Terminated CBO Whistleblower Shares Her Full Story With Zero Hedge, Exposes Deep Conflicts At "Impartial" Budget Office

Tyler Durden's picture

Earlier today, we suggested that in the aftermath of the Greg "Muppets" Smith NYT OpEd, contrary to assumptions by Jim Cramer, a bevy of potential whistleblowers would step up to tell their tale of fraud and corruption across all walks of life - from Wall Street to, far more importantly, Washington, consequences be damned. This was paralleled by an alleged JPM whisteblower describing to the CFTC the firm's supposedly illegal activities in the precious metals space, which while we initially dismissed, we now admit there may be more to the story (stay tuned), even though we still have our doubts. What we are 100% certain of, however, is that yet another whistleblower has stepped up, this time one already known to the general public, and one that Zero Hedge covered just over a month ago: we refer to the case of former CBO worker, Lan T. Pham, who, as the WSJ described in early February, "alleges she was terminated [by the CBO] after 2½ months for sharing pessimistic outlooks for the banking and housing sectors in 2010" and who "alleges supervisors stifled opinions that contradicted economic fixes endorsed by some on Wall Street, including research from a Morgan Stanley economist who served as a CBO adviser. As part of the review, Sen. Grassley's staff is examining whether Wall Street firms or others exert influence that compromises the office's independence." As we observed in February, "what is most troubling is if indeed the CBO is nothing but merely another front for Wall Street to work its propaganda magic on the administration. Because at the core of every policy are numbers, usually with dollar signs in front of them, numbers which have to make sense and have to be projected into the future, no matter how grossly laughable the resultant hockeystick." As it turns out, somewhat expectedly, the WSJ version of events was incomplete. There is much more to this very important story, one which has major implications over "impartial" policy decisionmaking, and as a result, Ms. Pham has approached Zero Hedge to share her full story with the public.

As we stated earlier, we will present any and every whistleblower's statement in its entirety, and without editing, and so we will, however we want to bring our readers' attention to several key aspects of Ms. Pham's termination from the CBO, because it may have substantial implications over the enacted $25 billion robosigning settlement. The reason for this is that Ms. Pham was fired because of her work voicing skepticism over precisely the same 'chain of title' validity issues that snarled foreclosure to a halt for much of 2011, which as Adam Levitin has said present a "potential systemic risk to the US economy" and which have necessitated the recently enacted Robosettlement to avoid massive losses for the banks (and in the process yet another shadow taxpayer bailout for the Too Big To Fail banks).

The bottom line is that the CBO was warned at least by Ms. Pham (and possibly others) over the dangers of precisely the issue that Attorneys General are scrambling to shove under the rug in exchange for a wristslap to all mortgage originators (i.e., the same banks that somehow are now getting bailed out by taxpayers and the GSEs on an annual basis). And just like every other issue that merely gets a cosmetic and very transitory liquidity facelift, nothing ever is actually fixed. As Ms. Pham says: "It is unclear how the recent State attorney generals’ agreement to a proposed yet unpublished terms of the $25 billion robo-signing settlement would repair the chain of title issues that continue to mutate. In January 2011, the Massachusetts Supreme Judicial Court reversed the foreclosure actions of two banks for lacking proof of clear title, followed by a decision in October 2011 that a buyer who purchased a house that was improperly foreclosed upon does not make the buyer the new owner of the house; the sale does not transfer the property."

While we are confident that even more contract laws will be terminally bent and broken simply to avoid some more balance sheet impairments for America's already insolvent financial system, the message here is clear: the CBO, and arguably other "impartial" policy advisors, will only focus on the established institutional opinion, preferably that set by Wall Street itself, and retaliate (in some cases with physical force) over anyone who provides a dissenting opinion.

Such as Ms. Pham.

Below is her full story (pdf).


Following the Wall Street Journal story, “Congress’s Number Cruncher Comes under Fire,” I realized that the true nature of the issues would not come out. Therefore, I am making public the letter that I wrote to Senator Grassley (Feb. 23, 2011) regarding circumstances that led to my firing after 2.5 months by the Congressional Budget Office (CBO), particularly my writing about mortgage fraud and its roots in mortgage securitization that CBO sought to deny was a problem.

For clarification, the WSJ did not give proper recognition to some individuals. My “supervisors” was Dr. Deborah Lucas, who was CBO chief economist and assistant director, and is currently tenured professor of finance and economics at the Massachusetts Institute of Technology (MIT). MIT Professor Lucas was called by the President to serve in a leadership role at CBO. Morgan Stanley economist and CBO advisor, is the Vice President of Economics Research at Morgan Stanley, Richard “Dick” Berner, whose policy framework for refinancing stimulus was to be incorporated into my writing. Dr. Lucas also shared with me analyses from Goldman Sachs, also on the CBO’s distinguish panel of economic advisors, on the housing market such as the banks’ limited risks on mortgage buy-backs.

As a Congressional senior staffer, financial economist, my initial responsibilities were to write a brief (paper) to Congress on the state of the foreclosure crisis and the alternative policy options, as well as cover banking and housing. Almost to the exclusion of other policy options, CBO Assistant Director Lucas and senior management worked around Morgan Stanley’s policy framework and related ideas to present to Congress as the policy choice (One would be correct to point out that CBO does not make policy). Below are excerpts from my letter to Senator Grassley:

I was repeatedly pressured by the CBO Assistant Director, Deborah Lucas… to not write nor discuss issues in the banking sector and mortgage markets that might suggest weakness in these sectors and their consequences on the economy and households...

CBO: Robo-signing, foreclosure fraud as “hype in the press”

When I wrote about the emerging foreclosure problems in September 2010, CBO Chief Economist Lucas maintained that robo-signing was media “sensationalism,” “the kind of event of the moment where we should be adding skepticism, not just repeating the hype in the press”; CBO wrote that my writing about it “lacks judgment about what is important.” Exploring this further in the letter,

…Issues at the heart of the foreclosure problems pertain to securitization….and the Mortgage Electronic Registration System (MERS), which purports to have legal standing on electronic records of ownership on about 65 million…mortgages… MERS…facilitated Wall Street’s ability to expedite the pooling of subprime mortgages into MBSs by bypassing standard ownership transfer procedures as the housing bubble escalated…


The implications have profound financial and economic consequences that would be of compelling interest to Congress and the public, but the CBO sought to silence a discussion of such risks, that in reality have been materializing. These risks put into question the ability of investors or bondholders to make claims on the collateral (the homes) that underlies trillions of dollars in MBSs, the bulk of which are now guaranteed by …Fannie Mae and Freddie Mac. This affects $10 trillion in residential mortgage debt outstanding, of which $7 trillion in mortgage-backed securities (MBSs)…

The CBO dismissing such issues prevents an analysis of the risks, so that the public may be forced again to shoulder the consequences for which they have not been a given a voice or a choice.

A month later after being told by CBO Chief Economist Lucas to not repeat this media hype, Georgetown University Law Professor Adam Levitin, Special Counsel to the Congressional Oversight Panel and scholar at the American Bankruptcy Institute, raised essentially the same issues in his testimony before the House Financial Services Committee:

“The chain of title problems are highly technical issues, but they pose a potential systemic risk to the US economy. If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever….


These problems are very serious. At best they present problems of fraud on the court, clouded title to properties coming out of foreclosure, and delay in foreclosures that will increase the shadow housing inventory and drive down home prices. At worst, they represent a systemic risk that would bring the US financial system back to the dark days of the fall of 2008.” [Executive Summary, first page]

Essentially, the chain of title on securitized mortgages appears broken, whether or not there is a foreclosure. This would pertain to most homebuyers in the past 10 years as most mortgages were securitized by Fannie Mae and Freddie Mac providing the guarantees, and the largest banks (“The $7 Trillion MBS Problem – Foreclosure Problems and Buybacks”). Recall that these same entities founded MERS, which expedited securitization and purported to have foreclosure authority from its electronic records of ownership on about 65 million mortgages. “Robo-signing” emerged as fraudulent or defective documents were used or created to establish the legal authority to foreclose as MERS faced legal challenges; as of July 22, 2011, foreclosures could no longer be initiated in MERS’ name. At last year’s pace, some figures suggest it could take lenders in New York 62 years to clear their foreclosure inventory, 49 years in New Jersey and a decade in Florida, Massachusetts, and Illinois.

It is unclear how the recent State attorney generals’ agreement to a proposed yet unpublished terms of the $25 billion robo-signing settlement would repair the chain of title issues that continue to mutate. In January 2011, the Massachusetts Supreme Judicial Court reversed the foreclosure actions of two banks for lacking proof of clear title, followed by a decision in October 2011 that a buyer who purchased a house that was improperly foreclosed upon does not make the buyer the new owner of the house; the sale does not transfer the property.

A striking little mention fact of the Massachusetts foreclosure case was that the lenders could not show that the two mortgages were part of the securitization pool. Let’s consider a thought exercise. Others have the raised the question: if the entity that has been taking the homeowners’ mortgage payments is not the real owner, what happens when the true owner(s) of

the mortgage shows up? Are homeowners on the hook again for those ‘missed’ mortgage payments? It was not uncommon for mortgages to be sold multiple times, and it is my understanding that loans were intentionally not given unique identifiers as it moved from origination or purchase through to securitization.
In response to the WSJ story, Director Elmendorf issued a public statement maintaining the integrity of CBO’s work, an excerpt which reads:

“…We have the utmost confidence in the objectivity of our work and devote considerable time and energy to explaining the basis of our findings as clearly as we can to help Members of Congress understand the work that we do.” (Bolded emphasis is CBO Director Elmendorf’s)

In early November 2010, a stunning example was CBO Director Elmendorf’s, a Harvard Ph.D. economist, view that employment growth in housing construction would spur economic growth, in his discussion of inputs into CBO’s macroeconomic forecast model. A question about the assumption was met with Director Elmendorf asking why they were “pessimistic” about such assumptions.

After my termination, Director Elmendorf stated that I should have followed directions from the more knowledgeable and experienced Chief Economist Lucas, taken the opportunity to learn from her. Director Elmendorf saw no ethical issues in her direction, but shifted to perhaps we had a difference of professional opinion. As I understand, Director Elmendorf and MIT Professor Lucas first claimed to Senator Grassley’s office that they could not speak about my termination due to personnel privacy protections, when none exists for Congressional employees. When given full immunity to speak freely to Senator Grassley’s office regarding my termination, they refused to speak.

It has been suggested to not mention these things in polite conversation, but I admit there were oddities following CBO’s termination. After CBO fired me at the end of the day saying “we do not know whether or what you know about economics, economic theory or finance,” I returned to my office to make a phone call. Everyone had left, but there was a silhouette of a man standing in the dark in an office across the courtyard watching me during the 15-20 minute phone call. Later, I came home to find some papers had been moved and could no longer find some important documents pertaining to this case. I attempted to retrieve these documents from my office at CBO, but the power to my office was shut down precisely as the documents from my computer were about to be e-mailed to me; the entire floor and building were unaffected. At about 3 a.m. during a week day, there was sudden a loud crash into my front door followed by complete silence. Perhaps it was just a complimentary early wake-up call.

The truth is still what it is.

As I have come to learn, the issue of foreclosure fraud ‘robo-signing’ seems to be spoken in hushed tones near the powers of Washington D.C. CBO has the ear of Congress and can make or break policies that affect the nation with its analyses.

Who is the CBO serving?

Lan T. Pham, Ph.D.



And her full letter to Chuck Grassley can be found here - pdf.

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The Big Ching-aso's picture



".....that has given rise to legal action in U.S. history."

Roh, roh.   Where have I heard that term 'legal action' for the slighted public-at-large before?

IOW, a whole new shit-load bunch of lawyers are gonna get a whole-lot class-action richer.  At the end of the day, the 'settlement' will be like about $1.50 per household give or take $1.49.    Not adjusted for hyper-inflation of course.

Call me Cynical but don't call me Shirley.

failure to perform's picture

Just used your comment to illustrate the article on fb! Thank you! :)

Cistercian's picture

You lack etiquette...


BobPaulson's picture

At least he likes himself. Gave himself a green arrow up.

Unprepared's picture

<You guys are merciless. That's why I like this site

<You moron

Cistercian's picture

Being vicious in the service of the Truth is no vice.


Excursionist's picture

No idea what that is supposed to mean.

non_anon's picture

you make a contribution to ZH for hard hitting news you don't get anywhere else, put your money where your posts are!

rufusbird's picture

You do congratulate a person who shines a light on a den of cockaroaches!

non_anon's picture

pony up you mofo's and thank you that have, happy Sts. Pats day that have given a contribution to ZH and those on the fence

SwingForce's picture

Right, you FIRE them. Just like Florida State Attorney General Pam Bondi did to June Clarkson & Theresa Edwards when they were working on the Mortgage Fraud.

RollinsArline3's picture

my roomate's mom makes $83/hr on the computer. She has been fired from work for 9 months but last month her pay check was $18339 just working on the computer for a few hours. Read more on this web site .....  http://bit.ly/FPPP3j

ACP's picture

First hard core exclusive...interesting.

I'm sure there will be more.

The Big Ching-aso's picture



Ya, fairly hardcore.   Maybe Mature-Audience.    The rest sure to be rated XXX though.

putaipan's picture

godbless the .999% !  we need 'em! imagine thousands of cathrine austin fitts rising up !  (but i too hope they look more like ms.pham)

12ToothAssassin's picture

I think that decimal does not mean what you think it means.

putaipan's picture

naw... i got it right.

it's really only the .001%'s entrails i wanna see hanging from telephone poles.  the others can do time or cooperate

Cistercian's picture

ZH is always EPIC.

  Trust me on this!

 Tyler rocks.....Hard.

JohnKozac's picture

Never ever think your story will be heard if you tell a Gub'ment agency. Remember how many people---mortgage insiders, secretaries, S&P execs, and so on--told the SEC and other agencies about the fraudulent mrotgages......see the result? They did Zippo...Nada......Zilch...Even Madoff said they turned a blind eye to all the fraud.

Spill th ebeans to ZH where it will be published and heard (and read) by at least somebody.

Awakened Sheeple's picture

Great job Tyler.. Let's make this go viral

Imminent Collapse's picture

ZH now breaking news. Tyler(s), you are extremely influential these days. Keep up the good reporting.

vast-dom's picture

not even the tip of the iceburg -- just wait till the real facts come out.....

SMG's picture

THANK YOU!! Both zh and Lan! I want a better world for all of us, and the kids. You guys are helping with that.

illyia's picture

Thank you ZH and WhistleBlowers.

We might have a chance.

Okay. But maybe...

LongSoupLine's picture



Zero Hedge just crossed over into full legitimacy.  With that, the MSM players just completely shit themselves.

Welcome to K.M.A. status Tylers!

fiddler_on_the_roof's picture

This whole whistleblower thing feels like an orchestrated drama, so that we sheeple will behave in a certain way, when some shit happens.
What is the end goal? I do not know.

The Big Ching-aso's picture




I just gave the 100th uptick to the first post.    Why's this important to relay?  I have no idea.

BreadnH2O's picture

Pack of smokes and a six pack to the Tylers and Miss./Mrs/Ms. Pham http://www.youtube.com/watch?v=HxkePLLhyfU&feature=related

nmewn's picture


There is hope.

DoChenRollingBearing's picture

Yes, and to Ms. Pham as well.

williambanzai7's picture

A PhD with a conscience. There is hope after all.

The truth about Robo Fraud is one big fucking whitewash.

CrazyCooter's picture

I have worked with PhDs before and generally I wasn't impressed. What is impressing is moral fortitude. I have filed complaints of fraud with an employer before; its a gut wrenching experience. I only did it after I was pretty sure my ass was gone. I (and the fraud) wasn't important enough to follow me.

This lady carries her balls in an ash can.



P.S. I am biased because I have a soft spot for intellectual asian ladies, particulaly the assertive and moral type.

williambanzai7's picture

Intellectual Asian ladies, you would have a field day in my neighborhood.

BigJim's picture

Do they like large men whose names begin with 'J'?

CrazyCooter's picture

I think the likelyhood of an educated asian lady with balls in an ash can packing it up to the great white north (aye) to hang out with me is slim to none (as my old man would say - betting on a three legged mule to win the triple crown).

Granted, when I got fish in my skillet, venison in my stew, and I am 1000k miles from the nearest population center over 50k when this bitch unwinds, I might have some market value ... but that is pretty out of the money ... honey.



FEDbuster's picture

Who knows they may serve up some black swan pretty soon?  Ever consider an Eskimo woman (has a bit of that Asian look)?

Taffy Lewis's picture

No money no honey no funny.



The Big Ching-aso's picture



I bet they have a football field day with you at midnight, you intellectually influential ninja Asian-type studly guy you.

williambanzai7's picture

As they say, the glass is always gleener...

TheFourthStooge-ing's picture

Not only a conscience, but competence, integrity, and courage. Her display of backbone is an admirable contrast to the writhing annelids that tried to silence her.

Thank you, Dr. Pham.


akak's picture

You, sir, besmirch every honest and decent non-financial annelid by implication --- even the order Helminthes will not take responsibility for the vermiform vermin of Wall Street.

TheFourthStooge-ing's picture

You are right. While annelids are spineless, this phylum of segmented worms includes many beneficial species, and thus it is unfair to compare them to the treacherous parasitoids of the Wall Street / Vichy DC political/financial cesspool.

I stand corrected.


DollarMenu's picture

The two of you sent me to the dictionary!

Genuine LOL - thanks!

bigkahuna's picture

helminthes:worm-like parasites 

dogbreath's picture

what kind of worms are in a dogs stool.  I've been told that giving your dog a copper penny is a cheap way to get rid of them

WillyGroper's picture

tincture of parsley if you can get them to drink it.

akak's picture

Typically, if they are visible and obvious, they will be tapeworms, which are not life-threatening (I have had them myself), and can be easily and painlessly eliminated with one pill.