Grayson

A Roundup of Opinions

MERS: The Center of the Mortgage Scam

Liberals and Conservatives Agree: Vote Third Party ... Plus Why Many Ron Paul Supporters (Like Me) Are Voting for Gary Johnson

Independent from Congress … or from the American People?

Last week we learned two things: that Jamie Dimon specifically telegraphed he is now more powerful than the Fed, and that the US economy is back down to the same March 2009 optical exercises in financial strength gimmickry to stimulate rallies. Recall that on FOMC day, the market barely budged on Bernanke's ambivalent statement and in fact was in danger of backing off as the readthrough was that of no more QE... until JPM announced a major stock buyback and dividend boost. The catalyst: a successful passing of the latest and greatest Stress Test, which according to experts was "much more credible" than all those before it. Wrong. The test was merely yet another complete farce and a total joke. But as expected, the test had its intended effect: financial shares soared across the board, and banks promptly took advantage of investors and robot gullibility to sell equity into transitory strength. Bloomberg's Jonathan Weil explains.

Last week we discussed the gradual unraveling of a topic we had been following for the past 3 years, namely the brazen and criminal manipulation in the Libor market, which directly and indirectly impacts a stunning $350 trillion worth of securities (and thus, their implied risk, and hence, prices). Today we are delighted to learn that the retribution against these banks who have been artificially representing to the market that they are in better condition than in reality (courtesy of Libor's "strict" self-reporting approach), are beginning to see lawsuits filed against them, with Schwab merely the latest out of the gate. And just as fraudclosure was the litigation topic of 2010 and 2011, sit down and watch as Li(E)borgate explodes into the biggest litigation pain for banks, with litigation expenses that could easily surpass both the robosigning scandal (and its robo-settlement) and the escalating banks Reps and Warranties scandal. Because as recent evidence confirms, there are likely emails proving manipulation exists black on white, as discussed last week. Which means that the case of Schwab, noted last summer by Reuters, is about to become a pandemic.

"Suckers" - Alan Grayson discusses the Federal Reserve's purchase of debt from Bear Stearns, including debt from recently foreclosed Red Roof Inn's.

When we last looked at the Bank of America joke of a "non-settlement" settlement for a paltry $8.5 billion when $424 billion in total misrepresented (530 in total) Countrywide mortgage trusts were at stake, we said, "we are confident that the legal process will prevail and that the presiding judge on this case, and if not him then certainly the New York District Attorney, will step up and demand a thorough reevaluation of the settlement process." We were, oddly enough, correct. According to a just released filing from the New York Attorney General Eric Schneiderman, Bank of America (and Bank of New York Mellon, one of the tri-party repo banks mind you), violated New York state law and "misled investors." In a knock out punch to Bank of America (and Brian Lin who was profiled here previously), the  bank allegedly violated the New York’s Martin Act and misled investors about its conduct tied to mortgage securitization as Bloomberg summarizes. Schneiderman said he has "potential claims" against Bank of America Corp. and its Countrywide Financial unit. As Zero Hedge alleged all along, "The proposed cash payment is far less than the massive losses investors have faced and will continue to face." What does that mean? Well, as the countersuit by the FHLB indicated (which we are certain will be the basis for the NY AG claims), the likely final settlement is probably going to be about $22 to $27.5 billion. Which also means that the bank's Tier 1  capital is about to be discounted by about 25% lower. Which, lastly, means that the stock is about to plunge due to a massive litigation reserve shortfall which will have to be plugged with, surprise, a new equity capital raise. Which brings us to our original question: got CDS (which closed around 200 bps today, roughly 25 bps wider - it is going much wider tomorrow, especially if the expected Sarkozy-Merkel-Zapatero meeting achieves absolutely nothing)? Cause this baby is going down...and it is probably about to be broken up into good BAC and bad bank, consisting almost entirely of all legacy Countrywide operations. Said otherwise, it could well be time for a CFC-BAC CDS pair trade.

It doesn’t matter what terms the President offers. It’s that simple. Boehner can’t deliver the votes...That's why Boehner is always crying--Alan Grayson

For all Zero Hedge readers who have long waited for their chance to ask Mr. Scott Alvarez of "Have The Federal Reserve Or Prime Brokers Ever Tried To Manipulate The Stock Market?" fame a question about life, the universe or why the CME decides to hike ES margins in an environment of rising realized vol, here it is. Tomorrow, at 2PM, Ron Paul will lead a hearing by the Financial Services Committee, which will luckily be carried by C-SPAN meaning one will be actually able to hear the dialog (alas, the House continues to believe that investing in microphones for their internal webcasts is a bad idea), titled: "Federal Reserve Lending Disclosure: FOIA, Dodd-Frank, and the Data Dump." The witnesses will be Mr. Thomas C. Baxter, Jr., General Counsel, Federal Reserve Bank of New York, and the one and only Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System. While the usual heeming and hawing will follow each and every question, what is unique about this session is that the FSC actually allows anyone to submit questions for the honorable lawyers. The link to submit questions is here: we urge Zero Hedge readers to take advantage of this opportunity and have Mr. Paul read their questions to the two general counsels, even if no legible answers will be (ever) forthcoming.

Gold has breached the $1500 level and reached new record nominal highs at $1,505.65/oz. Since yesterday it has gradually risen in all currencies and is approaching record nominal highs in all major currencies. $2,400/oz is the inflation adjusted (CPI) high of 1980 and given the very uncertain macroeconomic climate of today and concerns about the dollar and all major currencies, arguably even more uncertain than the 1970’s, the real high remains a very viable target. It is important to remember that while gold has risen some 6 times in 11 years ($250 to $1500) it rose by 24 times in 9 years in the 1970’s – from 1971 to January 1980 ($35 to $850). This puts the recent reasonably gradual increase in gold prices in perspective and should give gold bears and top callers pause for thought.

Now that Alan Grayson is no longer in Congress, Fed hearings have certainly lost that certain dose of panache which only a man, wearing a dollar sign tie, and cross examining the Fed's General Counsel which grinning like a diabolical Tasmanian Devil, would bring to the table. We managed to catch up with Grayson during today's session of Radio Free Dylan, in which the traditionally opinionated Fed critic had some very choice words about the President. In essence, the former Florida Democrat said that it is none other than the President, who is the reason there have been no prosecutions on banks: " I am not only blaming the Obama administration, if the Bush
administration had its head on straight they would have prevented a lot
of these things from happening to start with. But the President Obama administration said at the beginning, we are
going to look forward and not back and therefore in the process of
making that decision basically let these crooks off the hook." But that's ok - see the SEC, which incidentally has to give a person by person org chart and job description of its 3,500 porn addicts before it receive one additional penny of funding, is about to catch one or two criminal masterminds who bought some NYX calls after the information of today's merger, which was so badly leaked that virtually everyone knew about the deal ahead of the announcement, are about to spend some time in prison. In the meantime, all those who knowingly and willfully committed crimes in the great housing pump and dump (up to and including misrepresenting underwriting documents), are about to get away scott-free. Thank you Mr. President. That's some might fine change you got there.

"As is the case with most 'gold panel' commissions, those who control the game make sure they can skate away."

Per the just released OpenSecrets list of top 25 wealthiest politicians in America, there are 12 republicans and 12 democrats (and Hillary, whatever she is). While we applaud the diversity among the country's richest "representatives", we can't help but wonder if these people actually "represent" the common man, or the man (such as themselves) having a minimal average net worth of $28 million...

Remember when double and even triple inverse leveraged ETFs were all the rage? That all occurred in the brief period of time before it became clear that Bernanke would first take down the global financial system before he let Citi get back to $1/share again. Apparently one reader recalls it all too well: "In 2008 at the bottom of the market I sold positions I owned in physical gold and banks stocks such as Bank of America (BAC), Citigroup (C) and also non financial companies such as Ford (F). I used these proceeds to purchased inverse ETF’s such as NYSE: FAZ (Direxion Financial 3x Short) and NYSE:SRS (Proshares Real Estate 2x Short). Since making these purchases, these ETF’s have suffered significant drops in value as reflected in their price. In fact NYSE: FAZ has plummeted from $1100 per share to $11 per share and SRS has reduced in price from $1000 per share to $19.50 per share. It is now apparent that the Fed spent trillions of dollars to raise the price of bank stocks and to inversely suppress the price of these inverse ETFs." Yet is this nothing but a case of fippers' remorse? Is there legal precedent for an actual claim? Was the Fed in breach of duty "by allowing investors to make investments into funds such as FAZ and SRS and other inverse ETF’s, while the Fed was performing transactions that the Fed knew or should have known would severely harm the investors in these publicly traded fund." Will Bernanke cave and make whole everyone who dared to put money into the market, even if it meant betting on a broad market decline? After all the whole purposes of the latest propaganda campaign is to get people to put money in the market with no fear of loss whatsoever: whether one is bullish or bearish (and as the lack of participation shows, most are certainly still bearish). Which is where it gets interesting: "Therefore, I appeal to your office to make due and just compensation in treble damages amounting to $__ million dollars for a full and good faith settlement of this matter. If this is agreeable, I am prepared to enter into a confidential good faith settlement." In our ridiculous bizarro world, in which nothing makes sense following each recurring Fed intervention, perhaps the Fed making whole those who lose money regardless of their bias, is just what is needed to break the 33 weeks of outflows...