Citigroup et al Bailouts Present Additional Defenses Againsts Collection of Virtually Any Debt

Think about it. You are a taxpayer and your tax dollars are absorbing the “losses” associated with write-offs of your debts (mortgage, credit card, auto-loan, student loan etc.) whether you pay or not! The reason for the toxicity of those assets the government is eating up is NOT because of defaults, it is because the paper is bad to begin with. In plain words, those debts are not enforceable because the securitizers and investment bankers didn’t follow the rules and intentionally defrauded both the investors who put up the money and the “borrowers” who were in actuality the unwitting parties to a scheme to issue unregulated securities under false pretenses. Unless the “bailout” goes to the actual victims of the fraud instead of the perpetrators, how are we ever going to show our faces in the world financial markets again?

The Rescue of Citigroup


Too big to fail and increasingly desperate as investors fled its shares, Citigroup last night agreed to be rescued by the troika of agencies that have been gathering the U.S. financial system under a government umbrella in these desolate times.

The Federal Reserve, U.S. Treasury and Federal Deposit Insurance Corporation late last night unveiled the rescue of the banking giant, a “package of guarantees, liquidity access, and capital” aimed at stabilizing financial markets and reviving the faltering economy.

In part the package marks a return to Treasury’s focus on the troubled, mostly mortgage-backed securities that have encumbered Citi’s balance sheet and those of other banks and that were the original target of Washington’s $700 billion bailout measure. Citi will have to absorb the first $29 billion in losses on what the bank and agencies calculated to be a $306 billion portfolio, and taxpayers would be responsible for losses after that. In exchange, Treasury and the FDIC will get $7 billion in new preferred Citi shares that come with a dividend of 8%.

Treasury will also give $20 billion to Citi for additional preferred shares, and in turn attain authority over how the bank compensates its executives and Citi’s compliance with an FDIC program to help homeowners with troubled mortgages. This would come on top of the $25 billion in funds Citi received when it and other banks accepted government help this fall. Last night’s announcement, though later than planned due to hitches in the negotiations, was the latest aimed at preceding global markets’ weekly open. And though it concerned just one company, the ramifications of Citi’s travails would seem to make the deal mark another milestone in this season of bailouts. “If the government’s rescue plan is a success, it could help bring stability to the entire financial system,” The Wall Street Journal says. “If it doesn’t, even deeper doubts about the industry’s future could spread.”

6 Responses

  1. true… you know what they say…Hey! I dont have to put up with this! Im rich!

  2. Neil and Marie,

    I had the same exact thing happen to me except my “lender” was ONEWest/IndyMac. They finally responded to one of my many QWR’s which included a 12 month summary of my account which shows the mortgage paid in full, yet they continue to expect payments from me and they have gotten them, since they received full payment for my loan almost a full year before I finally got my modification.

    Neil, if Marie would like to speak to me, feel free to give her my email and I will gladly send her the account history reflecting the payment. Obviously they had a CDS on my loan and collected on it after they required that I had to be late in order to apply for a HAMP.

  3. How do I go about seeing who bought and sold our mtge and how many times. Read following as to why I am asking……….

    My husband and I had a wonderful gift handed to us on May 3, 2010. Our house which was getting ready to go into foreclosure. Got notice on 4-26-10. Paid off in full, the amount that Citimortgage’s attorney. Castle, Meinhold and Stawarski of Denver Co stated. On May 21, we were told that Citimtge had the money and that everything was in the process of being completeed so that we would get the deed. On May 24, we recieved letters from Attorneys, stating that we needed to make arrangements to move out, House up for sale on Aug 18. We contacted Citi collections..they have no record of money. Loss mitigation has the money, and is now stating that there is a title issue to contact the attorney.

    We contacted the attorny on May 25, and the Attorney says that money is there, our foreclosure is on hold, and that they will not contact collections to stop the calls and they will NOT release the title. Now where do we go. I am now getting ready to send out demand letters to all parties involved demanding they release our title. This title dispute is NOT our fault, our house is paid off. Any help or ideas in regards to this would be helpuful. Please feel free to eamil me at…serious responses only. NO spam. Thanks

  4. Neil,

    I would likek to speak to Michael, the author of the above message. I would appreciate it if you would ask him to contact me via e-mail.

    Many thanks,


  5. Another affirmative defense could be on the belief and knowledge that _______ has transferred/sold the MBS that contained the mortgage in question.

    For everyone deep in this I highly recommend Bloomberg Professional. It lists all MBS’s that have been created and the trade history of each one.

    You could easily show the court the date/time, the buyer/seller and trade price of the MBS.

    This will show you real time who is trading the MBS and what price they are paying for the mortgage backed security.

    If JP Morgan is claiming to be the holder in due course and you see the MBS offered or trade before foreclosure then this would certainly raise some concerns regarding the foreclosure.

    I see this happen all the time in Georgia.

    Lately traders are buying defaulted notes for 5-20 cents on the dollar and then foreclosing to make the difference.

    Something to look out for.

  6. I say let the damn banks fail on their own, one by one.

    San Diego, Calif.

Contribute to the discussion!

%d bloggers like this: