Tag Archives: Market Ticker

Foreclosure Fraud Just the Tip of the Iceberg

12 Tuesday Oct 2010

Posted by in bailout, Congress, economy, Financial Crisis, financial reform, financial regulation, Foreclosures, Justice Department, Obama administration, special interests, too big to fail, Wall Street

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Dylan Ratigan, Ohio Secretary of State Jennifer Brunner, and Karl Denninger of The Market Ticker unravel foreclosure fraud:

To reiterate, the fraud in foreclosures that we’re seeing now is just the tip of the iceberg. The purpose is to try and cover up, and cover for, the fraud in the mortgage process all the way back to the origination of the mortgages, which were then packaged into securities and fraudulently sold to investors as AAA quality, a rating gained by paying off the ratings agencies. As our parents always told us, one lie requires another one to cover up the first one, which requires another lie to cover up the second one, and so on, and so on, and…….

In my opinion, that’s why the Senate tried to sneak through the legislation that President Obama vetoed—it would have given the big banks protection from liability in this entire mess. As an aside–again just my opinion– but the only reason the president vetoed the bill was because of the attention it received and the light that was shone on its alleged “unintended consequences” (and if you’ll buy that….) My cynical nature when it comes to politicians tells me that “sending the bill back for modifications” translates into, ‘We’ll try again when the heat’s off.’

It’s also why, according to David Axelrod, the hope in the White House is that “this moves rapidly and that this gets unwound very, very quickly.” And why the White House opposes a national moratorium on foreclosures. A moratorium would give investigators and especially some 40 states’ attorneys general time to delve back into fraud and deceit at every level of the process

As Mr. Denninger explained, the only remedy is to force the big banks to buy back the toxic securities that they sold to investors under false pretenses. They can’t do that, which means Chase, BofA, et al, are insolvent. Actually, they’re insolvent now but for the phony profits from peddling this garbage to unsuspecting investors.

There is a provision in the financial reform legislation for resolution authority, that is breaking up large financial institutions that pose a “systemic risk” to the entire economy. Will Congress use it or will they do what they have done in the past and bail out their Wall Street cronies and contributors—again. If Republicans take control of Congress will they hold true to their campaign rhetoric of “no more bailouts” or will they dance to the tune of their big donors on Wall Street?

We may soon find out.

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Jail the Banksters!

14 Wednesday Apr 2010

Posted by in bailout, economy, Financial Crisis, financial reform, Politics, too big to fail, Wall Street

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The recent revelations about the goings-on at Washington Mutual bring back an old question about our friends the banksters. When is somebody going to jail? How about just charged and indicted? Something.

“Officials at the failed banking operations of Washington Mutual Inc. securitized substantial volumes of risky, fraudulent loans in the run-up to the financial meltdown despite repeated internal warning signs, according to a Senate probe.

The subcommittee has obtained documents showing that “at a critical point Washington Mutual included loans in its securities because they were likely to suffer a high rate of default, and they failed to disclose that to the buyers,” Sen. Levin said. “They also allowed loans that had been identified as fraudulent to be sold to buyers, again without alerting buyers when the fraud was discovered.”

Isn’t fraud a crime? Why are these executives testifying before Congress and not in a court of law? But then again, where else but the Wall Street bizarro world is this possible ?:

“March 26 (Bloomberg) — JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and UBS AG were among more than a dozen Wall Street firms involved in a conspiracy to pay below-market interest rates to U.S. state and local governments on investments, according to documents filed in a U.S. Justice Department criminal antitrust case.

A government list of previously unidentified “co- conspirators” contains more than two dozen bankers at firms also including Bank of America Corp., Bear Stearns Cos., Societe Generale, two of General Electric Co.’s financial businesses and Salomon Smith Barney, the former unit of Citigroup Inc., according to documents filed in U.S. District Court in Manhattan on March 24.

…None of the firms or individuals named on the list has been charged with wrongdoing.”

Or what about this at Lehman Brothers?

“In the years before its collapse, Lehman used a small company — its “alter ego,” in the words of a former Lehman trader — to shift investments off its books.

The firm, called Hudson Castle, played a crucial, behind-the-scenes role at Lehman, according to an internal Lehman document and interviews with former employees. The relationship raises new questions about the extent to which Lehman obscured its financial condition before it plunged into bankruptcy.”

Isn’t that pretty much what Lay, Skilling, and Fastow were doing at Enron? So why no perp walks yet for the former execs at Lehman?

In the JPMorgan–Jefferson County scam, the crooked politicians went to jail, the banksters took the money and ran. Somebody say double standard?

Karl Denninger at Market Ticker nails it:

“The only deterrent available is to start throwing the scammers in prison.  All of them.  We can start with the people at WaMu and Lehman, then go down the list and for each and every firm that cooked its balance sheet, nailing them under SarBox  [Sarbanes-Oxley] as well.  While we’re at it jail every bank executive involved in crooked derivatives deals with municipal and state governments, starting with Jefferson County in Alabama.”

Amen.

Geithner and the Lehman “Stress Tests”

13 Saturday Mar 2010

Posted by in bailout, Financial Crisis, Politics, Wall Street

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Timmy’s got more trouble. In a newly-released examiner’s report about the bankruptcy at Lehman Brothers, the New York Federal Reserve Bank (NYFRB), which was headed at the time by Treasury Secretary Geithner, is implicated as being in collusion with Lehman management’s efforts to keep their true financial condition hidden.

Here’s just one area of, shall we say, questionable behavior. The so-called “stress tests”:

“After March 2008 when the SEC and FRBNY began onsite daily monitoring of Lehman, the SEC deferred to the FRBNY to devise more rigorous stress-testing scenarios to test Lehman’s ability to withstand a run or potential run on the bank. The FRBNY developed two new stress scenarios: “Bear Stearns” and “Bear Stearns Light.” Lehman failed both tests. The FRBNY then developed a new set of assumptions for an additional round of stress tests, which Lehman also failed. However, Lehman ran stress tests of its own, modeled on similar assumptions, and passed. It does not appear that any agency required any action of Lehman in response to the results of the stress testing.”

Karl Denninger at Market Ticker:

“So let’s see what we got here.  They ran two sets of stress tests and the firm failed both.  Not satisfied with the results they then designed a third set, which the firm also failed (we can reasonably presume the third had less stringent requirements than the other two!)

Instead of applying any of these three, FRBNY, which was run by one Mr. Timothy Geithner… instead took Lehman’s word that all was ok and did nothing.

Wait a minute. In the spring of 2009 we were told that all the big banks ran “Stress Tests” of Geithner’s design.  But Treasury didn’t actually run them and didn’t actually get and process the data – they told the banks to do so.

Uh, that’s exactly what Lehman did, right?  And Lehman passed its own “internally computed” stress test but failed all three of the externally-computed ones.

Do you still accept that all these other banks are solvent?”

Yves Smith at naked capitalism has the solution:

“It is time for Geithner to go. He is not fit to serve as Treasury secretary.”

Freddie to Stop Buying Interest Only Mortgages, Finally

27 Saturday Feb 2010

Posted by in Financial Crisis

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Karl Denninger at Market Ticker on Freddie Mac’s announcement that they are finally going to stop buying and securitizing interest only mortgages:

“Freddie (and Fannie) had no business getting involved in these toxic self-immolation devices in the first place as they are intended to do exactly one thing – asset-strip the borrower by forcing him or her to come back after the interest-only period and refinancing.

In an environment where home prices are not advancing, however, such refinancing is of course impossible, which leads immediately to foreclosure…Say thanks to the government – both past and present administrations – for conspiring with our banks to literally fleece the American Citizen for the benefit of Wall Street.”

And the fleecing will continue, thanks to the Christmas Eve blank check from the Treasury Department.