TARP Resistance is Futile: Zombie Community Banks Targeted by Former Treasury Insiders

EB's picture

Submitted by EconomicPolicyJournal.com


Only days ago, we learned from the Financial Times that the 19 largest US banks are $50 billion short of meeting new capital requirements under Basel III accords, with their smaller lending cohorts needing an additional $10 billion.  Amazingly (or not), omniscient Fed officials have divined "that most banks should be able to reach the new levels by retaining earnings during the next few years rather than by raising capital in the market" (emphasis ours).


Presumably, this earnings retention would not include most of the aforementioned smaller community banks because Paulson's TARP has trapped them in a Zombiefied state of smothering debt and capital starvation (not unlike what the World Bank and IMF did to its pirated victems circa 1990-2008), aided and abetted by Fed-induced yield starvation .


Who wins?  No less than the Federal Reserve itself, because Treasury has recently been auctioning off its preferred stock in the smaller banks at firesale prices, which guarantees the state regulated banks will be folded into the Fed securitization and rehypothecation cartel.  Of course, well-connected former bank regulators, such as a former Comptroller of the Currency, will (and already are) profiting handsomely from these transactions, which we detail below, as well as recently in the second segment on Capital Account with Lauren Lyster:



Who loses?  While we're far from an endorsement of the Federal and State banking system in principle, the smaller community banks were the last vestige of the pre-securitization/unlimited moral hazard age, when lending meant "skin in the game" (as opposed to feeding mortgages through the GSE/JPM/Goldman slice-o-matic) and when depositors were seen as an asset (and not only as a balance sheet liability).


While it might be argued that many of these smaller banks would have otherwise been resolved by the FDIC in the 2008 maelstrom, ex-Goldmanite Treasury Secretary Hank Paulson put these mom and pop banks into a shotgun government cartel IPO--preserved in TARP salt, only to have the meat picked off their carcasses years later.


"TARP Provided Lifeline to Community Banks"


So reads a subheading in the most recent SIGTARP report.  Yet, what follows is a recitation of what happened when the banks grabbed the money (at the other end of Paulson's bazooka)--they discovered it was tied to an anchor thrown overboard.

"707 [banks] were accepted into CPP [Capital Purchase Program]; 351 small-and medium-sized banks remain, along with 83 financial institutions in CDCI [Community Development Capital Initiative], for a total of 434. Treasury describes CPP as a program to provide emergency support to “viable” banks.623 There are signs that some CPP banks face difficulty in exiting TARP. Despite the dramatic efforts to expedite the exit of the largest banks from TARP, there appears to be no corresponding plan for community banks’ exit from TARP. The only exit strategy for smaller banks that has been announced has been SBLF, through which 137 banks exited TARP. A SIGTARP analysis of the 351 banks that remained in CPP on March 31, 2012, shows one-third had missed five or more dividend payments, and 32% faced formal enforcement actions by their regulators."  

Hence the smothering spiral of debt and capital starvation.


Why smaller banks, shut out of the NYC securitization, re-hypothecation Collective, can't compete:

"Community banks’ lending to small businesses has decreased recently while large banks increased loans to small businesses. Small banks — those with assets under $1 billion — have steadily lost market share in small-business lending since 1995, according to an analysis of loan data by information provider SNL Financial LC (“SNL”).613 That group of banks now owns just 34% of commercial and industrial loans of less than $1 million that were secured by collateral other than real estate, down sharply from 51% in 1995, according to SNL. During that same period, bigger banks with more than $10 billion in assets doubled their market share of such loans, SNL reported."

Why the POMO tithing scheme is for Primary Dealers only:

"Once a loan is made to a small business or consumer, a community bank typically holds onto it rather than securitizing or selling it,” Timothy Koch, a professor of banking and finance at the University of South Carolina, said at that conference. 612 “Unlike big banks, community banks generate most of their earnings from net interest income on loans, and rely on core deposits by customers in the same community to fund lending,” he said."


"Community banks need capital to pay off CPP investments, and raising that capital has been a significant challenge along with weakened loan portfolios and slow economic growth."

With long term yields below inflation, government securities are already carry negative for banks who can't wash them at the Fed. Hence, Chairman Bernanke is aiding and abetting the executive branch in the destruction of community banks.


On how the TARP death ray "vaporized" an entire set of market choices whose purpose was to provide an alternative to the government agency known as the Federal Reserve:

"Industry experts say the amount of new capital needed by community banks nationwide is substantial. According to analysts with investment firms Raymond James and Barack Ferrazzano Financial Institutions Group, and consulting firm McGladrey & Pullen, LLP, it will take $23 billion in fresh capital for community banks to repay TARP or SBLF funds; to absorb credit losses and boost loan loss reserves; and to meet higher regulatory capital ratios.614 A higher estimate of $90 billion in community bank capital needs came from StoneCastle Partners, an asset management and investment banking firm. It included $43 billion for healthy institutions to acquire weak and failing banks; $28 billion for banks to clean up their balance sheets; $12 billion to boost loan loss reserves; and $7 billion for internal growth.615"

Why smaller banks cannot access the capital markets:

"Banks with assets under $1.5 billion do not have access to capital from private equity firms, mutual funds, foundations, and other institutional investors, according to some who follow the industry. “Capital offerings for less than $20 million to $30 million are often too small for many institutional investors regardless of structure or investment thesis. Institutional investors have fixed costs to cover and deal size minimums. They simply cannot monitor an unlimited number of small investments, no matter how promising,” the Conference of State Bank Supervisors said in a recent white paper.618 Institutional investors also want a bank to have a business plan that allows the investors to eventually realize gains through a stock offering or by selling the bank to a larger institution."  

10% of smaller banks in the US are at risk.

FDIC won't be bailing them out.

They will be assimilated:

"Some industry experts predict a wave of mergers and consolidation among community banks over the next three to five years. “Size matters, and a rule of thumb used by many industry experts is that most banks eventually will need to be $1 billion in assets or greater in order to achieve the scale necessary to operate as an independent entity,” according to a white paper published this year by FJ Capital Management, LLC. “The typical merger can save 20% to 40% in operating costs, thereby creating significant earnings accretion for the combined entity.”620 FJ Capital estimated 413 banks are potential merger candidates because they were trading below tangible book value, and had substandard capital levels and/or elevated asset quality issues.62"

A typical single case: Bank of Hamptoms Road (Norfolk, VA)


According to the American University School of Communication, this bank's Troubled Asset ratio has hovered near 100% since the crisis onset and shows no hope of ever going black. It has $115 million of capital and $72 million in reserves against $185 million of non-performing "assets." Note the $60 million of "other real estate." The best thing that can be said about it is that it has stemmed the bleeding from $(215) million to $(95) million in the last year. It's still losing deposits, capital, reserves, and assets at double-digit percentage rates year-over-year. 


As late as July 2009, common shares traded above $200 (1:25 split adjusted). The last trade June 8, 2012 was $1.21 (1:25 split adjusted).


The TARP "rescue" drove the shares down 80% over the first 6 months. Then Treasury converted its $84 million in TARP preferreds into common for a 74% notional loss, the board diluted in September 2010, missed the TARP dividend, diluted again in June of 2011, and has been selling off branches throughout.


The bank's recent 10-Q produced these gems. First, the asset attrition spiral continues:

"The Company reported a net loss of $7.9 million for the quarter, compared to losses of $21.4 million for the fourth quarter of 2011 and $31.6 million for the first quarter of 2011. First quarter 2012 results benefited fromlower provision for loan losses [ew: at exactly the moment when non-performing loans are skyrocketing] due to continued improvements in credit quality and reduced operating expenses due to continued progress from the Company's expense reduction initiatives."

Then, yield starvation:

"Net interest income for the first quarter of 2012 was $16.7 million, down from the $17.5 million in the fourth quarter of 2011 and $18.2 million in the first quarter of 2011."

Third, because old habits die hard, unwarranted risk taking:

"Noninterest income was $3.1 million during the first quarter of 2012 compared to ($1.1) million during the fourth quarter of 2011 and $2.1 million in the first quarter of 2011. Noninterest income benefitted fromstrong origination volumes in the Company's mortgage unit which saw revenues increase to $3.3 million from $2.4 million and $1.3 million in the prior year fourth and first quarters, respectively."

No doubt, someone will spin that as a "housing recovery." The increase in compensation costs related to bonuses to mortgage origination officers is relegated to a footnote.


A week ago, the bank holding company of Hampton Roads sold two of its failing branches to Bank of North Carolina (NASDAQ:BNCN), whose statement on the deal specifically mentioned the all-important $1 billion threshold, "Our goal of having a billion dollar presence in the Triangle will accelerate with this acquisition, and we are excited about offering our diverse product and service opportunities in both of these communities."  BNCN itself has a TARP ratio of ~50% and rising


As usual, it's the insiders who take over


The only money-good asset this dog [with fleas] (NASDAQ:HMPR) really holds is that "other real estate" line item, which is perhaps why the bank holding company is the target of a NY liquidation firm:

CapGen Capital Group VI LP and CapGen Capital Group VI LLC, both of New York, New York to increase their investment up to 49.9 percent of the voting shares of Hampton Roads Bankshares, Inc., Norfolk, Virginia, and thereby indirectly increase their investment in Bank of Hampton Roads, Norfolk, Virginia, and Shore Bank, Onley, Virginia.


This, and all the other TARP takeovers may be found in the Federal Reserve's H.2A report, "Notice of Formation and Mergers of, and Acquisitions by, Bank Holding Companies or Savings and Loan Holding Companies; Change in Bank Control."


Enter Eugene (Gene) Ludwig and the MF Global Connection


CapGen's leader, Mr. Ludwig, is a former primary dealer officer (Deutsche Bank) and Comptroller of the Currency, and whose business is "turnaround specialists." He is also the founder and current CEO of Promontory Financial Group, which has been granted special review and recommendation privileges by various Federal regulators to Bank of America, USBancorp, Wells Fargo.  Promontory is also a registered lobbyist for several prominent financial firms, including General Motors Acceptance Corporation (GMAC).


Last, but not least, Promontory was engaged by MF Global after a $110 million rogue trader debacle to provide, in part, "a comprehensive review of MF Global’s risk management and internal controls," according to Trustee Giddens' report of June 4, 2012.  The report explains:

"On May 26, 2010, Promontory reported to Holdings’ Audit Committee that MF Global had successfully and effectively implemented most of the Promontory recommendations and the CFTC undertakings and established an enhanced enterprise-wide risk management and compliance program and internal controls framework."

Of course, it would be internal controls that would be the demise of the firm, upon which former Crazy Eddie accountant, Sam Antar, recently commented, "All white collar criminals blame poor internal controls. I tried that trick at Crazy Eddie. The Feds were smarter back then."


While Promontory gave public cover for MF Global, Giddens' report reveals a few pages later that alarm bells were being simultaneously rung internally:

"Similar concerns surfaced in internal audit reviews. A Corporate Governance internal audit issued in May 2010 identified MF Global’s risk policies as not congruent with the changes to its broker-dealer business. Among the specific gaps identified by Internal Audit was liquidity risk reporting. Similarly, an Internal Audit report on Market and Credit Risk Management in October 2010 identified “High Risk” areas arising from the lack of controls over risk reporting. The report also reiterated that market risk policies had not been updated to reflect the current operating environment. The report attributed the failures to remediate gaps to staffing and budget constraints."

A land grab shrouded in a banking takeover, wrapped in a financial crisis "rescue."


The TARP zombie/takeover story is playing out with small variations throughout all the ~300 or so small banks which were trapped in TARP-assisted asset spirals. As stated above, many would have failed outright, further burdening the FDIC fund, perhaps to the point of exhaust, which may be the excuse of record. However, TARP gave Treasury a co-opt entry point to control the flow of equity on this sizeable section of community banking options. 


The Fed's merger notices are peppered with former officials using their insider positions and PE headhunters to profit from the "rescue." Whether the net result of killing off a whole tranche of Fed-free banking options was intentional, the combination of forced TARP and negative real interest rates will lead to fewer options and more Fed-centralized control of banking, as the process of slicing, dicing, and consolidating works its way up the food chain, aided and abetted by friends of Treasury. 


In future reports, we will detail other small bank merger and acquisition transactions by bank regulatory insiders, as well as develop the role of Promontory in the stress test/internal-policy-failure face-save kabuki that dominates the upper echelons of the extreme moral hazard tranche of the financial sector.


Special thanks to elliswyatt for serving as primary research contributor and TARP wordsmith.

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ebworthen's picture

The banks, the corporations, and government are becoming one.

A soulless, gutless, heartless slime beast that swallows babies and the light of day.

It is madness itself, accompanied by a horde of cavorting gibbons and baboons who worship it.

deerhunter's picture

Chunga,  It saddens me to hear you say your kids don't want kids for fear of the future.  My 5 year old grandson can shoot a BB gun with skill and knows how to plant and fertilize corn and beans with his dad in the tractor.  My 4th grandchild to be born in July.  Hope deferred makes the heart sick.  Fear is a bitch but none of us can afford to let it rule our futures.  Realism mixed with proper planning will aleve many fears.  Good luck to you.

chunga's picture


It saddens me as well. I'm going to do my best to fight these people as just a regular average guy.

Maybe I'll die trying but that's ok. I'm not stopping. It's too late for me and I will fight for your grandchildren too.

Jack Sheet's picture

and Lauren is keeping her legs tightly closed in front of Jamie's image...

OpenThePodBayDoorHAL's picture

She has nice posture. Would look good on top. You'd need a strip of duct tape for her piehole though...

sessinpo's picture

BTW - If anyone is willing to do a little research themselves, you can find tarp information form the treasury department underder tarp transactions. Who borrowed what and what the current dispositions is. I  downloaded the PDF file and just for kicks, I juse the search function in Adobe for my state so I could see which institutions borrowed what in my state.



Mad Mad Woman's picture

We have a small bank here in Central PA that is in trouble and is headed towards what this article described: Orrstown Bank based in Shippensburg PA. They've had some problem loans and at this time they are under-capitalized. I suspect that what this article describes is in their future.   http://www.pennlive.com/midstate/index.ssf/2012/04/federal_reserve_board...

wagthetails's picture

400+ isn't really that many banks...in a way this is what should have happened to the big banks.  The small troubled banks should not be allowed to continue, just held together long enough to be absorbed by stronger banks.  Of course big banks needed to be broken up and sold off, but held together with government funds.   

Born-Again Bankster's picture

Glass-Steagall, or a version thereof, being re-implemented is the only hope this country's community banks have.  While the eyes are on Europe, no one is paying attention to what is happening at home.  Unfortunately, this will never happen.  The FDIC hasn't allowed a new community bank to open in over a year.  Only one in the past 3.  These new banks would be making loans, allowing capitalism to work and local economies to grow.  It's a slow nationalization of the banking system while nobody is looking.  Criminal.  But the pace of failures is too slow.  Something has to happen to speed up the process.  Something bad.  A catalyst that will allow for a real nationalization.  It's coming, people.  Election year or not.  When TPTB get rid of the community banks, digital currencies will takeover and that will be all she wrote. 

sgt_doom's picture

"Glass-Steagall" ???  I suspect it's over.

BTW, nice tie, Bob!

Is the same ultra-rich dood who owns AT&T the same ultra-rich dood how owns part of JPMorgan Chase????

And speaking of network neutrality and AT&T, and frequently asked questions (or questions which SHOULD be asked, and pertinent to this bankster discussion):

Global FAQ

 What was the number one ranked communications corporation in 1950?

What is the number one ranked communications corporation in 2012?

Who actually owns AT&T?

Who invites Jeff Bezos (Amazon) and Mark Zuckerberg (Facebook) to those international banker forums known as "Bilderberg forums"?

Who lobbied fervently for the passage of NAFTA?

Who lobbied for China's entrance into the WTO?

Who established banking operations in Beijing and Moscow in 1973, immediately after Nixon's trip there?

What was the name of the senator from West Virginia who was the lead in congress in the passage of the legislation granting retroactive immunity to AT&T and the telecoms?

Who wants to end any semblance of network neutrality so they can control the Internet?

What was the name of that old German pop song with the lyric,

"Rock...e...feller....Rock..e.... .Rock ...e ..feller"?



EB's picture

"BTW, nice tie, Bob!"


Lots of great comments here, as usual.  

PMakoi's picture

Geez, just get out of them TBTF banks and those in the current crosshairs.  Non-profit coop credit unions.  Get one.

lynnybee's picture

i just sit here getting madder & madder; more angry & more angry .    i know what's going on !   the consolidation of power, the destruction of "local" .     (& my friends & family have officially banned me from talking any financial stuff anymore.   they don't understand & think i'm nuts.   how did this happen to me ?   i've gone from being a housewife to being immersed in this biggest story of our lifetimes. ) .      if i could go back in time i'd become a forensic accountant.  

hangemhigh's picture


"& my friends & family have officially banned me from talking any financial stuff anymore. they don't understand & think i'm nuts. how did this happen to me ? i've gone from being a housewife to being immersed in this biggest story of our lifetimes."  .

Lynnybee….you are not alone.   A man by the name of Joseph Campbell wrote a book about this very thing.  The book is called The Hero With a Thousand Faces

It is an archetypical tale about the source of all knowledge. 

A hero is called forth from the ordinary everyday  world  by unknown forces and  into a ‘shadow world’ where strange  forces wield dark power.    It is up to the hero to accept this call and if he/she so chooses many trials lay in wait.  If the hero is victorious in these encounters,  he/she emerges from the adventure forever changed .  

The reward for undergoing such dangerous exhausting ordeals is the awareness and self knowledge gained.  The hero now sees the physical world of the simple little  village that he/she originally left in an entirely new way.  The great gift the hero returns with is the ability to  explain what has happened, and why, to the inhabitants of the village.  



MilleniumJane's picture

So frustrating, isn't it?  I find myself in the same boat as you but my husband is starting to wake up.  It has been a long process but I still find his eyes start to glaze over when I try telling him about whatever latest insult the rat bastards at the top have cooked up to siphon more money to themselves.  He still won't touch his 401k but at least we don't have any credit cards or a mortgage to worry about.  Just the usual power, water, phone and medical bills, which continue to increase every 4-6 months it seems.  I keep hammering the point that we need to live simply and try to be as independent as we can because there is no way that we can count on the Federal Government to help if the worst happens (I used Hurricane Katrina as my major argument for this point).  Small steps, but I'm still nervous that it won't be enough when this finally implodes.

tony bonn's picture

this article confirms my prior comments about the rigged crisis and its even phonier response as a means for the mega-banksters to consolidate more control of money through the destruction of smaller independent banks....fuck the banksters and the fed....

and yes, that horseshit about lack of controls is laughable....the entire regulatory apparatus is about ensuring that banks have adequate controls and they are reviewed for compliance...but since gs and jpm control the regulators, the laughable excuse is elevated to holy writ....

MachoMan's picture

This is really pretty goofy...  The bank runs of 2008 caused all the community banks to be sucked dry and the money deposited in the TBTF (expectations of gov't backing)[necessitating the FDIC's increased guaranty].  So, now we get TARP (and its progeny, that allow the TARP funds to be repaid, but the community bank still has a debt, it's just called something different), that ensures the small community and regional banks will get sucked up into the TBTF...  people have been screaming about this for years...  hell, I bet I have a few posts on the subject at least a year old...

So, the FDIC is going to require three (3)+ years of payments to be pulled forward from community banks, but then fold like a circus tent?  Pretty thinly veiled, no?

The point is, this is the way it was always going to be...  this is what moral hazard begets...  moral hazard.  The inevitable conclusion of backstops is the consolidation of systemic risk.  It's a neat ploy...  and will buy the TBTF a little breathing room while the best assets are fully utilized and the rest siphoned off at firesale prices, but the conclusion is the same...  the complete lack of trust in the formal banking system, our currency, and the idiots that oversee them.

GMadScientist's picture


Is this a test? 
It has to be. otherwise I cant go on.
Draining patience. drained vitality.
This paranoid, paralyzed vampire act's a little old.

If there were no rewards to reap,
No loving embrace to see me through this tedious path I've chosen here,
I certainly wouldve walked away by now.

If there were no desire to heal
The damaged and broken met along this tedious path Ive chosen here,
I certainly wouldve walked away by now.

I still may. and I still may.
Be patient.

Angus195's picture

“On Sept. 1st, 1894, we will not renew our loans under any consideration. On Sept. 1st we will demand our money.

We will foreclose and become mortgagees in possession. We can take two-thirds of the farms west of the Mississippi and thousands of them east of the Mississippi as well, at our own price . . .

1891 American Bankers Assn as printed
in the Congressional Record of April 29 1913.

The same scheme is now underway 100 years later albeit with a twist.  As the Community Banks foreclose on 'hard assets' and place them on their balance sheets they essentially become 'troubled' massive holders of hard assets.  The large commerical banks will 'scoop' up these 'troubled' banks with their 'bailout' funds - and the real estate they hold - at pennies on the dollar.  The result will be further centralization of power and a massive transfer of wealth ... once again.

sgt_doom's picture

I am Dudley, but age has overtaken my decrepit bones.....

MachoMan's picture

This is basically the superficial aspect of it all though...  the REAL issue is the transfer of assets out of the commercial banks to the principal actors of the fraud.  The commercial banks (including the FED) are going to get folded, their assets picked up at firesale prices, and then we're in de jure feudalism.  It isn't a one-off event though...  it's trickling through daily...

The entities themselves are meaningless...  they're merely fronts...  just a first line of defense to liability.

Angus195's picture

Well said.  I understand this.  Its a giant vacuum cleaner - sucking hard assets all the way up to those behind the FED; your right, in the end we get de jure feudalism. 

rwe2late's picture

... burdening the FDIC fund, perhaps to the point of exhaust, which may be the excuse of record [for TARP]...

That excuse is laughable, inasmuch as it assumes "bailing out" the TBTFs to be less costly than would have been "bailing out" the FDIC and its insured depositers.

engineertheeconomy's picture

Central Bankers are Central Military Bankers.

The Dollar is the Military's greatest weapon.

Clearly, we have a very, very, very corrupt Military here in the United States. Their highest, most noble motive is to be in complete control of every person on earth, and they know that the easiest way to do that is to make us all poor and dependant on them financially.

They will stop at nothing, and nothing will stop them.

Hope you are well invested in physical farmland and physical precious metals, and not invested in anything paper - they will devalue it or steal it or both.

mick_richfield's picture

In the hierarchy of power in this world, the money people are above both the military and the political people.

And there's somebody above them, too.

Ghordius's picture

engineertheeconomy, congratulations. yes, a fiat currency is a weapon of war. +1

Zero Govt's picture

i watched a US news channel interview a top military brass as he explained the "war theatre" going on in Afghanistan like he was an administrator discussing nothing more than moving street signs about 

he was chillingly detached from the murderous action and reality (ie. delusional)

optimator's picture

If those guys ever get into a real war they won't be prepared and won't know what to do.  Those target drones will be gone the first day, leaving them blind.  There are folks in this world with a little more than an RPG7.

Zero Govt's picture

you can see the limitations of the US Military.. great at over-powering a nation with muscle for a few weeks..

..but holding and winning a turf war, useless (lost in Vietnam, lost in Iraq and soon to lose in Afghanistan). US military technology has made not a jot of difference to that outcome in 60 years

chunga's picture

We are not living in a black and white movie. This is not Bedford Falls and we are not dealing with Bailey Building and Loan Association, an institution vital to the well-being of the townspeople. In the real world, George Bailey no longer exists and Mr. Potter did indeed steal and keep Uncle Billy’s $8,000.
The stern looking bank regulator not only approved and encouraged this theft but also helped Mr. Potter convert that money in to trillions of dollars of unregulated derivatives; conspired to pay no taxes then proceeded to conceal that fact. To allow this charade to persist would be catastrophic.
Were it not for the verifiable truth that the U.S. government has entitled itself with the authority to print money as though it was ordinary paper, and are projecting a budgetary shortfall of over one [1] trillion dollars for this year alone; it is they who should accept their spot on the mantle as the least credit-worthy of all. It is also worthy of note and equally frustrating that this printed money is handed directly to the banks.

Foolishly following this dishonest course may very well bankrupt the entire country if not the world. And to further suggest that if these financial leviathans that now stride the earth suffer their demise as a result of their own bad acts, it would spell undoubtful doom for all; leaving us no option but to salt the earth and burn the churches.
This is ridiculous. The only ones that would be doomed would be them. The vacuum that would be created by their rightful rejection would be filled by honest institutions that are not financial predators. We are utterly sick of their financial junk innovations that they have, quite literally, turned into a mortal death pledge.

Little Rhode Island is going to be a huge battlefield in this mess; there is a standing Federal STAY ORDER in place on all foreclosures. A Special Master has been appointed with the authority to subpoena anyone she likes. That includes Pooling and Servicing Agreements, MIN Summaries, Milestones Reports, whatever she wants.

I wrote and sent this Open Letter that has been sent to the Presiding Justice and the Senate President and Senate Majority Leader.

An Open Letter to the State of Rhode Island Superior Court June 9 2012 Regarding Foreclosure Fraud

Also, I set up this electronic petition. Sign it please; it takes 30 seconds.

The Honorable Presiding Justice Alice P. Gibney: Recuse Justice's Allen P. Rubine and Michael A. Silverstein.

C'mon ZH Peoples, mount up. I'm going to try to make these bad people go away.

Baron Robber's picture

joined you Chunga. Thanks

chunga's picture

It will be very hard to just push this stuff back.

As so correctly stated in the OP; REMIC MBS are governed by NY Securities Law. The Pooling and Servicing Agreements and Master Servicing Agreements defined in the Trusts indenture them. This trumps UCC and it is very strict. Failure to comply with these laws render the mortgages VOID and NOT qualified mortgages.

See here: New York Estates, Powers & Trusts - Part 2 - § 7-2.4 Act of Trustee in Contravention of Trust

§ 7-2.4 Act of trustee in contravention of trust: If the trust is expressed in the instrument creating the estate of the trustee,  every  sale,  conveyance  or  other  act  of  the  trustee  in  contravention of the trust, except as authorized by this article and by any other provision of law, is void.

See that word - VOID?

If anyone tries to "back-fill" the pools of the trusts after the trust is closed (per sworn SEC statements) the tax-excempt status is gone and will be taxed at 100%.

See: IRS Rules 860 A - G

Then, what do you do with all the credit default derivatives that were sold on top of the certificates and bonds that were peddled on Wall Street that were backed by nothing?

chunga's picture


Just a parent who doesn't want to see their futures destroyed by central bankers and their govt. conspirators.

antisepticWipe's picture

I think you might have missed your calling.

antisepticWipe's picture

Way to go.

I signed it already chung

chunga's picture

Can't be scared. The author EB nails it here.

Thanks for signing; if I get enough momentum I'll invite my ass up there as an Amicus. Fuck them.

Northeaster's picture

It's going to take a lot more than blogger's and petitioners to get this fraud upon us changed.

It's great that you're being active, as do I just North of R.I. border, not sure about your "Representatives", but mine don't care and don't respond, at all.

When enough Americans have nothing else to lose, or decide to make a sacrifice with a true desire, whether through desperation or unleashed anger, only then will the status quo be changed.

Great piece by EB.

chunga's picture

You're probably right but so what.

My kids are old enough to have kids but they won't; they're afraid of the future.

I'll be glad to choose the hill I die on.

illyia's picture

Took the shot. It was painless...

mccoyspace's picture

This is a great report. Thanks.

Urban Roman's picture

New plan: don't Occupy Wall Street, Rehypothecate Wall Street!

bernorange's picture

Does "smaller banks" in the article include credit unions, or are they watching this travesty from the peanut gallery like the rest of us?

sessinpo's picture

I believe some credit unions also took money. In fact, I don't think it was strictly limited to banks.

New_Meat's picture

they'll be in the mop-up operation

Cash-NonCash's picture

Hello Gentlemen

All your bank are belong to us

You have no chance to survive make your time

Doña K's picture

What if this article is written to swing capital out of small banks and into bigger banks by spreading fear?

PM's, mattresses and guns! may be better.