Extension of Martin Act in New York Threatens Securitization Players

While most people didn’t notice, all of Wall Street took notice when the New York Governor signed into law a bill that extends the right of the state attorney general to investigate financial crimes and bring actions for equitable relief and damages.

Investment  bankers may not be going to jail but they are about to be taken to the cleaners for creating illegal securitization schemes that were directly intended to violate basic laws and doctrines that have existed for centuries. And this time the appetite is there to prosecute such claims.

PLAIN FACTS: The issuance of “certificates” aka “bonds” from a named “trust” was deceitful and based upon false claims, representations and assertions in the documents themselves in connection with REMIC Trusts and other special purpose vehicles. Both the certificates and the origination of loans took place in a scheme where concealment of the true nature of the transactions was the primary strategy. It is still happening.

  • The first purpose of the scheme was to lend money without any significant risk of loss regardless of whether the loan performed or not.
  • The second purpose of the scheme was to make money from the sale and trading of non-securities contracts that on average produced revenue of 12 times the amount of each loan.
  • The debt was obliterated by the sale of variant attributes of each debt on several different levels resulting in the divestment of the investbank of all risk of loss without transferring title to the debt to anyone.
  • Disclosure requirements were ignored as to both investors and borrowers
  • The loan transaction was distorted beyond recognition in which normal market forces between lender and borrower simply were not operating — and only the parties involved in securitization knew about it
  • Then for purposes of enforcement, the players created false documentation making it appear that the debt still existed.
  • Investors reasonably and erroneously believed that the loans were subject to normal underwriting standards, which they were not.
  • Borrowers reasonably and erroneously believed that the loans were subject to normal underwriting standards, which they were not.
  • Neither investors nor borrowers ever advised or given access or information that the investment banks and affiliated players were creating revenue of 12 times the amount of the investment of securities and 12 times the amount of each loan.

see New York Martin Act

Existing law is sufficient to address a scheme that was illegal starting with its conception. While securitization is not illegal, the employment of a securitization scheme for an illegal purpose is illegal per se.

Remedies include rescission for both investors and borrowers — or compensation to waive rescission.

What will emerge from all this is that the laws need to be changed to cover such securitisation schemes because as it stands now the debt is eliminated and enforceable under the requirements of both statutory and common law. That is not just an opinion, it is a fact. That fact is subject to equitable remedies worked out by the attorney general, the courts and the prospective defendants.

But that fact also means  that changes in the regulations and laws governing taxes (for so-called “REMIC), securities (for so called “mortgage backed” instruments), loans under TILA and deceptive lending practices must be put into play so that the intent behind all of those laws can still be accomplished, to wit: that both investors and borrowers know and understand exactly what is happening to their money, their names, their signatures, and their reputation and how much the investment bank is profiting from the transaction.

This is already intended by the law. But without regulations specifically targeting the practice of creating false documents and making false representations in the sale of allegedly mortgage-backed securities or the sale or enforcement of complex loan products to borrowers, the policies for enforcement will remain woefully inadequate.

7 Responses

  1. These should help also:Internal Revenue Code §860D(a)(4) must be transferred within three months or 90 days; (4) Trust (ie. REMIC ,as defined in Title 26,Subtitle A Chapter 1, Subchapter M, Part II§§ 850-862) .
    Defendant’s continually threatening wrongful foreclosure and threats of wrongful sale at auction, filing false fabricated beneficiary and assignments. The wrong doing is continual therefore tolls the fraud, tolled by active concealment. The Statutes of limitations does not start until after litigation is done successful or not see the US Supreme Court case U.S. Supreme Court mcdonough-v-smith-5: McDonough v. Smith: The Supreme Court Answers an Important Section 1983 Fabrication of Evidence Accrual Question
    See: McDonough v. Smith and Accrual of Section 1983 Due Process Fabrication of Evidence Claims

  2. There has to be a call for MANDATORY Reform
    Presidential Candidates .. Have remained virtually silent on this topic!

    The “Mortgage Crises” needs to be brought to the forefront during the Presidential Debates!
    The complacency of the DOJ, OCC, politicians and bureaucrats decries s system that excoriated the sheer corruption of Wall Street and the Big Banks.

    “Once a republic is corrupt, there is no possibility of remedying any of the growing EVILS but,
    by removing the corruption and restoring its lost principles,
    every other correction is either useless or a new evil.
    Thomas Jefferson

    Amazing, how words spoken over 242 years ago serve as a warning for us today.

    Too bad our government failed to pay attention!

    The governments response to the “Mortgage Crises?” – billion dollar settlements with the Banks!”

    Yes! fellow Americans and Veterans continue to suffer from the inefficiency, injustice and abuse.
    Blatant Mortgage Fraud created by the (securitization schemes!)

    It makes homeowners realize that the only response can be is to demand change. NOW!
    We have to pick ourselves up.., dry our tears, PRAY, and Fight the good Fight!

    Thank you Neil!
    Thank you to the many advocates who lead this “Charge” and those who continue to contribute to the Livinglies Blog, and Neil Garfield Blog Talk Radio ect. Blesdings

  3. The Community Reinvestment Act started with good intentions. But it went haywire. Profit is always the goal. How stupid they were to allow the most vulnerable to pay high rates to fund pension coffers. The greed got out of control. Greenspan did not help — he never saw it coming.

    Bob G is right. Sooner or later though, how it should have looked in 2008, will surface.

  4. Keep up the great work Neil. This was one humongous Ponzi Scam as you and others have pointed out. Crooks like Jamie Dimon, Brian Moynihan and many others is downright disquieting and unbelievable. All because our very own goverhment allowed this to happen, partisipated, looked the other way, and failed to do anything to protect us fellow Americans and Veterans. Little wonder our government is such a terrible, complicated, and huge “cesspool”. When does it end??
    Keep up the great work and Semper Fi..

  5. Someone here is living in a parallel universe, it seems. Who do you think finances the election campaigns of NY pols? That’s right, the banks and wall street. Dream on.

  6. The securitization of the financial crisis was illegal, because the collection rights (which is all that was securitized) were obtained by fraud.

  7. What a joke….on U.S. and the world.
    Blatant fraud in fact and results. Yet because it “Wasn’t illegal” It is OK?
    How about the intent of law? Protection from what was done to all of U.S.? Fraudsters use the law to not be lawful. Like I said what a joke.

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