"The biggest fraud in the history of capital markets."
These days are looking more and more like August 2008, as this foreclosure/mortgage fraud crisis is getting more and more severe by the day. Bankster Report's favorite, Catherine Austin Fitts, has been saying since at least 1995 that many of the "houses" to which MBS are supposed to be value-linked don't exist, and never did. In 1995, she confronted a Clinton administration official with the fact that "the Administration was planning on issuing more mortgages than there were houses or residents," to which she was told "Shut up, this is none of your business."
It's our business now, and it's the business of at least 40 attorneys general and hundreds of fraud investigators.
The mortgage market, from the most fundamental perspective, is in fact based on fraud, because mortgages themselves in our financial system are based on non-existent money. But Ms Fitts (and me too) think that the fraud is much less "abstract," but literally involves not only non-existent money, but non-existant houses. This latest robo-signing debacle only more clearly exposes that no one--not regulators, not bankers, not the market, and not even market participants and the people buying this crap--are even concerned with the legitimacy of the documenting paperwork: this current, rapidly expanding foreclosure fraud crisis is the obvious result of the underlying mortgage fraud crisis. Investigators are finally working it backwards: when a good doctor sees certain symptons--that is, banks having using illegal practices during foreclosure proceedings--he can works it back to determine the specific disease causing these symptons--that is, the banks using illegal practices to get the mortgages in the first place!
The events of this last month, thanks to judges and lawyers courageous enough to challenge the banks as well as some whistleblowers from the banks themselves, are making it clear that the largest US banks have absolutely no qualms about submitting fraudulent documents, suborning their employees to commit perjury, and outright circumventing the law. As Bloomberg reports today, Wells Fargo, JPMorgan Chase, and Ally Bank (the post-TARP name of GMAC) have admitted submitting fraudulent documents in hundreds of thousands of court cases. Would it be such a big jump to simply fabricate some mortgages, securitize them, and submit some nice, new, shiny tranches of "AAA" MBS to the market? If the banks are committing such crimes today in this "new age of increased regulation," how much more would they have been tempted to do when regulation was "more lax"?
From the above Bloomberg article:
"In a lawsuit filed on behalf of Kentucky homeowners last week, plaintiffs claimed banks, MERS [the Virginia-based Mortgage Electronic Registration Systems, which handles mortgage transfers between member banks] and loan servicers filed mortgages with forged signatures, submitted foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages."
If true, all of the above are serious cases of mortgage and foreclosure fraud, and perhaps more complexly, title fraud and title insurance fraud. For example: JPM forecloses on a house it claims to own because the current occupant is not making mortgage payments. JPM and the occupant go through the court proceeding, and despite the occupants protestations that JPM is not following the law, the occupant can't prove his claims and JPM doesn't admit to having done anything wrong, and so the judge grants JPM possession of the house. The occupant, who had purchased title insurance along with his now-doomed mortgage, loses the house. JPM resells the house to a new person and also sells that person a matching loan. The new occupant is current on payments, and himself has title insurance. The non-paying occupant has been removed, JPM was able to recover losses, and a new occupant is in the home: the system has "worked." Right?
He he he .... One year later (ie: today), JPM is sued by the attorney general of the State for fraud after the AG discovers patterns of document fraud and falsified court documents and gather testimony from JPM employee who state that they were told to robo-sign documents, which both the employees and supervisors knew was illegal, but did anyway. JPM admits that it "may" have used robo-signers for the documents, and perhaps even forged a few signatures, and is "having trouble" producing the title in some of the foreclosures cases in the AG's State. The original occupant sees this story about JPM--the bank that he claimed was up to something fishy during the foreclosure proceedings---and calls a lawyer. He asks a simple question: "Mr Lawyer, does my title insurance cover fraud?" The lawyer says, obviously, "Of course. Why?"
Meanwhile, the second occupant is still faithfully paying JPM for his loan, and hasn't missed a payment. Of course, he might be paying JPM, but JPM doesn't really own the title anymore, because JPM has pledged it as collateral for some other loans from another bank, and has also securitized the original loan into several tranches of "AAA" MBS and sold them. MERS is holding the title as the middleman between the banks. The lawyer for the first occupant of the house calls the AG to report his client's case. The AG adds the case to his successful fraud suit against JPM, and JPM is found guilty of filing fraudulent documents and falsifying court records.
Upon the conviction, the lawyer calls his client's (the original occupant) title insurance company. Like all insurance companies, ABC Title Co is just another financial institution, and the company has been not only watching the JPM cases closely, but has been suffering itself due to the rulings. As an insurer against fraud, ABC Title is now finding itself liable for thousands of payouts to the mortgage holders that JPM fraudulently foreclosed upon. ABC Title can't keep up, of course, and so ABC itself sues JPM. Meanwhile, the original occupant is also fighting to recover the title itself, which JPM has fronted as collateral and which is in the supposedly in the possession of the MERS middleman, and which another person entirely--the second occupant--has an seperate independent title insurance claim on. So, there are two individuals with two different insurance claims on the same title, a title that is pledged as collateral to a second bank, a third party title holder who has no idea who really owns the title, and a group of MBS holders expecting their money from JPM, which JPM is expecting from the second occupant! See what a mess fraud makes!
How does a judge settle this--and how do the title insurance companies survive (never mind the people)? They don't: there is not enough to go around. If JPM committed fraud, and the first occupant had title insurance for fraudulent claims against the property, then the title company owes the first occupant compensation. If JPM committed fraud that impacted the title company, then JPM owes the title company compensation, too. And then there's the guy who bought title insurance on a title that had a latent fraud claims against it and that happens to be the title for the house he's living in and financing. This is not even to mention anything about the second bank which is now legally entitled to the title as collateral if JPM itself starts missing payments to the second bank! This why analysts are calling the foreclosure fraud mess a "hydra": there are too many different faces on one single house, and one of the ugliest faces is the title insurance problem.
We know that we have people in houses paying mortgages to banks who claim to own the loan or the title, but cannot prove either. We also know that we have former loan-owners who are now home-owners because no mortgage company or creditor could produce the title in court. We also know that Bank of America has "foreclosed" on houses which the bank doesn't even own. The opposite of this--that side that I think will be exposed especially through title fraud/title insurance fraud--are the creditors with claims to houses that don't exist, and banks with "assets" on their balance sheets based on ghost houses that even a ghost could live in. We know that there is more debt than money on the planet, and more money than real assets, as the derivatives market is a $1.5 QUADRILLION "market" of promises and exposures, or...
$1,500,000,000,000,000 of promises that will never be fulfilled.
Fifteen thousand Trillion promises. We can't even imagine these numbers. How people can look at a number like that and claim that the global economy is "fixed" and what happened in September 2008 was a once-in-a-lifetime market crash is totally beyond me. Two years after being saved by the master heister Mr Paulson, we have banks admitting that they basically used taxpayer money to fund their massive mortgage fraud operations. Of course, we "conspiracy theorists" knew that there was incessant fraud all along which is exactly why Mr Paulson heisted America to save the banks in the first place. But now this is mainstream news, and attorneys general in 40 States are investigating banks, and the Wells Fargo, Ally (GMAC), JPM, and PNC have all suspended foreclosures until further notice. Its not a "conspiracy theory" anymore.
So, to recap: two years ago, the American taxpayer was heisted by a consortium of banksters, including master heister Mr Hank Goldman Sachs Paulson, which dropped the DJIA by 777 point in a single day, and threatened Congress with martial law lest it authorize a $700 Billion transfer of wealth from the people of the United States to the banksters' group of fraud-laced, immoral, corrupt banks that are themselves so incapable of operating responsibly that without such a transfer they would have gone bankrupt within weeks. The weak, corrupt Congress authorized the restriction-free transfer, and within two days of the bill becoming law, master hiester Paulson completely abandoned the "we must buy the toxic assets!" that lie he had previously concocted and vigorously repeated for the purposes of fear-mongering the entire planet into believing that an absolutely certain "complete global economic meltdown" would ensue if we didn't "buy the toxic assets." Once he had the money in hand, this mantra was abandoned, and suddenly Mr Paulson revealed an entirely new plan to, literally, deliver the money directly to the banks and hope they pay some of it back--the very banks that cannot even handle their own money responsibly nor that of their clients. Fast-forward two years, and these same banks are now admitting to massive and systemic foreclosure fraud, even to the point of forging signature, falsifying court documents, and intentionally and knowingly breaking the law.
But that's not all--because guess what? If these banks get financially hit because of this, the American taxpayer is going to be the one to pay. Not because of any new program that might be concocted to "save" them lest the Moon explode, but because of one that already exists: remember the FDIC's Temporary Liquidity Guarantee Program? Its the one were you get to back about half a TRILLION dollars in private bank paper? Yeah---what happens if JPM ($39.6 Billion in TLGP paper) and BofA ($44.5 Billion) get crimped for cash again due to their multi-year foreclosure fraud operation and the ramification? Who covers the payments to $95 Billion-worth of their creditors?
Who? We do, of course.
So--so much for that "crime doesn't pay" business, kids. Actually, crime really does pay, and pays really, really, really, really well if you do it in an Armani suit. I'm talking BILLIONS "well"---TRILLIONS "well." Plus, there's a great medical plan, solid benefits, and you might even get to visit the White House.
JPM's Jamie Dimond and Goldman's Lloyd Blankfein did!
PHOTO: Getty Images,
"Wall Street Backs Barack Obama's Toxic Asset Plan",
UK Telegraph. Editorial and news use.
"Wall Street Backs Barack Obama's Toxic Asset Plan",
UK Telegraph. Editorial and news use.
And they will be back.