Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Nye Lavalle
CDS sector weighs Bear Stearns backlash
By Aline van Duyn in New York
Published: March 16 2008 20:22 | Last updated: March 17 2008 02:51
Bear Stearns helped fuel the explosive growth of credit derivatives, the market where banks, hedge funds and other investors have taken $45,000bn worth of long and short positions on the credit-worthiness of companies or countries.

International regulators have already started pressing for a clearer system for settling contracts after a default, as many of the market’s settlement procedures remain untested.

These concerns have grown amid expectations of a surge in corporate defaults due to the credit crunch. [WE LENT MORE MONEY THAN WE HAD ON HAND]

On Friday, Bear Stearns, one of the main counterparties in this market faced a credit problem of its own. [BEAR NEVER HAD MONEY OF ITS OWN, JUST PLAYING WITH "OTHER PEOPLE'S MONEY AND THEY RAN OUT] Bear Stearns’ credit ratings were cut to the triple-B level, still investment grade, [i.e. INVESTMENT GRADE MEANS ANYTHING THAT ANYONE IS STUPID ENOUGH TO PURCHASE] but too low to be considered a solid counterparty [IN DEN OF THIEVES, MEANS YOU'RE OUT NOW] for many derivatives trades.

This created broader worries about the effect of Bear Stearns’ problems on the credit derivatives market, called credit default swaps (CDS). “A lot of people have close ties to Bear,” [EVERY COM AND INVESTMENT BANK IN WORLD, ESPECIALLY JPMORGANCHASE]said Matthew Albrecht, investment banking analyst at Standard & Poor’s Equity Research. The Bear Stearns crisis was already being felt in parts of the CDS market.

The market is used to hedge credit exposure, meaning that banks or investors can buy or sell protection in the event of a default in order to manage their exposure to a company or country’s debt or loans. [CONDOMS ARE ACTUALLY MORE EFFECTIVE] It is widely used to place bets [GAMBLING WITH YOUR PENSION MONEY] on the direction of credit-worthiness such as by buying or selling contracts based on CDS indices.

If Bear Stearns had defaulted, the market would have had to try to unravel the complex web of trades it was involved in. [OH BOY, THEY WOULD REALIZE THAT BEAR, JUST LIKE THEY WERE, WAS SELLING NOTES THEY DIDN;T OWN; WHERE PAID OFF OR PLEDGED TO 2, 3 OR EVEN 4 OTHER POOLS AT THE SAME TIME - - SAME THING THEY WERE DOING, JUST BEAR DID IT MORE] This could have created a logistical headache [RUN ON ALL BANKS AND COLLAPSE] for bankers because a CDS contract in effect pledges to protect an investor against loss if a default occurs. Counterparties need to get hold of bonds when a default occurs to pay back investors and, with Bear being a counterparty on so many trades, the complexity would have been unprecedented. [IF BEAR WENT INTO BANKRUPTCY, THE COURT WOULD HAVE SEEN ALL THE FRAUD GOING ON AT BEAR AS WELL AS THEIR "PARTNERS" IN THE ENTERPRISE, NOT RIVALS AND COUNTERPARTIES]

The issues with Bear Stearns came amid reports of growing back office strain at major investment banks.["SHIAT, WE'VE BEEN FOUND OUT"]

In particular, backlogs appear to be rising in some corners of the market, in terms of settling trades, [WE PUT BORROWERS AND OUR PAYMENTS INTO SUSPENSE ACCOUNTS] in spite of pressure from regulators to improve the infrastructure. This could create headaches if a large player were to default. [i.e. IF EVERYONE LEARNED IT'S ALL A PONZI SCHEME. ESPECIALLY THE CHINESE]

Robert Pickel, head of the International Swaps and Derivatives Association [WORLD SEX SWINGER'S CLUB AND CLUSTERF**K] said: “If any large entity were to default, the challenge would be to quickly value a lot of different positions in the markets where it has transactions with other counterparties. [i.e. "SHIAT, WE'VE ALL BEEN INFECTED WITH THE HIV VIRUS].

“This would be done by getting quotations, using market information and calls to market participants. It could take time and effort, but it would get done.” [EVERYONE WOULD HAVE TO GET TESTED AND THE RESULTS PUBLICLY KNOWN AND A SCARLET LETTER ON OUR HEADS]

Additional reporting by Gillian Tett, Michael Mackenzie, and Stacy-Marie Ishmael

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Doesn't say whether that 45 billion is notional value or not.  At first I thought it could be typo but Gillian Tett has used this number in other articles and she would know.  This is why I thought it had to be a typo:
Credit default swap risk gathers momentum ->Emirates Business 24|7
The global market for CDSs has rocketed over the past four years. There are now $46 trillion of outstanding trades. CDSs have been widely used by the thinly capitalised off-balance sheet vehicles created by banks over the past few years, and so these could struggle to find the money required if the derivative contracts are triggered, creating so-called counterparty risk for those expecting to be paid.

Now for some some perspective on just how loud that bang is going to be:
Your Financial Future: The Trillion Dollar Secret 
According to the Comptroller of the Currency, total Derivatives in the top 25 banks in the US amount to about 180 Trillion dollars. Not billion, trillion. 1000 times a billion.  To put this in perspective, the US GDP for the 3rd quarter of 2007 was about 11 Trillion dollars. So they are playing a game with a pool of fictional money that is 16 times bigger than our economy.  Let that sink in.

Now consider the following:

  • Current proposed U.S. federal budget is $3 trillion
  • The government’s maximum legal debt is $9 trillion
  • US GDP for 3rd quarter 2007 was about $11 trillion  
  • U.S. mutual fund companies manage about $12 trillion
  • U.S. annual gross domestic product is about $15 trillion
  • Likewise, the U.S. money supply is also about $15 trillion
  • US stock market is about $22 trillion
  • Outstanding Credit Default Swaps $46 trillion
  • The GDPs for all nations in the world is about $52 trillion
  • Total value of world’s real estate is estimated at about $75 trillion
  • Total value of world’s stock and bond markets is more than $100 trillion
The scariest part of derivatives is their leverage. Like exchange traded options, derivative contracts can control assets for only a fraction of the contract value. The banks take the leverage to an extreme and have very little in assets backing up their derivative portfolios. According to the Comptroller, the top 25 banks have assets that only amount to about 6% of the Notional Value of their derivatives.
JP Morgan, biggest player in derivatives, has assets backing up its portfolio of only 1.60%.
Still not sure about this BIG bang?
The Big Picture | Derivative Exposure 
Monday, March 17, 2008
Here is full Derivative exposure for iBanks  Comments (70)
About 74:1 Leverage for JPM with 91.7 TRILLION total

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