EDITOR’S NOTE: It’s worse than Martin thinks. If my information is correct, virtually all the RMBS derivatives and mortgage bonds are fatally defective (they can’t be fixed). The nominal value of that exceeds all the real money in the world by a factor of two. A lot of them cancel each other out, but the point is that there are three parts to every home loan — the obligation (receivable, as Wall Street likes to call it), the promissory note (which is supposed to be evidence of the obligation) and the mortgage that gives rise to the power to foreclose in the event of non-payment of the obligation.

The REAL problem is that the obligations exist but not the documentation, in legal terms. That does not extinguish the obligation. But it does mean that the note is not the evidence of the obligation even if they have the original. It also means that the mortgage, incident to the note, is worthless. And that means they can’t foreclose because they have no lien, much less a perfected lien. It also means that the obligation is unsecured which is dischargeable in bankruptcy. They can’t fix it without the borrower’s signature now or a court order reforming the original documentation. Not so easy.

The real creditors, the investors, have chosen to make their claims against the investment banks. Smart choice, because of the fraudulent lending practices, appraisal fraud, and TILA violations that exist as defenses, not to speak of damage actions for slander of title. By the time the case is done, there might not be much left of the obligation after off-sets for defenses, affirmative defenses and counterclaims.

The investors SHOULD get their money back from the investment banking firms — all $13 trillion of it, plus the synthetic instruments that multiple the real money factor by ten. That leaves the investment banks holding a bag of crap of their own creation. They are not the payee on the note, they didn’t lend any money, and they are not the mortgagee on the mortgage or the beneficiary under the deed of trust. If they sue the homeowner for unjust enrichment they must show “clean hands.” Not so easy when the whole thing was a PONZI scheme.


FDIC: 903 banks in trouble. What to do …

by Martin D. Weiss, Ph.D.

Martin here with an urgent update on the next phase of the banking crisis.

Just this past Friday, the government released new data showing that the FDIC’s list of “problem banks” now includes 903 institutions.

That’s ten times the number of bad banks on the FDIC’s list just two years ago.

The banks on the list have $419.6 billion in assets, or SIXTEEN times the amount of two years ago.

And yet, these bad banks are …

Just the Tip of the Iceberg!

How do we know?

Because the FDIC has consistently neglected to include the most endangered species on its list of problem institutions — the nation’s megabanks that are among the shakiest of all.

The FDIC doesn’t reveal the names of the banks on its list — just the number of institutions and the sum total of their assets.

Still, I can prove, without a shadow of doubt, that the FDIC’s list of problem banks is grossly understated and inadequate.

Consider what happened on September 25, 2008, for example.

That’s the day Washington Mutual filed for bankruptcy with total assets of$328 billion.

But just 30 days earlier, according to the FDIC’s own press release, the aggregate assets held by the 117 banks on its “problem list” were only $78 billion.

In other words …

Washington Mutual alone had over FOUR times the sum of ALL the assets of ALL the banks on the FDIC’s list of problem banks!

Obviously, Washington Mutual was not on the FDIC’s list.

Obviously, the FDIC missed it. Completely.

Also not on the FDIC’s list: Citicorp and Bank of America, saved from bankruptcy with $95 billion in bailout funds from Congress. Just these two banks alone had over FORTY-SEVEN times more assets than all of those the FDIC had identified as “problem banks.”

Some people in the banking industry seem to think the FDIC can be excused for missing the nation’s largest bank failures for the same reason that blind men groping in the dark can’t be blamed for missing an elephant in the room.

But the fact is that the FDIC even missed the failure of a relatively smaller bank: IndyMac Bank.

When IndyMac failed in July 2008, the 90 banks on FDIC’s “problem list” had aggregate assets of $26.3 billion. But IndyMac alone had $32 billion in assets. Evidently, even IndyMac was not on the FDIC’s radar screen.

This is …

Easily One of the Greatest
Financial Scandals of Our Time

The FDIC’s problem list is supposed to guide banking authorities in their efforts to protect the public from bank failures. If the FDIC is missing all the big failures, where does that leave you and me?

Heck — it’s bad enough that they refuse to disclose the names of endangered banks. What’s worse is that they’re hiding the truth from their own eyes.

And with so many misses so evident, you’d think they would have changed their ways by now.

Not so.

Even as I write these words to you this morning, banking authorities are AGAIN failing to recognize, analyze, scrutinize, or tell the public about the real impact of the most intractable disaster of this era:

Major U.S. Banks Still Extremely
Vulnerable to the Foreclosure Crisis

Here are the facts …

Fact #1. JPMorgan Chase, Wells Fargo Bank, and Bank of America each have more than $20 billion in single-family mortgages that are currently foreclosed or in the process of foreclosure.

Fact #2. Each bank has at least DOUBLE that amount in a pipeline of foreclosures in the making — $43 billion to $55 billion in delinquent mortgages (past due by 30 days or more).

Naturally, not all of the past-due loans will ultimately go into foreclosure. But these figures tell us that the biggest players are not only in deep, but could sink even deeper into the mortgage mayhem.

Fact #3. Combining the foreclosures and delinquent mortgages into a single category — “bad mortgages” — the sheer volume still on their books is staggering:

  • JPMorgan Chase (OH) has $65 billion in bad mortgages …
  • Wells Fargo Bank (SD) has $68.6 billion, and …
  • Bank of America (NC) has $74.9 billion.

Fact #4. The potential impact of these bad mortgages on the bank’s earnings, capital — AND SOLVENCY — is dramatic. Compared to their “Tier 1” capital …

  • SunTrust (GA) has 57.6 percent in bad mortgages …
  • Bank of America has 66 percent in bad mortgages …
  • JPMorgan Chase has 66.8 percent, and …
  • Wells Fargo has 75.4 percent.

Tier 1 capital does not include their loan loss reserves. But even if you included them, the exposure is still huge.

Moreover, this data is based on the banks’ midyear reports. Since then, we believe the situation has gotten worse.

And these numbers reflect strictly bad home mortgages! It does not include bad commercial mortgages, credit cards, construction loans, business loans, and more.

Here’s the key: Based on their size alone, we KNOW that none of these giant institutions are on the FDIC’s list of “problem banks.”

Yet they are all definitely WEAK, according to our Weiss Ratings subsidiary, the source of this analysis on bad mortgages.

Moreover, “weak” means “VULNERABLE,” according to the analysis of the Weiss ratings provided by the U.S. Government Accountability Office.

To help make sure your money is safe, I have four recommendations:

Recommendation #1. Don’t keep 100 percent of your savings in banks. Also seriously consider Treasury bills — bought through a Treasury-only money market fund or directly from the Treasury Department.

Don’t be put off by their low yield. The primary goal of this portion of your portfolio should not be the return on your money. It’s the return OF your money.

Recommendation #2. The only real risk in holding U.S. Treasury bills is the likelihood of a falling U.S. dollar. But don’t let that alone prompt you to run away from safe investments and rush into high-risk investments. Instead, stick with safety and protect yourself from a dollar decline SEPARATELY, with hedges against inflation, such as gold.

Recommendation #3. For checking accounts, money market accounts, and CDs that you have in a bank, be sure to keep your principal and accrued interest under the FDIC’s insurance limit of $250,000.

Recommendation #4. Given the magnitude of the potential crisis … given the limited resources of the FDIC … and in light of the strong anti-bailout sentiment of the new Congressional leadership … I feel you must not count exclusively on the FDIC or any government entity to guarantee your savings.

Instead, make sure you do business strictly with financial institutions that have what it takes to withstand adverse conditions on their own, even without a penny of government support.

Do your best to avoid banks with a Weiss rating of D+ (weak) or lower and seek to do business with banks that we rate B+ (good) or higher. Stay safe.

Good luck and God bless!


24 Responses

  1. The last will be first and the first will be last.

    I read the recommendations. My experience with money reveals the least is the most when it comes to helping businesses recover in this economy. Many have pulled out their coin purse and have change pockets, and focus on spending that which is considered the least to make a difference for the most.

    Jobs have opened up, unemployment rates are dropping, prices are holding steady, except for those prices that are being controlled and will rise come ‘he.. or high water’.

    Their constitution provided for the Mint to still coin money. If you notice gas stations have the vault holding their rolled coins. Coins matter.

    So recommendation Number #5.
    Recommendation #5
    Recommendation #5

    Some will hear and not understand, some will hear and understand for a while and forget and some will hear and heed the warning and prepare as instructed.

    Have coins (from the mint) , and $1 dollar bills, in your possession if you are stashing and preparing for any purported great fall. I don’t know if there will be one, or if we should concern ourself about one, but if someone were to concern themself, this comment is for you. I love you.

    Coins are durable. For every $1 dollar coin in circulation, some quantity of FRNs are removed from circulation. The government pays interest on the borrowed FRNs, coins save the government money, no interest charged.

    If you are not part of the solution, you are part of the problem. Your choice, and your free will, so I’m not pointing fingers we have a right to be part of the problem or the solution or both..it’s designed that way. I will remind you to Love unconditionally, for had these things not happened to us we would not have learned what we know now. We would not be awake to the world we live in. Everything we experience has Love behind it, because you learn things when someone loves you enough to show you the way, even if knowing the truth hurts. Everything you see, feel, touch, sense, smell, see, has unconditional love behind it. Do not fall for the deceit of hatred, anger, bitterness, and separation (us against them). There’s only two emotions. Fear and Love. I hope you are centered in the right emotion when the doors of the Ark close (so to speak) and you are stuck in your emotion and forced to keep it. It takes a higher consciousness, a level of intelligence, and ability to work toward a goal, and a heart to Choose Love. It’s the basic truth. It’s the original truth. Above all this worldly stuff, it’s all there really is, and when you get stuck in that emotion, you won’t mind what’s waiting for you.

    Light and Love,
    Trespass Unwanted, alive, allodial, life, live born, born alive, free, whole blood, freeman, corporeal, live, affinity



  3. Angry & Not Taking it.

    Your link below is a great idea .

    The 2010 French Revolution against the foreclosing, criminal banks, is a great boycott of these unrepentant liars.



    Judge H. Lee Sarokin

    Retired in 1996 after 17 years on the federal bench
    Posted: November 22, 2010 03:18 PM

    Does the Defense of Foreclosures by Lawyers Border on the Unethical?

    I am torn between my sympathy for those who are about to lose their homes through foreclosure and the injury I see to the rule of rule and the economy itself in the way foreclosure proceedings are being challenged and processed. People are angry with the banks and for good reason, but it is important to distinguish the granting of mortgages from what was done with them once granted. The banks may have been complicit in approving bad loans, but the borrowers must accept some responsibility.

    In all fairness, besides discovering that they could not meet the payments, defaults have occurred for a number of other reasons: the value of real estate has dropped; homeowners have lost their jobs or their income has been reduced; balloon payments could not be met; or other unanticipated circumstances have occurred. I watch with some misgivings the army of lawyers lining up to defend foreclosure proceedings, some by taking large fees or second mortgages on the very houses being foreclosed. (NY Times 11/62010 -Taking on a Second Mortgage to Pay the Foreclosure Lawyer)

    The media is full of revelations about the robo-signing of documents supporting foreclosures, and the practice is subject to numerous investigations and hearings. I have watched the video-taped depositions of bank employees admitting to verifying defaults with absolutely no personal knowledge of the facts. Of course, sworn testimony before a court must be truthful, but we have to be careful in deciding what renders it untruthful. It would be virtually impossible in any bank (even in those in which the mortgage remained with the issuing bank) for one person to know how much was loaned and precisely when and how much was paid on account. In this day and age, all of that information comes via computer printouts — not personal knowledge. So verifying that a mortgage is in default and the amount due is never based upon personal knowledge, but rather a search of the records and reliance on those records kept in the ordinary course of business.

    Foreclosure proceedings are not criminal in nature, in which a defendant can sit back, do nothing, and require the government to prove its case. These are civil proceedings and the borrowers and hopefully their lawyers know whether or not the mortgage is in default. To oppose the foreclosure, when both the borrower and lawyer know the mortgage is in substantial default, to my mind borders on the unethical. If indeed there are valid defenses to foreclosure — mortgages not in default, wrong property designated, etc. instances which I suspect are very rare, they should be pursued with diligence.

    On the other hand, the holder of the mortgage must prove ownership, and that information is solely in the hands of the banks and their assignees. That is not information a borrower would have, and the borrower (defendant) has an absolute right to know that a suit for foreclosure is being conducted by the current holder of the mortgage. That is a defense made in good faith and worthy of pursuit. I have reservations about the good faith of challenging the existence of a default with full knowledge that it exists, but none about insisting on proof of current ownership and the right to foreclose.

    Despite my sympathy for all those who may lose or have lost their homes, I am concerned with the stability of contracts, the rule of law, if they are abandoned at this fragile time in our economy. Any and all assistance possible, such as modifications, should be afforded borrowers so that they can remain in their homes, but failing that, our legal system and, in turn, our economy, cannot be jeopardized by excusing persons from performing under their written agreements when they know that they are in default. The person who buys a TV on time, but is aware that she or he is in default, should not be able to keep the TV and not make any further payments just because evidence of the debt and default comes from a computer rather than personal knowledge.

    Even defending foreclosure proceedings for the purpose of delay might seem like a laudable and noble goal, but the reality is that by doing so we are not retaliating against those mean banks that got us into this, but the shareholders, some of whom are homeowners themselves, who invested in these gift-wrapped mortgage packages only to find when opened — that they were worthless junk. Let us do everything we can to aid those in danger of losing their homes through foreclosure, but let us not sacrifice the rule of law and the sanctity of contracts in the process.

  5. Help!

    Regions Bank and/or Regions Financial Corporation were nationalized with $3.5 billion of tax payers money. Tax payers own them. However, “Regions”, through their predator lawyers, is quietly destroying families through confiscation of assets and income.

    Can anybody explain why “Regions” never gets the exposure it urgently deserves?

    Can you help?

  6. frankielee,

    Everybody’s head hurts – this is massive fraud – from A to Z.

    All of this relates to standing/real party in interest – at the time of the foreclosure action. If notes were not in possession and not properly conveyed to trusts – there is no standing by foreclosure plaintiff (most foreclosures proceed under name of Trustee to a Trust).

    It is becoming increasingly clear that the notes were not in possession at the time of foreclosures – and were not conveyed to the trusts – which means the loans were never securitized and the chain of mortgage title is non-existent. This cannot be “fixed” years later – as they only had 90 days to convey and properly assign loans to trusts..

    Then the question becomes – who HAS been collecting foreclosure proceeds??? Even if the loans were properly securitized – with all documents in order – the trust is only for current income pass-through – not for foreclosure proceeds. Meaning third party derivative contract holders (investors – if you will) – are profiting on the whole mess.

    Where is the IRS??? What and who is being reported? You would think the IRS would be all over this –

  7. pelucheven,

    Funny you should mention the money trail! This is a fatal problem for these transactions as they will show the true source, something the banks do not want!

    Many plantifs against the pretenders are missing this. As Gwen mentioned in one of her posts regrading using this, the Patriot Act was designed to protect against terrorist funds entering the country, but the way it is written, you can use this as a double-edged sword! Make the pretender prove the money trail back to the source since it is over the $10,000 amount required of the act.

    Maybe the light will come on for someone with this!

    ~Seeking Remedy

  8. This is the backdrop of our fight when there’s no money there’s no money. I know I was shifted or rather shafted into the greedy wall street pockets so why can’t it be shifted back to it’s rightful owners

  9. There is no contract between the servicers and us, and if the notes were not properly endorsed as it is required by NY trust law and the PSA, the bankers have no real collection rights, the investors own crap. Who do we owe our loans to?

    It seems that the actions to quiet title are more than necessary. They are crucial. The only way would be for the IRS to relax the REMICS rules. But this would probably will need new legislation in congress.

    These bankers may have pledged our notes without proper authority, making the issuance of any derivatives or hedge investment, CDS, CDO, or whatever they want to call them today null and void.

    I keep seeing notes with blank endorsements coming out of some bankers and servicers and using those to tell a story to the judge that the loan belongs to them and that they are foreclosing on behalf of some trust.

    This brings me to something a lot of people are ignoring so far and that is to follow the money. We have been so focused on following the paper trail, that we have forgotten the money trail.

    Will the FBI ever get on this issue?
    and the rest of the alphabet letter glossary of agencies that are doing nothing at all, what are they doing????

  10. Anonymous, happy thanksgiving to you too.

    I was wondering….would you care to comment on something that is perplexing me?

    I understand the HUGE implications of the recent Kemp case showing what Neil Garfield and you have been talking about forever about how the mtge’s never made it to the trusts, and the major implications of this idiotic failure on the part of the banks.

    Could you elaborate on the implications on the borrowers side? If these notes never made it into the trusts, and stayed with the lenders, wouldn’t that mean that although there’s hell to pay with the investors, the banks are still OK to foreclose, since they still retain the notes. Or did they somehow lose ownership?

    I’m really confused. And my head hurts. It may implode.


  11. Neil

    First – Happy Thanksgiving to you – and to all readers here. We do have each other to be thankful for.

    You accurately give the “three parts to every home loan” but, the fourth is the derivatives – derivatives are not part of securities, SPV trusts, or the original loan obligation itself.

    Derivatives were – and are- created by Wall Street to transfer collection rights – after the loan income producing asset is no longer performing.

    Thus, banks who purchased the mortgage loans, and then supposedly securitized the receivables, will keep the converted loans (now securities) on balance sheet (or off – if they fail to abide by FASB) – until the derivative collection rights are cleared. They may not remove the loan asset/security – until the “investor” derivative contract holders realize their profit by foreclosure proceeds. But, this means – someone else is collecting the foreclosure proceeds – not the bank – not the bank’s off balance sheet SVP conduit – and not the off balance sheet Trustee to the conduit. These parties are not entitled to foreclosure proceeds – the derivative contract holders will realize the proceeds. And, derivative contracts ARE NOT part of any ABC TRUST – for which a trustee claims to be acting on behalf of. DERIVATIVES ARE DERIVED – simply put. But attorneys feel they have the leeway to attach to the trust – even though the pass-through is broken – with collection rights removed.

    This is what is happening – and mortgage servicers KNOW THIS. They know foreclosure proceeds are not being remitted to any trustee – or any trust. The servicers are servicing for derivative contract holders — who is your unidentified creditor.

    This has long been the process for securitizations. And, the banks have proprietary relationships with these derivative (distressed debt) contract holders. The banks will not divulge their identify. And, as one reader here stated – the attorneys for the undisclosed creditor claim that it is “none of your business” – to know your true creditor.

    This is also how the media presents – “so what – you owe the debt – it is none of your business to know TO WHOM you CURRENTLY owe the debt.”

    This is the major problem – and is the problem encountered in courts across the country. However, this mentality is in violation of federal law – false – fraudulent – and fraud upon the courts. And, all have been denied their right to confront their true creditor – and negotiate.

    And, finally, these derivative (distressed debt) contract holders purchase collection rights at a steep discount – thus, profiting from others hardships due to fraud that started in the origination.

    Time to face the real culprits in the eye. No more pretending.

    Again, Happy Thanksgiving to all.








  13. The following shows how those governing us view these situatons. There’s not a hint here of the harm to the already totally stressed out American citizenry, just concern for the banks. My only concern for the banks is that they continue to exist at all. Let them fail.

    As the Congressional Oversight Panel warned:

    Clear and uncontested property rights are the foundation of the housing market. If these rights fall into question, that foundation could collapse. … If such problems were to arise on a large scale, the housing market could experience even greater disruptions than have already occurred, resulting in significant harm to major financial institutions.

    See full article from DailyFinance: http://srph.it/ar7Mlc

  14. Dear Sirs/Madams,

    I want to know what Weiss Rating Grade that the Phoenix, Arizona branch of J. P. Morgan Chase Bank is getting; I would appreciate a prompt response, because if that Grade is a D+ or lower, I will move my money elsewhere.

  15. Dear Garfiled,

    What is there to stop the bankers and their hired criminal lawyers from assigning deeds of trust left and Right, from manipulating MERS, from setting up a another scheme to finish all off?

    What is our recourse?

    The land records as we have seen are highly vulnerable to fraud, MERS is a toll at the service of the thieves, the fraud is being called technical irregularities and the guilty ones are not even being arrested or prosecuted for fraud.

    The onion keeps being peeled and it is stinkier by the layer. Let us see what comes out of it at the end.

    THERE ARE NO PROPERLY ENDORSED NOTES TO THE POOLS, will our lawyers pick up on that, will the courts realize they are being used as an accessory to commit a crime against us the PEOPLE????

  16. Another Class action CHASE and HSBC :


  17. we might be wise to consider france on 12-7-10, run on the banks. http://www.tennesseesonsofliberty.com/2010/11/french-soccer-player-kill-banks.html
    the international banking cartel = this malignant growth is terminal to

  18. I agree with Patrick.

  19. Mr. Weiss:

    Much of this is absolutely nonsensical advice!

    Buying ‘Treasuries’ at a low interest rate below the actual inflation rate, to prop up a bankrupt government married to bankrupt Ponzi banks, is grand foolishness, and will tax and work our children to death, to pay back. NO DEAL!

    The FDIC is bankrupt too. That’s why they cover-up the MBS mess… for temp cash flows.

    Buy silver, gold, or well-priced real estate instead.

    Our worthless Weimar-style cash is a form of treasury bond, i.e. “NOTE”; but at least more spendable than a unbacked bond, in an emergency, that we are all soon, going to experience here in America.

    Save America & our children. Bail the Titanic!

  20. I am going to BOYCOTT any of these banks that will foreclosure on my neighbors home with nullity or fraud.

  21. This revelation does not surprise me in the least. I moved my money into a small local bank, and I have other savings accounts. The problem with thinking that the present Congress is going to be anti-bailout may be premature. Congress is pro bank and so is the F#$%^&* Federal Reserve. The supposed QE2 is just another bailout for the mega banks, which is called something else other than “bailout”. They are still going to fail. Before that happens, you can hedge your bets with gold or silver–real gold or silver. The Federal Reserve must go. It is destroying the USA as well as the mega banks. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  22. Ok, so that’s aggregate approximately 210 billion for the four mega banks.

    The bailout was 700 billion.

    Time to bail out the citizens. We want our money back!
    We want our way of life back!

    When you get a defective service or product, you get your money back.

    Ok, that’s a simplistic ratio, but you get the idea.

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