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Many books have been written about the “PONZI” nature of Wall Street schemes but none of them ever actually explain why that term applies to fake claims of securitization of debt or what it means for the everyday consumer who thinks they are borrowing money — when in fact the homeowner is servicing and investing in an undisclosed scheme — one in which he or she thinks they are getting consideration for their issuance of a note but they are not.
In plain language, they think they are starting and buying a loan account when in fact no such loan account exists. Wall Street has perpetuated the securitization lie through the use of correspondence, notices, forbearance agreements, medication agreements, and even modification applications — all of which require the homeowner or consumer to agree that the loan account exists and that they owe the money as repayment for an unpaid debt.
In 2012 Mitch Fierstein wrote the book entitled Planet Ponzi, Glacier publishing available on Amazon.
Although thousands of books have been written about Ponzi schemes and many directed at the extra-legal and illegal nature of what Wall Street investment bankers call “securitization” I think that Fierestein probably captured it best when he described the essential ingredients of any successful Ponzi scheme. (SEE BELOW) And, as he correctly points out the most successful ones are those that span decades, thus becoming “institutionalized” in the minds of virtually everyone so much so that attempts to unravel it are met not just with skepticism but actual hostility.
Tonight I will explain why securitization claims are just simply a PONZI scheme and what that means to the ordinary consumer/homeowner (and “borrower”) in any consumer transaction.
But let’s start with this, as a checklist of items we will cover tonight:
ESSENTIAL ELEMENTS OF A SUCCESSFUL PONZI SCHEME
- Exponentially increasing liabilities — i.e., mounting debt. that is not disclosed until it crashes
- crappy, nonexistent, or inadequate assets
- deceitful or nonexistent accounting
- feeble, inert or toothless regulation
- a get rich quick culture for preference salted with a whole array of inappropriate incentives
- stupid, ignorant, lazy investors— the greedier the better, and
- an astonishing capacity for self-delusion
It is the last point that is so pervasive and which has caused a shift of the well-earned wealth of homeowners who played by the rules to the financial sector in several different forms. this shift is undermining the fabric of our society, trust in our government institutions, and the ability of the domestic and international economy to function in any normal way — i.e. based upon value as value has always been perceived and defined.
Eventually, the correction will come — maybe tomorrow and maybe in a decade. But anyone who studies economics and finance knows that it is coming. The point of talking about it is to come up with strategies that will save the wealth of ordinary people instead of merely adding to the current unfair, immoral, and illegal way that wealth gets shifted in increasingly extreme ways from Main Street to Wall Street.
Wall Street has most people thinking about capital growth — fueling wild speculation that bears no resemblance to trading on fundamental values. What people should now be focused on is capital preservation. Those that do that will enjoy multiple advantages and rewards when the inevitable crash occurs.
Filed under: foreclosure |
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