FedUpUSA

Let’s start with the last first….

That public trust is sacred, and it is the very foundation of the long-term success of your industry.

If bankers and regulators are to uphold that trust, we must demonstrate the ability to work together and engage in long-term thinking that will protect consumers, preserve financial stability, and lay the foundation for a stronger U.S. economy in the years ahead.

Sheila seems to think that there’s any sort of trust to regain?  Shirley you jest – or is that Sheila you jest?

Back up the page a bit we find…..

Instead, the biggest long-term risk to the success of the banking industry would be its failure to support the reforms needed to ensure long-term stability in our financial markets and our economy.

The American people have suffered enormous economic losses as a result of the financial crisis.

The American people suffered enormous economic losses as a result of fraud which in turn resulted in the financial crisis.  Yet the people who engaged in that fraud, from top to bottom, have not paid for it.  They have not been indicted, prosecuted or jailed.  Not only have they not suffered criminally, they weren’t forced to give back the money they stole either.

In April 2010, a Pew Research poll found that just 22 percent of respondents rated banks and other financial institutions as having “a positive effect on the way things are going in this country.”

I suspect if the Pew Research group included a response “hang them all from lamp-posts” that would have gotten the other 78% of the responses.  Of course Pew wouldn’t include something that would allow an honest expression of the depth of hatred that many have for the people in this industry. 

Then again, can you blame the public for that hatred?  It’s one thing to lose your home and everything you worked for as a result of raw speculation that you knew was dangerous, got involved in anyway, and lost the bet on.  That happens all the time, and most people deal with it.  It’s part of the risk:reward paradigm.

But it’s an entirely different matter when you’re told repeatedly that you can afford this house, you can afford to take on this credit, we’re the nice guys in the expensive $5,000 pinstripe suits and we’ve run our computer models and our simulations and this product is both safe and suitable for you.

Of course all of these representations turned out to be a pack of lies.

When we issued proposed guidance on non-traditional mortgages, industry comments found the guidance too proscriptive, saying that it “overstate[d] the risk of these mortgage products,” and that it would stifle innovation and restrict access to credit. Later, when we proposed to extend these guidelines to hybrid adjustable-rate mortgages, which at that time made up about 85 percent of all subprime loans, we received a letter co-signed by nine industry trade associations expressing “strong concerns” and saying that “imposing new underwriting requirements risks denying many borrowers the opportunity for homeownership or needed credit options.”

For our part, I think it is clear in hindsight that while our guidance was a step in the right direction, in the end it was too little, too late.

Fraud is fraud Sheila.  Lending people you know they can’t pay back and then playing “hot potato” with the paper, lying to the buyer of the paper so he’s induced to “invest” in something you have every reason to know is going to explode in his face, isn’t “too little, too late.”  It’s a scam.

At this point we’re not speculating any more.  We have sworn testimony that this happened.  That major financial institutions knew they were selling crap to investors – as much as 80% of their production in 2007.  That’s in the record in the form of sworn testimony at this point in time.

Oh yes, the non-bank issuers were worse.  But if the regulated banks had 80% of their production represented by fraudulent and bogus paper, does that not mean that the non-bank lenders were probably peddling paper that 100% garbage?  This, of course, leads one to ask – does it really matter whether the so-called box of chocolates you’re peddling is in fact 80% or 100% dog turds? 

I think not.

Accidents happen.  Speculation is part of all markets.  But when you have sworn testimony in the record that knowingly bad paper was being peddled and it was the vast majority of all the loans being made at the time, that’s not speculation nor is it an accident.

Nether the FDIC or other regulators in Washington have given a damn about this, you’ve done nothing to stop it, Congress has done nothing to stop it, and nobody has been punished for doing it.  Yet we now know that the only logical explanation in 2007 which I and others put forward – that these loans were in fact both fraudulently issued and sold, was factually true because at least some of the people who were doing it have admitted to the facts under oath.

The balance sheets of households, depository institutions, state and local governments and the federal government all suffered serious damage as a result of the recession. All of these sectors are taking steps to repair that damage, but in some cases it will be a long, painful process.

Now that’s a lie.  Very little contraction in systemic debt has taken place, and what has taken place has all been replaced by the federal government.  Shifting liabilities from one hand to another does not change the amount of the liabilities.  It is simply an attempt to hide them.  That’s a scam too.

But then again, that’s all we have these days in America when it comes to Washington and our so-called “financial markets” and “financial firms”, isn’t it Sheila? 

Whether you like it or not you’re a (major) part of the problem – both past and present.

The Market-Ticker

For financial terrorism?

(Reuters) – America’s big international banks may have to restructure and downsize their operations now, unless they can prove they will be easy to dismantle in another financial crisis, said U.S. regulator Sheila Bair.

Uh huh.  How about this Sheila?

Why don’t you talk about the fact that starting with Continental Illinois the FDIC has bailed out not depositors but bondholders?

You know, that “no disruption” model, despite the FDIC being called The Federal DEPOSIT Insurance Corporation.

Where do you see “bondholder insurance” in there?

I can’t find it.

“If they can’t show they can be resolved in a bankruptcy-like process… then they should be downsized now,” said Bair, chairman of the Federal Deposit Insurance Corp.

“There is no reason in the world why they should get some special treatment backstop that other businesses in this country don’t have,” Bair said.

NOW you say this?

This isn’t a 2008 story folks.  It goes back, again, to Continental Illinois.

That’s where this idiocy began.  It is also, not coincidentally, where the utter stupidity in leverage growth – that is, unsupported (and unsupportable) credit expansion began.

Gee, I wonder why when those who enable the leverage through being bondholders of financial institutions are told by the explicit actions of the US Government that they won’t lose their money if the institution does something stupid – or even worse?

Bair is now in the final months of her five-year term heading the FDIC, which she led during the tumult of the financial crisis. Her term ends in June.

Bair said she hopes to have major aspects of new capital requirements and the liquidation regime in place before she departs.

She’s not going to do jack and neither will her successor.

That you can take to the bank.

The Market-Ticker

The paperwork problems range from potentially forged documents to bank employees who never read borrowers’ files before signing off on an eviction.

Potentially forged?  I’d say that at least in a couple of cases there’s nothing potential about it, since Judges have called the documents either counterfeit or fraudulent.

Mukri would not comment about other banks but said that the OCC has teams permanently stationed at each one and that those teams have been in close contact with senior management at the banks to ensure the reviews are completed in a timely manner.

Uh huh.

Now how about if those teams demand that these institutions prove that they actually transferred the notes in question in the first instance into the trusts?

Oh, we don’t want go there, do we?  Nor do you want to look at intentional selling of notes into trusts where the reps and warranties were not met, right?  Why that could lead to some very uncomfortable places, couldn’t it?

Bair, whose agency insures deposits at thousands of U.S. banks, called the issue of document processing errors “troubling” and said “it’s just a further indication of how wrong we went with the mortgage origination process and securitization process.”

Fraud is “troubling”?

How about FELONIOUS Bair?

Pretty amazing stuff, really:

WASHINGTON—Federal Deposit Insurance Corp. Chairman Sheila Bair has urged lawmakers to scrap a controversial Senate plan that would force banks to spin off their derivatives businesses, saying it could destabilize banks and drive risk into unregulated parts of the financial sector.

How could this “destabilize” large banks?

Let’s remember that the now-common credit-default swap was invented after the Exxon-Valdez oil spill in 1989.  JP Morgan wrote a line of credit to Exxon, and then created the world’s first “modern” credit default swap to protect itself against a possible default on that credit line.

Ms. Bair’s FDIC has had every opportunity to regulate whatever risk exists out of the system.  Indeed, the stellar performance of her FDIC is demonstrated every week when we see 20, 30, 40 or even 50% overvaluations exposed by bank failures where the FDIC steps in to take over the firm.

At this point we find that there are alleged $100 million in assets (loans and paper), and $100 million in liabilities (deposits), but magically there is a $40 million loss to the deposit insurance fund! 

How is this possible?  Simple: The alleged $100 million in “assets” are really only worth $60 million, and yet nobody goes to jail for lying about asset values, nor has the FDIC come in and closed the institution before it went $40 million into the hole!

Banks with access to federal backstops, including The Fed window and FDIC insurance, should not be issuing or trading derivatives.   The reason for this is simple – if they do, they don’t care if they make good loans or terrible, guaranteed-to-blow-up loans, as they can make plenty of money writing loans they know will and intend to blow up!

“Banks are not perfect, but we do believe that insured banks as a whole performed better during this crisis because they are subject to higher capital requirements in both the amount and quality of capital,” she wrote.

Baloney.

What’s in the off-balance sheet box over at Wells Fargo Sheila?  What’s it worth? 

If you closed Wells tomorrow, how much would the deposit insurance fund lose?

I’m willing to bet the answer would be “far more than we have – or have access to through Treasury.”

That’s the problem.

It is time for Ms. Bair to resign.

It just never ends with Sheila, does it?

The good news is that the FDIC has a well-established process that works for failing banks. Going forward, this model should be available to close large, failing firms. This means banning government assistance to individual companies and forcing them into orderly liquidation.

It does?

The FDIC has a law called “Prompt Corrective Action” (USC 12 Chap 16 Section 1831o) which the FDIC and other regulators have absolutely ignored for the last three years.

This law applies to all insured depository institutions, including the “too big to fails” such as Wells, Citibank and JP Morgan.  It was put in place after the S&L crisis specifically to prevent the abuses that were rampant during those years, including evasion of capital requirements, lies about asset valuations and other forms of control fraud that led to bank executives stealing billions from taxpayers and prudent institutions during the S&L crisis.

This law begins with:

Each appropriate Federal banking agency and the Corporation [that's the FDIC - ed] (acting in the Corporation’s capacity as the insurer of depository institutions under this chapter) shall carry out the purpose of this section by taking prompt corrective action to resolve the problems of insured depository institutions.

Note that it doesn’t say “may”, it doesn’t say “except for institutions we think are too big to fail”, it doesn’t say “except for politically connected firms that are performing obscene acts on myself and other banking regulators, whether they be acts of bribery with money, votes or sexual favors.”

It says shall and it provides no leeway or discretion.

This law, if followed, absolutely prevents the FDIC from taking deposit fund losses.  It also prevents “too big to fails” from being too big to fail, since they are subject to the same sanctions and closure as is the small local bank on the corner.

It was and is the willful refusal of Sheila, along with Dugan at OCC, to follow this law as written that has enabled the “too big to fails” to continue to operate.  Had that law been followed EACH AND EVERY ONE OF THESE INSTITUTIONS THAT TAKE DEPOSITS WOULD TODAY BE CLOSED AND DISSOLVED as the law provides for NO DISCRETION in the actions of these regulators.

We cannot afford to let the status quo continue. We must embrace sensible regulatory changes and send a strong signal to large institutions and those who invest in them that from now on, they must sink or swim on their own. Only then will theoretical market discipline become reality.

Ms. Bair is chairman of the FDIC.

The law does not matter if those charged with enforcing it simply refuse, as Ms. Bair along with The Fed, OCC and OTS have demonstrated.

There was at the inception of this mess (and there remains today) not only sufficient legal authority to resolve these firms there is in fact a legal MANDATE that such firms be resolved rather than bailed out.

Sheila Bair is and has been a lying sack of crap.  She is asking for that which she won’t use, just as she has wilfully and intentionally allowed the taxpayer and the prudent banks of this nation to be repeatedly looted through her willful and intentional refusal to enforce already-existing black-letter law.

That The Wall Street Journal continues to publish her bleating and lies simply means that they, along with the rest of the media, are complicit in these acts and in fact are accessories before and after the fact in the act itself and its willful whitewashing.

We no longer live in a representative republic or a nation of laws and our Felonious Government has become filled with serial offenders.

In the area of banking regulation Sheila Bair is the poster child for that willful and intentional refusal to follow black-letter law as written.

What the hell is THIS?

Sheila Bair, one of the chief regulators overseeing Bank of America’s federal rescue, took out two mortgages worth more than $1 million from the banking giant last summer during ongoing negotiations about the bank’s bailout and its repayment.

It gets better…

Mortgage documents for that 14-room home include a provision, known as a second-home rider, stating that Bair and her husband must keep the house for their “exclusive use and enjoyment” and may not use it as a rental or timeshare.

Yet the couple has been renting out part of the house since they left for Washington, with Bair listing income from the “rental property” in Amherst as between $15,000 and $50,000 a year on her most recent financial disclosure form as head of the FDIC.

Oh yeah, there’s no conflict of interest here cough-friends-of-angelo-cough!

Of course the FDIC retroactively gave her a waiver from its conflict of interest rules – AFTER The Huffington Post started snooping around.

And of course the FDIC’s ethics officer says there was nothing wrong with what went on – even though it appears that Bair’s use for the property did not qualify for the loan she got, and that the programs that would qualify would and did carry a higher rate.

If, as the FDIC claims, this was an “innocent mistake” then Bair should immediately demand (and accept) a re-price on that paper to conform with her intended and actual use, retroactive to the issue of the loan, and immediately pay all accrued arrears.

We know that won’t happen though, right?