Tuesday, December 11, 2007

Current Economic Woes Are The Result of Massive Fraud

Current Economic Woes Are The Result of Massive Fraud

“During the years from 2000-2007, the banks took in securitization products including mortgages (worth over $1 trillion) and issued commercial paper. The banks created a great number of off balance-sheet conduits and structures. As such, these structures fail to report full liabilities on the bank’s balance sheets. This is what I call RahC™ (Randomly Activated Hidden Contingency) and RahD™ (Randomly Activated Hidden Debt). The industry created a Shadow Banking System (SBS) [phrase coined by Paul McCulley, PIMCO]. Yes, you’ve seen this movie before. Remember Enron? Enron apparently, through a series of related entities garnered a massive off-balance sheet contingency that exposed the company to risks and liabilities in untold and unknown amounts, not respected by its investors, the government or society. Well, with off-balance sheet liability and exposure related to hedge funds, commercial paper and derivatives, our formal banking system is now trying to absorb the assets burdened with unknown quantities and qualities of RahC and RahD losses and liabilities now exposed in our Shadow Banking System. Moreover, the SBS is not backed by Federal Deposit Insurance nor does this system have access to the Federal Discount Window for liquidity. Not to rub salt in this wound, but my ‘free market purists’ friends should now recognize some need for ‘refined free market industry and government regulations.’ How many times must we see this movie of ‘extremes’? Literally, untold exposure is etched in the fabric of off-balance-sheet contingencies.”Shadow Banking System (SBS) http://shadowbankingsystem.com/html/shadowbanking.html

Once again the Bu$h crime family is involved in a massive rip off, transfer of assets, wealth redistribution, fraud, whatever you choose to call it that will impact ordinary AmeriKKKans quite negatively. The current mortgage/credit/monetary/asset meltdown is the result of massive systemic fraud. Contrary to the media talking head spin, the so called subprime crisis is not the fault of irresponsible borrowers. How can someone get a loan who has no job or get a loan for a house they obviously cannot afford or secure a refinance loan that is well over their means without collusion on the part of the lender? If it were just one bank, one mortgage broker or one mortgage company you could say well, that’s just one unscrupulous banker, broker or an isolated event. But when it is nation wide and you see it happening millions of times you know it is deliberate. When I say nationally and system wide I mean total collusion involving the Chairman of the Federal Reserve Bank, the Fed itself, Wall Street investment banks, commercial banks, the bond rating services, mortgage companies, their brokers, insurance companies, real estate agents, the media and insider investors. This wide scale fraud involved whole industries coupled with government acquiescence and encouragement. So don’t fall for the okey-doke and blame it on Pookie and Shanaynay’s bad credit.
Most AmeriKKKans are totally unaware a “shadow banking system” even exists. Certainly most black folks are clueless about what is going on. That is why I write these types of articles to let you know what is happening. “What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August. My Pimco colleague Paul McCulley has labeled it the ‘shadow banking system’ because it has lain hidden for years, untouched by regulation, yet free to magically and mystically create and then package subprime loans into a host of three-letter conduits that only Wall Street wizards could explain. It is certainly true that this shadow system, with its derivatives circling the globe, has democratized credit. And as the benefits of cheaper financing became available to the many as opposed to the few, placating and calming waves of higher productivity and widespread diversification led to accelerating economic growth, incomes, and corporate profits. Yet, as is humanity's wont, we overdid a good thing, and the subprime skim milk has soured.” The Shadow Knows - Bill Gross founder and Chief Investment Officer of Pimco. http://www.pimco.com
For an insider like Bill Gross to admit a shadow banking system exists and to point out its foibles as the cause of the current crisis is extremely enlightening. But Gross is not opposed to a shadow banking system. He just wants one that is transparent, one that investors can have confidence in. Unfortunately the ruling elites cannot be trusted to play fair. They have an agenda that is neither good for the country nor the economy. Greed and “power” to shape and ultimately undermine the economy are their motivation but the means is plain old fraud using the banks, mortgage companies, rating services and an unregulated shadow financial system of hedge funds, derivative funds, offshore accounts and the global market to weave a web of interlocking entities based on leveraged credit and debt that are now unraveling like a cheap sweater. This is all deliberate; it is a variation of the “pump and dump” stock market themes. “To add injury to insult, on July 9, 2007 the SEC eliminated the so called ‘Up Tick Rule’ which normally does not allow traders to bet on the down (tick). As a result, Wall Street investment banks bet on the down - that subprime mortgage investments would devalue and incur great losses. As their own portfolios lost value or went bankrupt, great monies were made shorting same; some would say accelerating the losses. There is nothing wrong with a more profitable shadow mortgage banking model per se. In fact, the economy can and does benefit from more shadow banking. This time, it needs to be supported by industry and/or government minimum transparency, liquidity and credit safety belts. The fact that the Shadow Banking System’s model is neither federally insured nor able to use the Federal Discount Window makes it vulnerable to market extremes and unnecessary loss and asset devaluation severities. It is simply not healthy to ignore or deny that our secondary market system is lacking a certainty safety-net for the non-conforming (non-agency) loan and commercial paper markets” Who’s Zooming Who? Solutions to the Hollow Promises of Wall Street’s Shadow Banking System http://shadowbankingsystem.com/Whos_Zooming_Who.pdf
Note, the Security and Exchange Commission the very agency charged with looking out for investors by making sure the system is transparent open and fair reversed its’ policy and allowed traders to bet the mortgage market would take a dive! Obviously the fix was in!! It was classic pump and dump! Especially since they already knew many of the loans were shaky in the first place. The fraud was compounded and expanded when the investment banks repackaged these same shaky loans as exotic sounding investment opportunities and they were given AAA rating by the rating services. This made them extremely attractive so the banks and mortgage brokers could market and sell them to suckers looking for huge returns on their investments. This was systemic collusion and fraud. It was accomplished by industry wide Wall Street investment bank cooperation; all part of the ruling elites’ scheme to tank the economy and reduce us all to debtor surfs and wage peons.
“The American Securitization Forum in June 2007, as well as most industry and government groups (SEC, Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve, Office of Thrift Supervision, Treasury Secretary Paulson, FDIC, National Credit Union Administration, Conference of State Bank Supervisors, National Association of Consumer Credit Administrators,American Association of Residential Mortgage Regulators, Joint Economic Committee Chairman Schumer, October 2007, S&P Revised Guidelines of October 11, 2007, Moody’s Survey of September 21, 2007, etc.) recommended loan workouts or 'modifications' as an important immediate step to the current and impending mortgage meltdown. However, the September 21, 2007 Moody’s study entitled: Moody's Subprime
Mortgage Servicer Survey on Loan Modifications 'showed that most servicers had only
modified approximately 1% of their serviced loans that experienced a reset in the months
of January, April and July 2007.' The problems are multifold and complex. Not only do
we need to maximize loan workout modifications by overcoming issues of conflicting
authorizations in Pooling & Servicing Agreements, and failing lender and servicing
efforts, but we must align and resolve conflicting disincentives among all market
participants from borrowers to investors with law makers in between.” http://shadowbankingsystem.com/Whos_Zooming_Who.pdf
As you can see by the extremely low rate of loan modifications (adjustments) and the feeble plan the Bu$h administration recently came up with, the ruling elites have no real intention of resolving the problem or assisting the millions of folks facing default and foreclosure. Why should they, they’ve already made their money by selling the mortgages and by betting the bottom would fall out in their rigged con game!! In fact this is all part of their plan to destroy the working and middle classes and the system by siphoning off and transferring their wealth to the super rich. This is the same thing that happened during the depression before Roosevelt stepped in to save the farmers and home owners. (For that the bankers plotted a fascist coup against him which failed but not one of them went to jail! See Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated http://american_almanac.tripod.com/morgan3.htm )
As stated earlier the current fiasco is a variation of the Enron and Savings and Loan rip offs. Only this time the elites have not come up with a plan that calls for a taxpayer bailout, probably because they want a deep recession/depression. This way they can accomplish their nefarious agenda. Meanwhile the shadow banking system is imploding and because it is under the radar, the real damage will go unreported by the corporate media. Some of you are saying “this is a bit farfetched”. Not really when you consider the real US history or the fact 9-11 was an inside job or that ethnic cleansing was one of the goals of the Bu$h administration’s responses to Hurricane Katrina. We need to stop pretending our government and the people/corporations who bribe, control and tell them what to do aren’t a bunch of crooks, psychopaths warmongers and murderers.

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