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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Banks set plan to revive credit market

By JOE BEL BRUNO, AP Business Writer 10 minutes ago

NEW YORK - The nation's three largest banks said Monday they will team up to buy tens of billions of dollars in investments that lost value after global credit markets seized up.

The plan is designed to inject more confidence into the market, and increase investor appetite for the short-term debt known as commercial paper. The market for commercial paper, which is crucial for companies to fund short-term borrowing needs, locked up this summer.

That followed a crisis in the mortgage industry, as people defaulted on their home loans at a skyrocketing rate. It caused a widespread aversion to risk and led the Federal Reserve to pump money into the financial system, though the latest plan relies more heavily on the banks themselves.

The Treasury Department introduced the idea of a bailout in recent talks with Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co and others. It was not known how much money would be put into the fund, but there have been reports it could be between $80 billion to $100 billion.

"This proposal will complement other solutions investors and asset managers may utilize in committing and deploying capital to support more efficient markets," the Treasury Dept. said in a statement Monday

The government's role in coming up with a private-sector solution to the nation's credit problems is similar to the bailout of hedge fund Long-Term Capital Management in 1998. The Fed approached Wall Street's biggest banks to rescue LTCM before its wrong-way financial bets set off a financial shockwave.

This time around, the banks hope to not only prevent credit problems from spreading — but also are bailing themselves out. They operate structured investment vehicles, known as SIVs, that reportedly have as much as $400 billion worth of assets. Those could plunge in value unless the credit markets are stabilized.

The SIVs used short-term commercial paper, sold at low interest rates, to buy longer-term mortgage-backed securities and other instruments with higher rates of return. With the seizure of the credit markets, many SIVs had trouble selling new commercial paper to replace upcoming obligations on older paper.

The new fund — called the Master Liquidity Enhancement Conduit or M-LEC — would launch in the next 90 days and be used to buy distressed securities from SIVs. That would in turn give them the capital to pay off their commercial paper obligations, and ultimately extricate themselves from what otherwise might have been substantial losses.

By buying SIVs' distressed investments, the new fund would inject enough liquidity into the market to make investors more confident in buying commercial paper.

The funds' backers said they will shy away from risky instruments and buy only highly rated, asset-backed debt — a market that is already beginning to show signs of life.

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A little reminder that the government will kill, sell, or steal from each and every one of us to keep the old Fraudmobile running at top speed! Add this little analysis to what Ann posted and you may get a clearer picture....the Fraudmobile is racing to replace one business model steeped in fraud with another just as fraudulent. This time the whole model will be founded and built upon fraud instead of the gangsters having to figure out how to bleed us dry on their own.

Ho-hum; more fraud. At least they are upfront with it right away.....hang on to your wallets! The government is openly involved with this one. I guess it just doesn't care what we, the people, think of it any more. Maybe it is sheer desperation??

Super SIVs - A Fraudulent Attempt at Concealment

The Wall Street Journal is reporting Citigroup Rescue Plan Readied.

Over the weekend, the Treasury hosted talks to help a group of banks set up a $100 billion fund to buy troubled assets in exchange for new short-term debt. The banks hope to have the fund up and running within 90 days.

The problems stem from affiliated funds called structured investment vehicles, or SIVs, which Citigroup and others set up as a way to make money without taking the risk involved onto their balance sheets. Such vehicles are formally independent of the banks that create them. They issue their own short-term debt, usually at relatively low rates that reflects their high credit rating. Then, they use the proceeds to buy higher-yielding assets such as securities tied to mortgages or receivables from midsize businesses seeking to raise cash.

[Mish comment. This is classic borrow short lend long madness. When done with leverage it eventually blows up. Citigroup is an enormous player in SIVs and the assets on which it has lent (mortgage backed securities), have plunged in value]

Behind Treasury's concern were banks like Citigroup, whose affiliates owned $80 billion in assets backed by mortgages and other securities. The world's biggest bank, by market value, held the assets off its balance sheet and was facing the prospect of either having to unload them in a disorderly fire-sale fashion or moving them onto its books.

[Mish comment: One problem here is that Citigroup should never have been allowed to hold those assets off its books in the first place]

Under the proposed rescue package Citigroup, J.P. Morgan Chase & Co. and Bank of America Corp. will set up a fund, or "superconduit," to act as a buyer of last resort. It will pay market prices for SIV assets in an effort to prevent dumping.

[Mish comment: In other words, Citigroup is setting up a fund to buy assets from itself. How convenient. By the way, when you are buying something from yourself, who determines market price?]

Details are still being worked out but the oversight committee of the three banks will set criteria for what the new fund, to be called the Master-Liquidity Enhancement Conduit, will buy.

[Mish Comment: It will be interesting to see if there are "price guarantees"]

Banks would face huge losses if their affiliated funds were forced to unload billions of dollars in mortgage-backed securities and other assets because it would drive down prices and lead to big write-offs at the new, lower market prices. Indeed, in the past several months, Citigroup's own affiliates have sold some $20 billion in assets.

Some bankers objected to the plan, calling it an escape hatch for Citigroup, which has more SIVs than any other bank, according to people familiar with the situation. The bank has accounted for about 25% of the global SIV market. As of August, assets held by SIVs totaled $400 billion.

[Mish comment: $400 billion in off balance sheet assets is preposterous. Chuck Prince and his entire team should be fired. More to the point why should Citigroup be bailed out? They were incredibly greedy and they should pay the price]

Citigroup has drawn special scrutiny. The bank and its London office run seven affiliates, or SIVs, that would be able to sell assets to the superconduit.

Bringing assets onto its balance sheet would be a big problem for Citigroup because it would be required to set aside reserves to cover the assets. The banking titan operates with a capital ratio that is thinner than peers.

[Mish comment: So what? Citigroup deserves to have a problem for acting stupidly]
If the WSJ is remotely close to accurate on the plan details, this Super-SIV bailout is nothing but a fraudulent attempt to allow banks and financial institutions to keep questionable assets off their balance sheets.

Mandatory Auction Calls

On October 12 naked capitalism was talking about another fraudulent way of keeping assets off balance sheets:
Some financial firms have sought in recent weeks to avoid write-downs by selling mortgage positions to hedge funds, with an agreement that allows the hedge fund to sell them back after a set period. A hedge-fund trader says his firm recently bought $1 billion of risky subprime mortgage loans from Bear Stearns with a one-year pact, known as a "mandatory auction call," under which Bear agrees to participate in an auction for the loans that will provide the hedge fund with a minimum rate of return, according to a person familiar with the situation. "They didn't want the mortgages on their books," the hedge-fund manager says.

Such financial arrangements typically are considered proper if there's an economic purpose to the trade and if risk is taken on by both parties. Legal problems could arise if such trades are part of an attempt to conceal a company's financial picture, regulators say.
When it comes to Bear Stearns, there is absolutely no economic purpose to the trade. The only purpose was to conceal the current value of the asset. This makes it fraudulent. The SEC should investigate but it likely won't.

Super SIV Doomed To Fail

On Saturday I commented Super SIV Bailout Plan Doomed To Fail. As details emerge I have seen nothing to change that opinion. The WSJ article has filled in a lot of blanks and the remaining blanks will be filled in on Monday. But as of now this still looks to me like a game of Don't Ask - Don't Sell.

Don't Ask - Don't Sell

  • Don't Ask what the asset is worth.
  • Don't Sell or you will find out and not like the result.
Of course you can sell to the Master-Liquidity Enhancement Conduit at market prices, but market prices are not set by selling assets to yourself or by agreements to buy assets a back at a guaranteed price as Bear Stearns is doing.

Let's go back to the beginning. This problem was caused by loose monetary policy in conjunction with rules that allowed garbage to be kept off bank balance sheets. The proposed solution is another scheme to keep garbage off bank balance sheets. Logically the solution and the problem cannot be the same.

All indications are the Super-SIV bailout is nothing but a delay tactic that simply cannot work. Furthermore, there is another crisis waiting in the wings: commercial real estate. There is also a looming consumer led recession that is coming no matter what the Fed does. For those reasons, attempts to delay will only exacerbate the problem.

I do not know what the market will do on Monday. Perhaps this bailout will sent the market to new highs. Bulls certainly have been stomping as if the economic problems we face are temporary. Unfortunately the problems we face are not temporary. Structural economic problems run long and deep. Whatever final shape this bailout plan takes, it is doomed to fail over the long haul. A collapse in consumer spending and commercial real estate will seal the fate. Both are going to happen.

Mike Shedlock / Mish

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When it comes to Bear Stearns, there is absolutely no economic purpose to the trade. The only purpose was to conceal the current value of the asset. This makes it fraudulent. The SEC should investigate......

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The SEC knows. A week ago Thursday, they confirmed I have securities fraud in my case. He also added my punative damages against them must be in the 10's of millions of dollars.  Those I have told are surprised the SEC is so receptive to what I have.

I wish I could tell you more.  It will all be exposed.
Back to work.

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Joe B

     Is there anything you can share in a general sense for those of us who are also in litigation? I obviously do not want you to expose anything that can hurt your case, but I suspect you may have something that many of us could also use to our advantage. Is there anything you can share without any harm?
      I would be personally grateful... Thank you!!!

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