Wednesday, October 27, 2010

Federal Deposit Insurance Corp Chairman Sheila Bair Greenlights Fraud

There is no way that Shelia Bair believes that the foreclosure problems are 'mostly procedural'. But as a banking regulator in the USA, it's her job to do the bidding of the major banks. And they want this problem to go away.

She knows that the problems involve thousands of counts of fraud for every day since the housing bubble began. We have liars loans that the banks eagerly signed off on or purchased. An epidemic of ;'lost chain of title', where the banks didn't bother to notify any local governments of title changes and as the mortgages chained hands multiple times, no one bothered to put wet ink to to mandatory paperwork. We also have many instances of the banks selling the same mortgage multiple times to different clients and likely to the same clients as bundled securities.

The bankers aren't drooling knuckle dragging morons that eat gum from under desks, like they are trying to portray themselves. They knew what they were doing and they were not fooled by janitors and hair dressers. They knowingly signed off on millions of counts of fraud because it made them money.

Bair is worried that her clients in the banking industry will get in trouble or go to prison for their crimes. She's doing what she can to protect them from the law.

And don't get confused, in the old days, like the 1980s, banking regulators prosecuted crimes in the banking sector. They prevented epidemics of fraud. But after Clinton, Bush and now Obama have spent decades transforming the office, the banking regulators act as defense attorneys for the banks. Shielding them from the law. And that's what we're seeing here.

Sheila Bair has green lighted the fraud. She's giving the bankers the thumbs up, to exponentially expand their criminal activities.

The bankers are saved. They won't have to go to prison and they can increase the rate at which the break the law, with no fear or interference or prosecution.

We can all thank Sheila Bair for letting us know where the Federal Government stands on the epidemic of banking fraud.

You go girl! You're gonna retire a multi-millionaire! I can feel it!


FDIC Head Sounds Alarm on Foreclosure Litigation
Reuters | October 25, 2010 | 03:39 PM EDT

Litigation arising from foreclosure paperwork problems could be "very damaging" to the housing market, a top U.S. banking regulator said Monday.

Federal Deposit Insurance Corp Chairman Sheila Bair said she did not believe legislation would be needed to address concerns over whether the paperwork was properly done so long as investigations show the issue was mostly "procedural."

State and federal officials are investigating allegations that for years banks have not reviewed foreclosure documents properly or have submitted false statements to evict delinquent borrowers.

"I fear that the litigation generated by this issue could ultimately be very damaging to our housing markets if it ends up unduly prolonging those foreclosures that are necessary and justified," Bair told a housing conference in Arlington, Virginia.

"The regrettable truth is that many of the properties currently in the foreclosure process are either vacant or occupied by borrowers who simply cannot make even a significantly reduced payment and have been in arrears for an extended time."

Bair argued it is important to move foreclosures quickly because until they have been cleared out of the system, the housing market will continue to struggle.

She said the volume of foreclosures requires a "global solution" that involves all interested parties.

Those parties often include servicers, borrowers, lenders, second-lien holders and investors in securities backed by troubled mortgages. Foreclosures and modifications can be held up when the interested parties do not reach agreement on how to handle a delinquent mortgage.

Bair said one part of a global solution could be extending legal protection, providing a "safe harbor," to foreclosure proceedings if the property is vacant or if the servicer offered a meaningful payment reduction, such as 25 percent, and the borrowers could still not perform on the loan.

Missed Warning Signs

The state attorneys general are investigating the use of "robo-signers" — people who sign hundreds of affidavits a day — by banks and companies that collect monthly mortgage payments. It is alleged they did not properly review the documents they were signing.

Bank of America [ BAC 11.30 +0.00 (+0.00%) ], JPMorgan [ JPM 37.20 +0.00 (+0.00%) ] and Ally Financial's GMAC Mortgage are among the servicers whose practices have come under fire.

Bair said regulators and market participants missed clues about poor mortgage servicing. She said they should have questioned how mortgage servicers were able to keep up profits without sacrificing quality, even as servicing fees were declining significantly.

"In retrospect, there were warning signs that servicing standards were eroding," Bair said.

She also said the robo-signing controversy underscores how expensive and time-consuming the foreclosure process is, meaning modifications should be actively pursued before foreclosure proceedings.

"We know from experience that reducing the monthly payment through modification raises the chance that the borrower will make good on the loan," she said.

Covered Bond Support

Bair expressed qualified support for legislation intended to create a more robust covered bonds market. Potential issuers of these bonds, including banks like Bank of America, argue that a legislative framework could boost the market and provide a safer method for banks to raise funds to lend to consumers for mortgages and other loans.

Covered bonds are debt securities backed by cash flows from loans but they remain on the issuer's balance sheet and thus are seen as safer than non-guaranteed mortgage securities.

Bair made clear that her support for such legislation depends on losses being covered by investors and not, ultimately, her agency's deposit insurance fund, which guarantees deposits and meets costs associated with the FDIC seizing a failed bank.

"This would result in decreased market discipline from investors who know that their risks are essentially back-stopped by the FDIC," she said.

Wednesday, October 20, 2010

Piling On....

As I peruse the financial news today, I learn that Britain is going broke and shedding services and gov employees in massive cuts. They are getting rid Harriers, Aircraft Carriers, and many servicemen. The USA is pretty much alone in it's continued wars against Afghanistan and Iraq.

And now the USA is hell bent on fighting a currency war as China speeds the rate at which it is getting out T-Bills.

Then I see that my joking prediction from 2006 or so, was already common practice...
It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies.

And another one... I've been pointing out since 2000 that the USA would eventually enjoy some IMF style looting. Well it's here. I know some folks welcome the privatization of public services. Privatization for them is always a good thing, so long as it happens to someone else. Just wait until you start going months boiling all of your water before you drink or cook with it, and you can't stand the smell of it. That's the norm in many place where public water supplies have been privatized. Now it's coming the USA.
U.S. Debt Woes Expose Hidden Austerity and Looting of Public Assets

I'm seeing bad news on every front, with the banks exposed for engaging in fraud on a massive scale taking center stage. And of course they will be granted immunity from prosecution and lawsuits in their upcoming bailouts. As you can see, all of this crappy news is bolstering the markets. The markets of course are bolstered by good and crappy economic news.

This is it. This is a slide in my view that's worse than anything we've seen in months, and I think it's just getting started. Perhaps before the month is out, we'll even see the market experience some effects from the crappy economy and crappy state of business and banking. But don't put any serious money on it. I'm sure that that any perceived relationship between the markets and the financial health of our economy are purely coincidental.

And finally, for the kids that like to read and report on their parent's online activities...
NSA’s Newest Recruiters: Cartoon-Leopard Twins

Wednesday, October 13, 2010

It's October 13th...

Except for the Chilean miners, news all around has been fairly bleak.

Employment figures as predicted are actually much worse than the gov has been letting on.

Bankruptcies are matching the 2005 high.

And we've heard that waitresses and floor sweepers make up the paid professionals, that have been reviewing and signing off on foreclosure documents. I've been saying for many years our financial professionals don't understand their own paperwork and financial instruments, and it turns out, I was correct.

But the stock market ignores all of this and remains resilient in the face of poor economic tidings. Perhaps the fact that Goldman Sachs has now put a freeze on foreclosures because of the massive fraud uncovered in it's own robo-signing departments has been uncovered, is the reason?

There are only 18 more days left in the month. Though the economic news is as crappy as I expected it to be, we haven't seen any sort of recognized downturn. So far, my prediction has not come true.

It would be nice if it didn't, and the fundamentals improved. Still, even if I missed this call, the continued degradation just increases the severity of the correction to come. It's better for us to take our lumps as they come, rather than put them off until they become disasters. But that not how we do things in the USA.