Posts Tagged ‘MBS’
Foreclosure fraud

A long but fascinating audio on fraud in the foreclosures. Hat tip to the Market Ticker, who comments:

It’s two hours… In particular, listen to the couple of minutes starting at 12:30 in. Then listen to 6:30, and 42:30, right around 50:00 and then again at 70:00 and finally, at 78:00 in.

Pay attention to what’s being said here.

First: The assertion is made that the lenders and holders of the notes were paid in full. That is, they have no economic damage from the default (!) due to the way they structured the deals.

Second: The assertion is made that there was fraud in the inducement in all of these loans, in that there is an implied duty of dealing in good faith in all contracts that was violated by the banks that made knowingly bad loans – which we now have sworn testimony on. While this is not settled by any means, there is currently pending litigation on this point, and if this approach wins, well, then you go – those contracts are voidable.

Third: The allegation is made that the banks were not stupid – they knew the mathematics (as we all do now) and intentionally crashed the market. That just compounds the second point.

He aslo has charts on the growth of US money supply and debt here

Massive Market Manipulation

We have posted on the possibility of USD 15 trillion money laundering, a rogue US agency or an attempt to extort at least 50 billion. It seems so farfetched, surely it can’t be true. But is it any more unbelievable than the manipulation of the gold and silver market or that of AAA rated securities?

Gold and silver markets are manipulated in what was termed the biggest fraud in the history of the world. Gold is the biggest commodity market in the world. USD 5.4 trillion a year is traded through the LBMA and no end of derivatives hang off it. The leverage level is 100 to 1. In other words there are 100 ounces of paper gold for every ounce of physical gold. Every ounce of gold that leaves the LBMA causes leverage rates to rise. At some point the market is going to blow.

Listen to King World News Interview with Andrew Maguire & Adrian Douglas. Andrew told the CFC exactly what was going to happen to the gold price when it followed the pattern caused by the manipulation. It then moved exactly as he said it would. He even gave the CFC live commentary explaining what was happening.

The email exchange between Andrew Maguire and the CFTC is linked to at the King World News site. It includes the following:

A final e-mail to confirm that the silver manipulation was a great success and played out EXACTLY to plan as predicted yesterday. How would this be possible if the silver market was not in the full control of the parties we discussed in our phone interview? I have honored my commitment not to publicize our discussions.

I hope you took note of how and who added the short sales (I certainly have a copy) and I am certain you will find it is the same concentrated shorts who have been in full control since JPM took over the Bear Stearns position.

It is common knowledge here in London among the metals traders that it is JPM’s intent to flush out and cover as many shorts as possible prior to any discussion in March about position limits. I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC’s allowing by your own definition an illegal concentrated and manipulative position to continue.

The Wikipedia entry on Maguire states:

He went public in April 2010 with assertions of market manipulation by JPMorgan Chase and HSBC of the gold and silver markets. Maguire said “JPMorgan acts as an agent for the Federal Reserve; they act to halt the rise of gold and silver against the US dollar. JPMorgan is insulated from potential losses (on their short positions) by the Fed and/or the U.S. taxpayer.” “No one at JPMorgan is familiar with Andrew Maguire,” said Brian Marchiony, a JPMorgan spokesman. HSBC declined to comment….

Maguire and his wife were injured in London in a hit-and-run accident on March 26, 2010, the day after Maguire’s name came to light during a CFTC hearing on limiting gold and silver positions held by large market participants in order to prevent manipulation. Maguire believes the accident was an attempt on his life. The driver of the other vehicle was apprehended after a police chase, both on the ground and from the air in helicopters, but his name has not been released.

Think about the implications of the biggest commodity market in the world being manipulated. Of banks being even more leveraged in this than other securities. At the moment much of the manipulation may be designed to stop gold from appearing as a viable alternative to fiat currencies. But it also flags the potential manipulation in the event of a move back to the gold standard. A debate that has raged before. The Secret of Oz is a great documentary. Well worth watching for its outline of the debate between a gold standard and one which uses silver coinage as well.

We have commentated repeatedly on fraud in assorted securities market. I expect this book will detail more. If central bank manipulation of interest rates, the very price of money was not bad enough, we have the banks at it as well. Money is so central to everything that if it is too badly distorted the economy can’t fail but to destroy value, rather than create it.

It’s time to face facts, there is something rotten in the State of Denmark. Not to mention the other States of the formerly developed world. Formerly developed world is an awkward term. The “regressing world” seems a better term for describing our reality.

What is happening has nothing to do with classical models of capitalism. We now have a new form in the US, UK and perhaps other “Anglo” style economies. It can be thought of as connected capitalism. Not because the net connects us all, but because wealth accrues on the basis of connections. Not merit, not luck, but that now rather quaint concept …. corruption. Corruption on this scale will undermine the legitimacy of our system. This would be an unmitigated disaster.

Innovation represents the only hope for a beneficial black swan that will enable western governments to meet their promises. That will enable developed country citizens to have anything like the life style they are expecting. It must not be sabotage in a march to neo-luddite or pseudo-socialist alternatives. Neither they nor gangsta capitalism or its related connected capitalism will enable sufficient innovation. It really is a case of go forward fast or experience a collapse of Western civilization and much of the existing world order.

There is an interesting video here on the failure of our societies to continue to get big things done. It makes an unstated but nevertheless devastating attack on the precautionary principle. It also touches on the loss of the BS detector that Westerners used to have. We need to turn our culture around, fast.

Graphic courtesy of The Market Oracle

Vested interests co-opt Australia

Australian financial vested interests move to gorge themselves on taxpayer bailouts once the credit expansion contracts. They make the money we take the risks. They get the bonuses we get the bills. Elect idiots and they will make us pay. On covered bonds we previously stated:

Covered bonds are the canary in the coal mine for Australia. If a bank issuing covered bonds became insolvent the holders of the covered bonds will receive money from the sale of assets covered by the bonds before depositors get their money.  Currently the government insures most depositors. Basically covered bonds help stop investors taking a loss and increases the chance the taxpayer will pick up the tab.

In Australia there are still strong institutions working for the public good:

The RBA Prudential Regulation Authority have warned that covered bonds could threaten both depositors and existing debt investors. Source: The Australian

But the financial vested interests are making their move:

Borrowers may face higher interest rates unless Australia’s prohibition on covered bonds is lifted, allowing banks to compete more easily for funding when a global debt refinancing wave hits in 2012, analysts say. Source: The Sydney Morning Herald


The ABA (Australian Bankers Association) supports the development of a covered bond market in Australia and supports more reforms to boost securitisation markets. Source: NineMSN

The RBA is enormously influential in Australia. Normally one would not bet against it. But the lure of lucre and the appeal of jobs in investment banks will seduce many. It will be interesting to see what happens. The financial sector has not captured government in Australia to anything like the extent it has in the USA.

Well at least as far as the Australian Labor-Green government is concerned the question is answered:

Allow Australian banks, credit unions and building societies to issue covered bonds

The Government will amend the Banking Act 1959 to allow Australian banks, credit unions and building societies to issue covered bonds, to secure the long-term safety and sustainability of our financial system so it can continue to provide reasonably priced credit to Australian households and small businesses. Source: Treasury

And to make sure that when it does blow up the taxpayer is liable to the maximum possible extent:

Confirm the Financial Claims Scheme as a permanent feature of our financial system. Source: Treasury


The Gillard Government will invest a further $4 billion in high-quality, AAA-rated RMBS. Source: Treasury

The Gillard Government, not the Government! – That’s how it appears on the Treasury website. It looks like the labor spin doctors have well and truly penetrated the Treasury, as if we were in any doubt. Either that or it’s a Freudian slip on the part of some Treasury official. The decision is manifestly against the best interests of the nation. Even the Treasury econocrats can’t miss that. But he who pays the piper calls the tune

This takes government exposure to non-bank players since the onset of the global financial crisis up to $20 billion. Hat tip Business Spectator. $20 billion may not seem like much, but there are only around 20 million Australians. It’s around $1,000 for every Australian or nearly $2,000 for every working Australian. That’s equal to about two weeks of total average Australian earnings. Way to go government. We will thank you for it when our property bubble eventually pops.

If that’s not enough exposure for you, there is another $150 billion in large deposits and wholesale guarantees as well. That’s around $7,500 per Australian or $15,000 per working Australian. Approximately 15 weeks of total average Australian earnings.

Apparently this represents 6.6% the value of the scheme. I’m not even going to try and calculate what that adds up to. But it’s a lot of risk to have taken on board since the financial crisis. Particularly as most people do not even realize they are exposed to it.

If your exposure through your government is not enough, they have changed the rules to increase your exposure through your superannuation fund:

Financial institutions have expressed interest in using this bullet structure to raise funds. A recent Commonwealth Bank issuance included a $210 million bullet tranche. The success of that deal further demonstrates the viability of the bullet RMBS concept, with more bullet issuances expected over the coming months.

Bullet issuances can be structured to be eligible for inclusion in certain bond market indices, such as the UBS Composite Bond Index. Many institutional investors, who invest on behalf of Australian superannuation funds, are required to replicate or invest in the securities contained in these indices. This additional structural demand and diversification of investors has the potential to make RMBS more reliable and cost effective. Source: Treasury

Are we really gong to live a comfortable retirement selling houses to each other? How’s that working out in America? At least it is possible to create a reasonable sounding argument for selling our houses to the Chinese. Sure it priced us out of decent property, but at least it would be foreigners left making the losses when prices eventually collapsed.

If someone has to be hurt, I’d rather it was not my fellow citizens. But if citizens must suffer, it should be those responsible, and those who knowingly took the risk. Although it could be argued that Australians took the risk of electing the Labor government. It’s their incompetence that will cost us dear. So many voters are not blame free. But as with the US, we are effectively selling our unborn children into debt bondage. It’s either that or trashing our reputation for paying what we owe.

Also the Treasury has not thought through the web address when posting the extracts, unless they never intend to issue another banking report:

Bright boys in Treasury, our national finances are in good hands. Sigh. For when the extracts disappear the full report is available from here. Note the usual Orwellian name “Competitive and Sustainable Banking System”.  That’s as opposed to “How to Shaft the Taxpayer when all our Dodgy Loans Come Home to Roost”. As they inevitably will when our credit induced expansion reverses itself.

Poor old Glenn Stevens, a good man in a tough spot. He may have to follow the Chinese example and raise reserves. That will be politically popular. I can just imagine the vested interests taking that quietly. And we now know how powerful they are. His successor, who knows? He might be cognitively captured. I’d say the same about Swan, but I am not sure he has much by way of cognition to be captured.

Not that the Opposition are looking much better. Initial media reporting suggests Hockey has not grasped the problem with covered bonds. As for Malcolm Turnbull, the former Chair and Managing Director of Goldman Sachs Australia, he will look out for us. People never have a tendency to believe in the merits of whatever they do.

I’m optimistic on Abbott, his opposition to carbon trading cost the financiers dearly. He saw the truth then, he may do so again.  As for the “independents”, who knows? There is always a chance they can be made to see sense, particularly as the Reserve Bank is probably still against allowing banks to issue covered bonds.

If ever there was a tea party moment for all Australians, this is it. The rebellion against Turnbull’s ETS shows that the grass roots of a political party can get active and make a difference. But this needs to extend beyond that into the midst of those not normally involved in politics. I don’t think things are obviously bad enough in Australia to energize the masses of decent law abiding citizens. Those focused on making a living and looking after their family, friends and neighbors.

We will have our tea party moment, just as Ireland will have its Guinness one. That’s if the Irish have not had one, or two or three or…. already.  Imagine fighting so hard for for so many centuries for independence from England, only to give it up to the EU a couple of generations later. Is that what their forebears died for? Remember it’s better to laugh rather than cry.