FED PAPERS REVEAL INSIDER TRADING, PROFITS ON CRISIS

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

We now see that out of some $14 trillion mortgages that were funded, some 28% of them are currently in trouble and more may be on the way. But even if you assume that the loss would be $5 trillion, why would $10 trillion and more be required to cover that “loss.” Where did the extra money go and why did the bonuses on Wall Street continue to rise despite the worst economic cycle since World War II? How many times do we cover the loss? Who is profiting from from the duplicate U.S. payments? Are these the equivalent of War Reparations?

WHICH BANKS GOT WHAT?

EDITOR’S NOTE: When J Pierpont Morgan stepped in 100 years ago to stop financial panic he went to the financial institutions themselves and told them they had to fork up the money to save the markets and the economy. That was before the the Federal Reserve existed. The idea was to go to the engineers and tell them that they had to correct the mistakes they had made, the frauds they had committed and to mitigate the damages they had wrought. 100 years later, the Federal Reserve did exactly the opposite and created a third shadow trading market that dwarfed anything in human history. The beneficiaries were the financial institutions and even institutional and individual investors who collaborated in the origination of this mess and those who benefited from understanding it. The economy, the markets and the taxpayers took the hit while trillions of dollars were multiplied in insider deals that can only be described at best to be misguided and at worst, government complicity in depriving the economy of urgently needed capital, further enriching those people who created the problem.

To say that the Federal Reserve failed in its task at replacing peacemakers like Morgan, is an understatement of epic proportions. The actions of the Federal Reserve give unfortunate credence to conspiracy theorists who regard the FED as the agent of darkness, owned by the richest families and corporations in the world. We now have the worst of both worlds — a government that is controlled by these bank oligopolies, the Federal Reserve which is the vehicle for their “policies” and nobody except Elizabeth Warren to stem the tide of an attack on the middle class that was so pernicious and so successful that our nation will be forever changed by the events of recent years.

Totally ignoring the needs of small business (the source of most jobs in America) and small consumers (the source of most buying in America) the FED directed its attention solely to the desires of the one class of people who were not hurt and who profited by the derivative fraud perpetrated upon the pension and public funds of workers who put their money and trust in the system and perpetrated upon the consumers and taxpayers of the Country.

These papers reveal that the FED was well aware of defects in the entire scheme, well aware of the fact that the mortgages were illegally obtained and sold, well aware that the mortgages were void, and actively sought to create the appearance that the scheme was mostly comprised of legitimate transactions. The Bush and Obama administrations were actively complicit in this continuing deception. Their purpose? To avoid admitting the severity of the problem and to create the appearance that the situations was under control — which is why so much of the help from the United States Federal Reserve went to foreign nations and companies.

We can all understand that the Bush and Obama administrations were attempting to avoid a war — economic, currency and perhaps worse — caused by this direct and successful attack on this investment capital of the world held by homeowners, world governments, and pension and other public funds. But that seems more like a cover for the inherently wrong actions of doubling up on the trillions that were used to fund mortgages. We now see that out of some $14 trillion mortgages that were funded, some 28% of them are currently in trouble and more may be on the way. But even if you assume that the loss would be $5 trillion, why would $10 trillion and more be required to cover that “loss.” Where did the extra money go and why did the bonuses on Wall Street continue to rise despite the worst economic cycle since World War II?

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Cross Section of Rich Invested With the Fed

By SEWELL CHAN and BEN PROTESS, NY Times

WASHINGTON — One investor, Kenneth H. Dahlberg, is a World War II flying ace who, as a volunteer in President Richard M. Nixon’s re-election campaign, was a minor figure in the Watergate scandal.

Another investor, Magalen O. Bryant, runs a horse farm in Virginia and is active in steeplechase racing circles. A third, Ward W. Woods, is the chairman of the nonprofit organization that runs the Bronx Zoo.

They were among scores of wealthy but lesser-known investors in an emergency lending program the Federal Reserve announced in November 2008, three weeks after President Obama’s election, to support the market for student, auto, credit card and small-business loans.

The investors, whose identities were disclosed as part of a trove of 21,000 records released on Wednesday at the direction of Congress, are a cross-section of America’s wealthy — investors who, in the midst of the worst financial crisis since the Great Depression, heard about an opportunity and weighed the risk.

The list, not surprisingly, includes famous Wall Street financiers like J. Christopher Flowers, John A. Paulson and Julian Robertson, demonstrating the extent to which the Fed relied on fast-moving hedge funds to keep credit flowing through the markets.

There were also institutional investors like the Ford Foundation and the pension plan for Major League Baseball. And there were wealthy businessmen like the computer executive Michael S. Dell and the home builder Bruce E. Toll.

Investors like Mr. Dell are identified in the Fed’s data because they owned or were part of a group that owned a “material” stake in a company or a fund that received funding from the Fed. They may not have been involved in the decision to borrow from the Fed. Through the program, known as the Term Asset-Backed Securities Loan Facility, or TALF, the investors helped keep markets for consumer loans from seizing up by steadily buying securities. About $71 billion was lent by the Fed out of the $200 billion available. The program, which began in March 2009, ended June 30, 2010; two-thirds of the loans have been repaid early. The remaining ones come due as late as 2015. The Fed has said it does not expect to lose any money in the program.

The investors put up their own money in return for Fed financing that was then plowed into the markets for securitized loans — bundles of credit card or auto dealership debt and student loans. The investors shouldered the risk that the loan packages could lose value and be worth less than the amount they had borrowed from the Fed.

Ordinarily, bundles of loans of this type are not difficult to sell, but after Lehman went bankrupt in September 2008, the market for such debt suddenly froze. The point of the program was to keep money moving through the markets while having investors, not the Fed, bear the risk.

Mr. Dahlberg was one such investor. The newly disclosed records show he was an investor in Broad Creek Partners, which borrowed $28.1 million from the Fed, through TALF, to purchase a portion of a security issued by GE Capital, the financing arm of General Electric. The security was backed by subprime credit card loans. To obtain the loan, Broad Creek pledged as collateral the market value of the security, $30.5 million.

Nearly all of some two dozen TALF investors contacted on Thursday declined to comment or did not respond to messages.

One who did agree to talk was Dov C. Schlein, a former president of the Republic Bank of New York, who estimated that he made a healthy profit, but not a killing.

“Realistically, if you were an early investor you could net 10 percent,” he said. “If you came in much later when the program looked to be successful, then the return dropped to 8, 7, 6, 5 percent.”

Mr. Schlein said he told fellow investors that they should be prepared for their names to become public at some point.

“I told anyone who invested in it at the time that if you’re not prepared for that information to be disclosed, you should not invest,” he said.

Mr. Schlein said he was by no means certain of making money; if unemployment had skyrocketed to 12 percent, for example, he would have expected to lose from huge defaults.

Indeed, when Mr. Schlein told students in his finance class at Baruch College, his alma mater, about the Fed program, some deemed it too risky. A year later, a new group of students said it was a shrewd gamble.

“They said, ‘You got a gift from the Fed,’ ” Mr. Schlein recalled.

Mr. Schlein was an investor in a fund that received 19 loans, totaling $260.9 million, to purchase securities backed by credit card, auto and student loans.

Another investor, Jeffrey R. Krinsk, estimated that he made a profit of about 13 percent, or more than $300,000 on his investment of roughly $2 million, in less than 18 months. “The risk being assumed by investors was generally far less than the risk that was perceived by commentators who hadn’t taken the time to look through the extensive documentation associated with the program,” said Mr. Krinsk, a plaintiffs’ lawyer in San Diego. “It was actually less esoteric, less risky, than other investments I’ve made.”

Many of the investors in the program had backgrounds in finance, including Stephen Partridge-Hicks, who is credited with creating the market for structured investment vehicles, and Robert F. Corvino, who is a director of the CME Group, a major options and futures marketplace.

Many of the financiers, the records show, teamed up, like Jay M. Twery, Walt K. Weissman and M. Blair Wellensiek, who work at Tradelink Holdings, a Chicago trading firm.

Some financiers show up in the Fed data because of their ownership in companies that sought funds from the Fed. In one instance, Mr. Paulson and Mr. Flowers, the financiers, formed OneWest Bank, the successor to the collapsed lender IndyMac, which borrowed from the Fed. Mr. Dell’s investment firm, MSD Capital, is an investor in the bank as well.

Records show that Ms. Bryant, the steeplechase enthusiast, was an investor in Belstar Credit Fund, which obtained 22 loans in amounts ranging from $2.5 million to $75.2 million. Belstar used the loans to purchase securities backed by credit card and auto loans, mortgages and small-business loans. When reached by phone, she declined to comment.

Mr. Woods, who is chairman of the Wildlife Conservation Society, which runs the Bronx Zoo, and a former chief executive of Bessemer Securities, was an investor in the Nebris Corporation, which borrowed $10.2 million to purchase a security backed by student loans. He did not respond to messages left with his associates.

Mr. Dahlberg, a decorated aviator, became prominent early in the Watergate scandal because his name was on a check deposited in an account controlled by one of the burglars. Mr. Dahlberg, who was not accused of any wrongdoing in the scandal and is now a venture capitalist, did not return phone calls Thursday.

Mr. Schlein, the New York investor, said he felt he was helping out the Fed at a critical moment. “The program was well thought-out,” he said. “I thought it was an exceptional program.”

But he also said there was a downside potential. “The risk was that the economy was going to fall off a cliff,” he said.

Sewell Chan reported from Washington and Ben Protess from New York. Jo Craven McGinty contributed reporting from New York.

8 Responses

  1. too bad the ceo’s on wall street didn’t have some of the gumption that the woman ceo (on the news today) who was faced with firing her employees, but instead fired herself, as hers was the highest salary in the company. Kudos to her. That is what the Bankster Ceo’s should and could have done. They need to be sued, fired, strung up, tarred and feathered, and sent to a cell next to Bernie Maddoff.

    Isn’t it going to take morales, the golden rule and a knowledge of God to turn us around?

    We are doomed because the FDIC has statutory superpowers and the ability to rescind any and all contracts.

    We need to take back the power if we are to continue battling the Banksters. For right now, we are trying to put out small brush fires in the subburbs while Rome burns.

    Not by riot, but by knowledge. The Dodd Frank bill has comingled all the agencies, OTS, OCC, FED, HUD, FDIC, FTC and NCUA (did I leave one or two out?) into a new “Bureau of Consumer Financial Protection”. This obviously must be to somehow deny us of our rights.
    AND, congress is considering deleting the MID (Mortgage Interest Deduction) on our taxes.

    Take our houses, take our deductions…….what next, our children? our food? our life?

  2. Bill,

    Ditto —- Have said many times- Neil will be part of history books.

  3. Below, Ben Bernanke is caught lying, red-handed to Congressman Alan Grayson in session, on 7-21-09.

    http://www.youtube.com/watch?v=uGs_Qn5yEgs&amp

    In July 2009, Bernanke replies “2 ” (foreign) banks, but perjures that he doesn’t know, which two. It comes out yesterday Deutsche Bank and Credit Suisse were those two.

    Didn’t Clinton almost get impeached for the same?

    Personal sex lying is impeachable, but the biggest financial lie in history is not indictable?

    What American puts up with this?

  4. Neil:

    You don’t realize it yet, but YOU HAVE EXPOSED THE BIGGEST CRIMINAL ENTERPRISE IN THE HISTORY OF MANKIND.

    11,000 to 1 of Enron’s!

    Please don’t let off what is not excusable. Neither you nor us will never be able to fix it if you do.

    This government is complete UNION with the Federal Reserve, which is UNION with the pretender banks in complete synergy. Why?….for 30 years of cash flows from our house payments/rent, to back all their ridiculous ‘promises’, continued buying off of society, and cover-up of their Ponzi’s, until after they are long gone, to pay up.

  5. With all due respect, J. P. Morgan was NOT a peacemaker. Below is an early quote by him, later quoted in the Bankers Manifesto of 1934.

    These are not the words of peace. They are the words of a type of prophet.

    “Capital must protect itself in every way, through combination and through legislation. Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law, the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of wealth, under control of leading financiers. People without homes will not quarrel with their leaders…

    …By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd. Thus by discreet action we can secure for ourselves what has been generally planned and successfully accomplished.”

    J. P. Morgan (1837-1913) (quoted in “The Bankers Manifesto of 1934”).

    Morgan’s daughter married John D. Rockefeller Jr., another man of non-peace.

    More info: http://en.wikipedia.org/wiki/History_of_the_Federal_Reserve_System

    and,

    http://www.google.com/url?sa=t&source=video&cd=1&ved=0CDgQtwIwAA&url=http%3A%2F%2Fvideo.google.com%2Fvideoplay%3Fdocid%3D-1656880303867390173&rct=j&q=Freedom%20to%20facism&ei=CCH5TOPaDMTflgfKl4m7Bw&usg=AFQjCNGJNkJV-6nEz6gTiZetN5RDO8m3jg&cad=rja

  6. Engineering and Technology will resurface.
    The bankers are doomed.

  7. I predict that the layoff of bank employees will create the largest unemployment rates in history.

  8. […] This post was mentioned on Twitter by anti banker, Financial Wellness. Financial Wellness said: COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary We now see that out of some $14… http://bit.ly/hSflm6 […]

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