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One of the people that I have admired most during this nation's financial meltdown and clusterfuck has been the great Janet Tavakoli. From the beginning, she has consistently along with Yves Smith, Elizabeth Warren, Brooksley Born, and of course Congressman Alan Grayson hammered relentlessly and sounded the alarm of what would happen to our nation, should be continue to disavow the national 'cover up' of what Grayson rightfully is calling: FRAUD TO COVER UP FRAUD.

These great Americans would not allow companies like Goldman Sachs, JP Morgan, GMAC, Bank of America, Wall Street, the Bankers the Lenders, the illicit and illegal Foreclosure Mills and even our own government to rewrite history with their pitiful public relations propaganda machines.

They all understood that a day or reckoning would come without a doubt in our nation, when the corruption would finally reach a critical mass, and now that day has come.  

As the Foreclosure Mill thugs working for the Banks and Lenders began in earnest to provide false affidavits and have swept throughout American cities like a crazed mass of locusts, picking of the bones of innocent Americans who knew without a doubt, that they were being illegally foreclosed upon, the critical mass of corruption finally reached it's zenith, just as so many of these great leaders warned us about.

I find it absolutely incomprehensible that Timothy Geithner and Ben Bernanke and AG Holder have sat back in silence while these bunch of 'hoodlums' have been allowed to strip Americans of their legal rights to pursue what used to be called 'due process' in our nation's courts, to demand that the Banks and Lenders provide correct origination documentation of the original loans on their homes.  

Janet Tavakoli is now saying that every bank is about to shut down all foreclosures, in what she calls the "biggest fraud in the history of capital markets. She is also stating that within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy.

What this essentially will mean for what is left of the national housing market is a nightmare, beyond our wildest dreams.  We are only beginning to see the final Iceberg coming into view, that could very well finally destroy all homes values, and credibility in our entire Banking system, the could finally go over the cliff, because of their own greed and malfeasance.  

The following is part of the interview conducted by Ezra Klein:

Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?  Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security interest, and it’s not optional.

EK: And how much danger are the banks themselves in?  JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one.

EK: My understanding is that this now pits the banks against the investors they sold these products too. The investors are going to court to argue that the products were flawed and the banks need to take them back.  JT: Many investors now are waking up to the fact that they were defrauded. Even sophisticated investors. If you did your due diligence but material information was withheld, you can recover. It’ll be a case-by-by-case basis.  EK: Given that our financial system is still fragile, isn’t that a disaster for the economy? Will credit freeze again? JT: I disagree. In order to make the financial system healthy, we need to recognize the extent of our losses and begin facing the fraud. Then the market will be trustworthy again and people will start to participate.  EK: It sounds almost like you’re saying we still need to go through the end of our financial crisis. JT: Yes, but I wouldn’t say crisis. This can be done with a resolution trust corporation, the way we cleaned up the S&Ls. The system got back on its feet faster because we grappled with the problems. The shareholders would be wiped out and the debt holders would have to take a discount on their debt and they’d get a debt-for-equity swap. Instead we poured TARP money into a pit and meanwhile the banks are paying huge bonuses to some people who should be made accountable for fraud. The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on.

She is saying exactly what William K. Black has been saying from the beginning:  That America would never recover until the public trust is restored, and the Banks and Lenders, along with Wall Street, and shareholders take their full share of the responsibility and and pay back what ever they will need to, in order to restore financial trust and sanity again in our financial sectors, because if they do not, you can literally kiss the value in your own home goodbye, along with the rest of the real estate in our nation.  

Our financial markets are now in a state of a systemic nervous breakdown, and if this 'cover up' is allowed to continue, then what makes anyone actually believe that throughout out nation, that homeowners may indeed, simply get up and walk away from their homes in mass?

If this kind of silent revolution were to happen, whereby the Banks/Lenders and Wall Street refuse to own up to their own complicity in ruining millions of people's lives, and if they continue to play hard ball, and illegally foreclose on people, then what makes these 'crooks, lairs and thieves' actually believe that Americans will 'honor' a mortgage agreement when their homes become worthless?  And why should they?

We have been saying for some time that the affidavit problem that has led GMAC, Bank of America, and JP Morgan to suspend foreclosures in 23 judicial states could not be limited to these states. The robo signing of affidavits was clearly done across all sorts of court actions. As we indicated, the bogus affidavits are used in all foreclosures in judicial states; they aver various things about the plaintiff’s indebtedness, including the plaintiff’s ownership of the debt that are integral to the process. Providing an improper affidavit is considered to be a fraud on the court.

But the same fraud takes place in non-judicial states whenever a foreclosure is contested (which happens routinely in bankruptcy cases). So the false affidavit situation affects all states, just in much bigger numbers in judicial states.

Even more important, as we have stressed, the affidavit abuses are mere symptoms of much deeper problems with the mortgage securitizations. Why, pray tell, are law firms and servicers engaging in false representations and widespread document forgeries? It is because, as we have stressed, they made a botch of getting the notes (the borrower IOU) into the trusts, and simple fixes don’t work, hence the need to create a phony document trail. The Bank of America suspension of foreclosures in all states appears to be a tacit admission that the problems are as pervasive as we have suggested.

Exactly Ms. Smith, these assholes not only 'botched it' but they have now set the real estate market on a downward spiral that could indeed finally bring this endless ponzi scheme, house of worthless cards over the cliff.

The only reason, that the Banks are starting to freeze these foreclosures, is because they got caught (finally) in this epic illicit Foreclosure Mill scandal.  Had they not got caught, believe me, they would have simply continued falsifying documents, and of course HR 3808, which was simply another way to take away State's rights by allowing electronic Notaries to rubber stamp their latest in a series of 'cover the Banks/Lenders asses,' would have paved the road for the final destruction of 'due process' in our courts so that the initial cover up, that began with the Great Heist of 2008 by the Bush Administration could continue to fleece Americans.

But let us be crystal clear about what Ms. Tavakoli (and so many others warned us about)  This was not an accident at all.  It was Fraud covering up Fraud, that has finally caught up with our entire Democracy:

Now you getting it folks?  This is NOT a "minor clerical error."   It is NOT correctable at this point in time.   These securities are FATALLY DEFECTIVE.  The parties with the legal duty to check these facts did not do so.   It gets worse.

Most people don't understand that these securities were (and are) typically "sold forward."  That is, the bank doesn't take its own money, loan it to home buyers, and then take the notes and securitize them, selling the pieces to recover its money.  No, what happened then (and still does today) is that these MBS are sold first and filled after!

That is, a pension fund calls up Vampire Squid Bank and says "I need $100 million of MBS that pay a 5% coupon."   Vampire Squid Bank takes the $100 million dollars and then proceeds to securitize loans. But in doing so it took the $100 million on a prospective pooling and servicing agreement in which they agreed to provide loans of a certain credit quality and specification to the buyer.  So it's much worse than "we didn't know."  It's "we took the money, then we build the security and didn't look, even though we told you we would."  There's no fix for this without something like an RTC structure.  You have to put these loans back on the securitizers, and let them (if they can) stick them back on the originators.  If this blows up the big banks (and it will) then use Dodd-Frank's "Resolution Authority" and take them into receivership and resolve them.  I've been pounding the table on this for three years.  Everyone wants to make this sound "complex."  It's not, as Janet described.  It's actually quite simple - the investors were swindled.  Period. Just like they were in the 1990s by the exact same scam, but in a different sector.

And just in case, everyone is still confused about whether President Obama actually really 'vetoed' RS 3808, as opposed to a pocket veto, or a fake veto, or whatever, from the same website, this comes as another great and wonderful change in President Obama's turning of the page, in favor of the Middle Class, and God Bless you President Obama, for your courage !!!!!!

HR3808 Now ACTUALLY Vetoed

Our President decided to make it crystal clear and disappoint the beer-swilling banksters (those would be the guys that, in a just world, would be hanging from lamp-posts right now)

   Presidential Memorandum--H.R. 3808

   It is necessary to have further deliberations about the possible unintended impact of H.R. 3808, the "Interstate Recognition of Notarizations Act of 2010," on consumer protections, including those for mortgages, before the bill can be finalized. Accordingly, I am withholding my approval of this bill. (The Pocket Veto Case, 279 U.S. 655 (1929)).

   The authors of this bill no doubt had the best intentions in mind when trying to remove impediments to interstate commerce. My Administration will work with them and other leaders in Congress to explore the best ways to achieve this goal going forward.

   To leave no doubt that the bill is being vetoed, in addition to withholding my signature, I am returning H.R. 3808 to the Clerk of the House of Representatives, along with this Memorandum of Disapproval.


   October 8, 2010.

Don't you just friggin love it?  Memorandum of Disapproval.  

I could get use that !!!!!

Finally I cannot finish this diary without an encore performance, by the Congressman with Guts who called all this 'corruption out' so long ago, and who has been a major 'pit bull' for the Middle Class, and who has relentlessly gone after Wall Street/the Banks (and the War Profiteers)  and those, that are finally being called to task, because through his bully pulpit, and his extensive and amazing knowledge of exactly how our economy really works, he is the first Congress Person, to call for a National Freeze on all Foreclosures, as I indicated in my diary last night.

As I stated last night in my diary last evening, Congressman Grayson has called on Geithner and Bernanke, et, al, to immediately call a nationwide freeze on all Foreclosures in the USA.  He has been on the 'front lines and in the trenches' never wavering from asking the other questions, that few, if any, have had the 'guts' to ask Ben Bernanke, and others, to stand up, and be held responsible for this disgraceful 'cover up' that has now, and finally led us to this place of the final reckoning.


"So far, banks are claiming that the many forged documents uncovered by courts and attorneys represent a simple 'technical problem' with foreclosure processes.  This is not true.  What is happening is fraud to cover up fraud... The banks didn't keep good records, and there is good reason to believe in many if not virtually all cases during this period, failed to transfer the notes, which is the borrower IOUs in accordance with the requirements of their own pooling and servicing agreements. As a result, the notes may be put out of eligibility for the trust under New York law, which governs these securitizations. Potential cures for the note may, according to certain legal experts, be contrary to IRS rules governing REMICs. As a result, loan servicers and trusts simply lack standing to foreclose. The remedy has been foreclosure fraud, including the widespread fabrication of documents.   There are now trillions of dollars of securitizations of these loans in the hands of investors. The trusts holding these loans are in a legal gray area, as the mortgage titles were never officially transferred to the trusts... The liability here for the major banks is potentially enormous, and can lead to a systemic risk."

In my mind, the real question is this:  Why haven't we heard so much a a friggin peep from Geithner, Bernanke and AG Holder on this massive illicit and illegal Foreclosure Mills scandal?  Why the silence, why the continued deep and incomprehensible level of irresponsibility on their part, when these two men, where in fact the 'Stewards' in charge of the Titanic that is now, without a doubt going down faster than we can even imagine?  When are these two going to stand up and actually admit, that the 'status quo' and national cover up, has been caught in the headlights like a deer on a deserted highway in the dark of night.

Thanks to people like Grayson, Warren, Black, Tavakoli, Smith, and Simon Johnson, and so many others, who knew exactly where this 'cover up' would eventually end up, we are now at perhaps a moment where President Obama will have one last opportunity to demand that those that led us here, be held accountable.

That day has finally come in our country, and these great leaders who refused to give up on the rule of law, have been proven right.

My only hope, is that it is not too late, and that we do not end up with the absolute worse reactionary politics with people like Christine O'Donnell, Sarah Palin, John 'Orange Tan Man' Boehner, Newt Gingrich, and Mike Huckabee, in charge, shutting down our government, and turning back over 50 years of our progressive change, to the dark ages.

Let's get out there and vote, and make certain that this does not happen, but just as important, let us understand this truth:

The 'jig is up' thanks to the asshole thugs and mugger Foreclosure Mills and everyone knows this.  We either hold President Obama's feet to the fire and demand retribution and a return to the public trust, and make the Banks/Lenders and Wall Street return our nation and it's home owners 'due process' or in the end, we can just 'kiss our party good-bye' because what we will be facing if that is allowed to happen, is essentially nothing more than a Lame Duck Presidency for President Obama, and I believe, that finally he does understand this.

Thanks as always.  I appreciate your support.  This could be a great new start for the Obama Administration.  

To leave no doubt that the bill is being vetoed, in addition to withholding my signature, I am returning H.R. 3808 to the Clerk of the House of Representatives, along with this Memorandum of Disapproval.


   October 8, 2010.

Now that, Mr. President is 'change I can believe in.'  To me it is like listening to a great great piece of music by Mozart or my all time favorite jazz player, Dexter Gordon !!!!

Ms. B.

Originally posted to Badabing on Fri Oct 08, 2010 at 05:30 PM PDT.

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