This is gonna be a long one. But it’s necessary to point out Ron’s flaws. Go figure…
🔹 Claim: “Community Reinvestment Act (CRA) created the problem. Created in 1978, CRA forced mortgage lenders to make loans to unqualified borrowers.”
Analysis:
• False/Misleading. The CRA was enacted in 1977, not 1978. Its purpose was to ensure banks serve the credit needs of their entire communities, including low- and moderate-income (LMI) areas.
• CRA did not “force” banks to make risky loans. The law encourages lending but doesn’t dictate underwriting standards. Regulators evaluate compliance based on a bank’s lending activity, but there are no legal penalties for not making risky loans.
• Most subprime loans leading to the 2008 crisis were made by institutions not governed by CRA, such as non-bank lenders (e.g., Countrywide, New Century).
Verdict: Misleading. CRA is often incorrectly blamed for the subprime crisis.
🔹 Claim: “In 1998 a Chicago bank was sued by an ACORN attorney for not implementing the CRA and won.”
Analysis:
• Likely referencing Citigroup’s merger with Travelers around 1998 or HUD settlements during the Clinton administration. However, no specific high-profile CRA lawsuit in Chicago by ACORN in 1998 is known to have “set a precedent.”
• CRA enforcement happens via regulatory exams, not lawsuits. ACORN may have challenged mergers or lending practices, but there’s no legal precedent from this case forcing other banks to lend to unqualified borrowers.
Verdict: Unsubstantiated or inaccurately characterized.
🔹 Claim: “WMI/WMB got smart and packaged the loans and securitized into Bonds offerings (and Preferred). F&F, Lehman’s did the same.”
Analysis:
• Partially accurate. WMI (Washington Mutual Inc.) and WMB (Washington Mutual Bank) were heavy players in subprime loan origination and securitization.
• Fannie Mae (F&F) and Lehman Brothers also participated in RMBS (Residential Mortgage-Backed Securities).
• However, preferred stock isn’t the same as RMBS. Preferreds are equity instruments, not bonds backed by mortgages.
Verdict: Partially correct, but the phrasing conflates distinct securities.
🔹 Claim: “Trustees were required by the Prospectus to insure the securities. The insurance contract would be Derivatives (Credit Default Swaps).”
Analysis:
• Incorrect. Trustees of securitizations administer pools and represent bondholders’ interests but do not “insure” the securities.
• CDS (credit default swaps) are privately negotiated derivatives contracts, typically arranged by investors or counterparties—not trustees.
• Insurance was sometimes arranged by monoline insurers (like MBIA, Ambac), but not as a function of the trustee’s duty.
Verdict: Incorrect. Misunderstands roles of trustees and CDS mechanics.
🔹 Claim: “JPM provided 57%, BofA ~30% of the CDS.”
Analysis:
• No credible, verifiable public data supports these exact figures. JPM and BofA were major CDS market participants, but the percentages are speculative or made-up.
• Post-crisis disclosures (like those in the AIG bailout) revealed CDS exposure across many banks, but attributing 87% of CDS to just JPM and BofA is implausible.
Verdict: Unsupported and likely inaccurate.
🔹 Claim: “WMI Series R Preferred pays $300/yr, and WMI bought their own and others’ securities for cash flow.”
Analysis:
• WMI did issue preferred stock (Series R included), and some paid fixed dividends.
• Banks can and did retain tranches of securitizations, but the claim of $300/year as a benchmark return or that this was strategic reinvestment for cash flow is oversimplified and speculative.
Verdict: Contains kernels of truth, but speculative in its implications.
🔹 Claim: “Because securities are insured, banks had near zero exposure to default. Lenders just had to replace defaulted loans.”
Analysis:
• False. The 2008 crisis happened precisely because banks, insurers, and investors ** did have significant exposure—insurance coverage was insufficient or failed (e.g., AIG nearly collapsed).
• “Put-back provisions” exist in RMBS contracts, but they are often contested in court and not automatic.
• The claim that banks had “zero exposure” is contradicted by the historic losses, collapses, and bailouts that occurred.
Verdict: Inaccurate. Overstates the protection CDS and reps & warranties offered.
🔹 Claim: “FDIC: WMB securitized $2T in RMBS, $500B sold to F&F.”
Analysis:
• No credible public record from the FDIC supports a $2 trillion securitization total by WMB. That figure seems inflated.
• The $500 billion claim for Fannie & Freddie purchasing from WMB is unsubstantiated.
• Fannie and Freddie did purchase private-label RMBS, including some from WMB, but not in those quantities.
Verdict: Overstated or fabricated numbers.
🔹 Claim: “F&F are about to receive $1.1T from a Delaware Statutory Trust.”
Analysis:
• No public or legal record supports this claim.
• If such a DST existed holding $1.1 trillion in assets, it would be widely known, and its disbursement would massively impact F&F’s balance sheets—which it hasn’t.
Verdict: Fabricated or speculative. No supporting documentation.
🔹 Claim: “LIBOR litigation is about CDS settings.”
Analysis:
• Partially true. The LIBOR litigation revolves around the manipulation of LIBOR, which did affect pricing on derivatives, including CDS.
• But it was not solely about CDS. It included interest rate swaps, options, loans, and mortgage contracts tied to LIBOR.
Verdict: Somewhat accurate but overly narrow.
🔹 Claim: “$1.56T from TBTF banks to settle Derivatives Meltdown.”
Analysis:
• There is no single $1.56T settlement ever paid. Banks paid billions in fines and settlements post-2008, but not in that cumulative amount for derivatives alone.
• Total global financial system losses were in the trillions, but that figure is likely a conflated or imagined number.
Verdict: Inaccurate figure. No known source.
🔹 Claim: “Derivatives are options but naked because the writer doesn’t own the asset.”
Analysis:
• Partially correct. A credit default swap is a form of derivative, and naked CDS refers to when the buyer does not own the underlying asset.
• But CDS are not “options” in the traditional financial sense—they’re insurance-like contracts that pay upon default or credit events.
Verdict: Simplified, but directionally correct.
🔚 Conclusion:
This post contains a mix of true, half-true, and false information. It:
• Misrepresents the CRA
• Inflates numbers without citation
• Conflates financial instruments (e.g., preferreds vs. RMBS)
• Fails to distinguish roles (trustees vs. CDS underwriters)
• Relies heavily on speculative interpretations
⚠️ Verdict: Not reliable as a factual post. Contains financial misinformation, speculative claims, and inaccurate attributions. Proceed with caution and verify through credible sources like FDIC, SEC, and court documents.
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