Sen. Bernie Sanders

Sen. Bernie Sanders

Independent U.S. Senator from Vermont

Posted: December 2, 2010 12:43 PM

A Real Jaw Dropper at the Federal Reserve

At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from the Federal Reserve, how much they received, and the exact terms of this assistance. He refused. A year and a half later, as a result of an amendment that I was able to include in the Wall Street reform bill, we have begun to lift the veil of secrecy at the Fed, and the American people now have this information.

It is unfortunate that it took this long, and it is a shame that the biggest banks in America and Mr. Bernanke fought to keep this secret from the American public every step of the way. But, the details on this bailout are now on the Federal Reserve’s website, and this is a major victory for the American taxpayer and for transparency in government.

Importantly, my amendment also required the Government Accountability Office to conduct a top-to-bottom audit of all of the emergency lending the Fed provided during the financial crisis to be completed on July 21, 2011, which will take a hard look at all of the potential conflicts of interest that took place with respect to this bailout. So, in many respects, details that the Fed was forced to divulge on Wednesday about the $3.3 trillion in emergency loans that until now were totally kept from public scrutiny, marked the beginning, not the end, of lifting the veil of secrecy at the Fed.

After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed’s multi-trillion-dollar bailout of Wall Street and corporate America. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions and how we can make our financial institutions more responsive to the needs of ordinary Americans and small businesses.

What have we learned so far from the disclosure of more than 21,000 transactions? We have learned that the $700 billion Wall Street bailout signed into law by President George W. Bush turned out to be pocket change compared to the trillions and trillions of dollars in near-zero interest loans and other financial arrangements the Federal Reserve doled out to every major financial institution in this country. Among those are Goldman Sachs, which received nearly $600 billion; Morgan Stanley, which received nearly $2 trillion; Citigroup, which received $1.8 trillion; Bear Stearns, which received nearly $1 trillion, and Merrill Lynch, which received some $1.5 trillion in short term loans from the Fed.

We also learned that the Fed’s multi-trillion bailout was not limited to Wall Street and big banks, but that some of the largest corporations in this country also received a very substantial bailout. Among those are General Electric, McDonald’s, Caterpillar, Harley Davidson, Toyota and Verizon.

Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations including two European megabanks — Deutsche Bank and Credit Suisse — which were the largest beneficiaries of the Fed’s purchase of mortgage-backed securities.

Deutsche Bank, a German lender, sold the Fed more than $290 billion worth of mortgage securities. Credit Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage bonds.

Has the Federal Reserve of the United States become the central bank of the world?

The Fed said that this bailout was necessary to prevent the world economy from going over a cliff. But three years after the start of the recession, millions of Americans remain unemployed and have lost their homes, life savings and ability to send their kids to college. Meanwhile, big banks and corporations have returned to making huge profits and paying their executives record-breaking compensation packages as if the financial crisis they started never happened.

What this disclosure tells us, among many other things, is that despite this huge taxpayer bailout, the Fed did not make the appropriate demands on these institutions necessary to rebuild our economy and protect the needs of ordinary Americans.

For example, at a time when big banks have nearly a trillion dollars in excess reserves parked at the Fed, the Fed did not require these institutions to increase lending to small- and medium-sized businesses as a condition of the bailout.

At a time when large corporations are more profitable than ever, the Fed did not demand that corporations that received this backdoor bailout create jobs and expand the economy once they returned to profitability.

I intend to investigate whether these secret Fed loans, in some cases, turned out to be direct corporate welfare to big banks that used these loans not to reinvest in the economy but rather to lend back to the federal government at a higher rate of interest by purchasing Treasury Securities. Instead of using this money to reinvest in the productive economy, I suspect a large portion of these near-zero interest loans were used to buy Treasury Securities at a higher interest rate providing free money to some of the largest financial institutions in this country. That is something that we have got to closely examine.

At a time when Wall Street executives are now making more money than before the financial crisis, how many big banks that paid back TARP funds in 2009 to avoid limits on executive compensation received no-strings-attached loans from the Federal Reserve?

At a time when millions of Americans are paying outrageously high credit card interest rates, why didn’t the Fed require credit card issuers to lower interest rates as a condition of the bailout?

The four largest banks in this country (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) issue half of all mortgages in this country. We now know that these banks received hundreds of billions from the Fed. How many Americans could have remained in their homes, if the Fed required these bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans?

We have begun to lift the veil of secrecy at one of most important agencies in our government. What we are seeing is the incredible power of a small number of people who have incredible conflicts of interest getting incredible help from the taxpayers of this country while ignoring the needs of the people.

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At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from…
At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from…

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14 Responses

  1. There are so many levels of conflict of interest in what is going on.

    In my own situation, the PSA states very clearly who is to transfer to whom in the entire chain. Not one single transfer of the Deed conforms to the required chain of transfers. Instead, in a document that has very questionable origins and justification for creation, Litton personnel generated a SINGLE-STEP assignment from the supposed original named ‘lender’, per the deed of trust, in favor of BoNY-Mellon as trustee for a CWABS 2005 pool.

    That assignment was generated in 2010, dated in 2010, and recorded in 2010. The pool CLOSED in 2005. The mortgage documents have additional problems, asside from these issues where the PSA was ignored from the beginning.

    The obvious conflict of interest that exists right now is that Litton would be viewed as ‘working for’ the very BoNY Trustee for the CWABS pool that the Litton-generated assignment is in favor of.

    That ‘chain of assignments looks more like a very self-serving KNOT and that knot is therefore a ‘NOT’!

  2. ANONYMOUS- Blackrock was feted for their growing power broker role by the mainstream media this past spring. This is not news, and it is no surprise. My take on the whole “financial services industry” is that most people working in it are not that bright: sure, they are aggressive, motivated (by money and what it can buy) and haven’t much of a moral rudder. What galls me is that although they aren’t that bright, from either an intellectual or a commonsense standpoint, they have an arrogance and an attitude based on nothing. How do you defeat an enemy whose arrogance is a cover for their lack of self confidence? Answer that and we will prevail.


  4. Conflict of Interest – anyone??
    See Below – With the firms that Fed contracted with – you were finished before you could even cry “FOUL.”

    Farming out the bailouts: How the Fed tapped firms for help
    Saturday, December 4th 2010, 4:00 AM
    Ben Bernanke, Chairman of the Federal Reserve Board, right, sought help from financial firms in an effort to keep the economy from collapsing.
    Newly disclosed details regarding the Federal Reserve’s rescue efforts during the financial crisis show how the central bank used companies to help design or run programs they could then use to their benefit.
    To help stave off a run on typically very secure money-market funds, the Fed tapped Federated Investors for advice. Two days later, the Treasury established a program that would insure money-market funds against losses for a fee. Federated then borrowed $8.89 billion from that program.
    Other newly disclosed info showed Pacific Investment Management and BlackRock weren’t only advisers to the Fed, they also traded securities they helped value.
    “That’s the way the system works,” said David Castillo, senior managing director at Further Lane Securities. “It’s problematic that they’re customers, but that shouldn’t limit their ability to participate in this process. Quite frankly, we don’t have a choice. They have the expertise.”
    In its scramble to keep the economy from collapsing, Fed boss Ben Bernanke and other officials also launched a plan to ensure that banks and some major industrial companies had the short-term loans they needed to pay for daily operations. They consulted GE, a major financial lender, regarding that plan.
    The Fed set up a program to buy short-term loans from companies – including GE, which tapped the facility 12 times for $16.1 billion.
    Later, the Fed set up a program to keep consumer credit flowing. It hired Pimco, manager of the world’s largest bond fund, and BlackRock, the world’s biggest money manager, to provide analytical help, according to a report by the Fed’s Office of Inspector General. Without singling out any companies, the office said farming out tasks creates the potential for conflicts of interest.
    “We never found anyone maliciously trying to take advantage of taxpayers,” said Michael Smallberg, an investigator at the Washington-based Project on Government Oversight. “But we have concerns about how well those firewalls work.”

  5. Finding more and more that servicers are keeping the payments – not being sent anywhere. This is also on loans that may have been falsely placed in default – and falsely classified – as non-performing. Meaning loan collection rights were sold to servicer – before foreclosure. Servicer may then sell rights elsewhere. By the time you get to foreclosure – collection rights are long gone from trust/trustee..

    This is FDCPA violation – as foreclosure attorneys are naming a “possible” PAST creditor in the trust — “possible” past creditor because the loans were never conveyed properly to trusts anyway. Courts are NOT demanding the current creditor — to whom foreclosure proceeds will be paid. This is a big part of the fraud.

    Wake up courts – you have been sleeping.


    Fannie Mae Considers Auctioning Off NPLs
    Share |
    Friday, December 3, 2010
    By Paul Muolo
    Fannie Mae is contemplating selling nonperforming mortgages out of its portfolio, offering the notes to the highest bidder, according to vendors and investors who play in the NPL space.

    Like what you see? Click here to sign up for a National Mortgage News free trial and daily newsletter to get the latest feature stories, news headlines, data, and in-depth analysis on the issues impacting the mortgage industry.
    The government-controlled secondary market giant declined to comment about the situation and officials who have talked to the GSE about the idea did not want to be identified for fear of losing a potential client.

    Industry officials said if Fannie sells NPLs—instead of foreclosing on the mortgages and selling the resulting REO—it could save hundreds of millions of dollars, depending on the final sale price.


    THIS JUST IN: Bank of America has taken it on the chin the past two years (along with its stock price). Its “legacy” problems can be directly traced to its August 2008 purchase of Countrywide Financial Corp., which had $80 billion in problematic loans (home equity, nonprime, alt-A) on its books. It’s safe to say the “House that Angelo” built has been a Trojan horse of trouble for the megabank. B of A’s name has been dragged through the mud in regard to the foreclosure-gate scandal, and the firm recently announced that it was tossing its wholesale division overboard. But it does have some defenders, including Paul Rozo, CEO of PRMG Mortgage of California

  8. If someone has a NOD filed against them do not take the word of the bank that they are not moving foreword with the foreclosure!Be careful how you negotiate with them unless it’s removed.

  9. See below. US Treasury and OCC is ENCOURAGING servicers to not do “dual tracking” of modifications and /foreclosures?????? ENCOURAGE?? What the heck are they doing?? This is fraud – and, likely criminal. ENCOURAGING??????? Hate to say it – but US Treasury and OCC is covering if all they do is “ENCOURAGE.”. US Treasury and OCC should be sending to DOJs. We will get nowhere with “encouraging.” And, this despite testimony by NY Bankruptcy judge. Admire John Conyers – Mr. Conyers – do not back down.

    Federal Regulators Unable to Predict Extent of Foreclosure Crisis
    December 3, 2010
    by New York RealEstateRama

    New York Judge Describes Widespread Fraud in Foreclosure Process

    Washington, DC – December 3, 2010 – (RealEstateRama) — Today, House Judiciary Committee Chairman John Conyers, Jr. (D-Mich.) led a full committee hearing on “Foreclosed Justice: Causes and Effects of theForeclosure Crisis,” in which the Committee discussed with invited witnesses the government’s response to the country’s foreclosure crisis.One of the witnesses, a New York bankruptcy judge, testified that he had routinely encountered in his court foreclosure attorneys who: failed to know who they represented, lacked the underlying note evidencing their entitlement to seek foreclosure, failed to establish the legal chain of title establishing the standing of their client-mortgagees, and submitted to the court false affidavits attesting to the ownership of the note and mortgage.

    “I am dismayed that after more than four years and millions of foreclosures, the nation still remains paralyzed by unnecessary and unjust foreclosures wiping out our homes,” said Conyers. “Today’s hearing is part of a continuing effort by my Committee to get to the bottom of theforeclosure crisis and to identify solutions. At the next hearing, the Committee intends to hear from the principal financial institutions that rush to foreclose on millions of American families.I am relieved that the U.S. Treasury Office of Comptroller of the Currency announced yesterday that it would encourage financial institutions to stop so-called “dual tracking” whereby in the midst of negotiations with a homeowner to modify their mortgage, they simultaneously move to foreclose on the home.”

    San Mateo County_Law & Motion_Tentative Ruling:
    · DENIED. The Motion of Plaintiff to Strike Portions of the Defendant Jamie Ortiz’ Answer is DENIED. See, Code of Civ. Proc. Sec. 1161a and Vella v. Hudgins (1977) 20 Cal.3d 251, 255.
    · Plaintiff is seeking to establish its right to possession under CCP Sec. 1161a, under which Plaintiff is obligated to show it has perfected title! An “eviction after foreclosure . . . sale under CCP Sec. 1161a requires the purchaser seeking eviction to have ‘duly perfected’ title. Thus, in Sec. 1161a UDs, a plaintiff’s lack of title is a defense.” Friedman, Garcia & Hagarty, Landlord-Tenant (The Rutter Group) Sec. 8:388, citing Vella v. Hudgins (1977) 20 Cal.3d 251, 255 and Evans v. Sup.Ct. (Robbins) (1977) 67 Cal.App.3d 162, 169.
    · The Vella court states: “A qualified exception to the rule that title cannot be tried in unlawful detainer is contained in Code of Civil Procedure section 1161a, which extends the summary eviction remedy beyond the conventional landlord-tenant relationship to include certain purchasers of property . . . . Section 1161a provides for a narrow and sharply focused examination of title.” Vella, supra, 20 Cal.3d 251 at 255.
    · There is nothing contrary to law or improper about the allegations made in the Answer.
    · If the tentative ruling is uncontested, it shall become the order of the court, pursuant to Rule 3.1308(a)(1), adopted by Local Rule 3.10, effective immediately, and no formal order pursuant to Rule 3.1312 or any other notice is required, as the tentative ruling affords sufficient notice to the parties.

  11. I don’t know why people are worried about creeping socialism. You better be worred about Fascism and corporate welfare. The corporations are running your country, not the people–by the people, for the people. At least Bernie Sanders has the b#$%& to speak up. He, obviously, is worred about the people. Most of the rest of our politicians are not. As long as the money lands in their pockets, they do not care about the people. We are just vehicles to make them rich. I keep reading the following quote from Thomas Jefferson, because it was so prophetic: “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
    Thomas Jefferson, (Attributed)
    3rd president of US (1743 – 1826)

    Posted on December 3, 2010 by Foreclosureblues
    Posted on December 2, 2010 by Foreclosureblues



  13. Camden, America’s Second Most Violent City, Lays Off Half Of Police Department

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