NY STARTS NEW INVESTIGATION OF MEGABANKS ON MORTGAGES and FORECLOSURES

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BANKS LOOKING TO NY FED FOR PROTECTION

EDITOR’S NOTE: Maybe this will wipe that arrogant smirk off their faces. Again the investigations are renewed after it seemed they were giving up. Just as the financial regulatory agencies followed up an SEC settlement with Goldman, they all, including the SEC, started another barrage of subpoenas. Now the NY Attorney General is going the same thing, starting up anew after Andrew Cuomo, his predecessor, had dealt with the banks up to point that was good step in the right direction but fell far short of the relief needed and the restitution required.

The language of the world of prosecution has changed from “derivatives” to questionable securitization practices” signaling a large shift in the depth of their understanding of what happened and even whether the securitization of loans was and remains an illusion, leaving the homes free from encumbrance and the debts largely paid by bailout, insurance, guarantees and other hedge contracts.

IN THE END, YOU CAN’T PAY THE DEBT OFF AND THEN DECLARE IT IN DEFAULT (UNLESS THE CONTRACT ALLOWS YOU TO DO THAT AND SPELLS OUT THE PROCEDURE). THEY PAID THE DEBTS, CONTINUED THE PAYMENTS AND DECLARED DEFAULTS ON LOANS THAT WERE WERE PAID OFF AND/OR STILL RECEIVING PAYMENTS FROM THIRD PARTIES. THEY ARE TRYING TO STEAL FROM BOTH ENDS AND IT IS WORKING. IN MANY CASES BOTH WERE TRUE. THERE IS NO DEFAULT AND THERE WAS NO DEFAULT, AND THE FORECLOSURES UP TILL NOW HAVE BEEN A FARCE AND A FRAUD WITH JUDGES, UNSCHOOLED IN THE WAYS OF WALL STREET, SNOOKERED INTO PLAYING ALONG WITH IT.

BOTTOM LINE: The housing crisis could be over in twelve minutes and the budget deficit could be over in a year with a full economic recovery underway if we just stop listening to the spin of the megabanks, about how if we put them in jail the financial system will be crushed — and we start looking at real evidence about what really happened.

May 16, 2011

New York Investigates Banks’ Role in Fiscal Crisis

By

The New York attorney general has requested information and documents in recent weeks from three major Wall Street banks about their mortgage securities operations during the credit boom, indicating the existence of a new investigation into practices that contributed to billions in mortgage losses.

Officials in Eric T. Schneiderman’s, office have also requested meetings with representatives from Bank of America, Goldman Sachs and Morgan Stanley, according to people briefed on the matter who were not authorized to speak publicly. The inquiry appears to be quite broad, with the attorney general’s requests for information covering many aspects of the banks’ loan pooling operations. They bundled thousands of home loans into securities that were then sold to investors such as pension funds, mutual funds and insurance companies.

It is unclear which parts of the byzantine securitization process Mr. Schneiderman is focusing on. His spokesman said the attorney general would not comment on the investigation, which is in its early stages.

Several civil suits have been filed by federal and state regulators since the financial crisis erupted in 2008, some of which have generated settlements and fines, most prominently a $550 million deal between Goldman Sachs and the Securities and Exchange Commission.

But even more questions have been raised in private lawsuits filed against the banks by investors and others who say they were victimized by questionable securitization practices. Some litigants have contended, for example, that the banks dumped loans they knew to be troubled into securities and then misled investors about the quality of those underlying mortgages when selling the investments.

The possibility has also been raised that the banks did not disclose to mortgage insurers the risks in the instruments they were agreeing to insure against default. Another potential area of inquiry — the billions of dollars in credit extended by Wall Street to aggressive mortgage lenders that allowed them to continue making questionable loans far longer than they otherwise could have done.

“Part of what prosecutors have the advantage of doing right now, here as elsewhere, is watching the civil suits play out as different parties fight over who bears the loss,” said Daniel C. Richman, a professor of law at Columbia. “That’s a very productive source of information.”

Officials at Bank of America and Goldman Sachs declined to comment about the investigation; Morgan Stanley did not respond to a request for comment.

During the mortgage boom, Wall Street firms bundled hundreds of billions of dollars in home loans into securities that they sold profitably to investors. After the real estate bubble burst, the perception took hold that the securitization process as performed by the major investment banks contributed to the losses generated in the crisis.

Critics contend that Wall Street’s securitization machine masked the existence of risky home loans and encouraged reckless lending because pooling the loans and selling them off allowed many participants to avoid responsibility for the losses that followed.

The requests for information by Mr. Schneiderman’s office also seem to confirm that the New York attorney general is operating independently of peers from other states who are negotiating a broad settlement with large banks over foreclosure practices.

By opening a new inquiry into bank practices, Mr. Schneiderman has indicated his unwillingness to accept one of the settlement’s terms proposed by financial institutions — that is, a broad agreement by regulators not to conduct additional investigations into the banks’ activities during the mortgage crisis. Mr. Schneiderman has said in recent weeks that signing such a release was unacceptable.

It is unclear whether Mr. Schneiderman’s investigation will be pursued as a criminal or civil matter. In the last few months, the office’s staff has been expanding. In March, Marc B. Minor, former head of the securities division for the New Jersey attorney general, was named bureau chief of the investor protection unit in the New York attorney general’s office.

Early in the financial crisis, Andrew M. Cuomo, the governor of New York who preceded Mr. Schneiderman as attorney general, began investigating Wall Street’s role in the debacle. But those inquiries did not result in any cases filed against the major banks. Nevertheless, some material turned over to Mr. Cuomo’s investigators may turn out to be helpful to Mr. Schneiderman’s inquiry.

19 Responses

  1. Angelo

    Much is not being told. Right now, control is what is happening. This WILL NOT last forever.

    There need to be a redirection by those who claim to assist.

    Investigations are happening — you will see it. But, as far as I am concerned — not fast enough. .

  2. E. Tolle spot on I think you have some wonderful and workable ideas.Neil and friends could truly happen,keep going.

  3. Angelo wrote:

    Do you know of any expert witnesses who would be able to give an affidavit attesting to this topic?

    Actually, Neil Garfield does expert witnessing, and I for one would happily contribute towards a fund to get him to D.C. Who better to explain this mess, demand answers, and offer meaningful solutions?

    I’d give my last folding money to get a panel of OUR experts together and demand that OUR representatives hear them out. BTW, that’s what they’re supposedly there for, isn’t it? It’s about time they worked for us for a change.

    Bill Black, L. Randall Wray, Neil Garfield and anybody else of similar pedigree speaking on our behalf, all the while demanding real hope and change this time around would go a long way, if backed up with threats of “taking it to the streets” if positive change doesn’t result.

    I for one won’t blink again if Geithner et al threaten tanks in the streets and financial armageddon. I say bring it on. We’ll have our own little Tiannmen Square block party on Pennsylvania Avenue, with simutaneous get togethers on Wall Street, and anywhere else the flash mob decides.

    A letter writing campaign to our so-called representatives demanding an audience on behalf of every person foreclosed upon, or about to be foreclosed upon, with Neil discussing the crimes and the only possible solution…. the banks must give back and be put into receivership, and we the people need to be restored to as close as we can get to pre-collapse America with the proceeds. To do anything less is killing us all in a slow, painful death spiral into a multi-generational financial black hole. And any representative that disagrees can either be shown the door or a prison cell for siding with enemies of the state.

    The Road To Sanity Tour, starring Neil garfield and friends. Then the tour goes on the road to Europe?

  4. Mike

    I hear ya on that front, but most people here are looking for ways to fight their fraudulent foreclosures cases, not make a case of securities fraud. Those 2 cases are not going to help any of us!

    I would love nothing more than for NY AG to take down these major banks, because I live in NY, but 3 others have tried guliani, spitzer(see where that got him), and cuomo to no avail. Have you seen how they are already going after Schneiderman for this investigation, Dick Bove, came out and said its a witch hunt, and “you dont go after the hand that feeds you:”

  5. Angelo,
    To answer your question, we have the convictions of the top executives of Taylor Bean Whitacre, who under oath admitted to “plan B”
    ie selling to Colonial Bank, Notes which had already been sold to other investors.
    We also have the Federal conviction of a broker
    in Tampa,Peter Bakowski, USA vs Bakowski 8:09 CR 491T33TBM who confessed to selling the same
    Notes multiple times on the secondary market.
    This is only the tip of the ice berg. More convictions will be coming in the near future.

  6. Anon

    I have been here for almost 2 years reading your thoughtful and insightful post about collection rights and default debt buying, but I havent seen one pleading or case that brings any of this into the courtroom. Don’t get me wrong, it might be true, but if there is no case law or even pleading that bring this to light, I don’t see what good its doing.

    Its hard enough to get the judges to understand standing,and false or fabricated evidence in a foreclosure case, Now we want them to dive into the inner workings of securitization, GOOD LUCK.

    Do you know of any expert witnesses who would be able to give an affidavit attesting to this topic?

  7. ANONYMOUS,
    “It is not about paying “a debt off” ” how true! considering these debts have a half-life of radioactive waste 200,000 years .
    they CANT be paid off when the creditors just keeps selling the debt payments – the payments never catch up to the debt cuz the ghost of the debt just keeps moving.

  8. Well, it is about time somebody saw the light. I hope that this might be a way to help the poor smuck called the homeowner who caused the world economy to crash–not. People believe anything they hear and see on TV. Wake up everybody. The TV is in on the scam. Only a few TV shows talk about the truth. I hope Mr. Schneiderman pulls this off. Burmese8@yahoo.com

  9. It is not about paying “a debt off” — it is about falsely securitizing a receivable — that is not an actual asset receivable – but is only collection rights to a false default DEBT.

    It is about the transfer of collection rights — not receivables — as fraudulently represented in SEC prospectus.

    Why are “debts” not paid off by refinance?? Because the debt was never a valid debt. Each time a borrower refinanced — the earmarked trust was NOT paid off. Not that it was even actually conveyed to the bogus trust. Bogus trust — a “shell” to hold collection rights to already classified subprime default debt.

    The agencies are starting to work. Finally, waking up. But, in order for individuals to succeed in court — have to start focusing on what should be focused on — according to the law.

    Who is your current creditor??? That is the law. And that current “investor” creditor has deceived you — and the court.

  10. POLICE MACE PROTESTORS AT CHASE SHAREHOLDER MEETING–PROTEST OF CHASE’S FORECLOSURE PRACTICES–MANY ELDERLY MACED-DOES CHASE OWN THE PD TOO?

    http://www.scribd.com/doc/55673163/POLICE-MACE-CHASE-FORECLOSURE-PROTESTORS-DOES-THE-BANK-ALSO-OWN-THE-POLICE-DEPARTMENT

  11. It’s way past that—HOMES ARE BEING FORECLOSED ON WHOSE MORTGAGE DEBT HAS ALREADY BEEN PAID OFF—WAKE UP!!!

  12. WORD!

  13. The scam was simple, have MERS hold the mortgage deed and sell the Note ten times to multiple gullible investors. Each investor thought MERS was holding the mortgage deed for them.
    So on a $200K loan, the Note was sold ten times bringing in $2 million. About 20% was placed in an escrow account with the major servicers so they could make monthly payments to the investors for a few years.
    The problem occurred in 2008 when the investors caught on to the Ponzi scheme and stopped buying into the Pyramid. At that point all
    hell broke loose and the TARP funds were needed
    to prevent everyone’s ATM from seizing up. The TARP funds should have been called “CARP” funds,
    for “COUNTERFEIT ASSET RELIEF PROGRAM”.
    Figuring this out is not “rocket science” it is just
    “politically incorrect” because it would put a lot of
    “big whigs” in orange jump suits and cause the
    gullible “sheeple” to wake up and realize they’ve been had by Wall Street. This would be bad for the
    political elite because it might result in a “cleaning of the House and Senate” of all the patsies who reside there.

  14. “By opening a new inquiry into bank practices, Mr. Schneiderman has indicated his unwillingness to accept ONE OF THE SETTLEMENT’S TERMS—proposed by financial institutions that is, A BROAD AGREEMENT BY REGULATORS NOT TO CONDUCT ADDITIONAL INVESTIGATIONS INTO THE BANKS’ ACTIVITIES during the mortgage crisis. Mr. Schneiderman has said in recent weeks that signing such a release was UNACCEPTABLE.”

    These shenanigans drive me nuts! Always those “little” details that “slip by”, so insignificant that most reporters and politicians fail to notice or forget to mention. Looks as if this AG actually READ the settlement terms. Eric T. Schneiderman had sense and character enough to resist this part of the settlement terms. Thank God.

    We need to make some noise at our own AG’s office to ask why he or she is willing to accept no further investigations into the banks’ activities. Doesn’t that added condition from the banks tell our fabulous and humble servants, who are ready to sign the agreement, a thing or two? Or does it motivate more of them to go to the banks and ask for campaign money?

    I pray that NY does wipe the smirk off their faces!

  15. Let us hope and pray that it is in fact a true investigation and the proper parties are all held accountable. Criminally and civilly.

  16. What a great post. This most certainly continues to put the heat on the banks and they know now that it is not over by a long shot. Why don’t they just clean up their act, pay the necessary restitution and be known for helping the economy recover.

    I think it is clear now for the most part and this is just not something the banks are going to be able to walk away from – As a FNMA representative said to a reporter back in 2009 – the homeowner’s will feel the pain if they just walk away from their homes – well, same goes for the banks.

    If the banks continue to stall and walk away from their liability, they will feel the pain and the rest of the nation right along with them.

  17. Will this be a true investigation or just more lackluster posturing to try and placate the home owners and general public for the snookering we all took at the hands of the banks?Watch carefully and we shall all see what happens!

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