon enough is enough. We need to take the keys away from him.”
The lawsuit is expected to last several years. Corzine maintains that he is completely innocent and will contest it.
Should he lose, Corzine will be barred from certain types of financial trading and fined a small portion of his fortune. He is currently considering starting a new hedge fund.

 

Court Allows HSBC To Proceed With Putback Lawsuit Against Deutsche Bank

By Structured Finance Litigation Team on July 23rd, 2013 Posted in Deutsche Bank AG, HSBC Bank USA, Investment Banks/Deal Sponsors, Trustees

On July 23, 2013, a federal court in New York allowed HSBC Bank USA to proceed with a putback lawsuit against DB Structured Products Inc. (DBSP), a unit of Deutsche Bank AG, in connection with approximately $640 million in residential mortgage-backed securities (RMBS). HSBC, acting as trustee for Deutsche Alt-A Securities Mortgage Loan Trust, filed its lawsuit in November 2012, alleging that DBSP misrepresented the quality of 1,513 residential mortgage loans that it purchased and securitized in 2006. According to HSBC’s complaint, at least 323 of the loans underlying the RMBS contained misleading documentation concerning borrowers’ debt obligations, owner-occupancy rates, homeowners’ debt-to-income ratios, and employment status of borrowers. DBSP moved to dismiss on the grounds that, inter alia, HSBC was trying to sue for breaches of representations and warranties without providing sufficient prior notice, and that the pooling and servicing agreement (PSA) limited remedies to a loan-by-loan repurchase. In denying most of DBSP’s motion to dismiss, U.S. District Judge Robert W. Sweet found that HSBC “more than complied with the minimal notice requirements in the Agreements” and DBSP’s failure to repurchase or cure despite receiving breach notices was sufficient to establish a breach of contract claim. Judge Sweet further ruled that monetary damages would be an appropriate remedy because many of the disputed loans had already been liquidated or foreclosed. The case is Deutsche Alt-A Securities Mortgage Loan Trust v. DB Structured Products, Inc., case number 12-cv-08594, in the U.S. District Court for the Southern District of New York. Read the opinion here.

Inside Take: Arch Bay Dumps NPLs

Inside Take: Arch Bay Dumps NPLs, Servicing Rule Coming

January 16, 2013

Arch Bay Dumps Nonperforming Portfolio, Launches Lending Unit

By Paul Muolo / pmuolo@imfpubs.com
Arch Bay Capital, once one of the most active buyers of nonperforming residential loans, has sold most of its NPL portfolio and launched a company that will originate non-agency mortgages, according to industry officials who have been briefed on its plans.
Secondary market sources who work in the NPL space say that the Irvine, CA-based Arch Bay sold roughly 4,000 non- and subperforming mortgages a few weeks back. The buyer’s identity is not known. Arch Bay officials could not be reached for comment.
Over the past few years, Arch Bay has invested at least $1 billion in NPLs, purchasing troubled mortgages from such lenders as Wells Fargo. The firm is owned by York Capital Management, a private investment firm.
About 18 months ago, Arch Bay tried to launch an origination division and even hired several workers, but then pulled the plug on the idea, without explanation. It also tossed its senior management team at about the same time.

WELL WE KNOW IT WAS ROOSEVELT MORTGAGE THAT BOUGHT THESE JUNK LOANS.. HOWEVER , ARCHBAY CLAIMING TO OWN THESE LOANS IS FRAUD, YORK CAPITAL OWNS IT, SO ITS YORK WHO HAD TO FORECLOSE ON THESE NOTES NOT ARCHBAY. IF ARCHBAY WAS FORECLOSING ON YOUR LOAN , IT WAS FRAUD. YORK HID ITSELF , AND DID NOT EVEN SIGN THE LAND TITLES. BEING THE OWNER OF THE COMPANY AND MORTGAGES THEY MUST BE THE ONES TO SIGN LAND TITLES.


Roosevelt Management acquired it USBank National Association Trustee for RMAC TRUST SERIES 1-T

A CASE OF FRAUD

Case 1:12-cv-04761-JSR Document 39 Filed 02/04/13 Page 1 of 46
DEXIA SA/NV, et al.,
Plaintiffs,
v.
BEAR STEARNS & CO., INC, et al.,
Defendants
JPM, CHASE, WASHINGTON MUTUAL, DB STRUCTURED PRODUCTS, DEUTSCHE BANKS, LONG BEACH MORTGAGE,
http://sdnyblog.com/wp-content/uploads/2013/04/12-Civ.-04761-2013.02.04-Opposition-to-Motion-for-Summary-Judgment.pdf


THIS STORY GOES WITH THE ABOVE

BREAKING NEWS

JPMorgan Agrees to Pay $410M to Settle U.S. Energy Probe

JPMorgan Hid Reports of Defective Loans Before Sales

JPMorgan Chase & Co. overrode an independent analysis of home loan portfolios by buying and selling defective loans to create a sanitized version of the pool, which was then securitized and sold, a court was told.
FSA Asset Management LLC, which bought the residential mortgage-backed securities that later collapsed in value, and its parent Franco-Belgian bank Dexia SA filed hundreds of e- mails and transcripts of employee interviews in federal court in Manhattan on Feb. 4, urging a judge not to throw out their lawsuit over the collateralized securities.
JPMorgan received reports from independent mortgage loan underwriters showing that 20 percent to 80 percent of the loans in samples used for testing didn’t meet the underwriting guidelines, including fraudulent home appraisals or missing documentation, FSA Asset Management, or FSAM, said in the filing.
“Rather than disclose these known defects to FSAM, defendants bought and sold massive quantities of defective loans,” FSAM said. “Defendants secretly overrode the independent loan underwriters’ determinations, creating a final, sanitized version.”
FSAM failed to expressly assign fraud claims related to the securities to Dexia, so the bank isn’t allowed to sue under New York law, JPMorgan said in a Jan. 21 filing, urging the judge to throw out the lawsuit without a trial.
FSAM also can’t sue because it had recovered the full purchase price of the securities it bought so it suffered no harm, JPMorgan said.
The plaintiffs purchased more than $1.6 billion of residential mortgage-backed securities in 51 offerings between 2005 and 2007, according to an amended statement of claim filed in New York State court in May. The purchases were made from JPMorgan and two banks the New York-based lender acquired during the 2007 credit crisis, Bear Stearns and Washington Mutual.
“Defendants rehash the well-worn ‘don’t blame us, blame the financial crisis’ defense, which numerous courts have rejected,” Dexia said.
The case is Dexia SA v. Bear Stearns & Co. 12-cv-04761. U.S. District Court Southern District of New York (Manhattan).

Unidentified Lenders Account For Growing Share of Jumbo MBS

CAN WE ALL SAY HEDGE FUNDS - THAT ARE FUNDED BY THE BANKS TO HIDE THE FRAUD OF 2004-2008!

Small lenders have accounted for a growing share of contributions to non-agency jumbo mortgage-backed securities. Some deals have included more than 70 lenders, with most of the lenders contributing less than 5 percent of the volume of mortgages included in a security.
While the lenders’ individual contributions to a particular jumbo MBS are small, they add up to significant market share, particularly when issuers don’t identify the lenders in prospectus documents filed with the Securities and Exchange Commission or in reports published by the rating services.
Through two quarters in 2013, unidentified lenders accounted for 35.3 percent of the collateral backing the $8.29 billion in non-agency jumbo MBS issued during that period, according to a new ranking and analysis by Inside Nonconforming Markets. That was nearly double the amount of loans coming from First Republic Bank, which was the top contributor to jumbo MBS in the first half of 2013.
And while a few identified lenders increased their share of contributions to non-agency jumbo MBS in the second quarter of 2013 compared with the previous quarter, the volume of originations from unidentified lenders increased by 46.8 percent during that time.


DEUTSCHE BANK/DB STRUCTURED PRODUCTS
JPM/CHASE
CITI
USBANK CORP
WELLS FARO
GOLDMAN
BOA

 
ARE ALL  FUNDING THESE HEDGE FUNDS TO HIDE THE FRAUD OF THESE MORTGAGES FROM 2004- 2008 , AND SUDDENLY THEY COME UP WITH THE PAPERWORK FOR THE COURTS, BUT THE HEDGE FUNDS FAIL TO TELL THE INVESTORS OR THE COURTS THE DOCUMENTS ARE FRAUDULENT AND ARE ON LOAN ONLY FOR THE COURT HEARINGS AND ARE RETURNED BACK TO THE BANKS.

PENNY MAC ( OLD COUNTRYWIDE BOYS)
ROOSEVELT MORTGAGE
RUSHMORE
ARCHBAY HOLDINGS LLC 
ARCHBAY CAPITOL /ALSO KNOWN AS YORK CAPITOL

THE LIST IS ENDLESS BUT THESE ARE ALOT OF THE MAIN PLAYERS IN THE FRAUD UPON THE COURTS.

Senate Likely to Take Up Mortgage Issues this Week

By Brandon Ivey

bivey@imfpubs.com
The Senate will likely vote on mortgage-related issues this week before breaking for the August recess, according to industry analysts.
On Wednesday, the Senate Banking Committee Chairman is scheduled to markup S. 1376, “The FHA Solvency Act of 2013,” a bill with bipartisan support. The full Senate could also vote on the bill as soon as this week, according to the Mortgage Bankers Association.
The House appears less likely to vote on standalone FHA reform legislation as Republicans are pushing for a comprehensive overhaul of the housing finance system.
The MBA said the Senate could also vote on S. 1217, “The Housing Reform and Taxpayer Protection Act of 2013,” a bill from Sens. Bob Corker, R-TN, and Mark Warner, D-VA, to reform the government-sponsored enterprises. The bill faces resistance from Republican leaders in the House who are working to establish successors to the GSEs without a government guarantee.
And the Senate could vote on the nomination of Rep. Mel Watt, D-NC, as director of the Federal Housing Finance Agency. It remains unclear at this point if there are 60 Senators in favor of Watt’s nomination.

SAC Capital CEO Steven Cohen Throws A Party Despite Indictment

Can u say PIECE OF SHIT! Whoever said fraud doesn't pay or the fraudsters pay, they throw parties instead .


July 28 (Reuters) - Hedge fund billionaire Steven A. Cohen did not let the filing of criminal charges against his $14 billion SAC Capital Advisors get in the way of a party this weekend at his vacation estate in tony East Hampton, New York.

The Saturday night party at Cohen's 10-bedroom home on Further Lane took place two days after federal prosecutors in New York announced a five-count criminal indictment against SAC Capital that portrayed the 21-year-old Stamford, Conn.-based fund as a breeding ground for unlawful insider trading.

The lavish affair, which one source said included delivery of $2,000 worth of tuna from a local fish store to Cohen's home, was planned before the charges were filed. A person familiar with the event said the party, attended by a few dozen people, was intended by the 57-year-old manager to show support for ovarian cancer research, though it was not a fundraiser.

On Friday, lawyers for SAC Capital entered a not guilty plea to the charges. Some in the hedge fund industry said a fierce determination to carry on business as usual was behind Cohen's decision to go ahead with the bash at his 9,000-square-foot home on a street famed for its waterfront mansions.

Cohen, whose estimated fortune is $9 billion, set up shop in 1992 with just $25 million and earned a reputation as of the greatest stock traders of his generation. His firm has posted a 25 percent average annual return, one of the best performance track records in the $2.4 trillion hedge fund industry, despite charging investors some of the highest fees.

SAC Capital, after the indictment was announced, sent an email to employees and investors saying the firm would operate as normal. It stressed that prosecutors did not intend to take any action that would imperil the firm's ability to return some $4 billion in outside investor money by year's end.


RARE MOVE RAISES QUESTIONS

It's a rare move for federal prosecutors to indict a corporation, and it remains to be seen just how long Wall Street banks that lend money to SAC Capital and trade with it, will continue to do.

It also remained to be seen whether Cohen, who faces no criminal charges himself, can keep his hedge fund empire together as a fully functioning firm employing nearly 1,000 people, with offices in eight cities around the globe.

And it was unclear whether Cohen's more than 500 investment professionals, traders and analysts, will remain with the firm as the criminal proceeding unfolds. Investors have asked to withdraw most of the $6 billion in outside money the fund managed at the beginning of the year.

"I would be running for the hills and looking for a job now if I were an SAC employee" said Mark Jordan, a veteran wealth management recruiter. "Who in their right mind would put money in SAC again?"

A review of LinkedIn profiles for more than a dozen SAC employees revealed that some have been connecting through the online networking site with Wall Street job recruiters.

Up until recently, headhunters had said they were not seeing a flood of resumes from SAC employees, even after U.S. securities regulators filed a civil administrative complaint against Cohen on July 19 for failing to supervise two employees charged by prosecutors with insider trading.

As of early last week, SAC Capital was still interviewing candidates for clerical positions and junior trading and analyst jobs, according to headhunters and an SAC Capital employee, who declined to be identified.

On July 23, the firm posted a job opening on its website to fill a position in its 15-member controller's team, which is responsible for analyzing the firm's daily profits and losses from trading hundreds of stocks and bonds.

In the months before the indictment, the mood at SAC Capital's New York office had been good, according to a person who works there but declined to be identified.

Employees had tended to discount the possibility of federal prosecutors filing a criminal charge against SAC because the investigation had been going for at least seven years.


PERFORMANCE BETTER THAN INDUSTRY'S

Other employees rallied around the fact that SAC Capital's main portfolio was up about 11 percent for the year as of mid-July, compared with a 3.2 percent return for the average hedge fund through the end of June. The exceptional performance was seen as ensuring top traders and analysts who remained with SAC Capital would be on target to get handsome year-end bonuses.

Those rich year-end pay packages, a byproduct of SAC Capital's long success, is one thing that has earned Cohen loyalty from employees, even after they have left the firm.

But the mood darkened at SAC Capital on Thursday in the wake of the criminal indictment, said people familiar with the firm. There's worry that despite Cohen's intention to continue trading, he could be forced to eliminate jobs if Wall Street firms stop providing financing to enhance trading positions.

The indictment, which alleges unlawful trading took place at SAC Capital for at least a decade, has cast a shadow on Cohen's legacy and raised questions about the firm's track record.

"I hardly know Stevie Cohen, but he was a great money manager for a long time. How he did it, I really don't know," said hedge fund pioneer Michael Steinhardt on Wednesday, as word of the imminent indictment was spreading across Wall Street.

For now, one Wall Street executive said the firm's half-dozen prime brokerage firms are taking a wait-and-see attitude about eliminating lines of credit to SAC Capital or boosting collateral posting requirements for trading positions. The executive said the sense is that if one big Wall Street firm decides to cut ties with SAC, most other firms will follow suit.

This scenario could force quick liquidation of some positions. The firm lists its regulatory assets at about $50 billion, a figure that reflects the use of leverage, or borrowed money, to enhance the trading prowess of its $14 billion in capital, of which more than $8 billion comes from Cohen and his employees.

In a regulatory document, SAC Capital says some of the firm's "investments in securities are also conducted on a highly leveraged basis, including through the use of options." If SAC Capital was cut off from using borrowed money, it might not only force a liquidation but limit the ability of the firm to generate the kind of profits it has regularly generated.

Still some on Wall Street believe that if big Wall Street firms were to cut ties with SAC Capital, smaller firms might be ready to step in and fill some of the financing gap.

Junk mortgages under the microscope

Ita time the sec and the feds take another look at junk bonds with hedge funds

A close-up of one deal shows how subprime mortgages went bad, says Fortune's Allan Sloan.

(Fortune Magazine) -- It's getting hard to wrap your brain around subprime mortgages, Wall Street's fancy name for junk home loans. There's so much subprime stuff floating around - more than $1.5 trillion of loans, maybe $200 billion of losses, thousands of families facing foreclosure, umpteen politicians yapping - that it's like the federal budget: It's just too big to be understandable.
So let's reduce this macro story to human scale. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm - and this one's pretty bad.

So many homes are up for sale that prices are falling, and holders of mortgage-backed securities are getting hurt.

It was sold by Goldman Sachs (Charts, Fortune 500) - GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become a name itself, like AT&T and 3M.
This issue, which is backed by ultra-risky second-mortgage loans, contains all the elements that facilitated the housing bubble and bust. It's got speculators searching for quick gains in hot housing markets; it's got loans that seem to have been made with little or no serious analysis by lenders; and finally, it's got Wall Street, which churned out mortgage "product" because buyers wanted it. As they say on the Street, "When the ducks quack, feed them."
Alas, almost everyone involved in this duck-feeding deal has had a foul experience. Less than 18 months after the issue was floated, a sixth of the borrowers had already defaulted on their loans. Investors who paid face value for these securities - they were looking for slightly more interest than they'd get on equivalent bonds - have suffered heavy losses.

Investors to Fed: Thanks for nothing

That's because their securities have either defaulted (for a 100% loss) or been downgraded by credit-rating agencies, which has depressed the securities' market prices. (Check out one of these jewels on a Bloomberg machine, and the price chart looks like something falling off a cliff.)
Even Goldman may have lost money on GSAMP - but being Goldman, the firm has more than covered its losses by betting successfully that the price of junk mortgages would drop. Of course, Goldman knew a lot about this market: GSAMP was just one of 83 mortgage-backed issues totaling $44.5 billion that Goldman sold last year.
Now let's take it from the top.
In the spring of 2006, Goldman assembled 8,274 second-mortgage loans originated by Fremont Investment & Loan, Long Beach Mortgage Co., and assorted other players. More than a third of the loans were in California, then a hot market. It was a run-of-the-mill deal, one of the 916 residential mortgage-backed issues totaling $592 billion that were sold last year.
The average equity that the second-mortgage borrowers had in their homes was 0.71%. (No, that's not a misprint - the average loan-to-value of the issue's borrowers was 99.29%.)
It gets even hinkier. Some 58% of the loans were no-documentation or low-documentation. This means that although 98% of the borrowers said they were occupying the homes they were borrowing on - "owner-occupied" loans are considered less risky than loans to speculators - no one knows if that was true. And no one knows whether borrowers' incomes or assets bore any serious relationship to what they told the mortgage lenders.
You can see why borrowers lined up for the loans, even though they carried high interest rates. If you took out one of these second mortgages and a typical 80% first mortgage, you got to buy a house with essentially none of your own money at risk. If house prices rose, you'd have a profit. If house prices fell and you couldn't make your mortgage payments, you'd get to walk away with nothing (or almost nothing) out of pocket. It was go-go finance, very 21st century.
Goldman acquired these second-mortgage loans and put them together as GSAMP Trust 2006-S3. To transform them into securities it could sell to investors, it divided them into tranches - which is French for "slices," in case you're interested.
There are trillions of dollars of mortgage-backed securities in the world for the same reason that Tyson Foods offers you chicken pieces rather than insisting you buy an entire bird. Tyson can slice a chicken into breasts, legs, thighs, giblets - and Lord knows what else - and get more for the pieces than it gets for a whole chicken. Customers are happy, because they get only the pieces they want.
Similarly, Wall Street carves mortgages into tranches because it can get more for the pieces than it would get for whole mortgages. Mortgages have maturities that are unpredictable, and they require all that messy maintenance like collecting the monthly payments, making sure real estate taxes are paid, chasing slow-pay and no-pay borrowers, and sending out annual statements of interest and taxes paid. Securities are simpler to deal with and can be customized.
Someone wants a safe, relatively low-interest, short-term security? Fine, we'll give him a nice AAA-rated slice that gets repaid quickly and is very unlikely to default. Someone wants a risky piece with a potentially very rich yield, an indefinite maturity, and no credit rating at all? One unrated X tranche coming right up. Interested in legs, thighs, giblets, the heart? The butcher - excuse us, the investment banker - gives customers what they want.
In this case, Goldman sliced the $494 million of second mortgages into 13 separate tranches. The $336 million of top tranches - named cleverly A-1, A-2, and A-3 - carried the lowest interest rates and the least risk. The $123 million of intermediate tranches - M (for mezzanine) 1 through 7 - are next in line to get paid and carry progressively higher interest rates.
Finally, Goldman sold two non-investment-grade tranches. The first, B-1 ($13 million), went to the Luxembourg-based UBS (Charts) Absolute Return fund, which is aimed at non-U.S. investors and thus spread GSAMP's problems beyond our borders. The second, B-2 ($8 million), went to the Morgan Keegan Select High Income fund. (Like most of this article, this information is based on our reading of various public filings; UBS and Morgan Keegan both declined to comment.)

Welcome to Bailout City!

Goldman wouldn't say, but it appears to have kept the 13th piece, the X tranche, which had a face value of $14 million (and would have been worth much more had things gone as projected), as its fee for putting the deal together. Goldman may have had money at risk in some of the other tranches, but there's no way to know without Goldman's cooperation, which wasn't forthcoming.
How is a buyer of securities like these supposed to know how safe they are? There are two options. The first is to do what we did: Read the 315-page prospectus, related documents, and other public records with a jaundiced eye and try to see how things can go wrong.
The second is to rely on the underwriter and the credit-rating agencies - Moody's and Standard & Poor's. That, of course, is what nearly everyone does.
In any event, it's impossible for investors to conduct an independent analysis of the borrowers' credit quality even if they choose to invest the time, money, and effort to do so. That's because Goldman, like other assemblers of mortgage-backed deals, doesn't tell investors who the borrowers are.
One Goldman filing lists more than 1,000 pages of individual loans - but they're by code number and zip code, not name and address.
Even though the individual loans in GSAMP looked like financial toxic waste, 68% of the issue, or $336 million, was rated AAA by both agencies - as secure as U.S. Treasury bonds. Another $123 million, 25% of the issue, was rated investment grade, at levels from AA to BBB--.
Thus, a total of 93% was rated investment grade. That's despite the fact that this issue is backed by second mortgages of dubious quality on homes in which the borrowers (most of whose income and financial assertions weren't vetted by anyone) had less than 1% equity and on which GSAMP couldn't effectively foreclose.

It's all in the math

How does toxic waste get distilled into spring water? Watch. It's all in the math - and the assumptions about how borrowers will behave.
These loans, which are fixed-rate, carried an average interest rate of 10.51%. After paying the people who collected the payments and handled all the other paperwork, the GSAMP Trust had ten percentage points left. However, the interest on the securities that GSAMP issued ran to only about 7%. (We say "about" because some of the tranches are floating-rate rather than fixed-rate.)
The difference between GSAMP's interest income and interest expense was projected at 2.85% a year. That spread was supposed to provide a cushion to offset defaults by borrowers. In addition, the aforementioned X piece didn't get fixed monthly payments and thus provided another bit of protection for the 12 tranches ranked above it.
Remember that we're dealing with securities, not actual loans. Thus losses aren't shared equally by all of GSAMP's investors. Any loan losses would first hit the X tranche. Then, if X were wiped out, the losses would work their way up the food chain tranche by tranche: B-2, B-1, M-7, and so on.
The $241 million A-1 tranche, 60% of which has already been repaid, was designed to be supersafe and quick-paying. It gets first dibs on principal paydowns from regular monthly payments, refinancings, and borrowers paying off their loans because they're selling their homes. Then, after A-1 is paid in full, it's the turn of A-2 and A-3, and so on down the line.
Moody's projected in a public analysis of the issue that less than 10% of the loans would ultimately default. S&P, which gave the securities the same ratings that Moody's did, almost certainly reached a similar conclusion but hasn't filed a public analysis and wouldn't share its numbers with us. As long as housing prices kept rising, it all looked copacetic.
Goldman peddled the securities in late April 2006. In a matter of months the mathematical models used to assemble and market this issue - and the models that Moody's and S&P used to rate it - proved to be horribly flawed. That's because the models were based on recent performances of junk-mortgage borrowers, who hadn't defaulted much until last year thanks to the housing bubble.

The fallout

Through the end of 2005, if you couldn't make your mortgage payments, you could generally get out from under by selling the house at a profit or refinancing it. But in 2006 we hit an inflection point. House prices began stagnating or falling in many markets. Instead of HPA - industry shorthand for house-price appreciation - we had HPD: house-price depreciation.
Interest rates on mortgages stopped falling. Way too late, as usual, regulators and lenders began imposing higher credit standards. If you had borrowed 99%-plus of the purchase price (as the average GSAMP borrower did) and couldn't make your payments, couldn't refinance, and couldn't sell at a profit, it was over. Lights out.
As a second-mortgage holder, GSAMP couldn't foreclose on deadbeats unless the first-mortgage holder also foreclosed. That's because to foreclose on a second mortgage, you have to repay the first mortgage in full, and there was no money set aside to do that. So if a borrower decided to keep on paying the first mortgage but not the second, the holder of the second would get bagged.
If the holder of the first mortgage foreclosed, there was likely to be little or nothing left for GSAMP, the second-mortgage holder. Indeed, the monthly reports issued by Deutsche Bank (Charts), the issue's trustee, indicate that GSAMP has recovered almost nothing on its foreclosed loans.
By February 2007, Moody's and S&P began downgrading the issue. Both agencies dropped the top-rated tranches all the way to BBB from their original AAA, depressing the securities' market price substantially.
In March, less than a year after the issue was sold, GSAMP began defaulting on its obligations. By the end of September, 18% of the loans had defaulted, according to Deutsche Bank.
As a result, the X tranche, both B tranches, and the four bottom M tranches have been wiped out, and M-3 is being chewed up like a frame house with termites. At this point, there's no way to know whether any of the A tranches will ultimately be impaired.
"[In hindsight,] I think we would not have rated it" had Moody's realized what was going on in the junk-mortgage market, says Nicolas Weill, the firm's chief credit officer for structured finance. Low credit scores and high loan-to-value ratios were taken into account in Moody's original analysis, of course, but the firm now thinks there were things it didn't know about.

Two small lessons from the market turmoil

Weill doesn't lay blame on any particular party, although in a Sept. 25 special report posted on Moody's website, he called for "additional third-party oversight that reviews the accuracy of the information provided by borrowers, appraisers, and brokers to originators" when it comes to junk issues. Or, as he calls them, "non-prime."
S&P, by contrast, says that it considers both its original rating and subsequent downward revisions correct. "We used the best information available at the time," says Vickie Tillman, S&P's chief rating officer.
If you read documents that Goldman filed with the SEC in connection with this offering, you discover that they warn about pretty much everything we've discussed so far and some things we haven't: the impact of falling house prices, the difficulty of foreclosing, the possible changes in credit ratings, the fact that more than half the mortgages were in California, Florida, and New York, all of which were overheated markets.
It's all disclosed. In capital letters. So no buyer - and this is aimed at sophisticated investors - can say he wasn't warned.
Goldman said it made money in the third quarter by shorting an index of mortgage-backed securities. That prompted Fortune to ask the firm to explain to us how it had managed to come out ahead while so many of its mortgage-backed customers were getting stomped.
Goldman's profits came from hedging the mortgage securities it keeps in inventory in order to make trading markets. It said in a recent SEC filing, "Although we recognized significant losses on our non-prime mortgage loans and securities, those losses were more than offset by gains on short mortgage positions."
As we interpret this - the firm declined to elaborate - Goldman made more on its hedges than it lost on its inventory because junk mortgages fell even more sharply than Goldman thought they would.
What is there to take away from our course in Junk Mortgages 101? Two things. First, you have to pay at least some attention to all those "risk factors" that issuers forever warn you about - especially when you're dealing with a whole new thing like junk mortgages issued en masse instead of by specialists.
Second, when you rely on the underwriter and the rating agencies to do all your homework for you, you don't have safety. You have only the illusion of safety.

Was your Wamu or any loan bought by DB Structured Products in 2006?

Was your Wamu or any loan bought by DB Structured Products in 2006? Ace securities was what they dumped them in. Heres your link to maybe find your note on the Sec Edgar site

http://www.securitization.net/pdf/DBRS/2007/210414_ACE_Securities_29Jan07.pdf


Wells Fargo was master servicer
http://www.sec.gov/Archives/edgar/data/1412888/000105640408000833/dal07003_35-3.txt

How Goldman will sink the ships

Investors Lost, Goldman Won on WaMu Deal 

 

Washington Mutual Inc. and its Long Beach Mortgage Co. subprime-lending unit rang up one of the worst failures in U.S. history. Left in the wake were billions of dollars of soured loans and questionable lending practices.
But when times were better, the two companies had a powerful partner on Wall Street: Goldman Sachs Group Inc. GS -1.31%

Beached

• May 10, 2007: Goldman and WaMu underwrite bonds backed by $532.6 million in mortgages.
• May 16, 2007: WaMu unit says $49.3 million in loans are worthless.
• May 17, 2007: 'Good news,' Goldman trader writes in an email, 'we make $5mm' because the firm shorted the bonds.

Recently released emails and other documents, including securities filings, show how Goldman, considered one of Wall Street's most elite banks, built its mortgage business by closely working with lenders such as Washington Mutual and Long Beach, two firms that "polluted the financial system" with souring loans, according to a Senate review of Washington Mutual on April 13.
"Long Beach…was not a responsible lender," Sen. Carl Levin (D., Mich.), chairman of the Senate Permanent Subcommittee on Investigations, said in his opening remarks April 13. "Its loans and mortgage-backed securities were among the worst performing of the subprime industry."
Goldman declined to discuss its business with Washington Mutual or the communications in the emails released by the Senate panel.
Goldman was one of several Wall Street firms that helped sell bonds backed by Washington Mutual loans. Over the weekend, the Senate subcommittee released internal Goldman emails, including one showing that the firm made a $5 million trading profit by betting against securities Goldman sold in a Long Beach bond offering that lost money for its investors, raising a potential conflict with its clients. On Tuesday, the panel plans to question Goldman executives in a separate hearing.

The emails and others like them highlight "the importance of transparency, the importance of things being in the open, the importance of it being known who is in a position to benefit from what," senior White House adviser Lawrence Summers said Sunday on CBS's "Face the Nation."
Much has been written about Washington Mutual's failure. In September 2008, the Seattle lender was forced to sell itself to J.P. Morgan Chase & Co. JPM -0.87% at the height of the crisis in the largest-ever U.S. bank failure. But there has been less scrutiny of the ties between Washington Mutual and Goldman, which emerged stronger than rivals after the mortgage market's collapse.
J.P. Morgan said the Washington Mutual loans and securities being investigated were issued before J.P. Morgan's purchase of Washington Mutual. A lawyer for former Washington Mutual Chief Executive Kerry Killinger couldn't be reached.
At times, executives at Washington Mutual discussed seeking out Goldman for its reputation for excellence, according to Washington Mutual emails. But Washington Mutual executives also were wary of their partner because of concerns about how the Wall Street firm traded.
"We always need to worry a little about Goldman because we need them more than they need us and the firm is run by traders," a Washington Mutual executive wrote in an email released by the Senate panel in its probe of the lender.
Long Beach was founded in 1979 as Long Beach Savings & Loan by Roland Arnall, a Los Angeles developer who got his start in business in Los Angeles selling flowers on a Los Angeles street corner. A unit called Long Beach Financial Corp., based in Orange, Calif., was sold to Washington Mutual in 1999.
Aided by mortgage brokers who channeled loans to Long Beach, Washington
Mutual and Long Beach ended up bundling subprime home loans into $77 billion worth of securities, according to the Senate inquiry.

Some Long Beach bonds were ultimately used to allow Wall Street firms and hedge funds to bet against the U.S. mortgage market. Long Beach bonds were among those underpinning subprime-mortgage indexes—assembled by Goldman and other Wall Street firms—that allowed those firms and hedge funds to bet against the housing industry, according to data provided by Markit Group Ltd., which helps run the indexes.
The Long Beach loans ended up being among the worst performing in the indexes, according to a Nomura Holdings report. Separately, some Long Beach bonds also underpinned the Abacus 2007-AC1 debt pool now at the center of a Securities and Exchange Commission securities-fraud case against Goldman, which the firm is fighting.
By 2005, Long Beach was in trouble. According to the Senate report released April 13, Long Beach had to buy back $875 million of nonperforming loans from investors. Problems persisted.
Behind one sale of Long Beach securities was Goldman. In 2006, Goldman teamed with a Washington Mutual unit to sell a debt pool called Long Beach Mortgage Loan Trust 2006-A. Both firms agreed to buy some of the securities with the intention of reselling them or making a secondary market for them, according to a prospectus for them. Of the $496 million deal, Goldman was expected to purchase about $322 million of the securities with the intention of reselling them.
Washington Mutual executives appeared troubled by loans at Long Beach.
In an April 2006 email, a Washington Mutual executive told Mr. Killinger that
Long Beach's "delinquencies are up 140% and foreclosures close to 70% ... It is ugly."
By early 2007, Goldman bankers also were growing anxious about their business dealings with Washington Mutual and Long Beach, according to emails released as part of the Senate investigation into Washington Mutual.
A Goldman banker raised questions about the performance of Long Beach loans that were "performing dramatically worse" than other similar deals in 2006. "As you can imagine, this creates extreme pressure, both economic and reputational, on both organizations," the Goldman banker said.
In May 2007, Goldman executives were discussing problems facing the debt deal it had helped underwrite called Long Beach Mortgage Loan Trust 2006-A, according to emails released by the Senate panel.
Among the Senate documents is an email from a Goldman executive to Michael Swenson, then a Goldman managing director in the firm's mortgage group, about the 2006-A bond deal. In an 8 a.m. email, Goldman executives circulated a securities report that showed loans inside the pool had soured.
Six minutes later, a Goldman executive wrote, "bad news…(the price decline in the bonds) costs us about 2.5 mm," adding, "good news…we make $5mm" on a derivatives bet against the bonds.
The Senate panel, in a statement over the weekend, said the email showed how the soured Long Beach bonds "would bring [Goldman] $5 million from a bet it had placed against the very securities it had assembled and sold."
Mr. Swenson declined to comment through a Goldman spokesman. He is among the Goldman executives set to appear at Tuesday's hearing. A Goldman spokesman said in a statement: "It's our standard, prudent practice to hedge exposures."
Despite the close relationship between Washington Mutual and Goldman, Washington Mutual wondered which side Goldman was on. In October 2007, Mr. Killinger wrote in an email about a situation with Goldman: "I don't trust Goldy on this. They are smart, but this is swimming with the sharks. They were shorting mortgages big time."
  This is the link to SEC info
http://www.sec.gov/Archives/edgar/data/1355515/000127727706000388/form8kpsa20063.htm

http://www.sec.gov/Archives/edgar/data/1119605/000127727706000409/fwptermsheet_longbeach2006a.pdf