ELEPHANT IN THE LIVING ROOM: $600 Trillion of What?

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

At the core then is a simple question: which is more important — people or money? I thought the United States Constitution made that clear and gave Americans the 2d, 4th, 5th, 9th and 14th Amendments to make sure they could enforce it. But now the answer has become hopelessly and intentionally obscured. -Neil F Garfield

The mortgage crisis merely kicked off the debate. Mortgage backed securities are now widely regarded as the largest asset class in the world, indeed in world history. Small wonder. According to reports from the industry, they accounted for $125 Trillion in….what?

By allowing banks to create money, the world governments have accidentally created a Frankenstein that under current rules cannot be undone. More than $600 trillion in credit derivatives have been issued which were, until recently, regarded as “cash equivalent.” In plain language the private banks were issuing currency pretending that it was “backed” by government issued currency. But they issued as much as their printing presses could endure.

The problem is that the $600 trillion is vastly in excess of the $50 trillion in currency issued by all world governments. The problem is exacerbated by the fact that we really don’t know the terms of those derivatives since, according to the financial industry, each one has its own characteristics. Nobody knows what they are really worth and nobody knows whether some of them or most of them cancel each other out as “hedge” products.

But what we DO know is that central banks are having very little effect on the economies of the world — because their actions might effect, collectively, perhaps a few trillion dollars worth of currency while the rest of the world is trying to come to terms with a hundred times that amount.

What does this have to do with mortgages? Everything. About a quarter of these “assets” are based upon the presumption that somewhere there are at least $14 trillion in actual loans that are secured by mortgages on real property. If those mortgages disappear — POOF! — the actual value of the $125 trillion in assets becomes recognized for what it always was —- zero. The real question is not who takes that loss — although it is nothing to sniff at —- the real question becomes how do we cover up the fact that there IS such a loss, because with only $50 trillion in world currency, there literally isn’t enough money in the world to pay for it.

So the burden falling on homeowners and investors is that, as we have stated before, emperor never had any clothes but we must pretend that the clothes are real until we figure something else out.  In the meanwhile, if 50 million people are ejected from their homes under invalid documents that were fraudulently obtained, so be it.

The media would have us believe that the banks are reluctant to take the loss which is true enough. They tell us that if the foreclosures proceed, the recognition of those losses can be delayed because they still have the property which they acquired in illegal “credit” bids. But the real problem is not whether there are $500-$800 billion in losses sitting inchoate on the balance sheets of megabanks. The real problem is that the true loss figure might be as much as $125 trillion, which will put the rest of the $600 trillion in credit derivatives into question.

Everything was “securitized” and if the mortgages are any indication they didn’t follow normal legal procedure in transferring the obligations or notes. The problem with identification of the creditor and the amount of the actual obligation still outstanding in mortgage loans turns out to be the tip of an even larger iceberg. If the same questions apply to credit cards, consumer loans, student loans, auto loans and other types of credit extended to varying classes of people, and the same defects exist where the creditors are hopelessly obscured and the accounting for the remaining obligation is not possible, the value of the entire $600 trillion comes into question — and the question is whether that represents a world-wide loss and if so, who takes that loss?

So homeowners in America are being used as the scape goat for the excesses of world-wide finance that was conducted in the world of shadow banking, which turns out to be twelve times bigger than the real banking world. The guarantees of due process, justice for all and the American way are put on hold because the governments, who were asleep at the switch for the last 30 years, simply don’t know what to do.

Alan Greenspan who shares a considerable amount of the blame for this state of affairs admitted in interviews that with over a 100 PhD’s at his disposal he still doesn’t understand the content of the derivatives. That is what I mean by hopelessly obscured and it isn’t the fault of homeowners or the investors. They were used as pawns in a much larger scheme.

At the core then is a simple question: which is more important — people or money? I thought the United States Constitution made that clear and gave Americans the 2d, 4th, 5th, 9th and 14th Amendments to make sure they could enforce it. But now the answer has become hopelessly and intentionally obscured.

22 Responses

  1. For those considering refinancing their mortgages … knowing what we know now about how banksters operatae, this is an absolutely “must have” accessory for your closing!


  2. If you live in GEORGIA, contact me. If Bank of America is giving you any problems. If they have been sending you Intent to Foreclose Letters, placing forced flood insurance on you or etc. I might be able to help you.
    Sonya sonya36767@yahoo.com

  3. leapfrog

    I’m with you that Assange’s stuff is about CW/BofA. BofA was apparently ALWAYS the ultimate backer for CW.

    We also have all the stories about the CW notes never leaving CW. The CW securitization scheme in the PSA is also a ‘different animal’. There is also someone else who has previously commented that there is a ‘whole in the America’s Wholesale Lender paperwork that is big enough to drive a spacecraft thru. (AWL is a trade-name of CW.)

    With CW and BofA (and their pals at Litton/Goldman-Sachs doing their part of forging documents), the biggest current target that matches the HINTS provided would be BofA.

  4. A-MAN! Great! Motion hearing December 14th. That’s when I sink or pop to the top! If it works out, you might not ever hear from me again. That would be sad, though. Please e-mail me a number so we can talk. I mean it.

  5. Thanks, Bob. I did let that one die.

  6. sorry I blew up! That’s not why we’re here. This guy is loaded and he’s a criminal, as in “alleged rapist eluding capture’. ENOUGH!! Let’s stay on topic.

    PSA’s provide your defenses against the bad modification. Read your PSA’s. There is a statement about modification to benefit the best interest of the investors. Problem is the conflict of interest in Sponsor/serviced transactions. Unfortunately, Glass-Steagall gave them the right (Thanks, Bill). But it didn’t give them the right to violate the rule of law. QSPE’s can’t service investors with 40% default rates (IRS). If the guys at the other end of the hallway bought ’em short @ three and a half years while selling them long to their customers, that’s anti-trust, racketeering, etc., etc., etc. We’re the 1% that’s fighting to turn the tide. AND WE’RE WINNING! Systemic fraud on the courts while the judiciary looks the other way, that’s MONEY AND POWER (read Ruling Class) versus the people. Judges ARE feeling the pressure. This is very, very serious.

    What I’m puzzled about is that so many CDO deals have Citigroup on them. How about the big $62Billion writedown? Who’s mortgages were in that bonfire? and then the subsequent writedowns with the collapse of Lehman, Bear, Morgan, Merryl, WHO’S LOANS WERE EXTINGUISHED TO TEN CENTS ON THE DOLLAR? Somebody lost money and somebody made money. But the securities hold no……security. NOW PROVE IT!

    And don’t discount Soliman’s position. The accounting is the key to this.
    Read, read again, and read again until you understand.

    Where is Sam? Sam A Pal Don’t I Know. Yeah, that’s the guy who had a forensic accountant. Gotta get ahold of him.

    Whew, this “Who stole the Kishka? is making me tired.

  7. Another thing. If the judges were not getting orders from somebody (not calling them corrupt, but orders from their bosses). I am sure that the Superior Court Judges here in California are getting orders from there Bosses.

    There is enough evidence and enough rules to put the banksters their lawyers and half their employees in jail for many years.

    We would have quiet title with Damages along time ago.

    This is a political issue. This is sick, evil and they dont know how to get out of it.

    Be Strong and Courageous

  8. Aman: ZH has a lively discussion on the wikileak story – love reading the comments (just like I do here)


    Lots of speculation – I’m putting my money on BAC. We know they’re already in trouble with the toxic CW crap & stand to “take the fall” for Jamie & company…convenient patsies – although I will shed NO TEARS for BAC.

  9. usedkarguy

    Don’t shoot the messenger.

    Julian Assange is not the issue, he is a bi-product.

    This is not about George Soros or Mickey Mouse, this is about the United States of America loosing what made America Great.

    Capitalism with a safety net for the helpless.

    The Banksters and Big Corporate America has lost its edge with these can’t loose contracts.

    That is why the other countries are kicking our butts.

    Too big too fail is UN American and we have anti trust laws (that are not enforced)

    Did you hear about China supposedly on April 8th of this year diverting all of the emails etc… of the whole nation including the government and military unto its servers. That is only what we know.

    So if Wikileaks can do it. A lot of governments around the world can do it.

    I am not a conspiracy guy but if the United states wanted this guy behind bars. He would have already been eliminated. That is why I like the Bush family.

    How ya doing usedkarguy? I hope all is well.


    Check the case annotations on your statute. What they’re talking about is a state version of the federal statutes regarding counterfeiting. You’ ll get no mileage or traction with this. U might, however, get sanctioned for frivolous arguments.

  11. Julian Assange is a terrorist who should be killed on sight. I know the country doesn’t do a lot of things right, but if you support what this guy is doing, you are a “world traveler” yourself. Hope you like having George Soros for your King.

  12. When I got into all this, the first thing I found was this law on our books:

    Wisconsin Statutes, Chapter 134, 134.15 “Issuing and using what is not money; contracts void. (1)Any person who shall knowingly issue, pay out or pass, and any body corporate, or any officer, stock holder, director or agent thereof who shall issue, pay out or pass, or receive in this state as money or as an equivalent of money, any promissory note, draft, order, bill of exchange, certificate of deposit or other paper of any form whatever in the similitude of bank paper, circulating as money or banking currency, that is not at the time of such issuing, paying out, passing or receiving expressly authorized by some positive law of the United States or of some state of the United States or of any other country, and redeemable in lawful money of the United States, or current gold or silver coin at the place where it purports to have been issued, such
    person shall be punished by imprisonment in the county jail not more than six months or by fine not exceeding $100, and such body corporate shall forfeit all its rights, privileges and franchises and shall also forfeit to the state and pay for each offense the sum of $500.
    All contracts of any kind whatever the consideration of which, in whole or in part, shall consist of any such paper as is prohibited in sub.(1) and all payments made in such unauthorized paper shall be null and void.”

    Now the laws have been “re-codified”, but I truly believe that this fradulent securitization scheme is not a new one. Just read the above statute a few times. If you create “bills and notes” (bonds) that are unredeemable in lawful money, the underlying notes (as well as the bonds) are also void. Sounds pretty academic to me. Now let’s find some similar laws that echo that statute.

    How’s that for a theoretical defense, Joyce?

    P.S. I never thought you were a “bank” advocate. Glad to have you participating. Not enough real legal minds here. Lotsa chit-chat and sad stories, and not enough legal commentary. And please, Neil, take no offense. You are one man who has made historic strides with your effort to expose the fraud. But we need more attorneys here from different jurisdictions.

    I’ve got a smoking gun case that goes to SCIENTER; proof of intent at the time of the action. However, so many cases are just not that similar to where you can pursue one distict theory. That is, until you get to RICO. Gotcha!

  13. “Early next year, Julian Assange says, a major American bank will suddenly find itself turned inside out. Tens of thousands of its internal documents will be exposed on Wikileaks.org with no polite requests for executives’ response or other forewarnings. The data dump will lay bare the finance firm’s secrets on the Web for every customer, every competitor, every regulator to examine and pass judgment on.”


    No wonder the oligarchs hate this guy so much…I can’t WAIT to read/hear what he has to say…bring on the “data dump,” we’re more than ready. I hope he won’t be “silenced” before this happens.

  14. Yes, we’ve all been used as pawns in a much larger scheme.
    Pretending that you don’t understand it is also no excuse, Mr. Greenspan.

    Fraud fighter — I completely agree with you. I have posted this line of reasoning before. “Borrowers” should not have to pay over and over again for bank misdeeds, as homeowners and also taxpayers.

    Hey, with no house payments, we could use our new-found disposable income to purchase products made in the USA.

  15. The big banks are finished. It is only a matter of time before the system collapses them. They are being hunted by too many big players. If it comes down to allowing the banks to fail or the pension funds to fail, it will be the banks that bite the dust. The states will put pressure on their congressional delegations to pull the plug. Too many pensioners and members that vote.

  16. The Courts unfortunately are already only looking at whether or not the lender has the note. The problem is that those that come up with it are not even able to show that it has the correct endorsements for the transaction they were attempting to assign. Again, delving out the fraud, who has the note and all the rest certainly has to be dealt with, but we have to come up with a strategy that we can sell that protects the homeowners before the AG’s do something we don’t want.. And no one has suggested one thing with the exception of Anonymous who has made a brief statement.

  17. I am not saying that we should do this, I simply am asking the question what would the result have been had homeowners been able to pay their loans. This economy is at stake and any adverse measures to it will be far reaching. The last two courts I was in, the trustee’s have come up with the original note, but they have not proven to us that they came by it legally or with proper endorsement chain. The Judge is overlooking that little detail, now of course after all of this mess has surfaced, some judges might get with the program.

    I have cases where homeowners were qualified and did take the money and did purchase a home. The original lender was paid off with that I do agree when the note was endorsed over to the Trustee. It appears in some cases, the depositor paid the seller (originator) 1/2 in cash and the other 1/2 in non saleable securities and no release of lien could be executed because those notes allegedly were assigned to a trustee (at least that would have been the normal chain) however, we have not had an opportunity to look at the general ledgers for the movement of the funds in the transaction on an individual basis. In these cases we believe that the borrower is the last man standing that has a legal attachment to the note that has been paid in full by the depositor. Of course we don’t want to make the payments on accounts whereby the note can be proven as “paid” off or fraud was involved.

    . In otherwords, the homeowner is going to end up paying for it if it comes out of an approved settlement by the AG’s to force modification of the loans. That is the only reason that I bring up this question. I don’t think a modification after all that homeowners have been through and what they have been subjected to is going to satisfy them. We the people will stand firm however but how much they can accomplish will be the unknown at this time particularly if the AG’s cut a deal with the lenders and that is where this is headed..

    I don’t want the homeowners to pay the scoundrels either. I am not sure why everyone takes the position that I am looking after the BAnk’s interest. Nothing could be further from the truth. I was looking to measure the cost of subsidy payments on loans that have legitimate hardships and what effect this fraud has had on cost to the lenders for their mis deeds. Tht homeowner just might enjoy homeownership if we come up with the right strategy after all. Buy we have to look at everything and rule it in or out.

  18. joyce:

    I would never even dream of trying to have homeowners attempt to pay off this debt or any part of it because the banks have already been paid on it. It most likely is sitting out in some account in the Cayman Islands. As Marcy Kuptor said on MSNBC, the banks have their money and there is collusion involved.

    A much better solution is this: If the banks cannot prove that they have the original note and the debt is not showing on their books–then the homeowner gets to keep the property with no debt attached. This will immediately provide much needed equity in our economy that will soon start up the job market, sales and investments.

    It is the homeowner that can bring our country back

  19. Bob G. has a point: believing any of these crooks is probably a waste of time. I think we have lots of money being created from thin air, because we have computers. Remember those caper movies about moving millions of dollars from somebody’s account on a computer and the Internet. They are creating money in these accounts from nothing. That is part of the scam. Actually, that explains how they sold these MBS (loans) multiple times. If your house is a box of chocolates, they sold the box of chocolates several times. If you had an actual box in your hands, you could only sell it once. If you put it in a file on a computer, the file REPRESENTS the box–it is NOT THE BOX. Computer technology is a wonderful thing, but the human mind has conceived of a way of selling the loans multiple times, because it is REPRESENTED in a computer file. It is actually a form of ID theft. This slimy undercurrent of misrepresentation, forgery and fraudulent documents is facilitated through computer technology, and it does permeate other types of loans and obligations–car loans, school loans, credit card loans, and it is destroying the planet. We need the old-fashioned system returned with real paper representing real property. I, personally, think the paper should be kept at the County records (third party) for at least 30 years for real property. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  20. Is there any chance that someone can answer the question:

    What if the non performing loans and the anticipated percentage of non performing loans to come were to be brought current thereby reducing the losses that each group participant would take in the event, millions more loans are foreclosed and losses having to be written off. What would the effect be? In otherwords, as outrageious as it seems, the phony Trust would play out with homeowners honoring the debt (which of course would be through the assistance of the lender holding their note). A partnership if you will. Everything is so messed up and as you said, everything is so obscure, how would one know what would have happened if the debt had actually been paid. That appears not to have been the agenda at all now, but what if? Can you respond to this question.

  21. “Many of the world’s top economists and financial experts have said that the too big to fail banks are destroying the world economy, that they must be broken up in order to restore stability, and that small banks can easily pick up the slack and make all of the loans which are needed needs. See this, this and this.

    And yet many people still believe the myth that the giant banks have to be saved at all costs.

    How could that be?”


  22. Neil

    You need to read these blogs on occasion instead of just posting to them. Some time ago I explained how these large derivitive numbers are bogus, i.e., they count the same derivitive many times over as portions of it are laid off or reinsured by multiple bookies down the line.

    Common sense would tell you that $600T or even $125T is a nonsensical number. If a trillion dollars turns over 15 times in one year, that doesn’t equate to $15T in one fell swoop.

    At some point folks have get real about all this stuff and exercise a modicum of skepticism. If someone tells you that there is $600T in liabilities floating about out there, put them to their proofs. And that includes Neil, Anonymous, me or anyone else.

Contribute to the discussion!

%d bloggers like this: