"It is not a crime to destroy the economy"

[WhiskeyGirl]

It is not a crime to destroy the economy. The reason for this is because there is no law against predatory lending or predatory securitization. In 2002, Senator Phil Gramm (R-Texas) refused to legally define predatory lending when he ran the Senate banking committee. This week’s Goldman Sachs hearings on Capitol Hill focused on ethics resulted from Gramm’s actions. Gramm never admitted to wrong doing.

The regulators understood in 2002 that poor product design; aggressive and deceptive marketing practices; price gouging through high fees, high interest rates, and prepayment penalties; and under handed business dealings together had the characteristics of predatory behavior that transformed customers into victims.

The Securities and Exchange Commission waited to identify Goldman Sachs in a civil fraud charge. The institutionalized predatory lending and mortgage fraud that defined the lending and housing boom that started with failed mortgage companies ended with the predatory securitization with Goldman Sachs’ Lloyd Blankfein.

The April 27, 2010 Capitol Hill hearings on Goldman Sachs echoed with an absurdity over an inability of the Senators to have common ground on a definition and understanding of ethics. The investment banker's defense rested on dual agency as a market maker with no admission of wrong doing.

Senator Charles Schumer (D-New York) announced in May 2008 that IndyMac Bank would fail. The Senator's words caused a bank run, and IndyMac failed. The Federal Deposit Insurance Corp. took a $9 billion loss when it sold IndyMac in January 2009. Schumer was rewarded with thank you notes and financial contributions from the failed bank’s buyers. Schumer admitted no wrong doing.

Senator Chris Dodd (D-Connecticut) committed mortgage fraud when he applied for mortgage loans with Countrywide. The media focused on preferential treatment. The real story was that Dodd refinanced the mortgages on his primary and second homes with Countrywide. His reported incomes were different on the applications. He wanted a lower interest rate and misrepresented his income to get those lower rates. The Senate's ethic committee – even after Dodd had concealed the true nature of his applications from the public for close to one year – exonerated the Senator of ethical breaches of conduct. Dodd never admitted wrong doing.

While the world looks on at the “sh***y deal” that Goldman Sachs sold to its investors, the world should focus on the deal that the Senators delivered to the economy. The Senate has never admitted to wrong doing.

More here - http://www.examiner.com/x-46119-DC-Business-Commentary-Examiner~y2010m4d28-The-Senate-takes-on-Goldman-Sachs--on-ethics

Business as usual in the Obama administration?  Tax cheaters?  Mortgage fraud?  Privatized profits, socialized losses?

[WhiskeyGirl]

Why Was Goldman’s Structured Products Desk Trading Equities?

That question came up in the hearing earlier this week in reference to an email sent by Josh Birnbaum, a former MD in Goldman’s structured products group.

The email, sent in July 2007, sought authorization form senior management for the structured products desk to buy put options on a slew of competitors including Merrill Lynch, Bear Stearns and Lehman Brothers. The email also revealed that Birnbaum had bought put options on MBIA, Ambac and Countrywide.

Birnbaum denied he used information from another part of the firm as a basis for the short positions in various mortgage-related companies and broker dealers. He said at the hearing that trading in equities “was part of our macro-hedging strategy.” Birnbaum also said he couldn’t remember the exact names he bought put options on.

That didn’t seem to satisfy Sen. Tom Coburn, who pressed Birnbaum on whether there was a connection between shorting the banks and mortgage companies like Bear Stearns and selling them “shitty” CDO deals like Timberwolf, a part of which was purchased by Ralph Cioffi’s infamous hedge fund at Bear. Birnbaum said there was “no connection.”

But Coburn forgot to ask whether Birnbaum received any intelligence that came from the investment banking side of Goldman, which was actively working on several capital markets deals for nearly all of the companies he wanted to short including Countrywide, National City and IndyMac. Indeed, just a few months after the email was sent, Countrywide was purchased in a fire sale by Bank of America and IndyMac filed for bankruptcy.

Where is Mr. Obama?  Crony capitalist of the year?  As long as the capitalist includes Goldman?  OneWest?  Other's with ties to Goldman?  Chicago Climate Exchange?  Gore?  The job rotation?

Here’s the email in question:

    From: Birnbaum, Josh

    To: Montag, Tom; Mullen, Donald; McMahon, Bill; Petersen, Bruce

    Cc: Sparks, Daniel L; Gmelich, Justin; Swenson, Michael; Lehman, David A.; Birnbaum, Josh

    Sent: Tue Jul 24 20:35:09 2007

    Subject: Seeking Approval: Equities trading in SPG

    Since 6/21, the SPG Trading group has paused in our equities trading while we work with management and market risk to come up with quantitative limits for these positions. It sounds like we are getting close to having something systematic in place, but in the meantime, we are looking for approval to opportunistically buy puts on certain mortgage originators, RMBS, CMBS insurers, mortgage REITs, broker-dealers, and other related names exposed to.

    Examples names include:

    Indyrnac, Cap One, NatCity, Bear Stearns, Merrill, Lehman, Morgan Stanley, Overall stats on what we’d like to add:

    Premium: up to $25mm $Delta :up to $200mm Max potential loss per name in +30% move for name: up to $15mm

    In concert with these puts, we would like to buy back up to 50% of the $ delta (i.e. the beta) of these positions with S&P futures recognizing that even as we are bearish on these sectors, we are unlikely to hit our strikes if the broader market rallies.

    YTD P&L is +$49mm for our equities portfolio.

    Our current positions are below (excluding very small ones) :

    Countrywide, MBIA, PMI, Ambac, JER Investors, Redwood Trust, etc .

more here - http://dealbreaker.com/2010/04/why-was-goldman%E2%80%99s-structured-products-desk-trading-equities/

[WhiskeyGirl]

It’s Time to Coin the Phrase “Foreclosure Fraud”

You know how people like to bandy around the term “mortgage fraud”? Saying that people got “liar’s loans” and bought houses they knew they could not afford and so deserve to be foreclosed upon and evicted?

Those people never talk about predatory lending. They don’t talk about mortgage brokers who encouraged people to take out higher interest rate/no document check loans, who told them if they had trouble making the higher payment when the adjustable rate suddenly shot up in year 3, they could just refinance again and get back to the low teaser rate.

What does this mean? It means that banks, and the companies that they used to warehouse and process the mortgage documents backing their securities, either knowingly or negligently mishandled the documents and failed to actually transfer them into the trusts that back those securities. They acted as if they had. All would have gone well except that homeowners began to default and when the trusts went to foreclose, they found out that they don’t actually have the mortgages in their trusts. So, to cover it up, it appears that these document mills are fabricating missing documents, backdating documents, and doing assignments of documents after the time to lodge those documents in the trusts has long expired. In other words, they are committing fraud to cover up the fact that they failed to “perfect” their ability to foreclose.

Congress may be blind, deaf and dumb to the families needlessly made homeless, most prosecutors may be wringing their hands not knowing what to do—this latter part amazes me b/c you would think an ambitious prosecutor would love to become a populist hero by riding to the rescue of beleaguered homeowners—but, at least, bankruptcy judges and mortgage part and land court judges —perhaps because they are seeing so many boiler plate filings—have begun to smell the coffee.

more here - http://firedoglake.com/2010/04/07/it%E2%80%99s-time-to-coin-the-phrase-%E2%80%9Cforeclosure-fraud%E2%80%9D/

Where is Eric Holder?  Why isn't he charging to the rescue of these folks?

[WhiskeyGirl]

Now they're starting the final round: foreclosing on homes even after people were promised a modification. Foreclosure problems are reported in almost every state, but the most in depth report was done by The Chicago Reporter.Melissa Huelsman, who specializes in the areas of predatory lending/mortgage fraud lending litigation and foreclosure rescue scam litigation in Western Washington, told me that "unless you have something in writing from the bank that says they will not foreclose on your home," you can't believe the person on the telephone. Only a piece of paper promising you that the bank will not foreclose will protect you protect from foreclosure. When you start the modification process you do sign a piece of paper acknowledging that the foreclosure process can proceed if you fail to get a modification.

Huelsman thinks that if you're having trouble making payments your first call should be to an attorney who specializes in predatory lending or foreclosure rescue. She said there are attorneys taking cases at reduced fees or pro bono in almost every state. You can also make contact with a HUD housing counselor. She definitely does not think you should try to go it alone with the banks. The National Association of Consumer Advocates can help you locate a lawyer near you. Even if you started the modification process, it's not to late to seek help from a lawyer or HUD housing counselor.

She's had several run ins with Chase and its chairman and CEO Jamie Dimon. She thinks, "Mr. Dimon will spend the bank's money to fight rather than work out solutions." I found that to be true when Chase told me it won't consider principal reduction, even though all other major banks now do put that on the table.

In addition to the foreclosure mediation programs, NCLC, with its co-counsel, filed four class action suits on behalf of Massachusetts residents to challenge the failure of Wells Fargo Bank, Bank of America, J.P. Morgan Chase Bank and IndyMac Mortgage Servicers/OneWest Bank to honor their agreements with borrowers to modify mortgages and prevent foreclosures under the United States Treasury's Home Affordable Modification Program ("HAMP").

Clearly, you should not try to go it alone with the banks. They have lawyers on the payroll and you have little chance of being able to defend yourself. Don't wait until its too late and the bank already completed its foreclosure process while you patiently wait for an answer to your modification application.

Maybe banks have folks/friends in the job rotation?  Federal Reserve?  Treasury?  White House?

more here - http://www.walletpop.com/blog/2010/04/12/homeowners-face-foreclosure-after-told-to-stop-paying/

Where is Eric Holder?  Why isn't he all over this?  Why isn't he looking out for Main Street?

[WhiskeyGirl]

Louise Uchitelle's review of Simon Johnson and James Kwak's book 13 Bankers nicely summarizes the conventional post-crisis thinking.

To put it bluntly, as this book does: the efficient-market hypothesis does not work. It never has. Markets are not self-­correcting. Left to their own devices, bankers at the biggest institutions can’t seem to stop themselves from speculating with borrowed money until they inevitably crash the system.

And yet it's from the same quarters (liberal mostly) that you hear scandalous howls over the profits made by the likes of John Paulson (and Magnetar and some traders at Goldman Sachs) who did actually bet against the housing, and whose actions, to some extent acted as a countervailing force.

Granted, some would argue that Paulson helped fuel the bubble with his hand in creating synthetic CDOs, and certainly a handfull of hedge funds would not have been nearly significant enough to actually push back against the boom in housing.

But if we want a system that to some extent self-regulates, why are we, ex post facto, taking aim at those that bucked the trend?

Remember, it's Simon Johnson who himself called for John Paulson to be banned for life from the securities industry.

Wow.  What an idea.  Banning someone for life from the securities industry.

Read more: http://www.businessinsider.com/lets-talk-about-the-hypocrisy-of-slamming-efficient-markets-and-john-paulson-2010-4#ixzz0mtmQHFls

Who else was part of Goldman's sand box?

from the comments -

NoSingleOne on Apr 26, 12:55 PM said:

@txchick57: Heck yeah. It stopped being a fair, efficient market when AIG got bailed out at 100 cents on the dollar, which mostly benefited Goldman.

Left Wing Wanker on Apr 26, 10:14 AM said:

He was so desperate to short the market, he created the products to do it and hired Goldman to sell them.

The products weren't bets per se, they were guaranteed to fail yet they were sold as investments. Not good.