Daily Archives: September 19, 2012

QE3 – Pay Attention If You Are in the Real Estate Market

By Catherine Austin Fitts
September 17, 2012

I used to have a deputy who said that the FHA mortgage insurance funds were where mortgages went to die. That was, however, before the creation of MERS, derivatives and the explosion of mortgage fraud during the 1990s which in combination with the “strong dollar policy” engineered what I have referred to as a financial coup d’etat.

The challenge for Ben Bernanke and the Fed governors since the 2008 bailouts has been how to deal with the backlog of fraud – not just fraudulent mortgages and fraudulent mortgage securities but the derivatives piled on top and the politics of who owns them, such as sovereign nations with nuclear arsenals, and how they feel about taking massive losses on AAA paper purchased in good faith.

On one hand, you could let them all default. The problem is the criminal liabilities would drive the global and national leadership into factionalism that could turn violent, not to mention what such defaults would do to liquidity in the financial system. Then there is the fact that a great deal of the fraudulent paper has been purchased by pension funds. So the mark down would hit the retirement savings of the people who have now also lost their homes or equity in their homes. The politics of this in an election year are terrifying for the Administration to contemplate.

Various court squabbles over the MERS system for registering mortgages are also nipping at the Fed and Treasury heels. It is hard to win a presidential election in 3100 counties when multiple federal agencies are in the local courts trying to foreclose on half the county while supporting arguments that a national registration system is free to violate local property laws with impunity.

Why should the sheriff respect your rights if you take the position that the county has no rights and local property laws are meaningless? In fact, the Sheriff does not have sufficient staff time to process foreclosures and protect the local citizenry from the growing crime that results from hard times. The Sheriff is also running for election and the people who vote for him or her comprise a much larger group than the handful of local professionals on the big banks payroll, including those processing foreclosures for FHA, VA, Farmers Home and Fannie and Freddie.

Read on.

Financial Services Authority ‘Warned Barclays Over Diamond’ In 2010

It has emerged that the City regulator warned Barclays two years ago that its approval of Bob Diamond’s appointment as chief executive was dependent on the outcome of the Libor-fixing inquiry.

The detail was revealed in a file note made by the Financial Services Authority following a meeting in 2010 between its chief executive Hector Sants and the bank’s then-chairman Marcus Agius.

The FSA document was released by the Treasury Select Committee of MPs, which is heading an investigation into the Libor scandal.

While discussing the approval of Mr Diamond, the note said that Mr Sants “stressed that this is an ongoing investigation and the FSA’s position (the endorsement of Mr Diamond’s appointment) could change so the board should be aware.”

The note suggested that Marcus Agius would alert Mr Diamond to that effect.

In his evidence to the Committee on July 4 2012 after his resignation over the Libor scandal, Mr Diamond told MPs he had only learned of the extent of the Libor investigation the previous month.

Read on.

Judge’s wife ‘had affairs with two Citigroup bankers who did business with school board where she was a member’


  • Issue came to light following Grand Jury investigation into corruption
  • In interviews one of the Citigroup bankers broke down in tears
  • Bankers were bidding for contracts worth millions in public bonds
  • Jennifer Gottlieb will not be indicted because there is no law forbidding voting on public matters that involve intimate friends

A judge’s wife compromised her position on a county school board by having affairs with two high-ranking bankers who were bidding for lucrative contracts, it was revealed today.

Jennifer Gottlieb resigned last year from her role as a Broward County School Board member after a pair of Citigroup bankers who did business with the school admitted to investigators that they had affairs with her.

According to Local 10, investigative reports reveal that Rick Patterson, of Tampa, and Michael Baldwin, of Orlando, financed millions in public bonds to build schools.

Read more: http://www.dailymail.co.uk/news/article-2205534/Judge-s-wife-affairs-Citigroup-bankers-did-business-school-board-member.html#ixzz26wTvLxpx
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Tax evasion: UBS headquarters raided in Paris

Translated in English:

The French headquarters of Swiss bank UBS in Paris was raided Wednesday, September 19 in the investigation of money laundering tax fraud, the bank is suspected of having set up a double accounting and facilitated the opening of undeclared accounts in Switzerland .

A dozen investigators from the national judicial customs came in the morning in the premises of the bank with the judge Daïeff Guillaume Paris, in charge of the investigation, according to a source familiar with the matter.

Two people were indicted in this case, a former leader of the UBS office in Lille and a framework UBS employee in Strasbourg. Several searches had been conducted in the premises of the bank in Strasbourg, Lyon and Bordeaux since the end of June.

Bain Capital Must Justify Sealed Shareholder Suit

(CN) – A federal judge may unseal an antitrust complaint against Bain Capital for reporters who want to cover the allegations against Mitt Romney’s former company.
Shareholders accused 11 firms, including Bain Capital Partners, of forming bidding “teams,” to rig the market for leveraged buyout deals. The teams allegedly limited the number of bidders and depressed prices at target companies. Shareholders said they received lower average premiums in bids involving joint buyouts than single-purchaser deals.
Romney co-founded Bain Capital in 1984 and ran the company until he campaigned for governor of Massachusetts in 2002 – a position he won the following year and held until 2007 when he sought the Republican presidential nomination. Though Romney lost the 2008 nomination to Sen. John McCain, he became the official 2012 nominee in August.
Two months earlier, the plaintiffs filed a fifth amended complaint, incorporating new information collected in discovery. It was filed under seal pursuant to a 2009 protective order.
After The New York Times intervened and asked the court to lift the protective order, U.S. District Judge Edward Harrington found that the public right of access outweighed Bain’s asserted business interests.
“Defendants assert that allowing this information to be disclosed would hinder their ability to identify and attract fund investors, execute leverage buyouts, and run portfolio companies,” he wrote. “They further assert that the information, if disclosed, could be used by competitors ‘to copy critical aspects of the defendants’ business, which defendants have spent significant time and money developing and refining.'”
But Bain and the other defendants have failed to “explain how the particular information that they have redacted causes specific and severe harm,” Harrington added. “It is further unclear to the court whether the redactions are narrowly tailored to addressing that harm. The defendants at this time have only supported their position with general assertions of harm, which are insufficient to overcome a presumption of public access.”
Bain will get another chance, however, to propose a redacted version and clearly describe how unrestricted public access to the complaint will harm it.

Source: Courthouse News

Here is court document.

Consumer Financial Protection Bureau Beefs Up Mortgage Disclosure

Courthouse News Service.

WASHINGTON (CN) – The infant Bureau of Consumer Financial Protection rolled out a new proposal that will require mortgage lenders to create more borrower-friendly information policies.
     Perhaps the most important provision would require lenders to respond to borrower claims that incorrect information has been included in their loan or loan modification applications within 45 days.
     Lenders would have a similar amount of time to respond to borrower requests for information or to explain why the lender declines to provide the information requested.
     The changes, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, are meant to control practices that the bureau said became pervasive in the loan servicing industry during the housing bubble of the last decade. 
     Delinquent borrowers were particularly harmed by servicers that lost their loan modification documents, refused to tell borrowers the status or their modification requests or misled them about their status, the bureau says.

Read on.

Tax Moochers: Banks

Great article by Propublica:

Thanks to a leaked video, we know that Mitt Romney divides the country into those who pay taxes and those who don’t, the makers and the moochers.

There is one perhaps surprising group you can put in the latter category: the nation’s banks. Sure, banks pay taxes, but they pay a lot less thanks to a giant and underappreciated distortion in our nation’s tax code. Moreover, this tax code distortion makes the financial system and the economy more fragile, prone to bankruptcies and runs. Banks profit, and the economy teeters. Great bargain, huh?

It’s the tax code’s favoring of debt over equity.

For businesses, debt interest payments are tax deductible; equity payments, like when a company pays out a dividend, are not. At the margin, this encourages entities to take on more debt than they otherwise would, as Steven M. Davidoff noted in a Deal Professor column earlier this year. More debt not only makes companies more vulnerable to bankruptcy but also makes investors more susceptible to panics, when they withdraw their capital en masse. More equity would make the world more stable.

“The worst thing the tax code can do,” says Victor Fleischer, a tax specialist at the University of Colorado, “is to make it harder to use a sensible capital structure.” Mr. Fleisher, a contributor to The New York Times DealBook, testified in front of Congress last year about this problem.

Read more from Propublica.

Judge Rules No Class Action in Option One Suit filed By African-American Consumers

A federal judge has thwarted efforts by African-American consumers to proceed with a class-action lawsuit against Option One Mortgage in which the plaintiffs alleged that they were charged higher fees on home loans than white borrowers were.

The decision by Rya Zobel, a U.S. District Court judge in Boston, reverses a decision from March 2011 in which she ruled that the borrowers could sue as a class. The reversal was based on a U.S. Supreme Court decision from June 2011 that decertified a national class of female workers who had sued Wal-Mart Stores (WMT) claiming gender bias, Reuters reported Tuesday. The Supreme Court ruled that since Wal-Mart gave local managers control over promotions and pay then there were no common grounds for making those decisions.

Zobel found that the plaintiffs in the Option One case faced “the same commonality problem as did the Wal-Mart class,” she wrote. “Because plaintiffs do not claim that all of Option One’s brokers exercised their discretion in the same way, they do not raise a single question common to all plaintiffs in the class.”

Read on.

Wells Fargo, Morgan Stanley Cited for $73B in Faulty Mortgages

A law firm that won an $8.5 billion settlement from Bank of America Corp. tied to faulty mortgage bonds said Wells Fargo & Co. and Morgan Stanley failed to service $73 billion of similar securities, creating a default.

Gibbs & Bruns LLP cited at least $15 billion of Wells Fargo’s residential mortgage-backed securities and $5 billion from Morgan Stanley where holders have 25 percent or 50 percent or more of the voting rights, according to a statement Wednesday from the Houston law firm. The dispute also covers $23 billion of Morgan Stanley-issued RMBS and $30 billion of Wells Fargo’s RMBS where holders “have significant voting rights, but less than 25 percent or 50 percent,” the firm said.

Read on.

Spring Hill man pleads guilty to fabricating thousands of foreclosure inspection reports

TAMPA — As the housing market imploded, Dean Counce’s business boomed.

Counce’s Brooksville company contracted with lenders to regularly inspect properties in foreclosure throughout the state. By 2009, Counce was sending as many as 100,000 inspection reports each month to Bank of America, receiving about $6.50 for each. Bank of America then billed the federal entities that owned or insured the mortgages.

At one point, Counce was making as much as $1 million per month.

The problem: Half of those reports were fabricated. Now, investigators say, Counce owes taxpayers more than $12 million and faces up to 20 years in prison.

On Friday, the 42-year-old Spring Hill resident pleaded guilty in federal court to one count of conspiracy to commit wire fraud. His sentencing date has yet to be set.

Read on.