Now that the White House administration has made it perfectly clear that they do not intend on lifting a finger to stop the ongoing Fraud to cover up more Fraud, William K. Black along with L. Randall Wray are calling on the FDIC to get off their asses... (god forbid, they should do their fucking job for a change). Black and Wray are asking the FDIC to put some of the nation's biggest banks into receivership -- starting with the Bank of America -- and make them clean house.
The Foreclosure scandal is a cancer on the back of the entire American economic system, as as Black writes it is high time to: "foreclose on the foreclosure fraudsters."
The banks that are foreclosing on fraudulently originated mortgages frequently cannot produce legitimate documents... Now, only fraud will let them take the homes. Many of the required documents do not exist, and those that do exist would provide proof of the fraud that was involved in loan origination, securitization, and marketing. This in turn would allow investors to force the banks to buy-back the fraudulent securities. In other words, to keep the investors at bay the foreclosing banks must manufacture fake documents.... Foreclosure fraud is the only thing standing between the banks and Armageddon." So the only solution, then, is new management. "We should remove the senior leadership of the banks and replace them with experienced bankers with a reputation for integrity and competence, i.e., the honest officers that quit or were fired because they refused to engage in fraud," Black and Wray write. They suggest starting with Bank of America, which they call "a 'vector' spreading the mortgage fraud epidemic throughout much of the Western world." Looming large among Bank of America's sins is its purchase of mortgage giant Countrywide Financial long after it became clear that the company had engaged in massive fraud.
On Wednesday, administration spokesmen declined to endorse any dramatic federal action. They declared that they had found no "systemic" threat to the financial system from the foreclosure problems, spoke of "mistakes" and "errors" rather than pervasive fraud and said the banks and servicers now need to "fix" their "processes." They "cannot even bring themselves to use the 'f' word -- fraud," Black and Wray write. "They substitute euphemisms designed to trivialize elite criminality." The central problem appears to be that Obama Administration continues to see the mortgage and foreclosure crises primarily through the eyes of the banks -- not through the eyes of the regular people who became their victims, or even the taxpayers who bailed out the very fat-cat bankers who are now back to their tricks.
Black and Wray write:
This nation's most elite bankers originated and packaged fraudulent nonprime loans that destroyed wealth -- and working class families' savings -- at a prodigious rate never seen before in the history of white-collar crime. They created the worst bubble in financial history, echo epidemics of fraud among elite professionals, loan brokers, and loan servicers, and would (if left to their own devices) have caused the Second Great Depression. Even the extremely slow-to-anger New York Fed, which bought billions of securitized mortgages that Bank of America improperly represented as fully documented and conforming to underwriting standards, is now demanding that it buy some of them back. The two professors call for "[n]othing short of removing all senior officers who directed, committed, or acquiesced in fraud."
I happen to be of the opinion, that nothing in our nation will ever be the same, if we do not return to sane fiscal policies, and what that means to me, is that President Obama and his administration are in fact protecting the banks and Wall Street, the exact same way that the Republicans have been doing for just about ever. The rule of law is at the heart of this Fraud, and to allow it to go further, is simply untenable.
This 'cover up' and willingness to simply just look the other way by President Obama and his administration, is unacceptable and he is losing a great deal of credibility in his own party. Does he actually except voters to turn out for him or other Democrats, when millions of Americans are being illegally foreclosed upon? I certainly never expected him to 'wave a magic wand and give us all a pony' but I sure as hell, did not expect him to look the other, along with Geithner, et., al, when this Foreclosure mess, is threatening the very foundation of our national political body.
I wonder just how long President Obama actually believes that he can just 'look the other way' in hopes that what is going on right now with honest homeowners, thrown out of their jobs and homes, by the same Bankstas and Wall Street crooks (during the Great Heist of 2008), and I wonder even more, if President Obama understands the full implications of what this is going to do to our entire country.
Other experts are nailing it down, day in and day out, as to what this could mean for our entire country:
The foreclosure crisis is slowly killing the nation's economy, and the government has no idea what to do, analyst Christopher Whalen said on Bloomberg television (hat tip to the Big Picture). Whalen, managing director of Institutional Risk Analytics, who earlier this month speculated the nation is only one quarter of the way through the foreclosure crisis, said the current situation is reminiscent of the early years of the Great Depression -- both in the severity of the crisis and the inefficacy of the government response.
"This is cancer. This isn't a sudden crisis that's going to erupt out of the ground like some monster trying to eat us. It's a slow, wasting process," Whalen told Bloomberg's Mark Crumpton. "Barack Obama is walking in Herbert Hoover's shoes. They're making the same mistakes, almost unconsciously." An unforeseen consequence of the crisis, he said, is the blow to property taxes. When people lose their homes, they stop paying property taxes, and with states and municipalities in serious debt trouble, this will only make the situation worse. Whalen predicted disunity between Federal and local governments.
"We're going to have state moratoria, the way we did in the '30s," he said. "The governors of those states are going to say, 'Folks, stay in your homes, keep paying your property taxes, default on your mortgage. That's Washington's problem.'"
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Mr. Whalen certainly has it right: this is a cancer, and it is going to eat our country alive from the inside out, while the Banksters just keep stealing and stealing with absolutely 'NO OVERSIGHT.'
And now, we've got these crooks collecting the 'taxes' on many of these illegally foreclosed homes, so that they can rape and pillage at will:
As the Huffington Post Investigative Fund reported this week, big banks and hedge funds in the U.S. have been quietly collecting taxes on hundreds of thousands of homes. The process, called "tax farming," is simple: A company goes to a local government and reimburses it for taxes that citizens aren't paying. In return, the company gets to act like an old-fashioned tax thug -- the kind rabbis condemn in the Bible -- charging up to 18 percent interest and thousands of dollars in legal fees, simply because it can. As the District of Columbia attorney general told the HuffPost Investigative Fund, there's "no oversight at all."
And that is what it all boils down to now, isn't it? There is no oversight at all, least of all by our own President and Geithner, while they are all 'looking the other way' while this Fraud to cover up Fraud continues relentlessly.
I received permission from Dan Froomkin to publish this excellent commentary from William K. Black.
Nine stories the press is under reporting -- fraud, fraud and more fraud
ASK THIS | October 20, 2010
From liars' loans to liars' liens, the financial and foreclosure crisis has been one big story of banks defrauding their customers -- a vast criminal enterprise. You wouldn't know it from a lot of the media coverage, though. Regulatory hero and criminologist William K. Black helps connect the dots.
By Dan Froomkin
If it wasn’t already blindingly obvious that pervasive fraud was at the heart of the financial crisis and the ensuing foreclosure catastrophe, you would think that the latest news -- that banks have routinely been lying their heads off in the rush to kick homeowners off the properties they fraudulently induced them to buy in the first place -- would pretty much clinch it.
And yet the mainstream media still by and large hasn’t connected the dots.
What we are seeing all around us are the continued effects of a vast criminal enterprise that has never been brought to account, employing a process that, as University of Texas economist James Galbraith explains, involved the equivalent of counterfeiting, laundering and fencing.
So the person with the right expertise to lead us here is a criminologist -- in particular William K. Black, one of the few effective regulators in recent history (during the savings and loan crisis of the late 1980s), a notorious knocker of heads, and currently professor at the University of Missouri-Kansas City and author of the book, "The Best Way to Rob a Bank Is to Own One".
I first interviewed Black in April, and recently checked back in and asked him about this ongoing problem of the mainstream media’s inability to properly cover this story. He responded with this breathless and breathtaking list of failings (slightly edited for publication):
The things I think are critical and badly under reported are:
- The astonishing amount of mortgage fraud (literally, millions of cases annually) and how it hyper-inflated the bubble and led to the Great Recession.
- The fact that these mortgage frauds were overwhelmingly due to consciously fraudulent lending practices in which the CEOs of seemingly legitimate entities used accounting tricks as their "weapon of choice" to report higher profits and get bigger bonuses. (George A. Akerlof and Paul R. Romer got it right in the title to their 1993 article: Looting: The Economic Underworld of Bankruptcy for Profit.)
3. The disgraceful lack of prosecutions which has resulted from regulators virtually ending the practice of making criminal referrals and the pathetic March 2007 "partnership" that the FBI entered into with the Mortgage Bankers Association (the trade association of the "perps") that led the FBI and the Department of Justice to (implicitly) define out of existence fraud by the lenders (and to conceive of them as the "victim" -- which they are, but only of their controlling officers). Bush administration attorney general Michael Mukasey in June 2008 notoriously refused to create a national task force against mortgage fraud based on his claim that mortgage fraud was analogous to "white collar street crime."
- The "echo" epidemics of fraud set off by the primary epidemic of accounting "control fraud". The fraud designed by CEOs in turn kicked off an epidemic of fraud among loan brokers and appraisers. Reporters should explore the concept of the Gresham’s-style dynamic in which bad ethics were a competitive advantage and drove good ethics out of the marketplace.
- The massive foreclosure fraud we are seeing now as another "echo" epidemic. To optimize their accounting control fraud, lenders gutted underwriting. That led to "fraud in the inducement" (vis a vis borrowers), endemic documentation problems, and an extraordinary numbers of defaults. The process required tens of thousands of real estate financing personnel to commit fraud on a daily basis as their core function. Some of these people are unemployed, but many are in the industry and are presently engaged in loan servicing. Now that their job is to foreclose on properties, there is no reason to expect that they would suddenly become honest, and they haven’t.
- The ongoing massive cover up of losses on bad assets, particularly by the "too big to fail" institutions, which I call "systemically dangerous institutions" (SDIs). Those institutions, along with Federal Reserve Board Chairman Ben Bernanke and Congress (at the behest of the Chamber of Commerce and with no opposition from the Obama administration) in April 2009 forced the Financial Accounting Standards Board (FASB) to change the rules so that the banks do not have to recognize their losses unless and until they sell the bad assets. The implications of this cover up are large (and rarely reported). At the very least, it means that Treasury Secretary Timothy Geithner’s propaganda campaign about TARP saving the world at virtually no cost (perhaps even a "profit") is nonsense -- despite its success in influencing the Washington Post and Los Angeles Times. Consider:
A) The repayment of TARP funds does not mean the banks are healthy. Their asset values are often grossly inflated, which means their net worth is grossly inflated. That means that the claims that we have increased net worth requirements (and that Basel III will further increase net worth requirements) are false. Net worth requirements have meaning only if the accounting is honest
B) The repayment of TARP funds does mean that the banks are freed from any meaningful restraint on senior officer compensation. Note that absent the accounting lies the banks would often be reporting losses (and failure to meet required capital requirements, or outright insolvency) and could not pay their senior officers bonuses and would be subject to mandatory closure under the Prompt Corrective Action (PCA) law.
C) No commercial entity would have ever signed the TARP deals on the terms that the U.S. drafted for itself. The U.S. provided not only fresh money but an unlimited de facto guarantee (along with permitting phony accounting). If the U.S. had negotiated competently it would have owned virtually all the shares of every TARP recipient (which, of course, was a political impossibility).
D) The accounting lies are stalling the recovery. Markets cannot clear promptly when one creates an incentive to hold massively overvalued assets for years.
E) The losses are still there, but the taxpayers are on the hook via Fannie and Freddie and the Fed (which has taken over a trillion dollars in toxic collateral at grossly inflated values).
- The continued absence of effective regulation. It should be scandalous that Obama left in charge, or even promoted, the anti-regulators who permitted the Great Recession. The (failed) anti-regulator of Fannie and Freddie, for example, remains FHFA's acting director. This is significantly insane as a matter of both economics and politics. (The administration doesn't even seem to realize the issue of integrity.)
- The crises of state and local government and the lack of a rational basis for Republican and Blue Dog opposition to the proposed revenue sharing component of the stimulus bill. The compounding insanity of the administration failing to fight for its concept and failing to make explicit how badly its removal would harm the recovery, employment, and vital government services.
- The insanity of accepting mass, long-term unemployment rather than having the government provide productive jobs for everyone willing to work (as the employer of last resort).
I have nothing to add.
A special thank you to Mr. Froomkin for allowing me to publish his excellent article, but my greatest appreciation goes to William K. Black for his continued excellent work on behalf of the American people to weed out this 'cancer' that in the end, may swallow us all up into a horrifying deep economic depression, that we may never be able to recover from.
I certainly give President Obama kudos for everything that he has done in office to date, on behalf of the American people. However, I cannot stand by and watch silently, as great people like William K. Black and Chris Whalen (along with many other Americans that understand what is truly at stake here) that still have the integrity, to stand up for the truth and alarm the nation, as to where this is going to lead us all to in the end.
I only wish I could say the same about my own President and Timothy Geithner. There are a lot of things, that can be ignored in a Democracy, but the most basic tenants of property ownership, and the laws that have held fast for centuries, for property law, is not one of them, especially to protect those same 'crooks, liars and thieves,' who destroyed out national economy in the first place.
Thanks as always.