It’s Your Credit Card Too

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

Along comes the government and on “trust” accepts the story from the banks and gives them even more money. This all leads to the question of whether the banks on Wall Street have in plain sight converted us from a capitalist economy  to a socialist economy where the “Single lender” is the government and the banks are just brokers of government loans?

Editor’s Note: EVERYTHING was subject to a plan of securitization if it even smelled like debt. The question people keep asking is “was my loan securitized.” The answer is far more complicated than yes or no. That’s why we do seminars, analysis and keep writing here about the entire scheme.

It’s true that virtually every mortgage loan, car loan, student loan and credit card along with any other form of consumer debt and lots of commercial debt was subject to some documentation that laid out a plan to “securitize” the receivables that were virtually “risk free” (according to the sales people who laid this stuff off on pension funds and cities and other financial institutions. But it is NOT true that they followed their own plan. They DID divide up the income but it looks like they never did the paperwork on making the loans in the first place nor on the alleged transfer of the loans.

SO what you are left with is that the MONEY was “securitized” in the sense only that it was divided amongst people who never originated the loans. But the actual loans were untouched because the funding of the loan and the receivables were a whole different deal than the one put in front of the borrower. And the insurance, credit default swaps and credit enhancements were in FACT a whole different deal than the one represented and the proceeds of payments never went where investors in bogus mortgage bonds thought they were going.

Along comes the government and on “trust” accepts the story from the banks and gives them even more money. This all leads to the question of whether the banks on Wall Street have in plain sight converted us from a capitalist economy  to a socialist economy where the “Single lender” is the government and the banks are just brokers of government loans?

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An Anxious Fed Took Citi Subprime Debt as Collateral

By BEN PROTESS

When the Federal Reserve lent $70 billion through a program designed to kick start the credit markets, Pimco, BlackRock and other big investors ponied up a hodgepodge of collateral, including some securities backed by Citigroup’s subprime credit card debt.

The revelation, buried in the mounds of Fed data released on Dec. 1 about emergency lending facilities enacted during the financial crisis, highlights just how anxious the central bank was about the dearth of consumer lending..

When the Fed created the $70 billion program, known as the Term Asset-Backed Securities Loan Facility, or TALF, the central bank said it posed little risk to taxpayers.

After all, the Fed would only accept collateral with a supposedly unassailable triple-A grade from at least two credit rating agencies. At the time, many subprime securities carried such lofty ratings. The central bank also initially limited the collateral to just a few types of asset-backed securities, mainly those for credit card, student and auto loans.

But as the financial crisis dragged on, the Fed loosened the collateral requirements. When the program started in March 2009, investors were allowed to use securities backed by commercial real estate mortgages and so-called mortgage servicing advances, the loans used to cover homeowners’ missed payments.

Meanwhile, it has long since become clear that some securities were not worthy of their top-notch designations. Standard & Poor’s and Moody’s downgraded many such investments.

It is unclear how much, if any, TALF collateral lost its shiny triple-A sticker. But even if the securities got hit, investors could continue to use them as collateral on their existing loans, although they could not repledge the securities at a later date.

What is left on the Fed’s books now?

To date, two-thirds of loans have been repaid early. And the Fed has not lost any money on TALF, nor does it expect to in the future.

While all TALF collateral currently carries a triple-A rating, some $2.5 billion of loans are backed by subprime credit cards, according the Fed. Among the biggest issuers of those securities: Citigroup and G.E. Capital.

Citi has lost billions on its credit card business. The business seems to be stabilizing, but the bank still cannot find a buyer for its subprime portfolio.

2 Responses

  1. I haven’t often thought of something like this…the banks being brokers for government loans.
    Fannie and Freddie…middleman banks… and so on…maybe even MERS.

    We are all pawns in this “Pawnzi” scheme (Ponzi) … every pun intended. They launder the funds wherever they can.

    I pray the AGs don’t sell us short. I think they are our life rafts.

  2. Apparently, everyrybody on Wall Street is trading in debt, because they can bludgeon the American people into paying for it with illegal debt collection practices. It seems like the US is all about debt that will be fleeced out of the American people and the middle class. Much improved regulation needs to be in place for illegal debt collection practices. The Fair Debt Collection Practices Act needs to be beefed up big time. We need big prison sentences and criminal charges for illegal debt collection practices. Bigger, badder criminal charges for illegal debt collections practices would put many of the debt collectors out of business. Then, you would not have more than one pretender/lender trying to collect or the egregious 25-year foreclosure. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

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