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I Told You Social Security Was A SCAM
December 5th, 2011 | 
Author: 
Oh, look what we got buried in here!
Senator Dick Durbin, the chamber’s second-ranking Democrat, also rejected the complaints. He said the government has been borrowing surplus Social Security revenue to pay for other programs, and promising to repay it later with other tax revenue, so the money has already been mixed.
“This is not the first time,” he said. Durbin said he hoped the tax cut would be allowed to lapse next year though he said he couldn’t rule out another extension.
Ah, but when will it be paid back Dick?
Never, right? I mean you’ve been stealing it for 30 years sequentially, right? Indeed.
Chuck Blahous, a former Bush administration economic adviser who now sits on Social Security’s Board of Trustees, called the Obama plan a “very fundamental transformation” in how the program operates.
“When you start funding Social Security that way, you basically destroy any notion that people really paid for their Social Security benefits,” he said. “We’ve got this political dynamic that says, ‘Well, if you don’t extend this, then you’re in favor of raising taxes on poor working people. If that’s the dynamic, then Social Security is in really severe trouble.”
No. There never was a “lockbox” after Greenspan’s recommended changes enacted by Ronny Raygun. Instead the Federal Government tapped into the so-called “trust funds” and literally robbed them to set in motion a pyramid scheme — an orgy of spending money the government did not have, promising to pay with nebulous expectations of revenues yet to come “some day.”
Well, some day came and went, and the money wasn’t there, so we then blew serial bubbles with the government conspiring with Wall Street (ze banksters) to create even more illusions, such as the idea that “prosperity” would come through exporting all of our labor to China so we could buy cheap plastic crap while they can provide us some slave labor to do it with.
Yeah that’ll work out well. NOT.
Of course in the short term it does look good. But it led to this:
And now, in the throes of the Federal Government having subsumed fully 10% of the economy with false demand via deficit spending we’re desperately looking for a way — any way — to not have to admit that the demand is false!
Why? Because if we do admit that then both employment and tax receipts immediately collapse and we’re left with the stark reality that the Federal Government is double the size of what’s sustainable, which leads you to the inescapable conclusion that everything has to be slashed.
Yet Cramer and others prattle on this morning about how we’re having “hopeful signs” and “multiple expansion.”
Uh huh. Expansion eh?
That would be nice if the economic demand was real.
But it’s not.
Welcome to reality Dick.
Posted in Corruption, Debt, Economic Crisis, Economy, Financial System, Fraud, Government, Money, Scam, Senator Dick Durbin, Social Security | 
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IRS Likely to Expand Mortgage Industry Coverup by Whitewashing REMIC Violations
As established readers know, we’ve been writing since mid 2010 about the widespread, possibly pervasive, failure of mortgage securitization originators to convey the notes (the borrower IOU) to securitization trusts as stipulated in the deal documents, well before the robo signing scandal broke. This abuse matters because the transaction procedures were designed carefully to satisfy certain legal requirements, among them rules contained in the 1986 Tax Reform Act regarding REMICs, or real estate mortgage investment conduits, which required that the securitization trust receive all its assets by 90 days after closing and that all assets conveyed to the trust have to be “performing”, as in not in default. Failure to comply with the rules is a prohibited act and subject to taxation at a rate of 100%, and additional penalties may apply.
Now, with the Federal government under enormous budget pressure, shouldn’t the authorities be keen to go after tax cheats? The headline of a Reuters article, “IRS weighs tax penalties on mortgage securities,” would suggest so. But don’t get your hopes up. The lesson is don’t jump to conclusions when big finance is involved.
An overview from the article:
Should the IRS find reason to take tough action, the financial impact could be enormous. REMIC investments are held by pension funds, in individual retirement plans such as 401(k)s and by state and local government entities.
As of the end of 2010, investments in REMICs totaled more than $3 trillion, according to data supplied by the Securities Industry and Financial Markets Association.
In a brief statement in response to questions from Reuters, the agency said: “The IRS is aware of questions in the market regarding REMICs and proper ownership of the underlying mortgages as set out in federal tax law, and is actively reviewing certain aspects of this issue.”
This matter was raised early last year by an attorney I know with IRS, to a senior officer, not in enforcement but familiar with REMIC rules. She immediately understood the importance and nature of the violations being alleged and was keen to proceed. Having had no follow up, the attorney rang again, and the IRS officer took the call, this time reluctantly. She indicated she was not supposed to be taking to him. She said the issue had gone to the White House, where word came back that the IRS was not going to be used as a tool of policy.
So demanding that tax law violators pay what they owe is somehow seen as an misuse of government authority? That appears to be the message.
Knowing of this background, in the blogger meeting with Treasury last August, when someone we will euphemistically call as senior official argued that the Treasury had little power over servicers, I objected, and said it depended on whether they construed of their power narrowly or broadly. I pointed out that a Pacer scrape on foreclosure filings would find thousands of violations of REMIC rules that were subject to punitive charges, and that that was an important leverage point to bring the industry to heel. (Yes, this is an example of using tax as a tool of policy, as opposed to merely enforcing the rules……that was by design). He sidestepped the reference to REMIC both in my initial question and follow up.
Steve Waldman, who was also at the session, was as skeptical of the exchange as I was. From a message last August:
Re REMICs: The reaction to your probing was very suspicious.
It’d have been one thing if he’d said they hadn’t looked into the issue. But that wasn’t how he responded. He started talking about how he’d had his staff “look for leverage”, against servicers I think, but found there was nothing there. In other words, he didn’t want to leave the issue open. He wanted to neutralize it.
One possibility is that the truth is face value, but I doubt it. After all, we’d just had staffers describe using the government’s leverage in creative ways to protect taxpayers or serve other public purposes as “extra legal”. Yet here was [the senior official] apparently on a fishing expedition for leverage, no doubt desperate to persuade servicers to facililitate mods to help homeowners. Yeah. Right.
If I’m not misunderstanding you, your core point is that the paperwork on many boomtown mortgages is invalid, and therefore various sorts of transactions, from foreclosures to bundling into REMICs, cannot be legally done, at least not without a lot of expensive research and recertification. In other words, your line of thinking would put a question mark beneath the value of a whole lot of bank assets. That would obviously not be in the national interest according to Treasury. So of course they’ve already looked onto the story and there’s nothing to it.
As Waldman indicates, there is a blindingly obvious reason why the IRS inquiry is a coverup. If the IRS were to find any of the questionable practices to be violations, they’d lead to widespread and large assessments against mortgage investors. That in turn would spawn the mother of all litigations by investors against the originators and trustees. That would blow up the mortgage industrial complex and put us back in a financial crisis. That is the last thing the officialdom wants to happen.
Now in fact there are ways the IRS can make this problem go away. The article quotes Jim Peaslee, who is one of the top experts on REMICS and was i one of the major influences on the original REMIC regulation. Note how he avoids discussing whether there might be violations; his point is the IRS will take a “see no evil” stance:
James Peaslee, a partner at law firm Cleary Gottlieb who is an expert on taxation of securitized investments, said that even if the IRS finds wrongdoing, it might be loath to act because of the wide financial damage the penalties would cause. He notes that the REMIC investors, who he called “innocent parties,” would have to pay rather than the banks that were responsible for any wrongdoing in transferring mortgage ownership.
I had a few above-my-pay grade e-mail discussions with one of Peaslee’s colleagues, another REMIC expert, last year, and the issues are vastly more complex than mere mortals would appreciate. For instance (and this is one of the simple examples), arguably, if the securitization vehicle wasn’t really created with the assets it claimed, so arguably, at least technically speaking, it was disqualified from the outset. However, legal structures and issues don’t map cleanly on to tax issues. We’ve argued that if the notes were not properly conveyed to the trusts (assuming they are New York trusts, which is the governing law in the vast majority of cases) then the trusts will have a big problem with foreclosing, since New York trusts don’t have any discretion and there is no mechanism for getting the notes into the trust other than shortly after it was formed.
But that particular concern isn’t germane from a tax perspective. State law doesn’t determine characterization of an entity for federal tax purposes. So, for example, even if a taxpayer said he a partnership and planned to set up a state law LLC as the partnership vehicle but failed to take all the legal steps, but did have a contract with a partner, and both has acted according to the partnership tax rules and reported income them on their tax returns accordingly, it would most likely still be treated as a partnership in spite of the lack of a state law legal vehicle.
The net result, as the expert indicated, is “that the rules about REMIC (or other securitization) qualification become very bendable” which in turn gives the IRS a great deal of latitude in what it can deem to be acceptable. He felt that was a bad posture to take, since that would give the servicers considerable leeway to manipulate tax liabilities directly.
The Reuters article points out the more obvious concern: foregone revenues by letting tax violations go unpunished:
Adam Levitin, a Georgetown University Law School professor and expert on taxation, said that if the IRS fails to act, “it would be a backdoor bailout of the financial system.”
If the IRS did impose penalties, the REMICs could turn around and sue the banks for causing the problems and not living up to the terms of the agreements establishing each REMIC, thus transferring the costs to the banks. If the IRS finds wrongdoing but fails to act, the IRS would forego “potentially enormous tax revenue that would be passed on to the federal government,” Levitin said. “Given the federal budget deficit that’s not something to sniff at,” he added.
So why is the IRS looking into this issue at all? Wouldn’t one expect them to let sleeping dogs lie? I can think of reasons. First, the issue has gotten enough profile that the IRS (really Treasury) may feel it’s better to go into “put the matter behind us” mode. Second is that it isn’t just the Federal government who would be able to charge taxes against RMBS if they found they had violated the rules, but also states. It’s not hard to imagine that some states have realized that going after the RMBS could be a significant source of badly-needed income. The IRS may thus feel it needs to get in front of this potential source of that investor bugaboo “uncertainty” as well as discourage state action. Mind you, state rules necessarily track the Federal REMIC rules precisely, nor are they required to interpret them the same way, but an IRS “nothing to see here” finding would deter action by all but the most bloodyminded state treasuries).
So we have yet again another example of two tier justice in America. Do you think the IRS would cut you any slack if you had engaged in as many violations of the tax rules as mortgage originators and trusts have? But the point of having a kleptocracy is to avoid inconveniencing the people with money at all costs.
Posted in Bankers, Barack Obama, Corruption, Criminals, Cronyism, Debt, Economic Crisis, Economy, Federal Reserve, Financial System, Fraud, Government, IRS, Law Enforcement, Legal, Money, Oligarchy, REMIC, Scam, Secrecy, Timothy Geithner, US Treasury | 
Tags: Internal Revenue Service |
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Oh, Handcuffs? Hmmmm This Makes Two!
Washington, D.C., March 2, 2011 – The Securities and Exchange Commission today charged a former vice president at Colonial Bank who was the head of its mortgage warehouse lending division with conducting a $1.5 billion securities fraud scheme.
The SEC alleges that Catherine L. Kissick enabled the sale of fictitious and impaired mortgage loans and securities from the mortgage warehouse lending division’s largest customer – Taylor, Bean & Whitaker Mortgage Corp. (TBW) – to Colonial Bank, and she caused these securities to be falsely reported to the investing public as high-quality, liquid assets.
Got the essence of this? The loans were either bad or non-existent but they were booked as good, performing, and real.
That’s nice.
But in an interesting and “oh my gosh, there’s two” sort of change, we have this:
In a related action today, Kissick pleaded guilty to criminal charges filed by the Department of Justice in the Eastern District of Virginia.
That would be the second time some criminal fun comes. There’s no update yet on the sentence, of course, but at least the plea appears to have happened. The maximum sentence for the crimes she pled to is reported to be 30 years in the Federal Lesbotell and a $250,000 fine.
Of course the SEC settled for the usual:
The SEC’s complaint charges Kissick with violations of the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. Without admitting or denying the SEC’s allegations, Kissick consented to the entry of a judgment permanently enjoining her from violation of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Kissick also consented to an order barring her from acting as an officer or director of any public company that has securities registered with the SEC pursuant to Section 12 of the Exchange Act. Kissick also consented to an order prohibiting her from serving in a senior management or control position at any mortgage-related company or other financial institution or from holding any position involving financial reporting or disclosure at a public company. The proposed preliminary settlement, under which the SEC’s requests for financial penalties against Kissick would remain pending, is subject to court approval.
DON’T DO THAT AGAIN! I SAY, DON’T DO THAT AGAIN! I WILL SLAP YOUR HANDS! YOU DO NOT HAVE TO ADMIT GUILT EVEN IF YOU JUST DID IN CRIMINAL COURT, JUST DON’T DO THAT AGAIN!
Such wonderful enforcement by the SEC – that would be “Suckers Executing Crimes”, right?
After all, we know they use their office computers for porn viewing – so there’s the “Suckers” part.
Posted in Banks, Colonial Bank, Corruption, Debt, Economic Crisis, Economy, Financial System, Fraud, Law Enforcement, Legal, Money, Scam, SEC, Securities and Exchange Commission |
Tags: Corruption, Fraud, Law, Law Enforcement, Legal, Lenders, SEC |
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Morning Banking Funnies (Not Really)
Coming this morning are a couple of interesting points….
The Utah Attorney General’s Office says the entity responsible for 4,000 home foreclosures yearly in the state is violating the law.
In a filing with the 10th Circuit Court of Appeals in Denver, Assistant Attorney General Jerrold Jensen said the ReconTrust Co., a unit of Bank of America, is not allowed under Utah law to conduct foreclosure sales.
The law related to this is Utah-specific and states that you must be either an attorney licensed in the state or a title company to foreclose in Utah. Bank of America argues that The National Bank Act preempts. Utah says no and there are conflicting decisions thus far.
Here’s the problem folks – this is exactly the sort of creeping loss of your right for redress that you were told wouldn’t happen when the National Bank Act was passed. You were sold convenience and competition in banking, but it was explicitly stated at the time that this would not result in your rights under state law being lost.
Now, when it suits the bankers, they argue otherwise.
Bank of America said: “Our first priority is to help our customers remain in their home as demonstrated by the more than 775,000 permanent loan modifications completed since January 2008.”
Oh really?
Well then maybe you can explain this.
I was contacted by a BofA screwee, er, “customer” yesterday with a wee problem. He’s got some financial issues and is in the middle of a bankruptcy. The house is apparently not part of the bankruptcy proceedings.
Some time last year he made a phone call to inquire about a HAMP modification.
The original loan did not include impound for taxes and insurance (“escrow.”) Suddenly, out of the middle of nowhere, BofA turns around and whacks him with a sixty percent increase in his payments, arguing that now he must pay escrow (despite the fact that the face of his note does not say so) and that he originally, at the time the note was signed, had more than 20% equity (and thus wouldn’t commonly be required to do so.) Further, they’re clearly trying to “pre-fund” the escrow account.
This is a guy with an active (but not yet discharged) bankruptcy. He clearly doesn’t have a 60% increase in his payment, or he wouldn’t be in bankruptcy.
Now, months later, nobody will talk to him and they’re threatening to throw him out of his house. They also won’t drop the escrow demand, claiming that any inquiry into a modification instantly and irrevocably forces you into escrowing.
Where did that come from? Isn’t this “Contracts 101″? The original note is still in force and effect until and unless a new one is signed. If the original note provides that when you originated you did not have to escrow, how does the servicer get to unilaterally renegotiate that and demand escrow at a later date as the result of an inquiry?
I don’t have the full set of facts on this case as of yet and will likely write more on it when I do. And I fully understand (and explained to this gent) that escrow doesn’t change the money owed, just how it’s paid. Of course if the bank is trying to pre-fund the escrow account then it’s a problem - possibly a very serious problem for someone who’s stretching to make payments to begin with.
Oh, and there’s the usual chain of acts here too. When he called he was told he didn’t qualify for HAMP as he was current, and if he wanted to be considered he had to be late. Then when he was a month late they told him he had to be three months late. And then once he was three months late (basically at their direction) they wouldn’t work with him.
Haven’t we heard this story before – hundreds of times? Servicers basically telling customers to stop paying? Isn’t the servicer supposed to work for the benefit of the investor, who’s interest is, clearly, in timely payment, not in forcing mods (or foreclosures)?
But of course late fees and penalty charges are of interest to the servicer. So are foreclosures, because they get paid first on all those accumulated late and penalty fees. Oh yeah, and since the “investor” is Fannie in this case, is this not The Federal Government looking the other way while the servicer basically rips off the consumer and the government?
Never mind that escrow impoundments are beneficial for the servicer, as they don’t pay interest on them but they get to use the money during the time they “hold” it. And since they don’t pre-pay the taxes and insurance (you’re supposed to “save” the money with them, effectively) this is interest and earnings power that accrues to them during that time, when it should accrue to you.
The general rule on these when it comes to original notes has, in every jurisdiction where I’ve lived and dealt with it, forced escrow only if you have less than 20% down at origination. They also have permitted dropping both escrow and any PMI requirement as soon as the 20% equity threshold is reached.
Again, this is a matter of contracts – where does the servicing bank get the right under the law to renegotiate the original note and “determine”, at the demand of the “investor” (in this case Fannie) that you escrow where you did not have to before based upon an inquiry related to the terms for a modification under HAMP?
Not a completed mod (HAMP does require escrows on those), not even a trial mod, but a phone call?
This smells crooked…. assuming the facts are what they are…. and in this case it may lead the person involved to lose his house.
Posted in Bank of America, Banks, Corruption, Debt, Economic Crisis, Economy, Financial System, Foreclosuregate, Foreclosures, Fraud, Government, HAMP, Money, Mortgage Industry, Mortgage Modificaton, Mortgage Servicers, Mortgages, Scam |
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Fraud As A Business Model Endorsed by The Fed And OCC
Yep…. any screwing is a good screwing, so long as a bank does it and you, the consumer, are the screwee.
WASHINGTON — Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures. The FDIC supports such rules, according to an FDIC official involved in the dispute.
Got that?
The Fed and OCC are resisting cracking down on ILLEGAL fees and IMPROPER foreclosures.
What part of “illegal” don’t these guys care about?
Oh, that’s simple. If it’s illegal (say, by charging an illegal fee, foreclosing by committing perjury, doctoring wire information so that the fact that you’re funding terrorism in the Middle East is obscured, or screwing municipalities with hinky derivative deals, or perhaps not even transferring mortgages into alleged mortgage-backed securities) according to The Fed and OCC it’s perfectly ok if it screws the consumer – or anyone except a bank.
But as soon as you screw a bank, why that’s really illegal and for that you should be prosecuted.
That we continue to allow this as citizens, when we, the people, have the final and in fact unalienable right to say no simply means that we get the government we deserve.
So when you get screwed (and you probably are if you’re paying your mortgage right now, since nobody will tell you who actually owns it – therefore, you don’t know if you’re paying the right person), if you get charged an illegal fee (and then forced to pay it), if you’re an investor and get screwed by a computer run by a big bank that “front runs” your trades and thus allows said bank to have an unbroken “winning” record (remember, for every winner in a trade there is a loser – guess who the loser is? Yep – it’s you) or whatever other indignity you suffer, it’s your responsibility – directly – through your continued silence and continued re-election and permission to occupy the Capital that you grant for the clownfaces in DC, including those at The Fed and the OCC, that this occurs.
It is one thing to have a set of documents called “The Declaration of Independence” (setting forth unalienable rights that you possess not from government, but simply as a consequence of existence) and “The Constitution” (which sets forth a very small number of enumerated powers for our Federal Government) but if you, the people, sit on your ass while that same government gives license to blatant and clear lawless behavior such as the charging of illegal fees and does not enforce the law, including by criminal indictment, then you in fact have nothing at all.
Enjoy your self-imposed serfdom America.
It only ends when you demand it.
To start demanding it (and note, this is only a start) go to http://stopservicerscams.com/ (link is also permanently placed in the left side bar)
Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Foreclosuregate, Foreclosures, Fraud, Mortgage Servicers, Scam |
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Holy Crap! Senator Levin Reads His E-Mail
Whodduthunk?
For about 2 years, FedUpUSA has doggedly sent Senator Carl Levin e-mails with many of our daily posts. Rarely, if ever do we get a response…..even though he happens to be my Senator, since I reside in Michigan. Actually, I was pretty sure he’d blocked my e-mails along time ago. Apparently not.
From The Market-Ticker today:
Senator Levin Quotes Tickerguy! (Flash Crash Hearings)
In the hearing going on right now, The Senator said (in part):
One well known trader, Karl Denninger, recently made this public comment about U.S. trading activity:
“Folks, this crap is totally out of hand. And it’s now a daily game that’s being played by the machines, which are the only things that can react with this sort of speed, and they’re guaranteed to screw you, the average investor or trader. Go ahead, keep thinking you can invest.” (Emphasis omitted.)
Yes, I sure did.
May I ask why Nanex was not included in these hearings? They seem to have it documented quite well.
There was also my little July 4th missive and follow-up as well.
This much we now seem to know – at least some folks on The Hill read The Ticker.
At least we know someone at Senator Levin’s office read that daily post.
Posted in Corruption, Economic Crisis, Economy, Financial System, Fraud, Scam, SEC, Senator Carl Levin, Trading |
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