Category Archives: Mortgage Meltdown

Principal Reductions – Some Are Waking Up To What Could Be A Win Win Situation

Mortgage debt

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This is a must read story published in the NY Times by Joe Nocera of a breakfast meeting he had with Laurie Goodman, a senior managing director of Amherst Securities.

Enter Laurie Goodman. One of the country’s foremost authorities on mortgage-backed securities, she is also one of the most data-driven people I’ve ever met; at breakfast, she was constantly pointing me to one chart or another that backed up her claims. “She’s not into politics,” says my friend, and her client, Daniel Alpert of Westwood Capital. “She is using data to tell us the truth.”

It always seemed to me that in order to correct his crisis, writing down everyone’s principal would be the only solution.  For those that do not have mortgages on their homes and own them free and clear some sort of tax break would be in order to compensate them for the decline in the value of their home.

Values declined not because of the market, they declined because those very same banks who oppose these write downs created this mess by providing mortgages to almost anyone creating a housing boom that was destined to crash.  Yes, they know what they were doing but greed took control of corporate governance and patriotic spirit.  The attitude of  let’s rake in as much cash as we can then when it all fails we can take back all those homes and rake in even more cash for homes we have no investment in.

The housing crash was created by the banks unlike what New York City’s Mayor Bloomberg says.  He says blame it on Congress (and Fannie Mae who he says makes loans – wrong!).  Yes, while I believe it was a direct mandate from the White House beginning with Bill Clinton, the banks could have and should have used their better judgment and declined the push from above.  But GREED is a very dangerous intoxicant.   Given the green light by those high up in our political circles – the ones in charge – they quickly did what they believed was their patriotic duty to comply and fill their own pockets

The idea of helping struggling homeowners by writing down some principal on their mortgages — as opposed to reducing the interest or reconfiguring the terms to lower the monthly payments — is much in the air right now. Banks loathe the idea of principal reduction; they fear that people who are current on their mortgages will start defaulting just to get their principal reduced. They also don’t want the hit to their balance sheets.

Yes, of course banks would “loathe” the idea of reducing principal.  For one, the reduction of principal to real value would lower their net worth and show that many of them are actually insolvent.  Their solvency is basically falsified books whereby they keep real estate owned on their books at its value when they first financed it.  We all know that most of us will never see housing values come back to these artificially high values.

Second, the fact that most of the banks REO’s – real estate owned – is also a falsified book entry.  This is where my gripe continues with the greed and dishonesty of this entire industry.

The “bank” made a loan.  The “bank” SOLD the loan to a Wall Street firm who in turn packaged that loan with thousands of others into a security which they sold to investors around the world.  NOTE:  It is the security owned by thousands of investors who actually own the note – NOT THE BANK.

In addition, the bank taking all the action is NOT REALLY A BANK!  You see, the entity taking the foreclosure action is actually a servicing company – a collection agency if you will – that is owned by “the bank” but is not in itself a bank under any situation or charter be it federal, state or local.

The servicing company often uses the same name as “the bank” and lead everyone to believe that it IS “the bank”.  They have everyone convinced including the courts – judges and Clerks of the Courts as well.

When a servicing company like  – listen now – Bank of America Home Loans (not “the bank”) gets the court to award the foreclosure, the court just hands them the title because they are falsley led to belive that they are the bank, they own the mortgage note and therefore can claim the property without paying.

Once they take – no – STEAL the property, the non bank servicing company everyone thinks is the bank – which in the illustration above would be Bank of Amercia – then takes the property and gives it to “the bank” (illustratively Bank of America) who now owns the property free and clear on their books valued at an inflated artificial value.

Not only are the banks using these artificial values to bolster their books (fraudulently inflate their net worth) they are using stolen property to do so as well.

Of course they do not want to write down mortgages.  Actually they CAN’T.  Neither the bank nor the banks servicing company has the authority to do so.  Only the investors who own a share of the bond issue that the mortgage note resides in have the authority to do so.  In fact, only these same bondholders (and it would take 100% of them to do so) can initiate a court action to foreclose.  They are the true owners who along with the rest of American have been swindled – a milder term the screwed – out of their money by “the banks”.

But the states’ attorneys general who sued over the robo-signing scandal have made principal reduction the central plank of the settlement they are close to completing. The settlement will force the big banks to begin a sustained program of principal reduction, and will heavily penalize banks that don’t comply. From what I hear, the goal of the states is to prove to the banks that principal reduction will not cause the sky to fall — and is, ultimately, less damaging to bank profits than foreclosures.

In spite of all I say above, I feel forcing the write downs is a positive.  Not only will it stop the bleeding of continued declining values due to continued massive foreclosures, it will right the wrongs to many of the investors worldwide.  By writing down the mortgages thus allowing homeowners to continue living in their homes and making payments – albeit lower payments – it is a win – win situation for everyone.

The homeowner wins for obvious reasons.  The neighborhood wins as there will no longer be vacant and unattended deteriorating homes.  The investors win as they will get some return of their investment which is better then the zero they are getting now.  The economy wins as it will begin to turn the entire housing market around.  America wins as we can then begin to move forward again and make the American Dream of homeownership possible once again.  And we all know if the housing market is moving the economy moves.

Read Joe Nocera’s entire article To Fix Housing, See the DataPublished: November 4, 2011…click here

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An Attorney Answers … Who is holder of a note

Half million dollar house in Salinas, Californ...

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One of our readers – who  appears to be an Ohio attorney  well versed in foreclosure defense – offered a comment to which I replied and to which he again replied giving a more detailed explanation of  who is considered to be the holder of a promissory note therefore having the Standing to foreclose.

I feel this information is important enough to reprint these comments.  The information is important to all those who are facing and/or currently fighting foreclosure.

As this attorney states, it is always recommended that you seek the counsel of a qualified  – I stress qualified – foreclosure defense attorney.  While I understand that many of you facing foreclosure believe you cannot afford an attorney, I assure you that there are some out there whose fees are reasonable and affordable.

You will not often hear me say this, but if you are in foreclosure then you are not making mortgage payments or paying rent.  If you are evicted from your current home you will have to pay rent somewhere so use your diverted funds to fight for your rights and defend your foreclosure.

And to the many who have been so wiped out that eviction would mean absolute homelessness I encourage you to also look for an attorney who can help.  There are some out there that are willing to work Pro Bono (without fees). At the very least  represent yourself  Pro Se.  Learn what you can from blogs like this and the several others that are credible and offer sound advice and information.  Just answering your summons (in a judicial state) will buy you more time and time is what everyone needs.

Here now the comment conversation from the post Financial Turmoil Evokes Comparison to 2008 Crisis – NYTimes.com as posted on August 11, 2011:

On August 17, 2011 at 10:34 AM Ohio lawyer said: 

I disagree about ownership of the note being the only issue. Under the UCC, to be entitled to enforce the note, a person MUST be in possession of it (except when they can claim the note was lost, destroyed, etc.). In fact, a person in possession of a note endorsed in blank, even if they stole it, may enforce the note. Ownership is not necessary. Likewise, a person who “owns” the note may not enforce it unless they are also in possession of it. I was not sold on the “show-me-the-note” defense for a long time. But after briefing the issue several times in Ohio, I accepted its importance. Without actual possession of the note, a lender cannot prevail. I agree that standing is a major issue, but “ownership” is not the proper way of thinking about it.

  • On August 21, 2011 at 3:31 PM Larry Rubinoff said: |Edit This

    Thank you for your take on this very important subject. Since standing is a major issue and “”ownership” is not the proper way of thinking about it”, then what is the way to think about it.

    Possessing the note, as you say, endorsed in blank, gives the holder the right to foreclose. I was always under the impression that a mortgage note endorsed in blank is not like a bearer bond where anyone in possession of it can execute it. In other words, mortgage notes are not bearer bonds. What is your take on this?

    Of course, if a mortgage note is held by someone but has never been endorsed in blank then it is your argument that now the bearer does not have standing. If this is what you are saying, I must agree.

    On the issue of lost, stolen or destroyed, banks often use this as an argument and basically are using a “trust me your honor, I did have it at one time but it was lost, stolen or destroyed, therefore I should have the right to proceed with the foreclosure action”.

    Too many judges simply accept this from a bank because they are “the bank” and of course, banks don’t lie. Only one judge questioned this in the past asking the plaintiff which occurred.

    Was the note lost, stolen or destroyed? It could not have been all three and if you don’t know which it was then you probably did not have it. I believe it was now Supreme Court Judge Schack in New York who questioned and disallowed this argument.

    DISCLAIMER: i am not an attorney and my comments do not reflect legal advice in any way. My comments come purley from my research and experience in these matters.

    I do, very much, welcome comments from attorneys like the one I am responding to for their legal opinions. More dialogue like this can be of great assistance to our readers and the millions facing foreclosure.

    If you are an attorney and would like to publish your views and opinions here at TheForeclosureDetonator please contact me at lrubinoff@theforeclosuredetonator.org.

    • On August 21, 2011 at 10:50 PM Ohio Lawyer said: |Edit This

      The question is whether someone is a “person entitled to enforce” the note. This status is defined by the Uniform Commercial Code. Below are the relevant provisions of the U.C.C. as adopted in Ohio:
      UCC 3-301
      (A) “Person entitled to enforce” an instrument means any of the following persons:
      (1) The holder of the instrument;
      (2) A nonholder in possession of the instrument who has the rights of a holder;
      (3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 1303.38 or division (D) of section 1303.58 of the Revised Code.
      (B) A person may be a “person entitled to enforce” the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
      A “holder” is defined in U.C.C. 3-301
      (T)(1) “Holder” with respect to a negotiable instrument means either of the following:
      (a) If the instrument is payable to bearer, a person who is in possession of the instrument;
      (b) If the instrument is payable to an identified person, the identified person when in possession of the instrument.

      These two provisions have to be read together to get the complete picture. Let’s go through each type of person listed in U.C.C. 3-301.

      1. Holder – is someone in possession of an instrument which is either payable to that person (i.e. initially made payable to that person, or payable to that person via a special endorsement) or payable to bearer (e.g. endorsed in blank). This person need not be be the “owner” of the instrument, and may be in wrongful possession of it. Under this provision a thief could be a person entitled to enforce the note. All he needs is possession of a note endorsed in blank.

      2. Non-holder with rights of a holder – To qualify under this provision a person must: (1) be in possession of the note, but it need not be order or bearer paper; and (2) the person must have been given the rights of a holder. How does someone get the rights of a holder without being a holder? A holder transfers possession to the person and also grants to that person rights through a separate document, but doesn’t get around to negotiating the note. For example, Bank A sells a group of notes to Bank B. The notes are physically transferred to Bank B, but are not endorsed. Bank A also executes a bill of sale acknowledging that it sold the notes to Bank B. Think of it as possession plus ownership without endorsement.

      3. Someone not in possession under certain circumstances: There are two possibilities here. The first in the “lost, stolen, or destroyed” note. We see that often in foreclosure cases. The bank has to submit evidence to the Court to prove it can enforce the lost note. The other circumstance is almost never seen so I won’t go into it.

      That’s it. Only three classes of people can sue on a promissory note. Aside from “lost note” cases, possession is required. After that you need either negotiation (payable to order or an endorsement in blank) or some other evidence that you are intended by the last holder to be the person to enforce the note.

      This framework addresses commercial paper in general. That said, there may be other restrictions on transfers of certain types of mortgage notes. For instance, an FHA note cannot be sold to just anybody. They can only be transferred to other FHA-approved lenders. Some have suggested that such FHA or VA regulations renders notes issued under their programs to be something other than negotiable instruments. I do not know much about those arguments, but want to caution people that generalities are just that – general. Every situation is different and must be evaluated on its own facts.

      I can’t emphasize that last point enough. It’s all well and good for people to know the law, but too many borrowers try to go it alone. Law is not viewed in a vacuum; it is applied to fact. Most of the time the fact is harder to come by than the law. I urge borrowers to find counsel to help them. Doing it yourself almost never turns out well.

      I agree, Judge Schack drew attention to these issues by asking the simple questions and demanding some proof. Now, judges everywhere are more likely to listen to a borrower who challenges broad assertions of standing. Currently, this issue is pending before the Ohio Supreme Court and will likely be decided late this year. You can see the briefing on the issues on the Court’s website. The case name is U.S. Bank v. Antoine Duvall, Case No. 2011-0218.

Thank you Ohio Lawyer for taking your valuable time to offer these comments and help educate our readers.

To all attorneys:  Feel free to send your information for publication to me at lurubinoff@TheForeclosureDetonator.org.  You can remain Anonymous, use a screen name or if you wish have your name, address and phone number published.  If you choose to use only your name or screen name, please let us know what state you are in or what state(s) you practice in.

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Loan Modifications…Just Window Dressing

I have long maintained that Loan Modifications offered by “the” banks are no more then ‘window dressing’.  Propaganda by our “too big to fail” financial institutions who have profited and continue to profit through foreclosures.  They have no real interest – or intent – on helping the public out of the crisis they created.

There should be more main stream media coverage and exposure like the one in the tricityherald.com.

In a recent story published in tricityherald.com, the “voice of the Mid-Columbia/kennewick, Pasco and Richland, Washington”, they tell real stories of real people who have suffered this deceit.  Herein lies the truth of loan modifications.  Stories that are all to familiar.

Homeowners tell how banks failed to modify mortgages
by Kevin G. Hall.

Nearly three years into the deepest U.S. housing slump in generations, lenders are modifying only a small number of problem mortgages, and rising foreclosures are restraining the economy’s recovery.

The administration thinks that about 2.7 million U.S. homeowners are at least two months behind on their mortgage payments, roughly equal to the population of Kansas. Yet only 9 percent of eligible borrowers had been offered trial loan modifications through June. (emphasis added)

Through emails and calls received by McClatchy’s Washington Bureau and other interviews they evidently conducted there emerged a common theme;

Virtually all say they were encouraged, directly or indirectly, by their lenders to fall behind on their mortgage payments in order to qualify for loan modifications. Then the modifications never came.(emphasis added)

Continue reading

Inside The Meltdown…PBS Frontline…A Must See Program

Inside the Meltdown was broadcast Tuesday, February 17th on PBS Frontline.
The occurances of September, 2008, can be called “The Economic 911”. (my tag)

Courtesy of their site I am embedding the entire program for your viewing. It is a one hour program but is a MUST SEE by every American.

See and hear for the very first time what the causes were, why the actions taken by the government and why the urgency to spend billions of our dollars. Also learn if this crisis is close to being over. Includes commentary from former Bear Stearns executives.

The stark reality is shocking. Following is dialogue directly from the Frontline web page.

As the housing bubble burst and trillions of dollars’ worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail.

“Rumors are such that they can just plain put you out of business,” Bear Stearns’ former CEO Alan “Ace” Greenberg tells FRONTLINE.

The company’s stock had dropped from $171 to $57 a share, and it was hours from declaring bankruptcy. Federal Reserve Chairman Ben Bernanke acted. “It was clear that this had to be contained. There was no doubt in his mind,” says Bernanke’s colleague, economist Mark Gertler.

Bernanke, a former economics professor from Princeton, specialized in studying the Great Depression. “He more than anybody else appreciated what would happen if it got out of control,” Gertler explains.

To stabilize the markets, Bernanke engineered a shotgun marriage between Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use $30 billion to cover Bear Stearns’ questionable assets tied to toxic mortgages. It was an unprecedented effort to stop the contagion of fear that seemed to be threatening the rest of Wall Street.

While publicly supportive of the deal, Treasury Secretary Henry Paulson, a former Wall Street executive with Goldman Sachs, was uncomfortable with government interference in the markets. That summer, he issued a warning to his former colleagues not to expect future government bailouts, saying he was concerned about a legal concept known as moral hazard.

Within months, however, Paulson would witness the virtual collapse of the giant mortgage companies Fannie Mae and Freddie Mac and preside over their takeover by the federal government.

The episode sent shockwaves through the economy as confidence in Wall Street began to evaporate. Within days, in September 2008, another investment bank, Lehman Brothers, was on the brink of collapse. Once again, there were calls for Bernanke and Paulson to bail out the Wall Street giant. But Paulson was under intense political pressure from conservative Republicans in Washington to invoke moral hazard and let the company fail.

“You had a conservative secretary of the Treasury and conservative administration. There was right-wing criticism over Bear Stearns,” says Congressman Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Paulson pushed Lehman’s CEO Dick Fuld to find a buyer for his ailing company. But no company would buy Lehman unless the government offered a deal similar to the one Bear Stearns had received. Paulson refused, and Lehman Brothers declared bankruptcy.

FRONTLINE then chronicles the disaster that followed. Within 24 hours, the stock market crashed, and credit markets around the world froze. “We’re no longer talking about mortgages,” says economist Gertler. “We’re talking about car loans, loans to small businesses, commercial paper borrowing by large banks. This is like a disease spreading.”

“I think that the secretary of the Treasury could not fully comprehend what that linkage was and the extent to which this would materialize into problems,” says former Lehman board member Henry Kaufman.

Paulson was thunderstruck. “This is the utter nightmare of an economic policy-maker,” Nobel Prize-winning economist Paul Krugman tells FRONTLINE. “You may have just made the decision that destroyed the world. Absolutely terrifying moment.”

In response, Paulson and Bernanke would propose — and Congress would eventually pass — a $700 billion bailout plan. FRONTLINE goes inside the deliberations surrounding the passage of the legislation and examines its unsuccessful implementation.

“Many Americans still don’t understand what has happened to the economy,” FRONTLINE producer/director Michael Kirk says. “How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown.”

To view this program please turn off Bloomberg TV by pressing the square button on the lower left of the Bloomberg image on the left side of this screen. Thank you.


Is this crisis over or even close to being over? You be the judge.

Paul Volker on Charlie Rose

I have my opinions and beliefs that I publish here. But who am I, just an ordinary citizen with no credibility or national exposure. So, I am pleased to bring you clips of those who are and who may get you thinking more.

Paul Volker, regardless of his political affiliations was, to this writers belief, one of the best Federal Reserve Chairman of recent times.

I must go on record however, as saying, that I do not believe The Federal Reserve functions on behalf of the citizens of this nation. They are not elected government officials nor are they even a part of our government. They are in fact, a secret, privately help corporation who contols each and every dollar we own and collect interest on each and every dollar we not only own but which they manufacture out of thin air. Case in point, the over a Trillion Dollars used in these latest bailouts.

The question remains, and perhaps somewhere down the line someone like Paul Volker can explain to us, why is it that we can create dollars to enhance and enrich corporate America but we cannot create dollars to pay off our deficit? Why also can we not create dollars or at least move existing dollars at the same “superman” speeding bullet velocity to places like New Orleans?

I just don’t get it.

FBI Investigations and Government Bailout Schemes

The last few days have created a lot of conversation from people and Congressmen. It seems like some are beginning to wake up and smell the wilted roses.

Following are reprints of comments I have made recently on FlippingFrenzy.com. The article title is linked to the site for your reference. I am reprinting my comments as they describe my beliefs and point of view.

I am not in favor of this or any other bailout plan. Let the free market dictate who survives and who does not. As you will see in my last comment below, I believe there is a far greater plan in effect here that is not for the benefit of the people of this country.

None of these bailouts directly impact or offer badly needed help to Main Street, you and me. Why then you must ask is our government dong this.

Your comments are welcome.

Mortgage Fraud and the Housing Bailout by Ralph Roberts

Comment 1:

Finally!

Maybe someone out there has been listening. Ralph, you are finally beginning to put the blame where it should be.

As I have been saying and writing for many months now, “how high the fraud”? Perhaps now we can vindicate many of the mortgage brokers in the sub prime industry for being wrongfully accused of creating this crisis, however late it may be. It is much like letting a person out of prison after years of confinement only to find them innocent. You can’t give back the years they lost and you can’t give back the industry and jobs lost by the hundreds of thousands.
The corporate executives of these companies now under investigation knew full well what the end result of their schemes would be. After all, they are intelligent with a full understanding of how the system works. They worked the system, enriched themselves along with their inner circles and select employees at the expense of the entire nation.

Indeed, they formulated a plan, executed the plan and sold the concept of “free” money through real estate acquisition to an all but too willing population wanting a better life. In other words, they took advantage of people’s dreams and desires, they dangled a carrot and sucked everyone in. They wrote the book “Fraud For Dummies” and it was a best seller.

They said, we’ll give you something for nothing, in fact, you can have as much as you want for nothing, all we want is your signature. It is a fact that every signature they got they were able to multiply up to sixty times the value of the note. For every dollar you signed for they could make up to $60.

In my article posted here back in February, The Credit Crisis – Subprime Mortgages and Various Idiots, I said, “This could be the greatest Ponzi scheme in the history of the world, and the perpetrators have the nerve to blame it all on mortgage brokers.”The total count of corporate investigations given by the FBI is 26 although they do not name any of the others. I would only hope that Merrill Lynch and Bear Stearns are being investigated as well. I have long laid blame on them as well. Merrill, Bear and Lehman were the sub prime industry. They created the programs, issued the underwriting guidelines and sold the securities to a long line of waiting investors – also duped in believing these were AAA rated issues.

Perhaps J.P. Morgan should be investigated for planning a Sunday evening rescue of Bear Stearns with the aid of the privately and secretly owned Federal Reserve Board, much of which has been controlled for years by J.P. Morgan through his seat on the Board of The New York Federal Reserve Bank. J.P.’s Chairman, Mr. Dimon, still retains that seat. Was this 11th hour rescue to the tune of $55 Billion of taxpayer money just a cover up? Maybe the FBI will discover the truth and the truth needs to be known by all Americans.

The AIG bailout is probably another cover up as would be the $700 billion currently being proposed. None of these bailouts trickle down to any of us, it only obligates each and every one of us and many future generations to this debt.

So FBI, if you do browse this blog as it is said you do, my congratulations for doing your job and protecting the interests of the people of this country. You have the power. Use it to maintain the integrity, honesty and most of all the American way of life for your fellow citizens.

Comment by Larry Rubinoff — September 24, 2008

Comment 2:

“Give me control of a nation’s money and I care not who makes her laws.”Mayer Amschel Rothschild (February 23, 1744 – September 19, 1812)

Rothschild basically founded the central banking system and was instrumental in its formation in the U.S. His colleagues and partners were none other then August Bush – George W’s great grandfather – who headed up The Bank of New York – which in turn financed Hitler and J. P. Morgan – helping him create his empire. These two were instrumental in the formation of The Federal Reserve and The Federal Reserve Bank of New York where as I said earlier, J. P. Morgan still maintains a seat. It is said that by controlling The Fed Bank of N.Y. you control the Fed itself.

Do your research on Rothschild and you will find that he laid out a plan in the late 1700’s – an economic plan that would control most of the world’s economy. In part he called it “The New World Order”. Sound familiar? His plan, which is published and can be found on the internet is being executed today. President Bush is so quick to socialize our financial institutions with almost dictatorial powers. If you read about Rothschild and the Bush/Morgan connection you will understand why. There is no doubt in my mind that the Bush’s are part owners of The Federal Reserve.

Steve, you are correct. The old saying, “he who has the gold rules” has never been more evident then it is today. In fact, that is what Rothschild was saying and what our government is doing today.

Politics have always been dirty but never as it is today. Socialism is a very close cousin to communism which is a first cousin of facism.

Continuing to allow these massive bailouts – a cover up – will mean total control by government – now an entity unto itself and no longer representative of the people. The government will decide if and under what terms you get a mortgage, a car loan, a student loan and perhaps even a job. If you don’t belong to the right party or totally support it you may be denied your loans, a home and transportation.

Don’t think it can’t happen. My father, a Holocaust survivor, back in the 50’s attempted to get his electrical contractors license for several years in the town we lived in. Each time he failed the test by just one or two points. Since he had an excellent reputation as an electrician and was well respected at City Hall, some one at the city suggested he change his party affiliation from Democrat to Republican and he would get his license. He did that and yes, the very next time he took his exam he passed with flying colors.

If we as citizens continue to behave as “sheeple”, allowing the greed and fleecing of America by our elected officials and their corporate cronies, we are doomed.

Comment by Larry Rubinoff — September 24, 2008

Comment 3:

This was all an orchestrated, collaborative effort between government and the private sector financial institutions driven by greed on both sides.

Our politicians dance to the tune of the same drummer, The Fed.

During the Clinton years we saw the emergence and tremendous growth of sub prime. Lenders went from a handful – like Ford Motor Credit – to hundreds of bank subsidiaries around the country. And yes, it was at the governments request that more money in the form of credit was made available.

Sub prime was not the problem. Criteria such as Debt to Income, reserves and value were all taken into consideration. There were no problems then and we did see a period of declinging markets and values. The only difference was a much higher rate as those borrowers already exhibited a poor payment history.

Rates were as high as 16% but again, the borrower had to prove that they could afford it. Having bad credit did not mean you did not have the ability to pay.
The problem arose when the rules of engagement were changed. Eliminating any evidence of ability to pay and offering multiple loans to everyone.

To mask a depletion of our surplus and to take the emphasis over an ever increasing unprecedented deficit and an unpopular war draining trillions out of the economy, the only option left by the Fed and government (they are not one in the same) was to create a credit based (no real cash money involved) economic growth pattern in the only major industry left in this country. By doing so prosperity proliferated the society and society was too consumed by their new found material wealth – real estate, cars, electronics, leisure travel, etc. – to pay attention to or care about the rest.

This is not a normal capital market failure. This appears, to me at least, to be a well planned and orchestrated occurrance.

Pay close attention to the Rothschild quote I gave above.

Comment by Larry Rubinoff — September 25, 2008

The "SEC Jihad" and More Truth From the New York Times

A must read article published in the New York Times on line September 19, 2008 written by Joe Nocera. His reference to the SEC not doing their job, calling it the “SEC Jihad”, further points out the lack of oversight that occurred. His analysis and observations, I believe, are right on target.

After reading the NYT’s article then read the next one from a local hometown publication. It raises the question a very important question.

Hoping a Hail Mary Pass Connects
By Joe Nocera
New York Times published September 19, 2008

Henry Paulson at a news conference to announce an insurance program for money market

After reading the NYT’s article, read this one from a small local hometown paper. It raises a very good question.

Asia makes big screens and we just watch TV
Published: Saturday, September 20, 2008 1:38 AM EDT
by Chris Powell

What is it about the United States that every generation it must have a catastrophically mistaken imperial war and a catastrophically expensive rescue of its predatory financial class?A generation ago the catastrophically expensive rescue of the financial class arose from the collapse of savings-and-loan institutions, which had recklessly lent into a real estate boom against deposits insured by the government even as the government paid little attention to what the banks were doing. Today the catastrophically expensive rescue of the financial class arises from the failure to regulate the great New York financial houses, which were allowed to create and misrepresent bogus financial instruments, now called derivatives, and poison the world financial system with them. Ten years ago a few members of Congress proposed regulating these instruments, but Congress was dissuaded by worthies such as Federal Reserve Chairman Alan Greenspan, who testified that derivatives would diminish risk by dispersing it and thus should be left alone. Of course as it turned out so much risk was created and dispersed that it took the world’s economy hostage.
While he now is thundering emptily about accountability, Connecticut’s U.S. Sen. Christopher J. Dodd facilitated this failure of regulation from his seat on the Senate Banking Committee. Dodd was a leading advocate of unleashing the financial houses to do whatever they wanted, as by repeal of the Glass-Steagall Act in 1999. But Connecticut’s other members of Congress were just as negligent and approved staffing the financial regulatory agencies via the revolving door from Wall Street. Of course they financed their campaigns largely with financial industry contributions.Now the country is bankrupt and lemon socialism is replacing free-market capitalism, with the government desperately extending taxpayer guarantees to cover every bit of corporate irresponsibility as the country loses its sovereignty to the nations that hold its proliferating bonds. Asia makes big-screen TVs and Americans mainly just watch television — but not, it seems, much news.

Who’s Gulty…We’re Beginning To Hear The Truth

For over a year now, I have been saying that much of this economic crisis and the fraud surrounding it has come from the top. The top being the government, as in lack of oversight by the Securities and Exchange Commission (SEC), top executives of the major Wall Street bankers, the rating agencies and various insurers.

Focus was initially put on mortgage brokers. Wall Street and the banks selling their creative programs tried to avoid any direct involvement by doing so.

While bashing and destroying the mortgage broker industry, the other cause of the problem was put on the sub prime mortgage programs. Mortgage brokers were described as “putting people” into these bad and sometimes fraudulent programs as if they had created them and had the power to do so.

From the very beginning, I have said that the creators were Merrill Lynch, Bear Stearns and Lehman Brothers. They were sub prime. They did, in fact, create the entire sub prime products and markets along with creative financing, limited documentation or no documentation programs. It was their underwriting guidelines and rules that everyone followed.

To allow these Wall Street to securitize loans, thereby creating money out of thin air, they had to show that these investments were secure. The rating agencies, Standard and Poors, Fitch, Moody’s all readily and willingly rubber stamped every issue AAA.

To further this effort the risk was spread even further by insurers reinsuring most of this debt putting another layer of “false” guarantee on risky paper. This debt was leveraged up to 60 times. In other words, for ever dollar of debt obligated 60 additional dollars were created. So if you got a mortgage for $100,000 the banking industry got back $600,000 and all the risk was spread so far and wide that no one can ever put it all together. Instead, we pay to keep it going.

Then it was said that if only all loans followed Fannie Mae and Freddie Mac guidelines that none of this would have ever occurred. Wrong again, as I stated a year ago, Fannie and Freddie were doing the same and I predicted that they would follow the demise of the Wall Street banks mentioned above.

Not even close friends and associates believed me. Sheltered by their own false sense of investment security, no one believed any of these large companies could fail.

Well, here we are. More then a year later and all that I said would come to pass has done so. I am not trying to say, “I told you so” nor am I trying to rub salt into anyone’s wounds. What I am attempting to do is to get people to open their eyes, look at more then just the headline gathering news, sound bites and distorted, cover up stories primarily from main stream media. Perhaps they voluntarily report what the government wants them to.

Bottom line is that we, as a nation are in deep trouble, deeper then we are still being told. But there are those who are beginning to surface publicly attempting to expose the truth and the dangers of our current situation.

Regardless of your political leanings and views, regardless of party lines and regardless of what candidates you may vote for, the fact remains that there are those speaking out the things we as Americans need to know.

John McCain is doing that. In fact in his speeches in Tampa and Ohio he almost reaffirmed all that I have written and said over the past year.

Ron Paul sees and talks the truth. He along with the not so recognized official other party candidates for President see and expose the truth.

Glenn Beck of CNN reports on the realities and true situations of what is occurring not only in our financial markets but in our political system as well.

There are cadres of others who stand with the above and behind them as well. People knowledgeable and experienced in politics, government and economics. People much more credible then I attempting to get the story out so that we, the people, can take back control of the government and right all the wrongs.

We are seeing some very dangerous times. Nationalization of private companies – AIG, Fannie Mae and Freddie Mac – funding of private companies by the government – $65 billion to J. P. Morgan/Chase for the purchase (really a free acquisition) of Bear Stearns – and the creation of debt by a private company – The Federal Reserve.

Dangerous indeed. If the government can nationalize private firms under the guise of a bail out, then they can nationalize everything. Is that not how the Soviet Union functioned? This is the beginning of the elimination of Capitalism.

Allowing some companies to survive by public funds (really debt) is another serious situation. What we are saying is that if you are large enough we will allow you to continue and prosper as long as you listen to our (the government) guidance and desires. As in the Soviet Union, some were allowed to prosper and enjoy a lifestyle not available to the masses.

The Federal Reserve has taken liberties to loan money that will not be available to repayment for years, perhaps centuries. This just secures the financial futures of the owners of the Fed, their families and heirs for ever. Oh yes, I say owners. The Federal Reserve is a private company owned by people not know to anyone publicly. For every dollar they give out or create, we owe them back $1.20. For every dollar that is already issued and in circulation, we pay them $1.20. Don’t kid yourselves, these payments are and will continue to be made until We the People do something about it.

No one says it better then Paul Muolo, a reporter for SourceMedia as reported in National Mortgage News. Follow this link in his latest column What We’re Hearing.

You Decide.

Foreclosures Increase 55%… Unemployment at 6.1%

A real economic epidemic.

There is so much hype about the government’s effort to stem the tide of foreclosures through various rescue bills, plans and laws, yet they DO NOT seem to be working.

The latest effort, the takeover of Fannie Mae and Freddie Mac by the Government will also do little to stem the tide. This solution may be good for China’s interests as about 40% of their investments are in those two institutions. Yes, this move will guarantee them their money but at the expense of the stockholders. I also read recently that China will pull back its investments meaning that Fannie/Freddie will have less money to lend – another negative impact on our economy. While it does have some positive international ramifications, I see little benefit domestically. If we think those two companies were run badly before, just wait and see how they will operate under government rule.

It is no surprise to me, as I continually report, that these “feel good” efforts are meant only to comfort the public. We tend to get our news in snippets and on the run retaining only the main sound bites. When the headlines read, “Foreclosure Rescue……” we listen quickly and think, hey, things are getting better. They just said so. Then we tell our co workers, neighbors and friends that we just heard reports that help is on the way and an overall improvement of our economy is near. The comfort train is in motion.

CNBC.com in a report on line last month had the following to say about the state of the housing industry. It is a very good insight as to the state of the economy and the people of our country.

You can view the video at http://www.cnbc.com/id/15840232?video=823836941

The foreclosure rate went up 55% in July compared to a year ago.

  • That relates to 1 in every 464 homes.
  • There were 272,000 filings in July up 8% from June.
  • Bank Repossessions are up 184% over a year ago July.
  • Default notices are up 54% over a year ago July.
  • Auction sales are up 11%.
  • 750,000 foreclosed properties are for sale nationwide as reported by RealtyTrac.
  • 17% of all existing home sales in June were foreclosures as reported by the National Association of Realtors (NAR).
  • 40% of all sales are bank owned.

These figures are staggering. It indicates a rapid decline of our economy, escalating each and every month. Yet, Recession is not yet admitted.

Just do the math. If there were 272,000 foreclosure filings in July, 8% more then in June then June filings had to be around 254,000. Adding June and July together, we have a total of 526,000 homes in foreclosure in just two months.

Averaging June and July foreclosures we get an average of 263,000 homes per month. On an annual basis that is (263,000 X 12) a total of 3,156,000 homes per year. Yes, over THREE MILLION homes for the year.

If that figure is not staggering enough let’s see how that relates to people and not so much to brick and mortar and the economy. If the average household in America contains 4 people then we now have (3,156,000 X 4) 12,624,000 people affected. People of all ages, sizes and shapes – older folks, middle age folks and children who are too young to do anything – traumatized, displaced and broken.

If we take the averages above and project them 4 years into the future and add in the same numbers for last year the foreclosure crisis will affect around 63,120,000 people. As I see it, almost 20% of our entire population.

Add to this the ever increasing unemployment rates, high food and fuel prices and we have an economic epidemic of unprecedented proportions.

Government has appropriated billions of dollars for various rescue plans and corporate bailouts. One needs to ask, who does all this money really benefit? Obviously not the people.

We have allowed our large corporations to rape and pillage and they continue to do so. Not only did they make billions of dollars making loans, they made more billions securitizing these loans to sophisticated investors world wide. Now, through foreclosure they will once again profit through fees and charges for their services – all at the unconscionable expense of the American people.

There is a fraud occurring here beyond any we have seen to date. The victims are not just those that suffered at the hands of fraudsters and scammers – the victims are our entire nation of people – a real economic epidemic.

The latest unemployment figures released said there were 9.4 million people unemployed with over 562,000 new unemployment filings in July. What we need to remember about the total figure reported is that it only includes those still receiving unemployment benefits and does not include commission workers, many domestic workers, self employed and others not eligible for unemployment benefits. So it could well be argued that those figures could potentially be twice as large at the very least.

But using the published figures let’s see how this really impacts us as a nation.

If the new filings average 562,000 (figures increase each month so this figure would be conservative) and we annualize this, then we can expect another 6,744,000. If we add that to the existing 9.4 million we have a total of 16,144,000 – an even greater economic epidemic.

If each of these unemployed spends an average of $3,000 per month and now is limited to $1,000 that would mean that there is over $32 Trillion ($32,000,000,000) not circulating in our economy.

With no real improvements in sight for the economy, with no real plan for improving the economy and the lack of available capital and credit, we as a nation are suffering.

Our leaders still fail to call this a Recession when in fact, it may be the “Greater, Great Depression”.

We as a people need to come together, not only to help each other, but to come together as a group, with a strong voice that says, “We’re mad as hell and we’re not going to take it anymore”.

Those of us who grew up in the 60’s and 70’s did it then. Where are we now when the same voice we used then is needed even more now.

Fannie Mae and Freddie Mac Takeover Reactions

A false sense of security may have overcome everyone when the Treasury came riding in a “painted” white horse to save the day. Perhaps the horse they were riding was a black stallion adorned with armor as was its rider. They are prepared for battle, not for the good of the people but for some other causes.

Initial reactions by the mortgage market was an increase in rates, yesterday and another increase in rates today while the stock markets had a positive upswing. You will see a potential reason for this below.

Below are excerpts and my commentary from an article posted in one of the most honest publications on the web, Mortgage News Daily. Titled, “Experts Moderate Initial Enthusiasm for GSE Takeover”. As you will see, the quotes were taken by MND from sources such as Forbes, The Wall Street Journal and The New York Times.

“Reading through it all one gets a strong feeling that Freddie and Fannie aren’t necessarily dead, a huge battle is looming, and the Bush administration may pay a price for their actions.”

Larry: I believe we will all pay a price for this.

“…by the end of the day Monday, concerns about bank solvency and the weak economy returned.”

“Former Presidential candidate Steve Forbes, writing in his magazine suggests that the Treasury Department’s actions were taken months too late but that now the two companies (who Forbes has renamed Fonie and Fraudie) should be broken up into 12 new companies, recapitalized to the tune of $300 billion and both common and preferred stockholders in the old companies allowed to trade their shares for common stock in the new companies.”

Larry: Fonie and Fraudie, very appropriate Mr. Forbes. I also agree that stockholder should be protected and not wiped out.

“The New York Times is reporting that “policy makers and Congress began [on Monday] what promises to be an epic political fight over how to revamp the companies once the current crises ends.” These same factions, The Times reported, have also begun the ritual of assigning blame for events leading to that crisis.”

Larry: The blame game again. Why don’t they just accept the blame as they should?

“The Times states that some senior Treasury Department officials want to shrink the companies and turn them into public utilities. This would result in tightly regulated entities with smaller investment portfolios. Another version would turn the GSEs into pure government agencies with management vested in government officials and profits returned to the Treasury. However, the paper also reports that many Democratic lawmakers still see Fannie and Freddie as instrumental in providing more affordable housing.”

Larry: As I warned, watch out. Shrinking the companies reduces money availability. Having given Treasury too much power they can now do what ever they want. They are not for the people.

“In the meantime, Congress and the White House exchanged angry words over how the mortgage debacle played out. Presidential press secretary Dana Perino said that Congress had failed to act on administration recommendations for avoiding the crisis while Senator Dodd accused Treasury Secretary Henry Paulson of misleading lawmakers into giving him authority to spend huge amounts of money the rescue the GSEs while “assuring them at the time that he had no intention of using that authority.” Dodd said that he had taken the administration at their word and said it found it hard to believe that the takeover was going to happen.”

Larry: Treasury lied to Sen. Dodd. No, our government doesn’t lie to us, do they?

“Both Schwartz and the three reporters who wrote the WSJ article referenced above (Deborah Solomon, Michael Corkery, and Liz Rappaport) suggested that the takeover was pushed to a great extent by concern expressed by Asian investors who apparently regarded the close association of Freddie and Fannie with the U.S. government as a guarantee of their investments in the two companies.”

Larry: As President Reagan used to say, “here we go again”. I agree this move was meant for Asian investors. We need China, how else would Wal Mart stock their shelves. So, let’s protect Asian Investors by screwing American and other investors. Truly a government working for our common good.

I rest my case!

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