Posts Categorized: USAWatchdog.com

Posted by & filed under USAWatchdog.com.

Jim Sinclair’s Commentary

"What OTC derivatives do not do to the international investment banks, litigation will."
–JSMineset, 2006.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

With all the attention stories such as WikiLeaks and Irish bailout have gotten the last few days, a bombshell judgment against Bank of America in a New Jersey foreclosure case has been overlooked.  The judgment happened 2 weeks ago in a case involving the home of John T. Kemp.  His original mortgage company was Countrywide, but it was bought a few years back by B of A.   U.S. Bankruptcy Judge Judith Wizmur rejected a claim by Bank of America to foreclose on Kemp’s home.   According to a Bloomberg story yesterday, “Bank of America had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked.”   According to one witness, this was a common practice.  The Bloomberg story goes on to say, “Linda DeMartini, a team leader in the company’s mortgage- litigation management division, said during a U.S. Bankruptcy Court hearing in Camden last year that it was routine for the lender to keep mortgage promissory notes even after loans were bundled by the thousands into bonds and sold to investors, according to a transcript. Contracts for such securitizations usually require the documents to be transferred to the trustee for mortgage bondholders.”  (Click here to read the entire Bloomberg story.)

This is an earth shaking setback, not only for B of A, but for all banks involved in mortgage-backed securities.  The Promissory Note is the actual proof the bank owns the home.  No “note” means no proof of ownership.  You must possess the original Promissory Note for ownership to be valid.   I wrote about this enormous mortgage mess in an October post called “The 6 Trillion Dollar Problem.” I said, “The lack of the Promissory Note is the biggest of all the problems in this chain of chicanery.  Here’s why.  A Promissory Note is a financial instrument.  It is in the same family as a Federal Reserve Note.  For example, if you copied a $100 bill and then tried to spend that copy in a store, because you lost the original, is it still money?–Of course not.  You need the original financial instrument (in this case a $100 Federal Reserve Note) to make a legal transaction in a store.  The same is true for a Promissory Note. You need the original note to legally complete a foreclosure.  A counterfeit or copy of a Promissory Note is not a financial instrument, just like a counterfeit or copy of a $100 bill is not a financial instrument!”

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Posted by & filed under USAWatchdog.com.

Jim Sinclair’s Commentary

The Fed is not trying to help business. It hopes that QE might by some miracle do that, but this is not the main motivation.

The Fed has been feeding the banks by sending them money at almost no cost with which they buy treasuries, a camouflaged form of QE. Now the Fed is directly buying Treasury issues, which is QE in daylight.

The evidence of this is in the less than enthusiastic action of the bond market in all maturities.

The primary reason why QE is now, and why it will continue to infinity is the need of the Treasury to borrow in order to finance.

 

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

What is happening in the economy is signalling enormous changes for the U.S. and the world.  The scale of what the Federal Reserve is doing is unparalleled in human history.  No country has ever produced so much money and so much debt in such a short amount of time.   The Fed has embarked on another round of money printing (Quantitative Easing or QE2).  It has been reported that it will buy $600 billion in Treasuries and another nearly $300 billion in mortgage-backed securities.  In a statement nearly two weeks ago, The Fed left its plan of money printing open-ended.  It said it would, “regularly review the pace of its securities purchases and the overall size of the asset-purchase program in the light of incoming information and will adjust the program as needed.”

All the fancy financial terminology and complicated skullduggery can be boiled down to a simple phrase or two.  The dollar is being debauched at the hands of the Fed, and the massive debt and future commitments we owe will never be paid off in “real” money.   Boston University Economist Laurence Kotlikoff says the real amount America is on the hook for is $202 trillion. For perspective, just one trillion dollars is a stack of $100 bills nearly 68 miles high!

The Fed is trying another round of QE, even though the first instalment of $1.7 trillion did not work to actually repair the economy.  We spent another $2 trillion in TARP and other stimulus that was, also, supposed to fix the economy.  It’s a grand total of $3.7 trillion just in the last two years.  (Some say it’s more than $12 trillion spent or committed.)  All this money printing did inflate stock prices.  It also helped out the big banks.  It worked so well they are paying a record $144 billion in bonuses this year.  What did the man on the street get?–foreclosure fraud and higher unemployment (22.5% according to Shadowstats.com).   Now, the money is running out, and the Fed is back to printing to keep the economy from falling off a cliff–again.  Nothing has been fixed; the day of reckoning has just been postponed, but this cannot go on forever.  At some point, the U.S. dollar will take a severe plunge, and inflation will hit America with a vengeance.

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

The G-20 kicked off in Seoul South Korea this week.  It seems to me everyone should be talking about the U.S. defaulting on its obligations by massive money printing.  Instead, the group of twenty finance ministers and central bankers from the most important industrialized and developing economies of the world has been sidetracked.  There is the threat of a North Korean attack on South Korea.  The Guardian UK reports, “The British delegation is taking seriously the potential threat of an attack on the G20 summit by North Korea, whose border is just 50 miles away from the gathering in Seoul.  A diplomat said: “There has been speculation that the North Koreans will attempt some kind of disruptive incursion into South Korea.” (Click here for the complete Guardian UK story.)

Then, there is the latest PIIGS (Portugal, Italy, Ireland, Greece and Spain) problem that has popped up.  It seems Ireland has the Group preoccupied with another bailout in the EU.  Reuters reports, “Ireland’s issues have moved to the forefront of currency concerns recently after taking a backseat to U.S. Federal Reserve policy for several weeks. Yields on 10-year Irish bonds rose well above 8 percent to a record high over comparable German debt, the euro zone’s standard.  Investors are worried Ireland would not be able to cut spending as planned and may require a bailout, with bond holders forced to absorb losses.” (Click here for the complete Reuters story.)

There is also talk of a looming trade war among the G-20.  The Associated Press reports, “A dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression. The biggest fear is that trade barriers will send the global economy back into recession.  Hopes had been high that the Group of 20, which includes wealthy nations like Germany and the U.S. and rising giants like China, could be a forum to forge a lasting global economic recovery. Yet so far, G-20 countries haven’t agreed on an agenda, let alone solutions to the problems that divide them.” (Click here to read the complete AP story.)

Yes, a trade war could do great damage but, to me, that should take a back seat to what the Federal Reserve is doing by starting another round of quantitative easing (QE2).  The Fed is printing up a fresh $600 billion (for starters) and is on its way to turning the dollar into candy wrappers and toilet paper.  This is the currency that most of the world uses for international trade.  I cannot believe this is not the first item on the agenda of the top financial officials in the world!

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Last week’s decision by the Fed to start another round of Quantitative Easing was met with only one dissenting vote by the Federal Open Market Committee.  That does not mean everybody in the rest of the world thinks this is a good idea.  Any country holding dollars is faced with a decrease in buying power.  Some of the most powerful members of the G-20 are highly critical of the Fed’s money printing.  Germany, Brazil and China all made negative comments about the Fed’s latest round of QE in a Bloomberg article over the weekend.  It reported, “It’s our problem as well if the U.S. is no longer certain that the old recipes don’t work anymore,” German Finance Minister Wolfgang Schaeuble said yesterday in Berlin. The Fed’s injection of $600 billion was “clueless” and won’t revive growth, he said.  Brazil’s central bank president, Henrique Meirelles, said “excess liquidity” in the U.S. economy is creating “risks for everyone.” In China, Vice Foreign Minister Cui Tiankai said “many countries are worried about the impact of the policy on their economies.” He also said the U.S. “owes us some explanation on their decision on quantitative easing.”  (Click here for the complete Bloomberg article.)

Still, Fed Chief Bernanke is unwavering in the decision to print money to revive the economy.  The same Bloomberg article quoted Mr. Bernanke, “Our first objective, the first goal that we have, is to meet our mandate to get price stability and maximum employment in the United States . . . A strong U.S. economy, a recovering economy, is critical not just for Americans but it’s also critical for the global recovery.”  The rest of the world is clearly not buying the idea that the Fed is saving the world economy.  So what would make the Fed so defiant in the face of such global criticism?  I think the Fed is really worried about mortgage interest rates and declining home prices.  I bring out my favorite updated chart of mortgage resets for adjustable rate mortgages.   The chart below shows a tsunami of resets that will not crescendo until late 2012.   Study it for yourself:

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Look at what happened just a day after the Fed announced $75 billion a month of money printing to buy up Treasuries that, in turn, pushed down interest rates.  Frank Nothaft, vice president and chief economist at Freddie Mac, said last week, “With little sign of inflation to push up long-term interest rates, fixed mortgage rates held relatively steady this week, while ARM rates hit new all-time record lows.”  (Click here for the complete statement from Freddie Mac.)

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

One day after the Federal Reserve announced a $600-$900 billion second round of Quantitative Easing (QE2), gold and silver hit fresh all-time highs.  Yesterday, the yellow metal surged more than $40 an ounce to well over $1,390 before falling back a few dollars in after hours trading.  Silver, also, had a monster move!  It was up more than a $1.50 per ounce.  It, too, retracted slightly in after hours trading.  That surge in precious metals is a debilitating rebuke of the Federal Reserve’s wild and unprecedented money printing policies.   How bad is it, really, for the Fed to feel this is a good idea?  Gold is acting like a predator that smells the blood of wounded prey.  In this case, the prey is a much weakened Fed that seems desperate to keep its banking cartel afloat from the undertow of a sea of red ink.

It is reported that Sprott Asset Management bought 6.5 million ounces of physical silver at nearly $26 an ounce.  Respected financial blog Jesse’s Café American wrote yesterday about the deal, “Some might consider the price that Sprott paid to be a ‘leading indicator’ of where silver will be going. I think when the paper Ponzi scheme actually collapses silver will be much higher than that. After all, “he who sells what isn’t his’n must buy it back or go to prison.” Unless, that is, they are running the game. Then they just pay a fine and admit no guilt.” (Click here to read the entire post from JCA.) This kind of silver buying is a big plus for the physical market and a big negative for the often questionable paper market.

Big-time buyers are driving over-sized price moves in precious metals.  Hedge Funds, Sovereign Wealth Funds, big banks (like Goldman and JP Morgan) and Central Banks are now moving the markets in gold and silver bullion.  Movements like the one yesterday are not mom and pop retail buyers looking to purchase a dozen Silver Eagles or a Gold Eagle coins to put into a safety deposit box.

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Posted by & filed under Greg Hunter, USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Now that the mid-term elections are over, it is time to get back to reality.  Just because House Minority Leader John Boehner is taking over for Nancy Pelosi as Speaker of the House doesn’t mean the economy will get better.  Yes, the Republicans can now, pretty much, put the kibosh on the Obama agenda with big victories in the House and Senate, but is that enough to turn things around?  In a word–no.

The economy is functioning so poorly the Federal Reserve has widely telegraphed it will start another round of Quantitative Easing. It has been jokingly called “QE2” by the financial press.  What is QE2?  It is more Fed money printing to finance the country and revive the economy.  This kind of QE has never been done before in human history on this scale.  How much money will the Fed print?  The consensus among many economists is $500 billion, but that is just a start. Yesterday, Reuters warned, “Fed Chairman Ben Bernanke has said long-term asset purchases are an effective way to lower borrowing costs when rates are near zero, but a program of this size and scope is untested and many worry further expansion of the Fed’s balance sheet sets the stage for inflation or another asset bubble.”  (Click here for the complete Reuters story.)  

The Fed will start small but leave its plan of action open-ended.  In other words, it will commit to print as much as needed to buy treasuries and mortgage-backed securities to get the economy going again. One senior currency trader at HSBC, Daniel Hui, said on Bloomberg last week, “We think the eventual expansion of QE could be as large as $2 trillion if the Fed is serious about preventing deflation.”  (Click here for the entire Bloomberg interview.)

Citywire, a British publication, is one of many media outlets reporting that Goldman Sachs wants twice that amount of QE.  It reports, “The bank said that based on its own analysis the Fed ought to pump in a further $4 trillion in order to achieve the monetary easing the economy needs. . . “  (Click here for the complete Citywire story.)  

Former Bush economic advisor Marc Sumerlin talked about the upcoming Fed QE about a month ago on CNBC, “To me, it starts to get interesting at six to seven trillion dollars,” Sumerlin said.  (Click here for the CNBC interview and my post called “Could a Dollar Crash Be Coming Soon?”)  

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Posted by & filed under Greg Hunter, USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

In the wake of the financial meltdown of 2008, the Federal Reserve announced it would buy mortgage-backed securities, or MBS.  The January announcement by the Fed said it would buy MBS from failed mortgage giants Fannie Mae and Freddie Mac in the amount of $1.25 trillion.  At the time, the Fed said in a press release, “The goal of the program was to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally.”  (Click here for the full Fed statement.) It did provide “support” to the mortgage market, but did it also buy fraud and cover the banks that sold it?  The evidence shows, at the very least, it bought massive amounts of fraud.

We now know the Fed definitely bought valueless MBS because it has joined other ripped-off investors to demand Bank of America buy back billions in sour home debt.  A Bloomberg story from just last week, featuring Philadelphia Fed President Charles Plosser,  reports, “The New York Fed, which acquired mortgage debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc., has joined a bondholder group that aims to force Bank of America Corp.to buy back some bad home loans packaged into $47 billion of securities.  On the one hand, the Fed has “a duty to the taxpayer to try to collect on behalf of the taxpayer on these mortgages,” Plosser said today at an event in Philadelphia.”

Mr. Plosser lamented the “difficult spot” the central bank is in because it is both bank regulator and plaintiff.  He said, “Should we be in the business of suing the financial institutions that we are in fact responsible for supervising?” (Click here to read the complete Bloomberg story.) To that question, I ask shouldn’t the Fed have done a much better job of supervising the big banks in the first place?  The whole financial and mortgage crisis from sour securities to foreclosure fraud is in the process of blowing sky high.  The entire mess is clearly the biggest financial fraud in history!  It looks to me like the regulators were just supervising their pay checks being deposited into the bank.

And remember, the $1.25 trillion of mortgage-backed securities the Fed bought from Fannie and Freddie?  How much of that is fraud?  William Black, the outspoken Professor of Economics from the University of Missouri KC, says all the big banks were committing “major frauds”in the mortgage-backed security market.  Black says, at Citicorp, for example, “. . . 80% of the mortgage loans it sold to Fannie and Freddie were sold under false representations and warranties.” (Click here for the complete Black interview.) Black claims the frauds increased at some banks, and it is sill going on today!   (I admit I used this same video in a recent post.  I use it again, because it is the single most important and damning indictment of the big banks out there.  Professor Black defines the size of the entire fraudulent mortgage mess.)

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Posted by & filed under Greg Hunter, USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

When I was an investigative reporter at the networks, the first question we would ask when trying to decide if we wanted to do a story was: How many?  How many people have been hurt by a defective product?  How many defective products of a certain kind were in use? How many dollars will it take to fix the problem?  In the case of the recent mortgage crisis – “Foreclosuregate,” the question of how many has been answered.It has been widely reported that there are a little more than 60 million home mortgages in the Mortgage Electronic Registry System (MERS).  If every one of the 60 million mortgages are worth $100,000, that would mean a total of at least $6 trillion in home mortgages that are electronically filed.  In MERS, there is no physical written record of a “Promissory Note.”  In almost all states, you need that original “Note” to prove ownership of a home.  That means in almost every single state, the banks cannot legally foreclose on your home without this document.  Some say the loan documents were lost on purpose because the bankers did not want their massive fraud to see the light of day.  Whether or not the “Notes” were lost on purpose or accident, the fact is the original “Notes” are nowhere to be found.  That is what the “Robo Signing” part of the story is all about.  It has been widely reported that “foreclosure mills” were creating massive amounts of counterfeit Promissory Notes so banks could legally foreclose on homeowners.

In the post I did earlier this week called “The Perfect No-Prosecution Crime,” I laid out several layers of fraud and white collar crime of mortgage and foreclosure fraud.  The lack of the Promissory Note is the biggest of all the problems in this chain of chicanery.  Here’s why.  A Promissory Note is a financial instrument.  It is in the same family as a Federal Reserve Note.  For example, if you copied a $100 bill and then tried to spend that copy in a store, because you lost the original, is it still money?–Of course not. You need the original financial instrument (in this case, $100 Federal Reserve Note) to make a legal transaction in a store.  The same is true for a Promissory Note. You need the original Promissory Note to legally complete a foreclosure.  A counterfeit, or copy, of a Promissory Note is not a financial instrument, just like a counterfeit or copy of a $100 bill is not a financial instrument!

Can you see how big this problem really is for the banks?  This is $6 trillion in real estate that fat cat bankers cannot legally prove they own. Likewise, that means trillions of mortgage-backed securities HAVE NO BACKING.   I think this is the biggest financial fraud in history.  This was not an accident made by someone pressing the wrong button or a few documents that weren’t handled properly, but fraud on a massive scale that took years and tens of thousands of people to pull off.  Ironically, this is all playing out against a backdrop of outrageous Wall Street pay.  This year the big banks are going to pay a record $144 billion!  (Click here for more on that story.)

One of my regular readers thinks Congress can simply pass a law and make all the crimes retroactively legal.  To that I said, “So Congress is going to change hundreds of years of real estate document law in each and every state? Along with IRS tax laws broken, trust laws broken, security laws broken and on top of that, make crimes retroactively not crimes anymore? That’s a lot even for Congress. I think the path of least resistance is more likely printing money to paper over the problem. . . . I hope you are wrong on Congress because if they do change all of these laws to comfort the criminal banksters, we might as well change the name of the country to the United States of Crime.”

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