Is The FHFA Lawsuit Against The Banks Just A Subversive Res Judicata To Bail Out The Banks?

Tyler Durden's picture

That Zero Hedge has a jaded outlook on the world is pretty much clear by now. But even our cynicism is amateur hour compared to that exhibited by some of our readers. Below we present one outlook by reader Joseph, on how the FHFA "lawsuit" against the banks, a development that as we noted before stinks to high heaven from a purely (lack of ) logical standpoint, could be nothing less than Res Judicata in sheep's clothing, whose purpose is simply to facilitate the case for QE (banks tumble), then settlement of the settlement (banks soar), but not before the crony communists have built up a solid equity position in the names, QE3 is firmly in place, and Obama is seen as the crusader against the hated banks. Is it possible? Who knows. We will find out as the affidavits start trickling in.

Some brainstorming from Joseph:

"Issue preclusion" in first suit "fully and fairly litigated" is res judicata in all subsequent cases even if parties are different.


1. Initiate Fed Fannie/Freddie suit and stay all other litigation while bank panic ensues.
2. Drag down market and start QE3 while bank directors shovel money into Obama's campaign.
3. Bernanke buys the shitty MBS and worthless bank stock "to save economy," stocks up, bonuses saved, election won!
4. Throw the suit and lose (on a technicality!) creating res judicata so banks thereafter can win based on res judicata in all the other state and federal cases
5. Banks walk from all litigation winners so screw the attorney generals settlement and the New York state BOA litigation.
6. Taxpayers pick up tab TWICE, once for the original fraud MBS sold to F/F and once for QE3 to "save the economy."
7. Obama is a lawyer and this is basic "con" law.
8. Occam's razor.  Wells Fargo, the one not sued, is the one going down, IMHO.
9. On the other hand, I'm a sick twisted fuck, so what do I know.

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unky's picture

Of course it is. The banks have been on the brick of bancruptcy and sueing them gives the public a reason to funnel money into them and bail them out. You cant bail them out for nothing, that might lead to protests or whatever.

Denninger-is-a-douche's picture

Author appears to have a limited understanding of res judicata, issue preclusion, claim preclusion and how they apply.

Although this may have been intended as a quick "brainstorm" squib, it's long on blabber, short on sense.



unum mountaineer's picture

okay, i'll bite. What do you feel is/is not really happening here? and how does it look on your end?

the mad hatter's picture

no it is a song and dance to give the government the illusion of power. the banks own washington.

Tunga's picture

An un rebutted Affidavit stands as the truth. If you have something resembling a fact Denninger-is-a...; maybe you should use it to make an argument instead of a baseless insult?

Denninger-is-a-douche's picture

"An un rebutted Affidavit stands as the truth" - WTF on several levels. Are you trying to say the author's writings is an affidavit and unless facts are presented to the contrary all assertions are true?

I'm not going to write a treatise here on res judicata and the difference between claim and issue preclusion.  Do the homework yourself.  What the author has penned to that point is incorrect and to the extent the article is based on res judicata and issue preclusion it is wrong.

Here is a fact for you. . . legal interpretation by non-lawyers is nearly always flawed whether in simple nuance or complete misapplication.  For example, your misapplication and misunderstanding of the term affidavit.

Again, not going to do the homework for you but it would be a good idea for you going forward to not blindly take everything written that supports your world view as the truth.

Global Hunter's picture
Guy asked you a simple question you wanker, you'll catch more bees with honey.  Next time I trust that you our holy overlord of all matters legal will endulge us plebs and peons and edumacate us.
Denninger-is-a-douche's picture

I'm not a bee keeper.  Educate yourself.

XitSam's picture interpretation by non-lawyers is nearly always flawed...

So are you a member of the bar?

Maybe-Not's picture

Maybe you could offer those of us here to learn something the short version of your point. No one is here to argue with you. Explain the counter argument. If you can't, please go back to yahoo and state your non fact opinions there.


Thank you,


Denninger-is-a-douche's picture

I'll give you a hint.

Issue preclusion (collateral estoppel) is used to prevent relitigation of an issue of fact or law already decided by a court against a party.  However it cannot be a bar to a claimant that did not have a full and fair oportunity to litigate the issue in the previous case.  Mutuality of parties is no longer required but isn't really relevant for what would be the defendants in a future case.

Claim preclusion (res judicata) prevents a plaintiff seeking an action against a defendant in which the cause of action (or a cause of action that could have been joined in the first suit) already has a final judgment by a proper court.

connda's picture

Wow...that wasn't too difficult to do, now was it?  You could have just said that the first time you posted.  But, thanks!  I just learned something -- which is one of the reasons I follow ZH.

Tunga's picture

"... and lose (on a technicality!) creating res judicata ..." - snip from story.


"... (res judicata) prevents a plaintiff seeking an action against a defendant in which the cause of action (or a cause of action that could have been joined in the first suit) already has a final judgment by a proper court. " - Denninger-is-a...

Where is the contradiction here? You and Joseph appear to be in agreement.  


anonnn's picture

Did the lion lay down with the lamb?


Spitzer's picture

 Is there anyone in government that isn't a lawyer ?

These lawsuits are here to feed the lawyer industrial complex. Just like the recent raid the government did on Gibson guitar co. Get them lawyers employed...

Lawyers are all over TV too(cocky stun c*nts on Fox news like Megan Kelly). They actually think they provide something for soceity when they are actually the biggest destroyers of progress the world has ever seen. They are a joke, they make me puke.

At least the military industrial complex invents things once in a while.

dwdollar's picture

"...they are actually the biggest destroyers of progress the world has ever seen."

Well, I will agree they are fourth... behind bankers, politicians and lobbyists. Though there is quite a bit of overlap.

samsara's picture

Whenever TPTB/W appears to be doing the 'Right' thing,  Always look for an alternative reason.  Usually 180 degrees different.

Kayman's picture

always look for an alternative reason.

So true.  A healthy dose of skepticism is no longer healthy.  Start with obtuse cynicism and you can figure out what the politicians and banksters are doing.

john39's picture

seems like a waste of energy to figure out exactly the mechanism by which the banker cabal plans to continue fucking humanity...  enough to know that, one way or another, they plan to soak the average person with losses, and squeeze anything of value into the their control, while at the same time increasing and centralizing government control. 

rocker's picture

Think of it this way.  1) QE1/2 pumps the markets up. Banksters and elite HFTs make billions. 2) The economy rolls over. The banksters and HFTs take trillions out of the markets. Hence, with the markets crashing and they should fall hard, as QE3 twist fails.  4) Do we get QE4 with a special annoucement and some swap lines to Europe. The banksters profit again from a simply marvelous recovery in bank stocks, bonuses included.

The question is. Do the markets roll over as they should since none of it helped the real economy, (actually made it worse), or is step 4 engaged and we do get QE4.

It really blows must of us away to think this could happen. But look at it this way. Look at all the Bullshit they have already done. Look at the damage they have inflicted upon the sheeple and how much the elitist have made off of the ills of others. 

Simply Put, these people have No sense of right or wrong. Their code of ethics is witness to ignominy and they do not care at all.

With no conscience for anybody other than the aristocrats that are beholden to, they truly believe Greed is Good.

For myself, I think all bansters bonuses should be clawed back and paid to the treasury. But that will NEVER happen.

They will take back someone's house.  Why is it a one-way street.  Moral Hazard is alive and Well on Wallstreet.

As Joe Kernen said on CNBC to Carl. "Bailing out the Banks is all Good".

dick cheneys ghost's picture

Makes sense.........Look to the MSM coverage, or lack thereof, and it makes even more sense.........Even tho the NYTIMES broke the story thurs nite, there is virtually zero coverage of the story in todays online version.

resipsaloquacious's picture

If the case was "thrown" on a technicality (example, statute of limitations,), then res judicata or collateral estoppel could not act as a bar to subsequent litigation on the same issue.  Why?  Because the case was not fully and fairly determined on the merits.

This conspiracy theory is absolute rubbish. 

Steroid's picture

Logic is the weakest point of irrationality!

falak pema's picture


narapoiddyslexia's picture

Still, they could get a full judgment on this complaint, settle it for pennies on the dollar, and achieve the result the posting describes.

resipsaloquacious's picture

No, they couldn't.  A settlement has no res judicata effect on a subsequent case because the initial was settled and not determined by a Court. 

narapoiddyslexia's picture

I'll repeat it, more slowly this time. They could get a judgment on the complaint [of necessity, from a court] and then settle the in-hand court judgment, for pennies on the dollar, and achieve the result the posting describes.

resipsaloquacious's picture

OK.  I get your point and it still is completely wrong.  If there obtained a judgment on the complaint and then settled, the settlement could not bar or even have a detrimental affect on subsequent suits.  This is because they technically won the suit, whether a party post-judgment settles the case can have no res judicata effect on a subsequent litigation in the manner that this post suggest.

Res judicata is far more limited than most people understand.  You and the original poster have a misunderstood notion of what it is and what it can and cannot do. 


Bringin It's picture

resipsaloq - Not to get all what-is-is about it, but IMO you misunderstand the author's use of th term throw.

Not thrown - as in thrown out of court on a technicality, but

throw - as in throw the fight, as in intentionally lose the contest.

Here there are not so many lawyers.  People tend to settle things themselves.

dolly madison's picture

I am skeptical too.  Time will tell.

RockyRacoon's picture

Skeptical?   I think the whole article is simply weird.   The guy who came up with this half-baked thing is not an attorney.

decon's picture

I'm not a lawyer but typically charges adjudicated in Federal court and State courts even for the same matter don't constitute double jeopardy.  Since the FHFA are federal charges they shouldn't preclude the states from continuing with prosecutions.

anonymike's picture

Do 17 big banks that looted the country now have a common enemy against which they can rally their strength? An enemy that is such an economic retard that he just appointed a top economic advisor that thinks raising the minimum wage will increase employment? What will be the unintended consequences as, during an election year, battle is waged between the administration and the owners of the Fed? In this case, the republican establishment battle against Ron Paul to instead nominate a bankster lap-dog could get very ugly, or worse... OR, is this all just more political theatre that will again shift more liability from banks to taxpayers with another hand-slap "settlement" AFTER November 2012, in exchange for support of the current lap-dog? Occam's razor strongly favors the latter. Watch for clues in the months ahead...

Posted 3 Sep 11 at Economic Liberty News

Bringin It's picture

anonymike - you're talkin' sense.

knukles's picture




And PSS.... Note the one Not Sued, Wells Fargo, happens to have a Big Ginormous Splendid Wonderfully Large Shareholder in the Pink Named Uncle Warren.....
Du-fucking-h, huh?

narnia's picture

Res judicata would not fail to have MERS front and center.  

My two cents is that we are going to see a very big across the board, undoubtedly poorly conceived settlement for mortgagees.  Banks are then forced to play the game the way the Treasury wants or undoubtedly lose more in court.  Look for Wells Fargo to be the first bank to offer across the board settlement that Obama and Warren have already worked out.

RockyRacoon's picture

I think you have it.   The banks are balking, for obvious reasons, to write down principal balances.   They are getting their nuts in the legal vice to do some persuasion.

Pure Evil's picture

Well, actually the banks need a way to get the toxic mortgages off the books, not so much another bail out. They currently have so much money sitting at the Fed, they actually need a way to get it out into the economy through fractional reserve banking, but find it difficult being loaded down with billions in toxic mortgages.

I think he's got this part right:

Bernanke buys the shitty MBS and worthless bank stock "to save economy," stocks up, bonuses saved

This may be partially correct:

Throw the suit and lose (on a technicality!) creating res judicata so banks thereafter can win based on res judicata in all the other state and federal cases

Need to find a legal way to show that the banks aren't the real owners of the mortgages giving the Fed a reason to buy them up, (Of course it's all a show trial for the sheeple), marxists/fascists are unequaled at staging show trials. And, of course, all it takes is for the Supreme Court to refuse to hear any appeals to these court decisions thereby automatically making these decisions law of the land. If anyone doubts the ability of this being pulled off, all one has to do is go back and study how they pulled off the Resoluton Trust Corporation.

Banks walk from all litigation winners

And restart the fractional reserve banking poinzi scheme again.

Taxpayers pick up tab TWICE, once for the original fraud MBS sold to F/F and once for QE3 to "save the economy."

So true, but this isn't the second time taxpayers have picked up the tab, nor will it be the last.

Obama is a lawyer and this is basic "con" law

Yes, Obama is a good con artist, but this "con" is not his field of expertise

I have no experience or expertise in these areas either, but I would think that the only way to restart the next great frational reserve banking ponzinomics is to eliminate the toxic mortgages on the banks books.

We have to remember that fractional reserve banking is the way the keynesian government, fed banks, and WS interests keep the keynesian ponzi scheme going. Without it these same interests lose power and control over the economy and the sheeple.

Plus, now days, it matters little exactly who the President is, as long as they don't try to overstep their bounds when it comes to the military and the Fed. But, not to worry. With the cost of getting elected President approaching a billion or so dollars, future Presidents will be the bought and paid for whores of WS interests.

narnia's picture

The GSEs (through the Fed) and the Fed have already purchased $5 trillion in MBS.  This was done without even one act of Congress or as much as a story in the MSM on it. They could just outright purchase the rest of the mortages without a reason or a lawsuit and no one would even bat an eye (outside of ZH).  

If I were looking to re-engineer an after the fact determined appropriate bankruptcy proceeding or force an administrative action & didn't have a conscience, I'd get the other party tangled in a legal mess... one in which I make the rules...  and impose my will on them.     


Everyman's picture

If this is a political play, then the UNITED STATES OF AMERICA is DEAD!

There had better be heads rolling for bringing a fradulent suit and illegal case forward, or the banks need to be prosecuted.  It can't be this bad here in the USA, can it?  Are we that corrupt and criminal?

If the skeptics are correct then this country is screwed and the shooting will commence.  Even the powerful an d the posers have to realize that even that goes too far and is just too "in your face" America.

Bringin It's picture

Everyman - check out Pure Evil's post above re. Resoluton Trust Corporation.  This is nothing new.  The difference now is that we are no longer rich enough to trudge on, under the dead weight of the scams.

AldousHuxley's picture

welcome to the funeral party



Jack Napier's picture

I was also wondering why Wells Fargo was the only one left out of the suit. Sure they are one limb of the NWO so impunity isn't surprising, but then why go after JPM and Goldman?

knukles's picture

Well, teenie tiny things like Well's corporate jets were supposedly used for rendition flights...  Supposedly one of the Big South of the Border Money Launderers...
Some special little thingalmebobs that go Phhhhht in the Night.

Jack Napier's picture

I figured out the answer to my question. Public relations.

wombats's picture

Oh Jeez.  That is so twisted and cynical that it just might come to pass. 

FEDbuster's picture

Wonder if Uncle Warren thought this one up?  Sick and twisted (crooked) is the new normal.  Given that not much happens without Bankster/FED approval.  This move could be VERY orchestrated by the banksters.

oogs66's picture

i think the government wants to take over bank of america, and this time will take over management and attempt to drive down banker can hope