[Administrating:7053] Fwd: FW: Bankers are going to jail?

Four years after the crash that plunged the world into chaos thanks to mortgage backed securities and banking greed, a tiny handful of perpetrators are being put behind bars. Here are three very recent articles that highlight this:


1.Firstly, the front cover of Time Magazine: "This Man is Busting Wall Street." - http://swampland.time.com/2012/02/01/prosecutor-preet-bharara-busts-wall-street/

2.Secondly, a top executive gets busted for running a company that fraudulently signed mortgages which resulted in thousands of illegal foreclosures: http://www.huffingtonpost.com/2012/02/07/robo-signing-docx-missouri_n_1261369.html

3.Finally, it looks like some banks may get away with it. If there is no investigation, they will: http://usawatchdog.com/will-big-banks-get-free-pass-in-robo-signing-mortgage-mess/


What you need to know is this: all mortgages are frauds because no money is actually lent. Loans are created out of thin air by banks who call them "loans", and then have the audacity to charge interest because. Most loans are securitisied (sold) which means that the bank loses all rights to the debt. This is not conspiracy nonsense, it is a confirmed fact. The sooner society wakes up to this, the better.
Now, some mortgages take the fraud a step further. There is proof in the US (see point 2 above) of banks who paid companies to hire under-aged students to sign documents because they "lost" them in the securisation pool. They brought these forged documents to court, pretended they are real, and illegally foreclosed on thousands of homes.
Once again, we encourage all of you to open your eyes and learn what is going on in the world of banking and finance. There is no knight in shining armour who is going to come and save you. You save yourself by studying this information, sharing it, and making some very tough decisions for your family's future.
If you are a banker who has a soul, please switch teams play on the side of truth... before it's too late for all of us.
--The JJC

For more options, visit this group at
http://groups.google.com/group/administrating-your-public-servants?hl=en?hl=en

DROIT DROIT

http://www.scribd.com/doc/7547617/0-Intro-Course

INTRODUCTION TO DROIT DROIT

NOTE: To fully understand what a Deed of Trust is and what role you really play in this amazing instrument, study Course 8 PRIVATE BANKING in the NEW BEGINNING COURSES and Class A2.

Droit Droit is a private remedy based upon the current system the banks use to take possession of your property without going to court when the bank claims you breach the contract (mortgage or deed of trust) for nonpayment.

They know there is no money, but they count on your voluntary cooperation to play the game and pretend there is money to pay off the 30-year loan of credit with federal reserve notes.

The banks have used this system for 70 years and it works every time.

Adverse Possession http://t.co/QxaqhSG
Texas Man’s $16 Property Seizure http://t.co/74TiaBW

WHOSE Car Is It ?? http://www.famguardian.org/.../Media/Antishyster/V11N1-WhoseCarIsIt.pdf

Attorney/ Banker Interview About a Foreclosure: Bank Loan – “That is how it works.”

Bank Loan – “That is how it works.”

Interview with a banker about a foreclosure. The banker was placed on the witness stand and sworn in. The plaintiff's (borrower's) attorney asked the banker the routine questions concerning the banker's education and background.

The attorney asked the banker, "What is court exhibit A?"

The banker responded by saying, "This is a promissory note."

The attorney then asked, "Is there an agreement between Mr. Smith (borrower) and the defendant?"

The banker said, "Yes."

The attorney asked, "Do you believe the agreement includes a lender and a borrower?"

The banker responded by saying, "Yes, I am the lender and Mr. Smith is the borrower."

The attorney asked, "What do you believe the agreement is?"

The banker quickly responded, saying, " We have the borrower sign the note and we give the borrower a check."

The attorney asked, "Does this agreement show the words borrower, lender, loan, interest, credit, or money within the agreement?"

The banker responded by saying, "Sure it does."

The attorney asked, `"According to your knowledge, who was to loan what to whom according to the written agreement?"

The banker responded by saying, "The lender loaned the borrower a $50,000 check. The borrower got the money and the house and has not repaid the money."

The attorney noted that the banker never said that the bank received the promissory note as a loan from the borrower to the bank. He asked, "Do you believe an ordinary person can use ordinary terms and understand this written agreement?"

The banker said, "Yes."

The attorney asked, "Do you believe you or your company legally own the promissory note and have the right to enforce payment from the borrower?"

The banker said, "Absolutely we own it and legally have the right to collect the money."

The attorney asked, "Does the $50,000 note have actual cash value of $50,000? Actual cash value means the promissory note can be sold for $50,000 cash in the ordinary course of business."

The banker said, "Yes."

The attorney asked, "According to your understanding of the alleged agreement, how much actual cash value must the bank loan to the borrower in order for the bank to legally fulfill the agreement and legally own the promissory note?" The banker said, "$50,000."

The attorney asked, "According to your belief, if the borrower signs the promissory note and the bank refuses to loan the borrower $50,000 actual cash value, would the bank or borrower own the promissory note?"

The banker said, "The borrower would own it if the bank did not loan the money. The bank gave the borrower a check and that is how the borrower financed the purchase of the house."

The attorney asked, "Do you believe that the borrower agreed to provide the bank with $50,000 of actual cash value which was used to fund the $50,000 bank loan check back to the same borrower, and then agreed to pay the bank back $50,000 plus interest?"

The banker said, "No. If the borrower provided the $50,000 to fund the check, there was no money loaned by the bank so the bank could not charge interest on money it never loaned."
The attorney asked, "If this happened, in your opinion would the bank legally own the promissory note and be able to force Mr. Smith to pay the bank interest and principal payments?"

The banker said, "I am not a lawyer so I cannot answer legal questions."

The attorney asked, " Is it bank policy that when a borrower receives a $50,000 bank loan, the bank receives $50,000 actual cash value from the borrower, that this gives value to a $50,000 bank loan check, and this check is returned to the borrower as a bank loan which the borrower must repay?"

The banker said, "I do not know the bookkeeping entries."
The attorney said, "I am asking you if this is the policy."

The banker responded, "I do not recall."

The attorney again asked, "Do you believe the agreement between Mr. Smith and the bank is that Mr. Smith provides the bank with actual cash value of $50,000 which is used to fund a $50,000 bank loan check back to himself which he is then required to repay plus interest back to the same bank?"

The banker said, " I am not a lawyer."

The attorney said, "Did you not say earlier that an ordinary person can use ordinary terms and understand this written agreement?"

The banker said, "Yes."

The attorney handed the bank loan agreement marked "Exhibit B" to the banker. He said, "Is there anything in this agreement showing the borrower had knowledge or showing where the borrower gave the bank authorization or permission for the bank to receive $50,000 actual cash value from him and to use this to fund the $50,000 bank loan check which obligates him to give the bank back $50,000 plus interest?"

The banker said, "No."

The lawyer asked, "If the borrower provided the bank with actual cash value of $50,000 which the bank used to fund the $50,000 check and returned the check back to the alleged borrower as a bank loan check, in your opinion, did the bank loan $50,000 to the borrower?"

The banker said, "No."

The attorney asked, "If a bank customer provides actual cash value of $50,000 to the bank and the bank returns $50,000 actual cash value back to the same customer, is this a swap or exchange of $50,000 for $50,000."

The banker replied, "Yes."

The attorney asked, "Did the agreement call for an exchange of $50,000 swapped for $50,000, or did it call for a $50,000 loan?"

The banker said, "A $50,000 loan."

The attorney asked, "Is the bank to follow the Federal Reserve
Bank policies and procedures when banks grant loans."

The banker said, "Yes."

The attorney asked, "What are the standard bank bookkeeping entries for granting loans according to the Federal Reserve Bank policies and procedures?" The attorney handed the banker FED publication Modern Money Mechanics, marked "Exhibit C".

The banker said, "The promissory note is recorded as a bank asset and a new matching deposit (liability) is created. Then we issue a check from the new deposit back to the borrower."

The attorney asked, "Is this not a swap or exchange of $50,000 for $50,000?"

The banker said, "This is the standard way to do it." The attorney said, "Answer the question. Is it a swap or exchange of $50,000 actual cash value for $50,000 actual cash value? If the note funded the check, must they not both have equal value?"

The banker then pleaded the Fifth Amendment.

The attorney asked, "If the bank's deposits (liabilities) increase, do the bank's assets increase by an asset that has actual cash value?"

The banker said, "Yes."

The attorney asked, "Is there any exception?"

The banker said, "Not that I know of."

The attorney asked, "If the bank records a new deposit and records an asset on the bank's books having actual cash value, would the actual cash value always come from a customer of the bank or an investor or a lender to the bank?"

The banker thought for a moment and said, "Yes."

The attorney asked, "Is it the bank policy to record the promissory note as a bank asset offset by a new liability?"

The banker said, "Yes."

The attorney said, "Does the promissory note have actual cash value equal to the amount of the bank loan check?"

The banker said "Yes."

The attorney asked, "Does this bookkeeping entry prove that the borrower provided actual cash value to fund the bank loan check?"

The banker said, "Yes, the bank president told us to do it this way."

The attorney asked, "How much actual cash value did the bank loan to obtain the promissory note?"

The banker said, "Nothing."

The attorney asked, "How much actual cash value did the bank receive from the borrower?"

The banker said, "$50,000."

The attorney said, "Is it true you received $50,000 actual cash value from the borrower, plus monthly payments and then you foreclosed and never invested one cent of legal tender or other depositors' money to obtain the promissory note in the first place? Is it true that the borrower financed the whole transaction?"

The banker said, "Yes."

The attorney asked, "Are you telling me the borrower agreed to give the bank $50,000 actual cash value for free and that the banker returned the actual cash value back to the same person as a bank loan?"

The banker said, "I was not there when the borrower agreed to the loan."

The attorney asked, "Do the standard FED publications show the bank receives actual cash value from the borrower for free and that the bank returns it back to the borrower as a bank loan?"

The banker said, "Yes."

The attorney said, "Do you believe the bank does this without the borrower's knowledge or written permission or authorization?"

The banker said, "No."

The attorney asked, "To the best of your knowledge, is there written permission or authorization for the bank to transfer $50,000 of actual cash value from the borrower to the bank and for the bank to keep it for free?

The banker said, "No."

Does this allow the bank to use this $50,000 actual cash value to fund the $50,000 bank loan check back to the same borrower, forcing the borrower to pay the bank $50,000 plus interest? "

The banker said, "Yes."

The attorney said, "If the bank transferred $50,000 actual cash value from the borrower to the bank, in this part of the transaction, did the bank loan anything of value to the borrower?"

The banker said, "No." He knew that one must first deposit something having actual cash value (cash, check, or promissory note) to fund a check.

The attorney asked, "Is it the bank policy to first transfer the actual cash value from the alleged borrower to the lender for the amount of the alleged loan?"

The banker said, "Yes."

The attorney asked, "Does the bank pay IRS tax on the actual cash value transferred from the alleged borrower to the bank?"

The banker answered, "No, because the actual cash value transferred shows up like a loan from the borrower to the bank, or a deposit which is the same thing, so it is not taxable."

The attorney asked, "If a loan is forgiven, is it taxable?"

The banker agreed by saying, "Yes."

The attorney asked, "Is it the bank policy to not return the actual cash value that they received from the alleged borrower unless it is returned as a loan from the bank to the alleged borrower?"

"Yes", the banker replied.

The attorney said, "You never pay taxes on the actual cash value you receive from the alleged borrower and keep as the bank's property?"

"No. No tax is paid.", said the crying banker.

The attorney asked, "When the lender receives the actual cash value from the alleged borrower, does the bank claim that it then owns it and that it is the property of the lender, without the bank loaning or risking one cent of legal tender or other depositors' money?"

The banker said, "Yes."

The attorney asked, "Are you telling me the bank policy is that the bank owns the promissory note (actual cash value) without loaning one cent of other depositors' money or legal tender, that the alleged borrower is the one who provided the funds deposited to fund the bank loan check, and that the bank gets funds from the alleged borrower for free? Is the money then returned back to the same person as a loan which the alleged borrower repays when the bank never gave up any money to obtain the promissory note?

Am I hearing this right? I give you the equivalent of $50,000, you return the funds back to me, and I have to repay you $50,000 plus interest? Do you think I am stupid?"

In a shaking voice the banker cried, saying, "All the banks are doing this. Congress allows this."

The attorney quickly responded, "Does Congress allow the banks to breach written agreements, use false and misleading advertising, act without written permission, authorization, and without the alleged borrower's knowledge to transfer actual cash value from the alleged borrower to the bank and then return it back as a loan?"

The banker said, "But the borrower got a check and the house."
The attorney said, "Is it true that the actual cash value that was used to fund the bank loan check came directly from the borrower and that the bank received the funds from the alleged borrower for free?"

"It is true", said the banker.

The attorney asked, "Is it the bank's policy to transfer actual cash value from the alleged borrower to the bank and then to keep the funds as the bank's property, which they loan
out as bank loans?"

The banker, showing tears of regret that he had been caught, confessed, "Yes."

The attorney asked, "Was it the bank's intent to receive actual cash value from the borrower and return the value of the funds back to the borrower as a loan?"

The banker said, "Yes." He knew he had to say yes because of the bank policy.

The attorney asked, "Do you believe that it was the borrower's intent to fund his own bank loan check?"

The banker answered, "I was not there at the time and I cannot know what went through the borrower's mind."

The attorney asked, "If a lender loaned a borrower $10,000 and the borrower refused to repay the money, do you believe the lender is damaged?"

The banker thought. If he said no, it would imply that the borrower does not have to repay. If he said yes, it would imply that the borrower is damaged for the loan to the bank of which the bank never repaid. The banker answered, "If a loan is not repaid, the lender is damaged."

The attorney asked, "Is it the bank policy to take actual cash value from the borrower, use it to fund the bank loan check, and never return the actual cash value to the borrower?"

The banker said, "The bank returns the funds."

The attorney asked, "Was the actual cash value the bank received from the alleged borrower returned as a return of the money the bank took or was it returned as a bank loan to the borrower?"

The banker said, "As a loan."

The attorney asked, "How did the bank get the borrower's money for free?"
The banker said, "That is how it works."
. . . And that’s the truth!

U.S. housing starts rose 7.2% in March to an annualized rate of 549,000, while building permits increased 11.2%, the government reported Tuesday. Housing starts in February were revised up to 512,000 from an earlier estimate of 479,000. Economists surveyed by MarketWatch had expected March starts to climb to an annual rate of 520,000.

60 Minutes - The Next Housing Shock [mirror]

fwd: HOW TO PAY FINES AT THE WINDOW

Here is how I pay fines.
Any kind of fines.

From: _______Your Name_____________
Date: ___April 11, 2011__________
To: _____The Court ________
Re: ___(Ticket # 23498)
Account Number:_case #______

To Whom it may concern:


Please regard this as my offer to settle the above referenced matter.
I am requesting that the court will accept payment in consideration of their delivery to YOUR NAME the Original Order as duly executed by Justice NAME in its original form.

Thank you very much.

___________________________
by: authorized party



You are going to be informed they can not give you the requested document in exchange for payment.
You are going to be informed they can give you a copy of it or even a certified true copy in lieu of the original.
Say to them...
OKAY...FINE.
When they bring the copy to the counter or request payment pull out your photo copies of these in the requested amount and tender them for payment.


Attachment:

Canadian100_bill.jpg [ 34.21 KiB | Not viewed yet ]

Attachment:

Canadian20_bill.jpg [ 38.64 KiB | Not viewed yet ]



Wait for their response in refusing the tendered payment.
Tell them you will give them the real thing when they come up with the real thing in exchange.
A specimen for a specimen.

*make sure you have some small bills photocopied along with some change photo copied.


[author: Jack Harper - kissin' cousin of Canada's Prime Minister Stephen Harper]

fwd: Contrary to popular belief

JackieG says:


April 1, 2011 at 6:14 pm
Contrary to popular belief neither the government nor the FED prints money out of thin air.
All money is borrowed into existence with interest attached.
Of course, the nominal borrower (government) must put up collateral for this money.
What might that consist of??
Title.
Title to your property.
All of it.
Kids included.
And where might these titles be held for safe keeping?
At the bank….where else?
The Federal Reserve has a little known subsidiary
Within this subsidury exists a division called the DTCC and sub-division called DTC

Services include:

Custody & Safekeeping Services
Underwriting Services
Deposit & Withdrawal Services
Dividend, Reorganization and Proxy Services
Restricted Securities Family of Services
Direct Registration Service
DTC is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the Securities and Exchange Commission.

Now that above comes from their website.
Do you see the custody and safekeeping services offered?
Thats right.
What do you think that’s all about?
Safe keeping of original instruments of indebtedness in their original form is a major venue of the DTC.
i.e. original stock certificates, original mortgages, original birth registrations, etc.
How else could they claim to hold assets in excess of $34 trillion dollars including securities issued in the US and more than 120 foreign countries and territories?

Thats right….now your on to it.
I would never tell you this if I was not in possession of proof.

Here is some of it.

http://ming.tv/flemming2.php/__show_article/_a000010-000923.htm
http://www.dtcc.com/about/subs/dtc.php

fwd: MORTGAGE FRAUD PACKAGE

[got this from Jack Harper - kissin' cousin of Canada's Prime Minister Stephen Harper. this is mind-blowing!]

MORTGAGE FRAUD PACKAGE

Xxxxxx,
You have never read something like this.
I forgot I had this.
You are going to love this.


Jack


If human equality is to be for ever averted - if the High, as we have called them, are to keep their places permanently - then the prevailing mental condition must be controlled insanity

- George Orwell 1984



MORTGAGE FRAUD PACKAGE



Summary and Introduction

Metaphorically speaking, when it comes to the credit business, Canadians have been educated not to see the forest for the trees. A typical mortgage loan and its supporting documentation is so riddled with fraud and other illegalities that we fail to discern the merely unfair from the objectively criminal. Put another way: what is the official procedure for dealing with criminal acts committed as a matter of policy by financial institutions? The answer is that there is none. We then deal with that problem by denying its existence.

This analysis and report takes a layered approach to explaining the legal and equitable flaws in a typical mortgage loan agreement, its supporting documentation, and its administration, as follows:

Level 1 - General fraud (contractual substance misrepresentation)

Level 2 - Criminal interest rate (required deposit balance)

Level 3 - Currency Act fraud (unlawful consideration)

Level 4 - Forgery, uttering, etc. (making false document with intent)

Level 5 - Interest rate fraud (misrepresentation of cost of (alleged) borrowing)

Level 6 - Interest Act fraud (false disclosure, unlawful late-payment penalties)

Level 7 - Administration fraud (account falsification, breach of fiduciary duty)

By taking this approach the student can begin to see the larger fraud in terms of the relationships among its component parts. Each of the above categories is summarized below. A more detailed analysis forms the larger package.

Assuming then that things are as they appear and a very substantial number of mortgage documents in Canada are tainted by fraud, forgery, uttering forged documents, falsification of account records, etc., etc., then what are the theoretical consequences in equity? In theory the purported loans are wholly void, the purported borrowers are entitled to recover all moneys paid pursuant to such contracts, and the financial institutions and their lawyers are responsible for the resulting financial losses. The legal profession as a body is thus in prima facie conflict of interest with respect to this issue. Indeed it is the abject failure of the profession to police itself which has helped to create the problem itself.



Level 1. General fraud (contractual substance misrepresentation)

In most cases the financial institution does not in fact make a loan to the purported borrower. Rather it deceives the borrower into assuming they have received a loan through a misrepresentation of the substance of the transaction and of the source of the increase in purchasing power.

Normally the nominal borrower will be required to sign a promissory note for the amount of the purported loan and then give such promissory note to the financial institution. The mortgage will then be said to secure the promissory note. In cases where there is no promissory note the following will normally apply directly to the mortgage document.

The Canadian financial system operates on the premise that a promise to pay money is money, as per the discussion/summary provided by the Alberta Court of Appeal in Breckenridge Speedway Ltd., Green et al v. Reginam [1967] 61 W.W.R. 257, at p. 274 (underlining added):

The chartered banks in Canada issue obligations, namely, deposit liabilities, which are generally accepted as means of payment in Canada although they do not have the status of legal tender…. These deposit liabilities are a form of book debt owing by the bank to the customer and in most cases… are subject to transfer by cheque…. These deposit liabilities are used by the customers of the bank… which created them as a substitute for currency.

When a nominal borrower obtains a purported loan from a financial institution the institution will normally issue the borrower an unfunded obligation - a mere promise to pay money (legal tender - coins and notes) to the borrower – which promise to pay the borrower will then normally reassign, by cheque, to a third party (e.g., the person selling them the house). The institution will then owe the amount of the purported loan to the vendor of the property.

Normally the vendor will be content to hold the institution’s promise to pay as a deemed deposit account or else assign the liability to someone else by writing a cheque of their own. This in turn allows all financial institutions to issue credit – or promises to pay money – in vastly greater amounts than the institutions actually possess – individually or collectively.

When the purported borrower, however, signs a promissory note promising to pay the institution money the borrower has equally loaned money to the institution itself. The institution directly or indirectly records the promissory note as a deposit to the purported loan account which is then accessed by the purported borrower writing a cheque against the account transferring the institution’s liability – or promise to pay – to the vendor of the property. In terms of substance, the underlying promise to pay - the source of the increase in aggregate purchasing power - always remains with the maker of the initial promissory note and not the institution.

Another way to view the same phenomena is that the institution’s chequing account credit (in the amount of the purported loan) is effectively a promissory note issued by the institution to the nominal borrower. The borrower then pays for the house by giving the bank’s promissory note to the vendor of the property (who then takes it back to the bank). The key to the deception is to realize that there is no effective difference, in terms of financial instruments, between the promissory note created by the nominal borrower and the one issued by the financial institution. That is why the CIBC, for example, inserts the following disclaimer in certain of its (conditional) loan contracts:

6. Should the Bank from time to time take from the undersigned [the purported borrower] [promissory] notes representing any advances by way of [this account], such notes shall not extinguish or pay such advances but shall represent the same only.

The bank’s legal counsel recognize that the purported borrower’s promissory note represents a deposit of equal value into the loan account and that the bank provides no substantial consideration to the borrower. By the above para. 6 the borrower nominally agrees that their own promissory note money shall be deemed to be a gift to the financial institution while the bank’s promissory note money, which is 100% secured by the borrower’s promissory note (i.e., it is literally the borrower’s own money) shall be deemed to represent consideration by the bank to the borrower in the amount of the loan notwithstanding that it costs the bank nothing, or very nearly nothing.

It is thus a fraud to represent the transaction as a loan of substance rather than as an exchange of financial instruments having equal value. In R. v. Émond [1997] 117 C.C.C. (3d) 275, for example, the Quebec Court of Appeal ruled that it is malum in se (evil of itself - a fraudulent act) for a financial middleman to misrepresent the cost to themselves of a purported asset they have acquired for the use of a party. With respect to most institutional loans, the deposit liability issued by the institution is unfunded (or very nearly so) in terms of legal tender (currency). The account is funded, however, by the purported borrower's promissory note serving as a substitute for currency in the amount of the loan.

Effectively the purported borrower is hypothecating/capitalizing/converting their future earnings (equal to the loan amount plus interest) into a present-value financial instrument today (the loan amount). That financial instrument represents a net increase in total purchasing power in the economy. For all intents and purposes the borrower has effectively printed new money in the amount of the loan, they have guaranteed the value of such money by hypothecating their future earnings to it, and they have secured such money by pledging the asset to be acquired (or already owned) with it. By deceiving the nominal borrower (and society generally) into believing that the bank has loaned the existing money of a depositor, the bank(s) systemically and systematically acquire ownership of the nation and its productive output and capacity while producing virtually nothing at all. That is how the chartered banks have collectively increased their assets by some $800 billion since 1980 while the Bank of Canada has only printed about a net $20 billion of new currency.

By analogy, assume that a car rental business were to demand a virtually identical vehicle to the one purportedly being rented, and said to be held as security, from every customer. Without the customer's knowledge or informed consent, however, the purported rental business makes minor cosmetic changes to the vehicle and then supplies it to its customer, ostensibly as its own rental vehicle. If the purported rental business were very good at the deception it would soon be renting millions of vehicles to customers all over the country without ever having purchased a single vehicle of its own. The whole country would effectively be in the business of building new cars, giving them to the company as "security" and then unwittingly renting them back from the company at rates determined as if the rental company had in fact produced or acquired the vehicles by productive means.

The fraudulent result lies in part in what the legal system describes as the "unjust enrichment" of the person perpetuating the deception - in this case the car rental business. The financial value of the deception is represented by the total value of the vehicles being purportedly rented.

Returning to the purported loan, the only substantial property interest involved in the transaction is the property interest represented by the purported borrower's capacity to honour the promissory note they have made (and as secured by the mortgage). That property interest is then transferred to the institution for no consideration. Once so obtained the financial institution then purports to rent or loan the property interest back to the purported borrower in exchange for interest. The core wrongful act is the institution's concealment of the for-no-substantial-consideration-property-interest-transfer component of the whole transaction. The purported borrower is only told that the various financial instruments they sign are for security purposes - they are not told that their own instrument is in fact the financial vehicle which the institution intends to loan back to them at interest.

Once these facts are known, the institution's operating procedures become prima facie fraudulent. See also R. v. Olan (1978), 41 C.C.C. (2d) 145, 86 D.L.R. (3d) 212, [1978] 2 S.C.R. 1175, 5 C.R. (3d) 1, 21 N.R. 504; and R. v. Theroux (1993), 79 C.C.C. (3d) 449, 100 D.L.R. (4th) 624, [1993] 2 S.C.R. 5, 19 C.R. (4th) 194, 54 Q.A.C. 184, 151 N.R. 104, 19 W.C.B. (2d) 212.

Level 4., below, explains how, even if the reader does not grasp the prima facie fraudulent nature of the result, it is achieved by means which are equally fraudulent/criminal (and somewhat easier to appreciate). As the House of Lords noted in Scott v. Metropolitan Police Commissioner [1974] 60 Cr. App. R. 124 H.L., at p. 129:

One must not confuse the object of a conspiracy [to defraud] with the means by which it is intended to be carried out.





Level 2. The promissory note as a required deposit balance

Notwithstanding the fraud inherent to misrepresenting the substance of the transaction, there is also a somewhat unique problem with the mechanics of the deception vis a vis s. 347 of the Criminal Code.

As discussed above, by process and policy financial institutions require a potential purported borrower to first deposit the loan balance into the loan account by means of their own promissory note. Such device, per se, has also long been recognized as a means by which institutions understate the true cost of the purported borrowing - and this is where the problem arises with respect to s. 347.

Assume, for example, that an actual-currency lender wishes to charge a criminal rate of interest for a loan of, say, $1,000, but also to conceal that reality. A common mechanism for so doing is called a required deposit account. In this case the lender might claim to have loaned $2,000 while requiring the borrower to post $1,000 as a required deposit which itself pays no interest. Thus the lender advances a net $1,000 while collecting interest on $2,000. Whether the lender purports to loan $2,000 with the borrower giving back $1,000 - or the borrower first depositing $1,000 to receive back $2,000 is irrelevant to the deceptive result.

By manipulating the amount of the required offsetting deposit, virtually any real rate of interest can be disguised as a legal rate of interest (max. is 60% p.a.). For this reason the criminal law requires the effective annual rate of an agreement or arrangement to be determined net of any required deposit balance. Section 347(2) states, in material part, that (underlining added):

"credit advanced" means... the money... actually advanced or to be advanced under an agreement or arrangement minus the aggregate of any required deposit balance and any fee, fine, penalty, commission and other similar charge or expense directly or indirectly incurred under the original or any collateral agreement or arrangement;

where

"required deposit balance" means a fixed or an ascertainable amount of the money actually advanced or to be advanced under an agreement or arrangement that is required, as a condition of the agreement or arrangement, to be deposited or invested by or on behalf of the person to whom the advance is or is to be made and that may be available, in the event of his defaulting in any payment, to or for the benefit of the person who advances or is to advance the money.

With respect to the latter definition:

(1) Does the promissory note represent a fixed or ascertainable amount of the money actually advanced or to be advanced under the arrangement?

In the majority of cases the promissory note represents 100% of the money to be advanced under the arrangement;

(2) Is it required, as a condition of the agreement or arrangement, that the promissory note be deposited by or on behalf of the purported borrower?

The purported borrower is required to deposit the promissory note with the lender as a condition of the loan;

(3) If the purported borrower commits an act of default under the arrangement, is the promissory note available for the benefit of the purported lender?

If the borrower defaults then the promissory note becomes available for the benefit of the purported lender. This is made plain every time a purported lender sues a purported borrower. The purported lender produces the purported security instrument for enforcement, while concealing from the courts as well that the borrower's instrument also represented the consideration purportedly provided by the purported lender.

By s. 347 of the Criminal Code, however, any such arrangement will always be a criminal arrangement because it will always define an infinite and therefore criminal rate of interest when measured, as is apparently required, against the lender's own net contribution which is zero.



Level 3. Currency Act fraud (unlawful consideration)

Assuming that the institution does not in fact execute its purported consideration to the borrower via the payment of coins and notes then the transaction appears to be unlawful by s. 13 of the Currency Act.

The federal Currency Act sub-classifies currency of Canada into two types - legal tender coins and legal tender notes. Section 7 defines certain coins as current and s. 8 then states:

8. (1) Subject to this section, a tender of payment of money is a legal tender if it is made

(a) in coins that are current under section 7; and

(b) in notes issued by the Bank of Canada pursuant to the Bank of Canada Act intended for circulation in Canada.

The section then goes on to define limits for the number of coins which can be tendered in respect of a given transaction amount, but in general expressly provides for only two forms of legal tender/currency of Canada - (1) certain coins and (2) notes issued by the Bank of Canada.

The dominant legal principle appears to be expressio unius est exclusio alterius - that that which is expressed excludes that which is not. Unfunded liabilities of private corporations are not included as legal tender of Canada and are therefore implicitly excluded.

Section 13 of the Act then requires that the monetary aspect of every contract be carried out in the currency of Canada, subject to two exceptions (underlining added):

Contracts, etc.

13. (1) Every contract, sale, payment, bill, note, instrument and security for money and every transaction, dealing, matter and thing relating to money or involving the payment of or the liability to pay money shall be made, executed, entered into, done or carried out in the currency of Canada, unless it is made, executed, entered into, done or carried out in

(a) the currency of a country other than Canada; or

(b) a unit of account that is defined in terms of the currencies of two or more countries.

Assuming the obvious non-application of the two named exceptions, if a purported loan contract is not entered into through the provision of currency (coins and notes) of Canada by the purported lender, then prima facie, it is not a lawful contract.

The section makes two essential stipulations: (1) that every contract relating to money shall be executed in currency, and (2) that such currency shall be the currency of Canada.



Level 4. Forgery, uttering, etc. (making false document with intent)

Most mortgage documents claim, as at the date they are executed, that the purported borrower is the existing owner, and registered owner, of the property being mortgaged. In most cases the same documents will then also claim to be a receipt for the purported loan proceeds. Often, assuming that the purported loan was originally sought to obtain the named property, both of these declarations will be unequivocally false.

A typical 1995 farm mortgage, for example, purportedly evidences a loan of $87,000.00 by the Lloydminster Credit Union to Shaun Herle, Leslee Herle, Alexander Aloisius Herle and Andrea Herle on or before March 28, 1995. The document states, in material part (emphasis added):

WE, SHAUN HERLE, LESLEE HERLE, ALEXANDER ALOISIUS HERLE AND ANDREA HERLE... being registered as owner of an estate in fee simple in those lands in the Province of Saskatchewan described as follows:

FIRSTLY:

The North West quarter of Section Three (3) ... [etc.] ...

in consideration of the sum of EIGHTY-SEVEN THOUSAND... xx/100 Dollars ($87,000.00) lent [past tense] to the Mortgagor by LLOYDMINSTER CREDIT UNION LIMITED, Neilburg Branch, whose postal address is P.O. Box 56 in Neilburg in the Province of Saskatchewan, who and whose successors and assigns are hereinafter included in the expression "the Mortgagee," the receipt of which sum is hereby acknowledged, covenants and agrees with the Mortgagee as follows: (see Schedule "A" attached)

Registered with and forming part of the mortgage are three Affidavits - one by each of Leslee Herle, Alex Herle and Andrea Herle - which state (to use that of Alex Herle as an example (underlining added)):

FORM D

(Subsection 8(1) of the Homestead Act)

AFFIDAVIT

I, ALEXANDER ALOISIUS HERLE, of Neilburg, the Province of Saskatchewan, MAKE OATH AND SAY THAT:

1. I am a mortgagor.

2. My spouse is a registered owner of the land that is the subject matter of this disposition and a co-signature to this disposition.

SWORN before me at Unity, )

In the Province of ) ____[signature]__________________

Saskatchewan, on the 28th) ALEXANDER ALOISIUS HERLE

day of March, 1995.)

____[(apparent) signature of credit union’s solicitor]____

A Notary Public in and for the

Province of Saskatchewan

Being a Solicitor

Likewise, para. 7 of the mortgage contains the following material provisions (underlining added):

COVENANTS AS TO TITLE

(a) The Mortgagor has a good title to the said land;

(b) The Mortgagor has the right to mortgage the land;

(e) The Mortgagor has done no act to encumber the land.

The entire mortgage document, including the attached Affidavits, is signed, witnessed, and notarized on March 28, 1995. The relevant charges (under the Criminal Code) described in detail in the main body of the report (and briefly below) are based on the following facts (and notwithstanding the fraud discussed in Level 1):

1. The declaration of prior/concurrent performance/consideration by the credit union is false. No money or credit in respect of the loan was or had been advanced as of the March 28, 1995 sworn declaration to the contrary. According to subsequent account records, $87,000.00 of "loan proceeds" was disbursed by the credit union on May 9, 1995 (approximately six weeks later).

2. The declaration(s) of ownership of the property by the purported mortgagors was false as and when it was made on March 28, 1995.

3. The declaration(s) of registered ownership of the property by the purported mortgagors was false as and when it was made on March 28, 1995.

4. Registration of the mortgage claim by the credit union was affected on April 19, 1995 - approximately three weeks after the mortgage and affidavits to the contrary were signed, witnessed, and/or notarized - and approximately three weeks before any credit would be advanced on May 9, 1995.

Under Canadian law the provision of a false material particular within a security document will cause the document to be a false document (under s. 321(b) of the Criminal Code) even though the document is otherwise made by the person who purports to make it:

321. In this Part,

"document" means any paper, parchment or other material on which is recorded or marked anything that is capable of being read or understood by a person, computer system or other device, and includes a credit card, but does not include trade marks on articles of commerce or inscriptions on stone or other like material;

...

"false document" means a document

(b) that is made by or on behalf of the person who purports to make it but is false in some material particular;

Section 366(1)(b) then states:

Criminal Code s. 366

366. Every one commits forgery who makes a false document, knowing it to be false, with intent (b) that a person should be induced, by the belief that it is genuine, to do or to refrain from doing anything, whether within Canada or not.

The purported borrower and the financial institution are co-makers of the promissory note and/or mortgage document. The purported borrower is the maker in the sense that they sign it/them while the institution is the maker in the sense that it creates and has material control over the substance of the representations made therein. Either way, based on the assumptions mentioned above, the documents will be forgeries in law. If the institution has knowledge of the material falseness of the representations made in the documents when it registers the mortgage document then such act constitutes the offence of uttering forged (false) documents under s. 368 of the Criminal Code. (Also by s. 386 w.r.t. deceiving the registrar). And of course the institution commits a separate act of utter a forged document when it deposits the false document promissory note as a credit to the loan account.

Again in terms of the car rental analogy, it is obviously necessary for the company to take delivery of the customer's own vehicle before it can make the minor alterations so as to then loan the purported customer their own vehicle back. The principle is identical with a purported mortgage loan. That is why the documents will often state of the purported loan proceeds - "the receipt of which sum is hereby acknowledged" - even though no such funds will be, or will have been, received by the purported borrower as and when they sign the documents which claim the contrary.

The declarations are absolute and do not admit of subjective opinion. The words "the receipt of which sum is hereby acknowledged", for example, does not speak to a future contemplated act, but rather expressly to an act which has already occurred.

The same goes to a limited extent for the promissory note(s). If the promissory note is of the form "For value received, I promise to pay..." where no consideration has been in fact received as and when the instrument is signed and given over, then such an instrument is void for lack of consideration (i.e., even if the institution were loaning its own or someone else’s money).

The English language employs three primary tenses with respect to time. They are past, present, and future. A transaction which parties intend shall transpire at some future time can only be described using the future tense; it cannot be described using the past tense as that tense can only be used to described events that have already occurred.

If, as and when the promissory note is given to the institution, the "value received" is zero then the instrument is void from that point. It may be that an innocent or unintentional such mistake in the execution of a promissory note can be cured or ratified by the subsequent delivery of the consideration contemplated, but no such remedy can exist where the false statement (or null consideration) is a material element in a fraudulent misrepresentation.

Consider again the disclaimer clause discussed under 1., above, from a CIBC (conditional (i.e., overdraft or operating line of credit) loan contract:

6. Should the Bank from time to time take from the undersigned notes representing any advances by way of [this account], such notes shall not extinguish or pay such advances but shall represent the same only.

The fraudulent substance of the whole transaction is reflected in the circular argument defined by the disclaimer:

6. ...notes representing...advances...shall represent the same...

Here the bank is creating an Overdraft Account under which it agrees to make purported loans up to a certain specified amount, in this case $55,000. Because the written agreement makes it clear that no funds have as yet been advanced the paper has no value as a financial instrument, per se. If and when the purported borrower does actually draw upon the account the bank may (depending on circumstances) actually have to advance what is in effect its own money to the borrower. In such case the bank will then effectively demand, as per its para. 6, that the borrower reimburse the bank by giving a promissory note after the fact for the amount of the actual advance.

Again, this is somewhat of a special case (like a credit card account cash advance) that is procedurally more expensive to the bank because it must initially use its own funds instead of those of the purported borrower. In the vast majority of cases where a definite amount and timing is agreed upon in advance the security documents will generally falsely claim to represent a completed transaction so that the financial institution can fund the loan account with the purported borrower’s own financial instrument instead of tying up its own money.

At the end of any significant period the institutions will collectively own virtually everything while having produced nothing of substance. The mistake made in the past has been for those capable of seeing the fraud to argue for change on that basis. It is, however, far more efficient and effective to concentrate on the objectively criminal means by which the fraud is perpetrated rather than the fraud per se.



Level 5. Interest Act fraud (misrepresentation of cost of (alleged) borrowing)

Financial institutions employ all manner of dishonest device by which to conceal or disguise the cost of borrowing expressed as a rate per annum (i.e., even if they were actually lending their own or someone else's money). The most significant of these has been what are termed loan fees. Parliament has attempted on at least twelve occasions since 1880 to prohibit lenders from capitalizing their own business expenses to a borrower’s debt. In virtually every case, however, the courts ruled on ultimate appeal that these laws have some other purpose and basically refused to give them effect.

Of similar importance, especially in the more recent era, is the purported technique of "calculating" the agreed rate of interest as well as the interest payments per se. This fraudulent technique is recognized as unique to Canadian financial institutions and has been prohibited (in any form) in the U.K. since 1974 on the grounds that it has no mathematical validity and is "seriously misleading". Indeed, it is prima facie a fraud.

Other techniques discussed in the main body of the report, some more directly criminal than others, include multiple nominal accounts with prescribed minimum transfer amounts, word games with "shall" versus "may", willful subversion of legal principles, etc., etc.



Level 6. Interest Act fraud (rate misrepresentation, unlawful penalties)

Often a mortgage loan agreement will call for a penalty of usually $15 to $30 for the event of any payment not being made when due. The following, for example, is from a Canada Trustco mortgage loan contract:

Should any payment on this mortgage loan not be honoured, Canada Trustco may charge a fee for each such payment. At present the fee is $19.00 per item.

Section 8 of the Canada Interest Act expressly prohibits the charging of any penalty on arrears of principal or interest secured by mortgage of real estate:

8. (1) No fine or penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage of real estate, that has the effect of increasing the charge on any such arrears beyond the rate of interest payable on principal money not in arrears.

The act of stipulating for such a penalty theoretically strips the institution of its access to the civil courts (i.e., it forfeits its locus standi in curia) such that it cannot maintain an action (as per the explanation of Gwynne, J. of the S.C.C. in Bank of Toronto v. Perkins, [1883] S.C.R. [Vol. VIII] 603). The same principle applies to each of the seven categories mentioned at the outset. It is an axiom of free-market philosophy that the state not interfere in commercial transactions except by denying access to the civil courts through what is often termed the clean hands principle. The principle is intended to keep the system honest (emphasis in original):

CLEAN HANDS are required from a plaintiff, i.e., he must be free from reproach, or taint of fraud, etc., in his conduct in respect of the subject matter of his claim ; everything else is immaterial.

Also, such documents are on their face a fraud in that the provision itself is a representation of its validity. That is, the institution is a sophisticated financial and legal entity; the fact that it includes such a penalty provision is a de facto attestation to its legality. That misrepresentation is a fraud of itself.

Further, several of these $19 penalties were subsequently assessed in this particular case, and this involves a further wrongful act by the trust company. By signing the direct debit form, the purported borrower both directed and authorized the trust company to issue what is in effect a cheque written against the purported borrower’s account in the amount specified under the authorization/directive (see Esso Petroleum Co Ltd v. Milton [1997] 2 All E.R. 593).

The financial institution acts as the agent of the account holder in fact and in law. This is why, for example, a cheque writer can order the financial institution to stop payment on a cheque already written but before it has been presented against the account for payment.

It is, however, a crime to write a cheque against an account knowing that the cheque cannot be honoured (at the time it is written) due to insufficient funds. Section 362(4) of the Criminal Code even expressly states that, in a proceeding under s. 362(1)(a) (obtaining by false pretence), an accused is presumed to know whether a cheque they have written will be dishonoured as NSF. That section (362(4)) has since been ruled null and void (R. v. Driscoll (1987), 38 C.C.C. (3d) 28) as contrary to the presumption of innocence under the Charter of Rights and Freedoms - meaning merely that the cheque writer's knowledge of the account balance must still be established for a conviction under s. 362(1)(a). The more common term for the offence is "cheque-kiting" or "cheque- flashing" and is defined as the issuance of a liability against an account before an equivalent value has been deposited into the account (i.e., with the knowledge that there are no funds in the account at the time the cheque is written).

In the present case, the account holder’s agent, Canada Trustco, was instructed by the account holder to write a cheque, payable to itself, against the account, on a stipulated date each month. If, however, there are insufficient funds in the account, the institution must not issue the cheque because it would otherwise be committing a crime as the agent of the account holder and in their name. The institution obviously knows (or should know) that there is insufficient funds in the account but issues the cheque anyway solely to enrich itself by the $19 penalty - a penalty which it knows (or is deemed to know) is unlawful by s. 8(1) of the Interest Act.

In any event, in order to argue that it has not committed a wrongful act as the account holder’s agent by attempting to debit the amount with knowledge of the NSF status of the account, the trust company must argue that the $19 penalty is just that - a pure illegal penalty for the mortgage payment being in arrears - and not an NSF penalty per se. Either way the act itself is prima facie illegal.





Level 7 - Administration fraud (account falsification, breach of fiduciary duty)

Financial institutions systematically defraud their account holders through a large and seemingly increasing number of account manipulation techniques. These techniques range from simple deceptive word games to the direct falsification of the accounting records. The primary benefit to the reader is that even a tertiary review of these practices lays it bare that there is virtually no illegal act beyond the contemplation of a modern financial institution.

Conclusion

The "all or nothing" game has worked so well and so often in the past that the directors and legal counsel running the institutions are convinced that there is no indignity which the Canadian public will not suffer to prevent "the system" from collapsing. The reality is that these institutions produce nothing, they possess only a few billion dollars of real money and are nothing more than a sophisticated cheque-kiting operation with respect to the remaining trillion dollars of their so-called assets. They could disappear from the face of the Earth tomorrow and the vast majority of people would be radically better off.

If you have attended one of our seminars and/or are reading this first version (1.0) of the Mortgage Package then you are on the vanguard of a movement that became inevitable 300 years ago with the establishment of the privately-owned Bank of England. The core strategy of the money power elite has been to bury the truth in mountains of data that no single individual could hope to wade through in a single lifetime. But technology, and therefore time, is the natural enemy of such a strategy, and the clock is winding down.

We are truly a global village that can no longer put off dealing with the fact that those whom we have collectively trusted to manage our collective financial affairs have been stealing from us. The looters will very likely stage or provoke some act of violence so to justify changing the rules so as to escape justice. We must steadfastly resist being drawn into such a trap. The issue has gone well beyond political or economic philosophy - it is about a mass movement of resolute citizens firmly insisting on the application of the criminal law.

fwd: My #1 Pupil

Here is the documentation in regards to settling a credit card obligation put forward by my #1 pupil..
http://www.mindwarpsectorfour.com/creditcard.html


His handle is : Travette
http://forum.worldfreemansociety.org/viewtopic.php?f=23&t=3893&hilit=12000+credit+card

[above author: Jack Harper - kissin' cousin of Canada's Prime Minister Stephen Harper]

The Fact Remains..

The fact remains that, I can not find any evidence the bank has ever loaned a consumer money or suffered a loss in the event a consumer defaults.
It simply: does not exist.
So....no matter what the banks claim, this fact remains undisputed.
And,
In the absence of evidence to the contrary, the fact is deemed, admitted.
That is how you nail their lousy carcus to the wall.

[above author: Jack Harper -- kissin' cousin of canada's prime minister Stephen Harper]

of some interest ? got this email forwarded to moi:

Date: Fri, 25 Jun 2010 06:55:28 -0700
From:
Subject: Success with mortgage!


Some success! Kerry from Sechelt has been trying everything from GSA forms to liquidations against the court and Royal Bank regarding his foreclosure problem on his $450, 000.00 home in Gibsons BC. About 2 months ago the bank got an order to sell the house. Within a week Kerry appealed and put in to the bank and court a cease and desist order, a PPSA lien against his property, and a series of affidavits signed by Sechelt Elders and Squamish Elders claiming that the land had never been sold or ceaded by the Natives and that that the natives have a superior claim over the Royal Bank to the land.

Last week Kerry got summonsed to court again for yesterday and the Bank was bringing all the paper work that Kerry filed to bring it in front of the Judge. So.....Kerry had entered an affidavit which allowed Seemas (a native elder) to speak for him. Kerry read it into the court right off the hop and told the judge that it was native tradition for the elders to speak for someone untill they are competent in native ways to speak for themselves. The judge said "Well we can't go against native tradition" (Kerry is a whitey that has been adopted by the Sechelt natives) Kerry also read his affidavits into court and interestingly enough the judge commented to him that it was a good move reading them into court otherwise the court would not have seen them.

The lawyers for the bank told the judge that they were relying on code such and such to proceed with the forclosure and the judge said that that code would require a bill of sale in order to be applied. (A bill of sale between the natives and the Crown or the Bank evidencing that the Natives sold or ceaded the land in the first place.) Kerry piped up and said we have repeatedly asked by affidavit for the bill of sale and the Bank has not provided us with one. The judge then said do you have any copies of those affidavits? Kerry said yes and filed them in to the judge. Then majicely the Judge found that he already had copies of the affidavit in the pile of paperwork in front of him. (Obviosly, he had seen them but chose not to look at them untill they were presented in open court)

This is where it gets good.....the Banks Lawyers had entered an instrument that initiated the action (I forget what the instrument is called) This instrument according to the judge requires that it is backed by a bill of sale! The Judge asked the lawyers for the Bill of Sale. The lawyers nervously flipped through their papers and said they couldn`t find it.The judge said Òhhhh! `someone may be liable for a possible 14 year prison sentence for filing this instrument without there being a bill of sale!

Seemas stood up and said enough is enough we want this over and right now! We want that Bill of Sale by tommorrow. The Judge said no they have two weeks to come`up with it!
Then he said `` I`m allowing two weeks because I`m going on holidays and I don`t want to be around in two weeks when this case gets decided because it`s too big of a ruling for me. I don`t want to touch it.

Someone at the Bank or the Banks lawyers office is going to jail! Not only that but the Bank will be ruined by eventually having to pay everyone back who has a mortgage with them on any land in BC that has not been sold or ceaded to the crown. Kerrys house is within the municipality of Gibsons and that still means Jack Shit because the Natives have a superior claim to it. This is huge!

Dave

Bank Buys Broker for CONCEALED DEMOLITION
An open e-mail letter to:

David Hough, Executive Director
London Market Insurance Brokers' Committee

Copy:
Judi McLeod, Founder Editor, Canada Free Press
www.canadafreepress.com/

Steven Jones
Professor of Physics, Brigham Young University
Co-chair of Scholars for 9/11 Truth

Jim Fetzer
Distinguished McKnight University Professor of Philosophy
Co-chair of Scholars for 9/11 Truth www.st911.org/

Bcc

Date of sending: April 3, 2006

Dear Mr. Hough

Re: 9/11 - Bank Buys Broker for Concealed Demolition

In my e-mail to you titled, "Citigroup-AMEC 9/11 insurance fraud on Lloyd's of London?", I suggested that "Lloyd's convert its civil action in respect of alleged negligence by Citigroup-AMEC [in an alleged diesel-fueled fire leading to the destruction of WTC#7] into a RICO* suit in respect of apparent racketeering [including solicitation to murder], extortion, arson and insurance frauds .."
(Full text of letter at www.st911.org/ some excerpts below)

RICO* - Racketeering Influenced and Corrupt Organization

We remind you that Lloyd's et al. have sued Citigroup-AMEC et al. in respect of the destruction of WTC#7 which with WTC#1 and 2, became the first three steel-framed buildings in history to collapse through fire on 9/11.

One of the directors of Citigroup is the disgraced former director of the C.I.A., John Deutch. Mr. Deutch is a director of Raytheon where he helped to destroy 'Able Danger' counter-intelligence data-mining evidence pointing at Mohammed Atta's and the other al-Qaeda cells in America a year before 9/11.
www.abledangerblog.com/20...chart.html

Deutch's Citigroup is now arranging credit of $25 billion to help Cerberus Capital Management buy GMAC, the mortgage broker which allowed WTC leasholder, Larry Silverstein, to structure an alleged 'double occurrence' insurance fraud.
biz.yahoo.com/ap/060403/g....html?.v=9

Post 9/11, Mr. Silverstein claimed damages for two buildings (WTC# 1 & 2) but the, together with his Citigroup-AMEC and GMAC advisors, must have concealed from the court their prior knowledge that at least three WTC buildings (#1, 2 & 7) had been rigged for demolition with explosives and/or incendiaries.

If Mr. Silverstein did not know that the three WTC buildings were so rigged, he could not meaningfully have agreed with the officers of the New York Fire Department to 'pull' WTC building 7.
www.prisonplanet.com/011904wtc7.html

'Pull' is industry jargon for taking a building down with explosives.

To secure the WTC mortage, GMAC appears to have bought leaseholder-owned life insurance policies from Groupe Axa on behalf of mortgage investors, including, we suggest, Citigroup and various New York City Pension Funds ("NYPF") such as NY's Fire Department Pension Fund ("FDPF") and its Firefighters' Variable Supplements Fund ("FFVSF"), the latter being responsible for maximizing the retirement benefits of senior officers in the City fire department.
www.axa-financial.com/pre...ement.html

Around March 2000, these New York City Pension Funds were plaintiffs in what we consider was a Mafia-directed racketeering class action suit* against Orbital Sciences of Dulles VA.

* In the United States District Court for the Eastern District of Virginia,
Alexandria Division (Civil Action No. 99-197-A Jury trial demanded)

The NYPF suit appears to have been designed to extort mob control over war-gaming and insured-mortgage decision support technologies of Macdonald Dettwiler and Associates ('MDA') of Richmond, British Columbia, Canada.
www.mdacorporation.com/sy...ence.shtml
www.mdacorporation.com/ne...50301.html
www.mdacorporation.com/ne...10301.html

Following an out of court settlement, Orbital handed control of MDA to the CAI Private Equity group, custodian of the NYPF and many other labor union pension and insurance funds, thereby allowing 50 "prominent individuals" with CAI, Citigroup, GMAC and insiders to 'stage' hijackings for the 9/11 attack but conceal the subsequent demolitions in support of bogus insurance claims.
www.caifunds.com/specialinvestors.html
www.caifunds.com/successs...#macdonald

After 9/11, CAI, Citigroup, GMAC and their affiliates in Groupe AXA appear to have collected death certificates from families of dead firefighters and paid out "dead-firefighter" life insurance policies to victims' pension fund.
www.axa-financial.com/pre...ement.html

Deutch's Citigroup and GMAC appear to have conspired to use racketeering loans to finance 9/11 hijackings during bogus NORAD war games and divert attention from concealed demolitions and organized securities and insurance frauds.

New York firefighters with other City labor union members who missed, escaped or survived the 9/11 attacks, involuntarily profited from the deaths of their colleagues through AXA payments into their union pension and insurance funds.

City pension fund members are now at risk of being accused of participating in the 9/11 crimes and are therefore targets for racketeering and extortion.

We believe that Citigroup is buying GMAC to protect insider knowledge of the concealed demolitions of WTC buildings #1, 2 and 7 and the RICO activities of the CAI Private Equity Group members, who appear to be engaged directly or indirectly in murder, arson, racketeering and insurance frauds.

Once again, we invite you to forward this to your contacts at Lloyd's for consideration of a RICO suit against CAI's "50 prominent individuals" including the 9/11 insiders at Citigroup the bankers and GMAC the brokers.

Yours sincerely,


David Hawkins
British Columbia, Canada Tel: 604-542-0891

Notes:
"9/11 - Bank Buys Broker for CONCEALED DEMOLITION"

Silverstein's lawyers referred to .. near-simultaneous burnings four different courthouses by deranged man constituted 'multiple events .. Silverstein .. and partners .. borrowed $563 million from GMAC .. agreement to use insurance proceeds to pay off lender in trade center deal, the GMAC Commercial Mortgage Corporation"
www.greatgridlock.net/NYC/nycpress.html

"The World Trade Center leaseholder has won a court victory over his insurers .. A New York jury has decided that the 11 September 2001 attack on the two towers constituted two separate events. The US District Court ruling means Larry Silverstein could now get an extra $1.1bn (£0.56bn) from nine insurers to finance reconstruction. He has been fighting the insurance companies, arguing he was owed $7bn (£3.6bn) - double his $3.5bn policy."
news.bbc.co.uk/1/hi/business/4075053.stm

...

Exceprts from, "9/11 - A Citigroup-AMEC insurance fraud on Lloyd's of London?
..
by David Hawkins, Foundation Scholar, Cambridge University, Founder of the
Citizen's Association of Forensic Economists at Hawks' CAFE ..

"An open e-mail letter to: David Hough, Executive Director London Market Insurance Brokers' Committee"

...

"Underwriters at Lloyd's have an ongoing action to recover damages in respect of the alleged negligence by Citigroup Construction Defendants—AMEC PLC et al. ("Citigroup-AMEC") which defendants allegedly caused damage to a substation underneath World Trade Center building 7, that substation being the property of a Lloyds' insuree, Consolidated Edison Company of New York, Inc. (“Con Ed”).
www.total911.info/city_sj_motion.pdf

Lloyd's, with others, allege that Citigroup-AMEC was negligent in designing and installing the 7WTC water mains which ruptured and prevented firefighting and the 7WTC diesel generators, fuel lines and tanks which malfunctioned and fed fires causing an 'implosion' of the Con Ed substation.

...

We allege the Citigroup-AMEC partners sabotaged the diesel generators to feed fires lit by arsonists on the 11th, 12th or 13th floors of WTC7 where the Securities & Exchange Commission lost between 3,000 to 4,000 files. The SEC files contained evidence of insider trading by Citigroup-AMEC investment bank partners in the shares of initial public offerings during the high-tech boom. The House Financial Services Committee was seeking information about the treatment Citigroup's Salmon Smith Barney investing banking division may have given WorldCom executives. Salomon had offices in 7 World Trade Center and Citigroup says back-up tapes of corporate emails from September 1998 through December 2000 were stored at the building and destroyed in 9/11. Citigroup subsequently paid $2.65 billion to the settlement class which purchased WorldCom securities during the period from April 1999 through June 2002.
www.thestreet.com/markets...36925.html
www.citigroup.com/citigro...40510a.htm

At 5:20 p.m. on 9/11, 7 World Trade Center collapsed in its own footprint at a speed slightly slower than free fall under gravity in a manner consistent with a controlled demolition. Molten steel and partially evaporated steel members were found in the debris pile of WTC #1, 2 and 7. The thermal signature of 32 hot spots, 5 days and 10 days after the collapse, is consistent with all the buildings being rigged for demolition with an incendiary such as thermite.

We allege that the Citigroup-AMEC partnership now conspired to remove and destroy evidence of arson before filing bogus property insurance claims in an arrangement with Larry Silverstein and Silverstein Properties, including a claim for a double payment for the destruction of the Twin Towers. "Griffin quotes court documents to the effect that Silverstein had only $14 million invested in the insurance deal for the Twin Towers (compared to 50 times as much by his [off-book] lenders) through limited liability investment vehicles."
9-11-inquiry.blogspot.com...oking.html

End of excerpts from "9/11 Citigroup-AMEC insurance fraud on Lloyds ...."

http://www.hawkscafe.com/040506.html


[ps. David Hawkins -- he an oil expert]

fwd: What really took place at the bank…?


I'm going to delve into something here that has never, ever crossed the mind of Joe Six Pack from the time of his birth to his untimely death….other than the fact Joe was constantly in debt.

Joe goes to the bank one day as planned, to meet with the loans officer.
Upon entering Mary Stein’s office she knows what Joe is looking for.
Joe seats him self and Mary proceeds to tell Joe his income to debt service ratio allows him to qualify for a $240,000.00 mortgage loan.
Joe beams as he looks around her office at the ads portraying the possibilities of getting a bank loan.
Joe thanks her for the info confirming his application and leaves to go to his real estate broker.
Four days later Joe makes an offer to purchase and after some negotiations settles on a firm price.
Joe heads back to the bank to see Mary Stein where she pulls out some forms for Joe to sign and then slide them back across Mary’s desk.
Joe is not aware that he has just given the bank an asset item, a loan as it were, in order the bank may have a deposit on hand, in order to fund the check they will send to the people Joe purchased the house from.
Joe is completely oblivious to bank rules and policy that forbids the bank from loaning any of its depositor’s funds (liabilities) to him.
Joe is completely oblivious to bank rules and policy that forbids the bank from loaning any of its own money (profits) or credit to him. (no bank has credit, only liabilities to shareholders).
Joe is completely oblivious to bank rules, policy and Generally Accepted Accounting Procedures that show Joe is the only party to come to the bank with any funds in order to issue a check to the seller.
Joe is completely oblivious to bank rules, policy and Generally Accepted Accounting Procedures that show the only thing that took place was an exchange of asset items, neither of which were legal tender at the time of negotiation.
Yet, Joe pays…and pays, for maybe forty years with compound interest, setting Joe up for life with a ball and chain on his ankle attached to the bank.
At the close of the term and the bank receiving final instalment, Joe is eager to have his mortgage burning party.
Joe finds in his mail box a letter from the bank along with a "copy" of his mortgage stating the bank has discharged his obligation to the bank.
Joe is completely oblivious to bank rules and policy as to the meaning of the words; “discharge”, “copy” and “obligation”.
Joe is completely oblivious to the fact that according to law, a copy is a “forgery” and therefore, the bank retains the original instrument of indebtedness (title), but, not in its original form.
Joe is completely oblivious to the fact that by doing so, the bank retains “legal title” (registered owner) to his home and as the abstract from land titles office indicates that Joe has retained “equity title” as beneficial owner, a tenant.
That evening Joe gets drunk as he and his wife along with some friends burn the worthless piece of paper Joe received from the bank.
Joe is completely oblivious to the fact that according to the generally accepted rules of psychiatry and contract law, he is an utter fool and idiot….through no fault of his own.
Joe was taught something to the contrary in school, at home and in business.


Now….
what would happen, if Joe woke up…..by the millions and called the banker out on this one?
And sent these to his banker as an offer to settle the above referenced matter?

Effectively Dealing With Creditors

Letter Number 1:

For use with just about any type of financial
obligation issued by a licensed financial institution
mortgage, credit card, bank loan etc. (Does not work
if the loan is from a “private” source.)

From: ____________________
Date: ____________________
To: ____________________
Re: ___(Credit Card, bank loan, mortgage,
etc.) Account Number:___________

To Whom it may concern:

I would like to make arrangements to settle
the above referenced matter. Please provide me with
your statement of the amount owing as of ___(pick
date 2 weeks out for example)___, together with your
assurance that you will accept payment in direct and
immediate exchange for the original instrument of
indebtedness in its original form.

Thank you very much.

___________________________
by: authorized party


Letter Number 2A:

For use with adjustments in most cases when
you receive the initial response from Letter 1 above,
where they confirm an amount owing and provide
some comment that the “statements” or some other
lame documentation they provide are evidence of the
obligation.

From: ____________________
Date: ____________________
To: ____________________
Re: ___(Credit Card, bank loan, mortgage,
etc.) Account Number:___________

To Whom it may concern:

Thank you for your letter of ________,
wherein you confirm my outstanding balance as
requested.

Also, you have confirmed that the
“statements that _____(name of institution here)____
sends are your evidence of your indebtedness to the
Bank”. (This is a quote from actual bank letter and
wording may vary slightly, but should where possible
be quoted from their letter.)

Accordingly, would you please confirm that
the Agreement that exists between us which ratifies
this specific application of these “statements” and
confirms me as the party obligated to the Bank will
be delivered to me as the original instrument of
indebtedness in its original form, in exchange for
payment in full of my obligation as may be
referenced by these “statements”.

Sincerely,

___________________________
by: authorized party


Letter Number 2B:

For use with adjustments in other cases when
you receive the initial response from Letter 1 above,
where they confirm an amount owing and simply
ignore the second part of the request.

From: ____________________
Date: ____________________
To: ____________________
Re: ___(Credit Card, bank loan, mortgage,
etc.) Account Number:__________

To Whom it may concern:

Thank you for your letter of ________,
wherein you confirm my outstanding balance as
requested.

It is apparent that you have overlooked or
ignored my request to confirm that you would accept
full payment of the alleged obligation from me in
consideration of your delivery to me of the original
instrument of indebtedness in its original form.

Accordingly, unless I receive your written
confirmation that you will accept payment from me
in consideration of your delivery to me of the original
instrument of indebtedness in its original form on or
before ____(pick a date like 15 days from sending the
letter)____, I will conclude that you are either unable
or unwilling to comply, and I will thereafter consider
the matter between us to have been legally and
financially settled.

Sincerely,

___________________________
by: authorized party


Letter Number 3:

For use with adjustments in other cases when
you receive NO response from Letter 1 above.

From: ____________________
Date: ____________________
To: ____________________
Re: ___(Credit Card, bank loan, mortgage,
etc.) Account Number:__________

To Whom it may concern:

I have sent you my request as of
___(date)___ for you to confirm the balance owing
on the above referenced matter and for you to
confirm that you would accept full payment of the
alleged obligation from me in consideration of your
delivery to me of the original instrument of
indebtedness in its original form.

It is apparent that you have overlooked or
ignored my request. Accordingly, unless I receive
your written confirmation that you will accept
payment from me in consideration of your delivery to
me of the original instrument of indebtedness in its
original form on or before ____(pick a date like 15
days from sending the letter)____, I will conclude
that you are either unable or unwilling to comply, and
I will thereafter consider the matter between us to
have been legally and financially settled.

Sincerely,

___________________________
by: authorized party


NOTES:

1. The concepts outlined in these documents
will also work for most Court Orders to pay. Simply
change the wording such that you are requesting
confirmation that the court will accept payment in
consideration of their delivery to you of the Original
Order, as duly executed by ___(Judge name)___ and
in its original form (which is the original instrument
of indebtedness).

2. This process will not work with private
lenders because in most cases they can and will
produce the original instrument of indebtedness.

3. If you receive any communication from a
collection agency or lawyer representing the financial
institution, you should follow the concepts outlined
in the above letters but ONLY in direct
correspondence with the financial institution.

NEVER respond to a lawyer or collection agency
with anything other than the concept outlined in
Letter 4 that follows.

Letter Number 4:

For use with when terminating
communication from financial institution’s lawyer or
collection agent.

From: ____________________
Date: ____________________
To: ____________________
Re: ___(Credit Card, bank loan, mortgage,
etc.) Account Number:___________

To Whom it may concern:

I confirm that I have received a written
communication from you dated ___(date)___
wherein you make reference to the above captioned
matter.

It is apparent that you are acting on the
presumption that some relationship that you may
have with ___(name of bank)___ , is in some way
related to me. I am not a party to this implied
relationship you have with ___(name of bank)___,
either directly, indirectly or by means of any tacit
consent.

Accordingly, I do not understand how to
respond to you inasmuch as I am unaware of any
contractual relationship between us.

As a courtesy and because you may find it
helpful, I have attached recent correspondence
between myself and ___(name of bank)___, wherein
I have repeatedly offered to settle the mater between
myself and ___(name of bank)___.

Sincerely,
___________________________
by: authorized party
c.c file


Letter Number 5:

Alternate for use with when terminating
communication from financial institution’s lawyer or
collection agent.

From: ____________________
Date: ____________________
To: ____________________
Re: ___(Credit Card, bank loan, mortgage,
etc.) Account Number: __________

To Whom it may concern:

I confirm that I have received a written
communication from you addressed to
_____________ and dated ____________ wherein
you make reference to the above captioned matter.

It is apparent that either:

i) you are acting on the presumption
that some relationship that you may have with
__(name of bank)__, is in some way related to me,
which if such presumption is the case, I confirm that I
am not a party to this implied relationship you have
with __(name of bank)__, either directly, indirectly or
by means of any tacit consent, and accordingly, I do
not understand how to respond to you inasmuch as I
am unaware of any contractual relationship between
us; or

ii) you have entered into a contractual
relationship inclusive of evidence of consideration
paid to or agreed to be paid to __(name of bank)__,
which contractual relationship has caused you to
become the legal holder in due course of an alleged
obligation between ____________ and __(name of
bank)__.

If indeed you have entered into such a
contractual relationship with __(name of bank)__, as
set forth in clause ii) above, then I hereby confirm
that I accept your offer to reduce the amount of the
alleged obligation from $______ to $______; and I
confirm that I would like to make arrangements for
settlement of the above referenced matter
immediately upon you providing me with your
written and legally binding assurance that you will
accept payment in full settlement of this alleged
obligation in direct and immediate exchange for the
original instrument of indebtedness in its original
form that you must now be holding pursuant to the
aforesaid contractual arrangement between you and
__(name of bank)__.

Sincerely,

___________________________
by: authorized party

NOTE: underlined portion in last paragraph
may be omitted if not applicable.

What is right and wrong DOES matter in life:

All the money in existence in our monetary systems
has been borrowed at interest from a bank. When all
currency in the system is borrowed at interest, there
is NO MATHEMATICAL WAY to pay one penny of
interest without pushing some people off the table via
cancellation of their obligations to pay principal
through bankruptcy, or through the kind of
cancellation programs offered.

Reform must come from the side of
dissatisfied customers, because the lenders have NO
motivation to move away from their current position
of power and influence. If people who favour the
customer over the lender are able to use the law to
stimulate change, any imbalance created by giving
people their real estate for free will best correct itself
through a change in banking laws and practice, NOT
through perpetuation of the present system of
GRAND THEFT of the entire wealth of society by
the banking cartels.

Under the present system, someone HAS to
get something for NOTHING. There is no other way.
Either the bankers continue to get interest payments
for NOTHING at risk, or customers get free real
estate after "borrowing" money that was created out
of NOTHING and having the "loan" either cancelled
for fraud, or discharged in bankruptcy, or the lender
gets the real estate from the customer for NOTHING,
following a foreclosure on the loan that was created
out of NOTHING. The answer is to stop basing bank
lending on NOTHING but, a fraudulent exchange.


[from an email forwarded to moi -- the writer/author is Jack Harper - kissin' cousin of Canada's Prime Minister Stephen Harper]

Get ready for higher mortgage rates

The difference between rates on a 30-year fixed mortgage and 10-Year Treasury note eased thanks to Fed support.

By Chris Isidore, senior writer
February 23, 2010: 3:24 PM ET


NEW YORK (CNNMoney.com) -- Even though signs of a housing recovery are uneven at best, the Federal Reserve is about to take off the training wheels it has had in place for more than a year to help the battered market.

The Fed has been buying mortgage-backed securities, the bundling of home loans that are used to fund mortgage lending, since late 2008. But next month it plans to complete its purchase of $1.25 trillion in mortgages.

That could be bad news. There is wide agreement that the removal of this support will mean higher mortgage rates, which could hit housing prices and sales hard. Some even worry that this could cause the broader economic recovery to stall.

The program was the largest single injection of cash into the economy by the Fed during the financial crisis, and it will be the longest-lasting source of funds as well. Even though the Fed intends to stop buying mortgages, few expect the central bank will start selling them to private investors any time in the next few years.

Higher rates on the way. But even if the Fed holds onto the mortgages it has already purchased, the act of no longer buying additional mortgages is likely to raise mortgage rates in the coming weeks. Experts say a jump of at least a quarter to a half percentage point is likely.

San Francisco Federal Reserve President Janet Yellen warned of higher rates in a speech Monday. Fed Chairman Ben Bernanke is likely to take questions about the Fed's mortgage program when he testifies about economic conditions on Capitol Hill Wednesday and Thursday.

The spread between the interest on 30-year fixed rate mortgages and the benchmark 10-year Treasury note now stands at about 1.2 percentage points. Before the financial crisis, this spread was typically closer to 1.5 percentage points.

The worry is that high foreclosure rates and a still struggling economy will make investors demand a bigger spread than "normal", since mortgages carry far greater risk in the current market.

Before the Fed started buying mortgages, the spread had climbed to about 2.5 percentage points. A return to that spread is unlikely, but there is uncertainty about how high it could go.

Paul Kasriel, director of economic research at Northern Trust, said he "wouldn't be surprised" if the spread widened by half a percentage point from current levels.

That can have a significant impact on prices by limiting what a buyer can pay for a home. Take the $178,000 median home price of existing homes sold in January. A buyer with a 20% down payment will pay just over $750 a month in mortgage payments for a 30-year fixed loan at today's rate.

Raise that rate by a half point, and the same buyer will only be able to afford a home worth $170,000 to keep payments near the $750 a month level.

The other concern is that even if the spread doesn't increase that much, mortgage rates could still shoot up simply if Treasury yields start to rise. That's possible if the debt problems in Greece and other weaker European countries is resolved in the new few months and investors who moved to U.S. government debt in a flight to quality move out of Treasurys.

End of tax credit to add to problems. The worries about the Fed pulling back support for housing are compounded by the end of up to $8,000 in tax credits for home buyers. To qualify, buyers face an April 30 deadline to sign a sales contract.

Dean Baker, co-director of the Center for Economic and Policy Research, argues that the Fed's program and tax credit for home buyers "ended the free fall in home prices."

But he thinks that the removal of this support could mean that home prices could start to drop by as much as 1% a month again. He also thinks mortgage rates could climb by as much as a percentage point in the coming months.

Jay Brinkman, chief economist for the Mortgage Bankers Association, said even if there isn't a big impact on home sales and prices, higher rates will lead to a plunge in mortgage refinancings.

The MBA now forecasts refinancings will fall to a range of $500 billion to $600 billion this year from $1.4 trillion last year. That will mean even less cash available for homeowners to spend on other goods or to reduce debt.

But Brinkman said the Fed is right to do what it is doing, even if the housing market is still in tenuous condition.

[b]"It's kind of like a pain killer. If you stay on it too long, the withdrawal pains may be worse than the pain you were trying to deal with," he said.

But David Wyss, chief economist with Standard & Poor's, said he isn't sure that the Fed will even follow through and stop buying mortgages. If home sales and prices start to tumble sharply once again, the central bank could be back buying mortgages fairly quickly.

"It's like the parent who is teaching a child to ride a bike who carefully lets go while running along side," he said. "The Fed thinks the child is able to balance by himself at this point, but it's still going to be running alongside the bike, just in case."

http://money.cnn.com/2010/02/23/news/economy/fed_mortgages/

Fannie Mae seeks $15.3B in gov't aid after 4Q loss

Fannie Mae asks for $15.3B in federal aid after posting $16.3 billion loss in fourth quarter

Friday February 26, 2010, 6:23 pm EST

WASHINGTON (AP) -- Fannie Mae needs another $15 billion in federal assistance, bringing its total to more than $75 billion. And worse, the mortgage finance company warned its losses will continue this year.

The rescue of Fannie Mae and sister company Freddie Mac is turning out to be one of the most expensive aftereffects of the financial meltdown. The new request means the total bill for the duo will top $126 billion.

And the pain isn't over. Fannie warned Friday that it will need even more money from the Treasury, as unemployment remains high and millions of Americans lose their homes through foreclosure.

Fannie Mae reported Friday that it lost $74.4 billion, or $13.11 a share, last year, including $2.5 billion in dividends paid to the government. That compares with a loss of $59.8 billion, or $24 a share, a year earlier.

Fannie Mae, which was seized by federal regulators in September 2008, has racked up losses totaling $136.8 billion over the past three year.

Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie, lifting an earlier cap of $400 billion.

Earlier in the week, Freddie reported a loss of almost $26 billion for last year. The company didn't request any more money, but expect to do so later this year.

Fannie and Freddie play a vital role in the mortgage market by purchasing mortgages from lenders and selling them to investors. Together the pair own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.

"Through this prolonged stress in the housing market, we are helping homeowners across the country, supporting affordable housing, and providing financing to keep the residential markets functioning," the company's chief executive, Mike Williams, said in a statement.

The two companies, however, loosened their lending standards for borrowers during the real estate boom and are reeling from the consequences. At the end of last year, nearly 5.4 percent of Fannie Mae's borrowers had missed at least one payment -- dramatically higher than historic levels.

During the most recent quarter, Washington-based Fannie suffered $11.9 billion in credit losses and a $5 billion write-down for low income tax credit investments.

That led to a fourth-quarter loss of $16.3 billion, or $2.87 a share, including $1.2 billion in dividends paid to the Treasury Department. It compares with a loss of $25.2 billion, or $4.47 a share, in the year-ago period.

http://finance.yahoo.com/news/Fannie-Mae-seeks-153B-in-govt-apf-941423971.html?x=0

Banking on dummies coming in for a loan

From: Jack Harper (xxxx@gmail.com)
Sent: Sun 1/03/10 9:04 PM
to:

To whom it may concern;


For illustrative purposes...
You walk into a bank and approach the counter with (2) $10.00 bills (notes).
You ask the young lady if she would kindly exchange these for a $20.00 bill (note).
You exchange your two pieces of paper (notes) for her one (note).
Did the bank give you a loan?

Same scenario...

You are seated across from the banker or bankers rep...
You sign a piece of paper (note) worth $13,000.00 and give it to him in exchange for a check (note) for $13,000.00
Did the bank give you a loan?

Not only that, the bank expects the dummy to not only pay the non-loan back but, pay compound interest on top of it.

There is only one way to lawfully verify this scenario...
Offer to pay the loan...and get their assurance you will get your note back.

For use with just about any type of financial obligation issued by a licensed financial institution mortgage, credit card, bank loan etc. (Does not work
if the loan is from a “private” source.)



From: ____________________
Date: ____________________
To: ____________________
Re: ___(Credit Card, bank loan, mortgage,
etc.)
Account Number:___________

To Whom it may concern:

I would like to make arrangements to settle the above referenced matter.
Please provide me with your statement of the amount owing as of ___(pick date 2 weeks out for example)___, together with your assurance that you will accept payment in direct and immediate exchange for the original instrument of indebtedness in its original form.

Thank you very much.

___________________________
by: authorized party

I'm suggesting here that if you do not get the note back then, the young lady at the counter took your two tens and then told you to buzz off....get the hell out of the bank.
And her boss did the same.



Regards,


JackieG


[JackieG is kissin' cousin of Canada's Prime Minister Stephen Harper]

HOW THE BANK SWITCHES THE CURRENCY
This is a repeat worded differently to be sure you understand it.

You must understand the currency switch.

The bank does not loan money. The bank merely switches the currency. The alleged borrower created money or currency by simply signing the mortgage note. The bank does not sign the mortgage note because they know they will not loan you their money. The mortgage note acts like money. To make it look like the bank loaned you money the bank deposits your mortgage note (lien on property) as money from which to issue a check. No money was loaned to legally fulfill the contract for the bank to own the mortgage note. By doing this, the bank received the lien on the property without risking or using one cent. The people lost the equity in their homes and farms to the bank and now they must labor to pay interest on the property, which the bank got for free and they lost.

The check is not money, the check merely transfers money and by transferring money the check acts LIKE money. The money deposited is the mortgage note. If the bank never fulfills the contract to loan money, then the bank does not own the mortgage note. The deposited mortgage note is still your money and the checking account they set up in your name, which they credited, from which to issue the check, is still your money. They only returned your money in the form of a check. Why do you have to fulfill your end of the agreement if the bank refuses to fulfill their end of the agreement? If the bank does not loan you their money they have not fulfilled the agreement, the contract is void.

You created currency by simply signing the mortgage note. The mortgage note has value because of the lien on the property and because of the fact that you are to repay the loan. The bank deposits the mortgage note (currency) to create a check (currency, bank money). Both currencies cost nothing to create. By law the bank cannot create currency (bank money, a check) without first depositing currency, (mortgage note) or legal tender.

[above...just some tidbits from the site: http://www.thetrustee911.com/foreclosurefraud.htm

...which i got from Canada's Prime Minister's kissin' cousin [Jack Harper]email:

Foreclosure fraud?

From: Jack Harper (xxxxx@gmail.com)
Sent: Thu 1/07/10 4:53 PM

Ive been telling everyone over and over and over for well over a year, what this states....
Now...tell me if you get it now or are you still lost in the fog?
http://www.rumormillnews.com/cgi-bin/forum.cgi?read=164200

Banks Bundled Bad Debt, Bet Against It and Won

by Gretchen Morgenson and Louise Story - NYTimes.com
Thursday, December 24, 2009


In late October 2007, as the financial markets were starting to come unglued, a Goldman Sachs trader, Jonathan M. Egol, received very good news. At 37, he was named a managing director at the firm.

Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.

Goldman's own clients who bought them, however, were less fortunate.

Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.

Goldman was not the only firm that peddled these complex securities -- known as synthetic collateralized debt obligations, or C.D.O.'s -- and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.

How these disastrously performing securities were devised is now the subject of scrutiny by investigators in Congress, at the Securities and Exchange Commission and at the Financial Industry Regulatory Authority, Wall Street's self-regulatory organization, according to people briefed on the investigations. Those involved with the inquiries declined to comment.

While the investigations are in the early phases, authorities appear to be looking at whether securities laws or rules of fair dealing were violated by firms that created and sold these mortgage-linked debt instruments and then bet against the clients who purchased them, people briefed on the matter say.

One focus of the inquiry is whether the firms creating the securities purposely helped to select especially risky mortgage-linked assets that would be most likely to crater, setting their clients up to lose billions of dollars if the housing market imploded.

Some securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created.

Goldman and other Wall Street firms maintain there is nothing improper about synthetic C.D.O.'s, saying that they typically employ many trading techniques to hedge investments and protect against losses. They add that many prudent investors often do the same. Goldman used these securities initially to offset any potential losses stemming from its positive bets on mortgage securities.

But Goldman and other firms eventually used the C.D.O.'s to place unusually large negative bets that were not mainly for hedging purposes, and investors and industry experts say that put the firms at odds with their own clients' interests.

"The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen," said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. "When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else's house and then committing arson."

Investment banks were not alone in reaping rich rewards by placing trades against synthetic C.D.O.'s. Some hedge funds also benefited, including Paulson & Company, according to former Goldman workers and people at other banks familiar with that firm's trading.

Michael DuVally, a Goldman Sachs spokesman, declined to make Mr. Egol available for comment. But Mr. DuVally said many of the C.D.O.'s created by Wall Street were made to satisfy client demand for such products, which the clients thought would produce profits because they had an optimistic view of the housing market. In addition, he said that clients knew Goldman might be betting against mortgages linked to the securities, and that the buyers of synthetic mortgage C.D.O.'s were large, sophisticated investors, he said.

The creation and sale of synthetic C.D.O.'s helped make the financial crisis worse than it might otherwise have been, effectively multiplying losses by providing more securities to bet against. Some $8 billion in these securities remain on the books at American International Group, the giant insurer rescued by the government in September 2008.

From 2005 through 2007, at least $108 billion in these securities was issued, according to Dealogic, a financial data firm. And the actual volume was much higher because synthetic C.D.O.'s and other customized trades are unregulated and often not reported to any financial exchange or market.

Goldman Saw It Coming

Before the financial crisis, many investors -- large American and European banks, pension funds, insurance companies and even some hedge funds -- failed to recognize that overextended borrowers would default on their mortgages, and they kept increasing their investments in mortgage-related securities. As the mortgage market collapsed, they suffered steep losses.

A handful of investors and Wall Street traders, however, anticipated the crisis. In 2006, Wall Street had introduced a new index, called the ABX, that became a way to invest in the direction of mortgage securities. The index allowed traders to bet on or against pools of mortgages with different risk characteristics, just as stock indexes enable traders to bet on whether the overall stock market, or technology stocks or bank stocks, will go up or down.

Goldman, among others on Wall Street, has said since the collapse that it made big money by using the ABX to bet against the housing market. Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm's overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.

Even before then, however, pockets of the investment bank had also started using C.D.O.'s to place bets against mortgage securities, in some cases to hedge the firm's mortgage investments, as protection against a fall in housing prices and an increase in defaults.

Mr. Egol was a prime mover behind these securities. Beginning in 2004, with housing prices soaring and the mortgage mania in full swing, Mr. Egol began creating the deals known as Abacus. From 2004 to 2008, Goldman issued 25 Abacus deals, according to Bloomberg, with a total value of $10.9 billion.

Abacus allowed investors to bet for or against the mortgage securities that were linked to the deal. The C.D.O.'s didn't contain actual mortgages. Instead, they consisted of credit-default swaps, a type of insurance that pays out when a borrower defaults. These swaps made it much easier to place large bets on mortgage failures.

Rather than persuading his customers to make negative bets on Abacus, Mr. Egol kept most of these wagers for his firm, said five former Goldman employees who spoke on the condition of anonymity. On occasion, he allowed some hedge funds to take some of the short trades.

Mr. Egol and Fabrice Tourre, a French trader at Goldman, were aggressive from the start in trying to make the assets in Abacus deals look better than they were, according to notes taken by a Wall Street investor during a phone call with Mr. Tourre and another Goldman employee in May 2005.

On the call, the two traders noted that they were trying to persuade analysts at Moody's Investors Service, a credit rating agency, to assign a higher rating to one part of an Abacus C.D.O. but were having trouble, according to the investor's notes, which were provided by a colleague who asked for anonymity because he was not authorized to release them. Goldman declined to discuss the selection of the assets in the C.D.O.'s, but a spokesman said investors could have rejected the C.D.O. if they did not like the assets.

Goldman's bets against the performances of the Abacus C.D.O.'s were not worth much in 2005 and 2006, but they soared in value in 2007 and 2008 when the mortgage market collapsed. The trades gave Mr. Egol a higher profile at the bank, and he was among a group promoted to managing director on Oct. 24, 2007.

"Egol and Fabrice were way ahead of their time," said one of the former Goldman workers. "They saw the writing on the wall in this market as early as 2005." By creating the Abacus C.D.O.'s, they helped protect Goldman against losses that others would suffer.

As early as the summer of 2006, Goldman's sales desk began marketing short bets using the ABX index to hedge funds like Paulson & Company, Magnetar and Soros Fund Management, which invests for the billionaire George Soros. John Paulson, the founder of Paulson & Company, also would later take some of the shorts from the Abacus deals, helping him profit when mortgage bonds collapsed. He declined to comment.

A Deal Gone Bad, for Some

The woeful performance of some C.D.O.'s issued by Goldman made them ideal for betting against. As of September 2007, for example, just five months after Goldman had sold a new Abacus C.D.O., the ratings on 84 percent of the mortgages underlying it had been downgraded, indicating growing concerns about borrowers' ability to repay the loans, according to research from UBS, the big Swiss bank. Of more than 500 C.D.O.'s analyzed by UBS, only two were worse than the Abacus deal.

Goldman created other mortgage-linked C.D.O.'s that performed poorly, too. One, in October 2006, was a $800 million C.D.O. known as Hudson Mezzanine. It included credit insurance on mortgage and subprime mortgage bonds that were in the ABX index; Hudson buyers would make money if the housing market stayed healthy -- but lose money if it collapsed. Goldman kept a significant amount of the financial bets against securities in Hudson, so it would profit if they failed, according to three of the former Goldman employees.

A Goldman salesman involved in Hudson said the deal was one of the earliest in which outside investors raised questions about Goldman's incentives. "Here we are selling this, but we think the market is going the other way," he said.

A hedge fund investor in Hudson, who spoke on the condition of anonymity, said that because Goldman was betting against the deal, he wondered whether the bank built Hudson with "bonds they really think are going to get into trouble."

Indeed, Hudson investors suffered large losses. In March 2008, just 18 months after Goldman created that C.D.O., so many borrowers had defaulted that holders of the security paid out about $310 million to Goldman and others who had bet against it, according to correspondence sent to Hudson investors.

The Goldman salesman said that C.D.O. buyers were not misled because they were advised that Goldman was placing large bets against the securities. "We were very open with all the risks that we thought we sold. When you're facing a tidal wave of people who want to invest, it's hard to stop them," he said. The salesman added that investors could have placed bets against Abacus and similar C.D.O.'s if they had wanted to.

A Goldman spokesman said the firm's negative bets didn't keep it from suffering losses on its mortgage assets, taking $1.7 billion in write-downs on them in 2008; but he would not say how much the bank had since earned on its short positions, which former Goldman workers say will be far more lucrative over time. For instance, Goldman profited to the tune of $1.5 billion from one series of mortgage-related trades by Mr. Egol with Wall Street rival Morgan Stanley, which had to book a steep loss, according to people at both firms.

Tetsuya Ishikawa, a salesman on several Abacus and Hudson deals, left Goldman and later published a novel, "How I Caused the Credit Crunch." In it, he wrote that bankers deserted their clients who had bought mortgage bonds when that market collapsed: "We had moved on to hurting others in our quest for self-preservation." Mr. Ishikawa, who now works for another financial firm in London, declined to comment on his work at Goldman.

Profits From a Collapse

Just as synthetic C.D.O.'s began growing rapidly, some Wall Street banks pushed for technical modifications governing how they worked in ways that made it possible for C.D.O.'s to expand even faster, and also tilted the playing field in favor of banks and hedge funds that bet against C.D.O.'s, according to investors.

In early 2005, a group of prominent traders met at Deutsche Bank's office in New York and drew up a new system, called Pay as You Go. This meant the insurance for those betting against mortgages would pay out more quickly. The traders then went to the International Swaps and Derivatives Association, the group that governs trading in derivatives like C.D.O.'s. The new system was presented as a fait accompli, and adopted.

Other changes also increased the likelihood that investors would suffer losses if the mortgage market tanked. Previously, investors took losses only in certain dire "credit events," as when the mortgages associated with the C.D.O. defaulted or their issuers went bankrupt.

But the new rules meant that C.D.O. holders would have to make payments to short sellers under less onerous outcomes, or "triggers," like a ratings downgrade on a bond. This meant that anyone who bet against a C.D.O. could collect on the bet more easily.

"In the early deals you see none of these triggers," said one investor who asked for anonymity to preserve relationships. "These things were built in to provide the dealers with a big payoff when something bad happened."

Banks also set up ever more complex deals that favored those betting against C.D.O.'s. Morgan Stanley established a series of C.D.O.'s named after United States presidents (Buchanan and Jackson) with an unusual feature: short-sellers could lock in very cheap bets against mortgages, even beyond the life of the mortgage bonds. It was akin to allowing someone paying a low insurance premium for coverage on one automobile to pay the same on another one even if premiums over all had increased because of high accident rates.

At Goldman, Mr. Egol structured some Abacus deals in a way that enabled those betting on a mortgage-market collapse to multiply the value of their bets, to as much as six or seven times the face value of those C.D.O.'s. When the mortgage market tumbled, this meant bigger profits for Goldman and other short sellers -- and bigger losses for other investors.

Selling Bad Debt

Other Wall Street firms also created risky mortgage-related securities that they bet against.

At Deutsche Bank, the point man on betting against the mortgage market was Greg Lippmann, a trader. Mr. Lippmann made his pitch to select hedge fund clients, arguing they should short the mortgage market. He sometimes distributed a T-shirt that read "I'm Short Your House!!!" in black and red letters.

Deutsche, which declined to comment, at the same time was selling synthetic C.D.O.'s to its clients, and those deals created more short-selling opportunities for traders like Mr. Lippmann.

Among the most aggressive C.D.O. creators was Tricadia, a management company that was a unit of Mariner Investment Group. Until he became a senior adviser to the Treasury secretary early this year, Lewis Sachs was Mariner's vice chairman. Mr. Sachs oversaw about 20 portfolios there, including Tricadia, and its documents also show that Mr. Sachs sat atop the firm's C.D.O. management committee.

From 2003 to 2007, Tricadia issued 14 mortgage-linked C.D.O.'s, which it called TABS. Even when the market was starting to implode, Tricadia continued to create TABS deals in early 2007 to sell to investors. The deal documents referring to conflicts of interest stated that affiliates and clients of Tricadia might place bets against the types of securities in the TABS deal.

Even so, the sales material also boasted that the mortgages linked to C.D.O.'s had historically low default rates, citing a "recently completed" study by Standard & Poor's ratings agency -- though fine print indicated that the date of the study was September 2002, almost five years earlier.

At a financial symposium in New York in September 2006, Michael Barnes, the co-head of Tricadia, described how a hedge fund could put on a negative mortgage bet by shorting assets to C.D.O. investors, according to his presentation, which was reviewed by The New York Times.

Mr. Barnes declined to comment. James E. McKee, general counsel at Tricadia, said, "Tricadia has never shorted assets into the TABS deals, and Tricadia has always acted in the best interests of its clients and investors."

Mr. Sachs, through a spokesman at the Treasury Department, declined to comment.

Like investors in some of Goldman's Abacus deals, buyers of some TABS experienced heavy losses. By the end of 2007, UBS research showed that two TABS deals were the eighth- and ninth-worst performing C.D.O.'s. Both had been downgraded on at least 75 percent of their associated assets within a year of being issued.

Tricadia's hedge fund did far better, earning roughly a 50 percent return in 2007 and similar profits in 2008, in part from the short bets.

http://finance.yahoo.com/banking-budgeting/article/108476/banks-bundled-bad-debt-bet-against-it-and-won

freedie and fannie loving helicopter Ben

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The Real AIG Outrage!

http://online.wsj.com/article/SB123725551430050865.html

The Real AIG Outrage Article

President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout.

Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government's AIG "rescue." This federal takeover, never approved by AIG shareholders, uses the firm as a conduit to bail out other institutions. After months of government stonewalling, on Sunday night AIG officially acknowledged where most of the taxpayer funds have been going.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no "bailout." Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.

* * *
Given that the government has never defined "systemic risk," we're also starting to wonder exactly which system American taxpayers are paying to protect. It's not capitalism, in which risk-takers suffer the consequences of bad decisions. And in some cases it's not even American. The U.S. government is now in the business of distributing foreign aid to offshore financiers, laundered through a once-great American company.

The politicians also prefer to talk about AIG's latest bonus payments because they deflect attention from Washington's failure to supervise AIG. The Beltway crowd has been selling the story that AIG failed because it operated in a shadowy unregulated world and cleverly exploited gaps among Washington overseers. Said President Obama yesterday, "This is a corporation that finds itself in financial distress due to recklessness and greed." That's true, but Washington doesn't want you to know that various arms of government approved, enabled and encouraged AIG's disastrous bet on the U.S. housing market.

Scott Polakoff, acting director of the Office of Thrift Supervision, told the Senate Banking Committee this month that, contrary to media myth, AIG's infamous Financial Products unit did not slip through the regulatory cracks. Mr. Polakoff said that the whole of AIG, including this unit, was regulated by his agency and by a "college" of global bureaucrats.

But what about that supposedly rogue AIG operation in London? Wasn't that outside the reach of federal regulators? Mr. Polakoff called it "a false statement" to say that his agency couldn't regulate the London office.

And his agency wasn't the only federal regulator. AIG's Financial Products unit has been overseen for years by an SEC-approved monitor. And AIG didn't just make disastrous bets on housing using those infamous credit default swaps. AIG made the same stupid bets on housing using money in its securities lending program, which was heavily regulated at the state level. State, foreign and various U.S. federal regulators were all looking over AIG's shoulder and approving the bad housing bets. Americans always pay their mortgages, right? Mr. Polakoff said his agency "should have taken an entirely different approach" in regulating the contracts written by AIG's Financial Products unit.

That's for sure, especially after March of 2005. The housing trouble began -- as most of AIG's troubles did -- when the company's board buckled under pressure from then New York Attorney General Eliot Spitzer when it fired longtime CEO Hank Greenberg. Almost immediately, Fitch took away the company's triple-A credit rating, which allowed it to borrow at cheaper rates. AIG subsequently announced an earnings restatement. The restatement addressed alleged accounting sins that Mr. Spitzer trumpeted initially but later dropped from his civil complaint.

Other elements of the restatement were later reversed by AIG itself. But the damage had been done. The restatement triggered more credit ratings downgrades. Mr. Greenberg's successors seemed to understand that the game had changed, warning in a 2005 SEC filing that a lower credit rating meant the firm would likely have to post more collateral to trading counterparties. But rather than managing risks even more carefully, they went in the opposite direction. Tragically, they did what Mr. Greenberg's AIG never did -- bet big on housing.

Current AIG CEO Ed Liddy was picked by the government in 2008 and didn't create the mess, and he shouldn't be blamed for honoring the firm's lawful bonus contracts. However, it is on Mr. Liddy's watch that AIG has lately been conducting a campaign to stoke fears of "systemic risk." To mute Congressional objections to taxpayer cash infusions, AIG's lobbying materials suggest that taxpayers need to continue subsidizing the insurance giant to avoid economic ruin.

Among the more dubious claims is that AIG policyholders won't be able to purchase the coverage they need. The sweeteners AIG has been offering to retain customers tell a different story. Moreover, getting back to those infamous bonuses, AIG can argue that it needs to pay top dollar to survive in an ultra-competitive business, or it can argue that it offers services not otherwise available in the market, but not both.

* * *
The Washington crowd wants to focus on bonuses because it aims public anger on private actors, not the political class. But our politicians and regulators should direct some of their anger back on themselves -- for kicking off AIG's demise by ousting Mr. Greenberg, for failing to supervise its bets, and then for blowing a mountain of taxpayer cash on their AIG nationalization.

Whether or not these funds ever come back to the Treasury, regulators should now focus on getting AIG back into private hands as soon as possible. And if Treasury and the Fed want to continue bailing out foreign banks, let them make that case, honestly and directly, to American taxpayers.

Please add your comments to the Opinion Journal forum.




futrcash

Freddie Mac: The Government's Next Black Hole?

By STEPHEN GANDEL
– Tue Mar 17, 5:05 pm ET

AIG is to date the most expensive corporate bailout in American history, requiring $180 billion of government funds. But it may soon have competition. Last week, mortgage giant Freddie Mac said that it had lost $50 billion in 2008 alone. A look at the company's books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could even be larger.

"Freddie's portfolio of [mortgage] insurance is more risky than the market was led to believe," says Paul Miller, an analysts at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink. But Fannie was better capitalized than Freddie going into the credit crunch. So even though Freddie by many measures is smaller than Fannie, the problems at Freddie will probably end up costing more.

Citigroup and other banks have also lost money, and will need more capital to survive. But in those cases it's not clear who will take the hit - shareholders, bondholders or the government. In the case of AIG, Freddie Mac and Fannie Mae, however, there is no question where the money will come from. Freddie and Fannie were taken over by the government and put into conservatorship last fall. AIG is now 80% owned by the government. The losses at those companies are now taxpayer losses. (See 25 people to blame for the financial crisis.)

And like AIG, Freddie has had to come back to the government a number of times with cup in hand. The mortgage giant has already received $14 billion in government aid. After the fourth quarter loss of $24 billion, the company said it needs an additional $31 billion from the government to keep the lights on.

Freddie's business, which in part comes from a government mandate, is insuring mortgages. So when borrowers lose their jobs, as many now are, Freddie is going to lose money. But only a quarter of Freddie's red ink, or about $13 billion, comes from mortgage insurance woes. The firm took a larger hit from its investment in mortgage-backed securities tied to subprime, adjustable-rate or jumbo mortgages. By law, Freddie isn't allowed to insure against losses on those types of mortgages, in part because they are riskier. But it bought securities tied to those home loans anyway - which it is allowed to do - in order to capture the higher rates of return that those mortgage bonds offered. Unfortunately, the bets didn't pay off. Freddie lost $16 billion on those investments. (See pictures of Americans in their homes.)

Another bet that didn't pay off for Freddie was on interest rates. The firm's managers bought derivatives that would pay out if interest rates rose. Instead, a global financial meltdown has caused interest rates to plummet. That resulted is a $15 billion loss for Freddie from its hedges.

Freddie lost another $1 billion on bonds tied to short-term loans made to Lehman Brothers. Like Lehman, that investment went belly up. Then there are all the houses it now has to repossess as people stop paying their mortgages. The company now owns about 30,000 homes. Maintaining these houses cost about $3,300 a month each, and that comes on top of the loan loss, which is typically about one-third of the size of the mortgage. Wave goodbye to another billion.

When will the red ink at Freddie stop? It's hard to say. In its most recent annual report, the company said that if it had to mark all of its assets to the price similar bonds are trading for in the market, the company's net worth would sink by another $65 billion. But Freddie's bottom line woes may run deeper even than that. Freddie has $38 billion in losses it has yet to acknowledge in its investment portfolio. The firm also has additional $48 billion in non-performing loans that it either holds or has guaranteed against. In a painful stroke of irony, there is a $15.4 billion line item on the asset side of Freddie's balance sheet for deferred taxes. That means Freddie is still hoping to claim $15 billion in write-offs against future profits. But since Freddie continues to lose money, and because it is now part of the government, the likelihood that the company will have to pay taxes anytime soon is probably nil. Add all those items up, and it becomes apparent that the government will likely spend more than $100 billion in additional funds cleaning up the mess at Freddie.

"The losses at Freddie show the pressure the banking system as a whole is under," says Fred Cannon, chief equity strategist at Keefe, Bruyette & Woods. "Freddie is going to need more capital, but they are not alone."

http://news.yahoo.com/s/time/20090317/us_time/08599188558300

It's A Wonderful Mortgage Crisis

What the classic holiday movie "It's a Wonderful Life" can teach us about the mortgage industry meltdown.

By Andrew M. Rosenfield | Newsweek Web Exclusive
Dec 23, 2008

It's traditional during the holiday season to watch the great Frank Capra movie "It's a Wonderful Life," and this year, the film is particularly relevant—it can help us to better understand our current economic malaise and the mortgage credit problem that is at the center of the crisis.

In one of the most famous scenes, there's a run on the Bailey Building and Loan, a small bank owned by George Bailey, the tortured character played by Jimmy Stewart. As depositors clamor to get their money back, Stewart tells them, "You're thinking of this place all wrong, as if I had the money back in the safe. The money's not here. Your money's in Joe's house, that's right next to yours. And in the Kennedy house and Mrs. Macklin's house and a hundred others. Why, you're lending them the money to build. … Give us 60 days."

In the language of finance, Bailey is explaining that the Bailey Building and Loan made and held "whole loans," mortgages that have not been securitized. Its liabilities are the deposits the bank's depositors have come to withdraw, and its assets are the highly illiquid mortgages that it holds as a result of lending money to the town's residents to build their homes in Bedford Falls.

If the movie were remade today (and let's hope it's not), here's what would happen in Bedford Falls. A different George Bailey—played, say, by Brad Pitt—would have "originated" home loans in Bedford Falls. Pitt would have then sold those loans to Freddie Mac or to Fannie Mae or to another loan aggregator. Each of those loans would then ultimately have been "securitized" into one of many "tranches": cut up into many slices based on the risk of repayment of each chunk of the loan. The various slices from thousands of loans all over the United States would then be pooled, again by potential risk of default, and that pool would issue a mortgage-backed security that was "rated" by one or more of the federally sanctioned ratings agencies: Moody's, Standard & Poor's and Fitch. (In the current crisis, those investments had cryptic names like "GSAMP 2006-S5 A2" and "WAMU 2007-HY6 2B1.") The idea behind the pooling of loan slices is a powerful one—by sorting the payments to those supplying capital into specific risk categories, it is possible to lower the cost of capital to borrowers.

Now, what would the Bailey Building and Loan do with the proceeds it receives from selling the loans that it originated? It would buy securities that would be held as assets on its balance sheet and, depending on the risk and value of those securities, it would continue to originate more loans. So far, this all seems well and good. The securitization has lowered the cost to borrowers and made the assets held by the Bailey Building and Loan appear to be more liquid—instead of lumpy whole loans, its new assets are securities that, at least in theory, can be sold and that are priced in the market.

The problem is that while the Building and Loan would buy securities such as treasury bonds, it would also likely buy small amounts of a lot of mortgage-backed securities, such as the above-mentioned GSAMP 2006-S5 A2 and hundreds of other such securities. These securities aren't heavily traded in markets, but the top category of these offerings typically was treated by bank regulators as extremely safe—likely to return the full value of the investment made in them with interest—because of their very high investment grade ratings. When housing declined in value throughout the United States, many mortgage-backed securities became imperiled, and as a result, many of the nation's banks became insolvent.

So in the presence of a run, in our remake, Brad Pitt might say this: "Why, don't ask for your money back right now when the housing market is in decline. You know that money isn't in the safe; it's invested in GSAMP 2006-S5 A2 and WAMU 2007-HY6 2B1 and the like. I can't give you your money back unless and until those multiyear-duration securities get repaid (if they ever do) or if they somehow revert back toward par value and I can sell them. Since they're trading at cents on the dollar, they have a long way to go. Just give me 60 days, and maybe the Treasury will bail me out."

Jimmy Stewart told his depositors that he knew that their investment in the Bailey Building and Loan was "good," even though its assets were not liquid. This is because he knew the location of each home held as collateral, the occupant-borrower, the prospects for repayment and more. All that Brad Pitt's George Bailey could ever know is that he bought securities rated highly by each and every one of the three government-endorsed rating agencies, and that the investment banks that underwrote them thought those securities were sound investments. Nothing more. He'd have no idea who the borrowers are, where the homes are located, what their condition is or whether they are even occupied, much less the likelihood that a particular borrower could weather the storm.

The contrast is what makes a new viewing of "It's a Wonderful Life" compelling this holiday season—it's a reminder of a simpler time, and simultaneously a stark reflection of what went wrong in the current crisis.

http://www.newsweek.com/id/176794

It’s not the Borrowers; It’s the Loans.

Apr 23rd, 2007 by IrvineRenter in Analysis Denial runs deep in the financial markets. The vast majority of participants either want or need prices to steadily increase. Any facts or opinions that run counter to the idea of ever increasing prices must be quelled in order to prevent a catastrophic collapse of prices due to panic selling. One of the more glaring examples of this phenomenon has been the slow leak of information regarding the upcoming debacle in our housing market.

In February and March as the sub-prime lending implosion became front page news, market bulls were presented with a major public relations problem. It was imperative for the bulls to convince buyers the damage from subprime lending was "contained" and would not "spill over" into other borrower categories and ultimately into the overall economy. The supposition is that the widespread use of exotic loans is not the problem, it is the practice of giving these loans to those with low credit scores. In other words, it is not the loans, it is the borrowers. This is wrong. It is not the borrowers; it is the loans.



As a primer, I would like to illustrate the basic distinctions made with the type of borrower and the type of loan (for a better, more detailed analysis see Calculated Risk). There are 3 main categories of borrowers: Prime, Alt-A and Sub-Prime. Prime borrowers are those with high credit scores, and Sub-Prime borrowers are those with low credit scores. The Alt-A borrowers make up the gray matter in between. Alt-A tends to be closer to Prime as these are often borrowers with high credit scores which for one or more reasons do not meet the strict standards of Prime borrowers. In recent years one of the most common non-conformities of Alt-A loans has been the lack of verifiable income. In short, "liar loans" are generally Alt-A. As the number of deviations from Prime increases, the credit scores decline until finally you are left with Sub-Prime.

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There are also 3 main categories of loans: Conventional, Interest-Only, and Negative Amortization. The distinction between these loans is how the amount of principal is impacted by monthly payments. A conventional mortgage includes some amount of principal in the payment in order to repay the original loan amount. The greater the amount of principal repaid, the quicker the loan is paid off. An interest-only loan does just what it describes; it only pays the interest. This loan doesn't pay back any of the principal, but it at least "treads water" and does not fall behind. The Negative Amortization loan is one in which the full amount interest is not paid with each payment, and the unpaid interest gets added to the principal balance. Each month, the borrower is increasing the debt. One of the features of all interest-only or negative amortization loans is an interest rate reset. All these loans have provisions where the loan balance comes due either in the form of a balloon payment or an accelerated amortization schedule. Either way, the borrower must either refinance or face a major increase in their monthly loan payment. This increase in payment is what makes these loans such a problem, and this is why it isn't the borrower, it is the loan.



As you can see from the table above, the category of loan and category of borrower are independent of each other. Starting in the lower left hand corner, we have the lowest risk loan for a lender to make, a Prime Conventional mortgage. As we move up or to the right, the risk increases. The riskiest loan a lender can make is the Negative Amortization loan to a Sub-Prime borrower.

The market apologists have admitted there is risk going up the side of the chart because sub-prime borrowers are beginning to default. These same spin-doctors are denying the risk of default will spill over into Alt-A and Prime. They making this argument because these two categories have historically had low default rates. They conveniently forget all the "liar loans" taken out by those with higher credit scores and payment resets for I/O and neg am loans which were also given to the Alt-A and Prime crowd. Historically, this group has not defaulted because they have not been widely exposed to these loan types. Basically, they are ignoring the risk moving along the bottom of the chart: the risk endemic with Interest-Only and Negative Amortization loans. This is a fatal flaw in their analysis.

So why will so many Alt-A and Prime borrowers go into default? To answer that question, we need to make a more detailed analysis of the exhibit: Adjustable Rate Mortgage Reset Schedule



First, I would suggest you review Financially Conservative Home Financing. In that post I stated, "At the time of reset, if you are unable to make the new payment (your salary does not increase), or if you are unable refinance the loan (home declines in value), you will lose your home. It’s that simple." It is my contention based on the information in the above chart, we can deduce the Alt-A and Prime borrowers will face one or both of the conditions which will cause them to lose their homes.

Look at the gray bars which make up the majority of the reset amounts due over the next 24 months (2007 and 2008). These are the Sub-Prime borrowers. They are already defaulting in large numbers, and we have all witnessed the tightening of credit (or elimination of credit) being offered to these borrowers. We also know many of these borrowers were put into the dreaded 2/28 loans and they cannot afford the reset. And, as if that isn't enough, most of these borrowers were given 100% financing (if they could save up for a downpayment, they probably wouldn't be Sub-Prime.) Therefore, it is probably safe to assume many if not most of these borrowers will default. Why wouldn't they? Most haven't put any money into the transaction, they have no equity as prices are declining, and they already have bad credit. What is the worst that could happen? They will just go back to renting, big deal. Think about what that means... a large number of defaults and foreclosures will occur over the next 3 years (the time span will be spread out due to differences in borrower holding power and the time spent in the foreclosure process).



In addition to the tightening credit and worsening buyer psychology, if large numbers of sub-prime borrowers are defaulting over the next 3 years, prices will certainly fall. Therefore, it is also safe to assume that when the Alt-A and Prime borrowers who have taken out adjustable rate mortgages need to refinance starting in earnest 3 years from now (see the red and light gray bars in the Adjustable Rate Mortgage Reset Schedule), they may be underwater and unable to refinance.

Why do I think so many will be underwater? For one, prices will be significantly lower in 2010. In the forums, we have already documented price reductions by the builders of about 15%, and we also know it isn't helping sales. More builder price reductions are on the way. It isn't difficult to imagine prices being 30% or more below the peak by 2010. How many Alt-A and Prime borrowers with adjustable rate mortgages do you think have more than 30% equity in their properties?



Nationally, approximately 40% of residential real estate is owned outright; therefore, if the total equity in real estate is 55%, the remaining 60% of homeowners have a total of 15% of home equity. This is admittedly a rough calculation, but it certainly does not appear as if a great many people with mortgages have more than 30% equity in their homes to ensure they are able to refinance. Many bulls have speculated that most Irvine homeowners are sitting on mountains of equity because home prices have increased so dramatically over the last 5 years. Sounds plausible, but it isn't true. Where did this equity go?



Has anyone else noticed all the conspicuous consumption in Irvine? Every house has two luxury cars in the driveway, the Spectrum is always full of shoppers, and every homeowner is busy competing with their neighbor to see who can look richer (see Southern California’s Cultural Pathology). If you want to know where all the equity went: they spent it.

To bring us back to where we started, a great many Alt-A and Prime borrowers will lose their homes because they will be hopelessly underwater when they need to refinance 3 to 5 years from now. If they had borrowed with conventional mortgages as they did in the past, they would not be facing this mortgage reset timebomb, and they would simply ride out the Sub-Prime debacle just as many homeowners made it through the declines of the early 90's. However, it is different this time. This time, the loans they have taken out are going to ruin them. It's not the borrowers, it's the loans.

http://www.irvinehousingblog.com/blog/comments/its-not-the-borrowers-its-the-loans/

U.S. bank stress tests to show capital needs

Sun Feb 22, 2009 4:24am EST
David Lawder

WASHINGTON (Reuters) - Financial regulators will soon launch a series of "stress tests" to determine which of the largest U.S. banks should get bigger capital cushions in case of a deeper recession, a person familiar with Obama administration plans said on Saturday.

The person, speaking on condition of anonymity, said if institutions were found to need additional capital, financial authorities would provide them with an "extra cushion of support."

Banks are expected to receive additional information about the tests in the coming week from regulators.

The largest U.S. banks are "well capitalized" for current conditions, the source said, but the Obama administration wants to ensure they can withstand a more severe economic climate and play an important role in helping restart the flow of credit.

Initial plans for the stress tests were announced on February 10 as part of Treasury Secretary Timothy Geithner's bank stabilization plan, but the source on Saturday for the first time linked the tests to additional government support for large banks. That person did not specify what form any extra capital cushion may take.

Little is known about the form of the stress tests, but the person described them as "consistent, forward looking and conservative."

The Obama administration tried on Friday to ease market fears the government was poised to nationalize some large banks that are struggling with losses and a lack of confidence, notably Citigroup and Bank of America.

Bank shares fell sharply, with Citigroup plunging 22 percent to below the $2 fee of a typical automated teller machine, or ATM, and Bank of America trading around the $4 level.

White House spokesman Robert Gibbs said on Friday, "This administration continues to strongly believe that a privately held banking system is the correct way to go."

That was quickly echoed by a statement from the U.S. Treasury.

INVESTORS LOSE CONFIDENCE

Citigroup and Bank of America have each received $45 billion in government capital in recent months and guarantees against losses on portfolios of illiquid mortgage assets -- aid that now exceeds their market value.

With investors losing confidence in the sector as recessionary losses on real estate and commercial loans mount, analysts say the government may have to do more to prop up the largest banks.

But rather than opting for a sweeping takeover, the government may act more incrementally, demanding a little more control every time Bank of America or Citigroup seeks more capital, analysts said.

Major interventions in financial institutions, such as Bear Stearns 11 months ago, American International Group in September and a second-round investment in Citigroup, occurred just after major drops in share prices made it clear they could not raise private capital.

The government "will try to do everything they can before they nationalize banks, but they may ultimately do it," said Lee Delaporte, director of research at Dreman Value Management, which has $10 billion under management.

"The bank stocks are telling you nationalization is going to happen," Delaporte added.

Thus far, the Treasury has put up about $235 billion for banks largely by purchasing only preferred shares to avoid diluting common shareholders. Under Geithner's revamp, those injections could come in the form of shares that could be converted to common equity if necessary.

The lack of detail in Geithner's bank plan, particularly about a $500 billion to $1 trillion public-private fund to soak up toxic assets, has fueled investor concerns that bank takeovers could become an option. Geithner did not specify how much money would be earmarked for bank capital injections under the plan, which mapped out how the second $350 billion of the $700 billion bailout fund would be spent.

Geithner has devoted $50 billion to modify troubled mortgages and $100 billion to support a $1 trillion Federal Reserve asset-backed securities lending facility aimed at unblocking frozen consumer credit markets.

Lawmakers have pressed Geithner on whether and when he will return to seek more funding to shore up the banking system. Geithner told Congress on February 11 that as the "design elements" of his plan were fleshed out, he would have a better handle on the ultimate risks and costs for the program.


http://www.reuters.com/article/newsOne/idUSTRE51K1YC20090222

Can Your Bank Pass the Stress Test?

TIME.com
By Stephen Gandel Thursday, Feb. 19, 2009

* Citigroup has a projected leverage ratio of just 3.8%

* JPMorgan Its post-test leverage ratio drops to 6.4%, from nearly 8%

* BofA is still on the monitor, but it's not far from being healthy again. It has a stressed leverage ratio of 4.6%. Just $7.3 billion in new capital would put BofA back on its feet. And with Uncle Sam finalizing its deal to guarantee $118 billion of BofA debt, the bank may already be on the mend.
NOTE: This calculated leverage value does NOT include the US Govt backstop as details not clearly known when the study was done!

* Wells Fargo is generally considered one of the banks that are least likely to fail. But our stress test says otherwise. Even with its $58 billion loan-loss buffer, Wells is still in the hole for $59 billion, or 60% of its capital. With $40 billion remaining and an expected $5 billion in income, the bank could sink to a less-than-rosy leverage ratio of 3.7%.

For months, customers and investors have wondered if their banks will survive. The government may soon give its opinion. But don't be surprised if you find the answer inconclusive.

In early February, Treasury Secretary Timothy Geithner, as part of his bank fix, said he will "stress-test" the nation's largest financial firms to find out which ones are fit and which ones are flatlining, and then apply the appropriate therapy — which we assume means anything from injecting capital to pulling the plug. By using a medical term, Geithner gave the impression that he had some fiscal electrocardiograph that could be strapped to banks to chart the strength of their accounts. But when it comes to a bank checkup, the actual test is far less scientific. (Read "Geithner's Challenge: Selling a Plan Without the Details.")

In theory, a financial stress test looks at a firm's loans, assesses which will go bad and then concludes whether the bank will have money left when those accounts go unpaid. Pretty clear.

But in reality, to run the test, you have to guess not just which borrowers will stop paying but also when. Some losses will be covered by profits elsewhere. So the firm's bottom line must be estimated. The variables leave plenty of room for the government to make some banks look better or worse, depending on the assumptions it makes. Not so cut and dried. (Read "25 People to Blame for the Financial Crisis.")

Geithner hasn't detailed his test, other than that it won't be complete for another month. Worse, officials at the Treasury say the tests probably won't be made public. That will sort out the uncertainty that has driven the stock market down, won't it?

So instead of waiting around for the government's finger-in-the-air results, Time decided to poke and prod the banks on its own.

To do so, we relied on the loan-loss estimates of New York University professor Nouriel Roubini, a.k.a. Dr. Doom, who has been sagelike in his predictions about the credit crisis so far. We factored in the banks' results this year, as projected by Wall Street analysts. Besides the hit that banks will take for soured loans, the firms also have losses in their investment accounts. But since markets go up as well as down, we stuck to the actual cost of their lending foibles rather than guess where the market for debt is headed next.

The exception is Citigroup. Since the bank struck a deal with the government to shield $301 billion in losses, we had to account for some investment missteps to value the arrangement. Bank of America has a similar deal, but since the details aren't public, we didn't factor it in. (See pictures of the top 10 scared traders.)

Any stress test is also influenced by the measure you use. We chose the leverage ratio. To calculate it, divide a bank's equity by its assets, much of which are loans. The lower this ratio goes, the shakier a bank becomes. For example, a 10% leverage ratio means the bank has lent out $10 for every $1 in equity it has. A 5% reading translates to $20 out for every $1 in hand. Regulators like to see a reading of at least 5%. Anything less than that and a bank could become toast. Here's what we found:

Citigroup
Loan losses: Even after making a government deal, the bank is still on the hook for the first $40 billion in loan losses in the pool it has insured. Citi also has $277 billion in other, nonhousing consumer loans, such as credit cards and student debt. Roubini estimates that about 17% of consumer loans will go unpaid nationwide. That translates into a $47 billion river of red ink. Add in everything else (commercial real estate, corporate loans), and Citigroup will have to swallow $106 billion in loan losses by the end of 2010.

Capital cushion: Thanks to the Troubled Asset Relief Program (TARP), Citigroup now has $151 billion in equity, up from $113 billion a year ago. Alas, it will have a $76 billion hit from bad loans. Along with a projected bottom-line loss of $3.5 billion, that drops the bank's capital to $70.5 billion.

Prognosis: On the way to the ICU. Citigroup has a projected leverage ratio of just 3.8% — far lower than what it would need to be considered well capitalized. How much would the U.S. have to give the bank to nurse it back to good health? About $22 billion.

JPMorgan Chase
Loan losses: JPMorgan largely avoided the troubled subprime-lending game. Not so Washington Mutual, which JPMorgan acquired in 2008 in an FDIC-brokered deal. With housing prices still falling, many of those WaMu loans are going unpaid. JPMorgan has $105 billion in credit card loans, which could cost the company some $18 billion. And there is an additional $262 billion in corporate and commercial loans, which, according to Roubini, could tally $26 billion more in red ink. All told, it's a $97 billion loss for JPMorgan.

Capital cushion: JPMorgan has $23 billion in its rainy-day fund for such losses. Not enough. Shareholders' equity will drop to $121 billion, from the current $167 billion.

Prognosis: Looking good. JPMorgan is in better shape than other big banks are. Its post-test leverage ratio drops to 6.4%, from nearly 8% — still a picture of financial health. (See the best business deals of 2008.)

Bank of America
Loan losses: BofA's buyout of mortgage broker Countrywide means the bank has $400 billion in home loans outstanding — more than its competitors. Worse, Countrywide, by nearly all accounts, had shockingly low lending standards. Chalk up a higher-than-average $40 billion in losses there. On top of that, BofA has made $87 billion in loans to commercial real estate developers. Roubini predicts 17% of those loans will go bad as developers hit the skids. For BofA, that's $15 billion more in losses. Toss in $55 billion in commercial- and consumer-loan losses, and you get $121 billion in lending deficits by the end of 2010.

Capital cushion: BofA has put away $23 billion to cover future losses, and it has more equity — $177 billion — than JPMorgan or Citigroup. But that might not be enough to preserve it without government help.

Prognosis: Prepare the transfusion. BofA is still on the monitor, but it's not far from being healthy again. It has a stressed leverage ratio of 4.6%. Just $7.3 billion in new capital would put BofA back on its feet. And with Uncle Sam finalizing its deal to guarantee $118 billion of BofA debt, the bank may already be on the mend. (See the top 10 financial-crisis buzzwords.)

Wells Fargo
Loan losses: When Wells Fargo acquired Wachovia late last year, it more than doubled its loan book. In good times, that would be a major coup. These days, it's major trouble. Home buyers owe the bank $360 billion, up from about $150 billion just three months ago. Next, Wells has $154 billion in commercial real estate loans, as well as $200 billion in other types of commercial debt. Apply Roubini's overall 13% loss projection, and the conclusion is that Wells may be sitting on a $117 billion loss.

Capital cushion: The good news for Wells is that it has been aggressive in identifying problem loans — $37 billion from Wachovia alone. Wells officials argue that will lead to lower losses than its competitors'. But if not, the bank could be in trouble.

Even after the $25 billion Wells got from the government last year, it has just under $100 billion in equity, trailing other major banks by more than 50%.

Prognosis: Defibrillator. Stat! Wells Fargo is generally considered one of the banks that are least likely to fail. But our stress test says otherwise. Even with its $58 billion loan-loss buffer, Wells is still in the hole for $59 billion, or 60% of its capital. With $40 billion remaining and an expected $5 billion in income, the bank could sink to a less-than-rosy leverage ratio of 3.7%.

http://www.time.com/time/business/article/0,8599,1880499,00.html

I thought it was bad last year at this time. This jan its way worse. what will next jan hold?

Destroying Bank of America While Saving It
Tuesday, Feb. 03, 2009

While the battle between Bank of America CEO Ken Lewis and former Merrill Lynch CEO John Thain goes on over who knew about large bonuses and large losses and when they knew it, recent news that the bank will get $20 billion from the federal government along with $108 billion in loss guarantees has almost been forgotten. Much of the paper being supported by the government came from the Merrill acquisition.

The other important issue which has been raised is whether Merrill Lynch hid any of the problems on its balance sheet from B of A. According to Reuters, "New York Attorney General Andrew Cuomo is reportedly looking into whether federal bailout loans to BofA were used appropriately, and if shareholders of both companies were given all the necessary information about Merrill's finances."

All of the battling between the heads of Merrill and B of A is bound to take the combined company's eye off the ball of fixing the big bank. Even the board is bound to get tied up in the drama. So far it has supported Lewis. There is no way to know how long that will go on and who might replace him if he is forced to step down.

The federal government's problem is that, if it does not want to see its capital put at more risk, it needs to encourage the resolution of the dispute. But, investigations take time. That means Lewis could be tied up in the imbroglio for months. There is no elegant solution to the problem.

For the time being, both Cuomo and federal authorities should pass the ball to the Bank of America (BAC) board. It has a duty to look into the Merrill merger and decide what should be done about any misconduct. It is not unusual for boards to hire outside counsel to look through complex matters involving potential executive malfeasance. During the options grant scandal two years ago, boards often took the lead getting to the bottom of these sorts of issues.

Having the several government authorities in the mix of parsing how the Merrill merger went down puts too many cooks in the kitchen. The B of A board was not paying attention to management when it invested in risky assets and lost billions of dollars. Perhaps its members can earn their fees now.

—Douglas A. McIntyre

Why the bank bailouts are doomed

It's tempting to believe that more money will fix the messes of American and other global financial institutions. But simple calculations tell us the system is insolvent, and the possible solutions are unpalatable.
By Jon Markman
January 29, 2009

In the past 12 months, U.S. and British taxpayers, sovereign wealth funds and private investors have sunk $1 trillion into failing U.S. and British financial institutions, while central banks have slashed their cost of funds to nothing and their collateral standards even lower. Yet major banks continue to collapse. Why?

It's tempting to suggest that fixes so far were too late, too small and too clumsily applied. Yet new evidence suggests a much more uncomfortable answer: Perhaps the hole at the bottom of bank vaults is simply too big to fill even by governments that can mass-produce money with the press of a button. And therefore the only cure may be the most precious commodity of all, and that is time.

The math is not complicated. Bank losses from the write-offs of bad loans and busted derivatives tally up to $1.5 trillion so far. In addition, $5 trillion to $10 trillion worth of off-balance-sheet businesses such as structured investment vehicles -- leveraged lending vehicles used by big banks to fatten their profits in boom times -- are being forced back to banks' balance sheets by regulators. Rules require banks to keep a base of real shareholder capital amounting to 10% of those funds. So banks need to find up to $1 trillion within the next year to meet that objective.

Add the $1.5 trillion in losses to $1 trillion in needed new reserves, and you can see that banks need as much as $2.5 trillion in new capital to remain solvent under current rules. I know that we throw around words like "trillion" like they're nothing, but that is a lot of money. Consider that the entire world banking system had only $2 trillion in shareholder capital in 2007, before everything blew up.

Banking's leaky bucket
In aggregate, therefore, the entire system is simply insolvent, as liabilities are greater than assets. Governments aren't forcing banks to admit this, but investors are, and that is why big banks' shares have lost half of their value this year. Governments, meanwhile, are trying desperately to help banks plug the gap, but they're coming up short. When you add the $500 billion from sovereign wealth funds to the $500 billion from the first tranche of the Troubled Assets Relief Program, it's only $1 trillion. That's already been provided. So that leaves a gap of $500 billion to $1.5 trillion.

The easy way to fix this problem, of course, would be to change the rules: Tell the banks they don't need to keep 10% capital reserves. But that sort of glib solution only sounds good, and the reality is that in any normal business sense most of these businesses are ruined.
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Because the calculation is so easy -- and so devastating -- it kind of makes you wonder why the Bush administration created TARP in the first place. But the administration couldn't do nothing, as that would have been politically unpalatable, so $500 billion has basically bought more time for someone to come up with a better answer. Tick, tick, tick. Quite a few days have passed since October's TARP passage, and though bank shares enjoyed a brief end-of-year respite when hope emerged from its bunker, investors' patience has worn thin.

"People got bored with the credit crunch last year and assumed that it had gone away, and yet nothing has changed," said Satyajit Das, a credit expert who spoke to me from Johannesburg, South Africa. "The banking system simply has no capital. All the money that's been allocated so far has been like pouring water into a bucket with a hole in the bottom."

You can't very well have a bankrupt banking system, however, so the market has spent the first three weeks of the new year pricing in the inevitable next step: nationalization of most large banks. The reason is simple: If your owner can print money, you don't need to keep any reserves. Problem solved.

Ozzie-and-Harriet loans
Nationalization is a tame term for a concept that is paradoxically radical and boring. It's radical in that banks would have to issue equity to the government, a process that wiped out current shareholders. Yes, that would mean most bank stocks would go to zero. It's boring in that it would allow the banks to be run completely differently going forward in that they wouldn't have to answer to shareholders on a quarterly basis, they wouldn't be able to pay high salaries to executives and they would make loans that the government believed were in the public interest. Of course, the government would say the banks would be privatized eventually, but realistically it could be decades.

To be sure, the landscape of world business would change dramatically. Private owners have made a mess of things, but you can bet government bureaucrats would be worse. They probably would take fewer smart risks, such as lending money to the next Michael Dell or Bill Gates, and more dumb ones, like giving mortgages to low-income families with meagre means of repayment.

They would almost certainly not support lending to hedge funds or providing money for leveraged buyouts, or do much merger-and-acquisition financing at all. You can pretty much count on the U.S. government knocking the financial system back to the Stone Age, or at least the 1950s -- a situation in which banks accepted passbook savings accounts from Mr. and Mrs. Smith and then made plain-vanilla loans to Mr. and Mrs. Jones.

If this is to be the case, then perhaps the new U.S. Treasury secretary should stop the charade with the second tranche of TARP money and certainly not contemplate TARP II and TARP III, as has been discussed in Washington. Just nationalize the banks and get on with the next phase rather than pour more money down a hole.

It's not like there aren't already nationalized businesses in the United States. There's Amtrak, the U.S. government-run rail system. Mortgage lenders Fannie Mae (FNM.N) and Freddie Mac (FRE.N) are under federal control. There's even the post office, which could easily be a private business if it weren't determined to be a U.S. taxpayer-supported public utility by America's forefathers.

The high price of life support
Personally, I loathe this neo-statism, which is a less objectionable term for socialism. The best course of action, which would have been the most painful in the short term but beneficial in the long term, would have been to force banks to open all their books to regulators and investors, allowing us to see which were solvent and which were not. Then the U.S. Federal Deposit Insurance Corp., which is sort of a mini-nationalizer, could have closed the bad banks and merged their assets into strong banks, and we would be halfway through the crisis by now.

Instead, the previous U.S. Treasury secretary, Henry Paulson, decided on this disastrous course of putting insolvent banks on life support at the expense of U.S. taxpayers, which has only led to a massive waste of money and time.

Now time is running out, because the next phase of the credit crisis is at the door: the part where we see a normal rise of loan defaults during a recession, further crushing banks' earnings. At the moment, defaults are running at 2.5%, but history shows they will hit 10%-plus over the next year or two as commercial real estate and business loans sour. This is why fixing the U.S. banking system will not end America's recession; it will help only to smooth the path of a turbulent descent.

Get out your parachutes -- it's going to be a rough landing.

At the time of publication, Jon Markman did not own or control shares of any company mentioned in this column.


futrcash

Bank of America to get more government help: WSJ

Extra billions will help bank digest Merrill acquisition, newspaper says

By Alistair Barr, MarketWatch
Last Update: 8:32 PM ET 1/14/09

SAN FRANCISCO (MarketWatch) -- The government is close to committing billions in additional aid to Bank of America Corp. to help the giant bank digest its acquisition of Merrill Lynch & Co., the Wall Street Journal reported late Wednesday, citing unidentified people familiar with the situation.

"Even with help from the government, we think Bank of America's tangible equity levels are low relative to peers and that it will need to cut its dividend and or raise equity capital in the coming months," Stuart Plesser, a diversified financial services analyst at Standard & Poor's Equity Research, said.

Scott Silvestri, a spokesman for Bank of America, declined to comment, as did a Treasury spokeswoman.

The news suggests that the worst of the banking crisis may not have passed. The KBW Bank Index (BKX) has dropped 19% so far this year. Citigroup lost more than a third of its market value this week as it became clear the bank will try to shrink itself under pressure from big losses.

Bank of America shares dropped 3.3% to $9.87 during after-hours trading on Wednesday. That followed a decline of more than 4% during regular trading.

Bank of America (BAC) already got a $25 billion investment from the Treasury Department last year. But the bank told the Treasury in mid-December that it was unlikely to complete its purchase of Merrill because the brokerage firm had suffered larger-than-expected losses in the fourth quarter, the Wall Street Journal said, citing a person familiar with the talks.

Treasury was concerned that the deal's failure could affect the stability of U.S. financial markets, so it agreed to work with Bank of America on a plan that includes new government capital, the newspaper explained. Details are expected to be announced when the bank reports fourth-quarter results, scheduled for Jan. 20.

Any possible arrangement might protect Bank of America from losses on Merrill's bad assets. There would be a cap on the amount of losses the bank would have to absorb with the federal government being on the hook for the remainder, the Journal said.

Bank of America closed its acquisition of Merrill on Jan. 1. However, the deal was completed with the understanding that the Treasury and the bank would hammer out a plan to provide more government support, the newspaper added.

The report may increase concerns about fourth-quarter results for the banking and brokerage industries.

Deteriorating loan quality, continued losses on risky securities, and goodwill impairments will result in losses for the 27 major banks covered by Jonathan Glionna and Miguel Crivelli, fixed income analysts at Barclays Capital, according to a fourth-quarter industry preview they released on Wednesday.

The recession will cause problems in loan portfolios to spread from residential-related products to credit cards and commercial real estate, leading to materially higher nonperforming assets and exposing the inadequacy of banks' loan loss reserves, they added.

"With unemployment reaching 7.2% and GDP declining, we expect nonperforming loans to increase substantially, from $94 billion to $125 billion for our 27-bank aggregate," the analysts wrote. "This will force banks to set aside large loan loss provisions, impairing earnings."

The only bright spot is that the government will continue to support large, important banks like J.P. Morgan Chase, Bank of America and Wells Fargo (WFC) , they added.

J.P. Morgan (JPM) is scheduled to report Thursday morning. See full story.

Citigroup will report on Friday morning. The Journal said on Wednesday that Citi executives are bracing for an operating loss of at least $10 billion.

That's spurred the bank to develop a drastic plan to sell lots of businesses and try to shrink its roughly $2 trillion balance sheet by a third, the newspaper added.

Citi shares lost 23% on Wednesday to close well under $5 as investors worried that the bank may struggle to sell units and unwind positions at attractive prices in the midst of turbulent markets.

"We are embarked on a long-term transformation of Citi," Chief Executive Vikram Pandit told employees in a memo that was released publicly on Wednesday. "Our goal is to streamline our operations, strengthen our balance sheet, position ourselves to take advantage of historic global growth opportunities."

"Economics and psychology are both important in the markets," he added. "The economic model of our business is sound and positions the company for success over the long term. The clarity we provide as we report earnings should address the psychology of the market."

http://quotes.freerealtime.com/dl/frt/N?tmn_id={94A548BE-654B-4D4A-8B37-A612B7657194}

Update on FBC stock is up over 50% today...we'll see what it is eod but so far so good. Congrats FBC holders.

Hi board...new guy here.

Flagstar Bank (FBC) has preliminary approval for TARP money since Matlin-Patterson (MP) stepped in with $250M. MP also has a huge stake ($1.3B) in troubled res jumbo loan lender Thornburg Mortgage (THMR).

The hub-bub hope is MP will merge FBC & THMR essentially pulling both of these co's fat out of the fire. Should this happen THMR will start making new/refi loans again.

This could be excellent news for investors in each. We'll find out in the next 90 days. My hunch is it [news] will be much sooner than that. THMR only has until March to keep the wolves at bay...however recent developements look promising.

Dismal Outlook for Mall Owners

By LIAM DENNING
If you thought shopping malls were a nightmare in the run-up to the holidays, just try owning one now that there is nothing left to do but take down the tinsel.

As retailers count their takings, it is becoming clear that consumers took a holiday away from retail land. And broad trends, such as free-falling house prices and rising unemployment, point to a dismal 2009 for anyone in the business of flogging stuff on shelves.

The same goes for the companies that rent them floor space. Real-estate investment trusts operating U.S. malls are especially exposed. Tighter credit has turned the screws on a sector with almost $23 billion of debt maturing over the next two years, according to real-estate consultancy Green Street Advisors, and an aggregate market value of just $17 billion. No wonder that, on average, mall REIT stocks look set to close 2008 down almost 60%.

Yet, as so often with equities that have taken a drubbing, some have enjoyed spectacular bounces recently. Glimcher Realty Trust units have jumped by 250% since its November low, when it dipped below $1 a share. CBL & Associates' stock is up 150% since Dec. 1.

There are three reasons this looks premature. First is the National Association of Realtors' gloomy outlook. It expects the vacancy rate for the retail property sector to hit 12.7% by the third quarter of 2009, up from 9.8% a year earlier. Average rents, having dropped 2% in 2008, are expected to fall 7.3% next year. No sign of a second-half bounce-back there.

If the NAR's prognosis sets the weak overall tone, the retail sector itself could provide next year's nasty surprises. Some retailers, such as Circuit City Stores, have sought protection from creditors already. Credit markets are indicating severe distress at several others.

View Full Image

Associated PressGreen Street identifies three suffering firms -- Sears Holdings, Bon-Ton Stores and Dillard's -- that are also important "anchor" retailers for many malls. Bon-Ton's 10 1/4% bonds maturing in 2014, for example, offer an eye-watering spread of more than 93 percentage points over Treasurys. Even if these retailers do make it through the slump, they might have to restructure, perhaps closing some stores on the way, in order to do so.

Losing an anchor store is bad news for any mall, particularly lower-quality ones, where the closure can touch off a spiral of attracting fewer shoppers, leading to more closures. Green Street identifies Glimcher as having the highest exposure of the mall REITs to Bon-Ton, while it says CBL takes the top spot for both Dillard's and Sears.

The final issue is that mall transactions have dried up, meaning more guesswork than usual going into calculating the REITs' net asset valuations. Apart from economic headwinds, investors with mall REITs in their portfolios run up against the basic problem of having to manage what they can't adequately measure.

wow - CEO greed gamed the system while regulators turned a blind eye.



Between 2001 and 2007, Mr. Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.

During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.

“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”

JPMorgan Chase, which bought WaMu for $1.9 billion in September and received $25 billion a few weeks later as part of the taxpayer bailout of the financial services industry, declined to make former WaMu executives available for interviews.

“I never had a clue about the amount of off-the-cliff activity that was going on at Washington Mutual, and I was in constant contact with the company,” said Vincent Au, president of Avalon Partners, an investment firm. “There were people at WaMu that orchestrated nothing more than a sham or charade. These people broke every fundamental rule of running a company.”

“It was a disgrace,” said Dana Zweibel, a former financial representative at a WaMu branch in Tampa, Fla. “We were giving loans to people that never should have had loans.”

If Ms. Zweibel doubted whether customers could pay, supervisors directed her to keep selling, she said.

“We were told from up above that that’s not our concern,” she said. “Our concern is just to write the loan.”

The ultimate supervisor at WaMu was Mr. Killinger, who joined the company in 1983 and became chief executive in 1990. He inherited a bank that was founded in 1889 and had survived the Depression and the savings and loan scandal of the 1980s.

By saying yes WaMu accumulated and marketed the most toxic loans...

http://www.nytimes.com/2008/12/28/business/28wamu.html

futrcash

By saying yes WaMu accumulated and marketed the most toxic loans...

http://www.nytimes.com/2008/12/28/business/28wamu.html

futrcash

By saying yes WaMu accumulated and marketed the most toxic loans...

http://www.nytimes.com/2008/12/28/business/28wamu.html

futrcash

Citigroup lashes out at Wachovia-Wells deal

Citi cites Wachovia exclusivity pact, had provided liquidity this week

By Sam Mamudi, MarketWatch
Last Update: 2:09 PM ET 10/3/08

NEW YORK (MarketWatch) -- In a strongly-worded response to the news that Wells Fargo is buying Wachovia Corp., Citigroup Inc. claimed Friday that it had exclusive rights and claimed that Wachovia was not permitted to talk to anyone else.

Citi (C) also revealed that it had been providing liquidity support to Wachovia Bank this week, ever since a deal between the two banks had been agreed on Monday.

Citi said it had nearly completed the definitive agreements required to complete the deal. It demanded that Wachovia (WB) and Wells Fargo (WFC) "terminate" their agreement. "Citi has substantial legal rights regarding Wachovia and this transaction," it said.

A deal between Wachovia and Citi was unveiled on Monday. That deal would have seen Citi buy Wachovia's banking operations, with Citi receiving Federal Deposit Insurance Corp. protection against losses on $312 billion of Wachovia's more troubled assets. Wachovia is one of the largest holders of option adjustable-rate mortgages. See full story

"Wachovia's agreement to a transaction with Wells Fargo is in clear breach of an Exclusivity Agreement between Citi and Wachovia," said Citi in a statement. "In addition, Wells Fargo's conduct constitutes tortious interference with the Exclusivity Agreement."

"The Exclusivity Agreement provides, among other things, that Wachovia will not enter into any transaction with any party other than Citi, and will not participate in any discussions or negotiations with any third party," said Citi.

"The Exclusivity Agreement also provides that the parties would be irreparably harmed by any breach of the agreement and that the remedy of specific performance of the agreement is appropriate."

Shortly after it issued its statement, Citi released the Exclusivity Agreement. Read the Agreement

In a conference call Friday morning, Robert Steel, chief executive officer at Wachovia, addressed claims about a binding agreement with Citigroup by saying, "The controversy on this issue will be addressed in the appropriate way." He declined further comment.

One lawyer said that while the Agreement shows that Citi has a case, it's unlikely that it would be able to persuade a court to overturn the Wells-Wachovia deal.

"If Citi goes to court, how could they show lost profits in this market and with all those toxic assets [involved in the deal]?" asked Roger Cominsky, partner at law firm Hiscock & Barclay. "Talk about a pyrrhic victory. The court could say, 'Yes the agreement was violated, but your deal is dead and you don't have any lost profits.'"

Citi said when the deal was announced that it could have been exposed to potential losses of $42 billion as a result of the acquisition.

Cominsky said that if Citi was "serious" about blocking the deal, "they'd be filing a temporary restraining order right now." A Citi spokeswoman said she was not aware of any such filing being made.


In a move that reflects how Citi was blindsided by the Wells-Wachovia deal, Citi placed a full-page ad touting its deal with Wachovia in newspapers across the country on Friday, including USA Today.

"Citbank is honored to enter into a partnership with Wachovia," said the ad. "Together we will be part of the largest financial services company in the world."

Citi's acquisition would have seen it pay $2.16 billion in stock to Wachovia, plus the $12 billion in preferred securities and warrants it gave to the FDIC. In return, Citi would have received $448 billion of bank deposits -- a large source of stable funding.

At the time, Citigroup CEO Vikram Pandit said the acquisition offered a rare combination of potentially high returns and low risk.

But that deal has been trumped, with Wachovia instead agreeing late Thursday to merge with Wells Fargo in a deal that sees all of Wachovia folded into Wells Fargo. The new deal will not require any FDIC support, said Wachovia.

A source familiar with the situation said the Citigroup deal did not include a breakup fee, which would have made it more costly for Wachovia to break off discussions or a deal with Citi. See full story

Shares of Citi fell more than 12% in morning trading Friday, to below $20. As of 1.p.m., they were down about 10%, at about $20.30. Shares of Wells Fargo rose by more than 8%, to about $38.

http://quotes.freerealtime.com/dl/frt/N?tmn_id={146F5522-745D-4B02-8A37-15A02B992C28}

Run on Bank Helped Kill WaMu, But Your Money Is Safe

Sep 26, 2008 10:44am EDT by Aaron Task in Investing, Recession, Banking

In the biggest bank failure in U.S. history, the Federal Deposit Insurance Co. seized Washington Mutual's assets Thursday. The FDIC then quickly sold most of WaMu (that's assets and liabilities) to JPMorgan.

Simply put, WaMu was victimized by a classic "run on the bank." Customers withdrew $16.7 billion in a 10-day period following the bankruptcy of Lehman Brothers, leaving WaMu "with insufficient liquidity to meet its obligations," its regulators determined.

A longer explanation is WaMu was victimized by mismanagement and misguided bets on exotic (and toxic) instruments such as option adjustable-rate mortgages.

The deal has major ramifications for JPMorgan and the banking industry as a whole, as Henry and I discuss in a forthcoming segment.

For the vast majority of people who bank at WaMu, which had 2200 branches and $188.3 billion of deposits as of June 30, the important thing to remember is your deposits are insured up to $100,000, and the Federal government will go to every extreme to make sure it's available.

"There will be no interruption in services and bank customers should expect business as usual come Friday morning," FDIC Chairman Sheila Bair told reporters last night.

The sobering truth, however, is that repeated declarations about the sanctity of FDIC insurance from Bair, President Bush, Treasury Secretary Paulson, Fed Chairman Bernanke and others failed to quell concerns among WaMu's customers. That suggests more "bank runs" could be in the offing unless the government moves quickly to restore confidence.

1790 Comments
Showing comments 1 - 20 of 1790 Next

Yahoo! Finance User - Friday September 26, 2008 10:52AM EDT
I think confidence would be restored if Sarah Palin was running the country.

report abuseKentar S - Friday September 26, 2008 11:00AM EDT
With McCain and Palin in the White House we can get this thing turned around. Should the democrats prevail we are in for a real roller coaster ride. Socialism will not work with revolution and turmoil.

report abuseJohnny Ike - Friday September 26, 2008 11:02AM EDT
JP Morgan rescue the 1929 recession.......Will they do it again....I have the feeling.They will.

report abuseDanny Mack - Friday September 26, 2008 11:02AM EDT
I haven't seen a single article talking about the loss for stock investors. It's crazy. How did they allow no relief for the investors who lost every single penny that they invested in the company. How much exactly did investors lose today?

report abuseYahoo! Finance User - Friday September 26, 2008 11:03AM EDT
the stock's at a good price now!

report abuseYahoo! Finance User - Friday September 26, 2008 11:05AM EDT
I dont get it, they ask the people to put up 700billion$ to save banks like jpm 1 week later jpm buys a part of wamu ????????. I thought they had no money?????

report abuseWhit Chambers - Friday September 26, 2008 11:06AM EDT
The bailout is an Obamanation. What is the rush. Big deal if the market goes down to 8000 or so. We were there at 2001. Let the free market work things out an properly price assets - not a dictator like Pauliboy. Let the fed take it piece by piece, but don't artificially boost up the market.

report abusemartatrail - Friday September 26, 2008 11:09AM EDT
Our economy will soon fall All of us remain without work

report abusemutantkarma - Friday September 26, 2008 11:10AM EDT
I used to bank at Washington Mutual. I was a stockholder and believed the propaganda the employees of said and the reassurances Alan Fishman printed up and had taped up all over the service counters. My equity is now ZERO. Thanks you all for all the lies.

report abuseRyle G - Friday September 26, 2008 11:11AM EDT
Aaron is having a rough day today. Was he on a bender last night? Love the program though.

report abusemartatrail - Friday September 26, 2008 11:12AM EDT
Our economy will soon fall All of us remain without work

report abuseYahoo! Finance User - Friday September 26, 2008 11:12AM EDT
I don't know about Sarah Palin, but I can not only see a bank from my house, but I've actually been inside not one but several of them. Therefore, I'm more prepared than Sarah to fix this mess!!!

report abuseCTCrew - Friday September 26, 2008 11:13AM EDT
With all the arguments and pontificating about why WaMu failed one thing stands out; they lent money without the due dilligence to obtain assurances that there would be a high degree of confidence that the loan could be paid back, betting on the continued rise of the housing market. When housing pricing fell, they were left stuck with mortgages that defaulted. Democrats let this happen through Fannie and Freddie while republicans refused to intervene BEFORE the situation got out of hand and the Fed and Treasury sought to hush the problem for fear of a run on these same mis-managed banks. There was NO regulation nor desire to rein in these doomed lending practices.

report abuseMoxies - Friday September 26, 2008 11:15AM EDT
Ron Paul 2008 As we go deeper into a recession every American will appreciate the philosophy of Ron Paul. For the economy will be the catalyst that will bring the American people to the conclusion that Ron Paul's philosophy is the only thing that can save the United States of America.

report abuseYahoo! Finance User - Friday September 26, 2008 11:16AM EDT
This sucks! I have WM stock and now it's worthless!!!!!!!!!

report abuseYahoo! Finance User - Friday September 26, 2008 11:17AM EDT
With the way things are going, JPM will be the only bank left. I hope the Government is saving up for the bail out of the US Auto industry next.

report abuseweitzer53 - Friday September 26, 2008 11:22AM EDT
A class action suit would be the right course of action when we pay for the bailout with tax money and lose all equity in the stock. It time for the banks and this government to explain themselves. We the people...................................

report abusefine_thymes - Friday September 26, 2008 11:22AM EDT
#1 The government should just take the 700B and oraganize it's own bank and start making loans! That will get the other banks back into motion. Great Idea -someone get this idea to Congress please.

report abuseDeacon - Friday September 26, 2008 11:24AM EDT
Why was this run on WAMU not reported by the media until they collapsed. I would like to see a report on whether there are runs on any other banks.

report abuseMoxies - Friday September 26, 2008 11:24AM EDT
My neighbors and family members did not vote for Ron Paul, even though I informed them about Ron Paul's policies. Today, I personally know eight people that have lost their jobs and five families that have lost their homes. We will all know someone personally that have lost their jobs, homes and cars.

U.S. Takes Over Ailing Mortgage Lenders
Heads Of Fannie Mae, Freddie Mac Replaced; Companies Placed Into Government Conservatorship

Comments 56
WASHINGTON, Sept. 7, 2008


(CBS/AP) The Bush administration, acting to avert the potential for major financial turmoil, says the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.

Officials announced that the executives of both institutions had been replaced.

Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.

Treasury Secretary Henry Paulson says the actions were being taken because "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."

The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.

"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.

Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie.

The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans."

The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.

The takeover follows a report Friday by the Mortgage Bankers Association that more than 4 million American homeowners with a mortgage, a record 9 percent, were either behind on their payments or in foreclosure at the end of June.

Sen. Joe Biden said the government's rescue of the big mortgage companies Freddie Mac and Fannie Mae should not mean bailing out shareholders at the expense of taxpayers.

The Democratic nominee for vice president says it is important to help homeowners and make sure the two companies still are in a position to keep making loans.

That confirmed what investors saw in Fannie and Freddie's recent financial results: trouble in the mortgage market has shifted to homeowners who had solid credit but took out exotic loans with little or no proof of their income and assets.

For decades, Fannie and Freddie fulfilled the American dream, reports CBS News correspondent Tony Guida. Consumers took out loans from banks, which in turn sell those loans to Fannie or Freddie. Then the mortgage giants repackaged those loans and sold them to investors, guaranteeing the mortgages would be repaid.

As home ownership grew universal, Fannie and Freddie prospered. Their CEOs, Daniel Mudd and Roger Syron together earned around $30 million dollars in 2007, reports Guida.

But as they fat, critics say they got greedy, underwriting too many home loans that never should have been made.

Fannie Mae and Freddie Mac lost a combined $3.1 billion between April and June. Half of their credit losses came from these types of risky loans with ballooning monthly payments.

While both companies said they had enough resources to withstand the losses, many investors believe their financial cushions could wither away as defaults and foreclosures mount.

Frank said the companies' financial picture was better than Wall Street investors assumed, but "it just plainly became clear that elements of the market wouldn't' accept that."

The epic decision highlights the size of the threats facing the housing market and the economy. On Friday, Nevada regulators shut down Silver State Bank, the 11th failure this year of a federally insured bank. And earlier this year, the government orchestrated the takeover of investment bank Bear Stearns by JP Morgan Chase.

"Any government action must help to strengthen our economy, which is suffering a crisis brought on by the administration's failure to stop predatory lending," said Sen. Chris Dodd, D-Conn., who chairs the Senate Committee on Banking, Housing, and Urban Affairs. "Any intervention also must minimize the cost to American taxpayers, and should not put other financial institutions at risk."

The crisis surrounding Fannie and Freddie promises to be a major challenge for the next president.

The role the two companies play in the U.S. mortgage market has grown dramatically over the past year as other lenders collapsed under the weight of bad subprime loans. The companies guaranteed about three-quarters of all new mortgages in the second quarter of this year, up from under 40 percent in 2006, according to the trade publication Inside Mortgage Finance.

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and James Lockhart, the companies' chief regulator, met Friday afternoon with the top executives from the mortgage companies and informed them of the government's plan to put the companies into a conservatorship as early as this weekend.

In July, Congress passed a plan to provide unlimited government loans to Fannie and Freddie and to purchase stock in the companies if needed. Critics say the open-ended nature of the rescue package could expose taxpayers to billions of dollars of potential losses.

Fannie Mae was created by the government in 1938, and was turned into a public company 30 years later. Freddie Mac was established in 1970 to provide competition for Fannie.

http://www.cbsnews.com/stories/2008/09/07/business/main4423279.shtml?source=RSSattr=HOME_4423279

2 brokers accused of $1B subprime fraud
Wednesday September 3, 1:36 pm ET
By Marcy Gordon, AP Business Writer
Federal prosecutors, SEC accuse 2 Wall Street brokers of $1 billion subprime securities fraud

WASHINGTON (AP) -- Federal prosecutors and regulators on Wednesday accused two former Wall Street brokers of defrauding customers by making more than $1 billion in unauthorized purchases of securities tied to subprime mortgages.

In an indictment unsealed in federal court in Brooklyn, N.Y., the two former Credit Suisse Securities brokers were charged with deceiving customers in a bid to pump up their sales commissions. The charges against Julian Tzolov, 35, and Eric Butler, 36, were announced by U.S. Attorney Benton Campbell in Brooklyn.

They are charged with securities fraud, wire fraud and conspiracy, carrying maximum total sentences of 25 years and up to $5.25 million in criminal fines. Give them the max!!!!

The Securities and Exchange Commission filed a related civil lawsuit in federal court in Manhattan, alleging that Tzolov and Butler led corporate customers to believe that auction-rate securities being purchased in their accounts were backed by federally-guaranteed student loans and were safe like cash. The SEC is seeking unspecified restitution and civil fines against the brokers, who were suspended by Credit Suisse last year.

The securities actually were backed by subprime mortgages, collateralized debt obligations and other high-risk investments, the authorities said. Because of their higher risk, they brought a higher yield and much larger commissions for the brokers.

Attorneys representing Tzolov and Butler didn't immediately return telephone calls seeking comment Wednesday afternoon.

Credit Suisse said the two resigned last September "after we detected their prohibited activity and promptly suspended them."

The New York investment firm said it immediately informed the SEC of their activities and has continued to assist the agency in its investigation.

Andrew Calamari, associate director of the SEC's New York regional office, said the case shows "how the recent turmoil in the subprime market has affected even investors who had no intention of buying subprime securities."

The authorities said Tzolov and Butler deceived foreign corporate customers by sending them e-mail confirmations in which the terms "St. Loan" or "Education" were added to names of other types of securities purchased for the customers.

The two brokers also frequently deleted references in the e-mails to "CDO," for collateralized debt obligations, or "mortgage" from the names of the securities purchased, the agency said. CDOs are complex financial instruments that combine various slices of debt.

As a result, customers were stuck holding more than $800 million in securities that lost their liquidity and value when the market for auction-rate securities began to collapse in August 2007, according to the SEC.

In recent months at least eight major investment banks, including Merrill Lynch & Co., Goldman Sachs Group Inc., Citigroup Inc. and Morgan Stanley, have signed deals with federal and state regulators to buy back more than $50 billion worth of auction-rate securities. The regulators alleged that the banks misled customers into believing that the investments were safe.


http://biz.yahoo.com/ap/080903/sec_subprime_charges.html?.v=8&printer=1

765 funds hold FRE, 96 have dumped

http://www.mffais.com/fre.html

mffais = Mutual Fund Facts About Individual Stocks

Federal Home Ln Mtg Corp (FRE) stock was recently dumped by 96 Funds!

http://www.mffais.com/rankings/220/

Fannie, Freddie capital can absorb losses: report
Tuesday August 26, 9:39 am ET

NEW YORK (Reuters) - Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News), the two biggest U.S. mortgage finance giants, have enough capital to absorb probable losses through the end of the year, according to Citigroup equity research.

(Citygroup holds 28,955,791 shares of FRE, lol)

Estimated third and fourth quarter revenue of $7.5 billion for Fannie Mae and $5.5 billion for Freddie Mac would cover likely losses of $1.5 billion and $1.2 billion, Citigroup said in slides for a conference call on Tuesday.

The excess capital over minimums in the second half of the year would thus total $20.3 billion for Fannie Mae and $12.7 billion for Freddie Mac, the slide presentation obtained by Reuters shows.

The companies have come under intense scrutiny over the past few months on investor speculation that mortgage losses would cause shortfalls in capital, and lead to a bailout by the U.S. Treasury. Fannie Mae and Freddie Mac shares have tumbled since May with analysts contending a taxpayer-funded rescue could leave shares worthless.

Citigroup analyst Bradley Ball in an August 22 report asserted that shareholder interests would likely be preserved despite increased chances for "extraordinary" actions by the companies and policymakers.




FRE headlines from Yahoo - Today, Tue, Aug 26, 2008

• [video] Consumer Data Boosts Street
at Forbes.com (Tue 6:49pm)

• UPDATE - FDIC sees 117 problem banks; most since 2003
at Reuters (Tue 6:48pm)

• IBD's Top 10 - Tuesday
Investor's Business Daily (Tue 6:47pm)

• S&P affirms Fannie Mae sr. unsecured debt rating
AP (Tue 6:25pm)

• Cramer Calls the Housing Bottom
at CNBC (Tue 6:17pm)

• Fannie, Freddie Rally, but Issues Remain
at TheStreet.com (Tue 6:13pm)

• Stocks Spin On Housing, Consumer Data
at Forbes.com (Tue 6:10pm)

• Currencies: Dollar up vs. most rivals, but capped by housing data, rising oil
at MarketWatch (Tue 5:54pm)

• Glimmers of good news in housing reports
AP (Tue 5:37pm)

• Stocks mixed on higher oil, consumer data
AP (Tue 5:36pm)

• Stocks Mostly Up On Consumer Confidence News
at Forbes.com (Tue 5:30pm)

• S&P cuts Fannie, Freddie preferred ratings
at Reuters (Tue 5:07pm)

• Fannie Mae, Freddie Mac shares climb
AP (Tue 5:05pm)

• Stocks Finish Flat as Gustav Looms
at CNBC (Tue 5:05pm)

• Stocks rise on energy shares, offsets bank fears
Reuters (Tue 5:04pm)

• S&P cuts Freddie Mac's preferred stock rating to 'BBB-'
at MarketWatch (Tue 4:58pm)

• Freddie Mac, Orange 21: Biggest Price Gainers (FRE, ORNG)
at The Wall Street Journal Online (Tue 4:57pm)

• [$$] S&P Lowers Ratings on Fannie
at The Wall Street Journal Online (Tue 4:55pm)

• [$$] Seeking usual recovery signs risks missing next turnaround
at The Wall Street Journal Online (Tue 4:33pm)

• [$$] Housing, oil weigh on stocks
at The Wall Street Journal Online (Tue 4:33pm)

• Natural Gas ETFs Jump On Storm Worries
at SmartMoney.com (Tue 4:31pm)

• Financial Stocks: Freddie Mac shares rise 20% as analysts question bailout talk
at MarketWatch (Tue 4:29pm)

• Freddie Mac, Darden, Chico's are big movers
AP (Tue 4:24pm)

• InPlay: Freddie Mac: S&P affirms Freddie Mac Sr. debt rating, others on CW, Lowered
Briefing.com (Tue 4:16pm)

• FDIC: 117 troubled banks, highest level since 2003
AP (Tue 4:11pm)

• This Homebuilder Is Actually Growing
at Motley Fool (Tue 4:00pm)

• Stocks Struggle as Gustav Looms
at CNBC (Tue 3:55pm)

• Our Assets Are Your Debts
at Minyanville.com (Tue 3:50pm)

• Financial Winners & Losers: Freddie Mac
at TheStreet.com (Tue 3:39pm)

• Summary Box: Existing Home Sales
AP (Tue 3:26pm)

• Housing Data Suggest Bottoming (Update)
at TheStreet.com (Tue 3:07pm)

• Fed Leans Toward Rate Hike
at Forbes.com (Tue 2:50pm)

• Fidelity hit hard by Fannie, Freddie downfall
at bizjournals.com (Tue 2:45pm)

• Fed: Rates not too low; next move likely to be up
AP (Tue 2:44pm)

• [$$] Oil prices, housing data push U.S. stocks lower
at The Wall Street Journal Online (Tue 2:32pm)

• Financial Stocks: Fannie, Freddie higher as analysts question potential bailout
at MarketWatch (Tue 2:15pm)

• Cramer: Beginning of the End for Housing's Woes
TheStreet.com TV (Tue 2:13pm)

• Federal Home Loan Banks sell $3 bln three year debt
at Reuters (Tue 2:12pm)

• Fannie, Freddie May Avoid Bailout After All: Analysts
CNBC (Tue 2:02pm)

• Subprime Today: Home prices fell further in June, leading to 16% annual decline
at MarketWatch (Tue 1:56pm)

• Fannie, Freddie capital can absorb losses: report
Reuters (Tue 1:41pm)

• Home Prices Turning Up in Spots
at CNBC (Tue 1:30pm)

• US CREDIT-GSEs' subordinated debt unlikely to trigger swaps
at Reuters (Tue 1:24pm)

• are big movers
AP (Tue 1:20pm)

• Trading Where the Action Is!
TradingMarkets.com (Tue 1:19pm)

• Goldman sees options before Fannie,Freddie takeover
at Reuters (Tue 12:56pm)

• Defaults Slow, but Don't Call It a Comeback
at TheStreet.com (Tue 12:52pm)

• Sector Snap: National bank stocks mostly rise
AP (Tue 12:30pm)

• Stocks Sway in Hurricane, Dollar Winds
at CNBC (Tue 12:16pm)

• [$$] Good News in Housing, the Dollar
at RealMoney by TheStreet.com (Tue 12:15pm)






Solar Stocks #board-11148
Peak Oil #board-6609
Coal #board-2809
Real Estate Bubble #board-7285
Lender Implosion #board-10076
HomeBuilders #board-1680
Your Economy #board-1948
Global Warming #board-11877

KDB warned against buying Lehman
By Song Jung-a in Seoul

Published: August 25 2008 10:48 | Last updated: August 25 2008 20:16

South Korea’s top financial regulator on Monday said it was “cautious” on Korea Development Bank’s interest in taking over a bank such as Lehman Brothers, stressing that such a deal would be better led by private lenders.

Jun Kwang-woo, chairman of the Financial Services Commission, told reporters he was aware that KDB was considering the possibility of buying a global investment bank.

EDITOR’S CHOICE
Investor doubt over Lehman fund assets - Aug-22Video: Henny Sender on Lehman’s troubles - Aug-21Lehman’s secret talks to sell 50% stake stall - Aug-21Lehman shares slide on fears over results - Aug-20Lehman examines Neuberger Berman sell-off - Aug-19Lex: Lightening Lehman - Aug-18“In principle, taking over a global investment bank can become an opportunity to raise the capability of the [Korean] investment banking business,” Mr Jun said.

“But at the same time, as the risks are also big, KDB should take a cautious approach.

“We welcome any efforts led by the private sector to go global, but it may not be proper for state-owned financial institutions to lead the role and take on excessive burdens.”

Lehman shares were down 5.5 per cent at $13.62 in early afternoon trade, after falling as much as 8.4 per cent on Mr Jun’s comments.

The Financial Times revealed last week that KDB had spoken to Lehman about buying a 50 per cent stake but failed to reach an agreement.

According to people familiar with the negotiations, the Koreans discussed a two-step process under which KDB would buy a 25 per cent stake directly from Lehman and another 25 per cent though a market tender.

Lehman is considering options to raise cash before its mid-September earnings report, which JPMorgan analysts expect to include writedowns of up to $4bn.

These include a sale of a stake in Lehman itself or the sale of all or part of its asset management arm or its commercial real estate portfolio.

KDB said on Monday that it was “thinking about various options [to raise competitiveness]” ahead of a planned privatisation.

But the lender declined to comment on its interest in Lehman.

Last month Min Euoo-sung, KDB’s new chairman and a former head of Lehman in Korea, said the lender would actively seek overseas takeovers. He said US subprime woes provided an opportunity for KDB.

“Plans for mergers and acquisitions in foreign markets are included in our strategy to develop into a global financial company,” Mr Min said.

Korea plans to privatise KDB by 2012 by setting up a holding company, and is preparing for an initial public offering next year.

http://www.ft.com/cms/s/0/ca816bd6-727f-11dd-983b-0000779fd18c.html

Wachovia's commercial loans stir worries

Bank may have cut corners In bid to join industry giants, analyst says

By Alistair Barr, MarketWatch

Last update: 6:59 p.m. EDT Aug. 12, 2008 Comments: 58

SAN FRANCISCO (MarketWatch) -- In September 2006, Wachovia arranged a $285 million loan for Latrobe, Penn.-based drinks maker Le-Nature's Inc.

The bank then sold the debt on to investors including Philip Falcone's $20 billion Harbinger Capital hedge-fund firm and the Missouri State Employees' Retirement System.

Roughly 60 days after the loan, Le-Nature's was bankrupt. The company was later found to have fraudulently inflated revenue by about 10 times, according to federal prosecutors.
Harbinger, Missouri and other investors sued Wachovia (WB 16.00, -2.21, -12.1%) , claiming the bank knew about Le-Nature's problems, but went ahead with the financing anyway. The fee of more than $7 million was alluring and the deal helped Wachovia in its goal of becoming a major player in the junk-bond market, the suit alleges.

Wachovia said earlier this year that it didn't know about Le Nature's problems and is itself a victim of the fraud.

However, the suit was an red flag to at least one analyst who is concerned that Wachovia may have let underwriting standards slip in recent years, looking to grow quickly to join Bank of America Corp. (BAC 31.13, -2.25, -6.7%) , J.P. Morgan Chase & Co. (JPM 37.92, -3.97, -9.5%) and Citigroup Inc. (C 18.54, -1.28, -6.5%) as one of the giants of the U.S. banking industry.

"This company's mantra was grow, grow, grow," Gerard Cassidy, an analyst at RBC Capital Markets, said in an interview. "They were so focused on wanting to be in the trillion-dollar asset club for banks that they cut corners."

Until now, most analysts and investors have focused on Wachovia's $122 billion portfolio of so-called pick-a-pay mortgages, inherited from the infamous acquisition of lender Golden West at the height of the housing boom in 2006. These kinds of negative-amortization mortgages allowed borrowers to pay less than the required monthly amount, increasing the size of the loan. As house prices slump, more of these home loans are souring.

But Wachovia also has more than $200 billion in commercial loans that could trigger even more losses if the U.S. economy slides into recession, according to Cassidy.

"This is more frightening to me because it's bigger," he said.
If Wachovia did cut corners underwriting commercial loans, then higher losses on these assets could force the bank to raise more capital or sell lucrative business to get through the downturn, the analyst added.

Robert Steel, Wachovia's new chief executive, brings a welcome, objective view to the company's problems, "but the heavy lifting has not begun," Cassidy warned.

MarketWatch contacted Wachovia spokeswoman Christy Phillips-Brown on Tuesday seeking comment. She said that the bank wasn't able to comment immediately. Shares of Wachovia ended down 12% at $16 in Tuesday trading.

Commercial-loan boom
In the past 15 years, commercial and industrial loans have more than doubled to $1.4 trillion, according to data from RiskMetrics Group and the Federal Deposit Insurance Corporation. Wachovia had $206 billion of commercial loans on its balance sheet at the end of June, up 25% from a year earlier and more than double from five years ago.

Such types of loans are made to companies to help them pay for acquisitions and for other reasons, such as financing inventories and receivables. They are sometimes unsecured, so when loans go bad there's no collateral to sell to recover any money, leaving a 100% loss, analysts say.

In contrast, real-estate loans are backed by property, so when defaults happen there are assets to sell. That has limited losses during previous downturns in the credit cycle.

Net charge-offs on real-estate loans have been lower than losses on commercial and industrial loans every year since 1991, according to RiskMetrics. That's partly because of the unsecured nature of some commercial loans.

But due to the current housing slump, there were higher losses on real-estate loans than commercial loans during the first quarter of this year, RiskMetrics data show.

As real-estate loans go bad, several banks have been trumpeting their business in commercial and industrial loans, which has been near record levels in recent quarter, RiskMetrics noted.

"However, as signs of a weakening economy continue to emerge, we are likely to see credit quality in C&I lending deteriorate in tandem with the general economy," wrote Kevin Mixon, an analyst at RiskMetrics, in a June report to investors.
This type of lending "is currently a less-appreciated component of risk in bank portfolios," he added. "A continued economic downturn may lead to increased events of default in this inherently higher loss-rate lending category in upcoming quarters."

Net charge-offs on commercial and industrial loans fell as low as 0.18% of total loans in the first quarter of 2006. Since then, the rate of losses has climbed to 0.68%, RiskMetrics indicated.

At the height of the dot-com bust, the rate of net charge-offs on these types of loans reached 1.71% in 2002. In 1991, during an earlier recession, net charge-offs climbed as high as 1.79%, RiskMetrics data show.

In the second quarter of 2007, before the credit crunch hit, Wachovia reported that net charge-offs on these types of loans were 0.07% of average commercial loans. That jumped to 0.88% in the second quarter of 2008.

In the second quarter of 2002, during the dot-com bust, Wachovia reported the rate of net charge-offs on commercial loans was 1.24%.

Worrying signs
The lawsuits surrounding the collapse of Le Nature's made RBC's Cassidy concerned about Wachovia's loan-underwriting procedures. But there have been other worrying signs, the analyst said.

In its latest annual report, Wachovia said provisions to cover bad debt would remain under 0.75% of average net loans, on an annualized basis, during the first half of 2008. However, soon after the bank disclosed in a regulatory filing that provisions would probably exceed that level.

"That was a red flag to me," Cassidy said. "Where were the controls?"

In April, The Wall Street Journal said that Wachovia was being investigated by federal prosecutors as part of a probe into alleged drug-money laundering by Mexican and Colombian money-transfer companies. An official at the bank told the newspaper that it was cooperating with authorities. Wachovia cut ties to the money-transfer firms when the probe started in December and January, the paper reported.

In the same month, Wachovia agreed to pay an estimated $144 million to settle charges that it took advantage of older customers through questionable relationships with telemarketers. The bank didn't admit or deny wrongdoing.

Also in April, the company reported a first-quarter net loss of $393 million, or 20 cents per common stock. Three weeks later, Wachovia almost doubled that loss to $708 million after reviewing agreements related to its bank-owned life insurance portfolio.

Mervyn's, SemGroup, WCI
Wachovia also has ties to some recent high-profile bankruptcies.

SemGroup LP filed for bankruptcy protection in late July after losing billions of dollars in oil-trading losses. The company changed a credit agreement in February, allowing it to borrow as much as $600 million, up from $250 million. Wachovia Bank was the administrative agent and issued the letter of credit.

At the end of July, Mervyn's LLC went bust. Wachovia Capital Finance, a unit of the bank, was administrative and collateral agent on a loan facility of up to $600 million that was extended to the retailer.

WCI Communities Inc. (WCIMQ:WCI Communities, Inc 0.28-0.05-15.15% went bankrupt on Aug. 4. The Florida home-builder had a revolving credit construction-loan agreement with Wachovia Bank.

"There's a history of evidence that this company cut corners.

They didn't have the systems in place to control risks," Cassidy commented. "Wachovia was in such a rush to get into the big guys' club, that our biggest fear, aside from pick-a pay, is that they didn't underwrite commercial loans properly."




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BankUnited has plunged 93 percent since last year

By GERALDINE FABRIKANT
Published: August 6, 2008

CORAL GABLES, Fla. — A cheerful sign outside the glistening offices of Bank United beckons consumers to tap into “Mortgage-ade.” Another promises a “59 Minute Mortgage.”

But easy money, it turns out, has created enormous problems at Bank United, Florida’s biggest regional bank.

By aggressively peddling a popular type of high-interest loan to risky borrowers, the bank tripled its profits in 2006 as real estate on Florida’s Gold Coast peaked, only to lose nearly $100 million in late 2007 and early 2008 as the market cratered. Now, its chief executive, Alfred R. Camner, is scrambling to raise $400 million in capital, an amount nearly eight times the bank’s shriveled value on the stock market.

Analysts and a corporate governance group are monitoring the bank’s asset quality and asking why Mr. Camner was allowed, with board approval, to amass a pool of volatile loans that at one point represented 75 percent of the bank’s mortgage portfolio, despite what has since proved to be great risk.

In many ways, Bank United symbolizes the excesses exhibited by the nation’s banks as home prices soared in recent years — and the pain that is afflicting them now that home prices are falling. Florida has been hit especially hard by the housing slump, and so has Bank United.

Since last September, the bank’s share price has plunged 93 percent, twice as much as the Standard & Poor’s 500 Regional Banks index. A year ago, the stock was $15.49 a share but closed on Wednesday at $1.50 a share, after gaining 19 cents.

In an interview, Mr. Camner, who is also the bank’s controlling shareholder, testily defended the bank’s strategy. “We did it for over 10 years,” he said, referring to the bank’s use of a risky but highly attractive product known as an option adjustable-rate mortgage.

“For a very long time, it was an excellent performing package.” he said. “It gave the borrower a chance to manage his money. If they qualified, it was an excellent loan.”

He also dismissed as “completely absurd” and “idiotic” concerns that the bank’s practices have eroded the strength of the bank’s assets, despite a recent revision by one brokerage firm of its shares to underperform.

Around 2003, as the Florida housing market took off, the bank, led by Mr. Camner and Ramiro Ortiz, its president, began promoting option adjustable-rate mortgages. Such loans enable borrowers to defer payments on interest as well as principal. Many banks found a bonanza in these loans, whose full interest expense can be counted as interest income by the bank whether or not the bank actually receives the money, making the loans all but irresistible to promote.

The strategy proved lucrative: Bank United’s assets more than doubled to $15 billion from $7.1 billion in 2003, while its total loans rose to $12.5 billion from $3.9 billion. By last October, the end of the bank’s fiscal year, Mr. Camner had allowed option adjustable-rate mortgages to dwarf overall mortgages three to one.

When the national housing market began to slide, Florida’s imploded. And while the broader banking industry struggled with mounting bad loans, falling home values and a weak economy, Bank United found itself on a particularly slippery slope as its newfound base of risky regional borrowers eroded. From mid-2006 to early 2008, the percentage of its assets designated as nonperforming soared more than fivefold to 4.75 percent.

“The bank clearly did not understand the risks,” said Gerard Cassidy, a banking analyst at RBC Capital Markets. “We believed that they pursued that business because it drove revenue and earnings growth.”

Indeed, the bank kept expanding. By the end of March, 48 percent of its $9.8 billion residential loan portfolio was outside Florida.

“By opening up offices across the country,” Mr. Ortiz said in an interview, “we were diversifying risk.” But, he added, “we never anticipated a national downturn.”

Now, some analysts fear that continued weakness in the housing market could cause an accumulation of nonperforming loans. Although losses as of May 31, were small, Mr. Cassidy said the ratio of nonperforming loans was high relative to other banks. For example, at the National City Corporation, an Ohio bank that expanded into Florida in recent years, the ratio is about 2 percent, less than half that of Bank United.

“The bank is currently well capitalized,” Douglas Rainwater, a banking analyst at Janney Montgomery Scott, said of Bank United. “But given the amount of nonperforming loans and the trend in their growth, losses would most likely increase substantially at some point.”

For the Corporate Library, an independent governance group based in Portland, Me., that is tracking the bank, the bank’s board also appears not to have fully understood the risks the company was taking. Mr. Camner’s compensation, which ballooned to $5.64 million, including a salary of $475,000, had grown “way out of whack” compared with other institutions its size, the group said.

“Outrageous compensation often signals a failure of oversight and backbone, so it often correlates to poor performance for shareholders in other categories,” said Nell Minow, the editor of the Corporate Library. “A board that can’t say no to outrageous pay requests can’t say no to poor strategy.”

In the interview, Mr. Camner repeatedly bristled at the criticisms and grew angry when a reporter asked questions about his compensation package, saying everything was fully disclosed.

It was apparently not the first time the bank had reacted strongly to questions it felt were critical.

When John Pandtle, then an analyst for the financial services company Raymond James, rated Bank United’s stock as underperform in February, the bank declined to allow Raymond James to participate in a meeting with investors and analysts.

In a note, Mr. Pandtle told clients the bank’s executive management had repeatedly refused to take phone calls and e-mails “seeking information about several areas where we have fundamental concerns, including rapidly deteriorating asset quality.” Mr. Pandtle declined to comment for this article.

Mr. Camner’s family ties have also been questioned by the Corporate Library. One daughter, Danielle, was previously at the bank but has left. Another daughter, Lauren, is a senior vice president and still serves on the board.

Meanwhile, Mr. Camner remains senior managing partner of Camner Lipsitz and Poller, a law firm that reaped $12 million in fees from the bank over the last three years, and where a third daughter, Errin, is the managing director.

Both Ms. Minow and Mr. Rainwater wondered whether these relationships were in the interest of shareholders. “If you bid the business out to other law firms,” said Mr. Rainwater, “perhaps you could save some money for shareholders.”

Today, Bank United is sufficiently eager to raise money that Mr. Camner has agreed to give up the supervoting shares that have given him control of the bank he founded 24 years ago, if the bank is able to raise $400 million from investors.

“There is a reality,” he said. “We need to conform to corporate governance, meaning that almost every company has one class of stock; there is only so long that you can have two classes.”

Still, he defended his income and other benefits, saying that everything the company has done was fully disclosed. “There is an independent committee that passes on everything,” he said.

http://www.nytimes.com/2008/08/07/business/07florida.html

2 Banks Will Buy Back $17 Billion in Securities

By ERIC DASH
Published: August 6, 2008

Two Wall Street giants agreed on Thursday to buy back more than $17 billion of auction-rate securities that were improperly sold to retail customers, likely paving the way for other banks and brokerage firms to take similar actions.

Citigroup reached a settlement Thursday morning with state and federal regulators, agreeing to buy back about $7.3 billion of auction-rate securities that it sold to retail customers and pay a $100 million fine for its conduct.

Merrill Lynch said it would buy back about $10 billion in auction-rate investments that it sold to retail investors, a move that gets ahead of regulators investigating the company.

Neither firm agreed to reimburse institutional investors, though both said they were trying to resolve similar problems with those customers.

Regulators have been investigating at least a dozen Wall Street firms for their role in the sales and marketing of so-called auction-rate investments, and analysts expect a wave of settlements in the next few months.

Bank of America, the largest retail bank, said Thursday that it had also received subpoenas from federal and state regulators related to sales of auction-rate securities. The investments are preferred shares or debt instruments with rates that reset regularly, usually every week, in auctions overseen by the brokerage firms that originally sold them.

The $300 billion market for the investments collapsed in February, trapping investors who had been told that the securities were safe and easy to cash in.

Citigroup’s settlement with state and federal regulators included a fine of as much as $100 million.

In a statement, the New York attorney general Andrew Cuomo said that Citigroup would buy back, by Nov. 5. auction-rate securities from individual investors, charities and small- and mid-sized businesses. These customers, about 40,000 nationwide, have been unable to sell their securities since Feb. 12, the statement said.

In a similar case in Massachusetts, Morgan Stanley reached an agreement with the attorney’s general office on Thursday to reimburse the cities of New Bedford and Hopkinton $1.5 million for the investments in the securities, the Massachusetts attorney general Martha Coakley said in a statement.

As part of the settlement, Citigroup agreed to a public arbitration process to resolve claims of consequential damages suffered by retail investors.

The bank, one of Wall Street’s biggest auction-rate securities dealers, will pay the $100 million to the New York attorney general’s office and a task force of 12 state regulators, led by the Texas State Securities Board. Each group would exact a $50 million penalty.

The federal Securities and Exchange Commission also participated in the settlement talks but elected not to exact a penalty, pending its own investigation.

The settlement follows several days of meetings between Citigroup and the state and federal regulators, and reflects Citigroup’s desire to put its auction-rate securities troubles behind it.

Thursday’s settlement has implications for other Wall Street firms, with the Citigroup deal serving as a benchmark for the industry. Two other banks, UBS and Merrill Lynch, are under investigation by several groups of regulators. But unlike Citigroup, UBS faces additional accusations that at least one of its executives engaged in insider trading.

Citigroup shares were down about 3.5 percent Thursday; Morgan Stanley shares were down less than one percent.

http://www.nytimes.com/2008/08/07/business/07citi.html


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Global Warming #board-11877

Freddie Mac’s Big Loss Dims Hopes of Turnaround

By CHARLES DUHIGG
Published: August 6, 2008

The gloom over the nation’s housing market deepened on Wednesday as Freddie Mac, the big mortgage finance company, reported a gaping quarterly loss and predicted that home prices would fall further than previously projected.

The announcement disappointed those hoping that the housing market might be bottoming out and heightened worries that the government could be forced to rescue Freddie Mac and the other mortgage finance giant, Fannie Mae. The news also signaled that mortgage rates were likely to rise.

In filings with the Securities and Exchange Commission, Freddie Mac said that “there is a significant possibility that continued adverse developments” could cause the company to fall below government-mandated capital levels. In an interview, the company’s chief financial officer, Anthony S. Piszel, said that warning did not imply the company believed that risk was likely or imminent.

Freddie Mac and Fannie Mae, which lubricate the housing market by buying mortgages from banks and other lenders and touch nearly half of all the nation’s home loans, have been severely weakened by the slump in the housing market. The downturn has forced millions of Americans out of their homes, cost Wall Street hundreds of billions of dollars and helped depress the broader economy.

“Basically, things are still bad,” said Steven D. Persky, chief executive at Dalton Investments, a $1 billion fund in Los Angeles. “Freddie Mac is telling us that nobody really knows how much worse they will get.”

The results disappointed analysts who had hoped Freddie Mac might provide enough good news to point a way out of the economic darkness. The company’s results contained few rays of light.

Freddie Mac announced $2.8 billion in credit expenses associated with increased housing delinquencies and foreclosure rates, and said that the value of mortgage-backed securities it holds had declined by $1 billion. The company lost $821 million during April, May and June, compared with a profit of $729 million during the comparable period a year earlier.

“Home prices declined faster than anticipated in the first half of 2008,” Richard F. Syron, Freddie Mac’s chairman and chief executive, said during a conference call with analysts. Executives believe the housing market is only about halfway through its downward cycle, he said.

“At this point neither we nor anyone else can predict when the national housing market will stop falling,” Mr. Syron said.

Executives said they expect the firm’s losses would increase through at least 2009, and that home prices would continue to decline by as much as an additional 9 percent.

Freddie Mac’s stock price fell by 19 percent on Wednesday, to close at $6.49.

Executives said they would shore up Freddie Mac’s capital reserves by cutting the firm’s quarterly dividend by 80 percent to 5 cents per share, pending board approval. The company also reiterated its commitment to raising at least $5.5 billion from investors.

However, as the company’s stock price has declined, raising those funds has become increasingly expensive. The company’s entire worth as measured by the stock market was $4.2 billion as of Wednesday afternoon.

“How do you raise $5 billion when the market thinks your entire company is only worth $4 billion?” asked Sean Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm. “Investors need to believe good news is around the corner to give a company more money, and Freddie Mac has said there is more bad news to come. We don’t think they’re going to be able to raise it.”

In an interview, Mr. Piszel said he believes the company is currently undervalued and that the current market capitalization will not undermine the firm’s ability to raise money.

If Freddie Mac is unable to raise capital, it could spark a political and financial crisis. Last month, Treasury Secretary Henry M. Paulson Jr. proposed giving federal officials the ability to pump billions of dollars into Freddie Mac and Fannie Mae by buying shares in the companies. That plan became law in a bill signed by President Bush last week.

Mr. Paulson has said he hopes to never use those powers. At the end of June, Freddie Mac held $2.7 billion more than what regulators require.

But if Freddie Mac continues to suffer losses and is unable to raise funds from investors, the company could fall below capital requirements, potentially forcing the government to pour in funds or take control of the firm.

In the call with analysts, executives said their confidence in the ability to raise capital stemmed from a variety of factors, including improving profit margins and accounting rules that would allow them eventually to reverse some of their current losses.

“We believe we can manage to maintain our capital position for some time,” said Mr. Piszel in the interview. In Wednesday’s earnings release, the company offered extensive data showing how its capital levels would fare under various scenarios.

“We’re not going to rush to raise capital because we don’t have to,” said Mr. Piszel. “We have disclosed the range of pain we can take, and we think it demonstrates the company is positioning itself to withstand severe stress.”

Analysts said the quarterly results indicate that mortgage rates would most likely continue to rise because Freddie Mac expects to scale back growth in how many mortgages it purchases.

“Freddie and Fannie have been propping up the mortgage market by continuing to buy larger numbers of loans,” said Paul Miller of the Friedman, Billings, Ramsey Group, an investment firm in Arlington, Va. “If they start pulling back, mortgage rates are going to start climbing to north of 6.5 percent. People will start panicking at 7 percent.”

The average interest rate on a 30-year fixed mortgage as of July was about 6.5 percent, according to Freddie Mac.

The company’s results on Wednesday also contained some small bits of good news.

Freddie Mac said revenue grew by more than 10 percent from last quarter, to $1.69 billion, including a 92 percent increase in net interest income to $1.5 billion. And executives indicated that profit margins on the loans they were now buying were at much higher levels than in previous years.

“They are the only game in town right now, and if Freddie and Fannie can make it out of this they’ll be enormously profitable down the road,” said David Dreman of DWS Dreman Concentrated Value, a $16 billion investment fund that owns about 10 million shares of Freddie Mac.

“Now the big question is, what will they look like when they make it through this crisis, and how bad will it get until it’s over?” Mr. Dreman added


http://www.nytimes.com/2008/08/07/business/07freddie.html?em

'They're All Toast': Roubini Says Brokers, Even Goldman, Can't Stay Independent

Posted Jul 22, 2008 05:09pm EDT by Aaron Task in Investing, Newsmakers, Recession, Banking

The broker/dealer business model is "inherently unstable" and the four remaining major firms will not be independent in a few years, says Nouriel Roubini, economics professor at NYU's Stern School and chairman of RGE Monitor.

Embattled Lehman Brothers is likely to seek a buyer "within months," Roubini says. Lehman Brothers ceasing to be independent is not such a shocking outcome, but Roubini ultimately sees a similar outcome for Goldman, Merrill Lynch, and Morgan Stanley.

The problem, he says, is that broker/dealers use the same model as banks -- borrow short and lend long -- only they borrow on even shorter timeframes, use more leverage, and don't have the kind of government backstop banks enjoy.

In the wake of Bear Stearns' demise, which showed how brokers are vulnerable to a "run on the bank" if they can't get overnight funding, the Fed temporarily opened its discount window to brokerage firms. But making that option permanent means submitting to the same kind of regulation and capital requirements as banks; that, in turn, means a very different business model -- and much lower profitability -- for Wall Street firms, whose current business model is "not viable," he says.

With U.S. financial giants like JPMorgan, Citigroup, and Bank of America dealing with internal issues, the most likely buyers are international financial firms or sovereign wealth funds, Roubini says. But unlike in 2007, foreigners are not going to settle for preferred shares, and non-voting rights next time around.

That raises the questions: Is America ready for (true) foreign ownership of major financial institutions? And do we have a choice?

http://finance.yahoo.com/tech-ticker/article/41330/'They're-All-Toast'-Roubini-Says-Brokers-Even-Goldman-Can't-Stay-Independent

Roubini: More Than $1 Trillion Needed to Solve Housing Crisis

Posted Jul 22, 2008 05:42pm EDT
by Aaron Task in Newsmakers, Recession, Banking

Treasury Secretary Hank Paulson has been putting on a full-court press in the last 24 hours, making the case for his plan to shore-up Fannie Mae and Freddie Mac.

"I would rather not be in the position of asking for extraordinary authorities to support the GSEs," Paulson said in a speech Tuesday in NYC. "But I am playing the hand that I have been dealt. There is a need to support efforts that strengthen Fannie and Freddie's ability to continue to play their important role in financing mortgages and in our capital markets more broadly."

The timing of Paulson's speech -- and various and sundry media appearances -- is not coincidental. This week, Congress is expected to vote on housing legislation that includes Paulson's plan, which a GAO report said is likely to cost the government $25 billion.

But $25 billion -- or even the GAO's worst-case $100 billion estimate -- pales in comparison to the cost of doing nothing, says Nouriel Roubini, NYU professor and chairman of RGE Monitor.

"We have to find a solution where government intervention prevents a disorderly outcome" in the housing market that leads to a "systemic banking crisis," Roubini says.

The housing bill, which earmarks $300 billion to backstop mortgages after lenders agree to lower mortgage payments, is "a step in the right direction" but "doesn't do enough," he says, predicting the government will ultimately need to spend more than $1 trillion.

Roubini's main concern stems from a view that the "housing recession is not bottoming by any standards," in contrast to hopeful comments from Paulson on Fox News and Barron's last weekend.

The economist believes U.S. home prices will ultimately fall 30% from their peak -- vs. 18% to date according to the S&P Case-Shiller Index -- "before bottoming out some point in 2010."

In the interim, the negative wealth effect of declining home values and increase in "underwater" mortgages will lead to more Americans walking away from their homes. Such "jingle mail" threatens to ultimately cost $1 trillion in credit losses, wiping out 75% of the capital of U.S. financial institutions, Roubini warns.

It is that "disorderly" outcome Roubini says the government cannot afford to let happen. With "the charade" that Fannie and Freddie weren't already government agencies over, he believes a nationalization of the 50% of mortgages not owned or guaranteed by Fannie and Freddie will be necessary, and the Frank-Dodd Bill is a small step down that road.

From Roubini's view, nationalizing housing avoids the government having to nationalization the entire banking system, making it the lesser of two evils.

http://finance.yahoo.com/tech-ticker/article/41423/Roubini-More-Than-1-Trillion-Needed-to-Solve-Housing-Crisis

Crisis? What Crisis?

Thursday, Jul. 17, 2008
By JUSTIN FOX
Time.com

It's getting to be a familiar ritual. Markets panic. A bunch of G-men in dark suits interrupt their routines for an emergency meeting or a conference call to piece together a rescue plan. They announce the plan. Panic subsides. Then, a week to a couple of months later, it starts all over again.

I count six such episodes since August 2007. In the early days, the Federal Reserve Board did all the work and usually made its big announcement on a Friday. Since then, Treasury Secretary Hank Paulson has moved to the fore, and he picked a Sunday afternoon to float his proposal for bolstering beleaguered mortgage giants Fannie Mae and Freddie Mac. The basic pattern, though, remains the same: Financial tizzy. Dramatic government action. Period of reduced tizzy. Repeat.

Is this cycle ever going to end? It has to someday, although at this point only a fool or a psychic would dare predict when. The more important question may be, What the heck does it all mean for people without Bloomberg terminals and subscriptions to the Financial Times?

For the financial crowd, this may well be--as is oft proclaimed--the worst crisis since the Great Depression. But you don't have to agree with Phil Gramm that this is a "mental recession" to acknowledge that things don't look quite so bleak beyond Wall Street--unless you're struggling to make payments on a house that's worth 30% less than the mortgage. Then you're in crisis. Most Americans aren't. The economy still seems to be growing. Job losses have been manageable. Yes, people are very unhappy about the economy. But day to day, they're more worried about the price of gas than the soundness of the financial system.

In part, that's testimony to the success of those G-men in dark suits. (There are women involved, but they're a distinct minority at Treasury and the Fed; men in light-colored suits are even rarer.) The U.S. government is a far bigger, more activist presence in financial markets than it was in the early 1930s, and this activism has staved off the kind of financial breakdown that sparked the Depression.

You can see this most clearly in the case of Fannie Mae and Freddie Mac, which buy mortgages from banks, thrifts and mortgage brokers and repackage them for sale to investors around the world. The two government-chartered companies have, together with the Federal Housing Administration, been the main factors in keeping mortgage-lending going in the U.S. since the market for private mortgage-backed securities collapsed last summer. They've been able to keep financing mortgages because of the widespread belief that if they faltered, the government would step in to make buyers of their mortgage securities whole. If Paulson and the Fed hadn't stepped in when Fannie and Freddie faltered in early June, the companies might have stopped buying loans and the housing market might have stopped functioning.

All this activism comes at a price. The Fed's rate cuts have fueled inflation and undermined the dollar, now trading at about $1.60 to the euro. The Treasury's willingness to backstop Fannie and Freddie, which together are on the hook for $5.2 trillion in mortgage debt--just slightly less than what the U.S. government owes investors--is already sparking a bit of worry about the soundness of T-bills and bonds. With more bailouts, that worry could snowball.

There are also valid concerns about the fairness and prudence of hitting up taxpayers for the missteps of well-compensated mortgage shills and Wall Street hucksters. "Socializing risk and privatizing reward," Senator Chris Dodd has called it.

Finally, there's the matter of effectiveness. Washington's response has so far shielded the economy from the worst of the catastrophe in financial markets. But it hasn't fixed the problem that started the crisis: the fact that a few million Americans got home loans they can never pay back. The resulting foreclosures have been driving housing prices down and forcing lenders to retrench. The result is less credit for heavily indebted American consumers. In the second quarter of 2008, this credit crunch was counteracted by $78 billion in stimulus checks--yet another of those government interventions. That boost is petering out. The likeliest next step, while not the Great Depression, is a recession that even Gramm will have to concede is more than just mental. Which could lead to a few more emergency meetings of the men in dark suits.

http://www.time.com/time/magazine/article/0,9171,1823931,00.html