Shocking Bubble in Student Loans Adds to Economic Woes

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Editor’s Comments: First let me say in the interest of transparency that I favor all education to be paid by the government from pre-k through graduate school. My reason is simple — a well informed well educated populace will be more productive, more competitive and less easily fooled by politicians issuing sound bites instead of facts. Information is king. If you want to progress toward the American dream it is no longer evident that working with your hands will get you there. You have to know things that employers need you to know and you have to process things cognitively that only a good education can instill.

Back to reality. The game has been on for at least three decades, perhaps four depending upon how you look at it. Unions were busted  wages declined or stagnated, while corporate profits and bonuses went to dizzying heights, leaving the rest of the country at or near the poverty level.

In lieu of wages, we made credit available that was spent like wages except that you had to spend it twice to be out of debt — once at the point of purchase with your credit card and again in installments at usurious rates when the bill came in. Homeowners were using the homes as ATM machines taking out equity loans just to maintain their standard of living. It doesn’t take an economist to know that one day that bubble had to break when the low wages paid to consumers would be insufficient to cover basic living expenses and certainly insufficient to pay the interest and principal on loans.

Conservatives can blame consumers all they want, but the fact remains that in order to create the illusion of a healthy economy, credit and debt was forced onto 99% of the population while wealth was transferred to the top 1%. To live within your means during this period meant you would live with in the most dangerous run-down neighborhoods with the worst schools. The peer pressure and pressure from life virtually forced the vast majority of Americans to accept debt in lieu of the wages they should have been paid.

Now we have the start of suicide and murders that have littered the landscape during the mortgage meltdown and which continue to this day. I know because I get calls from people who threaten suicide and then do it. It’s like the war in Afghanistan: how many people are aware that there were more suicides than those killed in action in 2012? We are numb to the results and our belief in our institutions is at an all-time low for good reason. This was a gradual process with plenty of people who know a lot about finance and economics screaming “STOP!” but were ignored.

In both the mortgage crisis and the student loan crisis, where defaults are skyrocketing, there is an opportunity for a fiscal stimulus to the country that won’t cost the government a dime. Trillions of dollars of stimulus money is locked up in the banks who have sequestered the money overseas along with Corporate America’s $3 trillion that they are holding and afraid to invest because they see what I see — at best an uncertain future for America and a profound distrust of American institutions to cope with the issues because the government is controlled by big business and big banks. It’s called an oligopoly when a group of companies control the marketplace.

Simple logic: why is it that while unemployment remains high and wages remain too low to survive, that Wall Street and the Dow Jones Industrial Average are reaching historic highs? Somebody is paying for those results. Since we cannot support those results through spending discretionary income because we don’t have any, and since we can’t spend our way out using credit because there isn’t any, Big Banks and Big Business are now burying their heads in the public trough taking corporate welfare and dodging liabilities with the full support of all three branches of government.

Doesn’t it bother anyone that during the last three decades the amount of GDP measured by standard means includes financial services which went from 16% of GDP to nearly 50% of GDP. That means that the loss of real productive businesses has been replaced by trading paper on the same deals over and over again so we maintain the illusion that the United States is an economic superpower. And eventually the euphoria in the stock market will be replaced with something less than that when the correction turns into a crash.

If we really want to save our economy, our world status (aside from military power) and the prospects for future generations we need real jobs with real services and real products to be produced here and to stop treating trading paper as somehow adding to GDP.

The solution is right in front of us. In the mortgage markets, the appraisals were untrue and unsustainable and the responsible party, according to existing law, is the lending entity. The loans were unworkable and bound to fail in both the real estate loans and student loans. And the risk was transferred from the loan originator, which is supposed to be the gatekeeper to undisclosed third parties who funded the loan without any disclosure or documentation provided to the borrower.

In short, predatory loan practices and outright fraud, proven by the robo-signing scandal in which fabrication of entire loan files cost only $95 according to its price sheet, convinced millions of people to borrow sums of money they could never repay on terms that were guaranteed to fail at he borrower level. In the meanwhile, the lenders (investors) were sold a different set of terms. The intermediaries tricked the lender, tricked the borrower and then set out to claim the loans as their own, getting the insurance proceeds and proceeds from credit default swaps and federal bailout.

Look under any rock in the private student loan landscape and you’ll find lost documents, robo-signed documents, fabrications, forgery and perjury. It’s the same tune as the mortgage mess.

In any normal situation where bankers go wild, hundreds of people go to jail and receivers are appointed with the express purpose of clawing back as much as possible to provide restitution and reparation to the victims. Following the existing rule of law, that is exactly what should happen here with real estate loans and student loans. It won’t fix everything, but it will fix a lot more than current policy and give a boost to an ailing economy whose foundation is rotting and cracking under the weight of  shadow banking.

Lawyer’s Student Loans May Driven Him To Murder, Police Say

23 Responses

  1. […] Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: fraud, restitution, securitization, student loan bailout, student loan meltdown, student loans Livinglies’s Weblog […]

  2. For all those with whom I’m in direct contact: I got hacked despite my antivirus. My most sincere apologies.

  3. Mar 8, 2013
    Philadelphia jury acquits 12 Wells Fargo protesters in “Citizens’ Foreclosure”

    Twelve protestors arrested in November 2011 for occupying a Center City Wells Fargo branch have been found not guilty by a Philadelphia jury. Defendants claimed they were staging a “Citizens’ Foreclosure” on the bank for engaging in discriminatory lending and sapping millions of dollars from the School District of Philadelphia. After viewing video of the protest and hearing defendants’ testimony, a jury found all 12 defendants not guilty on charges of conspiracy and trespassing.

    “This verdict shows that the people of this country stand on the side of justice and not the reckless profit-driven motives of big banks,” said defendant and Occupy Sandy organizer Larry Swetman. “I hope this decision will give the United States government the courage to start taking these banks—the real criminals—to trial and to hold them accountable to the people, instead of letting them hide behind back-room settlements.”

    One of the only Occupy-related trials in the country to be argued before a jury, today also marked the first civil disobedience Free Speech case in recent Philadelphia memory.

    “Today the people of Philadelphia defended the First Amendment,” said Defense Attorney Marni Snyder, one of seven lawyers who volunteered to represent the protestors pro-bono. “We sent a clear message to the District Attorney’s Office: prosecute the real criminals at Wells Fargo; these twelve defendants stand on the side of justice.”

    Defendants included a non-profit housing counselor, a Wells Fargo mortgage holder, a local teacher, an activist who participated in Civil Rights Era struggles, and Temple and Penn graduate students. During testimony, they pointed to the Pennsylvania Human Relations Commission’s report on Wells Fargo’s prejudicial lending practices and investigations by the Pennsylvania State Auditor General’s Office to draw connections between Wells Fargo’s profiteering and the defunding of our communities and school district.

    “I’m excited the jury chose to stand with us and ask the real questions about Wells Fargo and our city,” said defendant and future public school teacher Aaron Troisi, “Questions like, can we really afford to let Wells Fargo to continue robbing from our children and stay silent? Wells Fargo and other banks are partly responsible for the situation our schools are in now. The banks have stolen hundreds of millions of dollars from our schools and city.”

  4. FOX BUSINESS reporting banks are undergoing “stress tests” by their own banking regulators and under “stress” about the there own findings that they will report later today….also FOX BUSINESS reporting the bank owners “black pools”….their unregulated and unwatched electronic bank is more lucrative for them than ever….$60.4 trillion in our stolen wealth by these bank owner crooks since 2008 proves electronic fraud by the bank owners is a very deceptive way to control everyone. The bank owners are using technology for very nefarious purposes….they use technology to secretly defraud us, rob us, spy on us and to control all of us….

  5. Interesting link about the freemasons that states at least one third of the framers of the U.S. CONSTITUTION and the BILL OF RIGHTS were freemasons.

  6. Thursday, March 7, 2013
    Whistleblower: Wells Fargo Fabricated and Altered Mortgage Documents on a Mass Basis

    Over the last two and a half years, Wells Fargo, like most of the major mortgage servicers, claimed that it had a “rigorous system” to insure that mortgage documents were accurate and complete. The reason this mattered was that there was significant evidence to the contrary. Foreclosure defense attorneys found repeatedly that, for securitized mortgages, the servicer or foreclosure mill attorney would present documents to the court that failed to show the borrower’s note (a promissory note) had been transferred properly to the trust. This mattered not only on a borrower level, but indicated that originators of the mortgage securitizations hadn’t bothered transferring the notes properly to the trusts that were to hold them. This raised the ugly specter of what was called “securitization fail,” that investors had been sold securities that they had been told were mortgage backed when they might in practice not be.

    The robosiging scandal was merely the tip of the iceberg of mortgage and foreclosure problems that resulted from the failure to adhere to the requirements of well-settled state real estate law. The banks maintained that there was nothing wrong with mortgage ownership or with the records. All they had were occasional errors and some unfortunate corners-cutting with affidavits. If they merely re-executed all those robosigned documents, all would be well.

    Wells Fargo’s own actions say the reverse. It has been doctoring documents in house for over fifteen months for borrowers who are targeted for foreclosure. It was having this sort of work done outside the bank for an unknown period of time prior to that.

    A contractor who worked at a Wells Fargo facility in Minnesota reports that the bank engaged in systematic, large scale alteration of mortgage notes and fabrication of related documents in preparation for foreclosure. The procedures the bank used are questionable for a large portion of the mortgages.

    A team of roughly 100 temps divided across two shifts would review borrower notes (the IOU) to see whether they met a set of requirements the bank set up. Any that did not pass (and notes in securitized trusts were almost always failed) went to another unit in the same facility. They would later come back to the review team to check if the fixes and fabrications had been done correctly.

    Not only is having Wells Fargo tamper with documents in this way dubious in many cases (more detail on that shortly), but amusingly, the bank does not even appear to be terribly competent at this sort of falsification. The bank changed procedures frequently, and did not go back to redo its prior work. In addition, it regularly took loans that appear to have been endorsed properly and changed them as well. Finally, even if the procedures had been proper, the temps were required to meet such aggressive production timetables and were so laxly supervised that it seems unlikely that their work was done well.

    This account confirms what foreclosure defense attorneys have reported for some time: that servicers have been engaging in document fabrication for some time. It’s not uncommon for a servicer or foreclosure mill to present “tah dah” documents that miraculously remedy the problems that homeowner attorneys have raised, sometimes resulting in clear proof of fabrication, like two different notes (borrower IOUs) having been presented to the court, each supposedly an original.

    But what is striking about this practice is both the brazenness and the scale. Our source was told that Wells Fargo added a second shift to its mortgage doctoring operation in November 2011; he* did not know when it had been established. Bank employees claimed that these operations had formerly been done by outside firms and the cost of doing it in-house was much lower than the cost of doing it externally. Apparently having plausible deniability was too expensive.

    We sought comment from Wells Fargo on these allegations and they declined to respond.

    Gone fishing.

  7. No one knows what the future holds Christine. We are all here for a brief visit to learn so that we can hopefully contribute something good to the world. That is why our sovereignty is so important. It keeps us unbiased.

  8. Time is running out anyway… Better enjoy today. You never know if you’ll have a tomorrow.

  9. Follow the investments…these titular heads who are being prosecuted are the perps who are hiding the real masterminds of this scam….the BANK OWNERS.

  10. This ongoing robbery by the bank owners is all because the FEDERAL RESERVE BANK OWNERS have hijacked the money printing machine …..that is why the U.N./IMF/WORLD BANK hijacked all of our wealth….our gold, natural resources, property, and they use many fraudulent inducements such as, credit lending and investment, taxation, social safety nets & Labor in exchange for our BIRTH CERTIFICATES THAT FUNDS THEIR CREDIT PONZI SCAM….THAT THE BANK OWNERS INVEST IN & IT WAS ALL DONE WITHOUT OUR KNOWLEDGE OR CONSENT TO ENSLAVE US…..

  11. Don’t really know much about it other than the guy has never been a choirboy… between his involvement with prostitution, underage sex, banking, drugs, tax evasion, etc. Ain’t no smoke without fire. On the other hand…

    Anyway, things are moving.

    Berlusconi gets jail sentence in wiretap trial

    By Manuela D’Alessandro

    MILAN | Thu Mar 7, 2013 11:22am EST

    (Reuters) – An Italian court sentenced ex-Prime Minister Silvio Berlusconi on Thursday to one year in jail over the publication by his family’s newspaper of a transcript of a leaked wiretap connected to a banking scandal in 2006.

    It came in the middle of a political impasse arising from last week’s election which left no party able to form a government on its own, although Berlusconi’s center-right formation emerged as the second strongest in parliament.

    Berlusconi is in the middle of a series of trials, with separate cases over charges of tax fraud and paying for sex with an underage prostitute due to wind up this month.

  12. Don’t know when we’re going to “follow” the money here but that will be interesting too…

    IRAN: Bankers Get Death Penalty After $2.6B Scandal

    March 7, 2013 by Jack Blood
    Filed under World

    Albeit – Middle Managers and patsies… Maybe this is just another way to eliminate the Competition? This could give Goldman Sachs (whom are parked in Tehran) pause. We ask, could THIS be the reason why Israel, the EU, and the USA are threatening Iran? Follow the money right?

  13. ……that is why the truth about the truly horrible economic conditions are being masked. People believe the true measure of the economy is Wall Street is doing great…! Little do they know Wall Street has the money printing machine ….THE FEDERAL RESERVE BANK….prints all the money TOO BIG TO FAIL WALL STREET WANTS and have used THEIR MONEY PRINTING MACHINE to print and steal $60.4 trillion dollars from all of us since 2008 and they handed all of us the $60.4 TRILLION DOLLAR BILL for their robbery of all of us.

  14. Ex-Premier’s Ally Expelled From Ukraine Parliament
    Published: March 6, 2013

    Coincidence? I still think not! Heads are falling. The question is… are they good heads or bad heads? Are to tell, nowadays.

  15. The bank owners want no one helping their victims.

  16. The truth is…. the TBTF warranty is only guaranteed as long as we keep cooperating with these TBTF crooks who are the BANK OWNERS in disguise and their parrot media.

  17. Former Pakistan Finance Minister Abdul Hafeez Shaikh Resigned as a Member of Senate

    Palestinian Finance Minister Resigns Amid Cash Crisis

    Belgian Finance Minister Quits Over Banking Dispute

    Coincidence? I think not!

  18. Another big lie they sold…..investment is ownership….no it’s not because the banks don’t lend.

  19. Moron.


  21. It is the TOO BIG TO FAIL motto….send us you poor, your weak and your uneducated, that we created, and we will enslave them…..their warranty is guaranteed… is called TOO BIG TO FAIL..

  22. The most honest three minutes of TV ever. According to different sources, this has been seen by billions of people worldwide. Everybody knows the truth… except Americans who are in denial. 320 million of people is straight denial. Less than 5% of the world population still insanely hooked on that idea. So much so that they won’t get off their butt and take action. The greatest country in the world is dead.

  23. Does anyone really believe that these crashed just happen, out of nowhere? Electronic banking has existed for the past 10 years. Everything was hunky dory for the greater part of those 10 years and then, all of a sudden, as IMF is putting in place that SDR system while forgiving debt left and right, as scandal after scandal erupts worldwide, as Japan and China transact out of the dollar, as major things are being set up worldwide, banks crash… also left and right? PNC a few months ago, B of A a few weeks ago, other banks here and there.

    Come on, people! Use your brains! Nothing happens in a vacuum. (And, by the way, Iran has nothing to do with it. Iran is like foreclosures: a gawd damn distraction to keep people scared and too busy to think for themselves.) Why do you think governments are acting as they are? What do you think they really, really, really want to keep covering up by creating situations where people panic?

    And, come to think of it… Did you notice that those crashing banks are those most heavily investigated and those that have been making the front page for a couple of years?

    Millions left without money as RBS systems crash
    Up to 17.5 million RBS banking group customers were left without their money last night as the bank’s systems crashed.

    By Hayley Dixon12:03AM GMT 07

    The group, which owns Royal Bank of Scotland, NatWest and the Bank of Ulster, apologised to its customers amid reports that they were unable to access their accounts or withdraw money.
    The crash comes just months after a computer meltdown that left millions of customers unable to withdraw cash.

    People claimed that they had been left stranded, hungry and embarrassed as they were unable to access their own money and had their cards declined.

    RBS and its subsidiaries NatWest and the Bank of Ulster issued apologies via Twitter after customers reported problems with cash machines and cards being declined, accessing their accounts online and via telephone.

    A statement tweeted by accounts run by all three banks said: “We are aware of the problems our customers are having and apologise, we will provide more information as soon as we have it.”

    The Government could use its RBS stake to support our growing businesses 28 Feb 2013
    Stephen Hester, the chief executive of RBS, which is 80% state-owned, was forced to apologise last June after millions of customers were left unable to view an up-to-date balance, move money or pay bills for days after a software update.

    The three banks had to extend opening hours to assist customers. A month later more than 700,000 customers were affected by a “human error” that saw some accounts debited twice.

    Customers took to twitter last night to vent their frustration, with NatWest becoming one of the top topics on the social networking site just over an hour after problems were first reported at around 10pm.

    One user, Sharri Morris, tweeted: “Natwest, you left me with no dinner tonight, and left me walking home in the rain! I’d like some compensation please!

    Another, Mark Hillman, from Maidenhead, Berkshire, wrote: “Natwest whole system is down! No ATM’s, no online banking and cards WILL be declined. Just found that out the hard way. Pls RT.”
    RBS was not immediately available for comment on what was causing the problem.

    A NatWest customer services adviser said that online and telephone banking, cash withdrawals and payments had been affected for most of the UK’s customers, according to the BBC.

    The RBS group has around 17.5 million customers.

    Many said that they were considering moving to another bank in light of the most recent fiasco.
    Rich Stones ‏asked: “How many chances are #natwest customers gonna give them?”
    – Customers call for compensation after RBS systems failure

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