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Obama Pushes Hard to Protect Big Banks from Fraud Prosecutions ... But We Can Stop Him
As we've noted for years, the entire strategy of Washington towards the economy is to cover up the fraud which caused the financial crisis ... even though prosecuting fraud and re-establishing the rule of law is the only way to get out of this depression.
One major front in Washington's cover-up effort has been to settle fraud cases with the big banks for pennies on the dollar. This is a backdoor bailout for the banks, encourages them to commit more fraud, and fails to plug the basic holes in the economy which are preventing a recovery.
Why are we bringing this up now?
Because Obama is making a giant push to pressure the states attorneys general to settle all of their mortgage-related fraud claims against the banks for pennies on the dollar.
Yves Smith - who has an ear to the ground on this - warns that a settlement which hurts consumers and the economy will happen very quickly if people don't raise a ruckus.
Smith is asking people to call their state attorney general (not their elected reps) to oppose the settlement:
Here are some of the reasons to oppose a settlement:
1. There have been virtually no investigations, and the Administration has engaged in cover-ups rather than trying to get to the bottom of the mortgage mess
2. The big argument made in favor of the deal, that it will help borrowers, is patently false. Remember, Countrywide entered into a deal with attorney generals just like this, where they agreed to do mods in return for a settlement on abuses. Guess what? They didn’t do the mods. To add insult to injury, they actually abused homeowners who should have gotten mods. Nevada AG is suing Countrywide now over its failure to comply with the terms of its settlement. And even if some mods miraculously did get done, the settlement is designed to have banks hit a dollar amount. That means they will focus on the biggest loans, which means any relief will go to a comparatively small number of people in (originally) big ticket houses.
3. The Administration has only one chance to get this right. Now you might argue that Team Obama has no intention of getting the mortgage mess right, but the tectonic plates suddenly seem to be moving in elite circles. The Fed realizes that housing is a BIG problem and has even started making noise about it. Yet Obama is moving forward with a plan cooked up in late 2010 that is completely out of whack with the urgency and severity of the problem. Note that this settlement will NOT stop private actions, such as borrowers fighting foreclosures. And we will continue to banks refuse to take losses and drag out foreclosures to maximize fees. That will lead to continued pressure on housing prices in many markets as buyers stay on the sidelines, fearful of buying before a large shadow inventory clears.
Leaving the AGs free to investigate and increase the pressure that is already building up in the system is the best chance we have to deal with widespread fraud.
The attorneys general really need your support. It helps them to hear that their constituents appreciate them standing up to the banks and the Obama administration.
PLEASE call them TODAY. Here is a list of phone numbers. If you can’t get through, send an e-mail.
Please also sign this petition from Campaign for America’s Future (it has some talking points if you need them for the AG calls). Note you can opt out of being put on their mailing list (I know that has been a sore point with some past petitions). I know it is futile to ping Obama, but they will collect the number of people who sign, and that will in turn bolster the dissident AGs.
Please call today. Unlike Congresscritters, who get a lot of constituent mail and phone calls, AGs get much less in the way of messages from state citizens, so your calls will make a difference.
Smith tells me that it is especially important for residents of California, Virgina, Texas, Florida and South Carolina to call their attorneys general and tell them that they need to stand firm in the face of pressure from Obama.
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Why would any Republican AG do anything that Obama wants.....and that is the proof in the pudding of what we are up against.
GW - While I agree with the premise of your argument, we part ways with the idea that continued pressure on housing prices is bad. Shadow inventory will never clear until prices come down to some reasonable multiple of average incomes.
I don't disagree ... so then the normal rule of law should be allowed to proceed. Banks which artificially expanded a bubble due to fraud should be allowed to fail, and housing prices allowed to find their true price through normal market price discovery.
I've been saying this for years.
artifical expansion earned artificial justice. Parrot the parity parody
Excellent alliteration!! Milestones
thanks for making it a milestone
I've always wondered - and maybe someone can help me out here - why has there not been a move to allow people to step in and buy back their loans?
I mean, think about it - the loans were made then securitised right? OK, they were chopped up, pooled and blended in with other loans etc.
But surely someone somewhere knows which loan belongs to which pool which corresponds to which security right? Wouldn't there be a way to repackage the security so that you would have a security corresponding to a loan. This would reward all the prudent homeowners - if they buy back the repackaged security corresponding to their loan which is now trading at a steep discount then they wipe out their debt. Alternatively, it gets the MBS market moving again.
Also, going forward there should be a way to allow home owners to buy back their loan. If banks can securitize a loan and trade it freely then there should be a way for a homeowner to buy back the security corresponding to the loan as well.
I don't know - maybe I'm not articulating my ideas all that well, but I hope some can see what I'm talking about.
If companies and governments can buy back their debt, why not allow individuals as well?
My understanding is they were sliced and diced so badly that many of the loans are not properly correlated to any security and many of the loans were not properly recorded as liens against the property due to the use of the mortgage electronic registry system aka MERS.
Hence the lack of a clear trail of ownership, hence robosigning of fake or altered documents.
Hence banks foreclosing on property they don't own and even homes without any mortgage at all in some cases.
hence the term clusterfuck.
OK, agreed. But what about going forward?
Prospectively, end cheap credit and moral hazard and the problem fixes itself...
Technically speaking, what you're talking about has been available since the inception of security interests... practically speaking, the reason why this is not more prevalent is that homeowners are: (a) insolvent; and (b) not interested in swimming with sharks while wearing a meat suit [do you really want to purchase an instrument from a party who you know is a liar?]
I understand (b), but let's take a look at (a) for a minute. Please feel free to jump in and correct me if I'm wrong. I'm going to simplify a lot, my numbers might be off but I hope you see the point.
Let's say a homeowner A buys a house for $300k. Puts 20% down ($60k) and borrows the rest ($240k) - at 3% p.a. for 30 years. This equates roughly to a fixed payment of $1012 a month. The bank securitizes the payment and sells it on for $270k. Investor B picks it up.
After 10 years, the remaining amount on the loan is roughly $182k. The house is worth $165k. A is underwater.
However, the security is trading at $135k - 50% discount to original price.
If A buys back the security from B at $135k, say by taking out a loan - the $182k loan is cancelled out - has to be otherwise A is paying himself!
A now has a $135k loan on a house worth $165k - meaning that A has gone from being underwater to having $30k equity.
This would only work if both A and B are willing to transact with each other, but wouldn't it help the situation?
This is one of those only fit for the academic incubator kind of arguments... this would work if A made a loan with B, B sold the loan to C who securitized it and sold it to D... all of which are recorded every which way from sun down... and all transactions are not disputed by any of the parties...
Then, of course, the real world stepped in... if you wanted to try what you proposed, you'd have a few very significant headwinds: (a) the person/entity you would try and purchase the security from would likely be trying to offload it back upstream, not create its own downstream litigation risk, and/or may already be in a lawsuit to put it back; (b) you have no idea who all of the intermediary parties were... and, as a result, paying off the loan is going to take years, presuming you get it right; (c) the litigation costs will likely exceed the difference in price between the security and the remaining balance of the note; (d) it's only a reasonable concept for deficiency states, given your better option in non-recourse states is to turn the keys in; (e) the properties were securitized, i.e. bundled, and I don't think you can cherry pick your house out of the bundle; and (f) you're talking about the exception, not the rule, where anyone is going to be able to borrow the cost of another house in the meantime... (motherfuckers are broke).
Once the notes get pushed back to the originators, which they probably should in a LOT of cases, then your idea might get some traction... until that day.
I'm waiting for Barry to appoint Corzine head of the NY Fed.
Hello MF Global! Where did you go? Madoff was in jail by this point.
wonderful to know that someone is noticing.
prosecute sheik obummer.
http://expose2.wordpress.com
the coverup by the liar-in-chief is further evidence of my contention that he is a puppet of the rockefeller-mic-yale-cia cabal and is the twin brother of george bush - both heinous foul pieces of crooked crap....
Ha! - US state legal officers like their Attorneys General, live as part of America's court and lawyer bribery culture, in which lots of innocent people go to prison, and lots of innocent people have their lives destroyed and all their assets taken, and any lawyer who rocks the boat too loudly, like heroic Richard Fine in L.A., gets disbarred or jailed or worse.
A state Attorney General knows he can get 'taken down' in a minute by the feds - a fake scandal, fake criminal charges with fake evidence, cocaine planted in his car or child porn planted on his computer, and the media will bury him instantly.
That Attorney General is seeing innocent people get taken down all around him in the corrupt USA, and has probably himself been sending innocent people to prison, just to help himself get elected ...
Do you really think a few phone calls from 'citizens' will help to convince this deep-in-crooked-sh*t American AG to 'do something about corruption' that he well knew he should have been doing all along?
Ha!
These kinds of pipe-dream things that obviously won't work, backfire in terms of citizen motivation. A better course is to chronicle the corruption so well, the whole system is de-legitimised.
And then American Revolution can begin.
So bank guy - in other words, don't bother calling my state AG. Sorry fella, but I just did, and I hope you understand the difference between a skeptic and a cynic. BTW, if the only people calling the AGs are the banksters, which way to you suppose they are going to jump? They are elected too, and some are even ethical - unlike the US AG, who gives pimps a bad name.
Not to diminish the importance of this post, but the AGs can parade around all they want and agree to whatever they want... but in all likelihood, they have no ability to speak for individual, civil causes of action. In other words, where the governmental actors are simply going to fine them anyway (and then turn around and give them the money to pay the fine), they get to lose a chunk of hide from thousands of lawsuits alleging fraud, etc... and I'm pretty sure there isn't a jury left in the country that wouldn't tack on punitives. [which, given the precedent from the tobacco legislation, the fact that so many people were harmed by their actions likely makes anything fair game for purposes of due process; as opposed to the ~10x compensatory limitation generally imposed].
Due Process? Is that one of those extinct birds? I hear there's three left but some rich guys bought them on the black market.
BTW I also hear talk the banksters are making it legal to use customer funds in the event of insolvency. Of course since they don't get arrested anyhow im not sure why they'd need this?
As soon as this passes watch people that are current on payments with large equity get foreclosure letters. That would be the end of the road for me. And for as many others as possible.
What the fuck does that mean? Who is going to get a foreclosure letter when they're current on payments?
Just like anyone with understanding in the stock market dumps to retail schmucks, anyone with any good equity in their place should have gotten the hell out of it by now or made preparations for quick sale... before the next leg down (or, alternatively, a continuous grind down).
Unless, of course, they had a family and didn't consider their home as an "investment" but rather as a HOME.
Those poor family schmucks! What kind of fairy-tale life do they think their living trying to raise a family and keep kids in a stable environment! What kind of idiot does that?
...
It is exactly this myopic approach that ensures we cannot lay blame where it is due and move forward with this mess. I'm going to make a very, very simple observation, THAT ANY TIME YOU ENTER THE MARKET FOR ANYTHING, YOU ARE A SPECULATOR. Even if you have a disagreement with this definition, I'd think, objectively, you'd have to agree with the definition if it was narrowed to only include times in which one enters the market on leverage (also applicable to our situation).
The simple fact is, EVERYONE WAS/IS A SPECULATOR. How do you explain HELOCs? Now we cry over sour grapes.
The other issue is that your argument is patently bullshit considering the size of and ameneties in the offending homes. People didn't over extend themselves to get meager and humble "homes." They were busy borrowing money chasing material dreams, not merely shelter to sustain life. Keeping up with the Joneses was more important than making a gut check and calling lunacy to the whole charade.
Further, the fact that they saw the purchase as something other than what they actually were, is irrelevant to determining culpability in this case... actually, it's precisely the reason for culpability.
If someone ever asks you the definition of moral hazard or the evils that could come about through the nanny state, I present you exhibit A.
I suspect Romney will do the same....
a suspect is usually suspected
I suspect you're right.
It now appears that Eric Holder & Lanny Breuer (his second) have a conflict of interest by them being employed by the law firm of Covington & Burling. Of Covingtons clients, some work was on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase to set up legal opinion letters needed to create...MERS.
So apparently, even if the fox is in the henhouse, he would, by law, have to recuse himself from eating the chickens.
Oh what a tattered web...
Politics is evil.
Good luck with your desire to harness it in order to create good.
Coherence? How the fuck does that work?
U.S. HOUSING PERMANENTLY CRIPPLED
The US-based shadow home inventory is vastly larger than estimated. The bank owned inventory is enormous, but so is the variation in those estimates.
9.8 million homes are in bank inventory, or suspended animation within the system, waiting for liquidation, suppressing price further. Long past critical mass, only radical out-of-the-box solutions will work. Massive loan forgiveness is the only solution, but it will never be done. USGovt ownership of one quarter of American homes is more likely. Conclude as inevitable that the nation will soon face widespread bank failures and even more staggering loss in home values, since the overhang of home inventory will force home prices down another 20%, my ongoing estimate that has been repeated and repeated ad nauseum.
The problem is so great that the mortgage bond market can no longer be described as having viable parties and counter-parties.
http://news.goldseek.com/GoldenJackass/1327093200.php
Just watched "Margin Call"... excellent...
Exactly !
In Florida it IS the AG (Who receives massive contributions from the Robo-signers) who is the problem. She has been rewarded with guest appearances on Faux, although perhaps the blonds hair and tits help to disguise her as a regular Faux airhead bimbo, which she clearly is anyway.
Welcome to the land of the free.
At some point, in most U.S. markets you'll be able to purchase distressed real estate at 10 cents on the dollar. It's going down far more than another 20%. This opportunity will most likely occur in concert with hyperinflation. A loaf of bread will cost $10, gallon of gas $20, but real estate will essentially be worthless because no one will be able to get funding. Cash rules.
Mission accomplished, mother fucker!
9-11, Iraq, WMD, and the war on terror are childrens stories compared to the largest robbery in vomit-history.
20% further loss on homes is probably not going to be accurate...more like 50-60% in my estimation and it could be worse. Homes could revert back to prices from the seventies, when fiat money began...
don't forget the inevitable over-shoot...
Don't worry, Benron is the counter-party of last resort.
I like bankers.
Whats your recipe?
drugs.sex.rock-n-roll.
I prefer drum n bass
More cowbell.
Well the music has not stopped. What am I missing? Who's buying the homes that are taking the homebuilding stocks up. Or are they building apartments.
Everybody is on the air telling us we have a bottom. Where is the truth to this mess. Is it that bad Bambi is scared to prosecute the banksters so we don't show the truth of how bad most American's are in debt. Or is he waiting to see if he can get a second term and then blast them. If you listen to the jerks everything is so good as the market keeps melting up. How in hell are the banksters showing all these profits with garbage on their balance sheets. Or has the FED monetized the mess? Why would CS buy MBS paper from the FED. Is it good or not. Something really stinks and my nose keeps pointing to the FED. Bernanke has already made interest payments for the bonds of Greece and when will that end. A interest payment is just a temporary fix. Supposedly the SWAP lines will be repaid. LOL on that.
How can the average American ever understand how evil the FED Cartel is and how the destroy our dollar. Ron Paul gets it, Nobody else does.