Once More into the Breach . . .

By James Kwak

I’ve been largely sitting out the foreclosure scandal/crisis. Partly I’ve just been too busy, and partly the coverage on other blogs has been great. Mike Konczal in particular has been providing the “beginners” posts–here’s part one of five–that were my niche during the earlier part of the financial crisis, basically putting me out of a job, and Yves Smith has also been all over the issue.

I want to ask one question, but for those who are not economics blogs junkies, let me get you up to speed. It first turned out that in their haste to foreclose on houses, the law firms filing for the foreclosures (in many states, you have to get a judgment from a court in order to foreclose) were cutting corners and sometimes filing fake documents. Then it turned out that sometimes they were filing fake documents because the real ones didn’t exist. In particular, it is possible that many of the trusts that issue mortgage-backed securities never had properly-endorsed copies of the notes that underlay those mortgages. (See this Yves Smith post. Highlight quote, from the CEO of a mortgage originator: “We never transferred the paper. No one in the industry transferred the paper.”)

The question is this: Why, just weeks from an election in which Democrats are probably going to get clobbered, is the Obama administration sitting on its hands, writing this off as a bunch of technicalities, and opposing a foreclosure moratorium?

Not only would it be good politics for an administration that has a hard time establishing credibility with ordinary people, but you would think a halt to foreclosures is actually what the Treasury Department wants. Over the summer, Steve Randy Waldman pointed out that Treasury essentially confirmed what many had suspected all along–the main point of HAMP (the mortgage modification program) was not to help homeowners, but to spread out the foreclosure wave over time in order to prop up housing prices and therefore protect the economy. A foreclosure moratorium, by temporarily halting the flood of foreclosed houses onto the market, would be even better.

The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.

Big banks losing money isn’t what’s scary. What’s scary is that the administration may be pooh-poohing the foreclosure fraud crisis because it wants to protect the big banks once again. In other words, it’s minimizing the problem because it’s hoping that the banks will finish “reviewing their procedures,” say that everything has been fixed, and go on with their business; in that situation, it would be awkward for the administration to have come out strongly on the side of homeowners. This would basically be the operational equivalent of “it’s just a liquidity problem.”

But why? If this really could damage the big banks, why not let them take the hit and clean up afterward–especially if “orderly liquidation authority” is really the bazooka they claim it is? Why protect them now after being stabbed in the back repeatedly during the financial reform debate and in the current campaign finance cycle? Why not take this opportunity, if there really is one, to undo the mistakes of 2009?

Let’s hope there’s a better explanation than “we have created [our biggest banks], and we’re sort of past that point, and I think that in some sense, the genie’s out of the bottle.”

89 thoughts on “Once More into the Breach . . .

  1. i’d think the point of HAMP was to delay foreclosures up until the housing market started to clear. what the administration didn’t want was a complete crash in property values. once they stabilized, as they largely have, HAMP could be dispensed with, which it largely has been. once the market finds the right price level ie clears it’s in everyone’s interest to get it over with as fast as possible — get people out of too-expensive mortgages by refinancing or downsizing, get people who aren’t paying on their mortgages out of their homes so the banks can sell them to someone who will pay, etc. at least that’s the theory.

    as far as a blanket moratorium goes, i think it would be an overreaction in this case. read calculated risk who has had very good posts on this. of course whether it is or is not an overreaction or how damaging it could be to the banks depends on the numbers, and nobody has advanced any kind of numbers as to what the size of the problem really is. that’s what bothers me — there is a lot of talk but no numbers, and without numbers we don’t know how bad the problem is.

    also, when you say ‘coming out on the side of homeowners’ you have to say which homeowners you mean. if you mean ‘homeowners who are paying on their mortgages’ then except for an unlucky few a ban would be no help to them. if you mean ‘homeowners who aren’t paying on their mortgages,’ well, there would be little good press in helping them. the american public doesn’t think well of people who fail to meet their financial obligations, whether the root cause is being a victim of fraud, or bad luck, or bad economic conditions.


    In May 2005 we deposited and invested $200,000 in Real Property, where we recently found out that $118,800 was embezzled out of our property from Mortgage Lenders and Trust Brokerage Companies, namely Goldman Sachs through an escrow Transaction. The $118,800 in funds was paid to these embezzlers from the Investors unbeknownst that the securitization happened by encumbering our property and making up a fraudulent fake Promissory Note and Deed of Trust.

    See the link for further information: https://fdaaccount.box.net/shared/a1pjz9sz5c

  3. Why is the Obama administration sitting on its hands, writing this off as a bunch of technicalities, and opposing a foreclosure moratorium?

    Really? Obama is sitting on his hands for the same reason Carter sat on his during the Iranian hostage crisis. Obama was, is, and will be Carter.

  4. As always, their priority is to preserve “the system”. Even if that means transferring ever more of the nations wealthiest, even if that means criminals get to walk free and own billions, even if that means stomping all over individual rights and the rule of law…

    It is all worth it, they figure, if they can avoid a second Great Depression. (Or more precisely, if they can delay it until after they leave office.)

  5. Er, editing error. I meant to write, “even if that means transferring ever more of the nation’s wealth to the wealthiest”.

    This blog needs a “preview” button.

  6. This isn’t so hard. The administration is afraid of chaos in the markets. Their worst case scenario is that things get messy, court cases everywhere, uncertainty dominating the news and the markets. Then, maybe in the mess, the stock market collapses, the dollar plummets, and even a bank or insurer might go under. They lose all the credit they want in history and every election for the foreseeable future.
    Which is what the administration cares about, rather than the world economy, justice, etc. Unfortunate, but probably true of both sides.

  7. The trustee would most likely put the loans back to the bank after being pressured to do so by investors.

    If MBS investors are worried about their collateral and the imminent collapse of the MBS market, they are behaving in a weird fashion. Pimco has actually been increasing its MBS holdings of late.


    For what various bloggers are describing to occur, several different deal participants, each with very different financial interests in the transaction, would have to be negiligent simultaneously. That’s not implausible to me (I’ve seen all kinds of conflicts of interest on deals), but systemic? I do not have any difficulty seeing a fly-by-night loan originator messing up pretty much anything. Trustees, very different story.

    At any rate, I’ve appreciated seeing various bloggers going through the trouble to explain the mechanics of MBS, but I’ve not read much specific evidence. At all. If there is a systemic problem with trusts having phantom notes… How do you know? You working for a trustee? Where have the lawsuits been? Do you seriously believe Bill Gross has simply been waiting for bloggers to tell him there is a problem?

    While I absolutely loathe this administration and believe it is a total puppet for Wall Street, I am still willing to believe that maybe Obama would be smart enough to get some actual facts before bringing most of the activity in a major sector of our economy to a halt, espcecially if he is getting mixed messages from bloggers and market participants.

    Honestly, watching this whole thing unfold makes me sick. The banks should have been held accountable a lot earlier. But bloggers, who should know better, giving people the impression that they can get out of their debts by demanding a note? Are we really just a nation of deadbeats? What a disgusting culture.

  8. Poetic justice nd perhaps, we can regain our country’s integrity (at the same time any remaining value in with renewed currency) if we had the complete unwinding –and we used our last dollars as a country, to build a few prisons to house the politicians and the CEO’s who acted like racketeers instead of public servants and fiduciaries in trust.

    Not at all strange that not once has Sarbannes-Oxley been used to take down any of the scoundrels that sold packaged and sold AAA junk around the world….

  9. “Why not take this opportunity, if there really is one, to undo the mistakes of 2009?”

    That would require acknowledging that somebody make mistakes in 2009. We don’t do mistakes in America. That’s for foreigners and commies.

  10. “Bondgirl”
    Wow, to hear you tell the story would have us believing Bill Gross is the real Messiah. When exactly did Bill Gross become infallible in your mind?? The same day he started pimping bonds and other debt instruments on CNBC??

    Also, “Bongirl” could you remind us what is the Trustees’ duty and obligation in all of this transaction??? After reading your comment I seem to have forgotten….

    “Bondgirl” you talk about a Note…. is it not important??? Although in your almost 100% nonsubstantive comment “Bondgirl” you have managed to make the Note sound unimportant. In fact it is crucial. What functions does the Note perform? Let’s go down the list of functions/characteristics of the Note provided by Mike Konczal on his site:

    —Promise to repay the debt, the IOU.
    —Covered by Commerce Code
    —Contains terms of debt obligations.
    —Terms of debt: late fees, how interest is calculated for ARMs
    —Sets out what constitutes a default.
    —Is a “negotiable instrument”, like a check that you sign over to others.
    —Determines fees and terms of late payments, crucial for delinquent mortgages.
    —Can be replaced by a “Lost Note Affidavit” in case of emergency, but these were never meant to replace the note at scale or where note’s location is unknown.

    Well…. seems according to Bondgirl’s writing in the comment above, not very important. I mean if Bondgirl’s family was being thrown out of their home, “Bondgirl” would probably not require the Note to be shown/produced…. right????

  11. You still seem not to understand Obama.

    He doesn’t care about systemic risk, and obviously he doesn’t care about the well-being of the people.

    Bizarrely, he also doesn’t even care about what looks good politically. This is only the latest in a long line of incidents where it seems the Democratic intent is to look as bad as possible politically.

    I don’t know why so many intelligent people refuse to take the by now massive record of evidence as it is.

    By ideology Obama is clearly an extremist neoliberal corporatist, who cares about nothing but the rent extractions of these elite racketeers. He’s also politically incompetent at the presidential level (extreme example of the Peter Principle).

    Induce these facts from the body of evidence, then apply them to subsequent phenomena, and you’ll never go wrong. That’s been true for my applying “Obama as corporate thug” since months into his administration, and “incompetent” at least since he and the Dems took full political responsibility for the Republican* health racket bailout while letting the Reps pretend to oppose it. (By contrast, I’ll chalk up what looked like his incomptent stimulus negotiations to the now-evidend fact that he never wanted a real stimulus.)

    *I don’t just mean that figuratively. Obamacare is practically a transposition of the Heritage-authored Republican alternative to Hillarycare, as well as being heavily influenced by Romneycare which is also derived from that Heritage plan.

    So Obamacare is, in a very precise sense, a Republican program. Just as real reform advocates always said. Obama himself admits it.


  12. The debt (note) would still exist, the question is whether it is secured by a mortgage on real property. It has nothing to do with being deadbeats and everything to do with property rights.

  13. What about the deed of trust? (Ties note to a specific property, should be filed with county.) Separate issue all together.

    People are talking about this like it is the first time a piece of paper has been lost in the course of human history – if in fact that has even happened, which so far, no one has illustrated.

  14. Yep — especially the looming court cases. They could put an indigestible bulge in the ol’ anaconda’s gut for sure. It’s not only the big Wall Street lawsuits James speaks of, but also potential lawsuits by individual homeowners already forced out of their homes, and staying actions by those facing eviction, brought by thousands of small lawyers. Even the poorest can employ lawyers on contingency shares.
    And . . thanks James for another excellent post. I too was puzzled by Obama’s (in)actions on the issue. So sad, so hard to know what to do, how to get the monkey off our backs.

  15. “a piece of paper”??? “a piece of paper”?!?!?!—just exactly how dumb or disingenuous are you “Bondgirl”??? It is not “a piece of paper” but many pieces of paper “lost”. It is not “one incorrectly prepared document”, but many incorrectly prepared documents. It is not “a forged document” but many forged documents. It is not “a false affidavit” but many false affidavits. It is clearly a systemic problem. PERIOD.

  16. In individual cases where banks have committed fraud by falsifying documents, I believe the individuals responsible should face criminal prosecution and the banks that employed them should face substantial civil penalties.

    In individual cases where documents were lost but no fraud committed, there needs to be a legal mechanism for rectifying that situation. That mechanism should not be “just ignore the problem and make believe the documents exist” as the banks would like, but it also shouldn’t be “woohoo, no documents means free homes for everyone with no more mortgages” as some bloggers would like.

    A nationwide foreclosure moratorium is not going to solve the problem and is likely to have the unintended consequence of bringing the entire mortgage market to a halt.

  17. if nothing else, let us not forget who he chose to advise him. summers, geithner, the rubins, and others certainly won’t be advocates for the banks getting their just desserts. one can only imagine the tripe they’re feeding him.

    that in no way gets him off the hook. he’s the decider and he’s the one who gave the dem establishment what they wanted: the aforementioned clowns to advise and shape policy.

  18. Way to go russ. U get what is going on. I think we have to remember that people like simon and james have to tread carefully in their criticisms because it can cause them to lose their access. We need them to have that access to continue to fight for us.

  19. Hmmm …

    The real systemic risk that is ignored by all and sundry is the gallop toward mass repudiation of loans of all kinds.

    The banking cartel is corrupt, so is the government. People don’t feel an obligation to entities that have misrepresented themselves. Repudiationism is set to ‘go viral’ and this is the real ‘Black Swan’.

  20. Why doesn’t Obama do anything? A telling glimpse is today’s (Oct 17) NY Times article on the president:

    “These days, Obama has been seeking guidance in presidential biographies. He is reading, among others, “The Clinton Tapes,” Taylor Branch’s account of his secret interviews with Bill Clinton during the eight years of his presidency. “I was looking over some chronicles of the Clinton years,” Obama told me, “and was reminded that in ’94 — when President Clinton’s poll numbers were lower than mine, and obviously the election ended up being bad for Democrats — unemployment was only 6.6 percent. And I don’t think anybody would suggest that Bill Clinton wasn’t a good communicator or was somebody who couldn’t connect with the American people or didn’t show empathy.”

    Oh, good, read a book on “How to Be a President.” The country is discovering that gifted oratory doesn’t mean gifted presidency.

  21. Chris Whalen seems like a credible banking analyst. He is predicting bank nationalization.

    He says the TBTF banks are not generating enough money to cover operational expenses, the government will need to take them over. Bank of America and Wells Fargo will need to be restructured.

    He also says the Obama administration should sue Fannie, Freddie, JP Morgan and Wells Fargo for operating a “cartel”. These banks are so desperate for cash they are adding 4-5% [?] to the cost of refinancing a mortgage. This is pushing people who are able to refinance into bankruptcy, and keeping people who should qualify for a mortgage out of the market.

    On a note of optimism, he says, ‘There is hope and the hope lies in restructuring. We have to get a new set of political class, who are willing to tell the truth and stop the lying, and restructure. The United States can do this and get ahead of the game.”


    @ 1:07 into video

  22. Mr. Kwak wrote:

    “The scary possibility is that what they’re really afraid of is systemic risk: ”

    I agree. The conditions are ripe for another run. Rep. Paul Kanjorksi describes it best. Just in time for Halloween – trick or treat?

  23. Just looking at the behavior of this admin, one hypothesis I have a hard time rejecting is that the essential role of the Obama admin is to rehabilitate the Republican Party after Bush.

  24. Not that you ever left, but, Henry V notwithstanding, your post evokes Victor Laszlo’s well-delivered line: “Welcome back to the fight. This time I know our side will win.”

  25. Gotta weigh in to support bond girl. She’s right.

    Not only is she right, but here is why–the notes were validly assigned under relevant law to the trust. That transfer took the form of a bulk assigment in blank. Go read Rortybomb. Under the trust instrument and under New York trust law, that should do the trick.

    The little problem that is blowing the fingers off everybody who touches it is that assignments in that form wasn’t valid under the local laws of the various jurisdictions governing the notes or where the property is located.

    The trust is good. The conduit tax treatment is safe. It’s just the little matter of the beneficial owner of the note not being able to enforce either the note or its security interest in local courts.

    That should be easy to fix IF the underlying documentation has been in proper custodial safekeeping. Expensive and time consuming, but not hill for a climber. Absent proper custodial safekeeping, Katy bar the door.

  26. For the zillionth time, what specific transactions have led people to believe that massive amounts of promissory notes are missing?

    What specifically started this rumor? Does anyone even know?

    The blogopshere has gotten just as bad as the mainstream media at just throwing inflammatory stuff out there, without bothering to substantiate a single thing. Some social conscience that represents.

  27. Furthermore, in how many instances does anyone here actually believe that:

    (1) That person did not actually owe anything,

    (2) That person is behind on what they owe.

    If anyone here thinks a judge is going to say, “oh, you can’t produce the note, so they do not owe anything,” you are completely deluded. A judge is just going to tell you that an equitable note exists, especially if you have ever made payments in the past.

    But, by all means, let’s create a movement to get people who borrowed money that they will not or cannot repay, and get them to constipate the judicial system as much as possible. Won’t that show the banks!

    I love how the same people who in the past, have argued that there should be cramdowns on debt because there is no such thing as the sanctity of contracts are now arguing that the very lifeblood of capitalism is at stake. This really has come full circle. What a joke.

  28. Those are excellent questions you’re asking, James.

    The answer to all of them is that Obama hopes to throw the mid-terms to get a Republican majority in the House. At least then he’ll have a real excuse for not accomplishing what he promised his base (the “I’m a Democratic president with a Democratic Congress, how can you possibly expect me to enact my agenda?” excuse is wearing thin). Obama cannot be elected to a second term unless he can blame his studied ineffectiveness on the opposition.

    Read Thomas Frank’s “What’s the Matter with Kansas?” Obama and the Democrats are doing to their base exactly what the Republicans have done to theirs for decades. We’re all Kansans, now.

  29. In all fairness I have to admit there will be a rumour factor in all of this. It is being generated by raw fear and rage. Looking within I can feel it — it is really disturbing to think that a private financial power can send a sheriff to someone’s home with an eviction order and NO ONE in the government has duly examined the legality of that order. In the oil spill we saw the coast guard taking orders from the oil company. Now do we have law enforcement blindly taking orders from banks? Even once is too many. So what if rumors magnify it?

  30. I do not disagree with you at all. The banks have done some unfathomably terrible things to people lately, and they should be stopped. (Personally, if a bank wanted to break into my home and change the locks, they might want to send another team out to recover the bodies.)

    But… For the sake of sanity, these are really extreme anecdotes. People are going crazy trying to present them as “pervasive” or “systemic.”

    The oft-cited example of the woman from Maine in the NYT, that supposedly got this started… She is the reason the foreclosure process exists. She is not a wronged homeowner; she is a squatter. She has not made a payment on her mortgage since before Lehman failed. I am not sure what service or good her lawyer is doing for her by delaying the inevitable. If she had applied for rental assistance two years ago, she’d probably be off a waiting list by now, not putting her children at risk of being homeless.

    I think this kind of thing (rumors, hyperbole, etc.) is very detrimental to our efforts at pulling ourselves out of our economic, political, and moral morass. Personally, I do not look forward to living in a continued state of class warfare because we are collectively stuck at a dead end from defending the “property rights” of de facto squatters. And I definitely do not look forward to moaning about how President Palin has failed to pull us out of our second great recession. And that there is probably why the administration is not jumping into the fray.

  31. That was exactly my first thought

    as the song goes

    “…the first time, ever, I saw your face…”

    Watching the Clintons be “persuaded” was HUGE. Hope there is a Broadway Play about how that deal with the devil was made behind the scenes…”full-throated” should never be used when talking about either Clinton :-)

    Mom-love, when a woman actually has it, is a weak spot that psychos know hoe to push.

  32. Legally, the homeowner is NOT a “squatter.” She has every right to remain in the home unless and until somebody having a valid right to evict her establishes that right and does so. The mere fact that she is not paying her debts does not allow just anybody to evict her.

    A bank that forges documents to establish a right to evict the homeowner is a criminal. Full stop.

  33. These are not “fly-by-night loan originators” as “Bondgirl” is misleading people to believe. These are big name banks. This story broke when GMAC’s (no “fly-by-night operation”) robo-signer admitted he repeatedly submitted false affidavits to the court. This was after GMAC had been aware of the problem for over a year and did nothing. If you want to see the names of what “Bondgirl” refers to as “fly-by-night originators”, you can read the article in the Financial Times by Suzanne Kapner. Just go to Google and type “Wells adds to crisis over home seizures” in quotation marks and click on Suzanne Kapner’s article of the same title at FT. You can also go here:

    The names of the large Banks that have halted foreclosures after “finding out” mortgage documents had been rubber stamped with no proof of validity include Bank of America, and JP Morgan. Wells Fargo also used a “robo-signer”. At the article you can read about the Vice-President of Loan Documentation at Wells Fargo who signed as many as 500 foreclosure related papers a day on behalf of Wells Fargo.

    Yes, Wells Fargo Bank—what “Bondgirl” calls a “fly-by-night-loan originator”.

    What about Bank of America??? and JPMorgan??? Do those names sound like “fly-by-night loan originators”???

  34. The thing that rankles me about this entire mortgage documentation debacle is that there were procedures in place for a reason (to ensure proper documentation for the record) and those legally certifying that they were in full compliance were instead just processing the papers saying that they did all this stuff just as fast as they could in order to maximize making money.

    Remember that when Mr. Ponzi started out, he did have a sound business model, but he just couldn’t turn around the investments fast enough, so instead he starting paying off the early investors with money coming in from those investing later without ever putting the invested money through the step wherein the money was being made.

    Similarly, the mortgage industry was so eager to make more money in less time that they didn’t do the work that ostensibly justified the fees they were collecting. In other words, this was gross fraud and it has generated an ‘alegal’ mass of transactions whose true nature will never be known.

    This means, at least theoretically, that the bank which lacks the paperwork it should have in order to act against you can just make it up, or I don’t know what, but it is just going to be the judge taking their word for what it should have contained. The huge amount of legal wrangling that will, over the course of the next few years, be devoted to unraveling this epic negligence, could legitimately be charged to the portions of the financial sector that utterly failed to exercise any sort of due diligence.

    To not punish those who made money for services they did not in fact render is to tell them that it’s basically ok to repeat this mistake. That is why I am so against a slap on the wrist. Heads must roll (figuratively).

  35. “President Palin”. That use of words is so dumb it’s hard to know where to begin. Interesting that neither Meg Whitman or Carly Fiorina out in California want to have anything to do with the woman and have “scheduling conflicts” which allow them zero TV time with Palin. Hmmm, what a shame. Oh well. We can listen to some highlights from her fund-raising tour. Make sure to watch the video to the end….

    She sure does have a powerful intellect doesn’t she???

  36. It wasn’t the case of the woman in Maine than shocked my survival instincts. It was the case of the man in Florida who had paid cash, in full, for his house and got evicted.

  37. As Bogle said: ENOUGH.

    Thank you for what you’re doing — LOVE the book!!!
    I’ve blogged about it, tweeted it, etc. YOU ROCK!

    I hope you watch the video I made commenting about all this financial “wizardry” gone awry because it is exactly how MOST Americans feel right now about those in the “Ruling Class,” the east coast establishment, the financial and Washington lobbying elitist jerks, the history of banking and government and corporate fraud, et al, etc.

    I genuinely want to know what YOU think of my comments AND my video because last year I was forced to experience “trickle-down economics” as “smack-down economics” by losing investors, my house, my car, etc. because my investors lost their money in Citibank who lost their money in…. and so on. I ended up in the hospital because I’ve been screwed by corrupt, lying people for the last several years (must be southern California) and I can’t take it anymore! I hope Ravi Batra is correct, that we are experiencing the death rattles of the Age of Acquisitors and soon it will be over an replaced by something sane.

    Also because the ONE entitlement we DO have is the Truth (it may not be written in stone or in law, but dammit SOMEBODY’S got to insist upon it and that might as well be me since everyone else is far too greedy and cash-hungry). Telling the truth is NOT in our Bill of Rights, and frankly, the British Press seems to be doing okay by demanding actual fact checks and far less (if any) “copywriting” tricks and traps of clever linguistic “words of art.” If we can’t understand it, there’s no contract, right? Comprehendo?!

    My music video (made with all American workers out of work, by the way) slams big bad corporate wolves, FOX NEWS (faux news is nearer the mark), the big banks, the bailout, and shows how the super-rich elitist “puppet-masters behind the scenes” are merely pulling the strings by intentionally placing legal and linguistic “tricks and traps” for main street and America’s middle-class in an entertaining and very timely video.

    Elizabeth Warren would be proud, trust me, I’ve put her in a movie called UR PRE-APPROVED and I AGREE with her philosophy 100%. We need it now — the bankers and the rich have MORE than enough, for god’s sake!

    You may view my “artistic social commentary” (you write books, I do music) here:


    and you may also see it on YouTube at:


    Thank you very much for allowing me to rant, I want to believe that there are some bankers and intellectuals out there who are different, ethical, and trustworthy. I’m counting on YOU to help change the tide. As someone with Asperger’s Syndrome who can’t stand lies, why can’t “you banker people” (and, yes, I DO mean that as an insult) tell the truth? Why the lust for power — do you think so little of yourself and others to begin with? Are you people that LOW in self-regard and self-worth that you prey on others to get your jollies? Unbelievable.

    Thanks guys… keep up the GREAT research and work. I keep spreading your word!!!

    No apologies whatsoever,
    David Scotland, Creator/Performer of the MONEY song


  38. This will end up being a litigated argument between different groups of wealthy people. I suspect the banks will end up having to buy back the garbage, or the Fed will.

  39. It seems to me that the ONLY reason the banks agreed to a moratorium is that the title insurance companies are refusing to issue policies on foreclosed properties because they suspect that enough of these foreclosures are unsafe from a legal standpoint to make this a bad risk for them.

    This is a systemic issue, because without confidence that the paperwork both exists and that it is properly assigned, it is impossible to be confident that you actually own the property you think you own.

  40. Mondo, I am so sorry it was not the case of the woman in Maine who shocked your survival instincts.

    Perhaps there is something wrong with your instincts.

    @ Bond Girl, I can only paraphrase, and this is what I have to say: Personally, I do not look forward to living in a continued state of class warfare because we are collectively stuck at a dead end from defending the “property rights” of de facto BANKS.

  41. Re: @ purple___The Fed has already bought up a good chunk of the garbage with what was laid at Fanny May, and Freddie Mac’s feet via the “Six {(C,BAC,JPMC,WF)(GS’s and MS are pretty much out of the fray with MBS’s? Ref: “13 Bankers”)} TBTF Banks”. Here’s the circle of deception (poison)…quite an easy flow chart to follow: TBTF’s (sell) > Fannie/Freddie (get purchased/bought) > Gov’t./Treasury/Fed (yours and my money) > TBTF’s > Fannie/Freddie > Gov’t./Treasury/Fed (yours and my money)…repeat infinitely!. PS. Why should the Fed. buy the banks (TBTF) garbage and make the taxpayer foot the bill, if there was gross negligence, and malfeasance? :-)

  42. Charles Hugh Smith does a great job of describing our behavior as the sad reality of this systemic foreclosure fraud mess unveils itself:


    “The moral rot at the center of American life results from a normalization of pathologies–sociopathic and psychopathic states and behaviors are now “normal” or incentivized. Moral behavior is institutionally punished.


    The depth of our own pathology can be measured by our resistance to admitting the systemic fraud, lying, entitlement and narcissistic pathologies in whatever slice of American society we value.”

  43. Good post James.

    And for those that remember, Carter did try a rescue, but it turned into a fiasco (one not of Carter’s doing):


    But for the TBTF banking problem, it’s been a very disappointing performance by President Obama. I still don’t understand his end game:

    The President that presides over the corruption and destruction of America?

    The President that finally crushed due process, property rights and the rule of law?

    At first I thought Obama was going to end up being a Democratic Herbert Hoover. Now, I’m not so sure, but he seems to be shooting lower than that. Sort of a pathetic place in history.

  44. Hey I thought Rick Santelli settled this argument when he said that homeowners deserved to lose because they were too stupid to know that the banks were cheating them. Shouldn’t banks lose because they were too stupid to know that they would have to foreclose.

  45. What makes you think they were the ones being persuaded?

    The play within the play is where the “push” is to found.

    Like the missing documentation and the hapless defaulters. That’s not what the play is about.

  46. Oh look “Bondgirl”!!! It’s another “fly-by-night loan originator”!!! Metlife Home Loans which is a division of Metlife Bank which is a subsidiary of Metlife Inc. Having problems with—can you guess what “Bondgirl”??? Come on guess “Bondgirl”, you can do it!!!! Come on……… Yes!!!! Foreclosure processes!!!! Wow, I knew you could do it “Bondgirl”!!!! And…. and…. come on…. Yes!!! Robo-signing affidavits!!!! You are a clever girl!!!

    You might not have heard of Metlife Inc. before since it is one of those “fly-by-night loan originators” you were discussing above, but it’s an Insurance company which sometimes uses Snoopy and Woodstock in their advertisements. How a “fly-by-night loan originator” can afford those royalties for the use of Snoopy I’m not sure….

  47. Been tracking since 1991 a very “secret” cabal with the sole mission of making sure no one ever reads the most censored book on the planet

    follow the links to organized and outright authoritative “religion”

    and you’ll find how everyone has been DRUGGED, PUSHED, or TORTURED into insanity.

    How else could humanity arrive at a place where every “institution” has been “captured” and can now punish moral behaviour with impunity

    if it was not “god’s will” all along for us to be nutz?

  48. Your contributions to human history have been duly recorded, Bond Girl. You can stop looking for a new angle to “feel” righteous about 40% of USA born and bred citizens losing their homes.

    How’s construction going on the West Bank?

  49. Isn’t it surprising, Carla, what kind of women men like to fund? Ones that BELIEVE in the righteousness of throwing out other women into her slum lords snake pit.

    2000 a month to live with cockroaches

    bet the Maine women’s mortgage was a lot less…

    I could not do that to another woman, too personal considering that she (lady in Maine) never did anything PERSONAL to “Bond Girl”…

    But we all know how DANGEROUS women can get when they decide to take down the bad girl – no way to save Bond Girl for

    ALL THAT KARMA, is there?

    Yeah, I don’t get off on “shooting down” – politically speaking….you’re supposed to shoot up….

    700,000 financial services “engineers”

    (told you that hooligans at the bottom of the rung are currently made of the same stuff as the top rung – only the so-called Middle Class had actual CLASS)

    to throw 40% of USA born and bred citizens in “apartments” that cost more than the mortgages and were originally build with government funds….

    what a disgusting generation of freaks CONSUMING 10,000 years of civilization who INVESTED in architecture for the greatest good…

    We MUST bring out the HEAVY intellectual guns and keep shooting until every psychotic rationalization is illuminated from every angle – this is a HISTORIC HORROR Show.

  50. What might be needed is a public, non-profit, boring banking system.

    With regard to class warfare, how about a wealth tax and limits on wealth?

  51. I suspect Carla thinks I am more concerned about the Florida case because the Maine case involves a woman, not a man. If so, Carla, you should know your reflexive assumption is just the kind of thinking that retards the cause of women. I should know, because I am a woman.

  52. @Tao J,

    Thanks for the interesting read. It is always good to get some additional perspective on how we acquiesce to follow a short-sighted path of least resistance that is ultimately destructive.

  53. I do not think that they plan on protecting the banks so much as protecting their position.

    You are right Mr Kwak, the banks have not done this administration any favors. However, the administration does see the economy as dependent on the banks (its called blackmail when illegal). Also, they are dependent the positions that they have previously staked out with regard to the banks. They could go populist on the issue, but then where do they take that if they do? What exactly do they propose?

    Hence, the “there is nothing to look at here” story line. Now for them this can go two ways. One is that the story gradually dies away, and then they are back to square one, which is really what they want and expect.

    The other is that it blows up. That is becoming more likely. But if so, there is not much they can do anyway, as it may entail a serious bank crisis again, and the issues and the needed response are much bigger so must be delayed to work them out, preferably after the election when things do not completely depend on politics.

    In my understanding, the big issue here is if the banks will be attacked by the mortgage bond holders that lost money because the trusts where not set up properly. The consumer issues are incredibly serious from a legal stand point, but probably would be a blip on the slow motion on-going economic crisis we have on the in country.

    Of course, when the administration says that it will enforce the rule of law, I, like others hope that they follow through.


  54. Does anyone get the feeling that Obama is near to screaming, “You can’t handle the truth!”

    Seems like he’s doing everything contrary to what his average (once) supporters would want and there’s always some hidden logic (truth) why he can’t do what we would want…

  55. The whole crises is due to the financial industry. No ‘deadbeat’ homeowner is in the least responsible.

    1. No one would be foreclosed if the market value of the house was greater than the debt. The would simply sell the house.
    2. The finance industry crashed the housing values and caused massive unemployment.

    Therefore the responsibility is on the finance industry, not the ‘deadbeat’ borrowers. They would simply sell if it weren’t for the crashed market and unemployment.

    Only the finance industry received bailouts.

    There should be forced writedowns to market value for every loan, proportional to the loss of value and amount owed, and tax credits to people with paid-off homes.

  56. The Obama Administration (which I voted for) continues to mystify on this and other issues such as:
    Wall Street Reform
    Health Care Reform
    Guantanamo Bay
    Don’t Ask Don’t Tell
    Pot Laws in California
    And so one…
    The administration is a big disappointment on just about every issue.

  57. How very odd, mondo. That never occurred to me.

    I am sorry that you are more concerned about the legal rights of a person of means who has paid for something and is defrauded, than about the legal rights of a defenseless poor person who stands to lose his or her home because of criminal fraud on the part of one of the most powerful institutions in this country: a bank.

    Both situations are wrong and fraudulent; however there seems to be a “reflexive assumption” that poor people just get what they deserve, while when fraud is perpetrated upon a person of means, it is an outrage.

  58. By making use of Michael Jackson as a metaphor in his narrative, Chris Hedges accurately depicts the current collective state of mental-health in America. No, this is not funny. Carl Jung wrote about this in his books as he witnessed the neighbors sliding into mass-psychosis. He might have a solution.

    I can’t help, but as a teenager I slid into a psychosis once. It wasn’t funny. Blew all the fuses, did need not sleep or eat for a whole week… thought that everyone wanted to kill me. The funny thing about experiencing a psychosis is that you can’t buckle up! You think it is real, 100% real. In my humble opinion, the difference between an individual being psychotic and a nation experiencing mass-psychosis is the empirical fact that the nightmare of the individual turns out to be a bad dream. Mass-psychosis in a nation is for real. Just suck it up!


  59. Very puzzled by the calls for President Obama to support a national moratorium on foreclosure. Real estate property law is state law. The scandal is that many falsely sworn affidavits have been used in foreclosure proceedings. Does anyone doubt that the President is against the use of falsely sworn affidavits? Additionally, given the recent massive coverage of this, parties that want to foreclose and parties that will defend against such foreclosures are completely aware of this – the paperwork for foreclosures intitiated today is going to be much less problematic than just two weeks ago. Every state AG is involved. I actually like it that my President isn’t intruding on state affairs to make pointless gestures – call me crazy.

  60. Good point, Eric. I suspect that the White House is also looking at the politics of this with the Tea Party attitude in mind. The fact is that most of these foreclosures are happening because homeowners aren’t making payments on their mortgages. If the paperwork were in place, the foreclosures would rightly happen. Maybe the White House is concerned about being portrayed as “siding with deadbeats” rather than “siding with homeowners.” That’s not how I would position it, but I can see Glenn Beck portraying it that way.

  61. Carla, that’s the kind of bleeding heart half-thinking that makes a lot of people hate and fear liberals. I say this not as a Republican but as a left-leaning green radical in the tradition of Thoreau, as I come from a family of farmer-Quakers. The reason the Florida situation disturbed me had nothing whatever to do with your classist perspective. Didn’t cross my mind, actually, as I myself have been a welfare mother and have also paid cash, no mortgage involved, for real estate. I was concerned for exactly the reason I stated, that powerful private interests could command coast guards and sheriffs, bypassing “democratic” government supervision. That is threatening not just our possessions but our very freedom. It is beyond a bunch of crooks cheating us of our investments and destabilizing the economy. It is a much, much bigger issue.

  62. Trollo I mean Bevo, You obviously are short of historical education maybe you weren’t alive or were too young. Or maybe you get your facts from the Texas board of education.

    The facts are that Carter attempted a rescue. What happened the aircraft used in the operation were inadequate and the mission failed. I have no doubt he was sabotaged with bad information or advice or both.

    What he did do was negotiate the safe release of the hostages. This is and was his strong suite.

    The release of the hostages was carefully timed to make it look as if Reagan had something to do with it.
    Which He did not. Reagan did one thing well he “Acted” like a president. Apparently Reagan was better Acting like a president than an Actor.

    If you hate unions he is your man. Funny he was president of the SAG for a number of year. Must be different for people who have to work for a living.

  63. Bond Girl said:

    “If MBS investors are worried about their collateral and the imminent collapse of the MBS market, they are behaving in a weird fashion. Pimco has actually been increasing its MBS holdings of late.”

    As to the second part, rumor has it that Pimco is betting that the Fed will announce that QE2 will involve the purchasing of MBS, not just treasuries.

    As to the second point, well, some things just take time to unfold:

    “Today, the holders of over 25% of the Voting Rights in more than $47 billion of Countrywide-issued RMBS sent a Notice of Non-Performance (Notice) to Countrywide Home Loan Servicing, as Master Servicer (“Countrywide Servicing”), and to Bank of New York, as Trustee, identifying specific covenants in 115 Pooling and Servicing Agreements (PSAs) that the Holders allege Countrywide Servicing has failed to perform.

    The Holders’ Notice alleges that each of these failures has materially affected the rights of the Certificateholders under the relevant PSAs. Under Section 7.01 of the PSAs, if any of the cited failures “continues unremedied for a period of 60 days after the date on which written notice of such failure has been given … to the Master Servicer and the Trustee by the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates,” that failure constitutes an Event of Default under the PSAs.

    In a previous release, the Holders emphasized their intent to invoke all contractual remedies available to them to recover their losses and to protect their rights. Kathy Patrick of Gibbs & Bruns LLP, lead counsel for the Holders, emphasized that the Holders’ notice does not seek to halt loan modifications for troubled borrowers. Instead, it urges the Trustee to enforce Countrywide Servicing’s obligations to service loans prudently by maintaining accurate loan records, demanding the repurchase of loans that were originated in violation of underwriting guidelines, and compelling the sellers of ineligible or predatory mortgages to bear the costs of modifying them for homeowners or repurchasing them from the Trusts’ collateral pools.

    Patrick also noted that the group of Holders that tendered today’s Notice of Non-Performance is larger, and encompasses more Countrywide-issued RMBS deals, than were included in the August 20 instruction letter. When asked why the group of holders was larger, Patrick replied, “Ours is a large, determined, and cohesive group of bondholders. We have a clearly defined strategy. We plan to vigorously pursue this initiative to enforce Holders’ rights.”

    The Notice of Non-Performance, which is the first step in the process of declaring an Event of Default, was issued on behalf of Holders in the following Countrywide-issued RMBS”


  64. Mondo wrote, “I was concerned for exactly the reason I stated, that powerful private interests could command coast guards and sheriffs, bypassing “democratic” government supervision. That is threatening not just our possessions but our very freedom. It is beyond a bunch of crooks cheating us of our investments and destabilizing the economy. It is a much, much bigger issue.”

    Indeed, the more things change, the more they stay the same. From the most censored book on the planet,

    “Meeting a poor man who had been falsely accused, Jesus went with him before the magistrate and, having been granted special permission to appear in his behalf, made that superb address in the course of which he said: “Justice makes a nation great, and the greater a nation the more solicitous will it be to see that injustice shall not befall even its most humble citizen. Woe upon any nation when only those who possess money and influence can secure ready justice before its courts! It is the sacred duty of a magistrate to acquit the innocent as well as to punish the guilty. Upon the impartiality, fairness, and integrity of its courts the endurance of a nation depends. Civil government is founded on justice, even as true religion is founded on mercy.” The judge reopened the case, and when the evidence had been sifted, he discharged the prisoner. Of all Jesus’ activities during these days of personal ministry, this came the nearest to being a public appearance.”

    “In all these matters do whatsoever they bid you and observe the essentials of the law but do not pattern after their evil works. Remember, this is the sin of these rulers: They say that which is good, but they do it not. You well know how these leaders bind heavy burdens on your shoulders, burdens grievous to bear, and that they will not lift as much as one finger to help you bear these weighty burdens. They have oppressed you with ceremonies and enslaved you by traditions.”

    “Woe upon you, chief priests and rulers who lay hold of the property of the poor and demand heavy dues of those who would serve God as they think Moses ordained! You who refuse to show mercy, can you hope for mercy in the worlds to come?”

    “Woe upon you, scribes, Pharisees, and hypocrites! for you are scrupulous to cleanse the outside of the cup and the platter, but within there remains the filth of extortion, excesses, and deception. You are spiritually blind. Do you not recognize how much better it would be first to cleanse the inside of the cup, and then that which spills over would of itself cleanse the outside? You wicked reprobates! you make the outward performances of your religion to conform with the letter of your interpretation of Moses’ law while your souls are steeped in iniquity and filled with murder.”

    “And even while they seek all this honor from men, they secretly lay hold of widows’ houses and take profit from the services of the sacred temple.”

    “Woe upon you, scribes and Pharisees and all other hypocrites who make sure that they tithe mint, anise, and cumin and at the same time disregard the weightier matters of the law — faith, mercy, and judgment! Within reason, the one you ought to have done but not to have left the other undone. You are truly blind guides and dumb teachers; you strain out the gnat and swallow the camel.”

  65. For a contract to be valid … the following requirements are essential:
    The matter apt; the persons fit;
    Consent, and formal note of it.
    Ethics, Paul Joseph Glenn (1948)

  66. “Carla, that’s the kind of bleeding heart half-thinking that makes a lot of people hate and fear liberals.”

    Thank you, mondo. I never realized I was such a threat, but considering the source, I’ll consider it a badge of honor.

  67. And then, bodiddly, could we please abolish the private Federal Reserve system, and in accordance with our Constitution, return the control of our monetary system to The People, as described in the American Monetary Act? (www.monetary.org)

    Let the private banking system live on the spread between interest collected on loans and paid out on deposits. It would be an honest living for them, and a whole new day for the country.

  68. James,

    I wonder why you make the following distinction:

    “It first turned out that in their haste to foreclose on houses, the law firms filing for the foreclosures … were cutting corners and sometimes filing fake documents. Then it turned out that sometimes they were filing fake documents because the real ones didn’t exist.”

    Either way it is fraud. Does the reason matter? Strong enforcement of such fraud would actually serve as the best kind of limited foreclosure moratorium, the kind that I think we should have: Only allow legal foreclosures. If it takes 2 years to track down the documents, or they never can track them down, then perhaps banks will think twice about structuring their arrangements that way in the future.

  69. Foreclosures are the canary in the mine. The real problem is with property ownership. Who has the right to sell a property? Who can release the lien when a mortgage is paid in full? Separating the loan from the land has at least muddled the basis of property ownership in the US and that affects everyone, not just those facing foreclosure.

    Further, this means that a good portion (at best; worst case = ALL) of the CDOs, MBSs, and other related derivatives are in violation of their origination contracts and/or tax laws that govern them. This means there are potential tax liabilities (c.f. REMIC) and putbacks to the banks that packaged them from the investors that purchased the things.

    The banks did this. They (and their drones) should be harshly punished for inflicting this on Us.

  70. Answer to Mr. Kwak’s question: Obama is a corporate tool who neither cares nor knows how to build his party into anything other than a corporate front group. (The whole point is to reduce the citizenry to a passive choice between corporate front group Democrat and corporate front group Republican.) Parallel examples abound: sweetheart deals with corporate speculators, aka the bailout; sweetheart deals with Wall St., aka financial reform; sweetheart deals with big polluters, aka energy reform; sweetheart deals with big pharma and big insurance, aka health care reform; sweetheart deals with the military-industrial complex, aka defending freedom; sweetheart deals with government torturers, aka defending official secrets; sweetheart deals with Zionism, aka peace process. Of course, professional reformists such as Mr. Kwak and Prof. Johnson are blind to the obvious pattern; which is, of course, their professional duty. Only so can they again and again promise, This Time Can Be Different.

  71. That would be a great blog pseudonym, “Successful Psycho”.

    I don’t think national denial or national procrastination of pain counts as “psychosis” though. And I think it’s quite normal for teens to go through some mentally anguishing times.

    If people would read a little more (especially those of the Teabagger variety) they could make better educated choices when they vote, and read sites like this http://www.opensecrets.org/ to connect the dots with how and why these politicians pass the laws or don’t pass the laws (or intentionally don’t put on the floor for a vote, notice how certain issues magically get slid to the bottom of the pile of the legislative agenda) they do. The truth is journalism in this country isn’t that bad as people often think, but people don’t want to take the time to parse it. They want it thrown in their face or read to them.

    That doesn’t mean Americans have a psychosis. It means they are feeling high levels of frustration from the results they are reaping from years (decades) of lazy and uneducated voting choices.

    Paul Tsongas, similar to Walter Mondale spoke out strongly against the national debt. Both gentlemen’s reward for that was basically to be thrown onto the rubbish heap of historical footnotes.

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