Yves Smith Nails Obama on Failed Housing Policies

Editor’s Note: Yves wrote the piece I was going to write this morning. See link below. The salient points to me are mentioned below with comments. The principal point I would make is that Obama has been listening to people who are listening to Wall Street. The Wall Street spin is that this is just another housing bust. It isn’t. It is massive Ponzi scheme that was well-planned and executed with precision, sucking the life out of our economy. Normally Ponzi schemes (see Drier or Madoff) don’t get big enough to have that effect.

The bottom line is that the banks took money from investors under false pretenses and diverted the proceeds into their own pockets.

In order to cover that up they created false documents with false lenders and false secured parties, false creditors and false beneficiaries. They borrowed money from the lenders, then borrowed the identity of the lenders to declare it was the banks who were losing money from mortgage “defaults”, to receive proceeds of payouts from subservicers, payouts from insurance, payouts from credit default swaps and payouts from federal bailouts.

The plain fact is that under normal black letter law, the notes and mortgages were faked at origination based upon the false premise that the actual lender was named or protected. That was a lie. The loans are not secured and the investors have a mess on their hands figuring out who has what claim to what loan so they are suing the investment banks instead of going after the homeowners and striking deals that would undermine the hundreds of trillions of dollars in bets out there that is masquerading as shadow banking.

Instead the investors and the homeowners — the only true parties in interest — got screwed and the administration has yet to correct that basic injustice.

  1.  The proposals for the housing fix were predicated upon the fraud and other illegals activities of the parties in a mythological “securitization” scheme. They were not “unpopular” as Klein observes in the news. They were rejected because wall Street obviously rejected any plan that would take away their ill-gotten gains.
  2. Combat servicing operations using five times the staff of ordinary servicers are doing the work just fine. It was the lack of oversight and regulation that allowed the obfuscation of the truth by the servicers created for the sole purpose of covering up the fraud. These servicers never report the status of the loan receivable to anyone and they probably don’t have access to the loan receivable accounts. In fact, it is quite probable that no loan receivable account actually exists on the books of any creditor who loaned money through the vehicle of bogus mortgage bonds.
  3. Servicers were set up to foreclose, not service and not to assist in modification or settlement. Wall Street needed the foreclosure to be able to say to the investor, OK now the loan and the loss is yours, since we have drained all value out of it. Sorry.
  4. The administration had a ready tool available: enforcing the REMIC statute. They chose not to do this despite the obvious facts in the public domain that the banks were routinely ignoring both the law and the documents inducing investors to invest in non-existent bonds based upon non-existent loans.
  5. The CFPC had not trouble issuing a regulation that defined all parties as subject to regulation. Why did it take the formation of a new agency to do that? Treasury officials from the administration who argued that they had no authority over servicers were wrong and if they had done any due diligence, it would have been obvious that the banks were blowing smoke up their behinds.
  6. There are hundreds of billions of dollars, perhaps trillions of dollars in lost tax revenue that the ITS is not pursuing because the the policy of coddling the scam artists who manufactured this crisis. The deficit exists in large part because the administration has not pursued all available revenue, the bulk of which would have made a huge difference in the dynamics of the American economy and the election.
  7. Refusing the help the  victims by characterizing some of them as undeserving borrowers is like saying that a bank robber should be granted leniency because the bank he robbed was run poorly.
  8. The real issue is the solvency of the large banks which most economists and even bankers agree are in fact too big to manage, far too big to regulate. The administration is taking the view that even if the assets on the balance sheets of the big banks are fake, we can’t let them fail because they would bring the entire system down. That is Wall Street spin. Iceland and other places around the world have proven that is simply not true. The other 7,000 banks in this country would easily be able to pick up the pieces.

Yves Smith on Obama Failed Housing Policies

10 Responses

  1. @ CARIE- BRAVO, RIGHT the speed of which they tried to nail Assange re that trumped up scandle in europe was clearly trumped up.

  2. @Paul Reardon, That information about the TRADEMARK for “America’s Wholesale Lender” is NOT worth mentioning. It is NOT USED on the documents. It is also never PROPERLY USED unless it is present with the WHOLE as-filed ‘MARK’. It is really a SERVICE MARK and the original paperwork shows “COUNTRYWIDE” as part of the ‘mark’. I already STATED that “Countrywide’ was NOT mentioned ANYWHERE on the loan documents. That means the registered mark was NOT USED. Also the service mark is no longer valid. It has gone UNUSED too long. A CA attorney has already filed to have the sevicemark deleted from the government registry.

    I know my material on AWL Corp. I also know of a later filing of an “AWL Inc” in NY state, well after the loans were originated. That AWL is unrelated to CW or BofA.

    The only ruse that has been working for BofA on these loans is to try to claim the CW D/B/A is valid to claim the loans. It is not but you need to properly argue that case if this is the defense they produce.

    And if they try to produce the claim of the trademark (actually a servicemark), they need to be required to show WHERE the mark is present even ONCE on ANY of the loan documents. There is not even a little trademark symbol. Just like I already stated, the true SERVICEMARK must include “COUNTRYWIDE”. Without it’s presence, the mark was NOT USED.. Even NEIL has had articles on this site regarding the AWL Corp’s “WILD DEEDS”.

    So sorry you wasted your efforts today Paul.

  3. wrong thread but you will all catch it. significant ruling in that batch of decisions posted by Abby:Redmond v. Fed. Deposit Ins. Corp. (In re Ramsay), 226 B.R. 284, 1997 WL 837769,

    BAP No. KS-97-007 (10th Cir. BAP filed Nov. 21, 1997) (per curiam) (before Clark,
    Bohanon, & Matheson, JJ.) (Appeal from the United States Bankruptcy Court for
    the District of Kansas).
    A bankruptcy court order overruling an objection by the Chapter 7 trustee to a proof of
    claim filed by the Federal Deposit Insurance Corporation was AFFIRMED.
    This sounds like FDIC trying to collect on bad asset held by a bank. D’Oenche?
    Morris v. First Nat’l Bank & Trust of Phillipsburg (In re Taylor), 226 B.R. 284, 1998
    WL 123027, BAP No. KS-97-064 (10th Cir. BAP filed Mar. 19, 1998) (Clark, J.)
    (before McFeeley, C.J., and Clark & Matheson, JJ.) (Appeal from the United States
    Bankruptcy Court for the District of Kansas).
    A bankruptcy court order avoiding a creditor’s unperfected interest in the debtors’
    automobile under 11 U.S.C. § 544(a)(1) was AFFIRMED. The creditor argued that its
    interest was not avoidable because it was not a transfer of an interest of the debtor in
    property as the debtors had claimed the vehicle as exempt. The creditor could not assert
    the debtors’ exemptions as a defense to the § 544(a)(1) action, and, even if it could, the
    defense would fail because property claimed as exempt is nevertheless property of the
    debtor as of the petition date.
    The Court refused to address issues raised by the creditor related to the propriety of the
    bankruptcy court’s decision under 11 U.S.C. § 551 because the creditor lacked standing
    to appeal as it did not have a direct stake in the outcome of the matter.
    wow, that was just two in 20 pages. lotsa good reading is right!

  4. http://rt.com/usa/news/wolf-interview-039/

    With the world closely watching the rapidly developing case of Julian Assange, RT sat down with American author Naomi Wolf to discuss why journalists are finding it increasingly difficult to publish data the US government doesn’t want them to…

    “…I think it’s a little to do with what we’re seeing in the news right now, this huge fraud being uncovered in the banking sector. HSBC, Bank of America, Wells Fargo, Barclays, Bank of England, fraud, fraud, fraud. Not marginal fraud, but clearly systemic fraud. And I just wrote a piece about this for The Guardian. Tim Geithner finds out about this in 2008, writes an e-mail, doesn’t leak the news or call a press conference, and then becomes Treasury Secretary. So, it’s clear that there’s a small group of guys and girls who are in on massive fraud. So this Occupy movement, and journalism, threaten to uncover a lot of crimes if the books are ever opened. And in an electronic world, these crimes last forever. So that now is my working theory about why we’re seeing such a sudden and violent crackdown on reporting, on dissent, on whistleblowers…”

  5. FYI


    A reader with a Westlaw subscription downloaded this and then emailed it to me. Many thanks for that, as it is NOT published on the internet. Until now. Mwah-ha-ha-ha.

    CLICK HERE for the Sentinel Federal Appeals Court Ruling of August 9, 2012

    This commentary came from the fellow who sent this to me. I think it is spot-on.

    Miss Barnhardt,
    I thought you might be interested in reading the actual opinion of the In Re Sentinel Group case, which I have attached in PDF. It was very hard to find for some reason, and I had to access my Westlaw account in order to get it. I think it would be well worth your time to read it, as I am afraid that it appears to confirm what you have been saying.

    The entire case reads like an after-the-fact rationalization of a predetermined conclusion. Years ago when I was with a different firm, I worked on numerous major institutional fraud and auditing cases, and I cannot recall a ruling even remotely similar – let alone from a federal court of appeals.

    Please pay particular attention to the section on equitable subordination, on pages 6 through 8. Unbelievably, the court acknowledged in that section that even though some of the bankers lied under oath during the trial, that fact did not prove “sufficiently egregious” actions on the part of the bank.

    I will quote the opinion: “Instead of finding that their testimony [i.e. their lies] justified a finding of egregious bank behavior, the district court essentially found that the bank officials were such artless liars that they couldn’t have been concealing deliberate wrongdoing.” See page 7, column 2.

    So in other words, a U.S. Court of Appeals has found that if a banker lies under oath during a trial, that fact proves that the bank was innocent of any misconduct with respect to the subject matter of those lies. Did we get transported to bizarro world without knowing it?

    Read this quote from the ruling, which is, in essence, the entire financial market paradigm being guillotined:

    That Sentinel failed to keep client funds properly segregated is not, on its own, sufficient to rule as a matter of law that Sentinel acted ‘with actual intent to hinder, delay, or defraud’ its customers.
    U.S. Circuit Judge John D. Tinder

    What this means is that even if Jon Corzine is somehow dragged into court by private citizens, because you know damn good and well that the Justice Department will never, ever touch him, Corzine now has a legal precedent, likely from a bribed or otherwise coerced Federal Appeals Court, explicitly stating that an FCM can use customer deposits to pay its debts, and that the customers themselves are subjugated and have basically no legal right to their own monies, no matter what the law says, or what legal assurances, claims or guarantees are made to that customer about their funds held with an FCM or any other brokerage or depository institution. The “secured” party at the front of the line will always be the mega-bank who made the fraudulent loan using the stolen customer funds as collateral.

    In other words, all customer funds in the United States are now the legal property of JP Morgan, Goldman Sachs, BNYM, or whichever megabank is the counterparty on the loans the FCM or depository institution takes out in order to fund its mega-levered proprietary in-house trading desks.

  7. Tell Yves keep it up and you will see Wall Street kiss asses that will make the Obama administration look like Eliot Spitzer. Obama was bad but the new agency and the Volcker rule should address some of the root causes and that without even going into these GOP vermin who have now voted to let your wife or daughter die on the table if performing an abortion is disturbing to their conscience.

  8. Now how can we make Obama understand that he has less than 3 months to fix what he caused? Granted, he inherited the mess. Yet he didn’t have to compound it with half ass measures pampering the banks while ignoring the entire country. That, he did on his own and from his own volition!

    The guy is running and conveniently ignoring everything having to do with foreclosures, banks, fraud, etc. And he will leave the scene of the crime(s) in a much worse shape than he found it: the can has been kicked ad nauseam and we all have lost 4 precious years. What kind of language does he understand?

  9. Yeah, I read the piece in the Times yesterday. True, it started out as one thing and morphed into another. Still, I was relieved to see the topic given any coverage at all in the midst of this election cycle coverage of everything else. And, there are always the bullshit articles on how the housing market is recovering… yet again. I was one of those many letters sent to Obama in the early year of his failing HAMP program. I told him how the servicer was abusing people, namely me. It was insane! I explained it so well and got a nice reply. Still, by then it was all too late. The servicer won out, just wore me down. In the end, I don’t know what I was fighting for. There was a bullseye up with my photo on it. But they’ve taken it down. I had to prioritize. Geithner. The worst. How could Obama put him in charge of this? Such a bad decision. And how could he not see that? I told him. I told him. Now, he may lose. Well, I sent the Big O $25 the other day. Even I cannot stand by and see Mittens take over a fuck things up even worse. I guess I didn’t really give up.

  10. “They borrowed money from the lenders, then borrowed the identity of the lenders….”

    On my loan documents, they did not even bother to ‘borrow” the identity of a lender! They named one that did NOT EVEN EXIST!

    Such a SUPPOSED LENDER can not expect to have the BK court view the loan as EVER being PERFECTED. No entity can LEGALLY represent the false entity named on my loan documents.

    Also, the money trail does not match up with this ‘lender’ that did not exist. How could it?

    The named lend was only the well-known, but fake “America’s Wholesale Lender Corporation”.

    More people should start fighting those loans. BofA and BoNY-Mellon try to claim them as the products of Countrywide’s D/B/A America’s Wholesale Lender.

    That D/B/A was not recited on the loans ANYWHERE in most of the cases. Also, NOWHERE was “COUNTRYWIDE’s” name on those loan documents.

    Getting a real fight going on MORE of these loans would help get them recognized EVERYWHERE as the false documents they actually are.

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