BEFORE WE START GIVING BAILOUT MONEY TO THE BANKS AGAIN, HOW ABOUT WE TAKE THIS AS OUR SECOND CHANCE TO SET THINGS RIGHT?

Look up anything I am saying here.

There is universal agreement that we got the “bailout” wrong in 2008, at least in part. It ended up rewarding the securities brokerage companies for bad behavior with money and prestige because we allowed them to “convert” (like religion) to commercial banks.

Those firms had literally made trillions of dollars, had no exposure to risk and had parked pornogrpahic profits from off-balance sheet transactions around the world in the form of ownership of precious metals distributions centers and other investments.

The “Troubled Asset Relief Program” had to be redefined multiple times because each time the premise was wrong. First it was to set off defaults on mortgages. But the banks held no mortgages. So then it was to set off losses on declining values of mortgage bonds. But the banks were selling bonds not buying them. And there was the problem that they weren’t bonds and they were not mortgage backed.

Then they abandoned any definition and simply kept the name of TARP and gave money to the banks anyway because the Fed wanted to pump money into the economy — a program that was barely effective because it turned out  that the banks were reluctant to actually risk loaning money in a recession.

So before we start “offsetting losses” this time I propose something radical. This time we require evidence of a loss before we pay for it. The fact that this might undermine the entire securitization “marketplace” (which is really a totally controlled trading zone) is not a reason to do it anyway again. It is a reason to bring the “investment banks” back into compliance with our laws, rules and regulations.

The added bonus is that the entire goal of the US Treasury and the Fed would be achieved. It would provide relief to millions of homeowners who have been screwed by the banks who have continued to bet against the loans that they were granting.

The revelation that there are no losses would also be revelation that there is no identified creditor after the current practice of “securitization” is applied. All the players get paid far more than they deserve by any metric employed. That is everyone except investors and borrowers, who are the only two parties with a real interest in “the game.”

The proposition is simple: please show us your losses before we pay them.

 

EXAMPLE. An easy example of what I am saying is the AIG bailout. AIG was an insurance company that had underwritten an “insurance” policy in favor of Goldman Sachs, a securities brokerage firm that was at the epicenter of “Securitization” of mortgage debt.

But actually it was not an insurance policy which is always defined as a contract to cover a real economic loss.

As Matt Taibbi wrote in Rolling Stone more than 10 years ago, Hank Paulson, then U.S. Treasury Secretary and former CEO of Goldman Sachs, prevailed upon President Bush (literally going down on his knees) to bailout AIG so they could pay the bet that Goldman made that the value of the certificates they were issuing as “mortgage backed bonds” would decline. Since the certificates were essentially worthless it was a good bet.

Tens of billions of dollars went to Goldman Sachs when the government bailed out AIG so it could pay off the Goldman Sachs bet. The bet was based upon a declaration of an “event” in the sole discretion of Goldman Sachs without any review or even subrogation to any remaining rights of collection. that’s because there were no rights to subrogate. And that’s because Goldman neither owned the certificates (“mortgage bonds”) nor the mortgage debts.

So Goldman received the money as pure profit. Nobody ever received compensation for actual loss on the certificates (i.e., the investors who bought the certificates) nor for any actual loss on the mortgage debts (because there were no actual losses on mortgage debts. Goldman kept the money and parked most of it offshore and paid virtually no tax on that. It wasn’t bailout. It was a gift.

 

4 Responses

  1. FNMA & FHLMC were taken into Conservatorship on September 6, 2008. FNMA & FHLMC Mortgage Bankers Association and the 5 Big Banks started MERS INC. Each of the members resold the same loan over and over endlessly taking placing profits and storing them offshore and in holding companies. This hurandious Greed cost Pensions and Investors to lose everything. Billions of homes were illegally foreclosed on. No injury of losses could legally be claimed. All documents were created to foreclose. Each home created major illegal profits for these greedy entities that started Mers Inc. There were at one time 5,000 members to create illegal multiple sales on each home. The profits far exceeded the amount of loans. Most members of which is the Shadow Banking System lost their Licenses to Lend for illegal gotten gains through counterfeiting and money laundering. Tearing up their Licenses and keeping their illegal profits. FHFA currently oversees the GSE’S. FHFA states that the GSE’S are never a creditor on any individual loan. All of this is available to read. Mers Inc. needs to go or land ownership rights are over and the United Nations Agenda 21plan WINS. We lose our Borders , Land, Rights, Freedoms, Liberties, Guns, Free Speech the Right to Vote etc… No Constitution just the United Nations rulings. Ask Britain EUROPEAN UNION and Australia how they like being ruled by the UN. Time to take back America before it’s too late.

  2. Yes Poppy — But how are we going to require this? We did not have a voice back then, and we do not have a voice now. Difficult to raise money to hire law firm when people are out of work. All focus is on Staying Alive. ALL politicians – still wrapped in themselves. Politics as usual despite the pandemic that is killing and will kill many more.

    It is time to step outside our own boxes, and do whatever we can do. I am ready – with no where to go. .I have tried for years. TRIED. Whatever we have done in past has to be reevaluated. It has not worked. One by one subjects us to an individual judge that is angry — he/she can’t get their higher (adjustable rate – which all have a high floor despite extremely low government rates that businesses have used for over decade) to fund a higher rate on pension.

    Further, anyone trading on this horrible pandemic, to their benefit alone, should be prohibited. Just my two cents.

    It all has to stop.

    1918 all over again, And, with that flu – came hyperinflation. Money was valueless.

  3. Perfect timing for a collaborative effort to sound the alarm. People are now paying attention.

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