Why we are still living with lies

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Nobody realized that investment securities brokers were seeking to convert themselves into a printing press for hypothetical money. They were allowing investment banks to securitize imagination. Any hypothetical event, movement or data can be securitized. Anything can be an asset class just because some investment bank says so.

Hat tip to Ian

When they revoked Glass Steagal and allowed the sale of certificates that were legally redefined as non-securities under the Securities Exchange Act, they were taking advantage of accounting rules that started changing in the 1960’s (off-balance-sheet transactions, greater allowance for accepting management figures etc).

Nobody in Congress or the Oval office understood what they were doing — including Clinton, Bush, Obama, Trump, and Biden.  None of them had any experience, training, or certification in securities brokerage, analysis or underwriting. No legislator or Chief Executive of government ever imagined that the creation, issuance sale, and trading of securities on a nonexistent business would ever occur.

Even consumer advocates like Porter and Warren barely understand the real issue at stake here.

Nobody realized that investment securities brokers were seeking to convert themselves into a printing press for hypothetical money. They created exchanges where their hypothetical money could be exchanged for real money leaving them with her real money and everyone else holding a hologram of an empty paper bag.


The government was allowing investment banks to securitize imagination. Any hypothetical event, movement or data can be securitized. Anything can be an asset class just because some investment bank says so.

Everyone is playing the game because the money generated from such activity is enormous. And the fact that there is a constant risk component of total collapse does not bother them — because the management of the entities involved is not personally liable for losses or liabilities of the eternity they directed to participate.
Most people don’t remember or know that all securities brokerage firms were restricted to only one form of business entity — sole proprietorship or general partnership. In both instances, the partners or owners were all personally liable for losses. This was an extremely important component of the self-regulation of the securities industry. When the restrictions were lifted, the brokers were allowed to incorporate, shifting the risk to shareholders.
Then they started offering their own shares in IPOs and of course keeping the money. THAT is what paved the way for them to do the same thing only on a much larger scale. Now they issue certificates as though they were interests in specific loans grouped into portfolios. But neither the loans or the “interests” exist in the legal world. When tested in court the “owners” always lose.
The media was on this trail back in the early 2000s and suddenly went dark. Remember Gretchen Morgenson and Matt Taibbi?
The portfolios are nonexistent because the loan accounts are wiped out in securitization. The entire house of cards is built on the idea that they can lie and fabricate documents to create the appearance of ownership and rights to administer, collect and enforce a loan account that does not exist anywhere on their books.
PRACTICE NOTE:  Look at the headers and metadata. If you don’t know what that means, find someone who does know. In a recent case I reviewed the headers revealed the absence of the company that was supposedly reporting the data.
The data was supposedly reported by FNMA but the headers showed it was an Equator platform of Altisource, a spinoff of Ocwen Loan Servicing. Ocwen has no access, knowledge or contact with any company who has been named as “claimant,” “beneficiary,” “or Plaintiff.”
So it cannot produce a report from the designated “Creditor” showing the balance on the loan account (because the loan account does not exist).
The presumed “principal” (FNMA in this recent case) most likely has no knowledge or control over the litigation with the homeowner and probably has no relationship with the attorneys who are pursuing the foreclosure.
Securities firms continue to create, issue, sell and trade more certificates because it is a virtual printing press for money.
In the end, it is the people that get hurt —- pensioners, consumers, homeowners. Fund managers are getting bonuses for participating so they keep buying the certificates as the ROI increases each year. Some of the returns have been reported as high as 8.5% in a market where no such returns are possible. That is because this is all based on the continued sale of new certificates without which they cannot keep earlier investors happy.
A large part of our economy is resting on a PONZI foundation that may or may not be sustained. History says it will not.
In an IPO the securities firm gets a fee or commission for participating and enabling the offering of a company’s securities to the public. The proceeds of the sale, less fees, costs, and expenses, go to the company whose securities were sold. In today’s securitization marketplace, the proceeds are paid directly to the securities firm, who keeps it.
In a securitization IPO, the securities firm gets all the money and then pays astonishing money to everyone who participates in the plan. By everyone, I mean NOT the homeowner who enables it (and actually pays for it), but investors are getting a larger piece of the pie as they realize how much is in the pot of gold.
Eventually, some of those incentives seep down to consumers — but nowhere near the compensation that they are entitled to receive for assuming risks like the absence of a creditor who is accountable under lending and servicing laws.
And, to put a finer point on it, they have no accountability under the Federal Truth in Lending Act or the Securities Exchange  Acts. Because they say so they are NOT lending money nor are they issuing securities.
The results are staggering. And the disclosure to consumers and investors is nonexistent. And most of the fund managers don’t want disclosure. They want to keep buying certificates because that is what pays their salaries and gives them performance bonuses for returns above the market. 

Nobody paid me to write this. I am self-funded, supported only by donations. My mission is to stop foreclosures and other collection efforts against homeowners and consumers without proof of loss. If you want to support this effort please click on this link and donate as much as you feel you can afford.

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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

Yes you DO need a lawyer.

If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

Please visit www.lendinglies.com for more information.

4 Responses

  1. And of course, always a hat tip to Java! Another man of courage and strength.

  2. Spelled DEREGULATION. Not just by revocation of Glass Steagal Act but also by implementation of the Commodities Futures Modernization Act of 2000 signed into law by Bill Clinton – just before he left office.

    All was connected to politics and forced implementation of the Community Reinvestment Act (CRA). All connected. The goal was to get home ownership into the lower and middle class that had been long ignored. The only problem is – you don’t saddle the low/middle income group with high interest rates – while the upper class gets the best rate on the market.

    All backfired with massive fraud, derivatives, robo-signing and false foreclosure. You can’t foreclose on a mortgage that does not exist by accounting in the first place. All these people deserve restitution for being conned with their lives and dignity being destroyed. No one was regulating. It is not the “thought” behind it that was wrong. It is not the “securitization” that is wrong in theory. The problem is, without regulation, everything went haywire – out of control. No one was watching what being done.

    Biden wants to bring in all back. He will use another program – but, in effect, will be the same CRA. This time, the people will be smarter. Adjustable rates? Interest Only? No – get your regulation in order first. Sorely lacking even to date.

    And, always, a “hat tip” to Ian!!!!! He is always a voice here of common sense. Thanks to you too Hammertime! Also a voice of reason and strength. OH – and Neil is right – I recall Gretchen. Disappeared. You speak out – you are shut down. Same for many more.

  3. Because. Cowards in Government.

  4. Pretty good – “…hologram of a paper bag” We’re beyond educating the govt, judges, courts about securitization I believe although this article and recent ones laying out the details much better.

    Around the time of election finance industry ignoring and financing criminality was laid out but buried w the election.

    Now the global oligarchs are getting exposed and again finance and securitization has enabled them.

    If politicians from both parties don’t get our system is broken they’re part of the problem and traitors.

    Example of Credit Suisse –

    “An investor presentation for the deal, seen by the Financial Times, explains that one of the main goals of this division is to “create a positive brand impression of CS by financing the principals’ favourite business tools (business jet) and luxury toys (yachts)”.

    While banks regularly engage in so-called significant risk transfer transactions to reduce the capital they hold against loans, the derivative deals usually involve staid corporate or mortgage portfolios that form the bread and butter of bank lending.”


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