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Fed Audit Reveals $16 TRILLION In Secret Loans To Bailout Foreign Banks
July 22nd, 2011 | 
Author:
From Senator Bernie Sanders:
The Fed Audit
The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”
Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.
The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.
For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.
In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.
To Sanders, the conclusion is simple. “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” he said.
The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.
The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.
A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”
The entire GAO report is here.
Don’t you think the mainstream media would be interested in talking about this? Apparently not. Just think about how far $16 Trillion would go towards solving our government debt/deficit problem. Someone tell me why it is we are talking about ‘austerity’ programs when we can afford to bailout FOREIGN BANKS! This is stealing from working, taxpaying middle class (Americans) to bailout the wealthy (foreign) bankers. Meanwhile our Congress is in DC arguing over how much pain will be inflicted upon the American people because we’re broke. How long will you stand for this America?
Perhaps now you understand our motto here at FedUpUSA:
STOP THE LOOTING AND START PROSECUTING!
Posted in Audit, bailouts, Banks, Bernie Sanders, Corruption, Crime, Criminals, Debt, Economic Crisis, Economy, Federal Reserve, Financial System, Foreign Central Banks, Fraud, Government, Money, Oligarchy | 
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Confidential Federal Audits Accuse Five Biggest Mortgage Firms of Defrauding Taxpayers
So Where Are The Cops Again?
Gee, what have I been talking about for a couple of years now?
WASHINGTON — A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, four officials briefed on the findings told The Huffington Post.
No, really?
And if you remember, I and others have talked about FHA guaranteed loan performance not being exactly honestly reported either…..
The resulting reports read like veritable indictments of major lenders, the sources said. State officials are now wielding the documents as leverage in their ongoing talks with mortgage companies aimed at forcing the firms to agree to pay fines to resolve allegations of routine violations in their handling of foreclosures.
Oh yeah, fines. Rip people off, pay a fine. We’re just going to continue what we’ve been doing, right? Make it perfectly ok – a business practice. Commit 100 felonies, get caught committing 10 of them and say “Oh gee, I’m sorry, here have that back.”
But you get to keep the fruits of the other ninety!
Justice officials will soon meet with the largest servicers and walk them through the allegations and potential liability each of them face, the sources said.
I’ll believe it when I see filed charges.
Rather than punishing banks for misdeeds, the administration is now focused on helping troubled borrowers in the hope that it will stanch the flood of foreclosures and increase consumer confidence, officials involved in the negotiations said.
Right – breaking the law is just fine if you’re a bankster.
You know damn well the government isn’t going to do jack about this, and you also know damn well that the State AGs will kneel before the banskters rather than sue or prosecute as well.
It’s all they’d done thus far.
We’re all rendered nothing more than maids servicing these jackasses – by force – in their expensive hotel suites.
Posted in Ally Bank, Audit, bailouts, Bank of America, Banks, Citigroup, Corruption, Economic Crisis, Economy, Financial System, Foreclosuregate, Foreclosures, Fraud, Government, JPMorgan Chase, Mortgage Loans, Mortgage Servicers, Mortgages, Taxpayer, Wells Fargo |
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Time to Audit the Remic Trusts
As I have written, when we peel back the layers of the real estate “onion” what we find is layer after layer of fraud. From the mortgage
brokers to the appraisers and lenders, from the securitizers to the ratings agencies and accountants, from the trustees to the servicers, and from MERS (Mortgage Electronic Registry System) through to the foreclosures, what we find is a massive criminal conspiracy—probably the worst in human history. I realize that is a harsh claim but I cannot find any other words that fit.
In the old days, we used to hang horse thieves. The justification was that a man’s horse was necessary to his way of life, and in some cases, to his very survival. There can be little doubt that a home is equally important to maintenance of a middle class living standard today for most Americans. There is almost no calamity worse than loss of one’s home. It is the main asset that most Americans hold—essential to the educational success of one’s children, and to a comfortable retirement of our citizens. Americans typically borrow against their home equity to put their kids through college, to ease the financial distress caused by unexpected health care expenses, and to finance other large expenditures. The accumulated equity in the home is the only significant source of wealth for the vast majority of Americans. The home is necessary to one’s continuing connection to the neighborhood, school district, and network of friends. Theft of one’s house today is certainly equivalent to theft of a horse 150 years ago.
And, yet, we are not hanging the thieves who are stealing millions of homes from Americans. The thievery today is orders of magnitude greater than the horse thievery of the distant past. Today’s foreclosure thieves have stolen more property of citizens than all previous thieves combined since the founding of our nation. The only thing that could trump it would be the theft of property and livelihood from our native Americans. To be sure, we have evolved as a nation, and I would not advocate hanging those responsible. But without question they ought to be incarcerated in prison, with long terms and with confiscatory monetary penalties—perhaps 10 years for anyone who helps to improperly foreclose on a homeowner’s property, and $10 million for each case of fraudulent foreclosure. That would provide the proper incentive as well as the proper monetary reward that will be required to get good lawyers to take cases of homeowners who are being illegally thrown out of their homes every minute of every day.
The real estate finance sector is trying to pin the blame on some sloppy paperwork and overburdened workers. They promise to put things right, hiring more workers to work diligently to dot those eyes and cross those tees. In reality it was all fraud, intentional and massive. Home theft was the business model. That is what the Bush administration meant when it pushed the “ownership society”—a society in which the top tenth of one percent would own everything.
First, they changed bankruptcy laws so that a first mortgage on one’s principal residence is the only debt a judge cannot reduce. This was to ensure that when the wave of foreclosures began, those who lost their homes to the true ownership class would still have to pay off the mortgage. Next, they created “affordability” products—such as the neutron bomb hybrid adjustable rate mortgages hawked by Chairman Greenspan–that were designed to blow up the borrowers while leaving the real estate intact. Then they created derivatives—the so-called mortgage backed securities–sold to investors. Toxic waste derivatives were then re-packaged into even more trashy collateralized debt obligations that were sold to bank customers, with banks buying credit default swap “insurance” to place bets against their own customers.
The banks then farmed out mortgage servicing to their own subsidiaries, “misplacing” payments that ought to have gone to the securities holders. This was in order to claim borrowers were delinquent so that the servicers could squeeze late fees and default fees and extra interest out of them. Investors in the securities would be last in line, with the servicers maximizing their own incomes and protecting the interests of their mother banks (which often had second liens on the properties in the form of home equity loans). This is why the servicers make it so difficult to modify the loans—which is in the interests of the borrowers and the investors, but against the interest of the banks with second liens. And they created MERS to operate as a foreclosure steam roller, which outsourced the foreclosures back to the servicers with deputized “vice presidents” pretending to be officers of MERS in order to scam the courts.
We now know that the “mortgage backed” securities were not backed by mortgages. In reality they are unsecured debt. The “pooling and servicing agreements” (PSAs) that govern securitization require that the mortgage documents (including the wet ink notes as well as a clean chain of title) are transferred in a timely manner to the trustees. This was rarely and perhaps never done, because it was counter to the recommendation made by MERS (Mortgage Electronic Registry System). Instead, notes were either destroyed or held by the servicers to speed the foreclosures that were always envisioned as the end result of the mortgage origination process. Not only does this practice render the securities fraudulent but it also violates the federal tax laws that govern the REMICs—meaning back taxes are due.
But worse than all that, by breaking the chain of title and by destruction of documents, MERS and the servicers have jeopardized the entire system of property rights. Most, perhaps all, foreclosures have been fraudulent, which means that resales of the homes are also frauds. It goes without saying that the original mortgages were frauds from the very beginning—to complete the transformation to the ownership society it was necessary to ensure that by construction, default was inevitable. Either the homeowner would be unable to pay, or the servicer would “lose” the payments. By obscuring the chain of title, it would be impossible for the debtors or the courts to sort things out. Separating home owners from their property was necessary to ensure that we can create Bush’s ownership society. It is the modern form of the feudal foreclosures and seizures of peasant lands that concentrated ownership in the hands of agricultural capitalists—creating the first ownership society.
The scale of the problem is huge. Some estimate that as many as $6.4 trillion worth of home mortgages (33 million of them) are frauds, with destroyed or doctored documents. Probably all of the $1.4 trillion worth of private label residential mortgage “backed” securities violate the PSAs—so are actually unsecured debt. Three state supreme courts have already ruled that MERS cannot be the owner of mortgages, hence, has no standing in foreclosures. MERS contaminated 65 million mortgages—decoupling the mortgages from the notes and destroying the chain of title. A consortium of investors (including PIMCO, Black Rock, and Fannie and Freddie) that owns $600 billion of the private label securities are suing the banks to take them back. One investor action alone against Bank of America concerns $47 billion in fraudulent mortgages—enough to put a serious dent in its purported net worth of $230 billion (which is probably a vast overstatement resulting from cooking the books). A suit in California seeks $60-$120 billion in lost recording fees alone. All 50 states are investigating the servicers for fraud. The top five servicers (Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, GMAC-Ally) have 60% of the business and include the top four banks that account for 40% of the banking business.
It is time to push the reset button. All foreclosures should be stopped immediately. The REMIC trustees should be audited to see if they have properly followed the requirements of the PSAs and laws applying to REMICs. If they do not have the notes, the securities should be put back to the banks. If the banks cannot absorb the losses, they must be closed and resolved. The FDIC in turn will end up with the mortgage backed securities and underlying mortgages. Working with Freddie and Fannie, all of these should be modified, into new fixed rate mortgages—with a “clawback” to reset principle to current market value of the homes, and with new notes. Investors are going to take losses so there will be fall-out that government will have to address. There will be hundreds of billions of dollars of losses. Congress must find a way to mitigate effects on the economy as well as on investors in MBSs and other assets related to real estate. This is a big problem, but it is not insurmountable.
Every top management official of all the biggest dozen banks, plus everyone at MERS, all officers of every servicer, rater, appraiser, accounting firm, and mortgage broker ought to be investigated for fraud. In the aftermath of the thrift crisis, 1852 bank insiders were prosecuted and 1072 were jailed. So far in this much bigger crisis there have been only 50 criminal probes and 80 civil lawsuits authorized by FDIC. It is time to get serious about the home thieves.
L. Randall Ray – Benzinga
Posted in Audit, Banks, Corruption, Debt, Economic Crisis, Economy, Financial System, Foreclosuregate, Foreclosures, Fraud, Government, MERS, Money, Mortgage Electronic Registration Systems, Mortgage Servicers, Mortgage-Backed Securities, REMIC |
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Study Finds That Of All Factors Determining The 'Bailoutability' Of Crappy Banks, Ties To The Federal Reserve Are Most Critical
Adam Smith, Charles Darwin and George Washington are not only rolling in their graves, they are dancing the macarena. A new study by the UMich School of Business has found what everyone has known since the crisis began, if not centuries prior: that the biggest, crappiest banks were guaranteed to get more bailout funding the more political ties they had (and more kickbacks they had offered). Is this sufficient to claim that capitalism in its purest sense has been corrupted beyond repair, courtesy of political intervention and constant pandering? Probably not, but it sure makes a damn good argument. In any case, the data is sufficient for all bears to start keeping a track of which banks are increasing their lobbying efforts and funding: those are the ones where the greatest weakness is likely still to be uncovered (if it hasn’t already). And while the political relationship probably is not a big surprise to any realistic readers, another finding of the study makes a solid case for abolition of the “apolitical” Federal Reserve:
A new study by Ross professors Ran Duchin and Denis Sosyura found that
banks with connections to members of congressional finance committees
and banks whose executives served on Federal Reserve boards were more
likely to receive funds from the Troubled Asset Relief Program, the
federal government’s program to purchase assets and equity from
financial institutions to strengthen its financial sector.
The unsupervised Federal Reserve gets to make or break banks, presumably under the gun of its one and only master, Goldman Sachs, which has already destroyed its major historical competitors: Bear Stearns and Lehman Brothers. This is a sufficient condition to not only audit the central bank but to immediately seek its abolition, and also to commence anti-trust proceedings against Goldman Sachs which is not only a monopoly, but by extension has veto power over the very regulatory mechanism that is supposed to keep it “fair and honest.” The system is truly broken.
More findings from the study:
Further, their research shows that TARP investment amounts were
positively related to banks’ political contributions and lobbying
expenditures, and that, overall, the effect of political influence was
strongest for poorly performing banks.
Can someone reminds us what the core premise of capitalism is again, and why we pretend to live in anything other than a hard core socialist society?
One of the professors of the study had this to say:
“Our results show that political connections play an important role in
a firm’s access to capital. The effects of political ties on federal capital investment
are strongest for companies with weaker fundamentals, lower liquidity
and poorer performance — which suggests that political ties shift
capital allocation towards underperforming institutions.”
The US financial system now need a new four letter acronym: everyone knows TBTF. We hereby annoint the Too Blatantly Briby To Fail (TB2TF) category of financial institutions. We posit that in 5 years there will be two banks in the former group: JP Morgan and Goldman Sachs, while every single other bank will make up the latter.
Among the specific data findings:
The researchers used four variables to measure political influence: 1)
seats held by bank executives on the board of directors at any of the
12 Federal Reserve banks or their branches (the Federal Reserve is
involved in the initial review of CPP applications from the majority of
qualified banks); 2) banks with headquarters located in the district of
a U.S. House member serving on the Congressional Committee on Financial
Services or its subcommittees on Financial Institutions and Capital
Markets (which played a major role in the development of TARP and its
amendments); 3) banks’ campaign contributions to congressional
candidates; and 4) banks’ lobbying expenditures.They found that a board seat at a Federal Reserve Bank was
associated with a 31 percent increase in the likelihood of receiving
CPP funds, while a bank’s connection to a House member on key finance
committees was associated with a 26 percent increase, controlling for
other bank characteristics such as size and various financial
indicators.
The last data point is truly troubling: while it is one thing to pander to corrupt politicians, at least when their transgressions are made public they can and will be booted out. Yet what checks and balances exist to punish current and former Fed staffers who endorse near-bankrupt companies, in self-evident conflict of interest acts, for enhanced survival? As the Fed is accountable to nothing and nobody, save Goldman Sachs, one can argue that Goldman decides the fate of the very core of the US financial system: which firms get the thumbs up and down treatment. This is an unbelievalbe travesty of both the constitutional and the tenets of capitalism and must be rectified immediately. It certainly helps that the president, being a Constitutional law professor, will surely get right on it.
“Our findings also suggest that qualified financial institutions were
more likely to receive an investment from CPP if they were bigger and
had lower earnings and lower capital,” said Duchin, U-M assistant
professor of finance. “This is consistent with an investment strategy
seeking to support systematically important institutions experiencing
financial distress.”
If this study’s finding are confirmed and repeated independently by other research teams, it is safe to say that any pretense America has to being an efficient capitalism system (where those who can no longer compete, disappear) can be used to wipe the nation’s collective backside. Between this, and a choice of US dollars and Treasuries, Cottonelle is starting to see some serious competition.
h/t Geoffrey Batt
Posted in America, Anti-Trust, Audit, Bailout, Banks, Bear Stearns, Ben Bernanke, Capital Markets, Capitalism, Corruption, Economy, Fail, Federal Reserve, Financial System, funding, Goldman Sachs, JP Morgan, Lehman Brothers, Markets, Performance, research, Results, TARP |
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Republican On Senate Banking Committee Rumored To Follow Sanders, Place Hold On Bernanke Reconfirmation
This exciting development from Firedoglake:
As Ben Bernanke’s confirmation hearing begins in the Senate Banking
Committee, a source tells FDL News that one Senate staffer and an
outside source confirmed to him that at least one Republican on the
committee will also place a hold on the Federal Reserve chairman,
throwing the process into potential turmoil and giving Chris Dodd a
difficult series of choices to make.
Dodd, who just announced his intention to vote for Bernanke’s
confirmation in the Banking Committee and on the floor of the Senate,
would be in charge of the decision to honor or ignore that hold. The
fact that Dodd tried to place a hold on the FISA Amendments Act in
2007-08, and was generally ignored by Harry Reid, just adds a layer of
irony to the process.
The source, speaking on condition of anonymity because of his work
behind the scenes on the Bernanke confirmation, told me that two
separate sources assured him that the Republican hold would be made
public after today’s hearing. One staffer said that two Republicans
would place the hold, while the other said it would just be one. The
source said that the trans-partisan nature of opposition to Bernanke,
with a conservative Republican and a socialist independent uniting to
block the appointment, shows the intensity of the feelings on the
issue. “It’s great to see everyone come together – Democrats,
Republicans, progressives and libertarians, against this Federal
Reserve, which is not federal, and not a reserve, just a group printing
money and giving it to their buddies,” the source said.
While most people think that the multiple holds would delay the
process, it’s unclear whether or not it would succeed. Dodd would
probably have the discretion to roll over the hold in committee, though
he may be reluctant to do so, experts in Senate procedure said. Harry
Reid could also seek cloture on the motion to proceed on Bernanke’s
nomination on the floor, which would require 60 votes.
At the very least, this delay and the publicity surrounding
bipartisan opposition to Bernanke would bring attention to the issue of
the Federal Reserve and the desire for transparency, like the movement
to audit the Fed. That provision has already passed in the large
financial reform bill in the House Financial Services Committee, and Barney Frank said yesterday
that he didn’t expect any changes to the bill as it passed the House,
citing the public anger over the issue of transparency. There is
language on Fed audits in the draft financial reform bill written by
Sen. Dodd, which also strips the Fed of some of its power, but it is
not the same as Bernie Sanders’ audit the Fed bill, which has as many
as 30 cosponsors.
The source, who has been working on the Federal Reserve issue for
five years, marveled at how the issue has gained so much new attention
during the financial crisis. “Up until last year, nobody knew what the
Fed was. Ron Paul got 5 co-sponsors on his audit bill when he first
introduced it, and now we have 300.”
Sen. Dodd’s office has not yet responded with a comment.
Posted in Anonymity, Audit, Audit the Fed, Audits, Barney Frank, Ben Bernanke, Bernie Sanders, Chris Dodd, Confirmation, Corruption, Democrats, Economy, Federal Reserve, Financial Crisis, Financial System, House Financial Services Committee, Irony, Money, Publicity, reform, Republicans, Ron Paul, Senate, Transparency |
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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
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