Posts Categorized: USAWatchdog.com

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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Posted by & filed under USAWatchdog.com.

(Courtesy of Greg Hunter’s of USAWatchdog.com)

Dear CIGAs,

Did you know that in the aftermath of the Savings and Loan (Thrifts) scandal there were more than a thousand felony convictions of financial elites?  The cost of the wrongdoing associated with the rip-off and closure of nearly 800 Thrifts cost taxpayers more than $160 billion.  The current sub-prime/mortgage-backed security scandal is 40 times bigger according to Economics professor William Black.  That means the size of the crime is $6.4 trillion by my calculation.   Can you guess how many indictments there have been on financial elites who created this enormous mess?  Zero, none, nada, zip.  Yes, not one single prosecution or conviction has been started of achieved. 

That is simply outrageous considering the width and breadth of the many crimes committed.  There was “rampant” mortgage fraud in the loan application process according to the FBI as far back as 2004.  (Click here to see one of many stories of the FBI warning of mortgage fraud)  There was real estate document fraud when the original Promissory Notes and loan documents were “lost.”  The Promissory Notes were required to create tens of thousands of mortgage-backed securities (MBS).  No “note,” no security.  That is security fraud.  No security means the special IRS tax treatments for the MBS’s were fraudulently obtained.  That is IRS tax fraud.  Because there were no documents, the rating agencies fraudulently made up triple “A” ratings for the securities.  When the whole mess blew up, big banks hired foreclosure mill law firms to create forged documents.  That phony paperwork was and is being used to wrongfully remove homeowners from their property.  That is foreclosure fraud.

It appears to me the entire mortgage/securitization industry is one giant criminal enterprise.  And yet, last Wednesday, Housing and Urban Development Secretary Shaun Donovan said, “We have not found any evidence at this point of systemic issues in the underlying legal or other documents that have been reviewed.”  What!  Well, look a little harder Mr. HUD Secretary.  (Click here for the complete Reuters story with Donovan’s quote.)  Donovan did say the foreclosure fiasco is “shameful,” but that is not the same as a criminal prosecution now is it?  Where is U.S. Attorney General Eric Holder in all of this?  I guess he’s busy planning a lawsuit to stop California from making pot smoking a misdemeanor.  Holder is probably also very busy with continuing legal actions against Arizona’s immigration law.  I guess trillions of dollars in mortgage and securities fraud is just not enough of a legal priority for America!

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

(Courtesy of Greg Hunter’s of USAWatchdog.com)

Dear CIGAs,

There are some big questions facing the real estate market after the foreclosure fraud story exploded in the last few weeks.  The number one question for anyone who has a mortgage is “Who really owns your home?”  This would be simple to answer before the mortgage-backed security (MBS). These MBS’s were mortgages that were bundled together and sold to investors such as pension and bond funds by big banks.  They were considered as safe as U.S. Treasuries but paid a much higher interest rate.  The big banks received gigantic profits from MBS’s especially in the 2005 to 2008 time frame when most of the bundling was done.  It was all about the fees, and damn the paperwork.  Recently, Congressman Alan Grayson said, “It appears that on a widespread and probably pervasive basis they (the banks) did not take the steps necessary to own the note . . . which means that in 45 out of the 50 states they lack the legal right to foreclose. . . .  So they have simply created a system where servicers hire foreclosure mill law firms whose business is to forge documents showing or purporting to show they have a legal right to foreclose.”   I wrote about this recently in a post called “Could Foreclosure Fraud Cause Another Banking Meltdown?”

Guess what?  Some investors are already demanding their money back from companies like Countrywide Mortgage because it didn’t maintain “accurate loan records,” and that is “in violation of underwriting guidelines.”  This week, investors asked for $47 billion back in a demand letter delivered to Countrywide!  Because Bank of America bought Countrywide a couple of years ago, B of A is on the hook for the refund.  (Click here for the complete story from PR Newswire.)  This kind of investor outrage is just the beginning and will only intensify in the days and weeks to come.  Will the Fed be forced to, once again, save the big banks by printing trillions of dollars?  Who knows, but the banks cannot afford to buy back all their sins without going bust!

This will, also, further cloud the chain of custody for documents that prove who the rightful owner of a property is.  Adam Levitin, a Georgetown University Law Professor, said last week on CNBC, “The problems coming out in the foreclosure process raise questions about whether, and frankly this is frightening, but whether anyone in the U.S. has clear title to their property.”

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

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

It has been called foreclosure gate, robo signing, foreclosure fraud or just sloppy paperwork; but no matter what you call it, it’s signaling a new financial meltdown for the U.S. economy.  The securitized mortgage debt created in the real estate bubble is being called the “largest fraud in the history of capital markets” by people like renowned gold expert Jim Sinclair.  The big banks packaged mortgages into securities (mortgage backed security) and then sold them to pension funds and investors.  The mortgages in these securities had to meet what is called “contractual representation and warranties.”   That basically means the bank had to legally be able to prove it owned the property it was selling in the security.  Once more, the mortgage applications and appraisals were required to be free of fraud.  The “robo signing” is all about creating paperwork that proves the banks owned the property in the “security” and the mortgage was done correctly.  In millions of mortgages, the banks either can’t find or do not want to produce the original paperwork with the borrowers signature  (promissory note).   Now, investors want to force the banks to buy back trillions in mortgage backed securities that have lost value.   In a recent interview on MSNBC, Congressman Brad Miller said, “. . . in almost every contract if they (the MBS’s) weren’t what they were contractually required to be, the bank had to buy them back.  That’s probably more than they could buy back and we may be back where we were two years ago.”  (Click here for the entire MSNBC interview with Rep. Miller.)

Two years ago, Treasury Secretary Hank Paulson warned Congressional leaders we were just days away from a complete “meltdown of our financial system, with all the implications here at home and globally.”  I think we will be getting to that point again and soon.  Sinclair says, “Securitized mortgage debt is going to be the final shot that kills all kinds of financial entities in the Western world.”  (Click here for the complete Sinclair post at JSMineset.com.)

Some in federal and state government are calling for a moratorium in all foreclosures across the entire country.  CNBC recently reported, “40 States to Launch Probes Into Foreclosure Mess.”  The story goes on to say, “The attorneys general of up to 40 states plan to announce soon a joint investigation into banks’ use of flawed foreclosure paperwork.”  (Click here for the complete story.)  Wall Street is sending up warning flares that the economy could be damaged even more if foreclosures are stopped.  (Many banks have already stopped foreclosures in some states.)  According to a Reuters story, “The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but said dramatic nationwide action could unjustly impose losses on the investors who help provide credit to the $11 trillion U.S. mortgage market.  “It is imperative…that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy,” SIFMA Chief Executive Tim Ryan said in a statement.”  (Click here for the complete Reuters story.)

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

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

This weekend, Bank of America became the latest lender to delay all foreclosures in 23 states because of possible problems with the necessary documents needed to repossess a home.  GMAC Mortgage and JP Morgan Chase have had similar problems recently with documents that prove the bank has the right to foreclose.   ADINews.com posted a statement from B of A, “We have been assessing our existing processes. To be certain affidavits have followed the correct procedures, Bank of America will delay the process in order to amend all affidavits in foreclosure cases that have not yet gone to judgment in the 23 states where courts have jurisdiction over foreclosures,” BofA spokesman Dan Frahm said in a statement.”  (Click here for the entire ADINews.com story.)

Florida Congressman Alan Grayson says the foreclosure document “problem” is really fraud on a massive scale.  He calls what is happening now a “foreclosure fraud crisis” that could affect 60 million properties in the U.S.  It is all because the banks have lost track of promissory notes signed by the homeowners.  I was the first mainstream media reporter to do a story on this problem in 2008.  (Click here for the 2008 “Produce the Note” story from CNN.)    Back then, some big banks could not “produce the note” that proved it had the right to take back a home.  The problem has gotten much bigger as more homeowners discover the banks do not have the original documents. 

After physical paperwork was filled out and signed by the borrower, the banks electronically filed the paperwork into a computerized system called the “Mortgage Electronic Registry System” (MERS).   According to Congressman Grayson, 60%, or 60 million, mortgages are in MERS.  The banks lost track of the original paperwork, the note, signed by the borrower.  That is what actually proves the bank owns the property.  Grayson says, “It appears that on a widespread and probably pervasive basis they (the banks) did not take the steps necessary to own the note . . . which means that in 45 out of the 50 states they lack the legal right to foreclose. . . .  So they have simply created a system where servicers hire foreclosure mill law firms whose business is to forge documents showing or purporting to show they have a legal right to foreclose.”  (Click here for the entire Congressman Grayson video statement from 9/30/10.)  

Please take a moment and grasp the enormity of this problem for the banks.  There are 60 million homes which banks loaned money on, and now they might not be able to legally get the property back if the homeowner defaults!  Another colossal problem for the banks is the trillions of dollars in mortgages bundled into securities.  Remember, the banks were giving anyone who could fog a mirror a mortgage which allowed them to create and sell lucrative mortgage backed securities.  So, there are trillions of dollars in mortgage backed securities that now could have NO backing!   Would you like to be the pension fund manager who bought that security?  Do you think this just might cause an accounting problem for the banks?  Do you think this could push some of the big banks into bankruptcy?  Will there be another financial meltdown and government rescue?

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

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

I was pulling up to a store yesterday in my car, listening to CNBC on XM Radio, when an interview with banking analyst Meredith Whitney came on.  I shut the car off and listened because, over the years, I have learned when Whitney talks, everybody should pay attention.  There are only two reasons why I think this way:  (1) Whitney has a track record of many good calls on the economy and banking.  (2) Her predictions are usually spot on.   

For those of you who are not familiar with Ms. Whitney, in November of 2007, she first raised the specter that Citigroup might have to cut its dividend because of losses in mortgage backed securities.  At the time, Citigroup stock was trading for around $50 a share, and everybody looked at her like she had two heads.  Whitney never backed off that call in her many interviews in the months that followed.  Citigroup, of course, did cut the dividend and almost went bankrupt.  The stock now sells for less than 4 bucks a share.

In June of this year, when everybody in the mainstream media was still hyping “Green Shoots” and the so-called “Recovery,” Whitney predicted on CNBC, “Unequivocally, I see a double-dip in housing.  There’s no doubt about it . . . prices are going down again.”  Bang!–another direct hit.  I wrote about this in a post called “Double Dips Coming Everywhere.”

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Posted by & filed under USAWatchdog.com.

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

My nephew, Luke, called me the other day vexing over the materials used in our coins.  He is a finance major in grad school and was researching money when he discovered that pennies were 97.5 percent zinc and nickels were mostly copper with only a nickel coating.  He told me he was going to start saving every pre-1982 penny he got because, after that, the mint stopped using 95% copper in the coin.  Luke told me the copper in a pre-1982 penny was worth more than two cents.   I told him, “Pretty soon the mint will have to punch coins out of plastic if the price of metal keeps going up.”  Then I asked, “Do you know why prices are going up?”  Luke said, “Yes, it’s because the Federal Reserve and its monetary policies.”  I was shocked and proud all at the same time!  It looks like he’s actually learning something in business school.  Currently, it costs about 1.8 cents to make a penny and nearly 9 cents to produce a nickel.  The government is considering cheaper metals to bring the cost of making coins down.  (Click here to see what our coins are currently made of.)  

It is said, when empires fall, one of the first signs of decline is a debasement of the currency.   Long before the Roman Empire fell, its leaders debased the currency.  The debasement was small at first, but over time, precious metals were watered down and coin sizes shrank.  For example, silver coins ended up having so little silver in them they became unpopular and shunned.  A debased Roman currency brought, what else, inflation.  Sound familiar?  

I have been asking myself for years “Why can’t we have honest money?”  We little guys are forced into the stock market to save for retirement and to stay ahead of inflation.  It now looks like the 401k is not such a good invention or investment.   

By and large, working people are pushed into 401k’s.  In the right business cycle with the right demographics (as in lots of baby boomers investing in stocks at the same time, such as the 80’s and 90’s, when business and inflation were relatively stable), the 401k is a not a bad deal, especially when you consider that companies often match or contribute funds to make the investment plan advantageous to participants.  But in the wrong part of the business cycle (aging baby boomer population and big government bailouts), the 401k can provide some gut wrenching lessons about “investing.”  People are painfully finding out that these plans have not been such a good “long term”  deal.  The S&P 500 has gone nowhere in more than a decade. Today, it’s back to 1998 levels.  (Click here to check out a chart of the S&P 500, and see for yourself.)  

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Posted by & filed under USAWatchdog.com.

Dear CIGAs,

There has been a flurry of proposals this week on how to get the economy growing again.  The President has been giving speeches across the country offering up plans for more infrastructure spending, business tax cuts and credits.  The Republican plan includes keeping all the Bush tax cuts in place and rolling back spending to 2008 levels.  Basically, the Democrats want more stimulus spending and some tax cuts, and the Republicans want more tax cuts and some spending reduction.

I do not hold out much hope for either plan to lift the deeply troubled economy.  The reason?  We are dancing around the problem child—the banks. (The  financial reform bill passed in July did absolutely nothing to fix the banks or the economy.)  On the bottom of the spectrum, about 120 banks have failed  so far this year.  Underwater commercial and residential real estate loans are swamping the banks.  The trend here is for more failures than last year.  Last week, economist Nouriel Roubini of Roubini Global Economics said more than half of the 829 U.S. banks on the FDIC’s “Problem List” are likely to fail.  (Click here for more on this story.)

In July, I wrote about the cash problems the FDIC will face next year in a post called“Banking Disaster Largely Ignored By Mainstream Media.” At the current bank failure rate, the FDIC will surely be out of cash and relying on a Treasury credit line well before this time next year.  FDIC Chairman Sheila Bair appeared on CNBC with Larry Kudlow this week.  Did he ask her about the extreme stress with the banking system because of the surge in failures?  Not a chance.  The mainstream media continues to ignore this gigantic problem.

On the top end of the spectrum, there are the “Too Big to Fail” banks.  Under Congressional pressure last year, the Financial Accounting  Standards Board (FASB) changed the accounting rules for toxic assets such as mortgage backed securities.  According to a Bloomberg report, “Changes to fair-value, or mark-to-market accounting, approved by FASB today allow companies to use “significant” judgment in gauging prices of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ write-downs and boost net income.” (Click here for the complete Bloomberg story.) To simply make up a value on questionable assets is nothing more than government sanctioned accounting fraud.  To abandon a major principal of accounting is a financial abomination!

Renowned precious metals expert Jim Sinclair of JSMineset.com has written a new book called “A Pocketbook of Gold.” Sinclair sites this mark-to-market accounting scheme, allowed by FASB, as a major reason to own gold.  Sinclair wrote, “Of course, if these toxic assets, for which there is little or no market, were ever properly taken onto the banks books, it would sink them completely. . . . The FASB changes are quite simply, a (now) legal way to lie about the financial health, and more specifically about the worthlessness of trillions of dollars of toxic assets on the Banks books.  ‘Mark-to-Market’ has become ‘Mark-to-Myth.’  In truth, the situation is dire, and banks and lawmakers are trying to push back the day of reckoning. . .”

The dramatically impaired U.S. banking system is the reason why the economy is not getting better.  According to financial writer Jim Willie, who holds a PhD in Statistics, there is only one solution to break the grip of this financial crisis.  Last week, Mr. Willie wrote, “The secret to a legitimate solution is easy. The big banks must write down their credit portfolios, and accept deep losses. If that results in liquidation, so be it!! Accounting fraud is not a substitute for restructure. Nor is dispatching badly impaired assets to the USFed, whose by all accounts is a Bad Bank Repository.” (Click here for the complete story by Willie.)

The economy cannot truly be fixed with tax breaks, stimulus, more debt or small spending cuts.  We have a deep financial insolvency dilemma.  A real recovery will only be achieved by honest reporting by the mainstream media, and honest accounting by the banks.  If we don’t demand this, then we will continue to dance around “The Elephant in the Room.”

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