A few interesting lawsuits going on in mortgage land. One of interest to
me is directed at Fannie and Freddie. The accusation is that these
entities made false statements in order to avoid paying required realty
transfer taxes to states and municipalities. I’m not sure of the merits
of these cases, but they are moving forward.
A description of the case being brought in Massachusetts:
TAUNTON, Mass. (CN) - Massachusetts and 14 of its counties claim Fannie Mae and Freddie Mac conspired to duck property transfer taxes by falsely claiming to be government agencies. The
commonwealth and its counties claim the defendants are corporations -
not governmental bodies - and owe money for tens of thousands of
property transfers and conveyances.
A similar suit has been filed in Nevada. A link to the court filings is
worth a look. Consider the defendants that are listed. Basically the
Whose Who of finance. (PDF Link)
The claim is that the banks and Fannie/Freddie avoided state transfer
taxes. The suggestion is that Fannie lied and claimed that it was a
government agency and therefore exempt from the taxes. From the filing:
Fannie Mae used those false records and/or statements to conceal and/or avoid its obligations to pay or transmit money owed to the State for payment of taxes upon the conveyance or transfer of title to real estate in the State by intentionally misrepresenting to the State that defendant Fannie Mae was a government agency exempt from conveyance or transfer taxes.
The law suit(s) covers a period prior to the take over/conservatorship
by Treasury. It will be interesting to see how Fannie defends itself.
They have two choices. Either they fold their cards and pay monster
amounts of old transfer fees to many States, or they defend their
original position that they were in fact government agencies prior to
August of 2008.
This would seem to put Fannie/US Treasury in a lose-lose
position. If these lawsuits go against them they are going to lose a
bundle. Every state will follow the MA and NV lead. Billions are
involved. The flip side is that if Fannie prevails and actually
convinces the Judges that they were government agencies back in
2002-2008 it creates an interesting problem.
If Fannie/Freddie were legally determined to have been "government
agencies" for all those years then the government has to be held liable
for the consequences of their actions. About $60 billion of common
shareholder value was wiped out, another $25 of Preferred equity had a
similar fate. If Fannie wins this lawsuit thousands of shareholders of
the busted common and Pref are going to file lawsuits.
I have always felt that the government would be held liable for a
portion of F/F’s shareholders losses. There is no doubt in my mind that
this lawsuit (if and when it comes) would have some merit. The facts are
clear. Congress is partially responsible for the demise of F/F.
The MA/NV suits are worth watching as they progress. The pref and common
of these dogs are trading in the “Pinks” at next to no value at all.
That is a fair price given the losses at F/F. Unless of course they were
government agencies all along....
The Federal Financing Bank (“FFB”) is an arm of Treasury. So I call it Timmy’s Bank.
There was some year-end stuff at this bank that I thought was
interesting. On December 22 FFB made a bunch of new loans to private
sector companies totaling $437mm. A nice Christmas present from our pal
Tim.
Here's the breakdown from the December FFB report. Note the month to month changes:
At a time when the country is pushing its own legal debt limit and
markets are waking up (and quaking) to the realities of massive funding
requirements in front of us I find it interesting that Timmy’s Bank can
dole out an extra $437mm on Christmas Eve. After all, the last I heard
was that Ford never got a government handout…….
I wrote
on Jan 30 that the die had been cast for Mubark and his hidden
billions. When Ali was deposed in Tunisia the Swiss government waited
about 90 seconds before seizing his money. When Mubark finally announced
that he was calling it quits it took the Swiss a somewhat more polite
hour to freeze the money and make a public announcement.
Something important about the press release from the Swiss and
Murbarak’s cash stash. It came out at 6 PM Friday night in Bern. No one
working for the Swiss government is around at that time. This press
release was written days ago. It was all set to go, waiting for the last
words from Hosni.
These facts will not be lost on the other Potentates who have big holdings with Swiss Banks. The facts are very clear. If you are a Potentate and lose your “Po” you will lose your dough.
I just ask the readers to put yourselves in the Potentate’s position.
What would you do if you were faced with losing your Po and dough?
You would do everything in your power to get some of it to a place that actually couldn’t be touched. That would exclude traditional
financial assets that can be so easily traced and can’t be made to
“disappear”. Gold and diamonds (and a few other things) can be made to
disappear. The amounts involved with all of the Po’s are so very large
that I am wondering if we don’t see some effect on prices of physical
"stuff" (+) and paper assets (-).
you B da man, bruce. having a grand ole weekend†
As others have pointed out, municipalities are getting hosed from many directions and the Federal government continues to have its cake AND eat it, in a manner of speaking. If any issue drives certain states to secede or withhold federal income tax. This issue is one of those straws that will break the camel's back. People need power, water, and sewer to survive. Numerous systems are in dire straits and need billions of dollars worth of work. That work won't get done for free. The laws of physics and market fundamentals will rule the day soon enough. I remember traveling in Russia in 1996 and seeing how a similar collapse worked out for them. If you had goods and services to trade, your family had clean water, if you didn't then you got sick and lived in unsanitary conditions. It was that simple. No surprise that the mafia and black market thrived in the late 90's in Russia.
the fed can run a deficit and the states cannot, so the states aren't going anywhere probably. the breakdown of payments will start to follow standard political lines, although Congressional reps can and will fight the move, (they shut down BABS, which is a blue state subsidy) and while states cannot run deficits what you call refinancing bonds in order to take the pressure off operation funds (of course higher rates would kill that golden goose) I expect this to be a political firestorm. just as it was during Bush. Although Obama is primarily a corrupt Chicago politician, who doesn't think too far outside the box when it comes to political paybacks. and the Bush GOP was driven by some real ideologues, and not the case here I don't think. Obama can make the red states pay, and he probably will.
If I was a Swiss bank whose business model is based on providing potentates & other dubious characters who happen to have fortunes, with private, "no questions asked on how or where you got your money" banking, I'd offer "transitional custodial" services to assist in "diversification" aka moving most of the money to other untraceable forms and/or locations, once the writing started to appear on the wall...
that way they still have some remaining assets they can "freeze" (after they deduct their hefty fees of course) - thereby pacifying the potentate's fleeced citizenry, while keeping current & future potentates (i.e., their lucrative customer base) as satisfied (& repeat) clients.
Taunton, MA is smack in the center of Bawney Fwank's 4th MA congressional district.
http://www.sec.state.ma.us/cis/cispdf/ma_uscongress.pdf Examine the exquisite gerrymandering shown in this map; it cost Speaker of the House his job and he barely avoided jail in his Felony conviction.
Taunton, MA, at one time was center of fine silver work, signs at city line still say "Silver City."
http://www.taunton-ma.gov/Pages/index
Lots of ironies flying around here.
- Ned
it use to host, dirt motorcycle races†
Fannie and Freddie are trying to play the same corporate strawman game that the fed does. It' not working. And while peopel are fighting the strawman game in mortgages with release the note it's also destroying the fed strawman.
You can't make tradition or lies into law. It's not going to fly.
Great legal angle for nailing F&F, the same could be said about MERS, no?
And about F&F Preferred, I never understood why they screwed who held those shares.
Go to the link on the NV lawsuit. MERS is behind everyone of those guys.
On the F/F. It was Paulsons choice. It was political. Who gets screwed? Shareholders. Okay, those are the rules. But Pref?? a more complicated issue unless there is a court approved bankruptcy. That ain't going to happen.
The F/F Sub debt was bought out by Treasury at a premium to par. Legally Preff and Sub debt usually get similar treatment.
I doubt the last chapter has been told.
.
Why is the government continuing to make guaranteed loans to Solyndra when the whole world know they're going tits up?
You touch on the most under-reported aspect of the housing bubble, collapse and aftermath - the municipalities got, and are getting hosed at every turn.
Whenever I think about strategic defaults, unsold REO properties, and fraudclosure, I wonder how much revenue the local municipalities are getting cheated out of.
In my opinion, the municipalities should get paid everything their owed right off the top, including the transfer taxes they were cheated out of. If they don't collect promptly, give them legal ownership of the property. Same thing with property taxes. If the people occupying the house don't pay, force the entity who says they hold the paper to pay immediately, or forfeit the property completely.
The fear that I have is while all this legal wrangling goes on (and no matter how it turns out, it is still at the taxpayer's expense) the local governments are getting screwed. Sorry, but I don't care about things like the existence "wet ink" documents in a digital world. I care that somebody is responsible for paying the RE taxes in a timely manner.
And it doesn't surprise me in the least that Fannie and Freddie would cheat the locals.
Yeppers. Something is definitely up with Freddie and Fannie. The government said last week that they are going to phase out of the mortgage business and some lawmakers are calling on the government to kill the GSEs now and take our losses.
The timing here, about four months out from a possible QE III scenario could be setting the groundwork for some sort of announcement from the Fed that they are going to finally deal once and for all with the Fannie and Freddie problem. And now, all the lawsuits are picking up just at the right time...
I don't know what they plan to do but Jeethner was out in the last couple of weeks launching trial balloons left and right, including a 100-year bond! It wouldn't surprise me to hear that the USG would bundle up all of Fannie and Freddie's value into a giant pie, divvy it up and dole it out as an investment vehicle.
There must be a reasonable plan to deal with the problem mortgages that are on the books. Surely, they must realise that they have to do something to enhance faith in the US economy besides spinning yarns about green shoots.
On the other hand, if these mortgages of the GSEs aren't taken into account by the time QE II expires, then either they don't have a viable plan or they know that we're all screwed anyway. If we don't have this resolved by July, it could get really, really bad.
:D
I flashed on a mental picture of a bunch of crooks all slowly backing away from a large bag, holding all the MBS filth!
I remember Byron Wein and a couple of other real estate guys practically champing at the bit when they thought they were going to get a piece of the mortgage puzzle.
Once Bill Gross got his government (semi-)guarantees, he was all about it, too. I have no doubt that you could find private investors to at least remove some of the slack that Fannie and Freddie have created in the mortgage market.
What should happen is that some of these derivatives are just labeled as null and void, others that are bundled would take a significant haircut and the rest would be re-packaged and sold as maturing securities. The only way for there to be trust in the investment vehicles is if there is a one-off ruling that exempts any mortgage in the pool from being contested as to chain of custody.
Once again, JPM laughs all the way home and the little guy would get screwed but sometimes I think it is better to just get it over with and move on in a more positive light. All this doing nothing is costing us a fortune through POMO and other back-door deals.
We just can't afford to take this any more.
The only way for there to be trust in the investment vehicles is if there is a one-off ruling that exempts any mortgage in the pool from being contested as to chain of custody.
Yeah, clear the titles and then sell off (again) the FF assets as MBS. Oh, the irony. For the right price, though, people would buy it.
It's the only thing that makes sense. I think people would be more disturbed if they awoke one day and the Fed owned all the private residential property under Fannie and Freddie. I know I would be. At that point, I would probably start collecting tins of beans and sterno myself.
That's why it won't happen that way. There must be a solution and a repackage deal is the only way it would work. It wouldn't guarantee that home prices wouldn't go down- in fact, I expect they would for a while, until prices get more in-line with salaries.
It would, though, put a floor under interest rates while inspiring confidence in the US dollar. One of the biggest problems now is the weakness of the USD, especially vis-a-vis the Japanese yen and the Swiss franc. If the USD could revert somewhere near the mean, even a second deviation, then things would get better almost overnight.
something is brewing with F&F and to be sure the taxpayer will be given the short end and the likes of BS and Pimco will be circling like vultures to pick over the good stuff at 20¢ on the dollar
I just can't imagine anyone coming up with a viable plan for that train wreck.
Maybe lifting the Potentates dough is to discourage other managed potentates from leaving their posts so easily.
1) It's called Sovereign Immunity. The government of these United Sates can only be sued when congress has Said it can be sued. The Fannie shareholder will be invited to play in the street.
2) Timmy's bank issue is no different than end-of-term pardons: Capacity to intervene ending, last gifts for friends.
3) Fleeing potentates will be spending large amounts of their booty at once, in some cases, up front, to ensure their retirement package. So the stolen shiny, instead of sitting in a vault, will be On the Market. = Prices Down.
I know it's unfashionable.
Wow .. the loans to Solyndra were made *after* they built a new robotic plant in CA - and fired all 180 original employees at their first plant, which was shut down early Dec 2010. The new plant was built using $500mm in DOE loans last year (stimulus money). Solar Fraud.
A "crack" in the Fed's meltup "dam"?
Black Swan looming?
Mideast unrest with spillover into Europe and USofA?
Love the logic of Fan/Fred. Meanwhile, back at the ranch, Ben still resists any meaningful audit on the bizare theory that the Federal Reserve is independent, and not part of the government.
Great. Then there is no possible defence from sovereign immunity, and RICO, securities fraud, insider trading, and god knows what else will stick to his smarmy ass.
Arrest Bernanke. All it takes is one DA with a set of balls.
PS Forgot high treason, a hanging offence.
If the Fed is indeed NOT a part of the Govt, then just WHO is the Bernank gonna call to bail his butt out of the slammer, should the Govt finally grow some and arrest him?
Once you get to court all common sense goes out the window and anything can happen. Were Fannie and Freddie read their Miranda?
It will be interesting to observe the breakdown of assets held by a rich ex-potentate, if we ever do get a window into what Mubarak owns. Clearly he has a lot of investments in companies and fixed assets in places such as Saudi Arabia and the UAE, but $40-70 billion is so large that there must be lots of cash and debt instruments, too. Is it in SFR, $, yen or pounds? What percent is in PM's? Whose debt instruments does he own? How much did he feel comfortable about storing in once neutral and secret Swiss accounts? Whom did he trust, Goldman Sachs? Bank Pictet?
What, if any, effect will Friday's Swiss action have on outflows from Swiss banks that have asset bases many times the size of Swiss GDP? What of the relations between the new Egyptian government---whoever it turns out to be---and neighboring Arab countries where much of Mubarak's wealth is held?
Lots of fallout to come.
After Timmy broke UBS to open up all of the "tax cheat's" hoards ... er ... secret accounts, (and how delicious is that?) I can't imagine anyone leaving significant questionable resources under Swiss control.
Chindit, they have had at least two years advanced notice--since well before the blessed event of 1/20/09.
Lots of fallout and lots of scrambling indeed. But I'd bet that the basic moves are well in the past.
- Ned
It's my understanding that Hong Kong, Macau, Singapore, Bird Turd Island (I forgot it's name, Vanuuatu?) are still in the market for potentate money. Don't they have banking secrecy that make a Swiss man jealous? It sure would be hard to live off an underground vault full of diamonds and gold. How are you going to sell large amounts without leaving a trail?
Easy.
Dear Mr. Bankster,
I would like to deposit 100 million in gold can I please have a credit line I can draw from of $50 million.
Yours truly,
The Hoz
You probably mean Nauru which literally is a shit hole. It had lots of bird shit (phosphate mining) and now that it's gone, it's just an empty hole. Thus the cognomen: Shit Hole.
You don't have to leave a trail with the physical stuff. You just have to change the locks when Hosni goes to the Riyadh Hooters for wings and beer.
"Ummm...Yeah, Hosni...'n thanx. We'll see'ya around sometime, OK? No, really, drop by sometime. Gotta go now. uh huh...Yeah...Bye..."
Re the banks and the lawsuits and the Fed Gov, you make the common American mistake of assuming there is some 'logic' to the judicial system, but there is not.
You have a bunch of bribed US judges getting their money from the law firms who pass on the instructions from the US ruling families.
Major parties file suits for various reasons, at times because it is unclear which is the preferred outcome by the oligarchs, and because filing the suit nearly always serves some 'positioning' purpose even if the case is stymied and thwarted. E.g., they cover their duties to the shareholders by 'Well, we filed, we tried, the judges just didn't see it our way.'
If things get politically thorny, the judges just invent some new cockamamie reason and resolve it on that basis, often delaying or burying the proceeding, and then it disappears from the media radar as well.
Even US law professors comment that it is a struggle for them to invent 'theories' that can cover all the inconsistencies of the US judges ... who just serve their masters and not some 'logic' of law.
"Courts have the inherent power to do all things reasonably necessary to insure that just results are reached to the fullest extent possible." Ex Parte Dibble 310 SE2d 440, 442 (SC App 1983)
The above concept of "equity" has been stated many times, by many courts and many judges since the beginning of this country ... and before. However, the terms are so open-ended that if you re-define the words and phrases, "all things" "reasonably necessary" "just results" "the fullest extent possible" the expression can say most anything and justify any result.
Double speak is not a matter of subjects and verb agreeing; it is a matter of words and fact agreeing. Basic double speak is incongruity, the incongruity between what is said or left unsaid and what really is. It is incongruity between the word and the referent, between seems and be, between the essential function of language-communication- and what double speak does: mislead, distort, deceive, inflate, circumvent, obfuscate. Double speak turns lies into reality augmentations. Language simply reflects reality as they see it. Their words are that, just words, and what they say is not reality, just their version of reality. We then have the right and even the obligation to evaluate their word, their version of reality, and determine whether we agree with them.
Hmmm...ponderous. I'm guessing the banks will simply respond by issuing more short contracts. Maybe the Po is holding tungsten dough. Eh?