David Dayen via The Intercept: Stealth Attack on Wall Street Bank Reform foams the runway for the next Financial Crisis

Editor’s Note:  S.2155 is known in Washington as the Crapo bill.  A fitting name.  Even Georgetown Law professor and former CFPB adviser Adam Levitin in a blog post warns the dangers of further bank deregulation.  This bill functionally exempts 85% of US banks and credit unions from fair lending laws in the mortgage market

By David Dayen/The Intercept

https://theintercept.com/2018/03/02/crapo-instead-of-taking-on-gun-control-democrats-are-teaming-with-republicans-for-a-stealth-attack-on-wall-street-reform/

In mid-January, Citigroup executives held a conference call with reporters about the bank’s fourth-quarter 2017 earnings. The discussion turned to an obscure congressional bill, S.2155, pitched by its bipartisan supporters mainly as a vehicle to deliver regulatory relief to community banks and, 10 years after the financial crisis, to make needed technical fixes to the landmark Wall Street reform law, Dodd-Frank.

But Citi’s Chief Financial Officer John Gerspach told the trade reporters he thought that some bigger banks — like, say, Citigroup — should get taken care of in the bill as well. He wanted Congress to loosen rules around how the bank could go about lending and investing. The specific mechanism to do that was to fiddle with what’s known as the supplementary leverage ratio, or SLR, a key capital requirement for the nation’s largest banks. This simple ratio sets how much equity banks must carry compared to total assets like loans.

S.2155 did, at the time, weaken the leverage ratio, but only for so-called custodial banks, which do not primarily make loans but instead safeguard assets for rich individuals and companies like mutual funds. As written, the measure would have assisted just two U.S. banks, State Street and Bank of New York Mellon. This offended Gerspach. “We obviously don’t think that is fair, so we would like to see that be altered,” he told reporters.

Republicans and Democrats who pushed S.2155 through the Senate Banking Committee must have heard Citi’s call. (They changed the definition of a custodial bank in a subsequent version of the bill. It used to stipulate that only a bank with a high level of custodial assets would qualify, but now it defines a custodial bank as “any depository institution or holding company predominantly engaged in custody, safekeeping, and asset servicing activities.”) The change could allow virtually any big bank to take advantage of the new rule.

Multiple bank lobbyists told The Intercept that Citi has been pressing lawmakers to loosen the language even further, ensuring that they can take advantage of reduced leverage and ramp up risk. “Citi is making a very aggressive effort,” said one bank lobbyist who asked not to be named because he’s working on the bill. “It’s a game changer and that’s why they’re pushing hard.” A Citigroup spokesperson declined to comment.

A bill that began as a well-intentioned effort to satisfy some perhaps legitimate community bank grievances has instead mushroomed, sparking fears that Washington is paving the way for the next financial meltdown. Congress is unlikely to pass much significant legislation in 2018, so lobbyists have rushed to stuff the trunk of the vehicle full. “There are many different interests in financial services that are looking at this and saying, ‘Oh my God, there’s finally going to be reform to Dodd-Frank that may move, let me throw in this issue and this issue,’” said Sen. Chris Coons, D-Del., in an interview. “There are a dozen different players who decided this is the last bus out of town.”

And Coons is a co-sponsor of the bill.

A hopeful nation — and the president himself — expected that the Senate would begin debate on major gun policy reform next week, but instead a confounding scenario has emerged: In the typically gridlocked Congress, with the Trump legislative agenda mostly stalled, members of both parties will come together to roll back financial rules, during the 10th anniversary of the biggest banking crisis in nearly a century. And it’s happening with virtually no media attention whatsoever.

Aside from the gifts to Citigroup and other big banks, the bill undermines fair lending rules that work to counter racial discrimination and rolls back regulation and oversight on large regional banks that aren’t big enough to be global names, but have enough cash to get a stadium named after themselves. In the name of mild relief for community banks, these institutions — which have been christened “stadium banks” by congressional staff opposing the legislation — are punching a gaping hole through Wall Street reform. Twenty-five of the 38 biggest domestic banks in the country, and globally significant foreign banks that have engaged in rampant misconduct, would get freed from enhanced supervision. There are even goodies for dominant financial services firms, such as Promontory and a division of Warren Buffett’s conglomerate Berkshire Hathaway. The bill goes so far as to punish buyers of mobile homes, among the most vulnerable people in the country, whose oft-stated economic anxiety drives so much of the discourse in American politics (just not when there might be something to do about it).

“Community banks are the human shields for the giant banks to get the deregulation they want,” said Sen. Elizabeth Warren, D-Mass., who is waging a last-minute, uphill fight to stop the bill. “The Citigroup carve-out is one more example of how in Washington, money talks and Congress listens.”

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Happy New Year: LivingLies Offices Closed for Rosh Hoshonah

The offices of the Garfield Firm and GTC Honors (which runs the LivingLies Blog) are closed today and tomorrow. This is a scheduled post. The Neil Garfield show will air again next Thursday before sundown when Yom Kippur (day of Atonement) commences. To our Jewish readers, we wish you a Happy New Year. To our readers who pray in other houses of worship, we support you and we give thanks for your support, your insight and your good wishes.

This is the beginning of the new year on the Jewish calendar. It culminates with a day of atonement in which we recognize our weaknesses and transgressions and atone for our misdeeds. My commitment is to redouble my efforts and seek the resources to do it — to create a vehicle for collaborative action as my friend Robert Needham has been writing and talking about on TV, radio and articles published all over the media. CollaborationUSA is a great model for recapturing governance for the people who have been largely disenfranchised by errors, misdeeds and other actions designed for self-aggrandizement, maintaining power, and ignoring the needs of the people over whom they purport to retain the levers of power. We all know that those levers were “purchased.”

Our economy and our society at large is dependent upon the success of the people acting in collaboration without regard to political alliances and using the power of their combined faith. Needham is a person of deep faith and a leader in bringing back people to living a life guided by faith. Whether your Hero is Jesus, Moses, Mohammed, Buddha or any other historical figure, my hope and wish is that we all ignore our apparent differences and band together as a collaborative group that legally, and non-violently recaptures government by the people and for the people.

This starts with voting — the ultimate weapon of each individual person and people who have common interests. I hope that people will stop voting for their “party” candidate and vote instead for an acceptable alternative who is committed to governance for the citizens and who oppose with all of their resources, the oligarchy of power emanating from Wall Street.

Their are now 5 banks who claim to be “too big to fail.” This is a claim to be above the laws of our government and the morals of our society. We should all reject that claim emphatically. If we want our economy to recover and if we want to recover a society that is based on Merit rather than pure Wealth and Power, we must end the complicity of government in failing to bring bankers to justice and the government cover-up that was required in order to justify the immunity deal offered by the Bush and Obama administration. The only way to do that is to vote people out of office who are effectively owned by Wall Street — and vote people into office who seek justice and freedom, privacy for our lives and our faith, and who seek a society in which the next generation is better at caring for each other than bullying or killing one another.

I have often offered the unsolicited advice to politicians to run against the banks. There is a deep reservoir of disgust that runs through all classes of society that is expressing disappointment and anger over the failure of two presidential administrations, several Congressional terms, and thousands of courts who have entered into co-venture with the Banks who directly and indirectly fund their campaigns and even the “government” operations. Memos and emails within the Florida court system have revealed that Judges are attempting to enter Judgments of foreclosure as quickly as possible, denying due process to homeowners with legitimate defenses, in order to retain funding that they fear will quickly disappear. The system and the Judges are trying to cash in on available funding before it disappears.

If you are a candidate seeking to serve in public office and you are behind in the polls, you probably have not received much from Wall Street. Whether you are down 5 points or 25 points, the votes are there to reverse the situation. Your campaign is sputtering. I say it again: run against the banks and the money and votes will be there. Have faith and be guided by your faith and moral standards of right and wrong. You will win, astonishing the pundits and political “experts.” Use this time between now and election day to wield your power of persuasion, and employ your courage and faith. People will join you in your quest not merely to send a message, but to reclaim the power vested in them by the 9th Amendment of the Constitution of the United States. “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.[1]

JPM Could Lose Its Charter for Criminal Responsibility in Madoff PONZI Scheme

From www.seekingalpha.com —
JPM’s Madoff entanglement could prompt review of bank charter
The Office of the Comptroller of the Currency (OCC) has reportedly told the office of U.S. Attorney Preet Bharara that a criminal money laundering conviction of JPMorgan (JPM) for turning a blind eye to Bernie Madoff’s Ponzi scheme could trigger a review of the bank’s charter.

Editor’s Note: practically every day we hear of new gross violations of law and intentional misconduct by the large banks who squandered their brand recognition on absurd situations. I have always said that it was impossible for Madoff to have stolen $60 Billion without the knowledge and complicity of the major firms on Wall Street. The revelations of the Madoff theft of money from investors was quickly cast as the largest fraud in history. But it wasn’t. The largest fraud can be counted in the tens of trillions of dollars by all the key players on Wall Street in the PONZI scheme that is falsely called securitization of debt — the proof of which can easily be seen at ground level as investors and borrowers alike are settling claims or winning key verdicts.

The Madoff affair actually provided cover for the Wall Street banks and helped steer the narrative to supposedly reckless and irresponsible behavior when in fact management was deceiving, stealing and profiting from a PONZI scheme that depended upon (a) the sale of mortgage bonds and (b) the sale of mortgage products. Once investors stopped buying bonds and homeowners stopped buying loan products the scheme collapsed and banks had the temerity to say they had lost vast sums of money — a claim that is clearly untrue. They received a bailout for those losses in the form of TARP and other programs from the U.S. treasury, the Federal reserve and other sources, when it was investors, insurers, borrowers, taxpayers, guarantors and other parties who were taking losses having given tens of trillions of dollars to the Wall Street banks in money and property.

Now the chickens are coming home to roost. And the cries of well-known analysts that the banks are being treated unfairly is losing credibility by the hour. The banks are finally losing the narrative and the association of politicians with them is proving more costly than the benefit of taking money from the bank lobbyists to protect the banks from prosecution arising out of behavior that would land any ordinary mortal in jail for a long time.

Lawyers defending foreclosure cases should take note and use this information pointing out what the court already knows: that there was fraud at the top in the selling of worthless mortgage bonds deriving their value from defective mortgages, there was fraud in the robo-signing, LPS fabrication of documents, the intentional destruction of cash equivalent promissory notes that we now know were defective, in the words of the investors, insurers, government guarantee agencies, insurers and rating agencies.

PRACTICE NOTE: It should be noted and stated openly that any pleading, affidavit or testimony from those banks is inherently untrustworthy and should be subject to intense scrutiny. The remedy of forfeiture in Foreclosures is extreme according to the public policy of every state and should be strictly construed against the party seeking that remedy. Every legislature has put that statement in its laws. Instead, the narrative has been that deadbeat borrowers were clogging the system with bogus defenses.

It never occurred to the courts, the lawyers and even the borrowers that the courts were clogged with bogus claims of ownership, bogus accounting for receipts and disbursements, the existence of co-obligors when the note payable was converted to a bogus bond payable, and wrongful Foreclosures that the banks and the regulators know were wrongful, obtained settlements, consent orders and more promises from people whose business model is all about lying, manipulation of markets and theft.

DISCONNECT BETWEEN HIGH FINANCE, REALITY AND LAWSUITS

WHAT IS THE EFFECT OF SETTLEMENTS, BUY-BACKS AND FEDERAL RESERVE BUYOUTS?

We hear these stories of settlements, purchases by the Fed, buybacks — but what they are buying and which mortgages are affected is never disclosed. Meanwhile the marketplace and the judicial system are functioning as though none of this activity was happening.
First of all it is never clear exactly what is being purchased. It does not appear as though the mortgages themselves have been purchased —  although that appears to be the claim when Fannie and Freddie are involved. If it is the mortgage bond that is being purchased or settled we don’t know whether all of the mortgage bonds issued by a particular alleged “asset pool” were purchased by the Federal Reserve or if they were the subject of a settlement with investors or regulatory authorities. We don’t know if the asset pool still exists. We don’t know how the money was applied and whether the bond receivable account was satisfied as to the asset pool or the investors.
 But we do know that each mortgage bond purports to convey an indivisible interest in the loans claimed by the asset pool, regardless of whether the loan actually made it into the pool or not. And we know that while the settlements are mostly proportional settlements in which less than 100 cents on the dollar was paid, the Federal Reserve is paying 100 cents on the dollar when the bond is sold. And to add to the complexity, we don’t know the terms of the settlement and whether the banks that are claiming to sell these worthless bonds to the Federal Reserve acquired any evidence of title to the bonds.
In the marketplace, banks are accepting payoffs on mortgages they sold. Then they are executing satisfactions of mortgages they don’t own — and never did own. And in court they are filing Foreclosures on the same mortgages and submitting credit bids on mortgages in which they lack ownership of any type of account receivable in which they fulfill the requirements of a definition of creditor who can submit a credit bid instead of cash. So the deed is issued on foreclosure without any sale having occurred because the property went to the credit bidder. And then the right to redeem  is further corrupted because nobody has bothered to require the production of documents showing the true balance of the receivable account (if there is one) after adjustments for receipt of loss mitigation payments.

UBS settles US mortgage lawsuit
http://www.news.com.au/business/breaking-news/ubs-settles-us-mortgage-lawsuit/story-e6frfkur-1226683410294

Bank Of America Calls Foreclosure Whistleblowers Liars
http://www.huffingtonpost.com/2013/07/12/bank-of-america-foreclosure-whistleblower_n_3588374.html

PRACTICE HINT: DO NOT LEAD WITH QUIET TITLE. YOU CAN’T GET THERE ANYWAY UNTIL AFTER YOU PROVE YOUR CASE THAT THE FORECLOSURE WAS WRONGFULLY BROUGHT. LEAVE THE BURDEN ON THE BANK. Attorney Argues “Produce the Note” and Makes a Bad Situation Worse for Homeowners Facing Foreclosure
http://implode-explode.com/viewnews/2013-07-17_AttorneyArguesProducetheNoteandMakesaBadSituationWorseforHomeown.html

OccupyHomes Rallies Around Homeowners Facing Foreclosure
http://www.truth-out.org/news/item/17579-occupyhomes-rallies-around-citizens-facing-foreclosure

JPMorgan Chase Loses Foreclosure Case in Oregon Jury Trial
http://247wallst.com/housing/2013/07/19/jpmorgan-chase-loses-foreclosure-case-in-oregon-jury-trial/

U.S. v BofA: Countrywide Eliminated Underwriting Standards

EDITOR’S NOTE:  The complaint below is from the United States Atty. for the Southern District of New York gives us a clear picture of the processing of loans without any underwriting standards at Countrywide and other aggregators across the country. The complaint is not authority, but it is a guide for what you can allege and what you can ask about in discovery.

It is time to ask the nuclear question, to wit: in light of the revelations that are already in the public domain with dozens of whistleblowers, is it not reasonable to assume that the aggregators not only knew about fabricated, forged and inaccurate loan applications, but actually intended that result. I ask that question because of the number of attempted prosecutions of people for mortgage fraud, when mortgage fraud was exactly what Countrywide wanted.  They clearly wanted the highest possible volume of loans approved under circumstances where it can only be assumed that they wanted those loans to fail, in order to be paid by insurers, counterparties on credit default swaps, the federal government in bailouts and now the Federal Reserve which appears to be  buying $85 billion in worthless mortgage bonds from the financial industry every month.

  Thus Wall Street collected money from the investors (and took a share of that and put it in their pocket), collected money from borrowers (and took a share of that and put it in their pocket), collected money from insurers which went only into their pockets, collected money from the proceeds of credit default swaps which went only into their pockets,  collected money from the government in the bank bailouts, collected money from the government sponsored entities who guarantee the loans, and are collecting money from the Federal Reserve who are buying worthless mortgage bonds which have little or no interest in any secured loan, residential or otherwise. On top of all of that Wall Street has taken the homes of more than 5 million families and is expected to take the homes of another 5 million families —  supposedly to cover the “loss”  on mortgage bonds they never owned and mortgage loans they never owned.

And then you have the real question, to wit: why would banks create a scheme that originated loans, most of which were destined to fail in one fashion or another? And the answer is unavoidable and incontestable: they did it because that was the way they could make the most money.

And then the second real question, to wit: why would banks want foreclosures but not want the property?  And the related question is why would they want a foreclosure under circumstances where a modification would produce far greater proceeds to mitigate the loss on a loan that a foreclosure? And the related question to that is why would the largest bank in the world adopt a policy of fraud in order to guide people into foreclosure deceiving them into thinking that they were getting a modification? And the final question related to all of that is why with the modification not become permanent after the borrower has done everything correctly during the trial period?  The answer is extremely simple: the foreclosure process is the largest cover-up in history for the largest economic crime in history; it provides cover for all of the defects, multiple payments that were already received and never disclosed, and the diversion of money and property from investors and homeowners.

Here are some relevant allegations in the complaint:

HUSTLE: A PLAN TO DESTROY HOMEOWNERS AND DEFRAUD INVESTORS: The U.S. Government in its complaint filed against Bank of America details the specific ways in which Countrywide was operating when loans were originated.

“Countrywide rolled out a new streamlined loan origination model is called the “hustle.”

In order to increase the speed at which it originated and sold loans to the GSES,  countrywide eliminated every significant checkpoint on loan quality and compensated its employees solely based on the volume of loans originated, leading to rampant instances of fraud and other serious lung defects all while countrywide was informing the GSES that it had tightened its underwriting guidelines.”

Countrywide eliminated underwriter review even from many high risk loans. In lieu of underwriter review, countrywide assigned critical underwriting tasks to loan processors who were previously considered unqualified even to answer borrower questions. At the same time, countrywide or eliminated previously mandatory checklists that provided instructions on how to perform these underwriting tasks. Under the Hustle, such instructions on proper underwriting were considered nothing more than unnecessary forms that would slow the swim lane down.

Countrywide also eliminated the position of compliance specialist, an individual previously responsible for conducting a final, independent check on alone to ensure that all conditions on the loans approval were satisfied prior to funding.

The Hustle began in full force in approximately August 2007.

Countrywide also concealed the quality control reports on Hustle loans demonstrating that instances of fraud and other material defects (i.e. defects making the loans in eligible for investors sell) were legion. Countrywide’s own quality control reports identified material defect rate of nearly 40% in certain months, rates that were nearly 10 times the industry-standard defect rate of approximately 4%.

U.S. v. BOA False Claims Act complaint, SDNY 10-25-2012

ENCORE BANK v. BOA, NA (2013) Effective as of July 1, 2008, the parent company of BofA, Bank of America Corporation, acquired the parent corporation of Countrywide, Countrywide Financial Corporatio

 

Banks Traded on Inside Information on Mortgages

Despite the pronouncements by Eric Holder, the chief law enforcement officer of the United States, and the obvious reticence of the Securities and Exchange Commission, the vast majority of securities attorneys believe that the banks were (a) trading on inside information and (b) committing securities fraud when they funded and then traded on mortgages that were too toxic to ever succeed.

The first, trading on inside information, is regularly prosecuted by the justice department and the SEC. It is why Martha Stewart went to jail in rather flimsy evidence. The catch, justice and the SEC say is that this only applies to securities and the 1998 act signed into law by Clinton makes mortgage bonds and hedges on mortgage bonds NOT securities. It also makes the insurance paid on the mortgage bonds NOT insurance. This is despite the fact that the instruments meet every definition of securities and both the insurance contracts and credit default swaps appear to meet every definition of insurance. But the law passed by Congress in 1998 says otherwise, so how can we prosecute?

The second, securities fraud meets the same obstacle they say because they can’t accuse anyone of committing fraud in the issuance or trading of securities when the law says there were no securities.

So goes the spin coming from Wall Street and as long as law enforcement in each state and the DOJ keeps listening to Wall Street and their lawyers, they will keep arriving at the same mistaken conclusion.

If Wall Street had in fact followed the plan of securitization set forth in their prospectuses and pooling and servicing agreements, assignment and assumption agreements and various other instruments that were created to build the infrastructure of securitization of debt — including but not limited to mortgages, credit cards, auto loans, student loans etc. — then Wall Street would be right and the justice department and the SEC might be stuck in the mud created by the 1998 law. But that isn’t what happened and therefore the premise behind the apparent immunity of Wall Street Banks and bankers is actually an illusion.

Starting with the issuance of the mortgage bonds, most of them were issued before any mortgage was originated or acquired by anyone. In fact, the list attached to the prospectus for the mortgage bonds said so — stating that the spreadsheet or list attached was by example only, that these mortgages do not exist but would be soon be replaced with real mortgages acquired pursuant to the enabling documents for the creation of the REMIC “trust.” But that is not what happened either.

In no way did the Banks follow the terms of the prospectus, PSA, assignment and assumption agreements or anything else. Instead what they really did was create the illusion of a securitization scheme that covered up the reality of a PONZI scheme, the hallmark of which is that it collapses when investors stop buying the bogus securities and more investors want their money out than those wishing to put money into the scheme. There was no reason for the entire system to collapse other than the fact that Wall Street planned and bet on the collapse, thus making money coming and going and draining the lifeblood of capital worldwide out of economies and marketplaces that depended upon the continued flow of capital.

The creation of the REMIC “trust” was a sham. It was never formalized, never funded and never acquired any mortgages. hence any “exempt” securities issued by it were not the kind intended by the Act signed into law in 1998. It was not a mortgage-backed security, or credit backed security, it was an illusion designed to defraud anyone who invested in them. The purpose of issuing the mortgage bonds was not to fund and acquire mortgages but rather to steal as much money out of the flow as possible while covering their tracks with some of the money ending up on the closing table for newly originated or previously originated bundles of mortgages that were to be acquired. That isn’t what happened either.

Wall Street bankers put the money from investors into their own private piggy bank and then funded and acquired mortgages with only part of the money while they made false “proprietary trades” in the “mortgage bonds” that made it look like they were trading geniuses making money hand over fist while the rest of the world saw their wealth decline by as much as 60%-70%. The funding for debt came not from the unfunded REMIC “trusts” but from the investment banker who was merely an intermediary depository institution which unlawfully was playing with investor money. The actual instruments upon which Wall Street relies to justify its actions is the prospectus, the PSA, and the Master Servicing agreement — each of which was used to sell the investors on letting go of their money in exchange for the promises and conditions contained in the exotic agreements containing numerous conflicting clauses.

Thus the conclusion is that since the mortgage bonds were issued by an unfunded and probably nonexistent entity, the investors had “bought” an interest in an incoherent series of agreements that together constituted a security or, in the alternative, that there was no security and the investors were simply duped into parting with their money which is fraud, pure and simple.

I would say that investors acquired certain passive rights to the instruments used, with the exception of the bogus mortgage bonds that were usually worthless pieces of paper or entries on a log. In my opinion the issuance of the prospectus was the issuance of a security. The issuance of the PSA was the issuance of a security, And the issuance of the other agreements in the illusory securitization chain may also have been the issuance of a security. If cows can be securities, then written instruments that were used to secure passive investments are certainly securities. The exemption for mortgage bonds doesn’t apply because neither the mortgage bond nor the REMIC “trust” were ever funded or used — except in furtherance of their fraud when they claimed losses due to mortgage defaults and obtained federal bailouts, insurance and proceeds of credit default swaps.

The loan closings, like the funding of the “investments” was similarly diverted away from the investor and toward the intermediaries so that they could trade on the appearance of ownership of the loans in the form of selling bundles of loans that were not even close to being properly described in the paperwork — although the paperwork often looked as though it was all proper.

The trading, hedging and insuring of investments that were not only destined by actually planned to fail was trading on inside information. The Banks knew very well that the triple A rating of the mortgage bonds was a sham because the mortgage bonds were worthless. What they were really trading in was the ownership of the loans which they knew were falsely represented on the note and mortgage. They thus converted the issuance of the promissory note signed by the borrower into a security under flase pretenses because the payee on the note and the secured party on the mortgage never completed the transaction, to wit: they never funded the loan and they made sure that the terms of repayment on the promissory note did not match up with the terms of repayment set forth in the prospectus, which was the real security.

Knowing from the start that they had the power (through the powers conferred on the Master Servicer) to pull the rug out from under the “investments” they traded with a vengeance hedging and selling as many times as they could based upon the same alleged loans that were in fact funded directly by and therefor owned by the investors directly (because the REMIC was ignored and so was the source of funding at the alleged loan closing).

Being the sole source of the real information on the legality, quality and quantity of these nonexistent investments in mortgage bonds, the Wall Street banks, their management, and their affiliates were committing both violation of the insider trading rule and the securities fraud rule ( as well as various other common law and statutory prohibitions and crimes relating to deceptive practices in the sale of securities). By definition and applying the facts rather than the spin, the Banks a have committed numerous crimes and the bankers should be held accountable. Let’s not forget that by this time in the S&L scandal more than 800 people were sent to jail despite various attempts to mitigate the severity of their trespass and trampling on the rights of investors and depositors.

Failure to prosecute, while the statute of limitations is running out, is taking the rule of law and turning it on its head. The Obama administration has an obligation to hold these people accountable not only because violations of law should be prosecuted but to provide some deterrence from a recurrence or even escalation of the illegal practices foisted upon institutions, taxpayers and consumers around the world. Ample evidence exists that the Banks, emboldened by the lack of prosecutions, have re-started their engines and are indeed in the process of doing it again.

Think about it, where would a company get the money to have a multimedia advertising campaign blanketing areas of the the Country when the return on investment, according to them is only 2.5%? Between marketing, advertising, processing, and administrative costs, pus a reserve for defaults, they are either running a going out of business strategy or there is something else at work.

And if the transactions were legitimate why do the numbers of foreclosures drop like stones in those states that require proof of payment, proof of loss, and proof of ownership? why have we not seen a single canceled check or wire transfer receipt that corroborates the spin from Wall Street? Where is the real money in this scheme?

James Surowiecki: Why Is Insider Trading on the Rise?
http://www.newyorker.com/talk/financial/2013/06/10/130610ta_talk_surowiecki

FROM OTHER MEDIA SOURCES —-

Foreclosure Victims Protesting Wall Street Impunity Outside DOJ Arrested, Tasered
http://www.truth-out.org/news/item/16527-victims-of-foreclosure-arrested-tasered-protesting-wall-street-impunity-outside-doj

Watch out. The mortgage securities market is at it again.
http://money.cnn.com/2013/05/23/news/economy/mortgage-backed-securities.pr.fortune/

Wall Street Lobbyists Literally Writing Bills In Congress
http://news.firedoglake.com/2013/05/27/wall-street-lobbyists-literally-writing-bills-in-congress/

Time to Put the Heat on the Fed and FDIC to Fix Lousy Governance at TBTF Banks
http://www.nakedcapitalism.com/2013/05/so-if-shareholders-wont-rein-in-jamie-dimon-time-to-put-the-heat-on-the-fed-and-fdic.html

West Sacramento homeowner uses new state law to stop foreclosure
http://www.sacbee.com/2013/05/23/5441875/west-sacramento-homeowner-uses.html

The Foreclosure Fraud Prevention Act: A.G. Schneiderman Commends Assembly for Passing Foreclosure Relief Bills
http://4closurefraud.org/2013/05/23/the-foreclosure-fraud-prevention-act-a-g-schneiderman-commends-assembly-for-passing-foreclosure-relief-bills/

Where did the California foreclosures go? Level of foreclosures sales dramatically down. Foreclosure legislation and bank processing. Subsidizing investor purchases via HAFA.
http://www.doctorhousingbubble.com/california-foreclosure-process-hafa-program-subsidize-investor-purchases/

Wasted wealth – The ongoing foreclosure crisis that never had to happen – The Hill’s Congress Blog
http://thehill.com/blogs/congress-blog/economy-a-budget/301415-wasted-wealth–the-ongoing-foreclosure-crisis-that-never-had-to-happen

Oregon Foreclosure Avoidance Program gets tuneup
http://www.oregonlive.com/opinion/index.ssf/2013/05/oregon_foreclosure_avoidance_p.html

Kickbacks at Fannie, Freddie Explain a Lot

13 Questions Before You Can Foreclose

foreclosure_standards_42013 — this one works for sure

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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 COMMENT AND ANALYSIS:  The criminality of the Wall Street banks for the last 15 years has been so widespread and pervasive that it is difficult to imagine a scenario under which such behavior could have gone undetected.  The questions are unending. One particular answer to those questions stands out far above all the other possible answers, to wit: the actions of Wall Street did not go undetected.

The banks and Wall Street in general practically invented the process of due diligence, which is an examination of a proposed deal to determine whether the representations of each side are true, exaggerated or just plain false.

The government-sponsored entities of Fannie and Freddie clearly had the resources to perform extensive due diligence before they put their stamp of approval and guarantee on loans and investments that were clearly not originated or issued in accordance with government guidelines or industry standards.

The same thing may be said for the rating agencies that “got it wrong” or the insurers who presumably evaluated the risk that they were undertaking, and of course the counterparties to the hedge products including but not limited to credit default swaps.

The Wall Street Journal published a number of articles about the close relationship and economic pressure existing between the banks that were underwriting the bogus mortgage bonds and the rating agencies, insurance companies, and counterparties to credit default swaps.  these articles in the Wall Street Journal and other periodicals in mainstream media started back in 2007.

Similar articles appeared in the blogosphere  before that time warning of the coming catastrophe. Anyone with a background similar to mine on Wall Street could easily see that the underwriting of loans to consumers (especially mortgage loans) did not and could not conform to any known standards for risk assessment.

Why would a bank loan money in the knowledge (and indeed the hope) that the money would never be repaid? Why did government-sponsored entities, insurance companies, rating agencies, securities regulators, and counterparties to exotic hedge instruments turn their heads the other way, with full knowledge of the impending disaster? The answer is as old and simple as the history of commerce —  kickbacks, payoffs, bribes and promises of lucrative employment.

The Wall Street Journal told the stories where individuals working for rating agencies and insurance companies were taken on fishing trips and other junkets following which they received threats from the Wall Street banks that if the rating and insurance contracts were not to the liking of the Wall Street banks, the banks would go elsewhere.

Considering the creation of such entities as mortgage electronic registration systems (MERS)  and the financial strength of the banks, it was easy to see that if the banks didn’t get what they want from existing rating agencies and insurance companies they would create their own. Thus in addition to direct payoffs to individuals the management of old established institutions was put under pressure to play ball with Wall Street or go out of business.

The same playbook was used with appraisers who were promised higher fees if they continue to raise the stated value of the real property as they were instructed to do. In 2005 8000 appraisers warned Congress that this would happen. They were ignored. All the information that was needed for due diligence was easily accessible to the institutions that ignored red flags and eventually became part of the largest case of criminal fraud in human history.

If you look at the history of organized crime in this country you will see substantial similarities between the crime syndicates and the behavior of Wall Street. Payoffs and kickbacks to law enforcement, agencies, government officials, and legislators in the governing body of states and Congress became the ultimate protection and immunity from prosecution regardless of the severity of the crime or the damage caused to society.

While it is true that most such syndicates and eventually fail we cannot wait for time to run its course. That is why the demonstrations by occupy Wall Street and others are so important to bring pressure on those who are protecting multinational banks and the people who run them. It is not going to be easy because the amount of money is staggering. Trillions of dollars have been siphoned out of our own economy and the economy of dozens of other countries. With that kind of money you can pay off a lot of people with more money than they ever dreamed of having.

So it should come as no surprise that a “foreclosure specialist” at Fannie Mae was caught picking up $11,200 in cash in a sting operation. The problem here is that we are catching the smallest fish in the pond instead of removing those who control the action. It is interesting that the case reported below involved steering foreclosure listings to particular brokers. By focusing attention on activities far from the core of evil emanating from Wall Street many of us are distracted from looking at the real cause and the real problem not only still exists, but is being renewed as we speak in new schemes not very different from the old schemes.

The arrogance of Wall Street is either well-founded or stupid. At the present time it appears to be well founded. It remains to be seen whether we the people force our representatives, regulators and law enforcement to reject the carrot and stick from Wall Street and return to a nation of laws.

Kickbacks as ‘a natural part of business’ at Fannie Mae alleged
http://www.latimes.com/business/la-fi-fannie-mae-kickbacks-20130525,0,6280041.story

Student Loans, Housing and Poverty in the U.S.

“Bottom Line: Foreclosures need to stop, student loans need to be modified and return to pre-2005 rules for dischargeability, wages need to rise and the number of people earning wages needs to rise. If you don’t have those ingredients, the economic “recovery” will forever be fragile and will forever be in danger of a much deeper collapse than we saw in 2008 because underlying conditions are worse. That’s why American companies are holding trillions in cash and assets overseas. They don’t trust us anymore.” — Neil F Garfield, livinglies.me

For assistance with presenting a case for wrongful foreclosure and student loans, please call 954-495-9867 (East Coast) 520-405-1688 (West Coast), customer service, who will guide you to our information resources and upon request put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Analysis: According to the official figures there are around 50 million people living below the poverty line. Surveys show that the number of people who can’t buy essentials for their family actually total close to 150 million people, which is half the country. The unemployment rate, if one were to add the number of people who are underemployed or who have given up looking for work, is probably over 20% — 60 million people!

The chasm referred to as income and wealth inequality is growing daily. $1 trillion in debt burdens students who could be far more productive. Until 2005, this debt was dischargeable in bankruptcy. But the banks managed to get changes made in the bankruptcy code equating student debt with alimony and child support and further requiring means testing in chapter 7 thus inhibiting the discharge of debts on credit cards charging 20% or more per year in interest and medical costs, which if you read Brill’s article in Time Magazine last week, are marked up 3000%.

Some $13 trillion in mortgage loans were faked and the banks continue to lie to the President, the Congress, the state legislatures, governors and Attorneys general.

If you add it all up, it isn’t hard to see why economists refer to the “recovery” as fragile. If you ask me it is unjust, wrong and impractical to continue on the same path we are on in the hopes that down the road somehow we will grow out of the problem we have — an economy that benefits a few people while the number of people falling behind, with lower and lower wages and decreased accessibility to credit increasing every month. Billions are added each month in student loan debt which is fast becoming a cancer on our society simply because of the new bankruptcy provisions.

The 7 year experiment in making student loans non-dischargeable is a miserable failure. It is a major contributor to the impending decline in the credit rating of the what was once the strongest nation on earth in every way. Because we allowed the banks to get the TARP funds and all the other forms of bank bailouts, and because we ignored the real victims — the investors and the homeowners who were tricked into deals that could not possibly work, the foundation of the country has been so undermined that we now rank #10 behind France and Spain in upward economic mobility. That means that the chances are better in those countries to climb the ladder of success than they are here.

This is not a piece suggesting we convert to socialism as our economic path. It is rather a call-out to our government that it cannot continue to bow to the will of the banks and expect the country to hold together. With half the country gasping for air, we must jettison our ideology and go for the practical solutions — most of which already exist or existed until a short while ago.

The problem is not that capitalism isn’t working. The problem is that capitalism is being used as a cover for the creation of illusions of prosperity and the reality of a near fascist state. That is what happens when someone corners the market on oranges and that is what happens when the someone is allowed to corner the market on money. And THAT is why we need government regulators and legislators who are NOT permitted to go through the revolving door from government to business and back again. If you take the referees off the field, don’t be surprised with what happens next.

For better or worse our economy is still 70% dependent upon consumer spending. Yet we pursue policies that diminish the ability of consumers to spend and diminish the number of consumers. The fact that there is still some muscle in the our system is testament to our inner strengths and prospects if we make the necessary changes to our democratic institutions and reign in those who are admittedly too large to govern or regulate.

Despite the obvious fundamental defects in the loan originations and transfers of loans that were the products of imagination and illusion, we treat them as real and even sacred. The playing field has been tilted so that all the benefits roll into one corner while the rest of us scramble to  make ends meet. The risk factors in any loan or program have been pushed entirely over into the public sector when the government should be able to stop the foreclosures, cure the student defaults and renew the progress of wage growth.

The keys to end this nightmare here and abroad is housing, student loans and employment. Students who have unpayable student loans are refused employment because many employers do credit checks. The same holds true for the millions of Americans who have been victims of fake foreclosures by strangers who never put up a dime to fund or purchase the loan and then submitted a credit bid at the “auction.” The private student loans arose because somebody thought it was a good idea to raise the cost of student loans by inserting profit seeking banks as intermediaries. Now that is corrected as to future loans, but it does nothing to correct the problems of past mistakes by government.

This isn’t just theory. Trillions of dollars are being held off shore by companies who legitimately are not convinced that the U.S. will actually pull out of this spiral anytime soon. So they are investing in capital and labor elsewhere. No effort has been made to claw back the trillions of dollars that disappeared in the maelstrom of the mortgage meltdown. Those funds are hidden off shore too.

And even more importantly, no company wants to invest in a marketplace where the laws are not enforced with consistency. If you speak with many CEO’s in private they will tell you that jail time for bankers would be a stimulus to confidence in the U.S. marketplace. What we have is a marketplace without boundaries as to the the fraud and other criminal behavior that was never before tolerated in our system.

Large and medium sized organizations holding trillions of dollars in liquid assets and other investments overseas see this very clearly. They have no more reason to commit to the U.S. economy than they do to any other banana  republic.

Why Student Debt Will Make U.S. Insolvent
http://www.business2community.com/finance/why-student-debt-will-make-u-s-insolvent-0430373

Wall Street turns profit in student loan debt
http://www.wsws.org/en/articles/2013/03/11/loan-m11.html

Student Debt Crushes Borrowers And Threatens The U.S. Economy
http://www.addictinginfo.org/2013/03/09/student-debt-crushes-borrowers-and-threatens-the-u-s-economy/

http://blog.credit.com/2013/03/do-we-need-to-change-bankruptcy-rules-for-student-loans/

Don’t Panic: Wall Street Is Going Crazy For Student Loans — But It’s Not a Bubble http://www.theatlantic.com/business/archive/2013/03/dont-panic-wall-street-is-going-crazy-for-student-loans-but-its-not-a-bubble/273682/

You Know What Sucks? Your Student Debt. You Know What’s Great? The Solution.
http://beingliberal.upworthy.com/you-know-what-sucks-your-student-debt-you-know-whats-great-the-solution-2

Look Who Got thrown Under the Bus for Criminal Prosecution on Banking Crisis

“Furthermore, evidence of the DocX forgery and fabrication process could be used to reach even higher. Who directly solicited the company for fake documents? The foreclosure mill law firms, which then knowingly submitted them into courts. Who directed the foreclosure mills to do that? The mortgage servicers, which are typically units of the biggest banks. Furthermore, there’s no reason to ever request the “entire collateral file” unless you have no other way to generate evidence to prove underlying ownership of the loan. This speaks to a faulty mortgage transfer process, improper securitizations, and generally fraudulent practices at the heart of Wall Street.”

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment: In a very good piece written by David Dayen for Salon.com (see link below), he takes the government and the bankers to task for masquerading under the “rule of law” while actually undermining it — something that consumers and homeowners have instinctively known for decades.

The general consensus of those in government and on the bench is that they are so deathly afraid of giving a free house to a homeowner that they are willing to overlook criminal and civil misbehavior — leading to granting a free pass to those pretending to be lenders to get the free house.

Worse than that, we have established a climate that allows for the possibility of taking a crime to some indescribable level where it becomes somehow necessary to allow the crime to stand because of the “risk” posed to the rest of society. That Too Big To Fail thing came directly out of the proposition that if the big banks were allowed or forced to fold,  the credit markets would freeze up. So our government gave them even more money than the ill-gotten and well secreted money they made during the mortgage boom, under the supposition that those banks would start lending.

The reverse happened. People received notices in the mail informing them of decreases in their credit limit on credit cards, HELOCs, and cancellation of loan commitments on small businesses and real estate purchases. The outcome predicted by those on Wall Street as well as Hank Paulson, then Treasury Secretary to President Bush, was a massive recession with millions of jobs lost and a huge demographic of people who are working at jobs for less money requiring less of their their talents. Armageddon arrived and we managed to steer our way of of the roughest waters for the time being, but we also proved that the Too Big To Fail hypothesis was dead wrong.

So they have a scapegoat that they are going to send to prison without involving any of her superiors, affiliates or the actual conspirators who created LPS and DOCX. The case proves, however, that people CAN go to jail for these crimes and that the line we were fed about it not being illegal was incorrect or an outright lie. The truth, as we now know it, is that the actions of the banks were a total fraud and that many entities and companies and institutions aided and abetted the the most massive fraud in human history.

Thus the issue is no longer whether there is a case that can be made, proven and thus sending people to jail and ordering restitution to all the injured stakeholders. Instead the issue of who will get thrown under the bus so that nobody really “important” gets the adjoining prison cells.

The recession was her fault. Meet Wall Street’s scapegoat, the one person to get jail time for the most massive mortgage fraud in history. By David Dayen

“This scheme was part of the giant bundle of illegal conduct known as foreclosure fraud. According to statements of fact from the Justice Department, from 2003 to 2009 DocX recorded over one million fake documents. That’s probably a low number. DocX wasn’t just forging signatures, they were fabricating entire loan files. During the bubble years, they created a now-infamous mortgage fabrication price sheet, where mortgage servicers, who had trouble proving in court that they owned the homes they wanted to put into foreclosure, could purchase, at low prices, whatever documents they needed. To “Recreate Entire Collateral File,” basically the whole set of documents including the promissory note? That would set a servicer back $95.00.”

CRIME AND PUNISHMENT: 2013 AND BEYOND

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

——————–HOW TO GET AWAY WITH IT——————–

“Thus under the current scenario each one ($1) dollar spent on criminalizing certain acts, prosecuting them and punishing them is met by a comparative figure of seventeen thousand ($17,000) dollars in damages caused solely by the Wall Street mortgage meltdown alone. It’s impossible to graph on a single piece of paper — it would take 12 reams of paper for economic crimes versus 1/4 inch on a single piece of paper for all other crimes.

‘If the current societal cost of all crimes including nonviolent drug related offenses was plotted at 1/4 inches, the next line down for economic crimes would be 68,000 inches long or 6,181 pages. Yet the number of people prosecuted and incarcerated for economic crimes is, thus far, less than 1% of the number of people snared in the 1980’s savings and loan scandal which all admit to have had far less reaching consequences than the PONZI “derivative” scheme of 1996-2012. ” Neil F Garfield, Esq., www.livinglies.me

CRIME AND PUNISHMENT

Do you think that a person who possesses marijuana should be given a state or federal pension? What would you do if you found out that this is exactly what is happening for 1,000,000 U.S. Citizens every year? What would you think if you were told that they were each getting a pension of $40,000 year, free medical care, plus the initial cost of processing their pension applications to the state or federal government which adds another $40,000 for each pensioner?  The cost is $40 Billion per year plus the cost of initial processing of another $15 Billion per year.

$55 Billion per year is spent on pensioning possessors of marijuana and other drugs, plus the cost of socialized medicine and care for all pensioners, which includes those who commit violent crimes when they are young who are now senior citizens posing no threat to society but nonetheless retain their room, board, and medical care. The total cost of this system exceeds $80 Billion per year, which using the ten year budgets that are being hotly debated in Washington, would reduce the deficit by about $1 TRILLION dollars.

Most of the pensioners would be forced to work if they were not on the pension system. The loss from taking these people out of the workforce is another $6 Billion per year, which over ten years is another $6 Billion and the loss to economic activity is at least another $25 Billion per year or over a ten year period $250 Billion to the federal and state government on income and sales taxes is another

There are 1,500,000 people incarcerated in the United States at any one time — more per capita than any other country in the world, most of whom have far lower violent crime rates than those in the U.S. which admittedly are declining due to factors not well understood (economic, abortion, lead in gasoline and other products etc. – nobody knows).

If you were to draw out a simple three stage pyramid of incarcerated people in this country the vast base of nearly 1 million people would be comprised of those committed non-violent acts which means by definition that nobody got hurt. The vast majority of those were given sentences of “pension” for minimum mandatory periods for possession of controlled substances, mostly, marijuana. Hence, these people committed acts that posed no threat to anyone in society, or to put it simply, posed no threat to society. We spend $40 billion per year, which with inflation and other factors will cost nearly a Trillion dollars over the next ten years on these people.

The next level comprising just half the size of the foundation of the pyramid consist of people who committed violent crimes. And the last level is composed of a tiny fraction of people who committed “economic” crimes that are presumed to be non-violent. The fact that these economic criminals altered the landscape of the finance and economies all over the world in whole or in part, resulting in inevitable suicides, mass shootings, riots, wars and billions of dollars in mental health costs which leads to tens of billions of dollars in physical ailments brought on stress does not get any consideration as to whether their crimes hurt society more than say, a murderer, who shoots his partner for stealing.

Up until thirty years ago the pyramid didn’t look anything like the pyramid today. Costs for incarcerated “pensioners” and other people held in prisons and jails were far less than 1/3 of what they are today. The reason that the cost of and size of the prison system has quadrupled in 3 decades is MONEY. The prison system was privatized and this is what happens when you privatize a societal function like police, fire, and prisons. After years of lobbying big business managed to support or convince legislators that privatizing the prison system was a good idea.

This was a great idea for business — but only if they kept the jails full, using the same business model as the hotels. If you have no guests staying there you lose money. The more you can count on a full prison or jail the more you can spend on new jails and prisons, using the Wall Street markets to bankroll you. The trick is to make sure that people are convicted of something and sent to prison. And if the prison industry had their way they would make breathing a criminal event because that would give them an unlimited number of people to choose from in filling their ever growing prison system.

The closest thing they could come to criminalized breathing is taking a puff of a cigarette and since there were many types of cigarettes — tobacco and other substances, they supported anyone who was “afraid” of marijuana and managed to pass a new era of prohibition where we all know is where organized crime got its start.

To make certain they were reaching the huge population of people who used marijuana they even made it a crime just to possess it. This coup enabled the prison industry to grow into one of the largest industries in our economy (over $60 Billion per year) and create one of the largest lobbying systems to make certain that as many thing could be criminalized as possible, so long as it was directed to large numbers of potential “guests.” Violent crimes were not as much fun as non-violent crimes because costs of insurance and other measures goes up exponentially as the risk goes up, guards demand more pay for assuming the risk of dealing with violent individuals and the list goes on. Hence the lower sentences on violent crimes than possession of pot.

As for the economic crimes, the pickings are slim. The prison business model views it as a loser. There are just not enough people committing them as those who commit drug offenses and violent crimes. So prosecutions are sparse and the number of guests is very limited — really of no consequence in the business model of the prison industry. Besides it was the kingpins of Wall Street that financed the privatization of prison systems with new bonds, stock offerings and hedge products like credit default swaps. The last thing the prison lobby wants are prosecutions of Wall Street titans who are supporting the prison industry. And the last thing a politician wants is to to decriminalize non-violent drug crimes if he or she is dependent upon Wall Street or direct donations to their campaigns from the prison industry. The two lobbies combined probably exceed the total of all other lobbying.

I submit that the pyramid is inverted and that any politician  who lacks the nerve to do what is best for society should be removed from office and replaced with someone who will vote with an eye towards what will most benefit his or her constituents and the country as a whole, as is stated in their oath of office. I submit that the reason why Wall Street criminals were not prosecuted is that they are indirectly in charge of criminal prosecution system and the departments of corrections in each state and federal prison or jail.

If you analyze the pyramid in terms of damage to society, the base would be economic crimes costing some 1/3 of the world’s wealth — $17 trillion — through an obvious PONZI scheme that was named “securitization.” The principal flag for recognizing a PONZI scheme is that it collapses when people stop buying in because the venture is using incoming investments to pay the old investors. That is exactly what happened.

Compounding the crime, the Wall Street Bankers took money from investors under false pretenses, intentionally diverted a large part of that money into their own pockets, and then funded mortgages from remote thinly capitalized entities of dubious or impossibility viability by manipulating property values, rating systems, mortgage brokers and nominees that became called “originators, as if that term means anything.

The Wall Street Banks diverted investor money into their own pockets, then compounded that with  making themselves (instead of the investors they were required to protect) beneficiaries of insurance, federal bailouts and proceeds from “hedge” products like credit default swaps.

Instead of protecting the investors by having them named as payee on the funded loans, they created plainly defective notes and mortgages that were patently wrong as potential liens on the homeowner’s property.

Instead of having the money that funded the loans come from REMIC trusts that issued the bogus mortgage backed bond, they funded the loans from other entities leaving the REMIC and the investor with nothing.

They had simply diverted the paperwork from the investors for whom they were supposedly acting as agents, and created the illusion that the Wall Street Banks owned the mortgage backed bonds that contained no mortgages, no notes, were not backed and therefore bogus bonds  with no capacity to pay the expected interest and principal back to the investor.

So the foundation of pyramid based upon societal damage would be $17 trillion, with a continuing cost of trillions of dollars per year caused by squeezing values of currency on which the banks made even more money, minimum, whereas the cost to society of even the most violent crimes would be under $10 billion using the most liberal formulas. The cost to society of non-violent drug crimes could be computed as high as $3 Billion per year depending upon whose analysis you look at.

Thus under the current scenario each one ($1) dollar spent on criminalizing certain acts, prosecuting them and punishing them is met by a comparative figure of seventeen thousand ($17,000) dollars in damages caused solely by the Wall Street mortgage meltdown alone. It’s impossible to graph on a single piece of paper. If the current societal cost of all crimes including nonviolent drug related offenses was plotted at 1/4 inches, the next line down for economic crimes would be 68,000 inches long or 6,181 pages.

The outcome is clear — the bigger the economic crime the less likely the punishment regardless of the damage to society. And, as we all know, criminals who are successful tend to escalate their criminality rather than say “‘enough.”

Unless the State and Federal and Local governments understand and act on these self-evident truths, it is virtually certain that whatever is left in world wealth will be taken on the next round of Wall Street exotic securities that only robotic supercomputers can properly value — on chips containing programs created on Wall Street and never reviewed by any regulatory agency.

I submit that like the FDA, an agency I have no love for, the labeling of products from Wall Street should await approval from a newly created division of the SEC that can review —- and understand — the tricks and tools of the new “securities” being offered and that the U.S. attorneys and Attorneys General get together a task force and claw back what they can to cure or assist their deficits.

Until that happens Wall Street will continue its 4 decades long pursuit of selling crap instead of investments.

Illinois Tops List of Most Foreclosures

Starting last month, the mega banks began an aggressive campaign to avoid modification, settlements or principal reductions and seek foreclosures before they are forced to modify.

Yes, we can help at livinglies, but the numbers are so high that there is no way we have the resources to help everyone. I am pitching in too, having become attorney of record for some. Like you, I am tired of waiting for lawyers who get it. I get it and although I am licensed in Florida we can help anyway.

Lawyers, accountants, analysts and others should be seeing this as a major opportunity to do well for themselves and for the owners of these homes by challenging the rights of the those collectors who are taking their money now, or demanding payment or threatening foreclosure. Lawyers have been slow on the uptake and in so doing are potentially setting themselves up for future malpractice claims for anyone, whether they aid or not, who received advice from the lawyer that was not based upon the realities of the securitization scam.

Call 520-405-1688, where you can get help in documenting the fraud, help in drafting the documents, and help in finding a lawyer. If you are a lawyer involved in foreclosure defense, bankruptcy or family law, you need to to start studying the real facts and the strategies that get traction in court.

We are planning a possible new Chicago seminar for lawyers, paralegals and sophisticated investors or homeowners. But we will only schedule it if we get enough calls to indicate that the workshop will at least pay for itself and that there will be volunteers to help on the ground to set up the the venue. It is a full day of information, strategy, role-playing and tactics to use in the court room.

Editor’s Analysis: Despite loosening standards for principal reductions and modifications, the foreclosure activity across the country is increasing or about to increase due to many factors.

The bizarre reason why the titans of Wall Street want these homes underwater combined with the miscalculation of the real number does not bode well for the housing market nor the economy. With median income now reported by the Wall Street Journal at 1995 levels, and the direct correlation between median income and housing prices you only need a good memory or a computer to see the level of housing prices in 1995 — which is currently where we are headed. As the situation gets worse, the foreclosure and housing problem will become a disaster beyond the proportions seen today. And that is exactly what Wall Street wants and needs — the investors be damned. Millions of proposals far  in excess of foreclosure proceeds have been rejected and forced into foreclosure and millions more will follow.

Wall Street NEEDS foreclosures — not modifications, principal write-downs or settlements. Foreclosures are food for the lions. The reason is simple. They have already received trillions in bailouts from the Federal Government. All of that was predicated upon the homes going into foreclosure. If the loans turn out to be capable of performing, many of those trillion of dollars ( generally reported at $17 trillion, which is more than the total principal loaned out to all borrowers during the meltdown period), the mega banks could be facing trillions of  dollars in liability as the demands are properly made for payback. The banks should not be allowed to collect the money and the houses too. Neither should they be allowed to collect the bailout money and keep the mortgages.

The “underwater” calculation is far off the mark. If selling expenses and discounts are taken into consideration, the value of homes used in that calculation is at least 10% less than what is used in the underwater calculation, which would increase the number of underwater homes by at least 15% bringing the total to nearly 10,000,000 homeowners who know now that they will never see valuation even coming close to the amount owed. The prospect for strategic defaults is staggering —- totaling more than 10 million homes  — or nearly twice the number of foreclosures already “completed”, albeit defectively.

Illinois is now getting hit hard, as the foreclosure menace spreads. Jacksonville up 30% in Florida, South Florida at 22 month high, Arizona with more than 600,000 homes underwater, all the paths lead to foreclosure. With that bogus deed on foreclosure in hand, Wall Street figures it is a  get out of jail free card.

Wall Street wants the foreclosures, needs the foreclosures and is going to get them — unless they are stopped in the courts. Don’t think you won’t end up in foreclosure just because you are current in mortgage payments. They have playbook that will trick you too into a foreclosure. If anyone tells you to stop making payments, watch out!

There’s A NEW Worst State For Foreclosures

By Mamta Badkar

Foreclosure activity in the United States fell 15 percent year-over-year in August. But housing is a local story and a few regions in the country were exceptions to the trend.

With one in every 298 properties receiving a foreclosure filing, Illinois had the highest foreclosure rate in the country for the first time since 2005, according to RealtyTrac’s latest foreclosure report.

Illinois pushed usual suspects like California, Arizona, and Nevada down the list.

The prairie state’s foreclosure rate jumped 29 percent month-over-month (MoM), and 42 percent year-over-year (YoY), with 17,781 properties in the state received a foreclosure filing in August.

And every detail in the state’s foreclosure report was ugly. Foreclosure starts – the pace at which mortgages enter the foreclosure process – were up 18 percent on the year. Scheduled foreclosure auctions were up 116 percent YoY. Bank repossessions climbed 41 percent YoY.

As a state that requires foreclosures to go through the judicial process, Illinois’ foreclosure rate was “artificially low” last year, according to Daren Blomquist, vice president of RealtyTrac.

5,268 homeowners in Illinois received a total of $357.3 million in assistance as part of the $25 billion national mortgage foreclosure settlement as of June 30, 2012, according to a report by the Office of Mortgage Settlement Oversight. That’s roughly $67,817 per borrower but it’s unlikely to have a large impact in reducing foreclosures in the future.

Foreclosure activity in the Chicago-Naperville-Joliet metro area was up 44 percent YoY, making it the metro with the eighth highest foreclosure rate in the country.

Blomquist told Business Insider in an email interview that in the case of the Chicago metro area, a land bank, like the ones set up in Cleveland and Detroit that rehabilitate properties or demolish them, could help ease the burden of distressed properties.

He doesn’t however expect any improvements in Illinois’ foreclosure rate anytime soon. “The foreclosures coming through the pipeline in Illinois and other states now are likely on mortgages that the banks do not deem are a good fit for any of the foreclosure alternatives outlined in the mortgage settlement.” He does however think that a program similar to Oregon’s foreclosure mediation program could help slow down foreclosures.

This chart from RealtyTrac shows the recent surge in Illinois’ foreclosure activity as its banks and courts push through foreclosures:

illinois foreclosure activity

RealtyTrac

RealtyTrac’s report also broke down US metropolitan areas with the highest foreclosure rates.

Click Here To See The 20 Metros Getting Slammed By Foreclosures

Shadow Foreclosures: Over 500,000 Az Homeowners Underwater

Yes, we can help at livinglies, but the numbers are so high that there is no way we have the resources to help everyone. Lawyers, accountants, analysts and others should be seeing this as a major opportunity to do well for themselves and for the owners of these homes by challenging the rights of the those collectors who are taking their money now, or demanding payment or threatening foreclosure. Arizona lawyers have been slow on the uptake here and in so doing are potentially setting themselves up for future malpractice claims for anyone, whether they aid or not, who received advice from the lawyer that was not based upon the realities of the securitization scam.

Call 520-405-1688, where you can get help in documenting the fraud, help in drafting the documents, and help in finding a lawyer. If you are a lawyer involved in foreclosure defense, bankruptcy or family law, you need to to start studying the real facts and the strategies that get traction in court.

We are planning a possible new Arizona seminar for lawyers, paralegals and sophisticated investors or homeowners. But we will only schedule it if we get enough calls to indicate that the workshop will at least pay for itself. It is a full day of information, strategy, role-playing and tactics to use in the court room.

Editor’s Analysis: Despite loosening standards for principal reductions and modifications, the foreclosure activity across the country is increasing or about to increase due to many factors.

The bizarre reason why the titans of Wall Street want these homes underwater combined with the miscalculation of the real number does not bode well for the housing market nor the economy. With median income now reported by the Wall Street Journal at 1995 levels, and the direct correlation between median income and housing prices you only need a good memory or a computer to see the level of housing prices in 1995 — which is currently where we are headed. As the situation gets worse, the foreclosure and housing problem will become a disaster beyond the proportions seen today.

Wall Street NEEDS foreclosures — not modifications, principal write-downs or settlements. The reason is simple. They have already received trillions in bailouts from the Federal Government. All of that was predicated upon the homes going into foreclosure. If the loans turn out to be capable of performing, many of those trillion of dollars ( generally reported at $17 trillion, which is more than the total principal loaned out to all borrowers during the meltdown period), the mega banks could be facing trillions of  dollars in liability as the demands are properly made for payback. The banks should not be allowed to collect the money and the houses too. Neither should they be allowed to collect the bailout money and keep the mortgages.

The “underwater” calculation is far off the mark. If selling expenses and discounts are taken into consideration, the value of homes used in that calculation is at least 10% less than what is used in the underwater calculation, which would increase the number of underwater homes by at least 15% bringing the Arizona total to nearly 600,000 people who know now that they will never see valuation even coming close to the amount owed. The prospect for strategic defaults in Arizona and elsewhere is staggering —- totaling more than 10 million homes  — or nearly twice the number of foreclosures already “completed”, albeit defectively.

As stated in the article below there is, as we have been saying for years, a huge difference between home prices and home values. Home prices can be pushed up or down based upon external factors In this case it was a flood of what looked like cheap money that is now apparent was neither cheap nor even money (because the named lender never made the loan). Home values and home prices should over the long run track each other given no manipulation of the marketplace which is exactly what Wall Street did. Home values, based upon the Case-Schiller index and thousands of other economists are based upon one simple variable — median income. Median income is now at the lowest point since 1995. That means home values are, after selling expenses and discounts, less than 90% of 1995 prices.

It is simply inevitable that people will take the hit on their credit and walk away from the homes rather than pay $200,000 for on-existent equity and that is exactly what Wall Street is counting on, forcing through its manipulation of government policy and spinning to the public media. If those homes do not go into foreclosure the mega banks’ scam will reveal itself, the assets on their balance sheet will vanish because they never existed anyway and the banks will fall. Whether they are too big to fail or not, they will fail — unless foreclosures spread out across the land.

by Kristena Hansen, www.bizjournals.com

Roughly 40 percent of all mortgaged homes in Arizona were under water during the second quarter of 2012, the third-highest negative equity rate in the nation, according to a report released Wednesday by CoreLogic Inc.

In raw numbers, that translates to about 521,600 homeowners statewide being under water for the quarter out of roughly 1.31 million total mortgaged homes, the report said.

Arizona’s negative equity rate was much higher than the national average of 22.3 percent (10.8 million homes) of all mortgaged homes that were underwater during the same period. That nationwide figure was also a gradual improvement from the first quarter’s 23.7 percent negative equity (11.4 million homes).

CALCULATING NEGATIVE EQUITY

Negative equity, or being under water, refers to homeowners who owe more on their mortgages than their home’s present estimated value. CoreLogic determines negative equity rates by the number of underwater homeowners versus all residential properties in a certain area with an outstanding mortgage.

CoreLogic experts say the improving negative equity landscape nationwide is largely due to the recent rebound in home prices, dwindling sales of lender-owned properties and low inventory of existing homes.

Home prices and home values, however, are distinctly different. Prices represent how much homes actually sell for, while home values are only an estimate and are therefore much harder to determine.

Michael Orr, a real estate expert at Arizona State University, said home value estimates will vary widely depending on who is making the assessment. That makes it tricky to hone in on best practices for calculating negative equity, he said.

Sam Khater, deputy chief economist for CoreLogic, explained how his firm makes its determinations.

Libor vs Mortgage Scandals: Amount of Money Appears to be the Only Difference

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It appears as though LIBOR is being thrown under the bus as a distraction from the much larger mortgage securitization scam. Both cases relied upon trust that was breached, money that was invented, figures that were fabricated, lying, cheating and inside trading to the detriment of the institutions that participated in one form or another. In both cases the ultimate victims on both sides of the transactions is the consumer.

Yet with LIBOR “suits are mounting,” (Wall Street Journal) investigations proliferating and a handy group of scapegoats far from the top of the scam may well be prosecuted.

The only difference seems to be that the size of the LIBOR scandal in terms of consequences to the institutions and consumers appears to be far less than the monumental scam foisted upon taxpayers all over the industrialized world, especially in the U.S.

To be certain the manipulation of the LIBOR rates was clearly an intentional act, but so was the insertion of the bankers naked nominees when residential loans were originated. In most cases, securitization was different in the commercial setting because it was more likely that more questions would be asked by higher priced, more sophisticated lawyers for the borrower.

The manipulation of LIBOR rates resulted in the wrong calculation of adjustable rate mortgages all over the world, making the notices of default, demand for payment and perhaps even the sales illegal. That is more in the nature of legal argument. The insertion of nominees controlled by the investment banks as payees, nominees, trustees, beneficiaries and mortgagees in lieu of the institutions that were actually providing the money and hiding the compensation that TILA requires to be disclosed, the steady practice of table funded loans which are deemed “predatory per se” under regulation Z, allowed intermediaries to pretend to be the lenders, the owners of the loans so they could trade with impunity. If they lost money, they threw the loss over the fence at the taxpayers and investment funds that bought bogus mortgage bonds. If they made money, they kept it.

The only difference is that the the amount of money involved in the non-existent securitization scheme that was so well “documented” was that it resulted in siphoning out the life blood of multiple nations and sending the world into a recession not seen in most of your lifetimes. AND the policy makers in Washington either were or are in bed with the perpetrators on this scheme, whereas the LIBOR scandal is being couched in terms where the traders were conspiring but the banks were unaware of their transgressions.

Let’s face it, if suddenly you have a trading department that is reporting profits geometrically and even exponentially higher than any other time in history, as CEO you would want to know why. Those trading profits did exactly that in both LIBOR and the mortgage securitization myth. One must ask why thousands of advertisements costing billions of dollars were on TV, radio, newspapers and magazines for loans at 5%. Put pencil to paper. If normal underwriting standards were used, and normal fees were applied to intermediaries who made the loan possible, there would be no room in the budget for such extravagance, much less the pornographic profits and bonuses reported on Wall Street. Why were armies of salesmen, including 10,000 convicted felons in Florida alone pushed into the market place as mortgage brokers or mortgage originators?

The intentional reporting of the wrong rates has an effect on all loans, past, present and future, but it requires yet more education of an already overloaded judiciary. So throwing a few traders under the bus and calling it a day is pretty much what is going to happen.

As it turns out though, the Banks have painted themselves into a corner on the securitization scam. What they securitized was paper, not money. The monetary transactions were left untouched by the documents, leaving the people who loaned the money through the scam vehicle known as a REMIC trust with no security for a bad loan.

Hence neither the documentation of an on-existent transaction between the parties named on the instrument, nor the manipulation of terms that were presented in one set to the investor-lenders and an entirely different set of terms presented to the borrower created valid contracts, much less perfected liens. But that didn’t matter to the intermediaries who were supposed to be acting as intermediaries — in the same way a check clears the bank — with no claim to the subject matter of the transaction.

They too manipulated rates by creating second tier yield spread premiums, and thus created spreads upon which they could withdraw money, pay for insurance, credit default swaps and other bets that the bad loans they wanted and received would fail, leaving the market in free-fall.

Predicting the market to to fall is like pushing a person off a cliff. You pretty much know that once the balance is lost the person is doomed. Doctoring up the applications with false income and false property appraisals did exactly that. It was a bet on a sure thing. Wall Street could rest comfortably in the knowledge that housing would ultimately fall to normal levels simply because there was nobody who could or would pay the premium they invested on the mortgage scam.

Now Wall Street is creating entities that will buy up “distressed”properties — a product of their own wrongdoing, using the money of the same people who owned the homes that were foreclosed — i.e., their pension and 401k retirement money. So they used your own money to fund a bad loan to you that they knew they could foreclose, and in between the time they originated the loan documents and the time of foreclosure they engaged in trading on your mortgage even though they had no part in funding or purchasing the loan.

My question to you is where is your outrage? When are you going to fight the bank control of Washington, the bank manipulation of judiciary by fabricating false, forged documentation that “looks right?” You can do it by voting against hose  most closely tied to the Wall Street community, by fighting with the party claiming to be your mortgage lender/servicer, or both. If you don’t you are handing the Country over to the banks and leaving it to your children and grandchildren to suffer the consequences.

Yves Smith Nails Obama on Failed Housing Policies

Editor’s Note: Yves wrote the piece I was going to write this morning. See link below. The salient points to me are mentioned below with comments. The principal point I would make is that Obama has been listening to people who are listening to Wall Street. The Wall Street spin is that this is just another housing bust. It isn’t. It is massive Ponzi scheme that was well-planned and executed with precision, sucking the life out of our economy. Normally Ponzi schemes (see Drier or Madoff) don’t get big enough to have that effect.

The bottom line is that the banks took money from investors under false pretenses and diverted the proceeds into their own pockets.

In order to cover that up they created false documents with false lenders and false secured parties, false creditors and false beneficiaries. They borrowed money from the lenders, then borrowed the identity of the lenders to declare it was the banks who were losing money from mortgage “defaults”, to receive proceeds of payouts from subservicers, payouts from insurance, payouts from credit default swaps and payouts from federal bailouts.

The plain fact is that under normal black letter law, the notes and mortgages were faked at origination based upon the false premise that the actual lender was named or protected. That was a lie. The loans are not secured and the investors have a mess on their hands figuring out who has what claim to what loan so they are suing the investment banks instead of going after the homeowners and striking deals that would undermine the hundreds of trillions of dollars in bets out there that is masquerading as shadow banking.

Instead the investors and the homeowners — the only true parties in interest — got screwed and the administration has yet to correct that basic injustice.

  1.  The proposals for the housing fix were predicated upon the fraud and other illegals activities of the parties in a mythological “securitization” scheme. They were not “unpopular” as Klein observes in the news. They were rejected because wall Street obviously rejected any plan that would take away their ill-gotten gains.
  2. Combat servicing operations using five times the staff of ordinary servicers are doing the work just fine. It was the lack of oversight and regulation that allowed the obfuscation of the truth by the servicers created for the sole purpose of covering up the fraud. These servicers never report the status of the loan receivable to anyone and they probably don’t have access to the loan receivable accounts. In fact, it is quite probable that no loan receivable account actually exists on the books of any creditor who loaned money through the vehicle of bogus mortgage bonds.
  3. Servicers were set up to foreclose, not service and not to assist in modification or settlement. Wall Street needed the foreclosure to be able to say to the investor, OK now the loan and the loss is yours, since we have drained all value out of it. Sorry.
  4. The administration had a ready tool available: enforcing the REMIC statute. They chose not to do this despite the obvious facts in the public domain that the banks were routinely ignoring both the law and the documents inducing investors to invest in non-existent bonds based upon non-existent loans.
  5. The CFPC had not trouble issuing a regulation that defined all parties as subject to regulation. Why did it take the formation of a new agency to do that? Treasury officials from the administration who argued that they had no authority over servicers were wrong and if they had done any due diligence, it would have been obvious that the banks were blowing smoke up their behinds.
  6. There are hundreds of billions of dollars, perhaps trillions of dollars in lost tax revenue that the ITS is not pursuing because the the policy of coddling the scam artists who manufactured this crisis. The deficit exists in large part because the administration has not pursued all available revenue, the bulk of which would have made a huge difference in the dynamics of the American economy and the election.
  7. Refusing the help the  victims by characterizing some of them as undeserving borrowers is like saying that a bank robber should be granted leniency because the bank he robbed was run poorly.
  8. The real issue is the solvency of the large banks which most economists and even bankers agree are in fact too big to manage, far too big to regulate. The administration is taking the view that even if the assets on the balance sheets of the big banks are fake, we can’t let them fail because they would bring the entire system down. That is Wall Street spin. Iceland and other places around the world have proven that is simply not true. The other 7,000 banks in this country would easily be able to pick up the pieces.

Yves Smith on Obama Failed Housing Policies

They are AT It Again: Ocwen Securitizing Gov.-Backed Mortgages

Just in case you were wondering if anything is changing in the world of finance, the answer is no, not really. Ocwen here is announcing that they are securitizing mortgages backed by the government, and selling the pieces to investors, who really ought to know better by now.

They are doubling down on a failed strategy in the hope that it will bring the housing market out of its slump. Maybe it will work for a time, but the net result is that the fundamental dysfunction of the financial markets are being ignored. Trust is the basic component of everything that happens in the financial markets and trust is what was broken completely in the mortgage crisis.

They lied, cheated, stole and then fabricated documents out of thin air, forged with the signatures of unsophisticated office workers who were told that if they want a paycheck they need to do what they were told. That gave birth to what was eventually called robo-signing and surrogate signing, forging of signatures and invalid documentation unsupported by either authority or consideration. It looks to me that no lessons were learned on Wall Street except that if you make the crime big enough, nothing will happen to you.

This is why in the Full day seminar on August 25 in Emeryville (San Francisco) we delve into the components of discovery and pleading so that homeowners stop making or allowing records on appeal to contain matters that are in dispute appear as though they are not in dispute.

One interesting question that should be asked is that if the risk of loss is covered by BOTH securitization (diversification) and government backing, what benefits are the consumers getting in rates?

This article from Housing Wire by Jon Prior, is one of many to come as the policy of “doing what works” continues to dominate over “doing what is right.” With these policies in effect the vast majority of homeowners are being left out in the cold and the few who litigate successfully will get reasonable settlements or modifications. The bottom line is that housing as a keystone component of our economy will continue to drag the economy even as we try to spike activity in other sectors.

Ocwen to securitize FHA mortgages

A special vehicle put together by subprime mortgage servicer Ocwen Financial Corp. ($24.38 0.29%) plans to acquire government-backed loans soon and package them into bonds for investors.

Ocwen and its former asset management firm Altisource built Correspondent One last year. The vehicle will buy mortgages originated by Lenders One, which Ocwen estimates wrote 8% of all home loans in the U.S. last year. Lenders One is a national alliance of mortgage bankers, correspondent lenders and suppliers of mortgage products and services.

Correspondent One will also acquire Federal Housing Administration mortgages soon for future securitizations, Ocwen disclosed to investors in its second quarter filing. Currently, roughly 98% of FHA loans are securitized through Ginnie Mae bonds.

The company said Correspondent One acquired roughly $17 million in conventional loans from Lenders One in the first half of 2012.

“Correspondent One has seen significant, positive environmental changes in the correspondent lending market. There has been a contraction in correspondent lending,” Ocwen said, alluding to recent exits by Bank of America ($7.91 0.035%), Ally Financial and others.

In July, Ocwen also began setting up agreements to purchase servicing on newly originated loans. Under the arrangements with undisclosed firms, lenders would sell the loan to either Fannie Mae or Freddie Mac or issue a Ginnie Mae security backed by FHA loans. The servicing on those loans would automatically transfer to Ocwen.

The company serviced nearly $128 billion in mortgages as of June 30, nearly double the $70 billion portfolio it held one year prior.

The funding pipeline for Correspondent One and these special arrangements reached nearly $195 million at the end of July, Ocwen said.

Ginnie may raise its minimum net-worth requirement for issuers of its FHA-backed mortgage bonds, American Banker reported this week. Smaller lenders are becoming shut out and could turn to more creative and private deals like the one Ocwen has set up in order to fund their new loans.

jprior@housingwire.com

@JonAPrior

British Government Getting Tough on Bankers

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.

DEFICIENCY JUDGMENTS AND ARBITRATION CLAUSES IN NOTES AND MORTGAGES

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Editor’s Notes:  

When I was on Wall Street, we had an expression “Bears make money, bulls make money but pigs never make money.” It means that people who think the market is going down have a number of ways to bet in that direction and protect their risks. People who think the market is going up have the same options. But those who seek to overreach and get all the money going both ways will lose.

In this case, National Bank is the pig. After invoking the power of sale in a non-judicial foreclosure, they sued for a deficiency they created by submitting a low bid at the “auction.” If the loan was securitized, (which presumably it was not or it was not brought to the attention of the trial court and therefore was not in the record on appeal) there is a good chance that the auction was rigged and faked because the trustee would have been a controlled or owned entity and the credit bid was false because it was not submitted by a party who was “the beneficiary in full or partial satisfaction of the contract secured by the trust deed. A.R.S. § 33-801(5) (2007). Bank asserted $675,000 was the fair market value at the time of the sale.”

In virtually ALL cases, the credit bid accepted by the trustee was from a party that was not, at the time the bid was submitted, a party whose description conformed to the definition of a beneficiary (creditor) in the statute. Thus the bid was an empty bid, void from inception, and should have been disregarded by the trustee (which of course was never done because they were taking their orders from the pretender lender instead of following the state statute. In this case the record on appeal is devoid of any evidence that National Bank was not the originator AND the lender at the time of the foreclosure, so you need to keep that in mind, if you are going to use this case for anything.

The Court appeals was completely perplexed by the action brought by National bank for a deficiency judgment against the “former” homeowners who probably have every right to reverse the foreclosure sale, remove or discredit the deed upon foreclosure and return to having full title and right of possession. The Court just didn’t understand why the deficiency action was ever filed, but was willing to rule on the arbitration clause, on the outside chance that there was something else besides a foreclosure invovled. IF not, the deficiency action should obviously be dismissed:

In the footnotes of the decision the Court makes it clear that the anti deficiency statutes apply, and hints that if the pretender lender sues for the deficiency they might be invalidating the foreclosure by their own actions because the Arizona statute gives a choice between foreclosure or suing on the note. Under no circumstances do the Arizona statutes allow the lender to pursue both remedies for the obvious reason that the so-called deficiency is artificially created by a self-serving “credit bid” and self serving statement as to the value of the property.

 

“1

A credit bid is a bid made by the beneficiary in full or partial satisfaction of the contract secured by the trust deed. A.R.S. § 33-801(5) (2007). Bank asserted $675,000 was the fair market value at the time of the sale.

2

The record is devoid of an explanation as to why the anti- deficiency statutes are inapplicable here. We are unable to discern if the property was too large or that the promissory note was not for purchase money or why the anti-deficiency statutes do not apply to homeowners.

We note that Arizona has two anti-deficiency statutes: (1) A.R.S. § 33–729(A), which applies to purchase money mortgages and purchase money deeds of trust that are judicially foreclosed, Baker v. Gardner, 160 Ariz. 98, 770 P.2d 766 (1988); and (2) A.R.S. § 33– 814(G), for deeds of trust foreclosed by trustee’s sale whether or not they secure purchase money obligations. And both anti- deficiency statutes prohibit the entry of a deficiency judgment after the forced sale of a parcel of “property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling.” A.R.S. §§ 33–729(A) and –814(G).

Arizona also has an election of remedies statute applicable to mortgages. Under A.R.S. § 33–722, a mortgagee can sue to judicially foreclose its mortgage or can sue on the note and waive the mortgage, but it cannot maintain both actions simultaneously. See Tanque Verde Anesthesiologists L.T.D. Profit Sharing Plan v. Proffer Group, Inc., 172 Ariz. 311, 313, 836 P.2d 1021, 1023 (App. 1992).”

The Appellate Court overruled the trial court as to its ruling on the deficiency action being “ancillary” to the foreclosure in order to reach its legal conclusion that if an action can be arbitrated it should be arbitrated:

“The Bank argues, as it has before3, that the deficiency action is “ancillary” to its statutory foreclosure action and therefore excepted from the arbitration agreement. Specifically stating:

‘Consequently, a deficiency action arises out of, relates to, and is dependent upon the non-judicial foreclosure of a deed of trust. The deficiency action is thus an “ancillary remedy” necessarily related to the non- judicial foreclosures.’

The trial court adopted that reasoning, finding:

[t]here would be no deficiency without a foreclosure; deficiency arises from the foreclosure. Therefore, a deficiency action is excluded from arbitration under the terms of the Note.

We disagree.

It is a challenge to interpret this decision. It swings one way and then it swings the other way, bat apparently only to preserve the right to binding arbitration if it has already been agreed between the parties. But it restates those statutes that are clearly intended to make Arizona an anti-deficiency state.

To read the entire opinion click here:  CV100772-opinion

 


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Editor’s Comment:

Do some research, think about what you know and what you need to know. Come to my seminar or any seminar on securitization and you will understand the significance. Naked short-selling is the same as selling forward. In both cases you sell to an “investor” something where you have no asset and no money to back it up. You take the money from the investor and use it pretty much any way you like and account for it as “trading profits.” Then you take what is left and you create the illusion of transactions when in fact the documents refer to a virtual transaction in which the parties were different than those described on the closing documents and the terms of repayment of the loan are different than the terms disclosed to either the  investor or the borrower.

This sort of thing is unfathomable to most people, except those who spent a lot of time on Wall Street or doing Wall Street-type things, which is an adequate description of my background. If you sold a car to someone when you didn’t have the car or the money to buy it and then you took the money and put part of it in your pocket as your fee and then went out and bought a junker, you might be charged with civil or criminal fraud. Don’t you think? But on Wall Street these behaviors are permitted in the name of increasing liquidity.

What a country!

Joe Floren Screws the Pooch

by Patrick Byrne

The first time I heard Joe Floren speak I was standing behind him in an elevator in his law firm’s San Francisco office tower  as another lawyer informed him that the subpoena Joe Floren had served the previous day on a colleague of mine had reached her in the hospital, after a difficult delivery of her first child, while she was breastfeeding for the first time.

“Really? That’s beautiful. I love it!” He replied with glee.

Joseph E. Floren, Esq., is a lawyer at Morgan Lewis, the white shoe law firm defending Goldman Sachs against Overstock’s prime broker litigation, and tonight I celebrate the mistake Joe Floren made yesterday.  In filing Goldman’s response to Overstock’s motion to vacate the trial court judge’s decision to stay his own decision to unseal various documents related to this litigation (in more straightforward English: the trial court judge decided to unseal some documents while also deciding to delay acting on his decision, but we objected to this delay, and Goldman responded to our objections), Joe Floren screwed the pooch. He filed something containing an attachment he forgot to redact. That attachment is a previous filing of Overstock’s, a filing which contains but a sample of the shenanigans at Goldman and Merrill that has turned up over the course of five years and millions of pages of discovery, but which filing we had redacted when we made it (as good litigants do).

Fortunately for the cause of all that is good and right about America, Joe Floren’s goof came to the attention of a diligent 1st amendment attorney in California named Karl Olson, who represents the Economist, Bloomberg, the New York Times and Wener Publications (owners of Rolling Stone magazine) in their efforts to obtain the documents.  Karl Olson provided Joe Floren’s sloppy filing to his clients. Tonight these stories appeared:

Rolling Stone: Accidentally Released – and Incredibly Embarrassing – Documents Show How Goldman et al Engaged in ‘Naked Short Selling’

Bloomberg: Goldman, Merrill E-Mails Show Naked Shorting, Filing Says

Economist: An enlightening mistake

Really, Joe Floren?  That’s beautiful.  I love it.

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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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Turning the Tide Toward Borrowers

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Editor’s Comment:

Nocera and several other responsible journalists have finally reached the point of taking a larger perspective than the narrow myths perpetuated by Wall Street. Wall Street would have us believe that they took bad risks and “made mistakes” causing the financial collapse. His point is the Justice Department has taken after “the smallest of smallest” and he believes that those prosecutions are in lieu of the prosecutions that ought to occur against those who are responsible for setting up a criminal enterprise with the appearance of a conventional business structure.

The problem is easy to describe and difficult to solve.  It is simply true that prosecutions of “small fry” are easier because they don’t have the resources or knowledge necessary to properly defend themselves.  It is equally true that the successful prosecution can be used for public relations purposes to show that a regulating agency or law enforcement is doing its job.

On the other hand prosecution of Jamie Dimon or Lloyd Blankfein would provoke a vigorous defense conducted by dozens of lawyers whose purpose would be to merely poke holes in the prosecutions case rather than proving their clients innocence.  In order to prosecute such people and those close to them, it would be necessary for the regulating agencies and law enforcement to acquire specialized knowledge so that they would know what to investigate and arrive at conclusions as to which violations to prosecute based upon their likelihood of success. 

The solution is obvious.  Since there is no likelihood that most regulatory agencies and most law enforcement agencies would ever be able to mount such a challenge to the Titans of Wall Street, and the political risk of losing such a case would be devastating, they simply must maintain the status quo, which is to say that they should continue the policy of going after “small fry”.  On the other hand if they really want to represent the citizens of their country or their state (or their county), they could appoint a special prosecutor whose payment would be relatively minimal in terms of getting the case started and largely dependent upon the actual payment of fines, penalties, interests, and restitution.  There are at present at least a dozen law firms in the country (including our very own GarfieldFirm.com) who could perform this service under the direction of the Attorney General or county attorney or both.

The only thing that the state would need to provide is space and facilities and perhaps some minimal capital.  To put this in perspective, I made an approach to the appropriate people in government in the state of Arizona in 2008 in that proposal it was my naïvely idealistic presumption that the state would be more than happy to collect taxes, fees, fines, penalties interest etc that were due from out of state residence residing on Wall Street in the state of New York.  Based upon existing AZ law I projected a 10 billion dollar recovery.  Their finance department looked over my analysis and decided I was wrong.  They projected a recovery of 3 billion dollars which as it turns out is exactly the amount of the budget deficit of the state. 

At this point it is fair to say that the risk reward ratio of prosecuting the Titans of Wall Street has reached a point where it is irresistible if it is performed by a special prosecutor who has no ambitions for public office.  In the process, the state would recover not only the taxes, fees, fines, penalties and interest, but the homeowners would be virtually guaranteed some form of restitution based upon the wrongful foreclosures and the trading of their loans and securities whose value was derived from their loans. 

It is well understood and known that we are only halfway through a contest of enormous consequence.  Without appropriate restraints on banking and financial service companies most of the liberties and rights set forth in the founding documents of our country will become meaningless.   Until now the investment banks have been able to control the narrative.  But the facts about their misdeeds and malfeasance are starting to drown out the gigantic Wall Street machine.  I’m not saying that the tide has already turned.  But with the help of readers like you who become proactive and write letters to their attorney generals, county attorneys, and the regulatory agencies demanding such action, the tide will turn earlier rather than later. 

The Mortgage Fraud Fraud

By JOE NOCERA

I got an e-mail the other day from Richard Engle telling me that his son Charlie would be getting out of prison this month. I was happy to hear it.

Charlie’s ordeal isn’t over yet, of course. When he leaves prison on June 20, Charlie, 49, will move temporarily to a halfway house, after which he will be on probation for another five years. And unless he can get the verdict overturned, he will have to spend the rest of his life with a felony on his record.

Perhaps you remember Charlie Engle. I wrote about him not long after he entered a minimum-security facility in Beaver, W.Va., 16 months ago. He’s the poor guy who went to jail for lying on a liar loan during the housing bubble.

There were two things about Charlie’s prosecution that really bothered me. First, he’d clearly been targeted by an agent of the Internal Revenue Service who seemed offended that Charlie was an ultramarathoner without a steady day job. The I.R.S. conducted “Dumpster dives” into his garbage and put a wire on a female undercover agent hoping to find some dirt on him. Unable to unearth any wrongdoing on his tax returns, the I.R.S. discovered he had taken out several subprime mortgages that didn’t require income verification. His income on one of them was wildly inflated. They don’t call them liar loans for nothing.

Charlie has always insisted that he never filled out the loan document — his mortgage broker did it, and he was actually a victim of mortgage fraud. (The broker later pleaded guilty to another mortgage fraud.) Indeed, according to a recent court filing by Charlie’s lawyer, the government failed to turn over exculpatory evidence that could have helped Charlie prove his innocence. For whatever inexplicable reason, prosecutors really wanted to nail Charlie Engle. And they did.

Second, though, it seemed incredible to me that with all the fraud that took place during the housing bubble, the Justice Department was focusing not on the banks that had issued the fraudulent loans, but rather on those who had taken out the loans, which invariably went sour when housing prices fell.

As I would later learn, Charlie Engle was no aberration. The current meme — argued most recently by Charles Ferguson, in his new book “Predator Nation” — is that not a single top executive at any of the firms that nearly brought down the financial system has spent so much as a day in jail. And that is true enough.

But what is also true, and which is every bit as corrosive to our belief in the rule of law, is that the Justice Department has instead taken after the smallest of small fry — and then trumpeted those prosecutions as proof of how tough it is on mortgage fraud. It is a shameful way for the government to act.

“These people thought they were pursuing the American dream,” says Mark Pennington, a lawyer in Des Moines who regularly defends home buyers being prosecuted by the local United States attorney. “Right here in Des Moines,” he said, “there was a big subprime outfit, Wells Fargo Financial. No one there has been prosecuted. They are only going after people who lost their homes after the bubble burst. It’s a scandal.”

The Justice Department has had a tough run recently. Last week, Eric Schneiderman, the New York attorney general — who was recently given a role by President Obama to investigate the mortgage-backed securities issued during the bubble — complained publicly that he wasn’t getting the resources he needed from the Justice Department. And, of course, on Thursday, a federal judge declared a mistrial on five charges of campaign finance fraud and conspiracy in the trial of the former presidential candidate John Edwards.

In the Edwards case, the Justice Department spent tens of millions of dollars, and trotted out novel legal theories, to prosecute a man who was essentially trying to keep people from discovering that he had had a mistress and an out-of-wedlock child. Salacious though it was, the case has zero public import. Yet this same Justice Department isn’t willing to use similar resources — and perhaps even trot out some novel legal theories — to go after the pervasive corporate wrongdoing that gave us the financial crisis and the Great Recession. (I should note that the Justice Department claims that it “will not hesitate” to prosecute any “institution where there is evidence of a crime.”)

Think back to the last time the federal government went after corporate crooks. It was after the Internet bubble. Jeffrey Skilling and Kenneth Lay of Enron were prosecuted and found guilty. Bernard Ebbers, the former chief executive of WorldCom, went to jail. Dennis Kozlowski of Tyco was prosecuted and given a lengthy prison sentence. Now recall which Justice Department prosecuted those men.

Amazing, isn’t it? George W. Bush has turned out to be tougher on corporate crooks than Barack Obama.

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