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Independence Day Message to Community Bankers

I like MidFirst Bank out of Oklahoma. In fact, I like most Community Banks and most Community Bankers. They provide personal banking for solid people who are not particularly huge customers. And, I know there is a rivalry, I kind of like Credit Unions too, although they tend to lag behind in technology. The reason I like these institutions is that their business models are mostly the old model of service without gouging. They give you a sense that they consider you important (because you are) and that they exist to serve you instead of the other way around. Most of them had nothing to do with securitized mortgages.

And with modern technology there is virtually no service that is unavailable at a community bank or credit union. Even the convenience of ATMs. Since they pay the fee, they leverage off of the infrastructure of all the existing convenient ATMs all over the world. I can’t think of a single reason why anyone would do their banking anyplace other than a community bank or credit union. It’s a relationship, not just a marketing venture designed to engorge themselves on your lifeblood.

So I have a suggestion for the community banks which apparently has not occurred to them. Many, if not most of their employees and officers are in the same boat as all the other victims of the mortgage fraud that has become the Great Recession. The “fix” their employees are in is the same as everyone else — underwater, delinquency, and foreclosure. This creates enormous personal stress and decreases productivity while at the same time overlooks a premium opportunity for the community bank or credit union that employs them.

Solid people still exist. If you take away the fraudulent transaction (especially the fraudulent appraisal) that put them behind the 8 ball in mortgages, their FICO scores would be 100-150 points higher. So but for the housing crisis, their payment record and credit-worthiness is significantly better than first appears. Add back the points irrationally deducted from their credit score and you have an entirely different credit proposition. And a huge potential profit center with people the community banks and credit unions know — intimately.

As housing prices keep sliding down, it is hard to keep in mind that they won’t go to zero. But it IS true that houses will never become worthless. It’s also true that eventually, some time in the distant future, those prices will rebound. In the meantime, millions of homes are going into foreclosure and being sold on the courthouse steps for pennies on the dollar. The current practice is to drop the auction price within hours of the actual sale so nobody knows the deal until it’s all over. And the current practice is to make short-sales difficult, although not impossible. So here is my message:

Use the strength of your financial institution for the benefit of your employees. You might even want to do the same for some of your customers. Buy the homes at the courthouse steps, on short-sale or out of REO, make a deal with the borrower (your employee or customer) wherein the current owner leases the home with an option to buy the house back. It’s basically refinancing with principal reduction.

Sound crazy? Look at these numbers. EXAMPLE: Originally sold for $230,000 the house or condo is now worth no more than $90,000 in fair market value and it is going down. There are three price levels for the sale, each lower than fair market value — REO sale, short-sale and auction bid, each lower than the other. The final auction sale price will probably be somewhere around 50% of the distressed FMV.

Since you are buying the property at a price lower than FMV, your LTV will still be in the safe zone. You lease or sell the residence back to the same owner who got screwed by the big boys on Wall Street with the option or sale price at fair market non-distressed value. The bank makes a lot of money, the risk is extremely low, the homeowner stays in the home, the stress is eliminated, and the loyalty of the employee or bank customer will be the equivalent of a blood oath.

There are approximately 6,000 community banks in the United States. Applying their collective strength against the system being played by the securitization players can cause a major correction in the foreclosure crisis. In doing so, they will enlarge their customer base, vastly increase the level of deposits in each branch, and create an immediate investment (new loans) at rates that will produce affordable payments for borrowers, while at the same time include an extreme premium for the underwriting bank.

How ’bout it? If any banker reads this and is interested and wants to start such a program you can either do it in house or you can outsource to some people who are accustomed to serving community banks and credit unions. Those people are not hard to find. I know about a dozen of them myself. If you want to talk to me about it send an email to ngarfield@msn.com and in the SUBJECT MATTER, write in CAPS, “BANK MORTGAGE PROJECT.” If you are not a bank executive, you can still write to me, but don’t use that subject matter.

Principal Reduction is Both Fair and the Only Practical Solution

From “Anonymous” in Response to Post about PAID IN FULL

Editor’s Note. I might have misstated the case when I said that investment banks are buying up the lower tranches. It’s not them. It is the people in the investment banks because they have another gambit to run on this. Anonymous, I would appreciate it if you would inquire and confirm, corroborate or rebut this statement.

The rest of your points are of course pearls. AND the specifics you offer make it increasingly clear that a principal reduction at the borrower’s end is only a reflection of the reality of the reduction on the creditor’s end — whether through payment, credit enhancement or waiver of rights that are questionable but nonetheless part of the deal.

One – in response to — “investment banks that are buying up the toxic waste tranches, ” —–investment banks are not buying up toxic tranches -they are consolidating these tranches onto their balance sheets -and writing them off the former receivable pass-through.

Two – we do not know what AIG (or other insurers) were entitled to once they honored the swap protection contract (they actually did not honor – the US Government did) – this information is not available. AIG could be entitled to whole loan collection rights. But, AIG “Obligations” are now owned by the US Government – who, by the way, is the party rejecting loan modifications – despite their law to promote them.

Three – paying an obligation for another party does not release action against the borrower. The debt remains. However, the real party must follow the law. The real party remain undisclosed. The real creditor must be divulged. And, any failure to disclose the real and current creditor deprives the borrower of the right to a modification negotiation with the actual creditor. We all know, by know, servicers are not the creditor.

Four- Use the paid “tranches” as evidence that the structure of the REMIC – as once originated (by cut-off date – ha ha) – is gone. Mezzanine tranche holders are only paid – if there is anything left after the A tranches holders are paid. And, this is ONLY for current pass-through. If the A tranches have been paid – in full- by swaps -there is nothing left to be paid to any M tranche holders. The “waterfall” structure is gone – thus, so is the pass-through REMIC that once organized the structured tranches.

Five – Balance sheet accounting is critical – who is accounting for the right to collect the loan? That is the fundamental question.

Six – As to “holder” of the note – there have been good challenges to the negotiability of the note posted here (see Collete McDonald). and post re- Professor at Pepperdine.

If you try to challenge strictly on fact that someone else “paid” the loan amount for you – you will not win. This has already been tested in debt collection. It will not work. But, this is greater than “debt” collection – as the current creditor is supposing to be negotiating with you according to Congressional law. You need to know your creditor – until you find that out – the foreclosure is a farce and and a fraud – upon you – and upon the court.

Finally, as Neil has stated many times, trying to get a complete discharge or “free home” will not work. Thus, trying to say the DEBT does not exist – will not hold. Only way you can possibly go this route is to claim that the account does not belong to you. And, that could be a focus – when a loan number has been changed (need less to say – your new loan number is not in the PSA “attached” “Mortgage Schedule.”

And, as PJ has also said – principal reduction is the key. There needs to be principal reduction with a fair interest rate.

Judges will not like hearing that the debt has been paid – and, therefore, you owe nothing. Need to shatter their “trustee” bogus Trust structure – and demand to know the current creditor. And, pursue counter-claims for a fraudulent foreclosure and fraud upon the court.

TO quote trespass unwanted,
I know nothing, and if I think I know something I know nothing. I don’t give legal advice because I don’t know legal things.

FRAUD IS THE CENTRAL PROBLEM

It is hard to state this strongly enough. The entire mortgage backed securitization structure was based upon FRAUD. An intentional misstatement of a material fact known to be untrue and which the receiving party reasonably relies to his detriment is fraud. BOTH ends of this deal required fraud for completion. The investors had to believe the securities were worth more and carried less risk than reality. The borrowers had to believe that their property was worth more and carried less risk than reality. Exactly the same. Using ratings/appraisals and distorting their contractual and statutory duties, the sellers of this crap defrauded the investors, who supplied the money and the borrowers were accepted PART of the benefit.

See this article posted by our friend Anonymous:

Posts by Aaron Task
“A Gigantic Ponzi Scheme, Lies and Fraud”: Howard Davidowitz on Wall Street
Jul 01, 2010 08:00am EDT by Aaron Task in Newsmakers, Banking
Related: XLF, AIG, GS, JPM, BAC, C, FNM
Play Video
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Day one of the Financial Crisis Inquiry Commission’s two-day hearing on AIG derivatives contracts featured testimony from Joseph Cassano, the former head of AIG’s financial products unit. Goldman Sachs president Gary Cohn was also on the Hill.
Meanwhile, the Democrats are still trying to salvage the regulatory reform bill, with critical support from Senator Scott Brown (R-Mass.) reportedly still uncertain.
According to Howard Davidowitz of Davidowitz & Associates, what connects the hearings and the Reg reform debate is the lack of focus on the real underlying cause of the financial crisis: Fraud.
“It was a massive fraud… a gigantic Ponzi Scheme, a lie and a fraud,” Davidowitz says of Wall Street circa 2007. “The whole thing was a fraud and it gets back to the accountants valuing the assets incorrectly.”
Because accountants and auditors allowed Wall Street firms to carry assets at “completely fraudulent” valuations, he says the industry looked hugely profitable and was able to use borrowed funds to make leveraged bets on all sorts of esoteric instruments. “Their bonuses were based on profits they never made and the leverage they never could have gotten if the numbers were right – no one would’ve given them the money in their right mind,” Davidowitz says.

To date, the accounting and audit firms have escaped any serious repercussions from the credit crisis, a stark difference to the corporate “death sentence” that befell Arthur Anderson for its alleged role in the Enron scandal.
To Davidowitz, that’s perhaps the greatest outrage of all: “Where were the accountants?,” he asks. “They did nothing, checked nothing, agreed to everything” and collected millions in fees while “shaking hands with the CEO.”

GMAC v Visicaro Case No 07013084CI: florida judge reverses himself: applies basic rules of evidence and overturns his own order granting motion for summary judgment

Having just received the transcript on this case, I find that what the Judge said could be very persuasive to other Judges. I am renewing the post because there are several quotes you should be using from the transcript. Note the intimidation tactic that Plaintiff’s Counsel tried on the Judge. A word to the wise, if you are going to use that tactic you better have the goods hands down and you better have a good reason for doing it that way.

Fla Judge rehearing of summary judgement 4 04 10

5035SCAN4838_000 vesicaro Briefs

Vesicaro transcript

Posted originally in April, 2010

RIGHT ON POINT ABOUT WHAT WE WERE JUST TALKING ABOUT

I appeared as expert witness in a case yesterday where the Judge had trouble getting off the idea that it was an accepted fact that the note was in default and that ANY of the participants in the securitization chain should be considered collectively “creditors” or a creditor. Despite the fact that the only witness was a person who admitted she had no knowledge except what was on the documents given to her, the Judge let them in as evidence.

The witness was and is incompetent because she lacked personal knowledge and could not provide any foundation for any records or document. This is the predominant error of Judges today in most cases. Thus the prima facie case is considered “assumed” and the burden to prove a negative falls unfairly on the homeowner.

The Judge, in a familiar refrain, had trouble with the idea of giving the homeowner a free house when the only issue before him was whether the motion to lift stay should be granted. Besides the fact that the effect of granting the motion to lift stay was the gift of a free house to ASC who admits in their promotional website that they have in interest nor involvement in the origination of the loans, and despite the obviously fabricated assignment a few days before the hearing which violated the terms of the securitization document cutoff date, the Judge seems to completely missed the point of the issue before him: whether there was a reason to believe that the movant lacked standing or that the foreclosure would prejudice the debtor or other creditors (since the house would become an important asset of the bankruptcy estate if it was unencumbered).

If you carry over the arguments here, the motion for lift stay is the equivalent motion for summary judgment.

This transcript, citing cases, shows that the prima facie burden of the Movant is even higher than beyond a reasonable doubt. It also shows that the way the movants are using business records violates all standards of hearsay evidence and due process. Read the transcript carefully. You might want to use it for a motion for rehearing or motion for reconsideration to get your arguments on record, clear up the issue of whether you objected on the basis of competence of the witness, and then take it up on appeal with a cleaned up record.

Talk About a Guy Who Gets It – “Anonymous?”

As some of you knew or probably have guessed, livinglies is a lightening rod for information. We have posts like the one below on the comments and emails sent with details that are neither for attribution or publication. In addition, several people in sensitive government positions use livinglies as a method of getting the real information out. Take a close look at this comment posted from “Anonymous” a frequent contributor. While succinctly stated his points are pearls.

Yeah – searching Maiden Lane is good. But, it will only tell you what “toxic” tranches the government took off the books of the banks that held them. These are the tranches that were NOT paid by the swap protection.

My point is that if the upper tranches were paid via swap protection, then the bottom tranches – held by the government (Maiden Lane) are simply worthless tranches. This is because the pass-through tranche structure has been paid and is no longer existent.

Lower tranches are only paid current payout – if – and only if – the upper tranches have been paid. But, this payment must be current. If a swap payout has occurred, the upper tranches are NO LONGER current. They are done – there is nothing left for for the subordinate tranches to receive. Purchasing worthless toxic assets, by the government, was only a ploy to aid the financial institutions that held worthless “toxic” assets – that are no longer part of the originated “waterfall” structure payout. Worthless assets from a dissolved and dismantled Trust.

You must remember, the REMICs were set up for current pass through of receivables ONLY. Nothing more. Foreclosures cannot be assigned to REMICs with knowledge of default.

My anger is – the government knows this – and what the heck are they doing? They claim to be promoting modifications – and at the same time – are the investor in the toxic securities that are dead. Thus, ironically, the government is the one denying a loan modification and/or principal reduction – and, forcing foreclosure – despite their own law – including the 2009 TILA Amendment and .Federal Reserve Interim Opinion.

But, listen to Mr. Ben Bernanke – he wants short sales. This is their goal. And, for anyone who knows of someone purchasing a new home – ask them their terms – ask them the size of their mortgage, ask them their down payment. These people are going to be in trouble. All is simply a transfer of wealth of from you – to them (new home buyers). I cannot figure out how this ever came to be – except politics in the worst possible way.

“KING” DEUTSCH CITED FOR DESTRUCTION OF CITIES

The article below was purloined from www.foreclosureblues.wordpress.com — the comments are mine. Neil Garfield

“According to the Federal Deposit Insurance Corporation (FDIC), Deutsche Bank now holds loans for American single-family and multi-family houses worth about $3.7 billion (€3.1 billion). The bank, however, claims that much of this debt consists of loans to wealthy private customers. (EDITOR’S NOTE: THUS ALL THE OTHER LOANS IT CLAIMS TO OWN, IT DOESN’T OWN)

The bank did not issue the mortgages for the many properties it now manages, and yet it accepted, on behalf of investors, the fiduciary function for its own and third-party CDOs. In past years, says mortgage expert Steve Dibert, real estate loans were “traded like football cards” in the United States. (Editor’s Note: This is why we say that the loan never makes it into the pool until litigation starts AND even if it was ever in the pool there is no guarantee it remained in the pool for more than a nanosecond). Sworn testimony from Deutsch employees corroborate that no assignments are done until “needed,” which means that in the mean time they are still legally owned by the loan originator. The loan originator therefore created an obligation that was satisfied simultaneously with the closing on the loan. The note is therefore evidence of an obligation that does not legally exist. Thus there are possible equitable theories under which investors could assert claims against the borrower, but the note and deed of trust or mortgage are only PART of the evidence and ONLY the investor has standing to bring that claim. Recent cases have rejected claims of “equitable transfer.”)

How many houses was he responsible for, Co was asked? “Two thousand,” he replied. But then he corrected himself, saying that 2,000 wasn’t the number of individual properties, but the number of securities packages being managed by Deutsche Bank. Each package contains hundreds of mortgages. So how many houses are there, all told, he was asked again? Co could only guess. “Millions,” he said.

The exotic financial vehicles are sometimes managed by an equally exotic firm: Deutsche Bank (Cayman) Limited, Boundary Hall, Cricket Square, Grand Cayman. In an e-mail dated Feb. 26, 2010, a Deutsche Bank employee from the Cayman Islands lists 84 CDOs and similar products, for which she identifies herself as the relevant contact person.

However, C-BASS didn’t just manage abstract securities. It also had a subsidiary to bring in all the loans that were subsequently securitized. By the end of 2005 the subsidiary, Litton Loan, had processed 313,938 loans, most of them low-value mortgages, for a total value of $43 billion.

EDITOR’S NOTE: Whether it is Milwaukee which is going the the way of Cleveland or thousands of other towns and cities, Deutsch Bank as a central player in more than 2,000 Special Purpose Vehicles, involving thousands more pools and sub-pools, is far and away the largest protagonist in the foreclosure crisis. This article, originally written in German, details just how deep they are into this mess, while at the same time disclaiming any part in it. It corroborates the article I wrote about the Deutsch Bank executive who said ON TAPE, which I have, that even though Deutsch is named as Trustee it knows nothing and does nothing.

SPIEGEL ONLINE
06/10/2010 07:42 AM
‘America’s Foreclosure King’
How the United States Became a PR Disaster for Deutsche Bank
By Christoph Pauly and Thomas Schulz

Deutsche Bank is deeply involved in the American real estate crisis. After initially profiting from subprime mortgages, it is now arranging to have many of these homes sold at foreclosure auctions. The damage to the bank’s image in the United States is growing.

The small city of New Haven, on the Atlantic coast and home to elite Yale University, is only two hours northeast of New York City. It is a particularly beautiful place in the fall, during the warm days of Indian summer.

But this idyllic image has turned cloudy of late, with a growing number of houses in New Haven looking like the one at 130 Peck Street: vacant for months, the doors nailed shut, the yard derelict and overgrown and the last residents ejected after having lost the house in a foreclosure auction. And like 130 Peck Street, many of these homes are owned by Germany’s Deutsche Bank.

“In the last few years, Deutsche Bank has been responsible for far and away the most foreclosures here,” says Eva Heintzelman. She is the director of the ROOF Project, which addresses the consequences of the foreclosure crisis in New Haven in collaboration with the city administration. According to Heintzelman, Frankfurt-based Deutsche Bank plays such a significant role in New Haven that the city’s mayor requested a meeting with bank officials last spring.

The bank complied with his request, to some degree, when, in April 2009, a Deutsche Bank executive flew to New Haven for a question-and-answer session with politicians and aid organizations. But the executive, David Co, came from California, not from Germany. Co manages the Frankfurt bank’s US real estate business at a relatively unknown branch of a relatively unknown subsidiary in Santa Ana.

How many houses was he responsible for, Co was asked? “Two thousand,” he replied. But then he corrected himself, saying that 2,000 wasn’t the number of individual properties, but the number of securities packages being managed by Deutsche Bank. Each package contains hundreds of mortgages. So how many houses are there, all told, he was asked again? Co could only guess. “Millions,” he said.

Deutsche Bank Is Considered ‘America’s Foreclosure King’

Deutsche Bank’s tracks lead through the entire American real estate market. In Chicago, the bank foreclosed upon close to 600 large apartment buildings in 2009, more than any other bank in the city. In Cleveland, almost 5,000 houses foreclosed upon by Deutsche Bank were reported to authorities between 2002 and 2006. In many US cities, the complaints are beginning to pile up from homeowners who lost their properties as a result of a foreclosure action filed by Deutsche Bank. The German bank is berated on the Internet as “America’s Foreclosure King.”

American homeowners are among the main casualties of the financial crisis that began with the collapse of the US real estate market. For years, banks issued mortgages to homebuyers without paying much attention to whether they could even afford the loans. Then they packaged the mortgage loans into complicated financial products, earning billions in the process — that is, until the bubble burst and the government had to bail out the banks.

Deutsche Bank has always acted as if it had had very little to do with the whole affair. It survived the crisis relatively unharmed and without government help. Its experts recognized early on that things could not continue as they had been going. This prompted the bank to get out of many deals in time, so that in the end it was not faced with nearly as much toxic debt as other lenders.

But it is now becoming clear just how deeply involved the institution is in the US real estate market and in the subprime mortgage business. It is quite possible that the bank will not suffer any significant financial losses, but the damage to its image is growing by the day.

‘Deutsche Bank Is Now in the Process of Destroying Milwaukee’

According to the Federal Deposit Insurance Corporation (FDIC), Deutsche Bank now holds loans for American single-family and multi-family houses worth about $3.7 billion (€3.1 billion). The bank, however, claims that much of this debt consists of loans to wealthy private customers.

More damaging to its image are the roughly 1 million US properties that the bank says it is managing as trustee. “Some 85 to 90 percent of all outstanding mortgages in the USA are ultimately controlled by four banks, either as trustees or owners of a trust company,” says real estate expert Steve Dibert, whose company conducts nationwide investigations into cases of mortgage fraud. “Deutsche Bank is one of the four.”

In addition, the bank put together more than 25 highly complex real estate securities deals, known as collateralized debt obligations, or CDOs, with a value of about $20 billion, most of which collapsed. These securities were partly responsible for triggering the crisis.

Last Thursday, Deutsche Bank CEO Josef Ackermann was publicly confronted with the turmoil in US cities. Speaking at the bank’s shareholders’ meeting, political science professor Susan Giaimo said that while Germans were mainly responsible for building the city of Milwaukee, Wisconsin, “Deutsche Bank is now in the process of destroying Milwaukee.”

As Soon as the Houses Are Vacant, They Quickly Become Derelict

Then Giaimo, a petite woman with dark curls who has German forefathers, got to the point. Not a single bank, she said, owns more real estate affected by foreclosure in Milwaukee, a city the size of Frankfurt. Many of the houses, she added, have been taken over by drug dealers, while others were burned down by arsonists after it became clear that no one was taking care of them.

Besides, said Giaimo, who represents the Common Ground action group, homeowners living in the neighborhoods of these properties are forced to accept substantial declines in the value of their property. “In addition, foreclosed houses are sold to speculators for substantially less than the market value of houses in the same neighborhood,” Giaimo said. The speculators, according to Giaimo, have no interest in the individual properties and are merely betting that prices will go up in the future.

Common Ground has posted photos of many foreclosed properties on the Internet, and some of the signs in front of these houses identify Deutsche Bank as the owner. As soon as the houses are vacant, they quickly become derelict.

A Victorian house on State Street, painted green with red trim, is now partially burned down. Because it can no longer be sold, Deutsche Bank has “donated” it to the City of Milwaukee, one of the Common Ground activists reports. As a result, the city incurs the costs of demolition, which amount to “at least $25,000.”

‘We Can’t Give Away Money that Isn’t Ours’

During a recent meeting with US Treasury Secretary Timothy Geithner, representatives of the City of Milwaukee complained about the problems that the more than 15,000 foreclosures have caused for the city since the crisis began. In a letter to the US Treasury Department, they wrote that Deutsche Bank is the only bank that has refused to meet with the city’s elected representatives.

Minneapolis-based US Bank and San Francisco-based Wells Fargo apparently took the complaints more seriously and met with the people from Common Ground. The activists’ demands sound plausible enough. They want Deutsche Bank to at least tear down those houses that can no longer be repaired at a reasonable cost. Besides, Giaimo said at the shareholders’ meeting, Deutsche Bank should contribute a portion of US government subsidies to a renovation fund. According to Giaimo, the bank collected $6 billion from the US government when it used taxpayer money to bail out credit insurer AIG.

“It’s painful to look at these houses,” Ackermann told the professor. Nevertheless, the CEO refused to accept any responsibility. Deutsche Bank, he said, is “merely a sort of depository for the mortgage documents, and our options to help out are limited.” According to Ackermann, the bank, as a trustee for other investors, is not even the actual owner of the properties, and therefore can do nothing. Besides, Ackermann said, his bank didn’t promote mortgage loans with terms that have now made the payments unaffordable for many families.

The activists from Wisconsin did, however, manage to take home a small victory. Ackermann instructed members of his staff to meet with Common Ground. He apparently envisions a relatively informal and noncommittal meeting. “We can’t give away money that isn’t ours,” he added.

Deutsche Bank’s Role in the High-Risk Loans Boom

Apparently Ackermann also has no intention to part with even a small portion of the profits the bank earned in the real estate business. Deutsche Bank didn’t just act as a trustee that — coincidentally, it seems — manages countless pieces of real estate on behalf of other investors. In the wild years between 2005 and 2007, the bank also played a central role in the profitable boom in high-risk mortgages that were marketed to people in ways that were downright negligent.

Of course, its bankers didn’t get their hands dirty by going door-to-door to convince people to apply for mortgages they couldn’t afford. But they did provide the distribution organizations with the necessary capital.

The Countrywide Financial Corporation, which approved risky mortgages for $97.2 billion from 2005 to 2007, was the biggest provider of these mortgages in the United States. According to the study by the Center for Public Integrity, a nonprofit investigative journalism organization, Deutsche Bank was one of Countrywide’s biggest financiers.

Ameriquest — which, with $80.7 billion in high-risk loans on its books in the three boom years before the crash, was the second-largest subprime specialist — also had strong ties to Deutsche Bank. The investment bankers placed the mortgages on the international capital market by bundling and structuring them into securities. This enabled them to distribute the risks around the entire globe, some of which ended up with Germany’s state-owned banks.

‘Deutsche Bank Has a Real PR Problem Here’

After the crisis erupted, there were so many mortgages in default in 25 CDOs that most of the investors could no longer be serviced. Some CDOs went bankrupt right away, while others were gradually liquidated, either in full or in part. The securities that had been placed on the market were underwritten by loans worth $20 billion.

At the end of 2006, for example, Deutsche Bank constructed a particularly complex security known as a hybrid CDO. It was named Barramundi, after the Indo-Pacific hermaphrodite fish that lives in muddy water. And the composition of the deal, which was worth $800 million, was muddy indeed. Many securities that were already arcane enough, like credit default swaps (CDSs) and CDOs, were packaged into an even more complex entity in Barramundi.

Deutsche Bank’s partner for the Barramundi deal was the New York investment firm C-BASS, which referred to itself as “a leader in purchasing and servicing residential mortgage loans primarily in the Subprime and Alt-A categories.” In plain language, C-BASS specialized in drumming up and marketing subprime mortgages for complex financial vehicles.

However, C-BASS didn’t just manage abstract securities. It also had a subsidiary to bring in all the loans that were subsequently securitized. By the end of 2005 the subsidiary, Litton Loan, had processed 313,938 loans, most of them low-value mortgages, for a total value of $43 billion.

One of the First Victims of the Financial Crisis

Barramundi was already the 19th CDO C-BASS had issued. But the investment firm faltered only a few months after the deal with Deutsche Bank, in the summer of 2007. C-BASS was one of the first casualties of the financial crisis.

Deutsche Bank’s CDO, Barramundi, suffered a similar fate. Originally given the highest possible rating by the rating agencies, the financial vehicle stuffed with subprime mortgages quickly fell apart. In the spring of 2008, Barramundi was first downgraded to “highly risky” and then, in December, to junk status. Finally, in March 2009, Barramundi failed and had to be liquidated. (EDITOR’S NOTE: WHAT HAPPENED TO THE LOANS?)

While many investors lost their money and many Americans their houses, Deutsche Bank and Litton Loan remained largely unscathed. Apparently, the Frankfurt bank still has a healthy business relationship with the subprime mortgage manager, because Deutsche Bank does not play a direct role in any of the countless pieces of real estate it holds in trust. Other service providers, including Litton Loan, handle tasks like collecting mortgage payments and evicting delinquent borrowers.

The exotic financial vehicles are sometimes managed by an equally exotic firm: Deutsche Bank (Cayman) Limited, Boundary Hall, Cricket Square, Grand Cayman. In an e-mail dated Feb. 26, 2010, a Deutsche Bank employee from the Cayman Islands lists 84 CDOs and similar products, for which she identifies herself as the relevant contact person.

Trouble with US Regulatory Authorities and Many Property Owners

The US Securities and Exchange Commission (SEC) is now investigating Deutsche Bank and a few other investment banks that constructed similar CDOs. The financial regulator is looking into whether investors in these obscure products were deceived. The SEC has been particularly critical of US investment bank Goldman Sachs, which is apparently willing to pay a record fine of $1 billion to avoid criminal prosecution.

Deutsche Bank has also run into problems with the many property owners. The bank did not issue the mortgages for the many properties it now manages, and yet it accepted, on behalf of investors, the fiduciary function for its own and third-party CDOs. In past years, says mortgage expert Steve Dibert, real estate loans were “traded like football cards” in the United States.

Amid all the deal-making, the deeds for the actual properties were often lost. In Cleveland and New Jersey, for example, judges invalidated foreclosures ordered by Deutsche Bank, because the bank was unable to come up with the relevant deeds.

Nevertheless, Deutsche Bank’s service providers repeatedly try to have houses vacated, even when they are already occupied by new owners who are paying their mortgages. This practice has led to nationwide lawsuits against the Frankfurt-based bank. On the Internet, angry Americans fighting to keep their houses have taken to using foul language to berate the German bank.

“Deutsche Bank now has a real PR problem here in the United States,” says Dibert. “They want to bury their head in the sand, but this is something they are going to have to deal with.”

Translated from the German by Christopher Sultan

EXHIBITS MORE IMPORTANT THAN PLEADINGS

From www.foreclosureblues.wordpress.com

Editor’s Note: I think we posted the referenced case when it came out, but this article from foreclosure blues does point out some things that I had not emphasized. They are right that a primary point to remember is that where there is a conflict between what the would-be forecloser SAYS and what they submit as EXHIBITS, the Exhibits control for purposes of motion hearings. Of course neither the pleading nor the exhibits are evidence until there is an evidential hearing, the exhibits are offered into evidence after a competent witness establishes authenticity, personal knowledge, business records, foundation etc.and the Judge accepts them into evidence. Of course you can change all that by just sitting back and saying nothing while they keep offering exhibits into evidence without any objections from you.

Editor’s Note….This decision is directly on point and this strategy has the potential to sway the entire foreclosure pendulum in favor of the homeowner, in order to obtain the leverage needed to force a truly viable financial solution.

A Florida Circuit Court Judge has issued a 5-page written opinion dismissing a foreclosure filed by Aurora Loan Services, LLC finding that the Plaintiff (Aurora) lacked standing at the inception of the case and that the MERS assignment was invalid.

The court cited several Florida cases and the Bellistri v. Ocwen case from Missouri as to the necessity of standing being established and that it cannot be waived. Aurora claimed to have standing by an alleged “equitable transfer” of the note, possession of the original note, and the MERS assignment. The court stated very bluntly “These arguments are without merit”.

As to the “equitable transfer” argument, the court found that there was no indication in the assignment that the note and mortgage were physically transferred to Aurora, and could not have been in view of the second count of the Complaint to “enforce a lost note”. The “physical possession” argument was vitiated by the fact that the exhibits attached to the Complaint, including the Note and Mortgage, were executed in favor of an entity other than Aurora (which we all know is nothing more than a servicer which was the servicer for the now-bankrupt Lehman Brothers), and that when there is a conflict between what the Complaint alleges and what the exhibits show, the exhibits control. The court also found that none of the documents attached to the Complaint identified Aurora as the “holder”.

The Court went on to show why the MERS assignment was a legal nullity, citing the LaSalle Bank v. Lamy case from New York, the MERS v. Nebraska Department of Finance case, the Arkansas and Kansas Supreme Court cases on the lack of authority of MERS, the Saxon v. Hillery case from California, and the In Re Vargas case from the California Bankruptcy Court to demonstrate that MERS’ capacity is limited and that MERS had no authority to execute the assignment. The Court held the assignment to be invalid.

The Court finally noted that the lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed, citing a Florida appeals case from the same appellate court which issued the BAC Funding case on standing (which we previously discussed on this website).

The Court dismissed the foreclosure and reserved jurisdiction to address the borrower’s request for attorneys’ fees.

The importance of this April 28, 2010 opinion is severalfold: first, it shows that trial court Judges are willing to accept the law on MERS from other jurisdictions. Second, it shows that trial court Judges are going to hold foreclosing parties to their legal obligations of proving standing by competent evidence. Third, it shows that courts will dismiss legally infirm foreclosure cases and entertain borrower requests for attorneys’ fees in having to defend a legally infirm foreclosure.

AIG Waived Rights in Bailout: NO SUBROGATION=PAID IN FULL

EDITOR’S NOTE: LISTEN UP! It’s easy to pass over these reports with the thought that it merely points out chicanery you already knew was about. But this one confirms what I’ve been saying for three years. The best defense against any claim is to show payment. Normally if someone pays off your debt it is either a gift (hence the defense of payment, even if it wasn’t by you) or they were buying the debt, which means that the deal was they were subrogated in the claim.

In other words if AIG gave Goldman Sachs money for “losses” on loan pools, the insurer would normally have the right to collect on the debts that were paid. OR they would have the right to receive money back if they paid for a loss claim where there was in fact no loss.

But that step was both skipped and waived. First of all, the payoff from AIG was never allocated specifically to a loan pool in violation of the express terms of the contracts with the investors who advanced the funds.

Second, the “Trustee” or manager of the pool never allocated the payment in any manner to the loans that were failing. Since most of the loans that were failing were the worst loans that would have made them a lot more valuable. In fact, for the investment banks that are buying up the toxic waste tranches, their end game might well be exactly that — to allocate the payments received from third party insurers and counter-parties on hedge contracts etc. and thus raise the value of the “toxic” pools considerably AFTER they have screwed all the investors and the borrowers.

The plain truth is that in the co-venture antics that were going on, the recipients of insurance, bailout, hedge, and other credit enhancements were acting at all times as either agents or constructive trustees for the investors. The fact that they received payment and failed to give that money to the investors is a case “between the creditors” as some judges like to say. But it also is a reduction in the amount owed to the investor from the pool (via the mortgage backed securities the investor bought).

If the reduction in the balance owed to the investor is properly allocated then the loans in the pool are no longer backing the full amount owed to the investor — they are backing something less. Now if AIG bought the loan, the borrower would still owe the money, this time to AIG. But AIG didn’t buy the loan, the pool, or anything for that matter. AIG merely paid out on an insurance contract under a deal where they, for their own reasons, specifically waived any claims for refund and under which they had no rights of substitution (subrogation) in the claims.

In plain terms, if you wreck your car and the insurance company adjusts it as a total wreck then they pay you off and take what is left of the car to mitigate their damages. What AIG did was pay the claim but they didn’t take the car, leaving you with the wreck to further mitigate your damages. It’s not a complete analogy but you get the point, right?

So back to AIG. Since they merely paid off the debt, the debt was reduced. The debt having been reduced it should have been reflected on the books of the investor or whoever is claiming to be the holder or enforcer of the loan obligation. It wasn’t. So the amount anyone claimed to be in default on any loans that were claimed to be in a pool (whether the loan actually made it into the pool or not) was and remains incorrectly stated. That means the notice of default, the notice of sale, the foreclosure suit are all wrong. In fact, when you add in all third party payments, as I have done in a number of cases, the obligation has been overpaid by factors of as much as 10 times the loan.

So we have a foreclosure on a home encumbered by a mortgage that has been satisfied because the OBLIGATION was satisfied. When the obligation was satisfied, the co-venturers here in securitization intentionally held onto the notes as though they were still due in full when they knew they had received multiple payments on them but since THEY were in charge of the bookkeeping, THEY didn’t reduce the loan balances.

Then THEY authorized some new entity to say they were the holder of the note, which they might be. But the note is evidence of the obligation, not the obligation itself.  If the obligation is paid, the holder of the note has only one action left — to give it back to the borrower marked PAID IN FULL.

June 29, 2010

In U.S. Bailout of A.I.G., Forgiveness for Big Banks

By LOUISE STORY and GRETCHEN MORGENSON

At the end of the American International Group’s annual meeting last month, a shareholder approached the microphone with a question for Robert Benmosche, the insurer’s chief executive.

“I’d like to know, what does A.I.G. plan to do with Goldman Sachs?” he asked. “Are you going to get — recoup — some of our money that was given to them?”

Mr. Benmosche, steward of an insurer brought to its knees two years ago after making too many risky, outsize financial bets and paying billions of dollars in claims to Goldman and other banks, said he would continue evaluating his legal options. But, in reality, A.I.G. has precious few.

When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.

But after the Securities and Exchange Commission’s civil fraud suit filed in April against Goldman for possibly misrepresenting a mortgage deal to investors, A.I.G. executives and shareholders are asking whether A.I.G. may have been misled by Goldman into insuring mortgage deals that the bank and others may have known were flawed.

This month, an Australian hedge fund sued Goldman on similar grounds. Goldman is contesting the suit and denies any wrongdoing. A spokesman for A.I.G. declined to comment about any plans to sue Goldman or any other banks with which it worked. A Goldman spokesman said that his firm believed that “all aspects of our relationship with A.I.G. were appropriate.”

A Legal Waiver

Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents. The documents, reviewed by The New York Times, provide the most comprehensive public record of how the Federal Reserve Bank of New York and the Treasury Department orchestrated one of the biggest corporate bailouts in history.

The documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks. It also contrasts with the hard line the White House took in 2009 when it forced Chrysler’s lenders to take losses when the government bailed out the auto giant.

As a Congressional commission convenes hearings Wednesday exploring the A.I.G. bailout and Goldman’s relationship with the insurer, analysts say that the documents suggest that regulators were overly punitive toward A.I.G. and overly forgiving of banks during the bailout — signified, they say, by the fact that the legal waiver undermined A.I.G. and its shareholders’ ability to recover damages.

“Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.”

“This really suggests they had myopia and they were looking at it entirely through the perspective of the banks,” Mr. Skeel said.

Regulators at the New York Fed declined to comment on the legal waiver but disagreed with that viewpoint.

“This was not about the banks,” said Sarah J. Dahlgren, a senior vice president for the New York Fed who oversees A.I.G. “This was about stabilizing the system by preventing the disorderly collapse of A.I.G. and the potentially devastating consequences of that event for the U.S. and global economies.”

This month, the Congressional Oversight Panel, a body charged with reviewing the state of financial markets and the regulators that monitor them, published a 337-page report on the A.I.G. bailout. It concluded that the Federal Reserve Bank of New York did not give enough consideration to alternatives before sinking more and more taxpayer money into A.I.G. “It is hard to escape the conclusion that F.R.B.N.Y. was just ‘going through the motions,’ ” the report said.

About $46 billion of the taxpayer money in the A.I.G. bailout was used to pay to mortgage trading partners like Goldman and Société Générale, a French bank, to make good on their claims. The banks are not expected to return any of that money, leading the Congressional Research Service to say in March that much of the taxpayer money ultimately bailed out the banks, not A.I.G.

A Goldman spokesman said that he did not agree with that report’s assertion, noting that his firm considered itself to be insulated from possible losses on its A.I.G. deals.

Even with the financial reform legislation that Congress introduced last week, David A. Moss, a Harvard Business School professor, said he was concerned that the government had not developed a blueprint for stabilizing markets when huge companies like A.I.G. run aground and, for that reason, regulators’ actions during the financial crisis need continued scrutiny. “We have to vet these things now because otherwise, if we face a similar crisis again, federal officials are likely to follow precedents set this time around,” he said.

Under the new legislation, the Federal Deposit Insurance Corporation will have the power to untangle the financial affairs of troubled entities, but bailed-out companies will pay most of their trading partners 100 cents on the dollar for outstanding contracts. (In some cases, the government will be able to recoup some of those payments later on, which the Treasury Department says will protect taxpayers’ interest. )

Sheila C. Bair, the chairwoman of the F.D.I.C., has said that trading partners should be forced to accept discounts in the middle of a bailout.

Regardless of the financial parameters of bailouts, analysts also say that real financial reform should require regulators to demonstrate much more independence from the firms they monitor.

In that regard, the newly released Congressional documents show New York Fed officials deferring to bank executives at a time when the government was pumping hundreds of billions of taxpayer dollars into the financial system to rescue bankers from their own mistakes. While Wall Street deal-making is famously hard-nosed with participants fighting for every penny, during the A.I.G. bailout regulators negotiated with the banks in an almost conciliatory fashion.

On Nov. 6, 2008, for instance, after a New York Fed official spoke with Lloyd C. Blankfein, Goldman’s chief executive, about the Fed’s A.I.G. plans, the official noted in an e-mail message to Mr. Blankfein that he appreciated the Wall Street titan’s patience. “Thanks for understanding,” the regulator said.

From the moment the government agreed to lend A.I.G. $85 billion on Sept. 16, 2008, the New York Fed, led at the time by Timothy F. Geithner, and its outside advisers all acknowledged that a rescue had to achieve two goals: stop the bleeding at A.I.G. and protect the taxpayer money the government poured into the insurer.

One of the regulators’ most controversial decisions was awarding the banks that were A.I.G.’s trading partners 100 cents on the dollar to unwind debt insurance they had bought from the firm. Critics have questioned why the government did not try to wring more concessions from the banks, which would have saved taxpayers billions of dollars.

Mr. Geithner, who is now the Treasury secretary, has repeatedly said that as steward of the New York Fed, he had no choice but to pay A.I.G.’s trading partners in full.

But two entirely different solutions to A.I.G.’s problems were presented to Fed officials by three of its outside advisers, according to the documents. Under those plans, the banks would have had to accept what the advisers described as “deep concessions” of as much as about 10 percent on their contracts or they might have had to return about $30 billion that A.I.G. had paid them before the bailout.

Had either of these plans been implemented, A.I.G. may have been left in a far better financial position than it is today, with taxpayers at less risk and banks forced to swallow bigger losses.

A spokesman for Mr. Geithner, Andrew Williams, said it was easy to speculate about how the A.I.G. bailout might have been handled differently, but the government had limited tools.

“At that perilous moment, actions were chosen that would have the greatest likelihood of protecting American families and businesses from a catastrophic failure of another financial firm and an accelerating panic,” Mr. Williams said.

For its part, the Treasury appeared to be opposed to any options that did not involve making the banks whole on their A.I.G. contracts. At Treasury, a former Goldman executive, Dan H. Jester, was the agency’s point man on the A.I.G. bailout. Mr. Jester had worked at Goldman with Henry M. Paulson Jr., the Treasury secretary during the A.I.G. bailout. Mr. Paulson previously served as Goldman’s chief executive before joining the government.

A Close Association

Mr. Jester, according to several people with knowledge of his financial holdings, still owned Goldman stock while overseeing Treasury’s response to the A.I.G. crisis. According to the documents, Mr. Jester opposed bailout structures that required the banks to return cash to A.I.G. Nothing in the documents indicates that Mr. Jester advocated forcing Goldman and the other banks to accept a discount on the deals.

Although the value of Goldman’s shares could have been affected by the terms of the A.I.G. bailout, Mr. Jester was not required to publicly disclose his stock holdings because he was hired as an outside contractor, a job title at Treasury that allowed him to forgo disclosure rules applying to appointed officials. In late October 2008, he stopped overseeing A.I.G. after others were given that responsibility, according to Michele Davis, a spokeswoman for Mr. Jester.

Ms. Davis said that Mr. Jester fought hard to protect taxpayer money and followed an ethics plan to avoid conflict with all of his stock holdings. Ms. Davis is also a spokeswoman for Mr. Paulson, and said that he declined to comment for this article.

The alternative bailout plans that regulators considered came from three advisory firms that the New York Fed hired: Morgan Stanley, Black Rock, and Ernst & Young.

One plan envisioned the government guaranteeing A.I.G.’s obligations in various ways, in much the same way the F.D.I.C. backs personal savings accounts at banks facing runs by customers. On Oct. 15, Ms. Dahlgren wrote to Mr. Geithner that the Federal Reserve board in Washington had said the New York Fed should try to get Treasury to do a guarantee. “We think this is something we need to have in our back pockets,” she wrote.

Treasury had the authority to issue a guarantee but was unwilling to do so because that would use up bailout funds. Once the guarantee was off the table, Fed officials focused on possibly buying the distressed securities insured by A.I.G. From the start, the Fed and its advisers prepared for the banks to accept discounts. A BlackRock presentation outlined five reasons why the banks should agree to such concessions, all of which revolved around the many financial benefits they would receive. BlackRock and Morgan Stanley presented a number of options, including what BlackRock called a “deep concession” in which banks would return $6.4 billion A.I.G. paid them before the bailout.

The three banks with the most to lose under these options were Société Générale, Deutsche Bank and Goldman Sachs. Société Générale would have had to give up $322 million to $2.1 billion depending on which alternative was used; Deutsche Bank would have had to forgo $40 million to $1.1 billion, while Goldman would have had to give up $271 million to $892 million, according to the documents.

Société Générale and Deutsche Bank both declined to comment.

Ultimately, the New York Fed never forced the banks to make concessions. Thomas C. Baxter Jr., general counsel at the New York Fed, explained that a looming downgrade of A.I.G. by the credit rating agencies on Nov. 10 forced the regulator to move quickly to avoid a default, which would have unleashed “catastrophic systemic consequences for our economy.”

“We avoided that horrible result, got the job done in the time available, and the Fed will eventually get out of this rescue whole,” he said in an interview.

And yet two Fed governors in Washington were concerned that making the banks whole on the A.I.G. contracts would be “a gift,” according to the documents.

Gift or not, the banks got 100 cents on the dollar. And on Nov. 11, 2008, a New York Fed staff member recommended that documents for explaining the bailout to the public not mention bank concessions. The Fed should not reveal that it didn’t secure concessions “unless absolutely necessary,” the staff member advised. In the end, the Fed successfully kept most of the details about its negotiations with banks confidential for more than a year, despite opposition from the media and Congress.

During the A.I.G. bailout, New York Fed officials prepared a script for its employees to use in negotiations with the banks and it was anything but tough; it advised Fed negotiators to solicit suggestions from bankers about what financial and institutional support they wanted from the Fed. The script also reminded government negotiators that bank participation was “entirely voluntary.”

The New York Fed appointed Terrence J. Checki as its point man with the banks. In e-mail messages that November, he was deferential to bankers, including the e-mail message in which he thanked Mr. Blankfein for his patience.

Many Thank-Yous

After UBS, a Swiss bank, received details about the Fed’s 100-cents-on-the-dollar proposal, Mr. Checki thanked Robert Wolf, a UBS executive, for his patience as well. “Thank you for your responsiveness and cooperation,” he said in an e-mail message. “Hope the benign outcome helped offset any aggravation. Thank you again.”

The Congressional Oversight Panel, which interviewed A.I.G.’s trading partners about how tough the government was during the negotiations, concluded that many of the governments efforts were merely “desultory attempts.”

All of this was quite different from the tack the government took in the Chrysler bailout. In that matter, the government told banks they could take losses on their loans or simply own a bankrupt company; the banks took the losses.

During the A.I.G. bailout, the Fed seemed more focused on extracting concessions from A.I.G. than from the banks. Mr. Baxter, in an interview, conceded that the way that the New York Fed handled the negotiations meant that any resulting deal “took most of the upside potential away from A.I.G.”

The legal waiver barring A.I.G. from suing the banks was not in the original document that regulators circulated on Nov. 6, 2008 to dissolve the insurer’s contracts with the banks. A day later a waiver was added but the Congressional documents show no e-mail traffic explaining why that occurred or who was responsible for inserting it. The New York Fed declined to comment.

Policy experts say it is not unusual for parties to waive legal rights when public money is involved. Mr. Moss, the Harvard professor, said the government might have been concerned that the insurer would use taxpayer money to sue banks. “The question is: was this legitimate?” he asked. “The answer depends on the motivation. If the reason was to avoid a slew of lawsuits that could have further destabilized the financial system in the short term, this may have been reasonable.”

But two people with direct knowledge of the negotiations between A.I.G. and the banks, who requested anonymity because the talks were confidential, said the legal waiver was not a routine matter — and that federal regulators forced the insurer to accept it.

Even if the waiver was warranted, experts say it unfairly handcuffed A.I.G. and has undermined the financial interests of taxpayers. If, for example, the banks misled A.I.G. about the mortgage securities A.I.G. insured, taxpayer money could be recouped from the banks through lawsuits.

Unless A.I.G. can prove it signed the legal waiver under duress, it cannot sue to recover claims it paid on $62 billion of about $76 billion of mortgage securities that it insured. (A.I.G. retains the right to sue on about $14 billion of the mortgage securities that it insured.)

If A.I.G. had the right to sue, and if banks were found to have misrepresented the deals or used improper valuations on securities A.I.G. insured to extract heftier payouts from the firm, the insurer’s claims could yield tens of billions of dollars in damages because of its shareholders’ lost market value, according to Mr. Skeel.

A.I.G. still has the right to sue in connection with exotic securities it insured called “synthetic collateralized debt obligations,” which are known as C.D.O.’s. Such instruments do not contain actual bonds, which is why they were not accepted as collateral by the Fed.

A.I.G. had insured $14 billion of synthetic C.D.O.’s,, including seven Goldman deals known as Abacus. One of the Abacus deals is the subject of the S.E.C.’s suit against Goldman. A.I.G. did not insure that security, but A.I.G.’s deals with Goldman are similar to the one in the S.E.C. case.

Throughout the A.I.G. bailout, as Congressional leaders and the media pressed for greater disclosure, regulators fought fiercely for confidentiality.

Even after the New York Fed released a list of the banks made whole in the bailout, it continued to resist disclosing information about the actual bonds in the deals, including codes known as “cusips” that label securities. “We need to fight hard to keep the cusips confidential,” one New York Fed official wroteon March 12, 2009.

Regulators said they wanted confidentiality because they did not want investors trading against the government’s portfolio. Others dispute that, saying that Wall Street insiders already knew what bonds were in the portfolio. Only the public was left in the dark.

“The New York Fed recognizes the public’s interest in transparency and has over time made more information available about the A.I.G. transactions,” a Fed spokesman said about the matter.

It was not until a Congressional committee issued a subpoena in January that the New York Fed finally turned over more comprehensive records. The bulk remained private until May, when some committee staff members put them online, saying they lacked the resources to review them all.

UTAH BOA BATTLEGROUND

by Morgan Skinner, KCSG News

Notice of Appeal Filed – Stay of Court Order to Vacate Injunction
Stopping Bank of America Foreclosures in Utah Requested
by Morgan Skinner, KCSG News1 day 14 hrs ago | 511 views | 0  | 8  |  |
10th Circuit Court, Denver (USC/photo)slideshow (St. George, UT) – A
Notice of Appeal to Federal Judge Clark Waddoups court order vacating
an Injunction against Bank of America and its subsidiary ReconTrust
Company halting all foreclosures in Utah was filed Friday, June 25,
2010 by St. George attorney John Christian Barlow.

Barlow told KCSG News he was “troubled by Court ruling but unrelenting
in pursuit of redress for his client (Cox) and other homeowners who
have become victims of mortgage lending gone mad.” Barlow said he has
motioned the court to allow Cox’s complaint to include a “Class of
Citizens” currently in foreclosure in Utah. Barlow contends his
client’s rights to remedies were taken away from her by a faceless
lender who continues to overwhelm homeowners and the judicial system
with motions and petitions as a remedy instead of making a good-faith
effort in face-to-face negotiations to help homeowners as the Utah
legislature intended. The David and Goliath legal battle over federal
versus states-citizens rights is headed to the 10th Circuit Court.

Judge Waddoups’ Memorandum of Explanation in support of vacating a
statewide Preliminary Injunction halting all foreclosures by the Bank
of America only served to raise more questions.

Some of the questions include:

1.) Why is the judge’s ruling at variance with his previous rulings
this year as noted in a Letter to Judge Waddoups submitted to the
court June 10th, 2010 by the Plaintiff’s counsel John Christian
Barlow, Esq. and E. Craig Smay, Esq. and posted June 21, 2010 in the
court docket, after the Ruling and Memorandum of Explanation.

2.) Why did Judge Waddoups essentially brush aside the Plaintiff’s
pleading that included the Supreme Court decision Cuomo vs. Clearing
House Association in which the Court said…“If a State chooses to
pursue enforcement of its laws in court, its targets are protected by
discovery and procedural rules” meaning a state has a right to enforce
its own laws against national banks.

3.) Why hasn’t Judge Waddoups recused himself from all Bank of America
or ReconTrust Company related cases since he was a senior partner in
the law firm Parr, Waddoups, Brown, Gee & Loveless now Parr, Brown,
Gee & Loveless that represented the Bank of America in Utah Fourth
District Court, Case No. 070402786 before he took the bench. And, the
law firm continues to represent the Bank of America and its
subsidiaries. According to the Code of Conduct for US Judges, a judge
should recuse himself when there may be a conflict of interest.

4.) Why shouldn’t Judge Waddoups recuse himself from any case in which
his old law firm represents either the plaintiff or the defendant
until he takes full distribution of his retirement fund with the law
firm as disclosed in Judge Waddoups most recent Financial Disclosure
Statement that shows he only took a partial distribution of his
retirement from the firm’s 401K

“Bank of America acquired the bankrupt Countrywide Home Loan portfolio
in a stock deal June 3, 2009. And, according to the ReconTrust
website, the Bank of America has over 1113 Utah homeowners in
foreclosure this month, and the numbers keep growing,” Barlow said.

The second part of the Plaintiff’s complaint has yet to be addressed.
It alleges neither the lender, nor MERS*, nor Bank of America, nor any
other Defendant, has any remaining interest in the mortgage promissory
note. The note was bundled with other notes and sold as
mortgage-backed securities or otherwise assigned and split from the
Trust Deed. Barlow said he has begun a quiet title action and expects
the court to adjudicate it according to the facts of evidence which
will clearly demonstrate lenders bundling notes into securities and
trading in the financial markets have created the underlying
homeowner’s mortgage nightmare.

*MERS(Mortgage Electronic Registration System) is a process designed
to simplify the way mortgage ownership and servicing rights are
originated, sold and tracked created by the real estate finance
industry. MERS eliminates the need to prepare and record assignments
when trading residential and commercial mortgage loans as securities.

Read more: KCSG Television – Notice of Appeal Filed and Stay of Court
Order Vacating Injunction Stopping Bank of America Foreclosures in
Utah Requested

$3 BILLION BANK BUSTER FILED IN CA AND NV

HUGE PRIVATE LAWSUITS FOR TAX EVASION BY SECURITIZATION PLAYERS:

Totaling more than $3 billion between just three states and probably more, my estimate is that these cases will succeed and that they will lead to settlements that will dwarf the Tobacco settlements.

California Qui Tam False Claims Recording Fees

Nevada Qui Tam

Nevada Qui Tam False Claims Tax Exemption

This is the case we have been waiting for. It will lead to the cure of state deficits where these actions are brought privately or by the AG of the state. I spent a good part of the Spring of 2009 trying to get Arizona to do this. They even figured out that their $3 billion deficit would be eliminated. But POLITICALLY they decided against it because people like McCain and Kyle were getting so much money from the bank lobby.

The $3 Billion figure is mine. I put pen to paper and came up with figures that dwarf that number, but in an effort to be conservative, I can’t up with figures less than that amount. The total figures would most likely be ten times that amount, although the eventual settlements would more likely be closer to the low figure.

There are many cases filed under seal in many states. In a nutshell these cases are going after the obvious – the taxes, transfer fees, costs and other statutory amounts that are due to the states and counties from the multiple transfers and movement of interests in real property without reporting it, recording it, or paying for it. There is at least $50 billion by my estimation in unreported taxable profits in Arizona alone but Arizona doesn’t permit qui tam actions like Florida, California and Nevada. So it’s up to the State AG. AZ official calculated the taxes due at $3 billion, exactly the amount of the States deficit, and that is without all the filing fees that were avoided. Hager and Hearne law firm in Reno heard me and expanded on what I (and others) have been saying for three years — we don’t need to be in a financial hole. All we need to do is collect what is due.

NOTE RECEIVED FROM BOB HAGER, A PRIME MOVER IN THESE LAWSUITS
There are two different cases in NV.  One is the MERS recording fee qui tam and the other is for false claims of tax exemption made to avoid payment of transfer taxes on foreclosures taken by Fannie and Freddie.  One week after Fannie was served with the NV transfer tax qui tam, the Federal Housing Finance Association ordered Freddie and Fannie to de-list from the New York Stock Exchange.  Please note in the transfer tax complaint where I lay out the factors the courts have looked at in determining without exception going back to the 1970's that Fannie and Freddie are not tax-exempt for purposes of state transfer taxes.  The 9th Circuit so ruled in 1996.  I estimate the penalties and treble damages for unpaid taxes in the transfer tax case in NV to be from $300 M to $500 M.


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