Federal Reserve Continues Welfare Payments to Banks

Posted on June 26, 2013 by Neil Garfield

If the bond buying program had been directed at direct assistance to investors and homeowners, the crisis would already be over and GDP would be rising by at least 3.5%, unemployment at 5% or less, and the deficit would be eliminated on an annual basis and vastly reduced long term. Debt would cease to be a problem which means that Banks would lose their position of complete dominance.

As Iceland shows all day and all month and all year, even the banks would be prospering and litigation would be virtually eliminated with respect to the validity and enforcement of mortgages and assignments. The cleanup would become the cure. The corruption of title is not problem in several countries because the county recorders wouldn’t accept the garbage that the banks were filing here. We have toxic title and the illusion of a healthy economy. Others do not have toxic title and are dealing with reality, warts and all.

Fed Announces Continued Bond Purchases, Mortgage Rates Fall
http://realtytimes.com/rtpages/20130626_bondpurchases.htm

It’s Official: Bank of America Has the Worst Reputation in the Banking Industry
http://www.fool.com/investing/general/2013/06/25/its-official-bank-of-america-has-the-worst-reputat.aspx

17 Signs That Most Americans Will Be Wiped Out By The Coming Economic Collapse
http://www.zerohedge.com/node/475692

Meet the Nation’s Toughest New Foreclosure Protection Law
http://www.theatlanticcities.com/housing/2013/06/meet-nations-toughest-new-foreclosure-protection-law/5952/

BUYING A HOUSE, BUYER BEWARE! Foreclosure documentation issues trap investors, creating litigation risk
http://www.housingwire.com/fastnews/2013/06/21/foreclosure-documentation-issues-trap-investors-creating-litigation-risk

Bank Of America Allegedly Gave Cash Bonuses To Workers Pushing Homeowners Into Foreclosure
http://www.businessinsider.com/bofa-sued-over-foreclosure-practices-2013-6

WHY WOULD A BANK BE SO ANXIOUS TO FORECLOSE IF IT WAS GOING TO ABANDON THE PROPERTY? Nearly 3 in 10 Oregon homes in foreclosure vacant
http://www.oregonlive.com/front-porch/index.ssf/2013/06/28_of_oregon_homes_in_foreclos.html

Foreclosures Are Still a Concern
http://online.wsj.com/article/SB10001424127887324520904578553660440428142.html

Florida puts a limit on deficiency Judgments but what happens when the real creditor shows up? Banks Go after Homeowners Years after Foreclosure
http://www.allgov.com/news/top-stories/banks-go-after-homeowners-years-after-foreclosure-130623?news=850369

Conflict for the big accounting firms? They did the audits and certified the balance sheets of both the investment banking companies and the ratings companies. A bad report card would put them at risk: Another Conflicted Foreclosure Review: PricewaterhouseCoopers and Ally/ResCap
http://www.forbes.com/sites/francinemckenna/2013/06/25/another-conflicted-foreclosure-review-pricewaterhousecoopers-and-allyrescap/

Regulatory Looting, Promontory-Style: Botched Foreclosure Reviews Alone Generate More than Double Goldman’s Revenues per Employee
http://www.nakedcapitalism.com/2013/06/regulatory-looting-promontory-style-botched-foreclosure-reviews-alone-generate-more-than-double-goldmans-revenues-per-employees.html

Promontory Financial Group Paid More Than $900 Million for Independent Foreclosure Review
http://4closurefraud.org/2013/06/24/promontory-financial-group-paid-more-than-900-million-for-independent-foreclosure-review/

 

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , | 132 Comments »

Follow the Money Trail: It’s the blueprint for your case

Posted on March 18, 2013 by Neil Garfield
If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.
Editor’s Analysis and Comment: If you want to know where all the money went during the mortgage madness of the last decade and the probable duplication of that behavior with all forms of consumer debt, the first clues have been emerging. First and foremost I would suggest the so-called bull market reflecting an economic resurgence that appears to have no basis in reality. Putting hundred of billions of dollars into the stock market is an obvious place to store ill-gotten gains.
But there is also the question of liquidity which means the Wall Street bankers had to “park” their money somewhere into depository accounts. Some analysts have suggested that the bankers deposited money in places where the sheer volume of money deposited would give bankers strategic control over finance in those countries.
The consequences to American finance is fairly well known here. But most Americans have been somewhat aloof to the extreme problems suffered by Spain, Greece, Italy and Cyprus. Italy and Cyprus have turned to confiscating savings on a progressive basis.  This could be a “fee” imposed by those countries for giving aid and comfort to the pirates of Wall Street.
So far the only country to stick with the rule of law is Iceland where some of the worst problems emerged early — before bankers could solidify political support in that country, like they have done around the world. Iceland didn’t bailout bankers, they jailed them. Iceland didn’t adopt austerity to make the problems worse, it used all its resources to stimulate the economy.
And Iceland looked at the reality of a the need for a thriving middle class. So they reduced household debt and forced banks to take the hit — some 25% or more being sliced off of mortgages and other consumer debt. Iceland was not acting out of ideology, but rather practicality.
The result is that Iceland is the shining light on the hill that we thought was ours. Iceland has real growth in gross domestic product, decreasing unemployment to acceptable levels, and banks that despite the hit they took, are also prospering.
From my perspective, I look at the situation from the perspective of a former investment banker who was in on conversations decades ago where Wall Street titans played the idea of cornering the market on money. They succeeded. But Iceland has shown that the controls emanating from Wall Street in directing legislation, executive action and judicial decisions can be broken.
It is my opinion that part or all of trillions dollars in off balance sheet transactions that were allowed over the last 15 years represents money that was literally stolen from investors who bought what they thought were bonds issued by a legitimate entity that owned loans to consumers some of which secured in the form of residential mortgage loans.
Actual evidence from the ground shows that the money from investors was skimmed by Wall Street to the tune of around $2.6 trillion, which served as the baseline for a PONZI scheme in which Wall Street bankers claimed ownership of debt in which they were neither creditor nor lender in any sense of the word. While it is difficult to actually pin down the amount stolen from the fake securitization chain (in addition to the tier 2 yield spread premium) that brought down investors and borrowers alike, it is obvious that many of these banks also used invested money from managed funds as gambling money that paid off handsomely as they received 100 cents on the dollar on losses suffered by others.
The difference between the scheme used by Wall Street this time is that bankers not only used “other people’s money” —this time they had the hubris to steal or “borrow” the losses they caused — long enough to get the benefit of federal bailout, insurance and hedge products like credit default swaps. Only after the bankers received bailouts and insurance did they push the losses onto investors who were forced to accept non-performing loans long after the 90 day window allowed under the REMIC statutes.
And that is why attorneys defending Foreclosures and other claims for consumer debt, including student loan debt, must first focus on the actual footprints in the sand. The footprints are the actual monetary transactions where real money flowed from one party to another. Leading with the money trail in your allegations, discovery and proof keeps the focus on simple reality. By identifying the real transactions, parties, timing and subject moment lawyers can use the emerging story as the blueprint to measure against the fabricated origination and transfer documents that refer to non-existent transactions.
The problem I hear all too often from clients of practitioners is that the lawyer accepts the production of the note as absolute proof of the debt. Not so. (see below). If you will remember your first year in law school an enforceable contract must have offer, acceptance and consideration and it must not violate public policy. So a contract to kill someone is not enforceable.
Debt arises only if some transaction in which real money or value is exchanged. Without that, no amount of paperwork can make it real. The note is not the debt ( it is evidence of the debt which can be rebutted). The mortgage is not the note (it is a contract to enforce the note, if the note is valid). And the TILA disclosures required make sure that consumers know who they are dealing with. In fact TILA says that any pattern of conduct in which the real lender is hidden is “predatory per se”) and it has a name — table funded loan. This leads to treble damages, attorneys fees and costs recoverable by the borrower and counsel for the borrower.
And a contract to “repay” money is not enforceable if the money was never loaned. That is where “consideration” comes in. And a an alleged contract in the lender agreed to one set of terms (the mortgage bond) and the borrower agreed to another set of terms (the promissory note) is no contract at all because there was no offer an acceptance of the same terms.
And a contract or policy that is sure to fail and result in the borrower losing his life savings and all the money put in as payments, furniture is legally unconscionable and therefore against public policy. Thus most of the consumer debt over the last 20 years has fallen into these categories of unenforceable debt.
The problem has been the inability of consumers and their lawyers to present a clear picture of what happened. That picture starts with footprints in the sand — the actual events in which money actually exchanged hands, the answer to the identity of the parties to each of those transactions and the reason they did it, which would be the terms agreed on by both parties.
If you ask me for a $100 loan and I say sure just sign this note, what happens if I don’t give you the loan? And suppose you went somewhere else to get your loan since I reneged on the deal. Could I sue you on the note? Yes. Could I win the suit? Not if you denied you ever got the money from me. Can I use the real loan as evidence that you did get the money? Yes. Can I win the case relying on the loan from another party? No because the fact that you received a loan from someone else does not support the claim on the note, for which there was no consideration.
It is the latter point that the Courts are starting to grapple with. The assumption that the underlying transaction described in the note and mortgage was real, is rightfully coming under attack. The real transactions, unsupported by note or mortgage or disclosures required under the Truth in Lending Act, cannot be the square peg jammed into the round hole. The transaction described in the note, mortgage, transfers, and disclosures was never supported by any transaction in which money exchanged hands. And it was not properly disclosed or documented so that there could be a meeting of the minds for a binding contract.
KEEP THIS IN MIND: (DISCOVERY HINTS) The simple blueprint against which you cast your fact pattern, is that if the securitization scheme was real and not a PONZI scheme, the investors’ money would have gone into a trust account for the REMIC trust. The REMIC trust would have a record of the transaction wherein a deduction of money from that account funded your loan. And the payee on the note (and the secured party on the mortgage) would be the REMIC trust. There is no reason to have it any other way unless you are a thief trying to skim or steal money. If Wall Street had played it straight underwriting standards would have been maintained and when the day came that investors didn’t want to buy any more mortgage bonds, the financial world would not have been on the verge of extinction. Much of the losses to investors would have covered by the insurance and credit default swaps that the banks took even though they never had any loss or risk of loss. There never would have been any reason to use nominees like MERS or originators.
The entire scheme boils down to this: can you borrow the realities of a transaction in which you were not a party and treat it, legally in court, as your own? So far the courts have missed this question and the result has been an unequivocal and misguided “yes.” Relentless of pursuit of the truth and insistence on following the rule of law, will produce a very different result. And maybe America will use the shining example of Iceland as a model rather than letting bankers control our governmental processes.

Banking Chief Calls For 15% Looting of Italians’ Savings
http://www.infowars.com/banking-chief-calls-for-15-looting-of-italians-savings/

Filed under: alternative medicine, AMERICAN HOMEOWNERS COOPERATIVE, AMGAR, ATM, bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , | 146 Comments »

Ireland Joining Iceland for Mortgage Principal Corrections

Posted on October 9, 2012 by Neil Garfield

Editor’s Note: It’s not final but it looks like Ireland is going to do pretty much the same thing that Iceland did, except this one is based upon the heart of the crisis — housing and bad mortgages, falsely presented to lenders and borrowers alike. The answer? Reduction in the balance due on mortgages that were falsely presented in the first place.

It is the obvious answer. Homeowners and lenders were BOTH fooled into believing that normal underwriting practices were at work. The originators even charged more for no-doc loans because they were taking a higher risk than the usual requirements of tax returns, confirmation of employment and income, and verification of the value of the property and the ability of the borrower to repay the loan.

The banks took the money from investors, promising to deposit those funds into a “trust” account for funding mortgages or acquiring mortgages within the prescribed period of time (90 days). The banks didn’t deposit the funds in any such account and instead commingled all the investor money to intentionally obscure the theft and the nature of the Ponzi scheme they were running.

The homeowner is said to be at fault for borrowing more money than they could afford to repay, but the bank sales machine expanded the offering of mortgages from 4-5 different types to over 450 different types of loans, along with assurances that the bank had reviewed the loan, and was satisfied that the loan could be repaid and that was because of rising prices in real estate fueled mostly by a flood of money and the boom in new house building where builders were only too happy to raise their prices as much as 20% per month, for appraisers to “use” in comparing property values. The truth is that the appraisers were under threat of either coming in with an appraisal at least over $20,000 more than the contract price, or they would never work again.

Yet somehow in the mind of policy makers and bankers (and the courts)  it was cheating when they gave those appraisals (indirectly) to investors but stupid on the part of borrowers who accepted the approvals. So the borrowers, who were cheated out of the deal they they were getting are stuck and the investors who are cheated out of the deal they thought they were getting, are getting settlements.

As Iceland has shown, the issue isn’t blame anymore. It is survival. And as Iceland as shown, the issue is whether the economy can be re-started and become robust once again. The answer is yes, as long as we turn a deaf ear to the bankers whose information and data is used by policy makers.

6 Years I ago I proposed that the answer to this problem was amnesty for everyone, with everyone taking a share of the loss. That still seems like a good idea. Iceland is putting bankers in jail and maybe that is where they belong. But I am more concerned with the health of our society, not the revenge against individual bankers.

Ireland Plans Bold Measures to Lift Housing

By PETER EAVIS, NY Times

DUBLIN – With its economy still reeling from the housing crash, Ireland is making a bold move to help tens of thousands of struggling homeowners.

The Irish government expects to pass a law this year that could encourage banks to substantially cut the amount that borrowers owe on their mortgages, a step that no major country has been willing to take on a broad scale.

The initiative, which would lower a borrower’s monthly payment, could prevent a tide of foreclosures, an uncertainty that has been hanging over the Irish housing market for years. If it works, the plan could provide a road map for other troubled countries.

Without the proposed law, Laura Crowley, a nurse who lives in a village 30 miles west of Dublin, figures she will lose her home. In 2007, Ms. Crowley and her husband bought a small home for the equivalent of $420,000. But they can no longer afford the $1,400 monthly payment. Her husband, a construction worker, is earning far less and her take-home pay has been cut by the country’s new austerity measures, which include new taxes. “This bill is the only light at the end of the tunnel for us,” she said.

Most countries that have suffered housing busts, including the United States, have made limited use of so-called mortgage write-downs, the process of forgiving a portion of the principal on the loan. The worry has been that some borrowers who can afford their mortgages will stop making payments to take advantage of a bailout. Banks have also been reluctant since they could face unexpected losses.

Ireland is different from the United States and most countries. During the financial crisis, Ireland bailed out the banks, and the government still has large ownership stakes in some of the biggest mortgage lenders. So taxpayers are already responsible for mortgage losses. In other countries, the burden of principal forgiveness would largely fall on privately owned banks.

But the debate is the same: whether to push lenders to take losses now, in hopes that things will get better faster, or wait for the housing market to heal on its own, which could cloud the economy for years to come.

Countries suffering from a housing hangover will most likely be watching Ireland closely to see how the law works. Spain, swamped with mortgage defaults, introduced a measure in March that allows for debt forgiveness, though under strict conditions.

In many ways, Ireland has to try something audacious. House prices are still 50 percent below their peak, compared with 30 percent in the United States. And more than half of Irish mortgages are underwater, meaning the house is worth less than the outstanding debt. While some of those borrowers can afford to keep making payments, more than a quarter of mortgage debt on first homes, roughly $39 billion, is in default or has been modified by lenders.

The housing market is now in a state of limbo as the government and the banks have made little effort to clean up the mortgage mess.

Unlike in the United States, Irish banks have foreclosed on very few borrowers. While Ireland’s leaders have considered it socially unacceptable for banks to seize large numbers of homes, they also feared the fiscal cost of foreclosures.

This approach creates doubt about the true level of bad mortgages at Irish banks. And borrowers, unsure of whether they will keep their homes, remain in a state of financial paralysis.

The new law aims to end this stalemate by overhauling Ireland’s consumer debt and bankruptcy laws.

While banks aren’t required to reduce the mortgage debt, the legislation gives them a powerful incentive to write down mortgages for troubled borrowers. Under the new rules, it will be less onerous to declare bankruptcy, making it easier for people to walk away from their homes altogether. As the threat rises, banks are more likely to reduce homeowners’ debt, rather than risk losing the monthly income and getting stuck with the property.

“For the banks, where there are losses, they have to be recognized,” said Alan Shatter, Ireland’s justice minister, who has sponsored the new law, called the Personal Insolvency Bill. “This legislation gives homeowners hope for their future.”

The legislation is intended, in part, to reach homeowners who are on the verge of running into trouble, as Geraldine Daly is.

A health care worker, Ms. Daly bought a home in 2009 in Belmayne, a new development in northern Dublin. Until last month, Ms. Daly said, she has been making her $1,200 payment. Then she fell behind after some unexpected expenses, including a car repair.

Ms. Daly estimates that her finances would become manageable if her monthly mortgage payments were cut to around $900. “Right now, I am a slave to this dog box.”

Critics contend the law could have unintended consequences.

One fear is that banks won’t have the money to absorb the potential losses on the mortgages. A big mystery is the level of defaults on so-called buy-to-let mortgages, loans that many Irish people took out to buy second homes to rent. In theory, the insolvency bill allows for write-offs on this type of mortgage, and analysts expect defaults on such loans to be higher than on first homes. Ireland’s central bank is expected to release the data soon.

To qualify, borrowers will have to prove that they are in a precarious financial position and cannot afford to pay. Analysts are concerned that the bill may actually be too restrictive and homeowners will continue to default. “There are so many layers that borrowers have to go through to get a write-down,” said Paul Joyce, senior policy researcher at Free Legal Advice Centers, a legal rights group that has supported moves to make Irish bankruptcy law more lenient. For instance, borrowers will most likely have to pay a big fee upfront to the person who handles their case.

John Chubb, a former construction worker who lives on a quiet cul-de-sac on the outskirts of Dublin, isn’t too worried about the process right now. He just wants to save his home.

Since having an operation for colon cancer in 2004, Mr. Chubb has lived primarily on government disability payments, and the bank has allowed him to pay only mortgage interest. But the lender is in the process of deciding whether to foreclose.

“I am expecting the word any day now,” he said. “I don’t know if I will be out on the front path before the bill passes.”

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , | 8 Comments »

Lawyers cashing in on Class Action Lawsuits for Investors: What About Homeowners?

Posted on October 9, 2012 by Neil Garfield

“I can’t predict the next scandal,” Mr. Berger said. “But I know that fraud is a growth industry, and so is greed.”

Editor’s Comment: Max W. Berger, partner of Bernstein Litowitz Berger & Grossmann, based in Manhattan has brought in over $1 Billion in damages for class action lawsuits filed ion behalf of investors. I’ve been predicting here that the amount of money that a lawyer can make correcting the malfeasance of the megabanks and servicers is staggering — far beyond profitable areas like personal injury and medical malpractice.

They are producing settlements rather than verdicts and judgments simply because the banks don’t really have a credible defense to what they did. They lied, cheated and stole. By diverting money from the securitization scheme that they said they were following and diverting the documentation away from the investors, as well as diverting huge payoffs and profits away from investors, the banks have screwed the investors (and all the pensioners and retirement account holders), screwed the taxpayers with creating false premises for bailouts, and screwed homeowners with false claims for foreclosures.

Is it time yet for lawyers to realize that even more money is to be made representing homeowners? The obstacles in the law create problems for certification of class actions but the possibilities remain. Any foreclosure pattern that REQUIRED the use of false documentation that was forged by unsophisticated clerks at the direction of the people who were claiming plausible deniability MUST be the target of such lawsuits and the answer to the problem of underwater mortgages, strategic defaults which are on the rise, and the limp economic recovery caused in large measure by the housing crash that cannot recover until the foreclosure scheme is stopped.

Lawyers for homeowners should be pouring through the discovery documents and pleading of the cases filed for investors, There they will find a treasure trove of information that drove the banks into offering billions in settlements of actions brought by civil action lawyers as well as government agencies. But the real question is why are the big name class action lawyers ignoring the horrendous damage to homeowners?

These lawyers have the resources and the knowledge that has been disclosed here on this blog and hundreds of other articles, mainstream news stories and bloggers across the country.

Iceland understood the problem and reduced household debt, bringing itself out from an actual economic depression into the fastest growth of western nations. Ireland is now about to require reductions in principal due to prevent the wave of foreclosures that has been hanging over that market as well, leading the way for other European countries to follow suit.

Each day thousands of lives are ruined by the false claims in foreclosures that dominate the “foreclosure industry” comprised of participants in a securitization chain to nowhere — the money wasn’t sent through that channel, the documents were diverted from that channel leaving the investors with nothing. Shareholders in the banks were misled and kept shares of the mega banks in their portfolios. Managed funds for pensions and retirement funds, have lost as much as 50% of their value endangering current pension benefits (a fact that will be revealed after the elections).

Why do I need to convince lawyers to make more money and do some good for society into action on behalf of homeowners when on the same facts, lawyers for the investors are making money hand over fist?

Business is booming for lawyers who care about investors, but not so much for lawyers representing the homeowners who were screwed worse than the investors. The homeowners in most cases have lost everything and more.

Their own pension benefits probably come from a managed funds that bought into the bogus mortgage bonds. Their pension benefits are in danger of being cut even while they lose their home and lifestyles from tricky defective mortgages that not even Alan Greenspan understood much less the unsophisticated home-buyer or homeowner refinancing homes that were in many cases in the family for generations.

Why is this so difficult for the lawyers and the judiciary to understand? Whose name would you put on the note and mortgage if you were lending money? Why wasn’t the name of the actual lender disclosed, much less shown as payee or mortgagee? If the REMIC trusts were real, no originator would have been allowed to place their name on the closing documents.

The money DID come from investors but did NOT come from the REMIC trusts that are alleged. The mortgage liens were not perfected and the underwriting process upon which the bank settlements with investors were based, was completely scuttled, especially where it came to intentionally inflated values of the property.

So where are the lawyers to take advantage of this huge opportunity where so much of the work has already been done for them by government agencies and class action lawyers for investors?

Investors’ Billion-Dollar Fraud Fighter
By PETER LATTMAN, NY Times

A few days after securing the largest shareholder recovery arising from the financial crisis – $2.43 billion from Bank of America – the plaintiffs’ lawyer Max W. Berger was not taking a victory lap.

“It makes me sad that in all of these scandals, no matter how good a job we do of getting results and inflicting pain, the government doesn’t seem to follow suit, and nobody learns, and it’s business as usual,” he said in an interview.

After a pregnant pause, Mr. Berger broke into a sly smile. He had another thought: “It gives us a lot of business, but it still makes me sad.”

With last month’s settlement with Bank of America, which resolved claims that the bank had misled shareholders about its acquisition of an ailing Merrill Lynch, Mr. Berger, 66, has now been responsible for six securities class-action settlements of more than $1 billion. His firm, Bernstein Litowitz Berger & Grossmann, based in Manhattan, has represented investors in five of the 10 largest securities-fraud recoveries. So far, it has recovered $4.5 billion for investors in cases connected to the subprime mortgage collapse.

“He is unquestionably one the giants of the plaintiffs’ bar,” said Brad S. Karp, the managing partner at Paul, Weiss, Rifkind, Wharton & Garrison, who represented Bank of America and has faced off against Mr. Berger in several other cases. “And what sets Max apart, beyond his talents as a lawyer, is that he’s a mensch, a person of real humility and integrity.”

There was a time, not too long ago, when the lions of the securities class-action bar were described in far less flattering terms. For decades, Melvyn I. Weiss and William S. Lerach, a pair of brash, crafty plaintiffs’ lawyers, dominated this lucrative pocket of the legal industry. Their firm, Milberg Weiss, revolutionized shareholder class-action suits by filing streams of cases against corporations, accusing them of accounting fraud. Critics called their aggressive tactics legalized blackmail. Congress passed laws aimed at reining in their practices.

The careers of Mr. Weiss and Mr. Lerach ended in disgrace in 2006, when their firm was indicted on charges that it had funneled illegal kickbacks to clients to induce them to sue. Mr. Weiss, Mr. Lerach and two other Milberg Weiss partners ultimately served prison terms. (It did not help the standing of the plaintiffs’ bar that at about the same time, Richard F. Scruggs, the Mississippi class-action lawyer, was imprisoned for trying to bribe a judge.)

“To be tarred by those brushes was very upsetting, but it was even worse to have everyone presume that we operated in the same way,” Mr. Berger said. “After they were charged, I can’t tell you how many people said, ‘Well, isn’t that what all of you do?’ ”

Yet a half-decade after Milberg’s downfall, there has been a shift in the public image and reputation of the securities class-action bar. The Bank of America settlement, which is still subject to judicial approval, comes at a moment when plaintiffs’ lawyers are being praised for extracting stiff penalties from banks related to their actions during the housing boom and the subsequent economic collapse. At the same time, resource-constrained government regulators have been criticized for not being tough enough.

In several cases, private plaintiffs have settled lawsuits for amounts far greater than the government received in similar actions. Bank of America, for instance, paid the Securities and Exchange Commission just $150 million to settle the commission’s lawsuit connected to the Merrill acquisition. Judge Jed S. Rakoff reluctantly approved the S.E.C. settlement, calling it “inadequate and misguided” and the dollar amount “paltry.”

“The securities class-action bar has come under relentless assault over the years,” said J. Robert Brown Jr., a corporate law professor at the University of Denver. “Yet these suits, especially the ones tied to the financial crisis, actually have had real value in the capital markets because companies need to know that there is a heavy price to pay for their misconduct.”

There are still detractors who scoff at that notion. These critics view securities class-action lawyers as bounty hunters who file nuisance lawsuits against deep-pocketed targets and then force them to settle rather than engage in costly litigation. They argue that the settlements have little deterrent effect because the payments almost always come from the corporations, not the executives and directors running the companies.

And questions have arisen over plaintiffs’ lawyers’ campaign contributions to local politicians who control the selection of legal counsel for shareholder lawsuits filed by public pension funds.

But even the most vocal opponents of securities-fraud class actions acknowledge that a variety of factors, including a combination of federal legislation and court rulings, have curbed abuses in the system. Many of the weakest cases are now thrown out earlier, and large institutional shareholders like state pension funds and insurance companies have taken greater control of the lawsuits.

They are also reining in the lawyers’ fees. In the past, plaintiffs’ lawyers received 20 percent to one-third of the settlement amount. Today the average fee award as a percentage of the recovery is much lower. In Bank of America, for example, Bernstein Litowitz and two other firms – Kessler Topaz Meltzer & Check and Kaplan Fox & Kilsheimer – are expected to ask for about $150 million, or 6 percent of the settlement.

“Things have definitely improved,” said Theodore H. Frank, an adjunct fellow at the Manhattan Institute and a longtime critic of abusive class actions. “Is it perfect? No. Is it better? Yes.”

Legal experts say the class actions filed after the financial crisis highlight the improvements. The lawsuits were far more risky and complex than the template “strike suits” that plaintiffs’ firms once churned out every time a company’s share price plummeted. And unlike large corporate scandals like Enron or WorldCom, there were no balance-sheet restatements or criminal convictions to use as evidence.

“We never viewed these cases as easy but felt we needed to be in them in a big way, so we really doubled down,” Mr. Berger said.

Bernstein Litowitz’s recent settlements read like a who’s who of the “too big to fail” era. Wachovia and its auditor paid its bondholders $627 million to resolve charges related to its mortgage holdings. Merrill Lynch settled claims that it had misled buyers of mortgage products for $315 million. Lehman Brothers’ underwriters paid $426 million to end a lawsuit over its stock sales. Washington Mutual’s underwriters and insurers paid $205 million to investors in the now-collapsed bank.

The big mortgage-related settlements are expected to add up to hundreds of millions in fees for Bernstein Litowitz, a 52-lawyer firm. Mr. Berger and his three founding partners started the firm in 1983 after splitting off from Kreindler & Kreindler, a plaintiffs’ firm best known for its aviation-disaster litigation.

The Bank of America settlement is a boon for the firm, ending nearly four years of bruising litigation and coming less than a month before it was set for trial. The lawsuit accused Bank of America of concealing from its shareholders, who were voting on the Merrill acquisition, the billions of dollars in mounting losses at Merrill, as well as billions in bonuses being paid out to Merrill executives.

Bernstein Litowitz and two other firms represented five plaintiffs: two Ohio pension funds, a Texas pension fund and two European pensions. Working with Mr. Berger on the case were his partners Mark Lebovitch, Hannah Ross and Steven B. Singer.

“This case will now serve as Exhibit A for corporate directors tempted to withhold information from shareholders,” Mr. Berger said. “The message isn’t complicated: Just tell the truth.”

New matters, meanwhile, are coming in. Bernstein Litowitz was appointed lead plaintiffs’ counsel in a lawsuit against JPMorgan Chase related to the bank’s multibillion-dollar trading loss out of a unit in London. And it is involved in the litigation against Facebook and Morgan Stanley over the social networking company’s botched initial public offering of stock.

Mr. Berger said finding cases had rarely been a problem.

“I can’t predict the next scandal,” Mr. Berger said. “But I know that fraud is a growth industry, and so is greed.”

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Fixing the Housing Market So It’s Safe to Buy or Hold

Posted on August 27, 2012 by Neil Garfield
Reality in Iceland: prosecution and letting the chips fall to the table
August 27, 2012. Neil F Garfield. Mainstream media and in particular Krugman and Ritholz have echoes what Simon Johnson and I have been saying for years. It’s not a question of theory or ideology. It’s a question of reality.
Citizens of Iceland were not in the least bit interested whether the “conservatives” or the “liberals” had compelling ideological arguments. They wanted jobs, economic stability, and decent prospects and opportunities. Citizens of Iceland were not interested in the concept of change or even change in government.
They wanted their society fixed, after being used and thrown under the bus by Wall Street using Icelandic banks as a conduit for international exchange of derivatives that turned out to be worthless. The Banks tried throwing Iceland under the bus, but Icelanders defied the power and wealth of the world’s largest banks and executed simple policies that followed the advanced thinking and analysts all over the world, past, present and future.
Bill Clinton was asked by many how he managed to take an ailing economy and turn it into a booming source of innovation with giant government surpluses. His answer was “arithmetic.” When I was a security analyst and investment banker on Wall Street the primary theme was that before investment, underwriting, or performing any act or making any decisions we had to start at the beginning — the fundamentals. Money may be hard to define but it is easy to measure.
At the end of the day if you taken more real money than you have spent, then you have more money at the end of the month. If some thief steals from you, your wealth drops. If someone claims to own your property and doesn’t own it, your wealth remains unchanged — but Wall Street, bucking the obvious proof in Iceland, says otherwise.
Wall Street says they can “borrow” the identity of homeowners and use it to create the equivalent of bank notes that can be accepted as cash equivalents as long as they dress it up with triple A ratings, and insurance companies that cannot pay for the loss and wouldn’t even if they could because the offer to buy the credit default swap, the insurance and other hedge products were based upon blatantly false premises.
Iceland simply did arithmetic and they continue to do arithmetic. They are reducing household debt, letting creditors suffer the risk of loss that was part of their contracts but now they don’t like their contracts. In Iceland too, the Banks demanded bailout money to save the financial system. But Icelanders rejected that on both legal and moral grounds.
They were not going to reward the perpetrators of fraud tooth further detriment of their victims, they would prosecute them and punish them for breaking the key laws and premises of a stable society — accountability to and for the truth.
They were not going to further burden the victims of the crimes with taxes to reward the perpetrators and their counterparts, they were going to provide as much restitution of wealth as possible and necessary to stabilize an economy that was crashing.
The financial system did not crash and burn as Wall Street had sternly predicted to the Bush and Obama administrations in the U.S. With more than 7,000 smaller banks ready and waiting pick up the pieces. They did not debase their currency and their prospects by saddling future generations with the mistakes of remote greedy bankers. They took the money that existed and disregarded the fake money, the ” cash equivalents” created all over the world allowing the shadow banning system to collapse under it’s own worthless weight. Nothing bad happened.
What did happen is that Iceland now enjoys normal economic growth, sharply declining unemployment and underemployment and does not consider trading paper whose value is based upon false transactions to be part of a their GDP. Produce real goods and services while in the U.S. And other “advanced ” superpowers they have turned themselves into paper tigers. While financial services went from 16% of U.S. GDP before this mess, it now counts for half. Arithmetic: if those shadow banking transactions are worthless then our real GDP is 34% less than what we are reporting.
In Europe where they have their heads partially in our sand, they are trying to sit on two chairs with one ass. They too understand that nothing trumps reality but the people who run government here and abroad are simply making far too much money pretending that shadow money is real money. The real value of our stock indexes is around 7500 for DJIA.
The facts are that housing is still in the dumps even if some reports show “signs of life.” to allow Foreclosures to proceed when the creditor had an undocumented c,aim without any real mortgage lien is absurd, bit it is done everyday. It isn’t a matter of defective documents, it is a matter of no documents, while the banks stole the identities of the pensions funds and homeowners for their own personal Profit,  and buried the losses until they were done trading worthless paper. THEN they gave the “ownership” of the worthless paper and the loss to the investment funds that thought they had purchased them years ago under rules that were never followed by Wall Street.
The foreclosures must end because they are illegally based upon a chain of paper without any money transactions (consideration). The “completed” Foreclosures should be disallowed because the transactions on which they were based were void for lack of consideration wherein the signature of the homeowner was procured by fraudulent premises and promises.
The real money transactions should be documented and the real loan status should be disclosed so that homeowners and investors can come to reasonable settlements and modifications without regard to the consequences to Banks whose continuing fraud is causing the U. S. And Europe without applying basic emergency procedures to stop the bleeding.
The loans are not secured by perfected liens and the principal loan origination was outright theft from investor-lenders and homeowners. But they could be secured and people could pay for the real market value of the deal they were tricked into, if we simply go back and do the arithmetic — and play fair.

Iceland Did It Right … And Everyone Else Is Doing It Wrong
http://www.ritholtz.com/blog/2012/08/iceland-did-it-right-and-everyone-else-is-doing-it-wrong/

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British Government Getting Tough on Bankers

Posted on July 8, 2012 by Neil Garfield

The Barclay Libor rigging scandal is apparently the straw that broke the Camel’s back in Great Britain. With various investigations of their co-conspirators in artificially creating moments in interest rates, the scam is unraveling. And in the balance, lies between $500 and $600 TRILLION dollars. How could that much money be effected when all the money in the world amounts to less than $70 Trillion? What the hell IS money anyway?

All these things are becoming less exotic and increasingly the subject of investigation, prosecution, conviction and sentencing in every place but the United States, where at this point in the savings and loan scandal of the 1980’s more than 800 people were already in jail. The British authorities are leading the way in Europe taking their cue from Iceland of all places, where prosecution of bankers has become the nation’s goal — bringing justice to the marketplace and bringing back certainty that those who play with the free Markets will be punished.

Iceland’s surge back to prosperity has been painful but they did it it because they forced the banks to accept “debt forgiveness” which is to say they merely forced the banks to admit that the debtors had been placed so far in debt with no assets or income to pay for the debt that it was
NOT going to get repaid anyway. That meant some of the assets on the balance sheets of the three biggest banks were worthless. Three banks failed and everyone held their breadth. Nothing bad happened. In fact the rest of the banking sector is prospering along with the rest of the Iceland economy.

In the U.S. Regulators and prosecutors seem to remain completely invested in the myth that bringing the banks and bankers to justice will bring down the entire financial system. It isn’t so and we know that because wherever the governments have cracked down on the financial services industry the economy got better — Iceland being only the latest example.

Back to the question: how could some reptilian behavior create more money than government allows and why is the government allowing it anyway? How could all the currency in the world be $70 trillion and the amount of money effected by the Barclay manipulation of Libor be ten times that amount, which is to to say ten times all the money the world? The answer is that it can’t. And the longer we pretend that it can, the longer and deeper will be the recession. The more we pretend that those exotic securities sitting in bank balance sheets are actually worth all that money, the longer we prolong the agony of the society that allows banks to exist. Those banks relying on fake assets should fail. It is that simple.

See Gretchen Morgenson’s article in the Sunday business section of the New York Times for a clear explanation of right and wrong and how the British are trying to get it right.

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Bankers Scared S–tless by Iceland

Posted on July 8, 2012 by Neil Garfield

Highly placed sources in high positions inform me that articles about Iceland are now starting to bother the arrogant banksters who started this mess. One such article is by Sarah Lyall in Sunday’s New York Times.

In a world drowning in fake debt, criminal behavior, and unnecessary Foreclosures, the one country standing out from the pack is Iceland with an economic growth rate of 2.8%, unemployment dropping like a stone, and new businesses opening quickly with loans underwritten by banks who were forced into debt forgiveness by the government.

Bankers in Iceland are being prosecuted, convicted, and sentenced for their crimes against the society that allowed them to be bankers. Not everything is perfect, but with business growing, employment growing, and a resilient determined population, Iceland is paying off it’s debts from the financial crisis and is able to easily borrow money in the open markets.

Government sources and economists say the reason could not be more obvious — forgiveness of debt, strengthening the already prodigious social safety net, and good data and information that turns out to be true and not filtered through the rose colored glasses that the bank PR machine is grinding out.

The application here and elsewhere is just plain obvious and notwithstanding proven — hold the banks and bankers accountable for their behavior, let them fail and even in Iceland where there were not a lot of banks (as opposed to the 7,000 banks and credit unions here that can easily pick up the pieces), the financial system not only survived, it prospered.

The difference between the banks in Iceland and the banks elsewhere (especially the U.S.) is that the banks, being creatures and inventions of the societies that created and allowed them to function, were managed and brought under control by government acting for the society and not for the banks.

Those seeking less government control are merely using it as a rallying cry to lure people into voting against themselves. We need fireman, policeman, teachers etc. And we need police on Wall Street in particular.

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SHILLER: Principal Must be Written Down for Economic Recovery

Posted on June 26, 2012 by Neil Garfield

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Editor’s Comment:  

We are looking into the abyss of economic failure. For economists, the people who know the facts, the ONLY answer left on the table is principal correction or principal reduction. We have tried everything else.

The reason is very simple. The Banks created a market where prices soared above values and like any other situation where there is a false spike in prices over values, the correction needs to be made. The free market has already arrived at the same conclusion —- nobody wants those mortgages even if they were valid and enforceable. The refusal to rush toward principal reduction is putting the banks in an all or nothing position. The market and the economists have spoken — if that is the choice the banks will get nothing.

But the word from the banks is that we can’t have principal reduction. The real reason is that their balance sheets will be wrecked by forcing them to admit that those assets they are reporting are pure fiction — an inevitable consequence of bank excess finally recognized by the rating agencies last week. But the banks are spinning the myth that if principal reduction (in other words REALITY) prevails then everyone will want to do it. Assuming that is true, why not?  Shouldn’t everyone want reality? The Banks have had their windfall, they have been paid enough to pay back the investor lenders, and they are driving the economy into a ditch with their unrelenting death grip on the purse strings. 

Americans must decide between the Iceland model in which their economy quickly recovered, and the American model where we continue to languish with no real prospects for recovery. The European attempt at austerity drove them further over the brink. In fact, every policy is now debunked that ignores the realities of the market place and the reality of the importance of the housing market in ANY economic recovery. There is only one thing left. It is the right thing to do.

We have exhausted every idea except for doing the right thing. Restore homes to people who were unlawfully and fraudulently induced into signing papers that never even recited the terms of repayment as it was recited to the real lenders and which never disclosed the multiple borrowers on each loan, most of whom were hidden from the borrowers. Write down the mortgages just as the banks have already done, as confirmed by trading in the marketplace. What is so difficult to accept here?

People get windfalls all the time when bullies take over markets. And yes many homeowners will want the benefits of a write-down that the rest of the world already accepts as true and necessary. The result will restore wealth and power to the middle class, revive the economy and restore our prospects. We will have the resources to repair our ailing infrastructure (an embarrassment to world traveling Americans), invest in education and job training, invest in innovation and get back some of that pride we once had in America.

The only people stopping this are those who are pandering to extremists who would rather see the Country collapse than to allow a “handout” to those undeserving deadbeat homeowners. The facts and reality leave them unpersuaded because fanning the flames of ideology is how many politicians achieve power and maintain it.

Like I said last week. It comes down to this: country or chaos. What is your choice?

Robert Shiller: Lenders Need To Write Down Mortgages To Solve America’s Housing Problem

By Mamta Badkar

Yale economist Robert Shiller says the housing crisis is a collective action problem.

This means, he argues in a New York Times editorial, that if all mortgage lenders were to act collectively and write down what was owed to them by individual homeowners everyone would be better off.

Shiller offers a few types of collective action to write down mortgage principles. One involves giving “community-based, government-appointed trustees a central role” in writing down mortgages, any idea proposed by Yale economist John Geanakoplos and Boston University law professor Susan P. Koniak.

Another proposed by Robert C. Hockett involves “eminent domain” which allows government to seize property with fair compensation to owners when it is done in public interest—and could apply to mortgages:

Professor Hockett argues that a government, whether federal, state or local, can start doing just this right now, using large databases of information about mortgage pools and homeowner credit scores. After a market analysis, it seizes the mortgages. Then it can pay them off at fair value, or a little over that, with money from new investors, issuing new mortgages with smaller balances to the homeowners. Taxpayers are not involved, and no government deficit is incurred. Since homeowners are no longer underwater and have good credit, they are unlikely to default, so the new investors can expect to be repaid.”

People are more likely to default on their mortgage when it is underwater i.e. when their homes are worth less than their mortgage. And  lenders lose money on foreclosures because of lower home values and legal costs. So it would be in everyone’s best interest according to Shiller if mortgage lenders were to take some such collective action.

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The Documents Fannie and Freddie Never Received

Posted on June 22, 2012 by Neil Garfield

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Editor’s Comment:

Go to the link below which will take you to the article posted on StopForeclosureFraud where  you will see a list of documents (just like the Pooling and Servicing Agreements that everyone ignored) that should have been received by Freddie, Fannie, Ginnie, FHA et al.  Since we now know that the securitization chain of documents was nonexistent until the dealers were called upon to fabricate them for cases in litigation, we know that the absolute minimum requirements for Fannie and Freddie approval were absent. 

This means, contrary to the assertions of 99% of the securitization “auditors”, and contrary to the appearance of a loan on a Fannie or Freddie website, that the loan was never delivered to those agencies nor any of the documents required.  Just as the REMICs never received the loans, Freddie never received the loans.  And since Freddie never received the loans it became the master trustee of “trusts” that never received the loans and were therefore empty.

All this means is that we have to go back to the first day of the alleged transaction.  Investor lenders, operating through dealers, (investment banks) were advancing money for the “purchase” of residential mortgage loans.   The money was advanced to the closing agent who paid off the party claiming to be the prior mortgagee, giving the balance to the seller of the property or to the borrower (if the transaction was supposedly a refinance).  The nightmare for the banks is that if we go back to that first day the parties named as “lender”, “beneficiary”, “mortgagee” are the only parties of record with an apparent recorded interest in the property.  Their problem is that contrary to conventional foreclosure practice, those entities (many of which do not exist anymore) never funded nor even handled the money as a conduit for the loan.  Thus the note and mortgage are fatally defective and cannot be enforced. 

This would mean that the loan never made it into any pool.  That would mean that all of the deals made by the dealers (investment banks) based on the existence of that loan would fall apart leaving them with an enormous liability since they had sold the same deal dozens of times.  And that is the sole reason why the bailout, insurance, credit default swaps, guarantees and other credit enhancements were so large.  The banks used their ability to control the people with their hands on the levers of power within our government to pay for the malfeasance of the banks that have wrecked our economy and our society.

As Iceland has already proven and Europe is in the process of proving, the only answer is to take the stolen money back from the banks, put it back into the private sector, and put it back into government budgets. 

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Wrong Bailout

Posted on June 7, 2012 by Neil Garfield

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Editor’s Comment:

It isn’t in our own mainstream media but the fact is that Europe is verging on  collapse. They are bailing out banks and taking them apart (something which our regulators refuse to do). The very same banks that caused the crisis are the ones that are going to claim they too need another bailout because of international defaults. The article below seems extreme but it might be right on target.

From the start the treatment of the banks had been wrong-headed and controlled by of course the banks themselves. With Jamie Dimon sitting on the Board of Directors of the NY FED, which is the dominatrix in the Federal Reserve system, what else would you expect?

The fact is that, as Iceland and other countries have proven beyond any reasonable doubt, the bailout of the banks is dead wrong and it is equally wrong-headed to give them the continued blank check to pursue business strategies that drain rather than infuse liquidity in economies that are ailing because of intentional acts of the banks to enrich themselves rather than the countries that give them license to exist.

The bailout we proposed every year and every month and practically every day on this blog is the only one that will work: reduce household debt, return things to normalcy (before the fake securitization of mortgages and other consumer and government debt) and without spending a dime of taxpayer money.  The right people will pay for this and the victims will get some measure of relief — enough to jump start economies that are in a death spiral.

Just look at home mortgages. They were based upon layers of lies that are almost endless and that continue through the present. But the principal lie, the one that made all the difference, was that the mortgage bonds were worth something and the real property was worth more than the supposed loans. With only a few exceptions those were blatant lies that are not legal or permissible under any exemption claimed by Wall Street. Our system of laws says that if you steal from someone you pay for it with your liberty and whatever it is you stole is returned to the victim if it still exists. And what exists, is millions of falsely created invalid illegal instruments recorded in title registries all over the country affecting the title of more than 20 million households.

All we need to do is admit it. The loans are unsecured and the only fair way of handling things is to bring all the parties to the table, work out a deal and stop the foreclosures. This isn’t going to happen unless the chief law enforcement officers of each state and the clerks of the title registry offices wake up to the fact that they are part of the problem. It takes guts to audit the title registry like they did in San Francisco and other states, cities and counties. But the reward is that the truth is known and only by knowing the truth will we correct the problem.

The housing market is continuing to suffer because we are living a series of lies. The government, realtors and the banks and servicers all need us to believe these lies because they say that if we admit them, the entire financial system will dissolve. Ask any Joe or Josephine on the street — the financial system has already failed for them. Income inequality has never been worse and history shows that (1) the more the inequality the more power those with wealth possess to keep things going their way and (2) this eventually leads to chaos and violence. As Jefferson said in the Declaration of Independence, people will endure almost anything until they just cannot endure it any longer. That time is coming closer than anyone realizes.

Only weeks before France erupted into a bloody revolution with gruesome dispatch of aristocrats, the upper class thought that the masses could be kept in line as long as they were thrown a few crumbs now and then. That behavior of the masses grew from small measures exacted from a resisting government infrastructure to simply taking what they wanted. Out of sheer numbers the aristocracy was unable to fight back against an entire country that was literally up in arms about the unfairness of the system. But even the leaders of the French Revolution and the Merican revolution understood that someone must be in charge and that an infrastructure of laws and enfrocement, confidence in the marketplace and fair dealing must be the status quo. Disturb that and you end up with overthrow of existing authority replaced by nothing of any power or consequence.

Both human nature and history are clear. We can all agree that the those who possess the right stuff should be rich and the rest of us should have a fair shot at getting rich. There is no punishment of the rich or even wealth redistribution. The problem is not wealth inequality. And “class warfare” is not the right word for what is going on — but it might well be the right words if the upper class continue to step on the rest of the people. The problem is that there is no solution to wealth inequality unless the upper class cooperates in bringing order and a fair playing field to the marketplace —- or face the consequences of what people do when they can’t feed, house, educate or protect their children.

LaRouche: The Glass-Steagall Moment Is Upon Us

Spanish collapse can bring down the Trans-Atlantic system this weekend

Abruptly, but lawfully, the Spanish debt crisis has erupted over the past 48 hours into a systemic rupture in the entire trans-Atlantic financial and monetary facade, posing the immediate question: Will the European Monetary Union and the entire trans-Atlantic financial system survive to the end of this holiday weekend?



Late on Friday afternoon, the Spanish government revealed that the cost of bailing out the Bankia bank, which was nationalized on May 9, will now cost Spanish taxpayers nearly 24 billion euro—and rising. Many other Spanish banks are facing imminent collapse or bailout; the autonomous Spanish regions, with gigantic debts of their own, are all now bankrupt and desperate for their own bailout. Over the last week, Spanish and foreign depositors have been pulling their money out of the weakest Spanish banks in a panic, in a repeat of the capital flight out of the Greek banks months ago. 



The situations in Greece, Italy, Portugal, and Ireland are equally on the edge of total disintegration—and the exposure of the big Wall Street banks to this European disintegration is so enormous that there is no portion of the trans-Atlantic system that is exempt from the sudden, crushing reality of this collapse.



Whether or not the system holds together for a few days or weeks more, or whether it literally goes into total meltdown in the coming hours, the moment of truth has arrived, when all options to hold the current system together have run out.

Today, in response to this immediate crisis, American political economist Lyndon LaRouche issued a clarion call to action. Referring to the overall trans-Atlantic financial bubble, in light of the Spanish debt explosion of the past 48 hours, LaRouche pinpointed its significance as follows:

“The rate of collapse now exceeds the rate of the attempts to overtake the collapse. That means that, essentially, the entire European system, in its present form, is in the process of a hopeless degeneration. Now, this is something comparable to what happened in Germany in 1923, and they’ve caught themselves in a trap, where a rate of collapse exceeds the rate of their attempt to overtake yesterday.

“So therefore, we’re in a new situation, and the only solution in Europe, in particular, is Glass-Steagall, or the Glass-Steagall equivalent, with no fooling around. Straight Glass-Steagall — no bailouts! None! In other words, you have to collapse the entire euro system. The entirety of the euro system has to collapse. But it has to collapse in the right way; it has to be a voluntary collapse, which is like a Glass-Steagall process. This means the end of the euro, really. The euro system is about to end, because you can’t sustain it.

“Everything is disintegrating now in Europe. It can be rescued very simply, by a Glass-Steagall type of operation, and then going back to the currencies which existed before. In other words, you need a stable system of currencies, or you can’t have a recovery at all! In other words, if the rate of inflation is higher than the rate of your bailout, then what happens when you try to increase the bailout, you increase the hysteria. You increase the rate of collapse. In other words, the rate of collapse exceeds the rate of bailout.

“And now, you have Spain, and Portugal implicitly, and the situation in Greece. Italy’s going to go in the same direction. So the present system, which Obama’s trying to sustain, in his own peculiar way, is not going to work. There’s no hope for the system. Nor is there any hope for the U.S. system in its present form. The remedies, the problems, are somewhat different between Europe and the United States, but the nature of the disease is the same. They both have the same disease: It’s called the British disease. It’s hyperinflation.

“So, now you’re in a situation where the only way you can avoid a rate of hyperinflation beyond the rate of hyper-collapse is Glass-Steagall, or the equivalent. You have to save something, you have to save the essentials. Well, the essentials are: You take all the things that go into the bailout category, and you cancel them. How do you cancel them? Very simple: Glass-Steagall. Anything that is not fungible in terms of Glass-Steagall categories doesn’t get paid! It doesn’t get unpaid either; it just doesn’t get paid. Because you remove these things from the categories of things that you’re responsible to pay. You’re not responsible to bail out gambling, you’re not responsible to pay out gambling debts.

“Now, the gambling debts are the hyperinflation. So now, we might as well say it: The United States, among other nations, is hopelessly bankrupt.

“But this is the situation! This is what reality is! And what happens, is the entire U.S. government operation is beyond reckoning. It is collapsing! And there’s only one thing you can do: The equivalent of Glass-Steagall: You take those accounts, which are accounts which are worthy, which are essential to society, you freeze the currencies, their prices, and no bailout. And you don’t pay anything that does not correspond to a real credit. It’s the only solution. The point has been reached—it’s here! You’re in a bottomless pit, very much like Germany 1923, Weimar.

“And in any kind of hyperinflation, this is something you come to. And there’s only one way to do it: Get rid of the bad debt! It’s going to have to happen.

“The entire world system is in a crisis. It’s a general breakdown crisis which is centered in the trans-Atlantic community. That’s where the center of the crisis is. So, in the United States, we’re on the verge of a breakdown, a blowout; it can happen at any time. When will it happen, we don’t know, because we’ve seen this kind of thing before, as in 1923 Germany, November-December 1923, this was the situation. And it went on after that, but it’s a breakdown crisis. And that’s it.

“Those who thought there could be a bailout, or they had some recipe that things were going to be fine, that things would be manageable, that’s all gone! You’re now relieved of that great burden. You need have no anxiety about the U.S. dollar. Why worry about it? Either it’s dead or it’s not! And the only way it’s not going to be dead, is by an end of bailout. That’s the situation.

“We don’t know exactly where the breakdown point comes. But it’s coming, because we’re already in a system in which the rate of breakdown is greater than the rate of any bailout possible! And there’s only one way you can do that: Cancel a whole category of obligations! Those that don’t fit the Glass-Steagall standard, or the equivalent of Glass-Steagall standard: Cancel it, immediately! We don’t pay anything on gambling debts. Present us something that’s not a gambling debt, and we may be able to deal with that.”

LaRouche concluded with a stark warning:

“If you think that this system is going to continue, and you can find some way to get out of this problem, you can not get out of this problem, because you are the problem! Your failure to do Glass-Steagall, is the problem. And it’s your failure! Don’t blame somebody else: If you didn’t force through Glass-Steagall, it’s your fault, and it continues to be your fault! It’s your mistake, which is continuing!

“And that’s the situation we have in Europe, and that, really, is also the situation in the United States.

“But that’s where we are! It’s exactly the situation we face now, and there’s no other discussion that really means much, until we can decide to end the bailout, and to absolutely cancel all illegitimate debt—that is, bailout debt!

“There’s only one solution: The solution is, get rid of the illegitimate disease, the hyperinflation! Get rid of the hyperinflationary factor. Cancel the hyperinflation! Don’t pay those debts! Don’t cancel them, just don’t pay them! You declare them outside the economy, outside the responsibility of government: We can no longer afford to sustain you, therefore, you’ll have to find other remedies of your own. That’s where you are. It had to come, it has been coming.”


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Eurozone Recession in Overdrive

Posted on June 1, 2012 by Neil Garfield

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Editor’s Comment:

France, Italy, Spain All at record lows in GDP

Mish Shedlock nails it in the article below. We are reminded again that where the banks get control of political policy, every avenue will be explored before Governments do the right thing — or the country explodes into chaos and a new Government is born. For those who have studied French history, these reports sound earily like the conditions that preceded the French Revolution and the bloodbath that followed. Rioting is commonplace. And the rioters are not just expressing outrage; they have lost faith in the their government, their currency and their prospects. Japanese seminars abound on how to store money and move to other countries. Malasia looks good to them. 

And here in the United States, the steam keeps building under the lid while the banks, realtors and other groups try to convince us that the recession, and the mortgage crisis that brought it on, is over and will NOW recover. Despite years of such “prosperity is just around the corners’ spinning, and some people still believe it when they hear it, we know from history, including our own, that revolution of one sort or another, doesn’t take a majority of citizens to get involved. In fact, every major revolution in every major country occurred with a small band of “fringe” people leading the way until their sucesses attracted the mainstream people who thought they could ride the storm and survive the aftermath.

Over the next 60 days, long-term unemployment benefits are over in this country. GDP is in for another hit. That was money going into the hands of people who were spending it the moment they received it. The full multiplier effect has been keeping our economy floating and now THAT is going away. 

Home prices are now at their lowest level since 2002 and all responsible analysts tell us that housing prices are going down another 15% and I think they are right. The economies of the world are crashing because the people have no money to spend. Even the employed are underemployed and can’t make enouogh money to pay for housing and other major purchases except on a much lower scale. 

We are in a depression, not a recession and the fact that this Depression is not yet as bad as the Great Depression should not lull us into a false sense that this is just a cycle that will run its course. It isn’t. This is the end of modern commerce unless we do something about it. And the ONLY thing left to do is to provide a mechanism where the middle class is suddenly redeployed with cash in their hands to buy things and cause commerce to renew. Don’t look to China or India either which are experiencing sharp decines in GDP. 

There is only one piece of currency that will restore the middle class . Iceland proved it as have other countries. FORCE BANKS TO REDUCE HOUSEHOLD DEBT. Between the mortgage chicanery and credit cards, government borrowing on terms they didn’t understand, and most banks that were “in the game” without knowing the rules, the money is gone. It isn’t the bank that has been robbed, nor government spending that is ripping the economies of the world apart. It is the banks themselves that siphoned off all our currency and our liquidity, and won’t put it back. They have lost their franchise through greed. It is time to nationalize the banks and then let them operate privately as utilities regulated as though they provide the lifeblood of the world.   

The “anti-regulators” are mere apologists for the new aristoracy that has pulled off a coup d’etat and pulled the wool over the eyes of the media and the public.

Eurozone Retail Sales Crash: Record Declines in France and Italy, Overall Revenues Drop at Near Record Pace

by Mike “Mish” Shedlock

Retail sales in France, Italy, and the eurozone as a whole hit the skids according to Markit. Retail sales in Germany were positive, but barely.

Steepest Decline in French History

Further sharp fall in French retail sales during May

 Key points:

  • Month-on-month decline in sales matches April’s survey-record
  • Steepest year-on-year decline in series history
  • Purchase price inflation eases to near-stagnation

Sales fell on an annual basis at the steepest pace recorded since the inception of the survey in January 2004. Margins continued to be squeezed amid an intense competitive environment, despite purchase price inflation easing to near-stagnation.

The headline Retail PMI® registered 41.4 in May, matching April’s survey-record low. French retailers indicated that actual sales came in well below previously set targets during May. The degree of undershoot was the greatest since February 2010.

Record Declines in Italy

Record year-on-year decrease in Italian retail sales in May

 Key points:

  • High street spending down sharply, albeit at weaker monthly rate
  • Job shedding steepest in series history
  • Discounting and cost inflation reduce profitability

Summary:

The Italian retail sector remained in contraction during May, with sales again falling sharply in spite of widespread discounting. Cost pressures meanwhile grew from April’s recent low on the back of rising transport costs, thereby adding more pressure to margins. Consequently, firms shed staff at a marked and accelerated rate that was the steepest since data were first compiled in January 2004.

High street spending across Italy contracted sharply on the month during May, albeit at a slightly slower rate than that registered during April. This was signalled by the seasonally adjusted Italian Retail PMI® posting at 35.8, up from 32.8. Sales fell for the fifteenth month straight, and panellists continued to highlight low consumer confidence and falling disposable incomes as the main factors behind the decline.

German Sales Show Slight Growth

German retail sales return to growth in May

 Key points:

  • Retail PMI points to marginal month-on-month rise in sales
  • Like-for-like sales higher than one year earlier
  • Wholesale price inflation eases markedly

The seasonally adjusted Germany Retail PMI rose from 47.4 in April to 50.7 in May, to indicate a marginal increase in sales on a month-on-month basis. That said, the rate of expansion was lower than those seen throughout the first quarter of 2012. Companies that reported a rise in sales since April generally noted that more favourable weather conditions had resulted in higher customer footfall.

Survey respondents indicated that actual sales fell short of initial targets for the second month running in May.

Sharp Drop in Overall Sales, Revenues Decline at Near Record Pace

Eurozone retail sales continue to fall sharply in May

 Key points: 

  • Retail PMI improves to 43.3, but still signals steep monthly drop in sales
  • Near-record annual fall in sales
  • Wholesale price inflation slows sharply

Summary of May findings:

The Eurozone retail sector remained firmly in contraction in May, according to PMI® data from Markit. Sales fell sharply on a month-on-month basis, and revenues compared with a year ago were down at a near-record rate. There were signs of easing pressure on retailer’s purchasing costs, however, as the rate of purchase price inflation slowed sharply to a 19-month low.

This should bury the notion the eurozone recession will be short and shallow.


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Pensioners Will Feel the Pinch from Illegal Mortgages and Foreclosures

Posted on May 30, 2012 by Neil Garfield

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Editor’s Comment:

There are many people whose opinion produces the resistance of government to rip up the banks that got us into this economic mess. They all say government is too big, that we already have too much regulation and that Obama is the cause of the recession. Their opinions are based largely on the fact that they perceive the borrowers as deadbeats and government assistance as another “handout.” 

But when it comes down to it, it’s easy to make a decision based upn ideology if the consequences are not falling on you. Read any news source and you will see that the pension funds are taking a huge hit as a rsult of illegal bank activities and fraudulent practices leaving the victims and our economy in a lurch.

The article below is about public pensions where the pension funds and the governmental units took a monumental hit when the banks sucked the life out of our economy. TRANSLATION: IF YOU DEPEND UPON PENSION INCOME YOU ARE LIKELY TO FIND OUT YOU ARE SCREWED. And even if you don’t depend upon pension income, you are likely to be taxed for the shortfall that is now sitting in the pockets of Wall Street Bankers.

Think about it. If the Banks were hit hard like they were in Iceland andother places (and where by the way they still exist and make money) then your pension fund would not have the loss that requires either more taxes or less benefits. And going after the banks doesn’t take a dime out of pulic funds which should (but doesn’t) make responsible people advocating austerity measures rejoice. They still say they don’t like the obvious plan of getting restitution from thieves because the theives are paying them and feeding them talking points. And some of us are listening. Are you?

Public Pensions Faulted for Bets on Rosy Returns

By: Mary Williams Walsh and Danny Hakim

Few investors are more bullish these days than public pension funds. While Americans are typically earning less than 1 percent interest on their savings accounts and watching their 401(k) balances yo-yo along with the stock market, most public pension funds are still betting they will earn annual returns of 7 to 8 percent over the long haul, a practice that Mayor Michael R. Bloomberg recently called “indefensible.”

Now public pension funds across the country are facing a painful reckoning. Their projections look increasingly out of touch in today’s low-interest environment, and pressure is mounting to be more realistic. But lowering their investment assumptions, even slightly, means turning for more cash to local taxpayers — who pay part of the cost of public pensions through property and other taxes.

In New York, the city’s chief actuary, Robert North, has proposed lowering the assumed rate of return for the city’s five pension funds to 7 percent from 8 percent, which would be one of the sharpest reductions by a public pension fund in the United States. But that change would mean finding an additional $1.9 billion for the pension system every year, a huge amount for a city already depositing more than a tenth of its budget — $7.3 billion a year — into the funds.

But to many observers, even 7 percent is too high in today’s market conditions.

“The actuary is supposedly going to lower the assumed reinvestment rate from an absolutely hysterical, laughable 8 percent to a totally indefensible 7 or 7.5 percent,” Mr. Bloomberg said during a trip to Albany in late February. “If I can give you one piece of financial advice: If somebody offers you a guaranteed 7 percent on your money for the rest of your life, you take it and just make sure the guy’s name is not Madoff.” Public retirement systems from Alaska to Maine are running into the same dilemma as they struggle to lower their assumed rates of return in light of very low interest rates and unpredictable stock prices.

They are facing opposition from public-sector unions, which fear that increased pension costs to taxpayers will further feed the push to cut retirement benefits for public workers. In New York, the Legislature this year cut pensions for public workers who are hired in the future, and around the country governors and mayors are citing high pension costs as a reason for requiring workers to contribute more, or work longer, to earn retirement benefits.

In addition to lowering the projected rate of return, Mr. North has also recommended that the New York City trustees acknowledge that city workers are living longer and reporting more disabilities — changes that would cost the city an additional $2.8 billion in pension contributions this year. Mr. North has called for the city to soften the blow to the budget by pushing much of the increased pension cost into the future, by spreading the increased liability out over 22 years. Ailing pension systems have been among the factors that have recently driven struggling cities into Chapter 9 bankruptcy. Such bankruptcies are rare, but economists warn that more are likely in the coming years. Faulty assumptions can mask problems, and municipal pension funds are often so big that if they run into a crisis their home cities cannot afford to bail them out. The typical public pension plan assumes its investments will earn average annual returns of 8 percent over the long term, according to the Center for Retirement Research at Boston College. Actual experience since 2000 has been much less, 5.7 percent over the last 10 years, according to the National Association of State Retirement Administrators. (New York State announced last week that it had earned 5.96 percent last year, compared with the 7.5 percent it had projected.)

Worse, many economists say, is that states and cities have special accounting rules that have been criticized for greatly understating pension costs. Governments do not just use their investment assumptions to project future asset growth. They also use them to measure what they will owe retirees in the future in today’s dollars, something companies have not been permitted to do since 1993.

As a result, companies now use an average interest rate of 4.8 percent to calculate their pension costs in today’s dollars, according to Milliman, an actuarial firm.

In New York City, the proposed 7 percent rate faces resistance from union trustees who sit on the funds’ boards. The trustees have the power to make the change; their decision must also be approved by the State Legislature.

“The continued risk here is that even 7 is too high,” said Edmund J. McMahon, a senior fellow at the Empire Center for New York State Policy, a research group for fiscal issues.

And Jeremy Gold, an actuary and economist who has been an outspoken critic of public pension disclosures, said, “If you’re using 7 percent in a 3 percent world, then you’re still continuing to borrow from the pension fund.” The city’s union leaders disagree. Harry Nespoli, the chairman of the Municipal Labor Committee, the umbrella group for the city’s public employee unions, said that lowering the rate to 7 percent was unnecessary.

“They don’t have to turn around and lower it a whole point,” he said.

When asked if his union was more bullish on the markets than the city’s actuary, Mr. Nespoli said, “All we can do is what the actuary is doing. He’s guessing. We’re guessing.”

Vermont has lowered its rate by 2 percentage points, but for only one year. The state recently adopted an unusual new approach calling for a sharp initial reduction in its investment assumptions, followed by gradual yearly increases. Vermont has also required public workers to pay more into the pension system.

Union leaders see hidden agendas behind the rising calls for lower pension assumptions. When Rhode Island’s state treasurer, Gina M. Raimondo, persuaded her state’s pension board to lower its rate to 7.5 percent last year, from 8.25 percent, the president of a firemen’s union accused her of “cooking the books.”

Lowering the rate to 7.5 percent meant Rhode Island’s taxpayers would have to contribute an additional $300 million to the fund in the first year, and more after that. Lawmakers were convinced that the state could not afford that, and instead reduced public pension benefits, including the yearly cost-of-living adjustments that retirees now receive. State officials expect the unions to sue over the benefits cuts.

When the mayor of San Jose, Calif., Chuck Reed, warned that the city’s reliance on 7.5 percent returns was too risky, three public employees’ unions filed a complaint against him and the city with the Securities and Exchange Commission. They told the regulators that San Jose had not included such warnings in its bond prospectus, and asked the regulators to look into whether the omission amounted to securities fraud. A spokesman for the mayor said the complaint was without merit. In Sacramento this year, Alan Milligan, the actuary for the California Public Employees’ Retirement System, or Calpers, recommended that the trustees lower their assumption to 7.25 percent from 7.75 percent. Last year, the trustees rejected Mr. Milligan’s previous proposal, to lower the rate to 7.5 percent.

This time, one trustee, Dan Dunmoyer, asked the actuary if he had calculated the probability that the pension fund could even hit those targets.

Yes, Mr. Milligan said: There was a 50-50 chance of getting 7.5 percent returns, on average, over the next two decades. The odds of hitting a 7.25 percent target were a little better, he added, 54 to 46.

Mr. Dunmoyer, who represents the insurance industry on the board, sounded shocked. “To me, as a fiduciary, you want to have more than a 50 percent chance of success.”

If Calpers kept setting high targets and missing them, “the impact on the counties won’t be bigger numbers,” he said. “It will be bankruptcy.”

In the end, a majority decided it was worth the risk, and voted against Mr. Dunmoyer, lowering the rate to 7.5 percent.


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Even the Chinese Know It

Posted on May 29, 2012 by Neil Garfield

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Editor’s Comment:

AUSTERITY MEANS “PROTECT THE BANKS AND SCREW THE PEOPLE”

The Financial Times ran an article 2 days ago about the Chinese being encouraged to spend more aand save less. I’m no fan of China’s political system, or even its economic policies (which come to think of it are the same thing, as Von Mises points out). As we look around the world and see Iceland prospering, China’s growth slowing to a mere 8% while our REAL GDP is still negative or by the reckoning of most economists, headed into downward territory. These propering countries who have concentrated on stmulating the rate of commerce (i.e. the economy) are the countries that are reducing debt (Iceland is now at the point where more than 25% of household debt has been eliminated not with spending fiscal stimullus money but with pressure on the idiots that got us into this messs- the banks.

Then look at the countries who are effectively governed by the banks, directly or indirectly— like US and Europe. They stand in stark contrast to Iceland and China. We are headed into what is called a “double dip” recession as though we would have hands up with ice cream cones in them, but the truth is that these recessions is literally taking food, medicine, and clothes off the table while they send their children into schools that are no longer able to teach and are located in neighborhoods that are less safe from criminal activity and the occoasional warehouse fire all because of “austerity.” Such neighborhoods are also less familiar and less appealing than the ones they got thrown out of after being tricked into using a home in which generations of their family grew up as the source of cheap capial encouraging, cajoling and pushing them with literally midnight visits to get them to sign on the dotted line to purchase a defective, fraudulent loan products whose purpose was to fail.

As we look at those countries who have adpted the politics and economics of austerity (“less spending” or “spending cuts” as it is known in the U.S.) the consequences could not be more clear — austerity, spending cuts, less spending, get the government out of the way are all slogans  that are leading us into disaster. And they are all spoken by people who are owned and controlled by the banks. And at the risk of offending my readers with political statements, Obama was exactly right when he said that the purpose of government was not to turn a business profit like Romney said he did (my sources tell me that Mitt was a figurehead running for president and they were making him look good, not that he was actually of any value). Obama correctly points out that government’s purpose is to maintain a society in which everyone gets a fair shake and a fair shot at the brass ring. Thus government is not for the rich who already got wealthy but for those who have not yet  achieved wealth. And this is because history teaches that no society has ever endured without a strong middle class.

This country needs to revive its economy by having more people spend more money. The obstacles to that are that too many people have no money, no  credit and no jobs. This is the time to divert the corporate welfare of farm subsididies and oil subsidies and the like to those programs that will give all our citizens a fair shake and a fair shot at success.

Like Iceland, the way to increasing the value of our currency, the way to prosperity is to reduce household debt. And the biggest item here that not only decreases household debt but increases household wealth is to return the homes that were wrongfully foreclosed and not to give a pittance of money to the victims with a slap on the wrist to those who stole the home with a credit bid when they were not only not the creditor, but they had never invested a dime in purchasing the loan. That used to be illegal. Wait a minute, it still is illegal. So why are we allowing the banks to continue this charade and why does the government, including Obama’s administration, drag its feet in taking apart these monsters that destroyed our economy? Why is the administration assume that the 7,000 OTHER banks and credit union wolld not prosper and enter into tacit agreements to keep the government afloat while we wait for the stimulus to take effect?

There is no expert or pundit that says we are wrong. All the banks have been able to do is to roll out doomsday sayers who say that if we follow the law we will be headed for disaster. Well take a look.  Disaster is here. And the Dow Jones Industrial Average is not a proper indicator or substitutute for people who can’t put food on a table that is now located in a dwelling that the rest of us would not even consider — their car.

We choose instead to protect the banks at all costs and we call that austerity because where else is the money going to come from except the banks who siphoned it out illegally? That is our policy, our politics and our economics. And while our soldiers risk life and limb because their country called them to duty, their families were being foreclosed, some at the precise moment they were taking a shot in the leg or heart for us. Is this the society we sent them to fight for?


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We Are Drowning in False Debt While Realtors Push “Recovery”

Posted on May 28, 2012 by Neil Garfield

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The figures keep coming in while the words keep coming out the mouths of bankers and realtors. The figures don’t match the words. The net result is that the facts show that we are literally drowning in debt, and we see what happens as a result of such conditions with a mere glance at Europe. They are sinking like a stone, and while we look prettier to investors it is only when we are compared to other places — definitely not because we have a strong economy.

Iceland and other “players” crashed but stayed out of the EU and stayed away from the far flung central banking sleeping arrangements with Banks. Iceland knows that banks got us into this and that if there is any way out, it must be the banks that either lead their way out or get nationalized so their assets can take the hit of these losses. In Phoenix alone, we have $39 BILLION in negative equity. 

This negative equity was and remains illusory. Iceland cut the household debt in each home by 25% or more and is conitinuing to do so. The result? They are the only country with the only currency that is truly recovering and coming back to real values. What do we have? We have inflated property appraisals that STILL dominate the marketplace. 

The absence of any sense of reality is all around us in Arizona. I know of one case where Coldwell Banker, easily one of the most prestigious realtors, actually put lots up for sale asking $40,000 when the tax assessed value is barely one quarter of that amount and the area has now dried up — no natural water supply without drilling thousands of feet or hauling water in by truck. Residents in the area and realtors who are local say the property could fetch at most $10,000 and is unsalable until the water problem is solved. And here in Arizona we know the water problem is not only not going to get solved, it is going to get worse because of the “theory” of global climate change.

This “underwater” mess is political not financial. It wouldn’t exist but for the willingness of the government to stay in bed with banks. The appraisals they used to grant the loan were intentionally  falsified to “get rid of” as much money as possible in the shortest time possible, to complete deals and justify taking trillions of dollars from investors. The appraisals at closing were impossibly high by any normal industry accepted standard and appraisers admit it and even predicted it it in 2005. Banks coerced appraisers into inflating appraisers by giving them a choice — either come in with appraisals $20,000 over the contract price or they will never get work again.

The borrower relied upon this appaisal, believing that the property value was so hot that he or she couldn’t lose and that in fact, with values going so high, it would be foolish not to get in on the market before it went all the way out of reach. And of course there were the banks who like the cavalry came in and provided the apparently cheap money for people to buy or refinance their homes. The cavalry was in a movie somewhere, certainly not in the marketplace. It was more like the hordes of invaders in ancient Europe chopping off the heads of men, women and children and as they lie dying they were unaware of what had happened to them and that they were as good as dead.

So many people have chosen death. They see the writing on the wall that once was their own, and they cannot cope with the loss of home, lifestyle and dignity. They take their own lives and the lives of those around them. Citi contributes a few million to a suicide hotline as a PR stunt while they are causing the distress through foreclosure and collection procedures that are illegal, fraudlent, and based upon forged, robosigned documents with robo-notarized attestations  that the recording offices still won’t reject and the judges still accept.

There is no real real economic recovery without reality in housing. Values never went up — but prices did. Now the prices are returning back to the values left in the dust during the big bank push to “get rid of” money advanced by investors. It’s a game to the banks where the homeowner is the lowly deadbeat, the bottom of the ladder, a person who doesn’t deserve dignity or relief like the bank bailouts. When a person gets financial relief from the government it is a “handout.” When big banks and big business get relief and subsidies in industries that were already profitable, it is called economic policy. REALITY CHECK: They are both getting a “handout” and economic policy is driven by politics instead of common sense. French arisocrats found that out too late as their heads rolled off the guillotine platforms.  

But Iceland and other places in the world have taught us that in reality those regarded as deadbeats are atually people who were herded into middle class debt traps created by the banks and that if they follow the simple precept of restoring victims to their previous state, by giving restitution to these victims, the entire economy recovers, housing recovers and everything resumes normal activity that is dominated by normal market forces instead of the force of huge banks coercing society and government by myths like too big too fail. The Banks are doing just fine in Iceland, the financial system is intact and the government policy is based upon the good of the society as a whole rather the banks who might destroy us. Appeasement is not a policy it is a surrender to the banks.

Cities with the Most Homes Underwater

Michael B. Sauter

Mortgage debt continues to be a major issue in the United States, nearly six years after home prices peaked, according to a report released Thursday by online real estate site Zillow. Americans continue to owe more on their homes than they are worth. Nearly one in three mortgages are underwater, amounting to more than 15 million homes and a total negative equity of $1.19 trillion.

In some of America’s largest metropolitan regions, however, the housing crash dealt a far worse blow. In these areas — most of which are in California, Florida and the southwest — home values were cut in half, unemployment skyrocketed, and 50% to 70% of borrowers now find themselves with a home worth less than the value of their mortgage. 24/7 Wall St. reviewed the 100 largest housing markets and identified the 10 with the highest percentage of homes with underwater mortgages. Svenja Gudell, senior economist at Zillow, explained in an interview with 24/7 Wall St. that the markets with the highest rates of underwater borrowers are in trouble now because of the rampant growth seen in these cities prior to the recession. Once home prices peaked, which was primarily in late 2005 through 2006, all but one of these 10 housing markets lost at least 50% of their median home value.

Making matters worse for families with high negative equity in these markets is the increased unemployment. “If you have a whole lot of unemployment in an area, you’re more likely to see home values continue to decline in the area as well,” says Gudell. While in 2007 many of these markets had average or below average unemployment rates, the recession took a heavy toll on their economies. By 2011, eight of the 10 markets had unemployment rates above 10%, and three — all in California — had unemployment rates of above 16%, nearly double the national average.

24/7 Wall St. used Zillow’s first-quarter 2012 negative equity report to identify the 10 housing markets — out of the 100 largest metropolitan statistical areas in the country — with the highest percentage of underwater mortgages. Zillow also provided us with the decline in home values in these markets from prerecession peak values, the total negative equity value in these markets and the percentage of homes underwater that have been delinquent on payments for 90 days or more.

These are the cities with the most homes underwater.

10. Orlando, Fla.
> Pct. homes w/underwater mortgages: 53.9%
> Number of mortgages underwater: 205,369
> Median home value: 113,800
> Decline from prerecession peak: -55.9%
> Unemployment rate: 10.4% (25th highest)

In 2012, Orlando moved into the top 10 underwater housing markets, bumping Fresno, Calif., to number 11. From its prerecession peak in June 2006, home prices fell 55.9% to $113,800, a loss of roughly $90,000. In 2007, the unemployment rate in the region was just 3.7%, the 17th-lowest rate among the 100 largest metros. By 2011, that rate had increased to 10.4%, the 25th highest. As of the first quarter of this year, there were more than 205,000 underwater mortgages in the region, with total negative equity of $16.7 billion.

9. Atlanta, Ga.
> Pct. homes w/underwater mortgages: 55.5%
> Number of mortgages underwater: 581,831
> Median home value: $107,500
> Decline from prerecession peak: 38.8%
> Unemployment rate: 9.6% (37th highest)

Atlanta is the largest city on this list and the eighth-largest metropolitan area in the U.S. But of all the cities with the most underwater mortgages, it has the lowest median home value. In the area, 55.5% of homes have a negative equity value. With more than 500,000 homes with underwater mortgages, the city’s total negative home equity is in excess of $38 billion. Over 48,000 of these underwater homeowners, or nearly 10%, are delinquent by at least 90 days in their payments, which is also especially troubling. With home prices down 38.8% since June, 2007, the Atlanta area certainly qualifies as one of the cities hit hardest by the 2008 housing crisis.

8. Phoenix, Ariz.
> Pct. homes w/underwater mortgages: 55.5%
> Number of mortgages underwater: 430,527
> Median home value: $128,000
> Decline from prerecession peak: 54.2%
> Unemployment rate: 8.6% (44th lowest)

At 55.5%, Phoenix has the same percentage of borrowers with underwater mortgages as Atlanta. Though Phoenix’s median home value is $21,500 greater than Atlanta’s, it experienced a far-greater decline in home prices from their prerecession peak in June 2007 of 54.2%. This has led to a total negative equity value of almost $39 billion. The unemployment rate also has skyrocketed in the Phoenix area from 3.2% in 2007 to 8.6% in 2011.

7. Visalia, Calif.
> Pct. homes w/underwater mortgages: 57.7%
> Number of mortgages underwater: 33,220
> Median home value: $110,500
> Decline from prerecession peak: 51.7%
> Unemployment rate: 16.6% (3rd highest)

Visalia is far smaller than Atlanta or Phoenix and has less than a 10th the number of homes with underwater mortgages. Nonetheless, the city has been especially damaged by a poor housing market. Home values have fallen dramatically since before the recession, and the unemployment rate, at 16.6% in the first quarter of 2012, is third-highest among the 100 largest metropolitan statistical areas, behind only Stockton and Modesto. Presently, almost 58% of homes are underwater, with these homes carrying a total negative equity of $2.6 billion dollars.

6. Vallejo, Calif.
> Pct. homes w/underwater mortgages: 60.3%
> Number of mortgages underwater: 44,526
> Median home value: $186,200
> Decline from prerecession peak: 60.6%
> Unemployment rate: 11.4% (16th highest)

In the Vallejo metropolitan area, more than 60% of the region’s 73,800 homeowners are underwater. This is largely due to a 60.6% decline in home values in the region from prerecession highs. Through the first quarter of this year, homes in the region fell from a median value of more than $300,000 to just $186,200. Of those homes with underwater mortgages, more than 10% have been delinquent on mortgage payments for 90 days or more.

5. Stockton, Calif.
> Pct. homes w/underwater mortgages: 60.3%
> Number of mortgages underwater: 60,349
> Median home value: $146,500
> Decline from prerecession peak: 64.3%
> Unemployment rate: 16.8% (tied for highest)

With an unemployment rate of 16.8%, Stockton is tied for the highest rate among the 100 largest metropolitan areas. Few cities have been hit harder by the sinking of the housing market than Stockton, where 60.3% of home mortgages are underwater. Though there are only 100,014 houses with mortgages in Stockton, 60,348 of these are underwater and have a total negative home equity of slightly more than $6.9 billion. Meaning, on average, homeowners in Stockton owe at least $100,000 more than their homes are worth.

4. Modesto, Calif.
> Pct. homes w/underwater mortgages: 60.3%
> Number of mortgages underwater: 46,598
> Median home value: $130,600
> Decline from prerecession peak: 64.5%
> Unemployment rate: 16.8% (tied for highest)

Since peaking in December 2005, home prices in Modesto have plunged 64.5%. This is the largest collapse in prices of any large metro area examined. As a result, 46,598 of 77,222 home mortgages in Modesto are underwater. Meanwhile, the unemployment rate rose to 16.8% in 2011. This number was 7.9 percentage points above the national average of 8.9% and almost double Modesto’s 2007 unemployment rate of 8.7%.

3. Bakersfield, Calif.
> Pct. homes w/underwater mortgages: 60.5%
> Number of mortgages underwater: 70,947
> Median home value: $116,700
> Decline from prerecession peak: 57.0%
> Unemployment rate: 14.9% (5th highest)

From its peak in May 2006, the median home value in Bakersfield has plummeted from more than $200,000 to just $116,700, or a 57% loss of value. From 2007 through 2011, the unemployment rate increased from 8.2% to 14.9% — the fifth-highest rate in the country. To date, more than 70,000 homes in the region have underwater mortgages, with total negative equity of just over $6 billion.

2. Reno, Nev.
> Pct. homes w/underwater mortgages: 61.7%
> Number of mortgages underwater: 46,115
> Median home value: $150,600
> Decline from prerecession peak: 58.3%
> Unemployment rate: 13.1%

There are fewer than 75,000 households in Reno, Nevada. Yet 46,115 home mortgages in the city are underwater, accounting for 61.7% of mortgaged homes. From January 2006 through the first quarter of 2012, home prices were more than halved, and negative home equity reached $4.39 billion. Additionally, the unemployment rate almost tripled in rising from 4.5% in 2007 to 13.1% by 2011. In 2007, Reno had the 54th-worst unemployment rate among the 100 largest metros. By 2007, Reno had the eighth-worst unemployment rate.

1. Las Vegas, Nev.
> Pct. homes w/underwater mortgages: 71%
> Number of mortgages underwater: 236,817
> Median home value: $111,600
> Decline from prerecession peak: 63.2%
> Unemployment rate: 13.9%

At 71%, no city has a greater percentage of homes with underwater mortgages than Las Vegas. The area with the second-worst percentage of underwater mortgages, Reno, has less than 62% mortgages with negative. The corrosive effects the housing crisis had on Las Vegas are evident in the more than 200,000 home mortgages that are underwater, 14.3% of which are at least 90 days delinquent on payments. Additionally, home values have dropped 63.2% from their prerecession peak, the third-greatest decline among the nation’s 100 largest metropolitan areas. Largely because of the collapse of the area’s housing market, unemployment in the Las Vegas area has soared. In 2007, the unemployment rate was 4.7%, only marginally different from the nation’s 4.6% rate. Yet by 2011, the unemployment rate had increased to 13.9%, considerably higher than the nationwide 8.9% unemployment rat.e.


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Iceland Forgives Household Debt and Now leads the Way to Economic Recovery

Posted on April 16, 2012 by Neil Garfield

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“Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.”

It’s Not a Theory

When it was Wrong from the Beginning:

The Highest Form of Economic Stimulus is to

Correct Debt Balances

Editor’s Comment: Iceland has taken the obvious common sense approach — fueled by an outraged population — and ended up creating the largest fiscal stimulus of any developed country without spending one cent of taxpayer money and without printing any “quantitative easing” currency debasing their currency. By the way more than 90 bankers there are headed for jail. Sounds like magic? That is what U.S. Banks would have you believe. But it is true as you can see from the Bloomberg article below.

The problem has been that the populations cannot pay the interest or the principal on debts that were so exotic in their construction that Alan Greenspan confesses he never understood them, let alone the borrowers. Borrowers were forced to rely on misrepresentations by the Banks and their agents as to the value of the loan, the value of the collateral and the viability of the transaction.

People in Iceland rioted in the streets throwing rocks at politicians and government buildings — not because they owed the money but because they knew that (a) they were victims of bank fraud and (b) the banks owed them money, not the other way around.

Under pressure from the government, the banks have decreased household debt by around 25% so far. The banks have not collapsed, financial system is in good shape and Iceland leads the developed world in economic recovery. The risk fell back on the Banks, the perpetrators of this mess.

The relief was and is being shared by two victims — the households tricked into buying these debt packages and the investors who pooled their money to fund the exotic debt structures. The claims of bank losses have been ignored as being not (and never were) economically real.

That’s what happens when the populations rises up and says “NO!” Similar programs here even on a small scale have corroborated the Iceland experience. And yet we continue to support the banks whom we believe are too big to fail. Following the Iceland example — now in its 3rd year — would provide many trillions of dollars in fiscal stimulus to our economy, launch the economy into a full recovery and clear up the budget deficits of local, state and federal government agencies.

It’s a choice. What do you choose?

Icelandic Anger Brings Debt Forgiveness in Best Recovery Story

By Omar R. Valdimarsson

Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.

Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.

Enlarge image Icelandic Anger Brings Debt Forgiveness

Icelandic Anger Brings Debt Forgiveness

Icelandic Anger Brings Debt Forgiveness

Paul Taggart/Bloomberg

A cyclist passes an Icelandic national flag hanging in a popular shopping street in Reykjavik, Iceland.

A cyclist passes an Icelandic national flag hanging in a popular shopping street in Reykjavik, Iceland. Photographer: Paul Taggart/Bloomberg

“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”

The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.

The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.

Crisis Lessons

“The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”

Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said.

Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.

Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”

People Vs Markets

Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.

Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.

Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.

“There are indications that some of the financial institutions in question haven’t lost a penny with the measures that they’ve undertaken,” she said.

Fresh Demands

According to Kristjan Kristjansson, a spokesman for Landsbankinn hf, the amount written off by the banks is probably larger than the 196.4 billion kronur ($1.6 billion) that the Financial Services Association estimates, since that figure only includes debt relief required by the courts or the government.

“There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjansson said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”

As a precursor to the global Occupy Wall Street movement and austerity protests across Europe, Icelanders took to the streets after the economic collapse in 2008. Protests escalated in early 2009, forcing police to use teargas to disperse crowds throwing rocks at parliament and the offices of then Prime Minister Geir Haarde. Parliament is still deciding whether to press ahead with an indictment that was brought against him in September 2009 for his role in the crisis.

A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.

Legal Aftermath

Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.

Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.

That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.

The U.S. subprime crisis sent home prices plunging 33 percent from a 2006 peak. While households there don’t face the same degree of debt relief as that pushed through in Iceland, President Barack Obama this month proposed plans to expand loan modifications, including some principal reductions.

According to Christensen at Danske Bank, “the bottom line is that if households are insolvent, then the banks just have to go along with it, regardless of the interests of the banks.”

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net


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THE PEOPLE ARE TOO BIG TO FAIL: BREAK UP THE BANKS

Posted on November 27, 2011 by Neil Garfield

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EDITOR’S COMMENT: Simon Johnson and Paul Krugman have consistently been right, so there is no reason to suspect they are wrong this time. The big banks are too big to manage, too big to regulate and too big for people to do business with them on a level playing field. The only logical answer, as with antitrust, is to break them up into smaller pieces and allow the different regulatory agencies that have jurisdiction over their multifaceted operations the room and resources to monitor these Goliaths.

A good place to start is Citigroup, which Obama ordered nationalized back in 2009 and was IGNORED by his own Secretary of the Treasury, Geithner. Obama was right and he should pursue this demand along with throwing Geithner back into the sea of sharks from which he came. Ignoring the warnings of world famous economists who have been consistently correct in describing and predicting the results of government policy and economics is essentially giving up our sovereignty and we may as well change the name from United States of America to United Banks of America.

We are currently propping up these failed institutions whose assets, profits and reputation have been plundered by management, lone of whom appears to have been at any risk of loss of money or their jobs. The cost is nothing less than our future. We need to take a close look at Iceland, where, of all places, the people stuck tot heir guns (so to speak) and forced a change in government and finance. The result was the miracle we pray for here in the United States.

The Media doesn’t report it, but there is shining example in an unlikely place now designated as the number one place in the world to vacation, and where climate change is warming up the country so that it is quite comfortable. By staying with the truth (the banks are broke) and prosecuting those who plundered our nation and their own banks, the rule of law, the value of the currency, and the ability to provide financing for the core of our economy — small and medium sized business and innovation — can be restored. Iceland proved it.

They insisted on taking control over the banks, breaking up the banks’ political power oligopoly, and restored social gains. They are not done yet, but they are far ahead of European nations whose economies are a wreck because they insist on pursuing policies that assist Banks instead of people.

Why Not Break Up Citigroup?

see WHY NOT BREAK-UP CITI FOR STARTERS?

By SIMON JOHNSON
DESCRIPTION

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

Earlier this week, Richard Fisher, the president of the Federal Reserve Bank of Dallas, captured the growing political mood with regard to very large banks, observing, “I believe that too-big-to-fail banks are too dangerous to permit.”

Perspectives from expert contributors.

Market forces don’t work with the biggest banks at their current sizes, because they have great political power and receive almost unlimited, implicit subsidies in the form of protection against downside risks — particularly in times like these, with Europe’s financial situation looking precarious. Mr. Fisher added:

Downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Then, creative destruction can work its wonders in the financial sector, just as it does elsewhere in our economy.

Mr. Fisher is a senior public official and also someone with a great deal of experience in financial markets, including running his own funds-management company. I increasingly meet leading figures in the financial sector who share Mr. Fisher’s views, at least in private.

What, then, is the case in favor of keeping mega-banks at their current scale? Vague assertions are sometimes made, but there is very little hard evidence and often a lack of candor on that side of the argument.

So it is refreshing to see Vikram Pandit, the chief executive of Citigroup, go on the record with The Banker magazine to at least explain how his bank will generate shareholder value. (Viewing the interview requires registration, however.)

Citi is one of the world’s largest banks. According to The Banker’s database, which includes data from the end of 2010, it had total assets of just under $2 trillion — putting it in the top 10 worldwide. Over all, The Banker places it as No. 4 in its “Top 1,000 World Ranking.” Citi is No. 39 on the Forbes list of the top 500 global companies, with total employment of 260,000.

Is there indication in Mr. Pandit’s vision that mega-banking will be good for the rest of us in the future? Don’t look for Citi to drive any kind of rethinking of the consumer market in the United States; Mr. Pandit just wants to downsize that part of his business.

The engines of growth, Mr. Pandit said, will be “the global transactions services business” and “emerging markets.”

Transaction services are important, but they do not require a very large balance sheet; these can equally well be performed by a network of small, nimble financial firms. Global commerce existed for centuries before banks built up risks that are large relative to their home economies.

And emerging markets are risky. Mr. Pandit is essentially betting that Citi can ride the cycle in those countries. Probably there will be relatively good profits for a number of years, and this will justify high compensation levels. But when the cycle turns against emerging markets, as it did in 1982, what happens?

In 1982, Citi had a large loan exposure in the emerging markets of the day — Latin America, and the Communist nations of Poland and Romania — and it was saved from insolvency by “regulatory forbearance,” meaning that the Federal Reserve and other regulators did not force it to recognize its losses. Citi was a relatively big bank at that time, but much smaller than it is today.

And its complex global operations are exactly what would make it very hard to put through orderly liquidation under Dodd-Frank. I argued here in March that there is no meaningful resolution authority for global banks; before and after that post I’ve taken this point up in private with senior officials in the United States and Europe responsible for handling the potential failure of such entities.

No one disagrees with my main point: we cannot handle the collapse of a bank like Citigroup in “orderly” fashion.

Jon Huntsman put mega-banks on the agenda for the Republican primaries, with a blistering commentary in The Wall Street Journal a few weeks ago: “Too Big to Fail Is Simply Too Big.”

Other contenders for the Republican nomination have followed his lead, including most recently Newt Gingrich. Whoever ends up going head to head with Mitt Romney is likely to make good use of this very theme — because Mr. Romney already has so much financial support from the top of Wall Street, it will be very hard for him to respond effectively.

Breaking up the biggest banks is not a fringe idea to be brushed off. Mr. Fisher is speaking for many people who work in financial services, who agree that the big banks are not good for the rest of us. Mr. Pandit’s interview just reinforces this point.

Any Republican candidates who say they are fiscally responsible must eventually confront this issue: What was the role of big banks in the enormous recession and consequent vast loss of tax revenue since 2008? Which sector poses clear and immediate danger to our fiscal accounts, looking forward — and in a way that is not yet scored properly in any budget assessment? As Mr. Fisher put it, rather graphically,

Perhaps the financial equivalent of irreversible lap-band or gastric bypass surgery is the only way to treat the pathology of financial obesity, contain the relentless expansion of these banks and downsize them to manageable proportions.

I suggest that Mr. Fisher could reasonably begin with Citigroup.

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