January 24, 2012

Source: Naked Capitalism

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December 23, 2011

Source: Seeking Alpha

Bloomberg reports that Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.

Derivatives are highly volatile financial instruments that are occasionally used to hedge risk, but mostly used for speculation. They are bets upon the value of stocks, bonds, mortgages, other loans, currencies, commodities, volatility of financial indexes, and even weather changes. Many big banks, including Bank of America, issue derivatives because, if they are not triggered, they are highly profitable to the issuer, and result in big bonus payments to the executives who administer them. If they are triggered, of course, the obligations fall upon the corporate entity, not the executives involved. Ultimately, by allowing existing gambling bets to remain in insured retail banks, and endorsing the shift of additional bets into the insured retail division, the obligation falls upon the U.S. taxpayers and dollar-denominated savers.

Even if we net out the notional value of the derivatives involved, down to the net potential obligation, the amount is so large that the United States could not hope to pay it off without a major dollar devaluation, if a major contingency actually occurred and a large part of the derivatives were triggered. But, if such an event ever occurs, Bank of America’s derivatives counter-parties will, as usual, be made whole, while the American people suffer. This all has the blessing of the Federal Reserve, which approved the transfer of derivatives from Merrill Lynch to the insured retail unit of BAC before it was done.

Read More…

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December 20, 2011

Source: Huffington Post

Many tout the U.S. as the Roman empire of the modern world. But as it turns out, that comparison may not be all good.

Income inequality in America is at levels even higher than those in ancient Rome, according to a recent study from two historians, Walter Schiedel and Steven Friesen, cited by Per Square Mile. After analyzing papyri ledgers, biblical passages and other previous scholarly estimates, the researchers found that the top one percent of earners in Ancient Rome controlled 16 percent of the society’s wealth. By comparison, the top one percent of American earners control 40 percent of the country’s wealth, according to Vanity Fair. (h/t ThinkProgress)

The findings add to the growing chorus of studies and criticisms indicating that the wealth gap is hitting truly remarkable levels. The top one percent saw their incomes rise by 275 percent between 1979 and 2007, according to the Congressional Budget Office, while the bottom fifth of earners only saw their incomes grow by 20 percent during that same period.

In addition, the total net worth of the bottom 60 percent of Americans is less than that of the Forbes 400 richest Americans. Perhaps even more shocking, the six heirs to the retail giant Walmart had the same net worth in 2007 as the bottom 30 percent of Americans. And the phenomenon isn’t just limited to the U.S. — income inequality is on the rise in most of the world’s major economies, according to the Organisation of Economic Development and Cooperation.

Read More…

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December 10, 2011

Source: International Business Times

By employing a plethora of tax-dodging techniques, 30 multi-million dollar American corporations expended more money lobbying Congress than they paid in federal income taxes between 2008 and 2010, ultimately spending approximately $400,000 every day — including weekends — during that three-year period to lobby lawmakers and influence political elections, according to a new report from the non-partisan Public Campaign.

Despite a growing federal deficit and the widespread economic stability that has swept the U.S since 2008, the companies in question managed to accumulate profits of $164 billion between 2008 and 2010, while receiving combined tax rebates totaling almost $11 billion. Moreover, Public Campaign reports these companies spent about $476 million during the same period to lobby the U.S. Congress, as well as another $22 million on federal campaigns, while in some instances laying off employees and increasing executive compensation.

Of the 30 companies analyzed in the report, which include corporate giants such as General Electric, Verizon Communications, Wells Fargo (WFC), Mattel (MAT) and Boeing (BA), 29 of them managed to pay no federal taxes from 2008 to 2010. Only FedEx, which raked in about $4.2 billion in profits during that period, paid a three-year tax rate of 1 percent — totaling $37 million — far less than the statutory federal corporate tax rate of 35 percent.

Read More…

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Posted by Camron Wiltshire on December 9, 2011

Site’ editor’s note: Former Illinois Governor Rob Blagojevich was sentenced to 14 years this week after being convicted of a wide range of corruption charges, including the allegation that he tried to sell the Senate seat vacated by President Obama.

You won’t see the talking head presttitutes discussing the fact that former Governor Rob Blagojevich was arrested exactly one day after he announced he was “…asking all Illinois government agencies to suspend business with Bank of America” …

Here’s Rod Blagojevich uncensored on We Are Change Chicago:

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Class of Homebuyers Claims BofA Found a New Dirty Trick

December 7th, 2011

This one will take your breath away.

Via: Courthouse New Service:

Bank of America found a new way to illegally extract money from customers, according to a federal class action: deduct taxes and insurance from mortgage payments, even though the homebuyers make those payments themselves, then call the mortgage in default for the unauthorized deductions, and charge late fees and penalties.

Lead plaintiffs Rick and Susan Dolfo say that’s what Bank of America did to them.

“This is yet another tale of Bank of America cheating its customers,” the complaint states. “In 2005, plaintiffs obtained a residential mortgage loan. Bank of America subsequently bought the servicing rights to the loan. From the time the loan was issued, plaintiffs complied with their obligations under the loan agreement. They made their monthly payments, maintained the required homeowner’s insurance coverage and timely paid their property taxes. Nonetheless, in December 2009, plaintiffs noticed on their monthly mortgage statement that Bank of America paid their property taxes and homeowner’s insurance without the plaintiffs’ knowledge or consent, and even though plaintiffs also paid them. To fund the impound account, and without informing the plaintiffs, Bank of America took money from plaintiffs’ monthly mortgage payment, not leaving enough to cover plaintiffs’ monthly mortgage payment, throwing plaintiffs into default. Once in default, Bank of America, as the loan servicer, was ale to charge additional fees and penalties. Bank of America also falsely reported to credit agencies that plaintiffs were in default on their mortgage.”

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December 2nd, 2011

Via: Alternet:

We now have concrete evidence that Wall Street and Washington are running a secret government far removed from the democratic process. Through a freedom of information request by Bloomberg News, the public now has access to over 29,000 pages of Fed documents and 21,000 additional Fed transactions that were deliberately hidden, and for good reason. (See here and here.)

These documents show how top government officials willfully concealed from Congress and the public the true extent of the 2008-’09 bailouts that enriched the few and enhanced the interests of giant Wall Streets firms.

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December 2, 2011

By Madison Ruppert
EndTheLie.com

In a shocking article published in Reuters, Felix Salmon confirmed what the so-called conspiracy theorists have said all along: former Secretary of the U.S. Treasury Hank Paulson was giving insider tips to his cronies at Goldman Sachs and other Wall Street titans which directly benefited them.

The article is entitled, “Hank Paulson’s inside jobs,” emphasizing the fact that this wasn’t some one-off lapse of ethics on Paulson’s part, but instead a disturbingly regular practice.

For those who are unaware, Paulson was the CEO and chairman at Goldman Sachs from 1999-2006 and he clearly provided them with actionable information that epitomizes the plague upon our economy, and the greater global economic system, that is crony capitalism.

However, this isn’t quite a brand new revelation given the fact that in October of 2009 Andrew Ross Sorkin exposed that Paulson met with the entire Goldman Sachs board in a hotel suite in Moscow at the end of June 2008.

Salmon covered this at the time, after Sorkin’s book was released, which detailed the meeting held after the Goldman Sachs boys had dinner with Mikhail Gorbachev.

At the time the Treasury chief of staff Jim Wilkinson told Goldman Sachs chief of staff John Rogers, “Let’s keep this quiet,” indicating that despite the fact that the Treasury’s general counsel Bob Hoyt claimed “it wouldn’t run afoul of the ethics guidelines,” they were well aware that wasn’t the case.

Hoyt said that it was acceptable so long as it was solely a “social event”, but unsurprisingly, Paulson didn’t record the so-called “social event” in his official calendar.

It is undeniable that these individuals knew very well what they were doing, and clearly they had no misgivings whatsoever.

During the Moscow meeting Paulson spoke of “the need for the government to have the power to wind down troubled firms, offering a preview of his upcoming speech,” according to Sorkin.

This wasn’t just a friend going over a speech with some old pals, as everyone knows the words of the Treasury Secretary heavily affect global markets almost instantly, just like speeches by the likes of Ben Shalom Bernanke, the Chairman of the Board of Governors of the private Federal Reserve.

Getting this kind of information ahead of time is critical, and through Sorkin’s writing it is clear that Paulson enlightened them as to the situation with Lehman Brothers, giving Goldman Sachs an unfair advantage over those who didn’t happen to have someone on the inside.

Paulson spoke of the possibility that Lehman Brothers very well might collapse, along with giving the Goldman Sachs board other insights into how he was viewing the economic climate and what was to come.

As Salmon points out, “Maybe it’s not so surprising that Goldman Sachs turned out to be so well positioned when Lehman did indeed [blow up] a few months later.”

This egregious breach of ethics is a perfect example of the corporatism that pervades Wall Street and has brought us to the brink of collapse where we are precariously perched today.

Paulson’s Moscow meeting with Goldman Sachs wasn’t an isolated incident as just a few weeks later on July 28^th, 2008, Paulson met with what Salmon characterizes as “a who’s who of the hedge-fund world” in the Eton Park Capital Management headquarters.

Unsurprisingly, Eton Park Capital Management was created by Eric Mindich, formerly of Goldman Sachs as well.

In a Bloomberg article published yesterday, Richard Teitelbaum details the meeting between roughly a dozen hedge-fund managers and Wall Street executives, including no less than five former colleagues of Paulson’s from Goldman Sachs.

Others in attendance were Stephen Mandel of Pine Capital LLC, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

During the meeting Paulson, “went on to describe a possible scenario for placing Fannie and Freddie into ‘conservatorship’ — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.”

Teitelbaum writes, “The fund manager says he was shocked that Paulson would furnish such specific information — to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.”

While he points out that “law professors say that Paulson himself broke no law by disclosing what amounted to inside information,” it is hardly arguable that it is ethically acceptable for the Secretary of the Treasury to furnish information to certain people which would give them an advantage over everyone else.

As Salmon points out, “Given that it’s taken two years since the release of Sorkin’s book for the Eton Park meeting to be made public, it’s fair to assume that there were other meetings, too — possibly many others.”

Indeed it is impossible to know how much trading of insider information occurs amongst the financial elite, as we only get a glimpse when sources choose to disclose this information toreporters like Teitelbaum and Sorkin.

It is quite unfortunate that this is such a rare occurrence, especially when we look at how the ultra-rich continue to profit at record rates while the rest of us struggle to pay the bills.

Surely these meetings did not occur only a couple of times, given the tight connection that Goldman Sachs – or more accurately, as is now painfully clear – Government Sachs enjoys with Washington.
Salmon sums up this issue in pointing out that the so-called conspiracy theorists have been right all along.

Salmon writes, “Paulson was giving inside tips to Wall Street in general, and to Goldman types in particular: exactly the kind of behavior that ‘Government Sachs’ conspiracy theorists have been speculating about for years. Turns out, they were right.”

Now if only the derisive label of “conspiracy theorist” would be lifted from these issues when it is far from a conspiracy theory and is indeed a conspiracy fact.

I won’t be holding my breath, because so long as governments criminally conspire with multinational corporations and others, the label of conspiracy will be denigrated in order to keep people from discussing and investigating these facts and issues.

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The US Occupy movement is at a critical point. To succeed it must develop a message of specific solutions to fix our broken system. People are seeing the next step as advocacy for constitutional amendments proposed through an Article V convention.
by Joel S. Hirschhorn
(libertarian)

Contact Joel S. Hirschhorn through delusionaldemocracy.com.]
Monday, November 28, 2011

There is a growing convergence of thinking about where the US Occupy movement should go as a next step to turning its values, concerns and commitments into changing what most Americans see as broken government under control of corporate interests.  When it comes to political and social movements, history shows us that they usually fail not because they disappear, but rather because they become marginalized, unimportant despite a core group of committed people and groups.

They lose popular appeal and support or never expand beyond a small early group of supporters.  The nation and many supporters move on.  Other movements grab the interest of the most informed, dissident-type people seeking truth, justice or change.  A good example of such a failed contemporary movement is the 911 truth effort.  The groups, websites and true believers keep on pushing their objectives a decade after the historic event.  But the goal of revealing what really happened that the official government story does not divulge is like a moldy piece of forgotten food in the refrigerator.

Movement death by inattention happens despite good resources, charismatic leaders and even great organization and communication skills.  Critical mass of public support simply never materializes, in large measure because diverse segments of the population never buy into the central arguments of the movement.  The Internet is littered with websites of activist groups that persist despite clear evidence of decay and wide disinterest.  True believers have a mission in life tied to their egos that prevent them from admitting defeat.  They do not move on.

The biggest mistake that passionate advocates for a cause make is overestimating their ability to reach critical mass and underestimating the competition of other movements with greater appeal which rob them of both attention and supporters.

Make no mistake; I totally and enthusiastically support the Occupy movement because it offers the prospect of producing reforms to fix our broken government and attracting very wide public support for a nonviolent Second American Revolution.  What worries me, however, is that many of its participants seem over confident, as if they cannot fail.  On the other hand, I have become impressed by a convergence of thinking about what the next big step for the Occupy movement can and should be.  I will briefly identify examples of this convergent thinking.

Canadian author Erich Koch has written a compelling article: An Objective for the U.S. Occupy Movement: A Constitutional Convention.  He buys into the view that the Occupy movement could embrace the thinking of Harvard Professor Lawrence Lessig who has presented the case for amendments to fix Congress.  Like others Koch is correct in saying that “No one in the movement would disagree with its main point: the fundamental problem is the corruption of Congress.”  Unlike others, Koch recognizes the path for obtaining reform constitutional amendments is using the provision in Article V for a convention of state delegates, having the same power as Congress in proposing amendments that still must be ratified by three-quarters of the states.  It has never been used despite many hundreds of state requests for a convention because, clearly, Congress and most status quo forces fear such a convention.

Koch cited a great article by Alesh Houdek: Has a Harvard Professor Mapped Out the Next Step for Occupy Wall Street?  Most is a review of Lessig’s book.  Correctly noted about using the convention option is “it bypasses the usual means of reform (Congress, presidential elections, etc.) which the lobbyists and other interested parties have learned so well to manipulate. And lastly, such a convention would be free to propose solutions that would otherwise be subject to be stricken as unconstitutional by the Supreme Court.”  This is critical to understand.  Houdek concludes: “Properly presented, the strategies and aims of Lessig’s book could make it the handbook the protesters have been looking for — and provide a pathway for them to ride out the winter ahead.”

Dan Froomkin also has presented the same case in: Lawrence Lessig’s New Book On Political Corruption Offers Protesters A Possible Manifesto.  He quoted what Lessig himself had said in an article about the Occupy movement and the concern that I share, namely that the Occupy movement “will become too diffuse and not focused” on the root issue of corruption of government.  And that the movement will only grow “if a wide range of people can be part of it.”  This requires coalescing around an issue “as fundamental as the corruption of the system.”  Only a constitutional amendment can fix the corrupting impact of money in politics.  This is also the focus of Dylan Ratigan’s fine effort, except that the use of the convention path has not been emphasized.

A specific call for an Article V convention was made by the pro-Occupy US Day of Rage group: “We are organizing a coordinated national campaign at local and state levels, including where necessary the occupation of state capitols, in order to demand an article V constitutional convention be called to restore representative democracy to our nation.”  A set of specific reforms to be fix the corruption-money problem are presented.

The 99 Percent Declaration group has also presented an important statement centered on the call for a National General Assembly, where delegates would formulate a petition of a list of grievances that would be delivered to the main parts of the federal government on behalf of 99 percent of Americans.  A suggested list of grievances includes the need for constitutional amendments to achieve solutions, but only for a few of the issues.  Not explicitly acknowledged, however, is that constitutional amendments, not ordinary laws, would be necessary for other solutions, such as term limits for Congress and abandoning the Electoral College.  Moreover, there is no specific recognition that serious amendment reforms will not be proposed by Congress, and that an Article V convention is needed.  Inattention to method was also the shortcoming of a similar list of solutions by Ralph Lopez.

Author Scott Turow has presented: How Occupy Wall Street Can Restore Clout of the 99%.  His recommendation to the Occupy movement is “work across the nation for a constitutional amendment requiring Congress to regulate the expenditure of private money on elections.  … The best antidote to this imbalance of income and influence would be to greatly reduce the role of private funding in our elections.  …As for the Occupy Wall Street movement, it has been criticized by some for not having a realistic agenda, even though polling shows that millions of Americans, including me, are sympathetic to the basic message of the protests.”  His prescription: “rally around a single goal and reinvigorate their movement.”  Fine, but missing from his analysis is the recognition that Congress will never propose reform amendments, only an Article V convention will do the job.

This sampling of recent writings clearly shows convergent thinking that the Occupy movement can and should focus on key reform constitutional amendments and, second, that some better informed critical thinkers recognize, this requires advocacy for using the Article V convention option that Congress has refused to honor.

As to Occupy movement success, I want again to emphasize that there is always competition for the attention and support of concerned Americans who recognize how broken our system is.  In particular, the well financed Americans Elect effort is impressive.  Because it is offering an alternative path to nominating a presidential candidate in 2012, over 2 million Americans have already signed up to be delegates for a web convention, with millions more very likely as the mainstream media keeps giving this effort attention.  Disgust with the two-party plutocracy is surely shared by Occupy participants and supporters.  But for movement success based on enticing many millions of Americans, the Occupy movement cannot ignore competition such as Americans Elect.  This means that the Occupy movement must explicitly start making the case to the broad public why their effort can achieve more of what is needed.  This is easily done.

Here are some key concepts that the Occupy movement could use.  No matter who is nominated by Americans Elect, the odds are that either the better financed Democrat or Republican candidate will win the presidency.  This may just require spending even more millions of dollars on campaigns.  And whoever is nominated by the group will likely be strongly linked to one of the two major parties, rather than some courageous reformer and enemy of the status quo.  Moreover, this group does not offer a realistic path to getting the key reforms of the system that most of us see critically needed, such as constitutional amendments, already recognized by many Occupy supporters.

A sign of trouble for the Occupy movement is a recent national poll that found: “In the latest survey, 33 percent voiced support for Occupy Wall Street, down from 35 percent in a previous poll, while opposition to the movement climbed from 36 percent to 45 percent. Twenty-two percent were unsure.”  These results are worse than earlier polls.  From the left, Chris Bowers commented: “the decline in Occupy Wall Street’s image is probably more connected to the increasingly negative coverage of the clashes between protesters and police than it is to declining support for movement’s message.”  Now is the time to move the message from what is wrong to solutions, using an Occupy Congress approach.  Otherwise, this view from the conservative right might prevail: “OWS will linger … but I’d argue we’ve seen the movement’s high tide. It will now recede into a mere annoying shadow of itself as support is withdrawn by political figures and organizations.”

True, Occupy movement success is not inevitable.  The movement must better define what success means and how it can be achieved if it is to attract and keep the support of many millions of Americans.  It needs specificity for its solutions that ordinary Americans can relate to.  Never underestimate the power and commitment of status quo forces to maintain control over the political, government and economic system that has so harmed most Americans.  The fight against the Occupy movement mostly seen as local police violence against peaceful demonstrators and protesters as well disinformation from some news outlets and pundits are nothing compared to what could be mounted if the movement is viewed as more threatening to the status quo delusional democracy with its delusional prosperity.

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November 20, 2011

By Joe Weisenthal – Business Insider

If you like your Wall Street analysis with a heavy dollop of rapture and Armageddon, today was the day for you.

Blame the weighty issues of the day (Europe, mostly), and yesterday’s big selloff for the spasm of bearishness.

It started off with Nomura’s Bob Janjuah. He said that any talk of the ECB saving Europe was a mere pipedream, and that if the ECB did go whole-hog buying up peripheral debt to suppress yields, then that would prompt a German departure from the the Eurozone.

Germany appears to be adamant that full political and fiscal integration over the next decade (nothing substantive will happen over the short term, in my view) is the only option, and ECB monetisation is no longer possible. I really think it is that clear and simple. And if I am wrong, and the ECB does a U-turn and agrees to unlimited monetisation, I will simply wait for the inevitable knee-jerk rally to fade before reloading my short risk positions. Even if Germany and the ECB somehow agree to unlimited monetisation I believe it will do nothing to fix the insolvency and lack of growth in the eurozone. It will just result in a major destruction of the ECB‟s balance sheet which will force an ECB recap. At that point, I think Germany and its northern partners would walk away. Markets always want short, sharp, simple solutions.

Okay, but that’s Janjuah. He’s always bearish so maybe that’s not even news.

But then there was Deutsche Bank’s Jim Reid, who is always sober, but not usually wildly negative. He offered up one of the most bearish lines in history in regards to German opposition to ECB debt monetization:

If you don’t think Merkel’s tone will change then our investment advice is to dig a hole in the ground and hide.

Oy.

But it got even wilder with the latest from SocGen’s Dylan Grice. Again, he’s always pretty negative, but he cranked it up a notch, comparing Germany’s policy today against the policies that enabled the rise of Hitler. Specifically, he said that post-Weimar, Germany became too aggressive about fighting inflation, thus prompting deflation, thus prompting more unemployment, thus enabling the rise of the Nazis.

He included this chart:

Image: Societe Generale

And finally, in our inbox, we just received the latest note from Nomura rates guru George Goncalves, which is titled: US and Europe: At the Point of No Return?

He writes:

…we were wrong in assuming one could be optimistic around the EU policy process and have learned our lesson not to accept apathy as a sign that all is factored in as its clear downside risks remain. In fact, we could be approaching the point of no return for the fate of the euro, the European financial system and more broadly the concept of a singular economic zone for Europe; this obviously would change the path for the US and the global economy in a heartbeat too. We still believe there is time to prevent worst-case scenarios, but these sort of watershed moments reveal one thing, that market practitioners are ill-equipped to navigate the political process, especially one that is driven by 17 different governments.

That’s it. Hope everyone has a fantastic weekend!

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October 26, 2011

Source: Daily Mail

An ex-Goldman Sachs executive is facing charges of insider trading, sources have claimed.

Multimillionaire Rajat Gupta, 62, is expected to shortly surrender to the FBI on criminal charges of leaking inside information to Galleon Group hedge fund founder Raj Rajaratnam.
Billionaire Rajaratnam was given 11 years in prison earlier this month by a New York court, the longest sentence ever handed down for insider trading.

Surrendering to the FBI: Rajat Gupta, a former director at Goldman Sachs, is expected to give himself up on charges of insider trading

Mr Gupta, who was also once the global head of elite consultancy McKinsey & Co, is one of the most prominent business executives to be caught up in the Government’s insider-trading probe.

Gary Naftalis, Mr Gupta’s lawyer, would not comment on possible criminal charges but issued a statement echoing his previous comments that his client has committed no wrongdoing.

Read more: http://www.dailymail.co.uk/news/article-2053561/Former-Goldman-Sachs-director-linked-Wall-Streets-biggest-insider-trading-scandal-surrender-FBI.html#ixzz1buDsv7Tx

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October 25, 2011

Source: Daily Bail

Why did the Federal Reserve Bank of New York (FRBNY), whose Chairman was Stephen Friedman (a Goldman Sachs board member who resigned from the New York Fed earlier this year when it was revealed that he had made $5 million by purchasing shares in GS with the knowledge that AIG would be paying counterparties at par and that Goldman would be getting a $13 billion windfall — when no one else had this information) and whose President was none other than current Treasury Secretary Tim Geithner, why did this New York Fed choose to pay AIG’s counterparties 100 cents on the dollar when AIG itself had been negotiating for steep haircuts with claimants, AND why did they then pressure AIG executives to keep quiet about the decision even discouraging AIG from disclosing the ‘par-payments’ to its shareholders in required SEC filings?

We’ll leave the decision itself (which was fraudulent, borderline criminal, and the reasoning given – a complete joke), for another post and focus on the cover-up.  Certainly it riled up Congressman Darrell Issa who fired off an angry letter last Friday to AIG management and the New York Fed, demanding the following from both:

1. Emails, phone logs and meeting notes of the following people: Timothy Geithner, Stephen Friedman, Tom Baxter, and Sarah Dahlgren;
2. Term sheets, including drafts, relating to AIG’s payments to its CDS counterparties;
3. Emails, phone logs and meeting notes referring or relating to public disclosure of AIG’s payments to its CDS counterparties including disclosure to the SEC.

Issa continues in his letter:

It is also disturbing that, at the time this secret deal was made, FRBNY Chairman Stephen Friedman, a member of the board of Goldman Sachs, purchased more than 50,000 shares of Goldman Sachs before knowledge of the FRBNY’s bailout of Goldman Sachs and other AIG counterparties became public knowledge.  According to news reports, this transaction has earned Mr. Friedman over $5 million in profit.

Finally, according to one AIG executive quoted in news reports, the FRBNY may have attempted to manage public disclosure of its decision to pay AIG’s counterparties at par by pressuring the company not to file pertinent documents with the U.S. Securities and Exchange Commission (“SEC”):

They’d tell us that they don’t think that this or that should be disclosed.  They’d say, “Don’t you think your counterparties will be concerned?”  It was much more about protecting the Fed.

These allegations raise serious questions about the transparency, accountability and wisdom of the FRBNY’s actions. The American people have a right to know the full details behind the FRBNY’s decision to stop negotiations with AIG’s counterparties and pay them billions of dollars of taxpayer money.

**********

DB here.  It’s not difficult to understand what happened, and it most certainly was not a coincidental result of independent decisions made during the heat of the crisis.  We’ve actually known it was the Fed for awhile.  Ever since House testimony from AIG CEO Ed Liddy confirming that “The Fed made us do it.”  The problem at the time was that we didn’t know which Fed.

Read Full Article Here…

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October 22, 2011

Source: Daily Bail

The only thing surprising about this ruling is that it took so long to be made. This is black letter law, folks, the logical extension of the Court’s Ibanez decision.

Without a promissory note, a foreclosing plaintiff cannot show a legal injury, i.e., does not have standing to sue. Without standing, the action before the court does not qualify as a “case or controversy” under Article III of the constitution. Courts can only make rulings on “cases or controversies;” advisory opinions are a legal nullity. Consequently, a court that purports to enter a “judgment” where it has no subject matter jurisdiction has in fact entered a legal nullity on its docket; that “judgment” is void as a matter of law.

As such, any such “judgment” entered where the plaintiff had no standing is open to collateral attack in any subsequent proceeding. What is more, subject matter jurisdiction cannot be waived; were that the case, parties could falsely induce courts to make binding rulings–obviously non-sensical.

The procedural posture of this particular case is unusually serpentine, no doubt. In any event, there is nothing controversial–as a legal proposition–about this case. I’m sure the banks, who are now shitting their pants over the implications of this case, see it differently, but they’re just wrong.

—

Source – Amnova

On Oct. 18th, 2011 the Massachusetts Supreme Judicial Court handed down their decision in the FRANCIS J. BEVILACQUA, THIRD vs. PABLO RODRIGUEZ – and in a moment, essentially made foreclosure sales in the commonwealth over the last five years wholly void. However, some of the more polite headlines, undoubtedly in the interest of not causing wide spread panic simply put it “SJC puts foreclosure sales in doubt” or “Buyer Can’t Sue After Bad Foreclosure Sale.”

In essence, the ruling upheld that those who had purchased foreclosure properties that had been illegally foreclosed upon (which is virtually all foreclosure sales in the last five years), did not in fact have title to those properties.  Given the fact that more than two-thirds of all real estate transactions in the last five years have also been foreclosed properties, this creates a small problem.

The Massachusetts SJC is one of the most respected high courts in the country, other supreme courts look to these decisions for guidance, and would find it difficult to rule any other way in their own states. It is a precedent. It’s an important precedent.

Here are the key components of the Bevilacqua case:

1. In holding that Bevilacqua could not make “something from nothing” (bring an action or even have standing to bring an action, when he had a title worth nothing) the lower land court applied and upheld long-standing principles of conveyance.

2. A foreclosure conducted by a non-mortgagee (which includes basically all of them over the last five years, including the landmark Ibanez case) is wholly void and passes no title to a subsequent transferee (purchasers of foreclosures will be especially pleased to learn of this)

3. Where (as in Bevilacqua) a non-mortgagee records a post-foreclosure assignment, any subsequent transferee has record notice that the foreclosure is simply void.

4. A wholly void foreclosure deed passes no title even to a supposed “bona fide purchaser”

5. The Grantee of an invalid (wholly void) foreclosure deed does not have record title, nor does any person claiming under a wholly void deed, and the decision of the lower land court properly dismissed Bevilacqua’s petition.

6. The land court correctly reasoned that the remedy available to Bevilacqua was not against the wrongly foreclosed homeowner but rather against the wrongly foreclosing bank and/or perhaps the servicer (depending on who actually conducted the foreclosure)

When thinking about the implications of Bevilacqua – the importance of point six cannot be overstated.

The re-foreclosure suggestion is not valid

Re-foreclosing on these properties in not likely as has been suggested by bank layers in light of the Bevilacqua ruling. We aren’t talking about Donald Trump here and we have a funny feeling he won’t be affected either. Mostly it’s guys like Bevilacqua who bought single or multi units, in the “hundreds of thousands” range. It seem unlikely that the majority of these folks would have the capital to eat their existing loses, re-foreclose at great expense, and on top of all of that come out as the highest bidder on the very property they formerly thought was their own. In many cases, as was the case in Bevilacqua, the original purchaser of the foreclosure may have already resold the property and moved on, thus leaving in their wake an even more serious problem; the likelihood of a property owner, who had nothing directly to do with a foreclosure, but is left with all the fallout of a post-Bevilacqua world.

Re-bidding on these properties in a re-foreclosure scenario would be done in what is soon to be a new inflationary environment (most originally bid in a deflationary environment for housing), thus making the “re-foreclosure” blank threat all the more unconvincing and unlikely.

However, it should be easy enough for investors similarly situated to Bevilacqua to simply hire fee contingent attorneys who can sue the banks and servicers for conveying fraudulent deeds – that seems like a much easier and logical proposition. When the potentially millions of lawsuits are added to the complaints filed by investors in MBS, we think the banks will finally be revealed as wholly insolvent. The only other way it could happen faster, is if the average American home owner, realizing he may never obtain clear title to his home (short of an indemnity from his bank), finally stops making his monthly payments on his invalid note (which completely lacks a valid security instrument). In this way, the existing insolvency of banks would be recognized in a matter of days rather than months or years.

The act of denial does not actually alter reality

Ostriches are said to have discovered this the hard way. On November 12th, 2010 in our article “Tattoos, Pyramid Schemes and Social Justice” we advocated that home owners, with securitized mortgages, regardless of their ability to pay, consider suspending their mortgage payments, and place those funds into a private escrow account instead. We wrote:

“Radical though it may seem, we believe the only way to stop the chaos of fraud and the breakdown of the rule of law in our courts, and most importantly to ensure that we ourselves are not participants in the fraud, is for homeowners who can afford their mortgage to stop paying it…”

The article goes on to say:

“For example, what is easier; to scorn those who are being foreclosed on because they can no longer afford their mortgage or to accept the possibility that our entire financial, and maybe justice system might be badly corrupted? Across all spectrums of crime, victims are often blamed, just ask attorneys who represent rape victims. This phenomenon is by no means unique to mortgage fraud, or those who have been raped by the institutions who carry out this trade. It has been made to appear as if those who have fallen on hard times are a matter of “incidental” inequalities in an otherwise procedurally just system. However, it is precisely the opposite which is true. Our financial institutions have created deliberate inequalities, through the use of procedurally unjust systems.”

We pointed out that suspending such payment might be done for the following reasons, which in light of the recent Bevilacqua decision, and the pending Eaton Decision, are increasingly being proven correct:

“1. They are not sure where or if their payments are going to the true note holder.

2. They no longer know who the true note holder is.

3. They have a legitimate concern that they may not be able to ever obtain clear title and/or title insurance (in the event of a sale) given what we now know about improperly conveyed titles and the illegitimacy of “MERS”.

4. They do not want to be an unwitting or passive participant in fraud.

5. They care about America, want our culture to be healed and recognize the dignity of every human being.”

Long before the Ibanez decision was handed down we wrote the following (taken from the same article):

“If these legitimate reasons are the cause to suspend mortgage payments, then what attack on these “non-co-operators” character can be levelled? In these cases, Judge’s will have to allow for proper civil procedure to take place in order for the legitimate inquiries of concerned Americans to come to light. Since banks virtually never produce adequate documentation (which appears to be by design), chances are things will escalate.”

We went on to discuss the unique risks of apathy and denial in the following:

“…Americans have a duty to ask critical questions about the operations of their financial institutions, and if evidence has been presented that a deal was made, but not everyone was playing by the rules, than those deals need to be looked at again. It is not good enough any longer to say, if it doesn’t affect “me” than, I’m not getting involved. We have a duty to one another as Americans, and more importantly as human beings, to care about truth and justice. What’s more, apathy, so long as we are not affected, is a short lived consolation. Ultimately, this crisis will affect everyone sooner or later.”

Certainly when the SJC handed down their opinion affirming Bevilacqua, perhaps hundreds of thousands, and ultimately millions of people who previously thought they were not affected, were suddenly well, affected. That is because there has been about six million foreclosures since the current economic crisis began, and those foreclosures may have resulted in many more interested parties, as was the case in Bevilacqua, who sold the subject property to four new owners, thus multiplying the number of parties involved, and ultimately the number of legal actions which could be brought. It is not hard to see where six million voided foreclosures might well result in new lawsuits in excess of that number – and if the courts advice is taken, these complaints would be directed, and properly so, at banks and servicers.

We expanded greatly on the themes of fraud, denial, and the likely economic consequences in our articles “Ibanez – Denying the Antecedent, Suppressing the Evidence and one big fat Red Herring” and “Eaton – Dividing the Mortgage Loan and Affirming the Consequent” which covered the other two recent landmark SJC cases – these may be worth reading in tandem with the present article in order to understand the full breadth of the problem.

In the Ibanez article, which was written in January of this year we wrote the following:

“If you live in Massachusetts and your mortgage has been securitized, or if you have purchased a foreclosure property, we think it would be wise to consider suspending your mortgage payments if you haven’t already.”

We believe these particular words have become incredibly relevant given the implications of Bevilacqua.

Finally, In our article “On the ethics of mortgage loan default” we tried to cover any outstanding inhibitions homeowners might have about the advice we were giving.

A few phone calls opens a whole new world

We decided to call a few title insurance companies to get their “take” on it all. We made the mistake of identifying ourselves as “bloggers” in the first phone call – that call may well have set a new land speed record for the fastest time from answering to hanging up. Thinking there might be a smarter approach, we decided to identify ourselves as homeowners (equally true) on the next call – the results were a little better, but only slightly.

The underwriters and title examiners we spoke to kept asking if we were attorneys, or if we represented the home owner as “council”. We thought this was curious because we kept pointing out that we were ourselves just homeowners. Then it hit us, they have never actually spoken to a real, live, breathing customer on the policy origination side, they had only ever spoken to lawyer-brokers. We thought; what an interesting confluence of incentives this must create, and why is the buyer of the policy necessarily so far removed from the seller?

Continue reading (there’s much more)…

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October 19, 2011

Source: Daily Mail

A University of Zurich study ‘proves’ that a small group of companies – mainly banks – wields huge power over the global economy.

The study is the first to look at all 43,060 transnational corporations and the web of ownership between them – and created a ‘map’ of 1,318 companies at the heart of the global economy.

The study found that 147 companies formed a ‘super entity’ within this, controlling 40 per cent of its wealth. All own part or all of one another. Most are banks – the top 20 includes Barclays and Goldman Sachs. But the close connections mean that the network could be vulnerable to collapse.

The 1318 transnational corporations that form the core of the globalised economy – connections show partial ownership of one another, and the size of the circles corresponds to revenue. The companies ‘own’ through shares the majority of the ‘real’ economy

‘In effect, less than one per cent of the companies were able to control 40 per cent of the entire network,‘ says James Glattfelder, a complex systems theorist at the Swiss Federal Institute in Zurich, who co-wrote the research, to be published in the journal PLoS One.

Some of the assumptions underlying the study have come in for criticism – such as the idea that ownership equates to control. But the Swiss researchers have no axe to grind: they simply applied mathematical models usually used to model natural systems to the world economy, using data from Orbis 2007, a database listing 37 million companies and investors.

Economists such as John Driffil of the University of London, a macroeconomics expert, told New Scientist that the value of its study wasn’t to see WHO controlled the global economy, but the tight connections between the world’s largest companies.

The collapse of 2008 showed that such tightly-knit networks can be unstable.

‘If one company suffers distress,’ Glattfelder says, ‘This propagates.’

Protest against global capitalism outside St Paul’s cathedral, London: But it seems unlikely that the 147 corporations at the heart of the world economy could wield real political power – they represent too many interests

The research requires more analysis, but it could be used to look for the weaknesses in the network of global wealth, and prevent future financial disaster.

Looking at ‘connectedness’ also puts paid to conspiracy theories about the world’s wealth – companies connect to highly connected companies for business reasons, rather than world domination.

The ‘core’ of 147 companies also represents too many interests to wield real political power – but it could act ‘as one’ to defend common interests. Sadly for market reformers, resisting change may be one such common interest.

Click here to read more.

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