Helping Homeowners In Michigan
Archive for December 2nd, 2010
The SEC: Never A Criminal Charge Or Admission
December 2nd, 2010 | 
Author:
U.S. securities regulators are in preliminary discussions with several major Wall Street banks aimed at reaching settlements to resolve a broad investigation of their sales of mortgage-bond deals that helped unleash the financial crisis, according to people familiar with the matter.
The probe involves complex pools of mortgages and other loans called collateralized debt obligations, or CDOs, slices of which were sold to different investors.
Yeah, just like Goldman.
That’s what this is about – the same CDOs that Goldman, if you remember, sold off to investors without disclosing that the way it came to be was due to the request of a hedge fund that wanted to be short the underlying credit.
That is, they sold something to people who were betting on the performance of that thing without disclosing that the purpose of the creation of the security was so another entity could take a position against performance of that same thing.
There was also the issue of whether or not that other hedge fund selected the securities to be included.
But at its core the problem with these securities, and the inherent scam, is that unlike a physical bond where the person who causes it come into creation (the borrowing company) obviously expects to pay there is no such necessary belief in the creation of a CDO.
This makes the intent of the creator a key fact that should always be disclosed.
But it wasn’t.
What should happen here is that the institutions involved should be both indicted and sued. If you can’t get them under the stricter standards of proof, I’ll take a civil judgment even though the people are owed the attempt to prosecute criminally. But the sort of “settlement” that’s being talked about almost-certainly will be another schmooze-fest with no admission of wrong-doing and a token “slap on the wrist” fine.
There is no “Securities and Exchange Commission” intended to protect investors. The purpose of the SEC is clearly to give cover to those institutions that bilk investors.
If you haven’t figured that out by now you need to go talk to God about a refund of whatever you paid for your brain.
Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Fraud, Government, Money, SEC, Securities and Exchange Commission | 
Comments Closed
Iceland Bankruptcy-to-Recovery Reveals Model That Works
Unfortunately, no other country has considered the just and common-sense approach that Iceland took. From Bloomberg:
Iceland is betting its decision two years ago to force bondholders to pay for the banking system’s collapse may help it rebound faster than Ireland.
Iceland’s taxpayers face a smaller debt burden than their Irish counterparts, where the government’s guarantee of the financial system in 2008 backfired this year when the banks came close to insolvency. Iceland’s budget deficit will be 6.3 percent of gross domestic product this year and will vanish by 2012, compared with the 32 percent shortfall in Ireland, the European Commission estimates.
While analysts expect Iceland’s recession to extend into next year, the nation’s exporters are benefiting from a 28 percent drop in the krona against the dollar since September 2008. The decline may help the nation of 320,000 people rebalance its economy faster than Ireland, whose euro membership rules out a currency devaluation. With Iceland’s OMX share index up 16 percent this year, the third-biggest gain in Europe after Denmark and Sweden, Nobel Prize-winning economist Paul Krugman says Iceland may be an example of “bankrupting yourself to recovery.”
“The difference is that in Iceland we allowed the banks to fail,” Iceland President Olafur R. Grimsson said in a Nov. 26 interview with Bloomberg Television’s Mark Barton. “These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”
That last paragraph is the key. Private institutions that make bad business decisions should FAIL. All this nonesense the banks want everyone to believe that the ‘economy would collapse’ without them, is just that, a bunch of baloney. Think about it. As opposed to the wonderful, glorious economy we have now?!! The proof that they are lying can be found in Iceland.
Instead here in the US and in other countries around the world the avenue being taken is to fleece the taxpayers to print the money to support the insolvent banks and for governments to ‘reign in’ spending by cutting any and all programs that actually support citizens (pensions, unemployment, medical care) and raising taxes. At the same time, governments are increasing the spending on their own salaries, benefits, pet projects and of course, lining the bankers’ pockets with newly minted cash and bending laws, rules and regulations to exclude the bankers, so that the banks will continue to show their gratitude by funding the government officials’ campaigns for reelection.
I think it should be obvious to anyone who has even remotely studied history. There’s a name for this system. It’s called communism.
Iceland has chosen freedom and so far, the rest of the world has chosen slavery under what now amounts to communist regimes.
STOP THE LOOTING AND START PROSECUTING
Posted in bailouts, Banks, Corruption, Debt, default, Economic Crisis, Economy, Financial System, Fraud, Government, Iceland, Money, Sovereign Debt, Too Big To Fail |
Comments Closed
Fraudclosure: Don't Look At Us! (Fraudie/Phoney)
After wasting three hours watching the self-servicing masturbatory fantasies put forward by both the GSE and banking regulators yesterday in the “Foreclosure” hearing in The Senate’s banking committee, I have to say I’m underwhelmed – and that’s being polite.
The Washington Post, of course, had to write on this:
Speaking to the Senate Banking Committee at a hearing on the national foreclosure debacle, Fannie and Freddie executives emphasized that they are not responsible for managing payments by borrowers on home loans or foreclosing on homeowners when they default.
These tasks, executives say, are the responsibility of mortgage servicers and law firms with which the companies contract.
Right. It’s just a matter of contract. Of course these same enterprises don’t pull their servicing when contracts are violated, even though they have a monstrous bully position in that regard. Nor do they take any responsibility for the bottom line when it comes to HAMP, even though they are now fully-owned government enterprises – that is, they’re under government conservatorship.
The fantasy games played yesterday in that hearing were truly amazing. Nobody took responsibility, even though everyone was at the table – OCC, the FDIC and of course the GSEs.
The problem of course is that the inherent conflicts of interest when it comes to the banks are not being dealt with honestly. That’s no surprise. The banks have surmised (correctly so) that we will allow them to rob us, and they have. Repeatedly. They have determined (again correctly) that we will not indict or shut them down even when they engage in blatantly criminal conduct such as money-laundering for drug gangs in Mexico, bid-rigging in municipal debt auctions and other similar schemes. Oh, and let’s not forget the banks that intentionally altered international money transfer instructions to hide the fact that they were going to and from prohibited entities – yet they still have their US banking licenses. All of this The Ticker has reported on over the last couple of years.
So it should not surprise anyone that as the desperation level increases they would reach for more and more ways to bilk people. Indeed, as I pointed out yesterday there’s a very valid question that was raised by The Fed’s “data dump” (and which explains why they tried like hell to hide it and evade a full audit): The Fed took a hell of a lot of collateral for loans during the crisis that they valued at 10 to 20% of it’s claimed “face” value, and yet these were all taken for short-term loans – a “repo” in effect – and thus was “given back” to these banks.
WHERE ARE THOSE ASSETS NOW AND AT WHAT VALUE ARE THEY BEING CARRIED?
What we do know is this: The banks have not taken these hundreds of billions (each) of “claimed” assets and written them down by 90%.
In fact at no meaningful time during or after this crunch did the banks ever declare provisions – that is, loss reserves – amounting to these haircuts or any reasonably-defensible percentage thereof.
The reason for this is clear: Had they done so they would have been instantaneously declared insolvent.
Unfortunately our so-called “regulators” have never answered the question to this day about what happened to those boxes of dog-crap. Since nobody has taken and written them off it can only be presumed that they’re still on the banks’ balance sheets and being carried at some ridiculous valuation compared to how The Fed saw their worth.
One of the arguments over “mark-to-market” accounting is that an asset intended to be held to maturity shouldn’t be subject to market risk on any given day. That may or may not be fair but once that asset is exposed to market risk by being pledged as security this argument falls apart.
That is, if you don’t like the mark that someone (including The Fed) gives you on an asset in a security pledge you might be permitted to not pledge that security, but if you do continue with the repo transaction there is no defensible argument against being forced to recognize that as the current value for book purposes, since that is a market price – thus, the argument that these are “impossible to value” has just been voided by your own voluntary act!
Everyone who wants to argue that we’re “recovering” has to answer the key question: Where are these assets and what’s the current market price?
See, I can make all sorts of “recovery” claims for an economy, or for any firm and institution within an economy, if I never have to recognize losses. But that’s not how reality works. Cash flow always wins, and the distortions that we’re seeing now in various market segments, including loan servicing, are blatantly about covering losses somewhere that haven’t been admitted to.
Unfortunately what this does is exactly what it did in Japan. It serves as an excess tax yet is not funneled to government to provide social program spending, but rather is used to cover up previous frauds and schemes – to fill holes that were created and maintained by bogus accounting practices. Since the cash flow always ultimately wins these fights the demand for such schemes increases as the cash flow deficit rises.
Three hours yesterday were spent without one hard question being asked of these people. The key question is in fact not about loan servicing at all – it is about the fact that there are obviously monstrous fees and costs being larded into these servicing programs that are inuring to the benefit of these banks – and they’re using that money for something.
The question goes back to the value of these so-called “assets” and where those assets are now.
Sorry Dodd, but three hours of masturbation behind the dias did exactly nothing to bring enlightenment to this question, and further, the weasels I saw behind the witless table in the form of the FDIC and OCC, not to mention the GSE representatives, served only to further obfuscate reality.
Unfortunately for The Senate and our economy the mathematics of cash flow do not abide Senatorial whitewash endeavors. They’re just a cold, hard calculation of the amount of cash required every month to cover all the current liabilities that must be cleared by a contemporary cash flow from somewhere.
The crisis is not over and will not be until reality is faced and the disposition of these securities is both determined and the damage from their deterioration in value admitted to and absorbed.
Posted in Corruption, Economic Crisis, Economy, Fannie Mae, FDIC, Financial System, Foreclosuregate, Foreclosures, Fraud, Freddie Mac, Government, GSEs, OCC |
Comments Closed
proudly supports:
Bill Still For President
for Congress
Michigan 11th District
By Bill Still
There is only one answer for the world economic situation; monetary reform.
1. No More National Debt
2. No More Fractional Lending
PDF PowerPoint Congressional Patriots Federal Reserve Balance Sheet Paulson's Lies Bernanke's Lies FedUpUSA Archive Mathematics of Failure Media Kit Door Hanger Corruption Flier Bank Flier Made In America A list of products and services made right here in the USA. Choosing to buy American made products preserves and creates American jobs.