We, the taxpayers are the ones who are ACTUALLY the Ones PAYING THE SETTLEMENT TAB!!  (Well, of COURSE!- This is America, right?)

Once Max and Stacy take the Settlement deal apart, Howard Kunstler comes on to hypothesize over why the American public keeps putting up with this foo-ey.

Cognitive dissonance? Or is it a John Brown moment? The insurrection at Harper’s Ferry – which ultimately led to the U.S. Civil War…

When do the American people say “ENOUGH!”?

The Epic Farce Continues – US Attorneys General “Robosigned” A Foreclosure Settlement Which Does Not Exist

It is only appropriate, and so ironic, that a politically motivated settlement whose purpose is to squash any claims of pervasive defective document fraud (and contract law but just ask GM bondholders about that – it’s hardly news) is itself found to be… defective. American Banker reports that the reason why the terms of the so-called historic (just ask the Teleprompter in Chief) foreclosure settlement deal are not public yet, is “because a fully authorized, legally binding deal has not been inked yet.” Wait, so America’s cohort of AGs just all, pardon the pun, robosigned a piece of paper that does not exist? What next: there is a different Linda Green signature on every page of this yet to be produced document making a complete mockery of the rule of law?

Oh and anyone who had doubts that the settlement, which incidentally is paid for by you, dear taxpayers, in the form of bank bailout cash, of which the banks still owe over $10 billion in some capacity, was merely a political ploy to get taxpayers to fund Obama’s reelection campaign by subsidizing squatters with $2,000 per vote in the presidential race come November, using banks as intermediaries to make the administration seem oh so powerful and daring to take on the banks, who in fact are the only ones benefiting from this farce, by holding a gun to the head of the hold out AGs forcing them to sign a piece of paper that does not even exist, this should put all those doubts to rest.

American Banker has the story:

The implication of this is hard to say. Spokespersons for both the Iowa attorney general’s office and the Department of Justice both told American Banker that the actual settlement will not be made public until it is submitted to a court. A representative for the North Carolina attorney general downplayed the significance of the document’s non-final status, saying that the terms were already fixed.

Read the full story at zerohedge

Yves Smith gives her top 12 things to hate – we are completely on page with her on every one; especially the first which is very important. Since when does fraud have a simple price association?

David Davey gives a comprehensive look at what to expect in the settlement also very good and important for understanding what is really up here – and finally, Washington’s Blog delivers the sucker punch calling the settlement what it is – a stealth bailout.  As always so well documented there is no argument left.

If you truly want to understand what is happening here, we strongly recommend you read all three articles at their source. We’ve linked them here with excerpts to get you started.

Yves Smith at Naked Cap gives a blow by blow rundown of why exactly this settlement is BS; and gives her top 12 reasons here:

The Top Twelve Reasons Why You Should Hate the Mortgage Settlement

As readers may know by now, 49 of 50 states have agreed to join the so-called mortgage settlement, with Oklahoma the lone refusenik. Although the fine points are still being hammered out, various news outlets (New York Times, Financial Times, Wall Street Journal) have details, with Dave Dayen’s overview at Firedoglake the best thus far.

The Wall Street Journal is also reporting that the SEC is about to launch some securities litigation against major banks. Since the statue of limitations has already run out on securities filings more than five years old, this means they’ll clip the banks for some of the very last (and dreckiest) deals they shoved out the door before the subprime market gave up the ghost.

The various news services are touting this pact at the biggest multi-state settlement since the tobacco deal in 1998. While narrowly accurate, this deal is bush league by comparison even though the underlying abuses in both cases have had devastating consequences.

The tobacco agreement was pegged as being worth nearly $250 billion over the first 25 years. Adjust that for inflation, and the disparity is even bigger. That shows you the difference in outcomes between a case where the prosecutors have solid evidence backing their charges, versus one where everyone know a lot of bad stuff happened, but no one has come close to marshaling the evidence.

The mortgage settlement terms have not been released, but more of the details have been leaked:

The Top 12 Reasons Why You Should Hate the Mortgage Settlement

Next for a good thorough read through of the blow by blows, be sure to read this piece by FireDogLake’s David Daven.

49-State Foreclosure Fraud Settlement Will Be Finalized Thursday

Forty-nine states, every one but Oklahoma, as well as federal regulators will participate in a foreclosure fraud settlement that will release the five biggest banks (Wells Fargo, Citi, Ally/GMAC, JPMorgan Chase and Bank of America) and their mortgage servicing units from liability for robo-signing and other forms of servicer abuse, in exchange for $25 billion in funding for legal aid, refinancing, short sales, restitution for wrongful foreclosures and principal reduction for underwater borrowers. The announcement will be made on Thursday.

This settlement arises from multiple abuses found in the servicing of loans and the foreclosure process over the past several years. At the height of the housing bubble, banks sliced and diced mortgages and traded them with little regard for the rules following land recording or securitization to such a sloppy extent that they lost track of the true owner on potentially millions of homes. To cover up for this massive failure, banks and their servicing units have been found to have routinely forged, back-dated and fabricated documents at county recorder offices and state courts across the country. Furthermore, they employed “robo-signers,” who signed hundreds of thousands (if not millions) of documents and affidavits without any knowledge of the underlying mortgages. In addition, investigations uncovered massive servicing abuses, including illegal fees charged to borrowers, putting borrowers into foreclosure at the same time as they were working out loan modifications, failing to honor previous settlements where promises were made on modifications, and countless other errors that maximized servicer profits and gouged homeowners. There are also cases of wrongful foreclosures where homeowners have been turned out of their homes without just cause, and servicer-driven foreclosures, where servicers illegally added late fees and applied payments inaccurately, pushing the homeowner into foreclosure. This is but a smattering of the examples of foreclosure fraud and servicer abuse found in a series of interlocking investigations, court depositions, reviews of documents in registers of deeds offices, and homeowner testimonials.

The deal caps a 16-month process that had several fits and starts, and closed with the final holdouts, New York and California, coming to terms. The deal will release claims from state Attorneys General, but individual homeowners retain private rights of action to sue over foreclosure fraud and other abuses. As part of the settlement, states will get a fixed amount in hard dollars that would go to fund legal aid services. “This will get a lawyer for everyone facing

49 States Foreclosure Fraud Settlement Will be Finalized Thursday

Next we move on to one of most trusted and well researched sources, Washington’s Blog:

Mortgage Settlement Is Just Another Stealth Bank Bailout

Yet Another Bailout for the Giant Banks … Homeowners Get Hosed Again

The 50-state settlement with the banks (Oklahoma didn’t sign, but supports letting the banks go scot-free) over mortgage fraud is a stealth bank bailout, according to many top observers. See this, this, this, this, this, this, this and this.

This is par for the course … All of Obama’s previous “mortgage relief” programs have really been stealth bank bailouts which screwed the homeowner. And see this.

For example:

Most independent experts say that the government’s housing programs have been a failure. That’s too bad, given that the housing slump is now … worse than during the Great Depression.

Indeed, PhD economists John Hussman and Dean Baker, fund manager and financial writer Barry Ritholtz and New York Times’ writer Gretchen Morgenson say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama’s foreclosure relief programs as being backdoor bailouts for the banks. (See this, this, this and this).

Mortgage Settlement is Just Another Stealth Bank Bailout

There’s plenty of noise in the MSM about the ‘historic’ settlement; but until you’ve read these three pieces, we don’t think you have the story by a far cry.

And be sure to read the earlier post here which contains the DOJ press release and notes from LivingLies on protecting your rights as a homeowner in spite of the ‘historic’ settlement.

 
Patti Griffin says it better than all of the specifics…

Here is the DOJ Press Release on the Bank Bailout, er, ‘Settlement’: We warn you it is heavy with feel good language that may make you want to hurl, but try to just read through it and pay close attention to paragraph 16 and the bolded sections there (our emphasis added).

As some 40 plus Attorneys General consider taking settlements from the big banks; the indictment is a small spark; but it is a spark.

Still leaving the people to fend for themselves at this point, however.

Robo-Signing Forgery Charge Hits First Top Executive In Financial Crisis

For the first time since the start of the financial crisis, a senior executive has been indicted on criminal charges and faces jail. The forgery charges against a mortgage processing executive come as the nation’s largest banks attempt to close the books on a civil investigation into widespread document fraud and could spark further federal criminal cases.

A grand jury in Missouri handed up the 136-count indictment late last week charging Georgia-based DocX — a subsidiary of the massive mortgage processor Lender Processing Services — and its founder and former president Lorraine O. Brown, with forgery. The indictment alleges that DocX employees fabricated signatures on hundreds of real estate documents, some used in foreclosures.

“This is the first time any grand jury in the country has indicted a corporation or a high-level executive at a corporation for ‘robo-signing,’” Missouri Attorney General Chris Koster told The Huffington Post. “The grand jury is alleging that the documents have false signatures on them, that the notarizations are fraudulent and that it was all done with an intent to deceive. If that’s true, it makes the [foreclosure] documents forgeries.”

A lawyer for DocX did not immediately return a call seeking comment. A lawyer for Brown told The New York Times she intended to plead not guilty and had no criminal intent.

The indictment stands in sharp contrast to the settlement shaking out over so-called “robo-signing” allegations between the state attorneys general and five of the nation’s largest banks. So far, more than 40 states have agreed to what could amount to a $25 billion settlement with Citigroup, Bank of America, Wells Fargo, JPMorgan Chase and Ally Financial over allegations they forged documents and incorrectly foreclosed on homeowners.

As those settlement negotiations turn to questions of whether banks should receive immunity from future charges of fraud, in Missouri Brown faces up to seven years in prison as well as fines if convicted, according to Koster. “The broader question is, ‘Did the banking system begin to move so fast that they lapsed into criminality? And if that occurred, do we as Americans care?’ I believe the unquestionable answer to that is yes absolutely we care.”

“You’re beginning to see criminal prosecution here of outright fraud,” said Ira Rheingold, executive director and general counsel of the National Association of Consumer Advocates, which lobbies against deceptive business practices. “I think it may foreshadow some other cases and I wouldn’t be surprised if you see some federal indictments.”

Read the full story.

And there are even government funded non profits like NACA out there ‘defending the homeowner’; yet, to date the devestation continues. Apparently unable to be abated.

What we note, with now, some perspective, is that nowhere, to date, so far as we can see…

Has anyone posted foreclosure scam warnings.

you know, those foreclosures being performed by
Third party servicers, and stand in ‘Trustees’ for various
UNnamed in the documents ‘Lenders’ in foreclosure proceedings.

So where are the warnings that say

Bank of New York Mellon [district bank for NYFED]

As Trustee for Trust bla bla pass through certificates yada yada.

As ‘Beneficiary’ to the ‘proceeds’ of the Security Instrument’ you signed on bla bla date at bla bla place has the right to call you, due and payable for a ‘loan’ which was funded through investment chicanery and through your signature made ‘real’ such that a security instrument and a promise to pay note were created and disbursed, out into the commercial realm at a general and specific profit to that commercial realm as they saw fit and appropriate; and then, after having profited from such endeavors, did they  see fit to further encumber and burden their prey as to impose drastic measures and sanctions and theft of houses to which they had no claims and in which they had no real honest collateral interest.

Or to put it more plainly, they had engineered a financial transaction in which they personally benefited, contributed nothing and engineered a profit center for others under whose control they operated.

Because none of it happened.

But oh poor wary consumer sans citizen

There was no loan.

There was no ‘securitization’

There was the writing down of credit
upon your collateral / chattel position

Such that your signature upon a promissory note
became the foundation of a wholy other
creature of
“finance”.

Beware the foreclosure rescue scam!

But whatever you do,

Do NOT beware the foreclosure scam.

Because that, dear friend,

is what is real.

Because how could we not, with comments like these:
Tue, 02/07/2012 – 16:56 | 2135685 AldousHuxley
AldousHuxley’s picture

If Ron Paul was a president of another country leading the efforts to put the gold standard back and move away from a dollar, yes US would deem him a terrorist and send him troops to kill him off.

Wikipedia (http://en.wikipedia.org/wiki/United_States_of_Africa)

In 1986, 2000, and the months prior to the 2011 Libyan civil war, Gaddafi announced plans for a unified African gold dinar currency, to challenge the dominance of the US dollar and Euro currencies. The African dinar would have been measured directly in terms of gold, which would mean a country’s wealth would depend on how much gold it had rather than how many dollars it traded, allowing a greater sharing of the wealth and self-determination in Africa. This has led some Africans to believe that, because it may have disrupted the dollar-dominated world economy, this may have been a reason for NATO’s 2011 military intervention in Libya against Gaddafi

Saddam tried to move away from dollar to Euro and got killed

Iran trying to move away from dollar and US is trying to kill the country too

http://en.wikipedia.org/wiki/Iranian_rial

It is all about money….more importantly the control over currency of exchange.

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Tue, 02/07/2012 – 17:25 | 2135825 BoNeSxxx
BoNeSxxx’s picture

You don’t have to leave our own shores for examples of this AlHux… (as you well know).

Lincoln, Kennedy,… they both tried it and met with similar ends.

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Tue, 02/07/2012 – 19:27 | 2136275 Pants McPants
Pants McPants’s picture

Lincoln?  I’d like to see a reference!

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Tue, 02/07/2012 – 20:22 | 2136417 pods
pods’s picture

FWIW:

“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe.”

Abraham Lincoln

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Tue, 02/07/2012 – 20:47 | 2136478 TruthInSunshine
TruthInSunshine’s picture

http://uts.cc.utexas.edu/~wbova/fn/history/greenbacks.htm

Abraham Lincoln and his Treasury Secretary, Salmon P. Chase (Chase Bank later named after him) went to the New York bankers “and applied for loans to the Government to carry on the [Civil] war; the bankers replying, ‘Well, war is a hazardous business, but we can let you have it [the loans] at from 24 percent to 36 percent.’” (Dr. R.E. Search)

Appleton Cyclopedia (1861), page 296, states: “The money kings wanted 24 percent to 36 percent interest for loans to our government to conduct the Civil War.” (qtd. in Search’s book)

President Lincoln and Secretary Chase were outraged at the usurious interest, and refused the offer.

Lincoln wrote to an old friend, Colonel Dick Taylor in Chicago, and asked for advice. His friend told him to “get Congress to pass a bill authorizing the printing of full legal tender treasury notes or greenbacks.” (qtd. in Search’s book)

60 million dollars of full legal tender greenbacks were issued. “All were taken at par and never appreciably fell below par at any time…” (Dr. R.E. Search)

Lincoln referred to these greenbacks as “the greatest blessing the people of this Republic [have] ever had.” (qtd. in Search’s book)

But as soon as Lincoln began issuing the greenbacks, “the bankers and money changers saw that unless they could stop that sort of thing they were ‘sunk’ as far as ever being able to issue money again themselves.” (Dr. R.E. Search)

The banksters “had been able to fool and hoodwink England, and keep her in bondage for 168 years, and they wanted very much to continue, and to add the balance of the world to their conquest; making the people everywhere economic serfs, working for them.” (ibid.)

From the London Times:

If this mischievous financial policy [greenbacks]… should become endurated down to a fixture, then that government will furnish its own money without cost. It will pay off its debts and be without debts. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe. [qtd. in Search's book]

The Bank of England/Rothschilds (do not be deceived by name, “Bank of England”; Bank of England was/is a private bank) issued, and distributed to American banksters, the following document, quoted in part below:

The Hazard Circular

Slavery is likely to be abolished by the war power, and chattel slavery abolished. This, I and my European friends are in favor of, for slavery is but the owning of labor, and carries with it the care of labor, while the European plan, led on by England, is that capital shall control labor by controlling wages.

The great debt that capitalists will see to it is made out of the [Civil] war must be used to control the value of money. To accomplish this, the Government bonds must be used as a banking basis.

We are now waiting for the Secretary of the Treasury of the United States to make this recommendation. It will not do to allow greenbacks, as they are called, to circulate as money any length of time, as we cannot control that, but we can control the bonds and through them the bank issues. [qtd. in Dr. Search's book]

###

OH but were were going to post the actual story these comments were posted under!?  RIGHT!!!  Here you go…

Believe In A Return To The Gold Standard? You Are Now Officially An Extremist According To The FBI

Submitted by Tyler Durden on 02/07/2012 16:15 -0500

• FBI
• Greece
• Reuters

Just when we thought the US could not sink any further in its usurpation of civil rights, here comes the FBI to advise all those who tend to think that the broken economic model of the past century is the cause for the global insolvency, that wanton fiat diluation and reckless debt issuance does not ‘fix’ the problem of uber-leverage, and that the gold standard is the proper way to return to monetary stability, will henceforth be considered extremists. From Reuters: “Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday. These extremists, sometimes known as “sovereign citizens,” believe they can live outside any type of government authority, FBI agents said at a news conference.” And the most epic line ever written: “The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.” So… the US did not go bankrupt by going off the gold standard? But why did the US “go bankrupt” then? We are confused.

Undesirable #1:

The insanity continues:

Routine encounters with police can turn violent “at the drop of a hat,” said Stuart McArthur, deputy assistant director in the FBI’s counterterrorism division.

 

“We thought it was important to increase the visibility of the threat with state and local law enforcement,” he said.

 

In May 2010, two West Memphis, Arkansas, police officers were shot and killed in an argument that developed after they pulled over a “sovereign citizen” in traffic.

 

Last year, an extremist in Texas opened fire on a police officer during a traffic stop. The officer was not hit.

 

Legal convictions of such extremists, mostly for white-collar crimes such as fraud, have increased from 10 in 2009 to 18 each in 2010 and 2011, FBI agents said.

 

“We are being inundated right now with requests for training from state and local law enforcement on sovereign-related matters,” said Casey Carty, an FBI supervisory special agent.

 

FBI agents said they do not have a tally of people who consider themselves “sovereign citizens.”

…

Sovereign members often express particular outrage at tax collection, putting Internal Revenue Service employees at risk.

Maybe it is not too late to be a beggar in Greece. At least there one is allowed to think anything as to why the country is completely broke and the population is living under “absolute poverty” without fear of being deemed a “sovereign citizen” and getting arrested at the drop of a hat.

And for those who still care about facts, below is a chart of global debt since the world formally and terminally went off the gold standard back on August 15, 1971:

###

And just for kicks and giggles, one last comment:

CrockettAlmanac.com’s picture

No one is a sovereign citizens as citizenship is defined by the state and the state reserves sovereignty for itself. Each of us is rather a sovereign individual.

We labor under the tender mercies of the state. Some believe that state sovereignty (which supposedly derives its power from the consent of self owned individuals and exists to protect the sovereignty of those individuals) is superior to individual sovereignty. Such a belief can not be sustained logically.

Others obey the state simply out of fear. One need not believe in the just nature of the state in order to feel compelled to pay taxes and submit to regulation.

But one remains a sovereign individual in any case. Each person has a right to control one’s own body and property. Criminals both in and out of government work ceaselessly to deny us these rights. But the rights remain as just and valid expressions of natural law no matter who attacks them.

No settlement. Full criminal prosecution – and that starts with investigations. So, we guess that means we have to fire Eric Holder and Lanny Breuer so we can claw back an actual Department of Justice to do the job…

Foreclosure Expert Confirms Mortgages Pledged Multiple Times, Not Actually Securitized, Document Problem Is Really a System of “Push-Button Fraud”

Yesterday, I showed that mortgages were fraudulently pledged to multiple buyers at the same time.

Today, foreclosure expert Neil Garfield (former investment banker, trial lawyer and board member of several financial institutions) confirms this, explains that the loans were not actually securitized, and the whole “sloppy paperwork” excuse is really an attempt to explain away a system of push-button fraud:

The game was to move money under a scheme of deceit and fraud. First sell the bonds and collect the money into a pool. Second take your fees, third take what’s left and get it committed into “loans” (which were in actuality securities) sold to homeowners under the same false pretenses as the bonds were sold to investors. By controlling the flow of funds and documentation, the middlemen were able to sell, pledge and otherwise trade off the flow of receivables several times over — a necessary complexity not only for the profit it generated, but to make it far more difficult for anyone to track the footprints in the sand.

If the loans had actually been securitized, the issue would not arise. They were not securitized. This was a mass illusion or hallucination induced by Wall Street spiking the punch bowl. The gap (second tier yield spread premium) created between the amount of money funded by investors and the amount of money actually deployed into “loans” was so large that it could not be justified as fees. It was profit on sale from the aggregator to the “trust” (special purpose vehicle). It was undisclosed, deceitful and fraudulent.

Thus the “credit enhancement” scenario with tranches, credit default swaps and insurance had to be created so that it appeared that the gap was covered. But that could only work if the parties to those contracts claimed to have the loans. And since multiple parties were making the same claim in these side contracts and guarantees, counter-party agreements etc. the actual documents could not be allowed to appear nor even be created unless and until it was the end of the road in an evidential hearing in court. They used when necessary “copies” that were in fact fabricated (counterfeited) as needed to suit the occasion. You end up with lawyers arriving in court with the “original” note signed in blue (for the desired effect on the Judge) when it was signed in black — but the lawyer didn’t know that. The actual original is either destroyed (see Katherine Porter’s 2007 study) or “lost.” In this case “lost” doesn’t mean really lost. It means that if they really must come up with something they will call an original they will do so.

So the reason why the paperwork is all out of order is that there was no paperwork. There only entries on databases and spreadsheets. The loans were not in actuality assigned to any one particular trust or any one particular bond or any one particular individual or group of investors. They were “allocated” as receivables multiple times to multiple parties usually to an extent in excess of the nominal receivable itself. This is why the servicers keep paying on loans that are being declared in default. The essential component of every loan that was never revealed to either the lenders (investors) nor the borrowers (homeowner/investors) was the addition of co-obligors and terms that neither the investor nor the borrower knew anything about. The “insurance” and other enhancements were actually cover for the intermediaries who had no money at risk in the loans, but for the potential liability for defrauding the lenders and borrowers.

The result, as anyone can plainly see, is that the typical Ponzi outcome — heads I win, tails you lose.

***

So the paperwork was carefully created and crafted to cover the tracks of theft. Most of the securitization paperwork remains buried such that it takes search services to reach any of them. The documents that were needed to record title and encumbrances was finessed so that they could keep their options open when someone made demand for actual proof. The documents were not messed up and neither was the processing. They were just keeping their options open, so like the salad oil scandal, they could fill the tank that someone wanted to look into.

###

 

Neil Garfield’s piece as linked from above:

WHY THE PAPERWORK APPEARS “SLOPPY”

The essential component of every loan that was never revealed to either the lenders (investors) nor the borrowers (homeowner/investors) was the addition of co-obligors and terms that neither the investor nor the borrower knew anything about. The “insurance” and other enhancements were actually cover for the intermediaries who had no money at risk in the loans, but for the potential liability for having defrauded the lenders and borrowers.

After centuries of lending money and preparing loan documents it seems that the least likely suspect for screwing up the paperwork on tens of millions of “loans” would be the Banks themselves. Yet that is what occurred. The purpose of this article is to show that it was not sloppy, it was intentional. And I will tell you why it was intentional.

The much expected announcement that after a thorough review they have determined the paperwork is in order is a last-ditch desperate effort to block inquiries into the mortgage creation process and the sale of “mortgage bonds” to investors. They attempted to emulate the government’s PR stunt last year with the “stress test” forgetting that they are private companies in litigation subject to discovery. They have now opened the door to discovery, which is the last thing they wanted. Litigants can now question who was involved in this “review”, what they did, from they received information and assurances, and what documents they looked at. They can ask what was the basis upon which they concluded that they could proceed with foreclosures?

The documents were not sloppy and they were not processed sloppily. They were created and treated exactly as planned. They did it because they thought they could get away with it. They had enough money to buy off any legislator or Judge, or so they thought. But it isn’t working out that way. It’s not the first time these mega-banks have stepped on a land mine and it won’t be the last, as long as we allow them to grow into such behemoths such that that ascribe to themselves the qualities of government or God.

The game was to move money under a scheme of deceit and fraud. First sell the bonds and collect the money into a pool. Second take your fees, third take what’s left and get it committed into “loans” (which were in actuality securities) sold to homeowners under the same false pretenses as the bonds were sold to investors. By controlling the flow of funds and documentation, the middlemen were able to sell, pledge and otherwise trade off the flow of receivables several times over — a necessary complexity not only for the profit it generated, but to make it far more difficult for anyone to track the footprints in the sand.

If the loans had actually been securitized, the issue would not arise. They were not securitized. This was a mass illusion or hallucination induced by Wall Street spiking the punch bowl. The gap (second tier yield spread premium) created between the amount of money funded by investors and the amount of money actually deployed into “loans” was so large that it could not be justified as fees. It was profit on sale from the aggregator to the “trust” (special purpose vehicle). It was undisclosed, deceitful and fraudulent.

Thus the “credit enhancement” scenario with tranches, credit default swaps and insurance had to be created so that it appeared that the gap was covered. But that could only work if the parties to those contracts claimed to have the loans. And since multiple parties were making the same claim in these side contracts and guarantees, counter-party agreements etc. the actual documents could not be allowed to appear nor even be created unless and until it was the end of the road in an evidential hearing in court. They used when necessary “copies” that were in fact fabricated (counterfeited) as needed to suit the occasion. You end up with lawyers arriving in court with the “original” note signed in blue (for the desired effect on the Judge) when it was signed in black — but the lawyer didn’t know that. The actual original is either destroyed (see Katherine Porter’s 2007 study) or “lost.” In this case “lost” doesn’t mean really lost. It means that if they really must come up with something they will call an original they will do so.

So the reason why the paperwork is all out of order is that there was no paperwork. There only entries on databases and spreadsheets. The loans were not in actuality assigned to any one particular trust or any one particular bond or any one particular individual or group of investors. They were “allocated” as receivables multiple times to multiple parties usually to an extent in excess of the nominal receivable itself. This is why the servicers keep paying on loans that are being declared in default. The essential component of every loan that was never revealed to either the lenders (investors) nor the borrowers (homeowner/investors) was the addition of co-obligors and terms that neither the investor nor the borrower knew anything about. The “insurance” and other enhancements were actually cover for the intermediaries who had no money at risk in the loans, but for the potential liability for defrauding the lenders and borrowers.

The result, as anyone can plainly see, is that the typical Ponzi outcome — heads I win, tails you lose. With that, Wall Street was allowed to suck trillions out of an economy that could not afford it. That $5 trillion surplus left when Clinton was in office was just too darn tempting for Wall Street. They just had to have it. And they got it. So the paperwork was carefully created and crafted to cover the tracks of theft. Most of the securitization paperwork remains buried such that it takes search services to reach any of them. The documents that were needed to record title and encumbrances was finessed so that they could keep their options open when someone made demand for actual proof. The documents were not messed up and neither was the processing. They were just keeping their options open, so like the salad oil scandal, they could fill the tank that someone wanted to look into.

The Obama administration is making a giant error in relying on the existing finance infrastructure to fix itself. This fraud runs so deep that practically everyone at their kitchen table feels it. The loss should fall on those who created it and the victims should be made whole, not because it is a reward but because that is what we do in a nation laws — take people who were victims of wrong behavior and get as much restitution as can be reasonably accomplished. Quantitative easing is only going to encourage Wall Street, creating yet another pool of cash that they will not be able to resist. Then what?

This is not an issue of simple robo-signing. This is about system and massive fraud which was at the basis of the entire mortgage and financial scandal. Read this entire article from Ellen Brown so you understand clearly what the real hidden fraud story that is STILL in place

A foreclosure settlement between five major banks guilty of “robo-signing” and the attorneys general of the 50 states is pending for Monday, February 6th; but it is still not clear if all the AGs will sign. California was to get over half of the $25 billion in settlement money, and California AG Kamala Harris has withstood pressure to settle.

That is good. She and the other AGs should not sign until a thorough investigation has been conducted. The evidence to date suggests that “robo-signing” was not a mere technical default or sloppy business practice but was part and parcel of a much larger fraud, the fraud that brought down the whole economy in 2008.  It is not just distressed homeowners but the entire economy that has paid the price, resulting in massive unemployment and a shrunken tax base, throwing state and local governments into insolvency and forcing austerity measures and cutbacks in government services across the nation.

The details of the robo-signing scam were spelled out in my last article, here.  The robo-signing fraud and its implications are expanded on below.

Why All the Robo-signing?

Over half the homes in the country are now held in the name of an electronic database called MERS—Mortgage Electronic Registration Services. MERS is a smokescreen concealing the fact that these mortgages were sold to trusts that sold them to investors.  The mortgages were chopped into pieces and sold as “mortgage-backed securities” (MBS), which traded in a supposedly liquid market.  That meant the investors could sell them in the money market at any time on a day’s notice.  Yale economist Gary Gorton gives this example:

Suppose the institutional investor is Fidelity, and Fidelity has $500 million in cash that will be used to buy securities, but not right now. Right now Fidelity wants a safe place to earn interest, but such that the money is available in case the opportunity for buying securities arises. Fidelity goes to Bear Stearns and “deposits” the $500 million overnight for interest. What makes this deposit safe? The safety comes from the collateral that Bear Stearns provides. Bear Stearns holds some asset‐backed securities [with] a market value of $500 millions. These bonds are provided to Fidelity as collateral. Fidelity takes physical possession of these bonds. Since the transaction is overnight, Fidelity can get its money back the next morning, or it can agree to “roll” the trade. Fidelity earns, say, 3 percent.

That is where the robo-signing came in.  Foreclosure defense attorneys armed with the tools of discovery have discovered that robo-signing — involving falsified signatures assigning mortgages back to the trusts allegedly owning them — occurred not just occasionally or randomly but in virtually every case.  Why?  Because the mortgages had to be left free to be bought and sold on a daily basis in the money market by investors.  The investors are not interested in making 30 year loans.  They want something short-term with immediate rights of withdrawal like a deposit account.

The Hazards of Borrowing Short to Lend Long 

The problem is that when panicked investors all exercise that right at once, there is no cheap funding available to back the 30 year mortgage loans, rendering the banks insolvent.  And that is what happened on September 15, 2008, when Lehman Brothers, a major investment bank like Bear Stearns, went bankrupt.

According to Representative Paul Kanjorski, speaking on C-SPAN in January 2009, the collapse of Lehman Brothers precipitated a $550 billion run on the money market funds.  A report by the Joint Economic Committee pointed to the fact that the $62 billion Reserve Primary Fund had “broken the buck” (fallen below a stable $1 per share) due to its Lehman investments.  The massive bank run that followed was the dire news that Treasury Secretary Henry Paulson presented to Congress behind closed doors, prompting Congressional approval of Paulson’s $700 billion bank bailout despite deep misgivings.

The sleight of hand that brought the banking system down was that the mortgages backing the money market were supposedly held by trusts that had lent money to homeowners for 15 years or 30 years.  It was the classic “borrowing short to lend long,” a form of shell game in which banks have engaged for hundreds of years, routinely precipitating bank panics and bank runs when the depositors or the investors all pull their short-term money out at the same time.

The Shadow Banking System Is Still Unregulated 

Periodic bank panics were averted in the conventional banking system only when the government agreed to insure the deposits of individual depositors in 1933.  But FDIC insurance covered only $100,000 (now $250,000), and large institutional investors had far more than that to invest.  The shadow banking system, in which deposits were “insured” with mortgage-backed securities, developed in response.  But the shadow banking system is unregulated and is just as prone to another collapse today as it was in 2008.  The Dodd-Frank banking “reforms” barely touched it.  As noted in an article titled “Risky Debt Use on Repo Market Hits 2008 Levels” in Friday’s Financial Times:

In the repo market, banks pledge their securities as collateral for short-term loans from money managers and other investors.  The market played a key role in the build-up to the 2008 financial crisis. Banks used toxic assets, such as repackaged subprime loans, to secure trillions of dollars worth of cheap funding.

When the US housing bubble burst, the banks’ trading partners refused to accept such securities as collateral and the repo market rapidly contracted.

However, a study by Fitch Ratings says the proportion of bundled debt being used as security in repo transactions has returned to pre-crisis levels.

Using the repackaged loans can increase risk in the repo market, the rating agency says. This is because the securities may be prone to sudden pullbacks such as the one experienced in 2008.

We could be looking at another banking collapse at any time; and to fix the problem, we first need to know what is going on.  The AGs should not agree to drop the curtain on the robo-signing scandal until all the evidence is on the table.  It is not just a matter of punishing the guilty; it is a matter of a banking scheme based on fraud, one that ultimately does not work and has jeopardized the homes, savings and investments of the public not just recently but for hundreds of years.

The Way Out 

There is another way to design a banking system.  The deposits of large institutional investors do not need to be backed by sliced and diced pieces of our homes to be “safe” (something that has proven not to be safe at all).  The large institutional investors seeking safety are largely “us” – the pension funds and mutual funds in which we have stored our savings and on which we rely for support when we can no longer work.  Hundreds of years of history have demonstrated that the only reliable guarantor is the government itself.

Our pension funds and mutual funds need a government guarantee just as much as our individual deposits do. But we don’t want to be guaranteeing the gambling and derivatives schemes of too-big-to-fail, for-profit Wall Street banks playing fast and loose with our money. Banking and credit need to be public utilities, operated for the benefit of the public in plain sight of the public.