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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IN MY OPINION:

STOP THE MORTGAGE SERVICERS FROM MANUFACTURING FORECLOSURES - INCLUDE IN THE BAILOUT PLAN!

UNLESS, this is included in the "BAILOUT PLAN", "MORTGAGE SERVICERS" will continue "MANUFACTURING FORECLOSURES". 

The PROPERTY OWNER will have NO RECOURSE to SAVE their home.

I don't think Bush, Paulson, Cox, Bernanke, Congressman has accepted the fact that the media and the "POWER PERSONNEL " of the USA  is dropping the senario about manufactured foreclosures.  Better said: "IGNORING THE FACT".

SERVICERS?
STOP "THIN AIR FEES".  Let them get paid a FIXED RATE MONTHLY FEE FOR EACH LOAN they service from the "LENDER", "SUFFICIENT" to operate their business of receiving mortgage payments and make them apply the money received  "IMMEDIATELY" to the PRINCIPAL & INTEREST", "ALL OF IT".  If the payment is late, once a month, charge a late fee to the "BORROWER" on same day of each month "15th of EACH MONTH" only if it is late. 

This business of "DECIDING HOW THEY WANT TO APPLY PAYMENT", when they get around to it and DECIDING HOW THEY CAN MANUFACTURE SOMETHING IS THE REAL PROBLEM.

AND IF THE BORROWER WANTS TO PAY TO PRINCIPAL ONLY, ADDITIONAL MONEY above the monthly payment amount, they must send letter stating apply to PRINCIPAL ONLY, with the payment.  Otherwise, additional payments will be applied to principal and interest.

IMMEDIATELY! Yesterday's business, posted to accounting system next day.
In other words, stay current with business transactions, receipts and disbursements.

QuickBooks Pro Accountants Edition, can even do this. Of Course, this in indiviual software, but WITH HIGH TECH computer technology, it certainly can be done main frame, online accounting.

STOP ENTERING PAYMENTS WHEN THEY GET AROUND TOO IT.

Additionally...all these trillions of dollars of bailout, I would bet there is not one accounting system properly managed daily, therefore, the criminal enterprises don't want anyone to know what they are doing.

It just can't be, if proper accounting was being done at all the entities, that all of a sudden this many need an immediate bail out.

In my opinion, they had to try to get a bail out while, Dictator Bush was still in office.  And the ENTERPRISES and BUSH are doing exactly the same thing as the SERVICERS, pulling figures out of "THIN AIR".

ADDITIONALY, REWRITE THE MORTGAGE INSTRUMENT FINE PRINT TO OVERRIDE THE EXISTING TOXIC WASTE MORTGAGES,THE GOVERNMENT IS GOING TO BAIL OUT.  MAKE ALL THE SAME WORDING IN FAVOR OF THE MORTGAGE HOLDER AND THE BORROWER ALIKE, PROCTECTING EACH ONE EQUALLY.

They stole our homes and then expect us to pay the criminals for stealing our homes.

AMERICA GET YOUR "STUFF" TOGETHER, AND CONSIDER ALL THE FACTS!

GENE
From Louisiana and Florida
















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Since there were no comments posted, I'm pulling this thread back to current date...

I see Ohio has expressed the same thing in another thread today, same that I was attempting to address.

I believe it was Moose that indicated that when the bailout was passed that the same servicers would continue service of these loans in all probability.

Well, the way of see it: THE SERVICER'S WILL CONTINUE TO DO THE SAME THING AS THEY ARE NOW DOING.

"MANUFACTURING FORECLOSURES".

Which won't help the borrowers and the housing problem will continue...

THE VOTING CITIZEN OF THE USA DOES NOT KNOW ABOUT THIS PART OF THE PROBLEM.

BUSH DIDN'T TELL ABOUT THIS IN HIS SPEECH LAST NIGHT.

REPEAT:  The public doesn't know what the SERVICERS are to doing.

Talking politics last evening, I got into a heated argument with a retired military veteran friend about the housing fiasco.  He began to tell me that what I was explaining to him, all I had to do was bring to the attention of the media, and I could become rich by exposing the senario about manufacturing
foreclosures.  He thinks the payments go DIRECT TO THE LENDER and is normal. HA!

GENE





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Ohio
Sorry for the echoing post. I honestly did not see yours. I know exactly what it's like to explain to others what happened in my situation.

It's like trying to speak Greek to a chimp...you get the same glazed look.

I've been called a liar, I've seen others roll their eyes and then there are those who just stand and look at you like you have 2 heads..

They always say there are laws..they can't do that..that kind of thing just doesn't go on in the land of the free and home of the brave....and blah blah blah...

If someone told these people a year ago what the financial picture of today would be like they would have that same stupid incredulous "you are crazier than hell" look on their face.

MSF will have to infect a bigger part of the population before this plague is recognized for what it is...unless servicers are dealt with right now this avalanche will continue.
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connect the dots

All servicers are contractually bound by the "GSE Guidelines" (Freddie or Fannie). The Guidelines expressly prohibit manufactured defaults. What you need to do is insist that Congress audit for compliance (this will stop the monkey business immediately) of the Guidelines which in the past, the failure to do so, has resulted in the mess they have created. 

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Agreed the public is completely unaware of the ms fraud aspect of this.  I had a troubling experience with this yesterday with respect to the media.  nytimes.com was soliciting comments on their 9/25 article on the bailout talks.  I submitted a brief comment mentioning the mortgage servicng fraud aspect.  nytimes.com posted over 1,000 public comments on their website.  Mine, mentioning ms fraud,  was NOT posted!  Does anyone else find that troubling?   

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cbs

Who’s Lobbying Congress On The Bailout?

Their Former Employees

bailout of banks and the law

 (CBS/AP)



Answers.com


(CBS) CBS News Investigative Producer Laura Strickler wrote this story for CBSNews.com with additional reporting from Sarah Fitzpatrick and Kim Lengle .



Revolving Door Moves Fast Between Congressional Committees and Financial Institutions

Among the armies of well-heeled lobbyists pressuring Congress on the size and structure of the financial bailout this week are a number of familiar faces. CBS News found 21 former staffers from the Senate Banking, Housing and Urban Affairs and House Financial Services Committees are now lobbyists for financial firms. Their job? To lobby those in Congress who will shape the financial bailout. The former staffers now represent hedge funds, private equity firms, investment banks and the failed mortgage giants Fannie Mae and Freddie Mac.

Senate rules prevent former senior staffers from lobbying their old committees for one year.

It’s well known on Capitol Hill that a few years on a Congressional oversight committee can be cashed in for a lucrative K Street job, sometimes garnering up to $20,000 a month for a lobbying job. But the connection between the oversight committees and the companies they sought to rein in is striking.

A number of the staffers lobbied for Fannie Mae or Freddie Mac since leaving Congress. The two mortgage giants have been told by their new oversight agency to suspend their lobbying activities in light of the government bailout. Over the last decade the Center for Responsive Politics notes the two companies spent $20 million on lobbying and political donations in part to resist regulation and stronger oversight.

Here’s just a few former Capitol Hill staffers turned lobbyists and what they have been doing since leaving their Congressional jobs according to records on the Legistorm website and Senate records:

Douglas Nappi has taken a few tours on both K Street and the Hill according to lobbying records. In 1999 he registered as a lobbyist for the New York Stock Exchange but notes his previous job was as “former counsel to the Senate Banking Committee.” From 2003 through 2005, Nappi served as the Republican chief counsel of the Senate Banking Committee according to Legistorm. Senate records show Nappi left the committee in early September 2005 and filed his first lobbying report less than three weeks later. Recently he lobbied for Freddie Mac and the Financial Industry Regulatory Authority as well as Clayton Holdings described on its website as “an information and analytics company serving lenders, loan buyers and bond issuers, servicers and fixed income investors in mortgage-related loans and other debt instruments.”

Alexander Sternhell left his job as the Democratic Deputy Staff Director for the Senate Banking Committee in late December, 2007 and registered as a lobbyist a few days later representing clients such as Freddie Mac, Citigroup, Capmark Finance and Wachovia. Sternhell is now lobbying with a three person team which has already garnered $480,000 for their work in 2008 according to Senate records. Sternhell tells CBS News he is lobbying on the financial bailout “where appropriate.” While he is not permitted to lobby his former committee yet, he is free to lobby other members of Congress and all other Congressional committees.

Kristi Kennedy worked as the Legislative Director for Senator Paul Sarbanes (D-MD) from 1999 through 2006. Sarbanes was one of the authors of the financial reform legislation known as Sarbanes-Oxley Act which is despised by many in the financial world. When Sarbanes left Congress, Kennedy did too. Within two months, Kennedy filed her first lobbying report according to Senate records and began lobbying for: Fannie Mae, the Financial Services Forum, Citigroup and Managed Funds Association according to Senate lobbying records. Today she says she is lobbying on the financial bailout package.

Lobbying reform advocates say the speed with which Hill staffers trade in their oversight responsibilities for lobbying jobs and press their new agenda with their former colleagues is troublesome.

“There should be a three year cooling off period so former staffers do not have these intimate relationships that they exploit for large paychecks,” says Joan Claybrook, president of Public Citizen who has actively pushed for more lobbying transparency and accountability.

One former banking committee staffer also found his way to a presidential campaign.

John Green was the Deputy Chief Clerk at the Senate Banking Committee until he left in 2004 to lobby for clients such AIG, Fannie Mae, Credit Suisse, AIG’s private equity investment partnership called Highstar Capital, Citigroup, Ameriquest Mortgage and dozens of other companies according to Senate records. In July, Green’s clients notified the Senate that he was no longer their registered lobbyist. His new job? According to Congressional Quarterly, he’s serving as a Congressional liaison for presidential candidate John McCain.

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4 justice now
B:

YES... VERY TROUBLING IN DEED.


R,

4J
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I C A

I C A LOBBY PROBE COMING!

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DOJ-Nab'sOneOfTheirOwn

DOJ Nabs One Of Their Own

Robert Coughlin, A Former Senior Justice Department Official, Pleaded Guilty Of Felony In Abramoff Scandal

Jack Abramoff (AP)



Answers.com


(CBS)  CBS News Justice Department Producer Stephanie Lambidakis wrote this story for CBSNews.com.


The Justice Department has racked up another conviction in the Jack Abramoff lobbying and corruption scandal. If you've lost track of all the lawmakers, staffers and administration officials who've been prosecuted or jailed, there are now 13. And it's the 13th person who's likely to be remembered most inside the Justice Department. Until he suddenly quit last year, Robert E. Coughlin III was a senior Justice Department official, a political appointee who had risen fast, from the congressional and public liaison offices to deputy chief-of-staff in the criminal division.

Unbeknownst to most everyone, Coughlin was actually under investigation by his own bosses for a massive conflict-of-interest with Jack Abramoff's lobbying firm. Tuesday he pleaded guilty in a Washington courtroom to a felony charge. He admitted that he acted as an eager lobbyist for some of Abramoff's pet projects, and according to email evidence in the plea agreement, sought out "friendly" officials who could make things happen. One of those projects was a 16-million dollar proposed jail that Abramoff wanted the Justice Department to fund for his tribal clients. When the Justice Department only approved 9-million dollars, Abramoff's point person, a friend and former Capitol Hill colleague, fired off a "crisis" email. It said that Abramoff "has made it abundantly clear to me that this is the highest priority .... PLEASE let me know how to make this happen."

Two months later, in January of 2002, the Justice Department reversed its decision in Abramoff's favor with the added bonus that the construction contract did not require competitive bidding. The court papers don't say which "friendlys" within Justice made the decision, but the Abramoff lobbyist was so thrilled that he emailed back the written sound of cash registers: "CHA-CHING!!!!"

Coughlin got the standard Abramoff reward: free meals at his now-defunct restaurant, Signatures, tickets to Washington sporting events, including 8 third-row floor tickets for a Wizards basketball game, and a free round of golf. He also hoped to get a job with Abramoff's firm, Greenberg Traurig, but that never materialized. In fact, when Coughlin was detailed to a separate office in Virginia, his Abramoff lobbying friend abruptly stopped wining and dining him.

The guilty plea comes as the Justice Department continues its recovery from the scandal over the firings of US attorneys who allegedly were not considered "friendlys" of the White House. It provides fresh evidence that politics infected decision-making within the department, and in the case of Robert Coughlin, it started when the administration was just two months old.


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BISHOP
AS SUGGESTED A MONTH OR TWO AGO....

THE SOLUTION IS A NATIONAL MORTGAGE SERVICING AGENCY THAT IS REQUIRED TO ACT AS THE SERVICER FOR ANY LOAN THAT IS PURCHASED BY FANNIE MAE, FREDDIE MAC...OR ORIGINATED BY A BANK CHARTERED UNDER FEDERAL OR STATE LAWS.

BY CONSOLIDATING THE SERVICING OF MORTGAGES....PROBLEMS GOING FORWARD WILL BE ELIMINATED....BECAUSE THERE WILL ALSO BE AN OVERSIGHT COMMITTEE COMPRISED OF THE U.S. HOUSE OF REPRESENTATIVES...AND THEY ARE NOT PERMITTED THE LATITUDE TO "HANDOFF" OVERSIGHT TO SOME OTHER ENTITY.

BY PUTTING THE "SERVICERS" OUT OF BUSINESS ...STABILITY IN OUR LIVES WILL BE RE-ESTABLISHED.

THIS IS ONE OF A NUMBER OF PROVISIONS THAT SHOULD BE INCLUDED IN THE $700 billion DOLLAR LEGISLATION BILL.

ANOTHER IS THAT BEFORE A FORECLOSURE MAY BE FILED, PROOF OF ACTUAL ENTITLEMENT TO BRING FORECLOSURE IN THE "STANDING" PARAMETERS ESTABLISHED BY LAW WILL RID THE COURT SYSTEM OF THE FRAUDSTERS. THE PROOF MUST BE FILED WITH THE COMPLAINT OF FORECLOSURE OR THE MATTER WILL BE DISMISSED "WITH PREJUDICE."

THE FOREGOING IS A GOOD ALTERNATIVE TO CREATING A NEW COURT SYSTEM AND IS NON-DISCRETIONARY...SO AS TO SHORT CIRCUIT ANY CORRUPT JUDGE'S MOTIVATION TO RENDER A DECISION IN FAVOR OF THE CORPORATE CROOKS....WHICH ...WE ALL KNOW HAPPENS ALL TOO OFTEN.
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Great Post, I agree. Until they address this, there will not be a solution.

PUT MORTGAGE SERVICERS OUT OF BUSINESS.
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arkygirl
The best way to use $700 billion +. Pay off every mortgage in America NOW! And every car loan and credit card bill. (Yep, it galls those of us who paid our mortgages, fighting every step of the way to do so. Some people took out stupid loans. But some people took out sensible loans and got eaten by servicers.)

It would put immediate value and liquidity back into the system. It would keep the government from taking total control over the entire banking system. It would stabilize home prices. All citizens would start with a clean balance sheet.

Trickle down has never worked; the money gets to the top and it stays there. Trickle up would be a better method. The truly stupid would run right back out and consume on credit; they would be on their own.

No mortgages= no servicers. Of course, the servicers would rape the government with fake fees but they would still be out of business.

If I had all that money to fritter away, that would be my choice of methods. Wall Street is a black hole; money goes in and never comes out (unless it is sent to secrecy jurisdictions in the Cayman Islands.)

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They whole point of the bailout is to cover up the fraud. If the government wanted to solve an economic crises caused by foreclosures that backed highly leveraged money they would simply stop the foreclosures. Why cover a quadrillion dollars in derivatives instead of a few trillion dollars in mortgages that back them. The bailout plan can't possible solve any underlying issues and the public can't possibly pay of a quadrillion dollars in derivatives. The bailout does give Wall street confidence, confidence they won't be herded into Federal penitentiaries.

The answer is simply this legal liability the government is throwing the country into a depression to get the financial crooks off the hook and really that's the bottom line.

Why would they do this there may be a million reasons perhaps they were offered a cut of the glut of cheap homes, perhaps a bank account in the Cayman islands, there could be a million back room deals that were cut, but the bottom line is the politicians donations came from the lending criminals in exchange for a legislative and judicial environment that condoned and facilitated fraud.

We have prima facie evidence the politicians sold out to the crooks because it happened we don't need to prove any crazy convoluted conspiracies true, false or partially true.

So what is the real solution? How about holding some of the biggest offenders accountable and recovering all the assets we can, declaring a moratorium on foreclosures until the smoke clears and we have a clear picture, how about writing down the derivatives debt that was money created using our money as backing,

The idea of boosting FDIC that the Republicans suggested and Barrack Obama supports is a good start, and the idea of government guarantee rather than purchase is a good one especially since government seizure of private property is illegal anyhow and it's completely off the wall to think the government could be allowed to resell property for a profit they illegally or at least without due process seized.

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arkygirl
I know it is a gigantic fraud laundering mechanism that they are seeking, Greg. It will absolutely preclude any accountability for any of them and that is the true motive. They want to play "Hide the Culpability" game.

If the state of the economy was the real issue, putting money back into the hands of the people would most certainly stimulate the economy. Since this has not even been discussed we can all assume that the bailout is to protect their own self-interests.

The Senate will undoubtedly give it to them.

 The House has a plan that costs nothing- no taxpayer dollars.

http://www.kaptur.house.gov/index.php?option=com_content&task=view&id=297&Itemid=1

                                                                                                                                               
October 1, 2008: Kaptur and DeFazio Propose the No BAILOUTS Act                                                                                                                                                                 | Print |                                
                                                                                                                                               
                                Representatives Marcy Kaptur (D-OH), Peter DeFazio (D-OR), Rush Holt (D-NJ) proposed an alternative measure, the No BAILOUTS Act, to address the financial situation without bailing out Wall Street and corporate executives.


"We want a good bill, not a fast bill.  We want a bill that will really work," said Kaptur, the senior-most woman in the House.
 
A summary of the "No BAILOUTS Act" follows.

Watch the video of the press conference.

   No BAILOUTS Act

Bringing Accounting, Increased Liquidity, Oversight and Upholding Taxpayer Security 

1)      Require the Securities and Exchange Commission (SEC) to require an economic value standard to measure the capital of financial institutions.

This bill will require SEC to implement a rule to suspend the application of fair value accounting standards to financial institutions, which marks assets to the market value, no matter the conditions of the market. When no meaningful market exists, as is the current market for mortgage backed securities, this standard requires institutions to value assets at fire-sale prices. This creates a capital shortfall on paper. Using the economic value standard as bank examines have traditionally done will immediately correct the capital shortfalls experienced by many institutions.

2)      Require the Securities and Exchange Commission to restricting naked short sells permanently

This bill will require SEC to implement a rule that blocks naked selling, selling a stock short without first borrowing the shares or ensuring the shares can be borrowed. Such practices many times harm the companies represented in the sales and hurt their efforts to raise capital. There is no economic value produced by naked short sales, but significant negative effects.

3)      Require the Securities and Exchange Commission to restore the up-tick rule permanently.

This bill will require SEC to implement a rule that blocks short sales without an up-tick in the market.  On September 19, 2008, the SEC approved a temporary pause of short selling in financial companies "to protect the integrity and quality of the securities market and strengthen investor confidence." This rule prevents market crashes brought on by irrational short term market behavior.

4)      "Net Worth Certificate Program"

This bill will require FDIC to implement a net worth certificate program. The FDIC would determine banks with short-term capital needs and the ability to financially recover in the foreseeable future.  For those entities that qualify, the FDIC should purchase net worth certificates in these institutions.  In exchange, these institutions issue promissory notes to repay the FDIC, counting the amount "borrowed" as capital on their balance sheets.  This exchange provides short term capital, with not cash outlay.  Interest rates on the certificates and the FDIC notes should be identical so no subsidy is necessary.

Participating banks must be subject to strict oversight by the FDIC including oversight of top executive compensation and if necessary the removal of poor management.  Financial records and business plans should be subject to scrutiny while participating in the program.

In 1982, Congress approved a program, known as the Net Worth Certificate Program, that allowed banks and thrifts to apply for immediate capital assistance.  From 1982 to 1993, banks with total assets of $40 billion participated in the program. The majority of these banks, 75%, required no further assistance beyond the certificate program.

5)      Increase the FDIC Insurance limit from $100,000 to $250,000.

The bill will require the FDIC raise its limit to provide depositors confidence that their money is safe and help eliminate runs on banks which are destabilizing to the industry.                        
                                                                                                                                                                                                                                                                                                         
Since this will cost us nothing and may uncover some fraud eventually, I am sure it is doomed to failure.


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This bill makes sense and would stop the panic while the smoke clears the problem is they created the smoke as a cheap stage prop.

http://onlinejournal.com/artman/publish/article_3803.shtml

 

           

Analysis             Last Updated: Sep 29th, 2008 - 00:54:47

 

Trouble in Banktopia: The financial system is blowing up

By Mike Whitney

Online Journal Contributing Writer

 

 

Sep 29, 2008, 00:18

 

            Email this article

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The financial system is blowing up. Don’t listen to the experts; just look at the numbers.

 

Last week, according to Reuters, “U.S. banks borrowed a record amount from the Federal Reserve nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression.”

 

The Fed opened the various “auction facilities” to create the appearance that insolvent banks were thriving businesses, but they are not. They’re dead; their liabilities exceed their assets. Now the Fed is desperate because the hundreds of billions of dollars of mortgage-backed securities (MBS) in the banks’ vaults have bankrupted the entire system and the Fed’s balance sheet is ballooning by the day. The market for MBS will not bounce back in the foreseeable future and the banks are unable to rollover their short-term debt. Game over.

 

The Federal Reserve itself is in danger. So, it’s on to Plan B, which is to dump all the toxic sludge on the taxpayer before he realizes that the whole system is cratering and his life is about to change forever. It’s called the Paulson Plan, a $700 billion boondoggle which has already been disparaged by every economist of merit in the country.

 

From Reuters: “Borrowings by primary dealers via the Primary Dealer Credit Facility, and through another facility created on Sunday [Sept. 21] for Goldman Sachs, Morgan Stanley, and Merrill Lynch, and their London-based subsidiaries, totaled $105.66 billion as of Wednesday, the Fed said.”

 

See what I mean, they’re all broke. The Fed’s revolving loans are just a way to perpetuate the myth that the banks aren’t flatlining already. Bernanke has tied strings to the various body parts and jerks them every so often to make it look like they’re alive. But the Wall Street model is broken and the bailout is pointless.

 

Last week, there was a digital run on the banks that most people never even heard about, a “real time” crash. An article in the New York Post by Michael Gray gave a blow by blow description of how events unfolded.

 

Here’s a clip from Gray’s “Almost Armageddon”: “The market was 500 trades away from Armageddon on Thursday . . . Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level -- a 22 percent decline! -- while the clang of the opening bell was still echoing around the cavernous exchange floor. According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.

 

“The panicked selling was directly linked to the seizing up of the credit markets -- including a $52 billion constriction in commercial paper -- and the rumors of additional money market funds ‘breaking the buck,’ or dropping below $1 net asset value.

 

“The Fed’s dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.” (New York Post)

 

Commercial paper is the lubricant that keeps the financial markets functioning. When confidence vanishes, because the stewards of the system in Washington are buffoons, investors withdraw their money, normal business operations become impossible, and the markets collapse. End of story. So, rather than restore the public’s confidence by strong leadership and behavior designed to reassure investors; President Bush decided to give a major prime-time speech stating that if Paulson’s emergency bailout package was not passed immediately, the nation’s economy would vaporize into the ether. Go figure?

 

Last week, the commercial paper market, much of which is backed by mortgage-backed securities, shrunk by a whopping $61 billion to $1.702 trillion, the lowest level since early 2006. So, Paulson’s bailout will effectively underwrite CP as well as the whole alphabet soup of mortgage-backed derivatives for which there is currently no market. The US taxpayer is not only getting into the plummeting real estate market, he is also backstopping the entire financial system including defaulting car loan securities, waning student loan securities, flailing home equity loan securities and faltering credit card securities. The whole mountainous pile of horsecrap debt is about to be stacked on the back of the maxed-out taxpayer and the ever-shriveling greenback. Paulson assures us that it’s a “good deal.” Booyah, Hank!

 

Paulson’s $700 billion boondoggle

 

How did Treasury Secretary Paulson figure out that recapitalizing the banking system would cost $700 billion? Or did he just estimate the amount of money that could be loaded on the back of the Treasury’s flatbed truck when it sputters off to shower his buddies at G-Sax with freshly minted greenbacks? The point is that Paulson’s calculations were not assisted by any economists at all, and they cannot be trusted. It is a purely arbitrary, “back of the envelope” type figuring.

 

According to Bloomberg: Swiss investor Marc Faber, known for a long track record of good calls, believes the damage may come to $5 trillion: “Marc Faber, managing director of Marc Faber Ltd. in Hong Kong, said the U.S. government’s rescue package for the financial system may require as much as $5 trillion, seven times the amount Treasury Secretary Henry Paulson has requested . . .

 

“’The $700 billion is really nothing,’ Faber said in a television interview. ‘The treasury is just giving out this figure when the end figure may be $5 trillion.’” (Bloomberg News)

 

Most people who follow these matters would trust Faber’s assessment way over Paulson’s. In his latest blog entry, economist Nouriel Roubini said that “no professional economist was consulted by Congress or invited to present his/her views at the congressional hearings on the Treasury rescue plan.”

 

Roubini added, “The Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown.”

 

Roubini is right on all counts. So far, more than a 190 prominent economists have urged Congress not to pass the $700 bailout bill. There is growing consensus that the so-called “rescue package” does not address the central economic issues and has the potential to make a bad situation even worse.

 

Banker’s coup?

 

Financial industry rep. Paulson is the ringleader in a banker’s coup the results of which will decide America’s economic and political future for years to come. The coup leaders have drained tens of billions of dollars of liquidity from the already strained banking system to trigger a freeze in interbank lending and hasten a stock market crash. This, they believe, will force Congress to pass Paulson’s $770 billion bailout package without further congressional resistance. It’s blackmail.

 

As yet, no one knows whether the coup backers will succeed and further consolidate their political power via a massive economic shock to the system, but their plan continues to move jauntily forward while the economy follows its inexorable slide to disaster.

 

The bailout has galvanized grassroots movements which have flooded congressional FAX and phone lines. Callers are overwhelmingly opposed to any bailout for banks that are buckling under their own toxic mortgage-backed assets. One analyst said that the calls to Congress are 50 percent “No” and 50 percent “Hell, No.” There is virtually no popular support for the bill.

 

From Bloomberg News: “Erik Brynjolfsson, of the Massachusetts Institute of Technology’s Sloan School, said his main objection ‘is the breathtaking amount of unchecked discretion it gives to the Secretary of the Treasury. It is unprecedented in a modern democracy.’”

 

“‘I suspect that part of what we’re seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,’ said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.” (Mish’s Global Economic Trend Analysis)

 

Brynjolfsson’s suspicions are well-founded. “Market Ticker’s” Karl Denninger confirms that the Fed has been draining the banking system of liquidity in order to blackmail Congress into passing the new legislation.

 

Here’s Denninger: “The effective Fed Funds rate has been trading 50 basis points or more below the 2% target for five straight days now, and for the last two days, it has traded 75 basis points under. The IRX is demanding an immediate rate cut. The Slosh has been intentionally drained by over $125 billion in the last week and lowering the water in the swamp exposed one dead body -- Washington Mutual -- which was immediately raided on a no-notice basis by JP Morgan. Not even WaMu’s CEO knew about the raid until it was done. . . . The Fed claims to be an ‘independent central bank.’ They are nothing of the kind; they are now acting as an arsonist. The Fed and Treasury have claimed this is a ‘liquidity crisis’; it is not. It is an insolvency crisis that The Fed, Treasury and the other regulatory organs of our government have intentionally allowed to occur.”

 

Bingo. This is a banker’s coup cooked up and facilitated by the deep-money guys who operate stealthily behind the political sideshow. The only time they emerge from their stinkholes is when they’re flushed out by a crisis that threatens their continued dominance. Grassroots resistance, spearheaded by Internet bloggers (like Mish, Roubini and Denninger) are demonstrating that they can mobilize tens of thousands of “peasants with pitchforks” and be a factor in political decision-making. It also helps to have elected officials, like Senator Richard Shelby, who stand firm on principle and don’t faint at the first whiff of grapeshot (like his weak-kneed Democratic counterparts). Shelby has shouldered the full weight of executive pressure which has descended on him like an Appalachian rockslide. As a result, there’s still a slight chance that the bill will have to be shelved and the industry reps will have to go back to Square One.

 

Market Ticker has provided charts from the Federal Reserve that prove that Bernanke has withdrawn $125 billion from the banking system “in the last four days” alone to create a crisis situation that will incite credit market mayhem and increase the likelihood of passing the bill. This is coercion of the worst kind.

 

The country’s economic predicament is steadily deteriorating. Orders for manufactured durable goods were off 4.5 percent last month while inventories continued to rise. Unemployment is soaring and the housing crash continues to accelerate. Credit Suisse now expects 10.3 million foreclosures (total) in the next few years. Numbers like that are not accidental, but part of a larger scheme to use monetary policy as a way to shift wealth from one class to another while degrading the nation’s overall economic well-being. More alarming, the country’s primary creditors are now staging a rebellion that is likely to cut off the flow of capital to US markets sending the dollar plummeting and triggering a deflationary credit collapse.

 

This is from Reuters: “Chinese regulators have asked domestic banks to stop lending to U.S. financial institutions in the interbank money markets to prevent possible losses during the financial crisis, the South China Morning Post reported Thursday. The China Banking Regulatory Commission’s ban on interbank lending of all currencies applied to U.S. banks, but not to lenders from other countries, the report added.”

 

Bloomberg News reports that Dallas Federal Reserve Bank President Richard Fisher has broken with tradition and lambasted the proposed bailout saying that it “would plunge the U.S. government deeper into a fiscal abyss.”

 

From Bloomberg: “The plan by Treasury Secretary Henry Paulson to buy troubled assets from financial institutions would put ‘one more straw on the back of the frightfully encumbered camel that is the federal government ledger,’ Fisher said today in the text of a speech in New York. ‘We are deeply submerged in a vast fiscal chasm. . . . The seizures and convulsions we have experienced in the debt and equity markets have been the consequences of a sustained orgy of excess and reckless behavior, not a too-tight monetary policy,’ Fisher said to the New York University Money Marketeers Club.” (Bloomberg)

 

Surely, the cure for hyperbolic “credit excesses and reckless behavior” cannot be “more of the same.” In fact, Paulson’s bailout does not even address the core issues which have been obscured by demagoguery and threats. The worthless assets must be written down, insolvent banks must be allowed to go bust, and the crooks and criminals who engineered this financial blitz on the nation’s coffers must be held to account.

 

The carnage from Greenspan’s low interest rate, “easy money” binge is now visible everywhere. Inflated home and stock values are crashing as the gas continues to escape from the massive equity bubble. The FDIC will have to be recapitalized -- perhaps, $500 billion -- to account for the anticipated loss of deposits from failing banks caught in the crosshairs of asset-deflation and steadily contracting credit. Recession is coming, but economic collapse can still be avoided if Paulson’s misguided plan is abandoned and corrective action is taken to put the country on solid financial footing.

 

Market Ticker lays out a framework for a workable solution to the crisis, but they must be acted on swiftly to rebuild confidence that major systemic changes are underway:

 

   1. Force all off-balance sheet “assets” back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Do it now. (Editor: In other words, no more Enron-type accounting mumbo-jumbo and no more allowing the banks assign their own “values” to dodgy assets.)

 

   2. Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can’t prove capital adequacy. (Ed: If trading derivatives contracts can damage the “regulated” system, than that trading must take place under strict government regulations.)

 

   3. Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six-month time limit and require 1/6th of the excess taken down monthly. (Ed: The collapse in the “structured finance” model is mainly due to too much leverage. For example, Fannie Mae and Freddie Mac had $80 of debt for every $1 dollar of capital reserves when they were taken into government conservatorship.)

 

If there’s going to be a bailout, let’s get it right. Paulson’s $700 billion bill does nothing to fix the deep structural problems in the financial markets; it merely pushes the day of reckoning a little further into the future while shifting the burden of payment for toxic assets onto the taxpayer. It’s a real turkey. The entire system needs transformational change so that the activities of Wall Street mesh with the broader objectives of the society it’s supposed to serve. Paulson’s business model is busted; it does no one any good to try to glue it back together.

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com.

 

Copyright © 1998-2007 Online Journal

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The object here is not to nitpick every point with a fine tooth comb while the bogus bailout plan passes.


The point is the Fed and the Treasury secretary have the power to manipulate the market and the banks to create a panic and they have the power as well to make a few simple changes to stop the panic without 700 billion in bailouts and ripping up the Constitution and seizing privately held assets in the Fog of economic war.


Did Paulson and Bernake create this crises to seize power and assets for now that's not the point they point is that can and are doing nothing realistic to stop the market crash and liquidity crises.


The issue is to do only what we need to do to stabilize the banks and market not as John Mc Cain suggests to go ahead and completely change the entire economic structure and thown us into recesion of depression causing debt and inflation becuase it's better than doing nothing.


Someone needs to tape McCains mouth shut until this crises is over or he'll get us in a world of economic hurt. He was put in power by finacial criminals and has Ameriquest lobyists as advisors as well as former advoser Phil Gramm.


The bailout would certainly cause a recesion or depresion even if the economy was strong and growing as McCain stated it was a couple of weeks ago.


It's an urgent matter of national security to ensure McCain is not involved in the matter of resolving the financial crises.


You don't send a monkey with a pipe wrench into the space shuttle to make last minute repairs just before a launch, and you certainly don't send the wolve to the hen house to gaurd the chickens.



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Sorry about the strong comments about John McCain very upset he's in a rush to pass the biggest change in government since the revolution with claims the plan as better than nothing and and making sure we don't point fingers. Sounds like a plan to launch a massive preemptive attack, without identifying the enemy, shoot first and ask questions later after the smoke clears.
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