Bankruptcy Trustee Accuses banks of Manipulating “Margin Calls” on Mortgage Bonds

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EDITORIAL COMMENT: WELL it looks like this is not over yet. The accusations are right on target — the more they drill down the more they find which is what we have been saying on Livinglies for 3 1/2 years. That’s what we keep doing in our COMBO title and securitization analysis and what we are teaching lawyers in our seminars.

Maybe the judiciary will wake up and realize that all these title and securitization reports should not be the burden of homeowners to produce. Maybe they should realize, in line with existing law, that the party seeking affirmative relief is the pretender lender who wants to forcibly take a home away from otherwise good citizens. Maybe Judges will realize that the party seeking affirmative relief is the plaintiff no matter what foreclosure procedure is invoked and that party must plead and prove a foreclosure case just like banks have been doing for centuries.

Maybe everyone will realize that just because the borrower stops paying doesn’t mean the payment was due or that the creditor didn’t get the money and that the declaration of default and all that comes after that is a farce without the laughs. Deutsch was Trustee for most of these pools, followed by US Bank. We already know they lied, cheated and stole at all levels of the fake securitization that was never backed up by actual transfers, and that that the original mortgages were fatally defective. Acknowledging that fact will cause pain only to Wall Street which in all events MUST go through the pain of shrinking back down to a proper size of 12-14% of GDP instead of its current reign of 50% of all measured services and products produced by the United States.

Maybe the narrative wil finally shift to the truth. It isn’t borrowers who are delaying the inevitable foreclosure. It is the banks that are delaying the inevitable collapse of the entire foreclosure and mortgage structure and the reduction not just of principal due on the mortgages, but a reduction in the real value of assets on their balance sheets and hence their power and market-share in what SHOULD be a free market.

Banks Sued in Thornburg Bankruptcy


WILMINGTON, Del. (Reuters) — The bankruptcy trustee for Thornburg Mortgage has sued Goldman Sachs, Barclays and other big banks for a combined $2.2 billion, blaming them for its bankruptcy.

The trustee filed four separate lawsuits, the most extensive of which blames a “collusive scheme” by units of JPMorgan Chase & Company, Citigroup, the Royal Bank of Scotland, Credit Suisse and UBS for driving the company into bankruptcy.

The trustee, Joel Sher, accused the five banks of acting together to use a series of unjustified margin calls to extend their control over Thornburg, which was once a leading provider of “jumbo” home loans.

The lawsuit seeks to recover $2 billon for fraudulent conveyances and transfers by the banks, which had financed Thornburg’s mortgage-backed securities.

The trustee said the banks eventually drove Thornburg into Chapter 11 in May 2009. It sought protection from creditors with $36.5 billion in assets, making it one of the largest bankruptcies during the financial crisis.

Citigroup said the lawsuit was without merit. Credit Suisse and UBS declined to comment. JPMorgan and RBS did not immediately return a call for comment.

Mr. Sher was appointed to run Thornburg after the company’s executives were accused of using Thornburg’s staff and offices, without creditors’ approval, to start a new company.

The trustee also sued Barclays, claiming it improperly seized mortgage bonds from Thornburg in 2007 by undervaluing the securities in a series of margin calls. The trustee is seeking at least $94 million.

Barclays declined to comment.

Mr. Sher sued Goldman Sachs, seeking at least $71 million and accusing the bank of scheming to seize hundreds of millions of dollars of investment-grade mortgage bonds that Thornburg had pledged as collateral.

Goldman Sachs declined to comment.

The final lawsuit claims Countrywide Home Loans, which was acquired by Bank of America, breached representations and warranties on the loans it sold to a unit of Thornburg.

That lawsuit was also brought on behalf of a group of investors known as the Zuni Investors, who were represented by David Grais of Grais & Ellsworth.

Mr. Grais has brought numerous “putback” lawsuits that seek to have originators like Countrywide repurchase mortgages that fell short of promised standards.

Bank of America did not immediately return a call for comment.

16 Responses

  1. With the present financial crisis we’re experiencing, relying on the old rules will significantly affect us.Several have filed for bankruptcy over the recession years, even so, it appears the middleclass down were the ones mostly hit. Wonder.




  3. cubed2k

    Nicely put. — When will the victims get relief????

  4. Please add me to your email list as I would like to receive copies of the blog articles. thank you.


  6. PS – “the judge made findings of fact”? How nice this can actually happen.

  7. Here’s where more of the mney went, from Bloomberg:

    “Lehman Brothers Holdings Inc. served notice on Barclays Plc that it intends to file a so-called summary judgment motion to recover $500 million in bonuses Barclays never paid although it was required to do so under the agreement to buy the North American investment banking business.

    In an April 29 letter to the bankruptcy judge, Lehman said the facts are no longer in dispute because they were laid out in the court’s Feb. 22 opinion that was the culmination of last year’s protracted trial. Lehman contends the judge made findings of fact where Barclays was obligated to pay $2 billion when it eventually only paid $1.5 billion in bonuses.”
    Dang, those poor execs are short half a billion in bonuses.
    2 billion in bonuses?! Well, I guess that Paulson guy’s still got em beat at 4 billion. Makes you really wonder if there weren’t in fact a handful of puppetmasters behind this whole ‘deal’. Makes me think of all those Trilateral Commission stories.

  8. So Thornburg Mortgage wins the lawsuit and gets their money back.

    Well, what about us paying on the god damn overpriced mortgages or refinances or whatever?

  9. But the bottom of all this shit, bonds, is people working and paying their god damn overpriced mortgages created by these god damn wall street/banks. Where’s my middle finger!!!!!!!!!!!!!!!!!!!!!!!1

  10. That’s right John, why do think CEO pay has mushroomed as of late. And they do not get penalized, but the corporation pays a fine. It’s pure old skimming off the make believe profits because it’s so complicated to track. How on earth can a company like GM go bankrupt but still pay their employees and CEO’s, and the CEO’s make big bucks. Every small business owner I know always end up paying their employees before themselves and end up making little. But yet these Wall St CEO’s end up making millions and millions while they lay off staff. Something is not right and has been for awhile now. Accounting gimmicks.

  11. Well said Neil.

    The whole purpose of banking and loans is TO FACILITATE production and the exchange of services and goods.

    Facilitate = Make (an action or process) easy or easier

    Banking=wall street=greed=corrupted intent or purpose.

    With GDP being 40% or whatever the figure = trading=speculation of little actual production of services and goods. This is why the middle class=worker is screwed. They work but their production and efforts are leveraged by banks =Wall St now. Why do you think the debt has mushroomed over the last 20 years or so.

    The basics of sound banking is out. It has been corrupted to not facilitate production of products and services but to facilitate speculating on prices of paper traded back and forth.

  12. Individual stockholders got the shaft, also, when larger companies ate smaller ones (wamu, national city, for instance) in 2008, was it? Even when a margin a/c was not involved, stocks OWNED outright disappeared in those ‘transactions’.

  13. South Carolina Chief Justice stops ALL PENDING foreclosures and requiring “an intervention process”, according to the Associated Press, 2 hours ago.

    The heat is on. Keep pushing.

  14. Whatta surprise. The banks in collusion? My goodness, how things have gone down the tubes. If you just remember that bank equals crook, you will be able to figure it all out.

  15. Ding Dong, the suckers are stepping in the Donkey doo doo, they been cutting the same tree branch they been sitting on for many a years gone by, never once thinking that the darn thing would fall, boo hoo and they just never have nothing to say, but they do duck and cover, behind the dudes with the black funny, bad fitting robes, plus passing a packet of green, now otherwise useless notes to the best takers in the gobberment.

  16. Yeah but they are still foreclosing in California approximately 30 foreclosures a day in Los Angeles County alone. Why is this still going on?

    Jerry Brown what is going on? Are you apart of this genocide?

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