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Explosive Charge: Morgan Stanley Peddled Security Its Own Employee Called ‘Nuclear Holocaust’

Note: The Trade is not subject to our Creative Commons license.

On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members' suggestions: "Subprime Meltdown," "Hitman," "Nuclear Holocaust," "Mike Tyson's Punchout," and the simple-yet-direct: "Shitbag."

Ha ha. Those hilarious investment bankers.

Then they gave it its real name and sold it to a Chinese bank.

We are never going to have a full understanding of what bad behavior bankers conducted in the years leading up to the financial crisis. The Justice Department and the Securities and Exchange Commission have failed to hold big wrongdoers to account.

We are left with what scraps we can get from those private lawsuits lucky enough to get over the high hurdles for document discovery. A case brought in the New York State Supreme Court in Manhattan against Morgan Stanley by a Taiwanese bank, which bought a piece of the same deal the Chinese bank did, has cleared that bar.

The results are explosive. Hundreds of pages of internal Morgan Stanley documents, released publicly last week, shed much new light on what bankers knew at the height of the housing bubble and what they did with that secret knowledge.

The lawsuit concerns a $500 million collateralized debt obligation called Stack 2006-1, created in the first half of 2006. Collections of mortgage-backed securities, C.D.O.'s were at the heart of the financial crisis.

But the documents suggest a pattern of behavior larger than this one deal: People across the bank understood that the American housing market was in trouble. They took advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers.

Morgan Stanley doesn't see the narrative as the plaintiffs do. The firm is fighting the lawsuit, contending that the buyers were sophisticated clients and could have known what was going on in the subprime market. The C.D.O. documents disclosed, albeit obliquely, that Morgan Stanley might bet against the securities, a strategy known as shorting. The firm did not pick the assets going into the deal (though it was able to veto any assets). And any shorting of the deal was part of a larger array of trades, both long and short. Indeed, Morgan Stanley owned a big piece of Stack, in addition to its short bet.

Regarding the profane naming contest, Morgan Stanley said in a statement: "While the e-mail in question contains inappropriate language and reflects a poor attempt at humor, the Morgan Stanley employee who wrote it was responsible for documenting transactions. It was not his job or within his skillset to assess the state of the market or the credit quality of the transaction being discussed."

Philip Blumberg, the Morgan Stanley lawyer who composed most of the names, meet the underside of a bus, courtesy of your employer.

Another Morgan Stanley employee sent an email that same morning, suggesting that the deal be called "Hitman." This might have been an attempt to manage up, because "Hitman" was the nickname of his boss, Jonathan Horowitz, who helped head the part of the group that oversaw mortgage-backed C.D.O.'s. Mr. Horowitz replied, "I like it."

Both Mr. Blumberg and Mr. Horowitz, now at JPMorgan, declined to comment through spokespeople at their banks.

In February 2006, Morgan Stanley began putting together the Stack C.D.O. According to an internal presentation, Stack "represents attractive business for Morgan Stanley."

Why? In addition to fees, another bullet point listed: "Ability to short up to $325MM of credits into the C.D.O." In other words, Morgan Stanley could — and did — sell assets to the Stack C.D.O., intending to profit if the securities backed by those assets declined. The bank put on a $170 million bet against Stack, even as it was selling it.

In the end, of the $500 million of assets backing the deal, $415 million ended up worthless.

"While investors and taxpayers all over the world continue to choke on Wall Street's toxic subprime products, to this day not a single major Wall Street executive has been held accountable for misconduct relating to those products," said Jason C. Davis, a lawyer at Robbins Geller who is representing the plaintiff in the lawsuit. "They are generally untouchable, but we are pleased that the court in this case is ordering Morgan Stanley to turn over damning evidence, so that the jury will get to see what Morgan Stanley really knew about the troubled nature of its supposedly 'higher-than-AAA' quality product."

Why might Morgan Stanley have bet against the deal? Did its traders develop a brilliant thesis by assessing the fundamentals of the housing market through careful analysis of the public data? The documents suggest something more troubling: Bankers found out that the housing market was diseased from their colleagues down the hall.

Bankers were getting information from fellow employees conducting and receiving private assessments of the quality of the mortgages that the bank would purchase to back securities. These reports weren't available to the public. It would be crucial information for trading in securities backed by those kinds of mortgages.

In one email from Oct. 21, 2005, a Morgan Stanley employee warns a banker that the mortgages Morgan Stanley is buying from loan originators are troubled. "The real issue is that the loan requests do not make sense," he writes. As an example, he cites "a borrower that makes $12K a month as an operation manger (sic) of an unknown company — after research on my part I reveal it is a tarot reading house. Compound these issues with the fact that we are seeing what I would call a lot of this type of profile."

In another email from March 17, 2006, another Morgan Stanley employee writes about a "deteriorating appraisal quality that is very flagrant."

Two of the employees who received those emails joined an internal hedge fund, headed by Howard Hubler, that was formed only the following month, in April 2006. As recounted in Michael Lewis's "The Big Short," Mr. Hubler infamously bet against the subprime market on Morgan Stanley's behalf, a fact that Morgan Stanley's chief financial officer conceded in late 2007. Mr. Hubler's group was supposed to be separate from the rest of Morgan Stanley, but the two bankers continued to receive similar information about the underlying market, according to a person briefed on the matter.

At no point did they receive material, nonpublic information, a Morgan Stanley spokesman says.

I struggle to see how the private assessments that the subprime market was imploding were immaterial.

Another of Morgan Stanley's main defenses is that it couldn't have thought the investment it sold to the Taiwanese was terrible because it, too, lost money on securities backed by subprime mortgages. As the Morgan Stanley spokesman put it, "This deal must be viewed in the context of a significant write-down for Morgan Stanley in 2007, when the firm recorded huge losses in its public securities filings related to other subprime C.D.O. positions."

This is a common refrain offered by big banks like Citigroup, Merrill Lynch and Bear Stearns to absolve them of any responsibility.

But does losing money wipe away sin?

Yes, Mr. Hubler made his bets in what turned out to be a deeply disastrous way. As part of a complex array of trades, he bet against the middle slices of subprime mortgage C.D.O.'s. He bought the supposedly safe top parts. The income from the top slices helped offset the cost of betting against the middle slices. But when the market collapsed, the top slices — called "super senior" because they were supposedly safer than Triple A — didn't hold their value, losing billions for Mr. Hubler and Morgan Stanley. Mr. Hubler did not respond to requests for comment.

So Morgan Stanley lost a great deal of money.

But let's review what the documents suggest is the big picture.

In the fall of 2005, bank employees share nonpublic assessments of how the subprime market is a house of tarot cards.

In February 2006, the bank begins creating Stack in part so that it can bet against it.

In April 2006, the bank creates its own internal hedge fund, led by Mr. Hubler, who shorts the subprime market. Among the traders in this internal shop are people who helped create Stack and other deals like it, and at least two employees who had access to the private due diligence reports.

Mr. Hubler's group had no investment position in Stack, according to the person briefed on the matter, but it sure looks as if the bank saw what was coming and tried to position itself for a subprime market collapse.

Finally, by early 2007, the bank appears to realize that the subprime market is cratering even worse that it expects. Even the supposedly safe pieces of C.D.O.'s that it owns, including its piece of Stack, are facing losses. So Morgan Stanley bankers set to scouring the world to peddle as a safe and sound investment what its own employees are internally deriding.

Morgan Stanley declined to comment on whether it made money on its Stack investments over all. But it looks to have turned out well for the bank. In Stack, it managed to fob off a nuclear bomb to the Taiwanese bank.

Unfortunately for Morgan Stanley, it had so many other pieces of C.D.O.'s, so many nuclear warheads, that it couldn't find nearly enough suckers around the world to buy them all.

And so when the real collapse came, Morgan Stanley was left with billions of dollars worth of shitbags.

That hardly seems exculpatory.

Bartlett Naylor

Jan. 23, 2013, 2:20 p.m.

Once again, Jesse Eisinger’s expert research and articulate writing addsd important depth to the issue of Wall Street corruptions.

It will be hard to prosecute these guys in spite of their obvious provable lack of morals and ethics because anybody with half a brain knew by 2005 that real estate was in super bubble territory.  The only way to win against them is to prove that they discounted the possibility of the contents of their CDO’s were immune from the coming crash because they lied about the quality of the mortgages they used to mint the investments, and even then they will defer guilt to the greedy monolines that sold AAA ratings for profit. 

I see it this way, as a college student going for my finance degree in the early/mid 90’s even I could see back then that median household income could not support median house prices, a fact that eventually had to lead to a downturn in real estate, thus safe and profitable RE investment opportunities were rare.  The banksters were selling snake oil and betting the buyers would be made sick by it, but it was buyer greed that allowed them to overlook the obvious, add the fact that the government was repealing safeguards like the firewalls between banking and Wall Street investment houses which we already knew was a roadmap to disaster, and gutted regulatory authority and budgets, what is a jury to think, that either everybody involved was stupid or so greedy they all got what they deserved.

Still justice will not be done till some of them at the top are in prison and stripped of the ill-gotten wealth, and the taxpayers are made whole, and not with the toilet paper repayment of toxic assets they mark to make believe and stuff the Fed with so the fed can make a book entry at Treasury which appears to show firms like AIG repaid the bailouts.  Because then the Fed increases the money supply and we all pay yet again with an inflation tax. 

We are slaves and we will never know freedom again as long as corporations are “people.”

I am not really sure what this article achieves. Many of the CDOs, CLO and synthetic structures of that vintage blew up and it has been well documented. Everyone on Wall Street was looking for a way out. Heck, they even made a movie out of it.
Perhaps it’s time to stop fighting the last war. There is plenty of asinine and crappy products being peddled right now.

Please don’t say “failed” (“to hold big wrongdoers to account”) when (whether or not you mean) the reality is “refuses”:

The only politically-significant citizens subject to prosecution or extralegal reprehension by the Obama Administration are Occupy Wall Street protestors and whistleblowers.

Your honor, my clients meant Nuclear Holocaust in the nicest possible way.

All you people don’t get it!! - follow the path of the fake, monopoly money that funded the housing market bubble and it leads back to the illicit and unconstitutional Federal Reserve - if we had “substance” in our money system, then crook banksters like JP Morgan (Rothschild) couldn’t mislead anyone!! - we have a plutocracy that caters to the rich -if you want to clean up the mess in Washington and the deceit, corruption and fraud on Wall Street, start at the top where all the dishonest money originates, then follow it to the Wall Street Investment Banks, then to our politicians and then to the major media - they are all in bed with each other, smiling and laughing at us - get this - MONEY=POWER=CONTROL!! - that in a nutshell is what is happening in this country, while “We the People” suffer the consequences!!

Does anyone think that banks and investment houses will ever be held accountable? look at HSBC who laundered drug money and worked with terrorists and their hosts and got what? A fine equal to about 4 months profit! The government reps even said that holding banks accountable would upset the world economy! Remember"too big to fail”? Until we have a uniform justice system there will be NO JUSTICE!

Dina J Padilla

Jan. 23, 2013, 6:07 p.m.

My daughter worked in the realty business and knew in 2004 that home mortgage owners would be stuck later on with zero interest and a hefty balloon payment after 2-5 years and REMAX took over competent realty businesses to make their won reality come true. Nationwide stated that homeowners did not have to prove income, a first time for any homeowner but one of many, many transactions that took place while this was all going. Most mortgage companies knew this full well because the home owners were never asked for monthly income statements even if offered, the realty companies would not take them for legal transactions during the course of applying for a mortgage loan and Nationwide among others said it was all okay to do it that way. Siphoning off years of inflated home interest of home owners the realty companies and banks,  all knowing full well that theses homeowners would lose their homes down the road.

And I might add - all of this fiscal cliff BS and debt ceiling debate is nothing buy smoke and mirrors - no one wants to tackle the real reason we are in a financial mess and why banks continue to steal out of the back pockets of Americans - it all started in 1913 when the FED came into existence - why the American people have allowed this institution to operate and control our money supply is beyond belief - Keynesian Economics has failed and now we are dealing with the aftermath - if we don’t do something soon about the dishonest money that the FED continues to flood the markets with (OE3), this country is going the way of Rome!!

Catherine Tripp

Jan. 23, 2013, 6:35 p.m.

It often takes years for the results of insider trading to come to light, and not all outcomes are profitable.  The point is opacity for all investors.  So far, the architects of disaster have evaded capture and conviction through their powerful lobbyists and “too big to fail” employers.  However, if you are a successful businesswoman who does not hide behind a chain mail corporate veil, say like Martha Stewart, the wheels of Justice achieve nearly light speed, and the plutocrats cackle in their mansions.

nathaniel bostwick

Jan. 23, 2013, 6:44 p.m.

Jaime Dimon still has a good job..right?

theresa brown

Jan. 23, 2013, 6:58 p.m.

In 2007 my Morgan Stanely account manager tried to get me to invest my money in these accounts.  I told him that this an oft repeated cycle - boom/bust - in housing and I did not want to loose my money nor did I want to be part of the ugliness if people lost theri homes.  I pulled my account out and barely lost any money at all.

We are never going to have a full understanding of what bad behavior bankers conducted in the years leading up to the financial crisis. The Justice Department and the Securities and Exchange Commission have failed to hold big wrongdoers to account.

They’re afraid to go too high…

http://archives.hud.gov/remarks/martinez/speeches/presremarks.cfm

It still amazes me that underwriters used to value their reputations—and it was a traditional part of evaluating a security to consider the underwriter /  packager.

Trashed the economy, trashed themselves.

Sociopaths who care only about money and their own personal income.

ribeekah grant

Jan. 23, 2013, 8:19 p.m.

When shame leaves a people and a society, this is what happens.  There is no accountability. The society is slowly spiraling into chaos which makes it dangerous.  There is a break down of law and order where the members of that society begin to think that they can do as they please and avoid the consequences for violating the rights of others.

This is more or less old news, although the specifics may be new.Matt Tiabbi exposed this story brilliantly and bravely in “Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History”. He was derided by the mainstream media, but he has since been proven right.

This article seems to contain fundamental misunderstandings of how the world works, what investment banks actually do, and the meaning of “material nonpublic information”.

For a more realistic view, see John Carney’s commentary on this story.

http://www.cnbc.com/id/100402056

Never fear. Obama has a solution. He will simply make YOU the U.S. taxpayer cover all of Morgan Stanley’s negligence via his secret treaties that Democrat Senate Majority Leader Harry Reid won’t allow to be discussed openly in the Senate.

I meant the alleged negligence of Morgan Stanley or any other American business if it occurs with a foreign entity (even profits that might have been made if US law didn’t contradict the terms of the treaty) in my opinion as per my understanding.

How about some names and pictures of these scumbags maybe their address.

Alfreda Weiss

Jan. 24, 2013, 5:27 a.m.

Not too smart to cheat China and Taiwan when they almost own the US.  Has Wall Street done anything positive in the US and if so, when?

JP: You don’t need leverage or fiat money (I’m not saying neither was involved, although I’ve always been under the im pression that the Fed was NOT fiat money but borrowed) when you allow wealth to become so concentrated that it can easily manipulate markets simply by entering and leaving them, and in any case immune to law.

Also, the Oil Bubble of 2006-8 may still be the greatest of all recent swindles and economic attacks on the world and the US, which its being dropped down the memory hole would certainly seem to indicate:

http://jdkabc.blogspot.com/2011/08/imtob.html

There does seem to have been some sort of gold scam recently based in the UK (as was the actual “trading” on which the Oil Bubble was based) which might even top the Oil Bubble’s take (I’m seeing figures over $10T for the former) if not destructiveness to the world economy—although if someone’s stealing, however they do it, someone else must be being stolen from.

James M. Fitzsimmons

Jan. 24, 2013, 10:50 a.m.

The State case should be followed up by the Feds. It seems to me that the Federal RICO statute’s criminal and civil provisions including forfeiture provisions are applicable here (T18 USC 1962 et. al.). Morgan Stanley is a “legitimate” enterprise as defined in the statute and the Morgan Stanley enterprise was utilized to commit illegal acts (mail fraud, wire fraud, interstate racketeering etc.) that are predicate offenses under the RICO statutes. This financial scandal reflects a pervasive atmosphere of corruption that encouraged otherwise average employees to participate in dishonesty and trickery, the characteristic tactic of con artist felons. A thorough Federal investigation might recoup some losses from the likes of Morgan Stanley though fines and civil forfeitures and may also serve as a deterrent to future participation in such financial chicanery. Political ideology need not be a factor here. Collect the evidence and make cases against the bad guys. What is needed is an independent team of prosecutors, investigators and a Federal Grand Jury.

Markus wrote: It will be hard to prosecute these guys in spite of their obvious provable lack of morals and ethics because anybody with half a brain knew by 2005 that real estate was in super bubble territory

I guess that Alan Greenspan doesn’t fit the “anybody with half a brain” description…...

The Occupy Wall Street movement had a just-cause. They lacked an understanding of the complexity of their undertaking and an articulate, designated, spokesperson.
How these architects of our country’s financial demise have not been prosecuted and remain gainfully employed is a stain upon our (non)Free Enterprise system that will forever be viewed with founded skepticism and resentment.

I have to agree with John Kennard, above.  The administrations have not failed to do anything.  They’ve blocked prosecution and refused to prosecute, but have yet to fail, since that implies trying.  I hate to be the guy who quotes Yoda, but, well, “there is no try.”

They’re increasingly looking like caged animals, though, which I think is a good sign.  Now that the Occupy people have been buying (and destroying) distressed mortgages and people (and companies) are defecting for cash over credit/loans, it could be that the big banks are nearing the end of their dominance.

Jim, I’d say Markus is pretty close.  I knew there was something wrong as soon as I heard someone say, “real estate prices never drop.”  The shift from commodity to investment is only of the best signs of a bubble I’ve ever seen.

Then, anybody in finance or politics would have known about then-DA Eliot Spitzer and his subprime investigation blocked by the OCC, for example:

washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html

(Note the timing of the article, versus when Governor Spitzer was embroiled in the prostitution scandal that forced him to resign.)

And a few months after that op-ed, even the non-experts were talking about this:

thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money

Obama has a choice. He can address the corruption within his administration, and the US financial system. And turn from austerity to creating jobs — good paying jobs. If he does, someday he might rank with Roosevelt, Lincoln and the greats of this country.

Or, continue to financial appoint insiders and lobbyists to oversee the public interest—and turning a blind eye to their wrongdoing.  On his current path, there is little doubt history will place him alongside Grant, Harding, Nixon and Bush. 

Obama, what is YOUR answer?  It is well past time for an independent prosecutor to investigate financial fraud, public corruption and favoritism within the US government.

How about these Ayn Randian/Neoliberals who believe that institutional and legal regulations smother the “job creators” creativity, that we all should count on the self interest of the ubermenschen to self regulate out of a sense of self preservation?

The US Market used to be considered world class, systemic fraud couldn’t happen here because it was highly regulated.

How long did it take them to hollow out the institutions of our society depended on, to destroy our economy and set off a global chain of evens which are causing the rise of fascism? 30-35 years? Keynes wrote a paper called the “Economic Consequences of the Peace” which was about the austerity program enforced on Germany after WW1 saddling them with all the blame and cost. 
Louis Brandeiss wrote “The Curse of Bigness” which described the danger of monopolies and trusts (Too Big to Fail) and how they kill competition and smother entrepreneurs and the real economy that does grow jobs. 
Much of what they wrote sounds like contemporary writers today but they have no power so are ignored.
Most of us might think this is the first time this has happened but it’s not even close. London created a worldwide property bubble in the mid 1800’s. They killed off the indians in Argentina for land, then went after the Argentinian Gov’t to recapitalize their banks when the bubble popped.
Same crap, Different century. 
These Banker Monsters know what they are doing, they belong to the same ruling class and banking dynasties. After a few generations those who remember die off and a new generation of sheep are ignorant enough to walk on their own into the abattoir.

Mansfield: “But self-policing of markets, corporations, legislatures, departments, and professions works so well!” (“Goak here.”)

Keynes also wrote _ A Short History of Financial Euphoria _ treating the leveraged bubbles that have been run time and again over the past several centuries (“Reinstate the Bubble Act!” “(Goak again.)”), but he’s far too focused there on those who fall for the things, and not nearly enough on those who run them, who can hardly be unaware of what they’re doing considering the history of such operations, and the “regulators” who benignly oversee them, ditto.

James M. Fitzsimmons

Jan. 25, 2013, 12:15 p.m.

Independent outside auditors reviewed the financial statements of the banks and investment companies in question. Some of the auditors had to know what was happening. Did they disclose that insufficient reserves for potentially worthless sub-prime mortgages and related “derivatives” were set up? Did the auditors make sound estimates of the value of securitized (potentially) worthless assets and compare the estimates to the clients stated valuations? (If Morgan Stanley was betting against its own assets…that was a clue!) If not, why not? Similar questions could be asked of the SEC, Bank Examiners, and probably Congressional oversight committees. Surely, some responsible officials, auditors, examiners, regulators, federal Reserve Bank officers, knew and reported the looming financial collapse. Why did not the critical responsible persons do something? Did all of these well educated and experienced people drop the ball? I do not know if additional regulations are needed or if the regulations in place were simply ignored and intentionally circumvented. I do know that fraudsters by definition ignore/circumvent/intentionally break laws and regulations about theft etc. Fraudsters engage in trickery and deceit. Seems to me that ideologically oriented solutions are certainly worth discussing at cocktail parties and in college seminars but before the statute of limitations runs out, can we at least collect available evidence of criminal conduct, if any, and prosecute the bad guys? Politicians and political ideologues will continue to obfuscate the essential nature of this disgraceful massive scam by arguing over economic theories.

Don’t need a book or an intellectual/a professor to understand the threat that monopolies pose.

Just think of a monopoly as that kid who was the worst bully you can remember from school…except in the school that we call Corporate America, that kid keeps getting bigger while nobody else - to include the teachers - do.  Soon enough that kid becomes so big that the teachers - the authority figures - are afraid of him…and so whenever whim (of greed) strikes him he rampages through the schoolyard - America’s economy - wreaking havoc and destruction wherever he goes.

That’s what America faces in the big banks (and Big Oil, and Big Insurance, and Big Medical, and Big Retail, and Big Telecommunications, and Big [______]). 

For the last 40 years Big [____] has been buying members of Congress and Washington insiders (the latter simply cycle through Administration after Administration as members of “the Executive Branch”) so that they can get ever bigger…ever further beyond the reach of law.

Now they think that they’re too big to discipline…consequently, they’ve become so mean that they’re going after democracy itself using weapons such as Citizens United.  Their intent?  No less than the rape of America herself.  And perhaps they are too big to discipline, for their cumulative purchases of Congressmen and Washington insiders has enabled them to buy 44.4% of the Supreme Court, too.

The Americans - the families - they destroy in their pursuit of wealth and power…in their pursuit of absolute domination…are simply too “little” to be relevant to them.  That is what democracy was supposed to prevent…and that is why they’re going after democracy itself.

Justice Journalist

Jan. 26, 2013, 1:27 p.m.

If you are a veteran or someone with a federally insured loan, you might want to know about a recent lawsuit filed in the US Court of Federal Claims, by a vet who claims that it’s the US government—not Chase and the big banks—that are responsible for foreclosing on millions of VA- and other federally insured home loans.

Search, “4 Justice Radio” on YouTube Video

Search, “Veterans Foreclosures” on Scribd, to read the complaint
summary.

The case number is 13-11.

If you have any questions call me at 608.622.7009

Thanks,
Justice Journalist
Host
http://4justiceradio.com
“Exposing Injustice”

Justice Journalist: “It’s the US government—not Chase and the big banks”: What difference is there now?

I cannot believe the free pass bankers are getting by some commentors.  Bankers used to have a fiduciary oblibation not to destroy the financial system.  We have what appears to be a clear paper trail, showing fraud and conspiracy to commit fraud, insider trading.  This scandal combines the worst elements of the junk bond and S&L frauds and people seem to have no moral compass -the libertarian MBA nonsense about mythical free markets, has replaced commonsense notions of culpability. 
These bankers should be banned from the industry for life, not given a free pass for criminal misconduct.  If car manufacturers got together and deliberately sold faulty vehicles which they knew would kill you, they would be prosecuted, there is know reason to treat financal products differently.  These guys have destroyed millions of people’s lives.  The economy will be operating under capacity for years as the debt is worked off. 
Anyone who says we should just give up on criminal prosecutions is spineless.

Justice Journalist

Jan. 28, 2013, 1:27 p.m.

John Kennard - Don’t know if you’re being redundant, or serious. In practical application, regarding one perspective on your comment, I guess you’re right. The way the banks and government make it APPEAR, there’s no difference between them.

But, the law says different and if “We the People” don’t work to hold the officials accountable to the law, then you’re right, there is no difference.

In practical application, the banks WORK for the government, so if they do something wrong or illegal regarding your government-insured loan, the government is responsible. So the government can’t settle with the banks—they have to settle with the person who was wronged (the homeowner).

You won’t find that tid-bit, on the Internet. Wonder why?

What’s happening is that there are so many “regular” people involved in this that they don’t want you asking any questions, telling the truth about what’s going on, or what happened to you regarding these scam foreclosures and loan modifications.

They don’t want you to see what’s right in front of your face: a conspired land grab that’s being perpetrated by judges, attorneys and federal employees.

In fact, even your friends and neighbors—even people posting comments on the blogs are working to DISCOURAGE people from digging deeper to find out what’s really going on. After all, some of them have invested in the trusts, where the government put many of the loans it insured.

They want you to just get angry, or defeatist rather than, to do whatever YOU can to CORRECT the problem. What can you do that will work? Who knows what defining act, will correct things? So, I guess you just have to do what you can do.  But, NAH!

We want “Occupy” movements and OTHER people, to do something, not “me”.

Yeah—“what’s the difference”—the difference is what you make it.
Are you going to throw up your hands and say, “what’s the use?” or are you going to do what it takes to do what’s right?

As a friend told me once, “Sheep attract wolves.” So, maybe if people are content on being sheep, they should just shut up and get eaten. Yeah, just help the wolf out and stop struggling, make it quick and easy on the wolf. Make it easy on your children, make it easy on your neighbors who are just as scared as you are.

All of you just stop struggling: don’t educate yourselves on what’s happening. Just keep watching what’s happening all around you, until it’s YOUR turn.

“It’s always the right time, to do what’s right.” Dr. Mr. Luther King, Jr.

Oh yeah, if anyone is interested:

1) Here’s the link to the complaint by the US Army Veteran who’s filed suit in the US Court of Federal Claims against the government, for Chase’s attempts to illegally foreclose on the Vet’s property without the Note:

http://www.scribd.com/doc/121743611/VA-Veteran-v-United-States-Government-Veterans-Foreclosures-by-JP-Morgan-Chase

2) Here’s the YouTube Video, that gives a bit more info.
https://www.youtube.com/watch?v=_TMuafYnQiY

Ask yourself: 
***Why are so many judges refusing to require Chase to produce Notes in bankruptcy and other cases involving a homeowner’s property when the law says otherwise?

***Why aren’t federally-insured loans included in the National Mortgage Settlement?

http://nationalmortgagesettlement.com/faq

“Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement.”

Yes, the vet filed the complaint and who knows what will happen? The point is that someone has CLEARLY DOCUMENTED what’s OCCURRED—a template so to speak—of how this illegal foreclosure scam is playing out. Just HOW the scam is taking place and NAMING who is involved.

If noting else, you owe it to yourself or someone you know who has faced or is facing foreclosure with a federally-insure loan, to read it.

The complaint even implicates government agencies of working with Chase—from the Veteran’s Administration, to the Office of Consumer Financial Protection—a government office—of with working for Chase, to steal mortgage payments and finally, Veterans’ homes.

But, if you’re just going to read it and say, “Pity”, maybe not.


Thanks,
—JJ

Catherine Tripp

Jan. 28, 2013, 3:41 p.m.

The foregoing discussion reminds me of a Great story from 2011 about a couple in Florida that successfully foreclosed on Bank of America.  Here is a link to a video from the local news station.  It is a real feel good story:
http://www.youtube.com/watch?v=G3d1qqQJcdM&feature=share&list=PLD67F79C381C962A7

ROFL -At no point did they receive material, nonpublic information, a Morgan Stanley spokesman says.  No, that would be the job of someone like attorney Philip Blumberg.  No the PR person’s job is to make public statements which, if made by an officer of the company, might result in further fines and sanctions.

These people are incorribible liars.

Richard Haydn

Feb. 7, 2013, 9:47 p.m.

“How about these Ayn Randian/Neoliberals who believe that institutional and legal regulations smother the “job creators” creativity, that we all should count on the self interest of the ubermenschen to self regulate out of a sense of self preservation? “

There are many shades of Neolliberalism.  I feel the most important thing overlooked by the “It’s all the greedy corporations fault” crowd is the the government is NOT there to protect you.  It is part of the problem and activly participates.  Elite businessman and Elite politicians are different sides of the same coin.  It is a public-private partnership.  Look up the “Keating 5” politicians from the S&L crisis of the late 80’s.  Same old story. 

So what is the answer?  The best motivator IS the free market.  That means: 1) If you screw up, you take the loss and not the tax payer.  2) End the FED.  It is a PRIVATE banking cartel, no matter what your econ prof told you.  They both create money and lend money.  Why should we pay a group of banks to do what the constitution already mandates the government do?  Employees of the FED are NOT paid by the Federal goverment.  They are paid by the banking cartel, unless they are currently taking a stint in the Treasury or other government agency… only to return to the bank at a later date.  We do not have a free market, we have a market largely controlled (through the artificial setting of interest rates) by the FED.  EVERY bubble in history has been fueled by cheap money, low interest rates.  3) LESS Governement: Hoodini, in a quest to contact his late mother, offered anyone a large sum of money if they could have the “spirits” untie them after Hoodini did the tying and placed them in a closet.  No one collected.  He tied them with a short piece of fishing string.  Anyone can get loose from a hundred feet of rope. Regulation has to be simple and tight!  Don’t fall for “We just need better government” - it will never happen.  Especially since both parties get uber amount of campaign money from the financial sector.

Richard Haydn said “So what is the answer?  The best motivator IS the free market.”

Interesting theory…let Wall Street, a bank, or any other con artist run whatever scam they want because “the free market” will ensure that they can only make a big haul and abscond with the loot - with other people’s futures - once.

Is that you, Boehner?

Richard Haydn

Feb. 8, 2013, 9:54 p.m.

@ibsteve2u,  But don’t you see that Wall Street and the government are in bed together?  The financial industry contributes huge sums to the political class.  Just because they are patriots?  Think about it.  Fannie and Freddie were the boys buying up a ton of the junk mortgages and as reckless if not more so than “private” business. We do not have capitalism or a free market. We have a mixed economy.

“So they can only abscond with the loot once”.  Well, big business and government, despite any of the regulations, continually abscond with the loot!  Bubble/bust repeat. So what is your answer?  We just need more honest politicians with the best interest of the common folks in mind?  Dream on.  You can have all the regulation you want - it doesn’t do jack if the people running the scams know they get to KEEP the loot.  Where are the indictments of the super wealthy behind Citi and Gloldman?  Don’t hold your breathe.  The people in government and at the FED are almost ALL x and future employees of these very institutions.  Capitalism doesn’t work any better than cronyism when the laws are ignored.  What does are current gov do for us?  Launder money for drug cartels - no problem -  just a little fine.  Screw people out of there homes and jobs, don’t sweat it - the taxpayers will keep your yacht payments coming. 

The institutions that you think are there to help are really the cause of most of our ills. 

Again, what is your solution?  I know.  Just more regulations by our altruistic politicians.

@Richard Hadyn:  What I know is the United States of America had an incredible run of mutual prosperity from the end of World War II until the middle 1970s.

In the first half of the 1970s, the Republicans sold out to Big Oil - and aligned themselves with Big Oil and the Islamic OPEC nations against the American people and the United States of America.  They did that by enforcing America’s addiction to oil through the blockade of all attempts to conserve energy, initiate mass transportation measures, or develop alternative energy.

Flush with Big Oil’s money, they reinterpreted the staggering economic shocks caused by the equally staggering and wildly variable price of energy into “the rich weren’t getting richer fast enough”...and inflicted voodoo economics upon America - an economic theory that is essentially permitting the wealthy few to keep more of whatever they divert from the many to themselves will result in the many getting more.

I.e., flatly self-contradictory.

That incentivizing of greed in turn resulted in the Republicans - the tools of that wealthy few - teaming up with the neoliberals (dishonest Republicans, no more) inflicting deregulation and inequitable free trade upon America.

I.e., the rules which had ensured that the wealth of the many was protected from the rapacious few were discarded and, worse, the few - incentivized by voodoo economics - were enabled to dispense with the “cost” of the American people in their role as “labor”.

In short, the decay of America began when the rules which you so lightly dismiss were either discarded entirely or biased to enable the wealthy few to divert wealth away from the many.

So yes, I do want “more regulation” - back to the level at which America was the land of mutual prosperity and “the American Dream” rather than a fiscal rape victim whose ability to defend herself and look to “the general Welfare” as demanded by our Constitution is compromised by the lack of morals, ethics, and patriotism of the Republicans/Tea Party/libertarians - the collective followers of Ayn Rand’s creed of self-gratification is paramount.

Rules…you know how you must set clear rules and limits for your kids or else your lack of responsibility as a parent will likely yield you children who are first juvenile delinquents and later irresponsible and even criminal?

The Republicans - the right in general - are examples of that sort of adolescence unrestrained.  Even if you set aside the lies that they used to involve America in their wars, ask yourself:  What kind of irresponsible behavior is running two wars off the books, absolutely unfunded???

The right claims that rules inhibit them, and they’re right:  Rules force them to behave like adults whenever they have power as political or corporate leaders…

When the right is allowed to operate without rules, they act like juveniles and you end up with the America of today:  Indebted, stained with the dishonor of Guantanamo and torture, and forever known - for the rest of human history - as the nation that lied itself into invading the sovereign nation of Iraq.

Nice, to have a historical legacy of providing the analogy for the implausible:  “Sure, that’s as likely as the United States finding WMDs in Iraq.”

@Richard Hadyn,

Re:  “the solution is free markets”  in September 2008 we had a systemic crisis, even money market funds fell below par.  If the Fed hadn’t intervened by buying illiquid debt and recapitalizing the system, we could have seen a repeat of something as bad as the Lombard banking crisis, which destroyed Europe’s economy.

First all financial markets are regulated.  The kind of public exchanges we have in the US, don’t exist in more lawless parts of the world.

The problems with deregulated financial markets are threefold, first there is no limit on speculators and gambling -we have seen 3 massive speculative collapses since 1980 S&L, LTC and 2008 - second the more risk a financial entity is willing to take on the larger it becomes relative to the market which means they become to big too fail because they bring down the financial system;  third financial entities gamble with other people’s money, so when they collapse depositors can be wiped out.

I appreciate your free market hypothesis but without proper regulation financial markets will always created bubbles and the main players in them will always become too big to fail, hence regulation is desperately needed.

The other problem with the notion of free markets is that certain economic assumptions about efficiency and stability are clearly false.  Joe Stiglitz got a nobel prize for proving that slight asymmetries in information in markets result in huge inefficiencies with the profits accruing to the well-informed.

Also,  economists assume honesty,  they exclude rigged markets from their efficient market hypothesis.  In the real world financiers are always fighting to rig or game markets.  Look at Enron for example, bankers went to jail for the fraud they committed.  On a bigger scale, consider this about 3-5% of world GDP comes from the illicit drug trade ALL OF THAT MONEY GETS LAUNDERED.  Banks actively participate in corruption.  In fact, I was just chatting with a banker friend who was commenting about how blatant the laundering was when she at a bank she worked for in Puerto Rico.

I am not asking you to change your neo-liberal free market ideals, I am only asking you guys to get beyond the sophmoric idealizations and work to set up healthy markets with decent regulations.  Just trusting that the idealized concepts of free market theory are always going to lead to a stable financial system with realistic pricing is foolish given the past 30 years of failed experiments (and we can go back much farther if we want).

@Bart:  I’d note that Hadyn - in response to my condensed version ( http://www.propublica.org/thetrade/item/explosive-charge-morgan-stanley-peddled-security-its-own-employee-called-nu/#63081) of what you just said - attempted to shift “the blame” from capitalism and the free market by pointing to the enabling corruption of politicians.

What he missed, of course, is the fact that those politicians are being corrupted by the practitioners of capitalism.  And the amount of corruption grows with the liquidity of those few who are themselves corrupt and so willing to corrupt government; a feedback loop, thanks to voodoo economics, that spells the destruction of America.

So he has a valid point whether he intended to make it or not:  Until we stop Wall Street and big banking from buying politicians - until we reform campaign finance, eliminate that anti-democracy weapon that is Citizens United, and close “the revolving door” - we’re not going to see anything but the continued economic and strategic decay of America that is the result and consequence of the wealthy few working with politicians to prioritize the greed of that wealthy few over the needs of the American people and the United States of America.

It doesn’t matter if the death of the United States of America is a consequence of the atomic bomb or the inability of America to defend herself conventionally thanks to the gutting she is taking at the hands of rapacious, ravening few:  America will still be dead, and tens of millions of Americans will go with her.

That is to be prevented.

@Catherine Tripp:  He’s actually doing the public a service:  In conveying the intellectual level of the right’s supporters, he (I am merely guessing at the gender) provides a warning to anybody who is giving a passing thought to allowing our right to again wield the power of the United States of America.

The appointments to powerful government positions that the Republicans make when they have the political power are drawn from a pool of such…which can make for entertaining reading:

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/10/AR2008091001829.html

Just as an addendum, the right is highly - highly - motivated to use whatever means are available, to include the ridiculous, to shift the focus to such as Barney Frank.

That helps prevent the American people from digging a little deeper and coming to the conclusion that anybody can unintentionally create programs that can be corrupted, but it takes the truly corrupt to go ahead and exploit the opportunity.

http://archives.hud.gov/remarks/martinez/speeches/presremarks.cfm

@Bart, thank you for the very detailed reply.  I appreciate your views and find them pretty convincing.  I would never be so naive as to think we can run a modern economy without some regulations.  I would prefer regulations had real teath.  You and Ibsteve2u, vs my point of view: not much difference really.  I just feel inadequate when it comes to explaining my viewpoint.  But I will give it another go.

First, I am not a Republican.  I was a state coordinator for the Ron Paul campaign.  That is a whole different matter.  What is critical is that those persons, like you and Steve, and the others that have taken the time to read and comment on this article, learn to work together for a better system. The whole sophmoric mentality that the Dems are for the little guy and the Reps are for the big cats is silly.  They are all out for themselves.  Period.  There may be a few Reps and Senators that really do have the average American in mind.  But by and large it is all about winning. So when Steve touts the Dems he is just a Redskins fan blasting the Cowboys.  Silly and not very productive.  The simple truth:  Both are for bigger governemnt - the Dems and Reps both support huge spending on the military.  Ridiculous spending that could be put to much better use.  Like as in easily feed the whole world for several years for what they spend in a singal year.  Then there is the social welfare spending.  I am 100% for a safety net.  Then again, as an inner city landlord, I see the despartate fight for all the druggies and drunks, and scammers to get on the “disability’” line.  I do not need white suburbanites to enlighten me on the plight of the poor.  They are my clientelle.  But I am not a very good businessman.  After a housing court judge heard how long I had let a family stay before finally evicting them she said “Are you a landord or a charity?”.  I digress.

Yes, it would have been very painfull to let Citi fail.  But they should have been allowed to go bankrupt.  The government certainly could have helped make it as smooth as possible.  In any event, if the government was going to bail anyone out, it should have been the tax payers and low income home owners.

What if they would have given the bailout money to everyone on the tax rolls?  The homeowners could pay down their mortage.  The non-homeowners would have extra momey to spend.  People would say “That’s crazy!”..  Is it not more ridiculous to give the money to the very bankers that caused the collapse (with the help of their friendly one-time and soon to be again employees currently working at the FED)?  Instead, we bail the banks.  They pump up their bonuses and forclose on millions of home owners.  The homes sit empty!!!!  The cities have to tear them down because the banks won’t maintain them OR pay city property tax.  Now that is idiocy. 

If you feel like an interesting read, and it’s free on the net, try http://bastiat.org/en/the_law.html  .

The point is that we need to all work together to examine the real systemic problems with our government and our economics.  Let’s leave the “your team sucks” stuff to those who spend all there time reading the sports pages.

I may be completely wrong.  But my opinion is that you will never get money out of politics, so the next best thing is to make governemt smaller so that it has less say over our lives.  So it is not the governemnt that picks the winners and the losers.  But again, I cannot explain this in a few short paragraphs and surely not as well as others who have written on the subject.

Finally.  If you believe government is the answer, just what shoudl it do?  Keep in mind that they will do what the money tells them to do, unless of course you can get money out of the system.  It has been my experience that people would not want to be rich and powerful if it did not mean they would be powerful.  In other words, able to infuence governments. 

I am for gay marriage.  I am for a women’s right to end her pregnancy.  I am against mindless, endless wars.  I am for tight, effective govenment regulation where needed.  I am an agnostic.  I refuse to be defined as a Rep or a Dem or a Libertarian, or any other group.  I call them as I see them.

Thank you, Bart, for your reasoned response.  For me the situation is too late.  I sold real estate for 30 years and knew fraud when I saw it in 2006.  Not only did Wall Street game the system, they did it, I now believe, with the cooperation of the government.  We experienced two massive crimes since 2000; one from Wall Street and the other from the wars of choice.  Both devastated the general public while enriching the special interests.
Sadly Obama says he is for restoring the middle class, but the essential criminal elements have been left in place.  Given the gang of 5 on the Supreme Court there is little hope for legal change.  How do people live on quick-sand in a corrupt society?  This is my first time and it begins with cynicism.  It goes to self-protection.  You might say I am becoming more “Republican” lite.  I not longer worry about the general good because my family is at risk.  I am not deluded that we have a “legal” society or one that will reward good work and good intentions.  We are ripe for “revolution” from especially young males who have no jobs of quality and no future.  They feel they have nothing to lose.  We are ripe for “plunder” by the fossil fuel cartel who know they have no way to get their product without taking risks producing health endangering pollution.  Obama’s hope and change is nice to hear, but I no longer buy it.  Too much time has passed.  Too much pain in the society.  Too much power in the vultures who have always been supported by the GOP.  Somehow I still have hope for my family, but part of that hope is thinking they will get out of here and find a better place.

john wickenden

April 19, 2013, 2:30 p.m.

Much as one loathes this behaviour the fact is that MS isn’t there to hand-hold a Taiwanese bank which should be able to make and stand on their own decisions.

The American people are going to have to fight incredibly hard to get serious financial reform.  We will prevail but power concedes nothing, so we are going to have to be well organized and very assertive.

John Wickenden

April 21, 2013, 1:39 a.m.

I’m with you there Bart….
The problem is this isn’t just about financial reform the corrosive power of mega-lobbying is now endemic. How do you get a lever in the feedback circle of corruption and payback to break it…...apart from a revolution.
I’m serious….how do you?

James M. Fitzsimmons

April 21, 2013, 3:56 a.m.

The Department of Justice has numerous criminal statutes with which to prosecute white collar criminals, to wit, RICO (T18USC1962); Conspiracy; Mail Fraud; Wire Fraud; Interstate Racketeering, ad infinitum. Prosecuting criminal behavior need not be a politically contemplated act; it is simply action that reflects integrity to the office of the Attorney General. What a concept!! Unfortunately, politics seems to permeate every action of the government these days as well as the “watchdog” media.

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Jesse Eisinger

About The Trade

In this column, co-published with New York Times' DealBook, I monitor the financial markets to hold companies, executives and government officials accountable for their actions. Tips? Praise? Contact me at .(JavaScript must be enabled to view this email address)