Wednesday, October 20, 2010

Forclosure Fraud: It's Worse Than You Think

The only thing surprising in today's Precious Metals bounce back was how small it was relative to the drubbing the Dollar took. Today the Dollar gave back virtually all of it's misbegotten gains from yesterday, yet Gold only reclaimed 1/3 of it's losses...Silver only a few cents.

Are Precious Metals investors and traders that afraid of the bullion cartel? And if so, why?

Jim Sinclair said it best late yesterday:

"Those that sold gold today based on a dollar rally are fools being foolish. TA this time around will bury the many."

I told you yesterday the Timmy [Pinocchio] Geithner is full of sh*t:

Geithner Weak Dollar Seen as U.S. Recovery Route Versus BRICs
By Ian Katz and Simon Kennedy
For U.S. Treasury Secretary Timothy F. Geithner, a weaker dollar may now be in the national interest.

The dollar has dropped more than 7 percent since Aug. 27, when Chairman Ben S. Bernanke signaled the Federal Reserve is prepared to ease monetary policy. Where once such a decline may have been met with resistance from the U.S., Geithner may now be tolerating it as a way of bolstering the recovery.

Companies from Costco Wholesale Corp. to Deere & Co. have credited the weaker dollar for giving their earnings a boost, and the currency’s slide has helped propel the Dow Jones Industrial Average above 11,000 for the first time since May. Higher stock prices in turn are bolstering consumer and business confidence. The danger is that the decline gets out of hand, fueling increases in the cost of living over the long term and prompting investors to avoid U.S debt.

“In an era where deflation pressures appear to be the greatest risk, growth is below trend and the U.S. wants to boost exports, why would they not want” a weaker dollar, Jim O’Neill, chairman of Goldman Sachs Asset Management in London, said in an interview. “The answer is when it becomes a problem for financial markets. Until then it’s a straightforward strategy.”

A weaker dollar can help the economy by making U.S. products less expensive in overseas markets and by boosting the overseas earnings of U.S. companies in dollar terms. As the cost of imports rises, American consumers switch to U.S.-made goods, and domestic producers face less competition from abroad.

“The dollar is going to go down,” Martin Feldstein, a Harvard University professor who was chief economic adviser to President Ronald Reagan, said Oct. 7 in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “It will cause Americans to shift from imported goods into domestic services. All of that will strengthen the economy.”

Companies in the S&P 500 that get more than half of their revenue internationally have returned about 5.1 percentage points more than those whose sales comes mostly from the U.S. since the start of September, according to data compiled by Bloomberg.

A weaker dollar is “a positive for equities as long as it’s not viewed as a collapse of the dollar,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion.

Matt McCormick, portfolio manager at Cincinnati-based Bahl & Gaynor Inc., which manages $2.9 billion, said the dollar’s weakness is benefiting companies he owns with “significant” overseas revenue, including McDonald’s Corp., Procter & Gamble Co., Intel Corp. and Qualcomm Inc.

“A low dollar will be with us for longer than most people expect,” he said.

Yesterday's meager boost in Chinese interest rates was today seen for what it was...a bad sign for the US Dollar. It was in no shape or form a positive for the national toilet paper. And Geithner's empty vote of confidence in the Dollar was an even bigger joke than I made of it.

And as I suggested, yesterday was a strong buying opportunity in the Precious Metals. However, unless and until Gold prices jump resistance near 1363, traders must remain cautious on the bull side. Volatility remains explosive, though recent precedence suggests we may see another new high in Gold very shortly. The mushrooming "forclosuregate" story should see to that.

Forclosuregate is no imaginary threat to the financial system. IT IS THE BEGINNING OF THE END OF THE FINANCIAL SYSTEM. Containment is paramount as we head into the elections on November 2. Unfortunately for the government, this story has gone viral, and containment is now virtually impossible. The government's worst fears have been exposed as the butterfly bandage on this sucking chest wound, formally known as the "subprime crisis", is peeled back to reveal the true depths of it's threat to the financial system.

If you can find the time, it would be well spent perusing these stories regarding"foreclosuregate":

The Second Leg Down of America’s Death Spiral
By Gonzalo Lira
I swear to God Almighty: Mortgage Backed Securities are America’s Herpes—the gift that keeps on oozing.

Last Friday, Bank of America announced that it was suspending all foreclosure proceedings, presumably until further notice. Other banks have already suspended foreclosures in a whole truckload of states. A nationwide moratorium on foreclosures might soon happen—which would be a big deal: Global Financial Crisis, Part II—Longer, Wider and Uncut.

“It’s oozing from where?”

“Man, you guys are fucked.”

But the mainstream media—surprise-surprise—has downplayed the whole shebang. They’re throwing terms out there into the ether, but devoid of context or explanation: “Robo-signings”, “foreclosure mills”, forged signatures, “double booking”, MERS—it’s confusing as all get-out.

So the mainstream media just mentions it casually—“and in other news tonight . . .”—like it’s no big deal: A couple-three lines, lots of complicated, unfamiliar terms, an attitude like it’s a brouhaha over paperwork of all things!—and then zappo-presto-change-o!: They’re showing video footage of a cute koala nursing in the arms of a San Diego zookeeper.

But even the koalas know that something awful is heading America’s way. Smart little critters, they’re heading for the treetops, to get away from this mess.

So what the hell is going on with the God forsaken mortgage mess in the United States?

It’s got a lot of bells and whistles, but it’s basically quite simple: It’s all about the fucking Mortgage Backed Securities (MBS). Again.

by Ellen Brown
Looming losses from the mortgage scandal dubbed “foreclosuregate” may qualify as the sort of systemic risk that, under the new financial reform bill, warrants the breakup of the too-big-to-fail banks. The Kanjorski amendment allows federal regulators to pre-emptively break up large financial institutions that—for any reason—pose a threat to U.S. financial or economic stability.

Although downplayed by most media accounts and popular financial analysts, crippling bank losses from foreclosure flaws appear to be imminent and unavoidable. The defects prompting the “RoboSigning Scandal” are not mere technicalities but are inherent to the securitization process. They cannot be cured. This deep-seated fraud is already explicitly outlined in publicly available lawsuits.

There is, however, no need to panic, no need for TARP II, and no need for legislation to further conceal the fraud and push the inevitable failure of the too-big-to-fail banks into the future.

Federal regulators now have the tools to take control and set things right. The Wall Street giants escaped the Volcker Rule, which would have limited their size, and the Brown-Kaufman amendment, which would have broken up the largest six banks outright; but the financial reform bill has us covered. The Kanjorski amendment—which slipped past lobbyists largely unnoticed—allows federal regulators to preemptively break up large financial institutions that pose a threat to U.S. financial or economic stability.

"This Is Criminal": Foreclosure Process "Rife with Fraud," Barry Ritholtz Says
"The whole chain of the foreclosure process is rife with lies, with false affidavits, false testimony -- with fraud," Ritholtz says. "This is criminal and these people need to go to jail."

Unlike some observers, who believe banks only appear guilty of what The WSJ editorial page called "sloppy work," Ritholtz says problems in the foreclosure process go far beyond mere technicalities.

"This is more about forgetting to dot an ‘i' and cross a ‘t'," he says. "This is a systemic approach to foreclosure where the rule of law completely trampled on and property rights have been totally ignored."

While some expert fret the impact a foreclosure moratorium will have on the housing market and/or bank balance sheets, Ritholtz says something far more fundamental is at stake.

"This is about property rights," he says. "This is about very sacred rights...and the respect for the rule of law" - or the lack thereof.,WFC,BAC,PNC,MET,XHB,FNM

Foreclosuregate - NOT simply "lost" paperwork!
By Karl Denninger

Say goodbye to your Pension Funds for me, will ya!

There are no "lost notes" ladies and gentlemen.

Either: * The Trustee never got the notes, in which case he filed this certification and in doing so committed fraud upon the MBS investors, OR * The Trustee has the notes and doesn't want to produce them because there is something in there that could lead to the foreclosure being dismissed (E.g. TILA violations) or the Trustee being sued (e.g. he took the note even though it violated their representations and warranties relating to loan quality), in which case the fraud is upon the court in the instant case.

Pick one, but either way someone has been defrauded.

It is literally impossible for it to be otherwise.

When will the damn media and prosecutors start STOMPING on this crap?

Armageddon: What Democrats Are Hiding & Why They Are Really Scared
In June, a conversation took place in a hotel restaurant in Washington. As a latecomer to the conversation, it was easy to pick up that the topic that was the $165 billion union pension bailout bill introduced by Sen. Bob Casey [D-PA] in March.

Upon introductions, one of the individuals stated, “this is Armageddon.”

When asked for clarification, the person explained about the accounting rules developed to shore up underfunded union pensions and the dates when those union companies affected would have to assume their liabilities had the DC crowd (in particular, the Democrats and the unions) in a panic.

Yesterday, the Washington Examiner’s Mark Hemingway gave a good breakdown of how bad it could get for Democrats and their union bosses:

On Nov. 1, the Financial Accounting Standards Board (FASB) ceases to take public comment on a new rule requiring that companies more accurately report liabilities they have from participation in multiemployer pension plans. Unless FASB is persuaded otherwise, the rule takes effect Dec. 15.

There are some 1,500 multiemployer pension plans in the United States, which are unique to unions. In these plans, multiple companies pay into the pension plan, but each company assumes the total liability.

Under “last man standing” accounting rules, if five companies are in a plan and four go bankrupt, the fifth company is responsible for meeting the pension obligations for the employees of the other four companies.

What this means is that companies with union labor often have pension liabilities that are several multiples higher than the pension expenditures they report — the Kroger grocery store chain shocked analysts last year when it disclosed its multiemployer pension liabilities more than doubled in a year to $1.2 billion.


FASB’s new rule could effectively wipe out the paper worth of many companies, especially in the trucking and construction industries. Once banks and creditors are aware of these staggering pension liabilities, it will make it nearly impossible for union businesses to get loans, credit lines or bonding.

The effects of having to meet reality will almost certainly cause a significant drop in stock prices for those companies affected and, as a result, may cause a large ripple effect throughout the rest of the economy. In those cases where the liabilities exceed the value of the unionized companies, it is entirely possible many of those companies will go out of business, laying off tens of thousands of employees, and further causing a drop in economic activity.

These are just a few stories and presentations that represent the "truth" about forclosuregate.

[I slipped in the last story about labor union pension bailouts because it is a significant story that is not getting the attention it deserves...and pension funds are going to get whacked by forclosuregate.]

To really understand the depths of the problem for the banks, consider their insolvency is about to be exposed because of their own errors. If the New York Fed is looking for a payback on bad mortgage derivatives, consider that the Federal Reserve may be the most insovent bank of them all. And who bails out the Fed?

Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview.

If the issues aren’t fixed within 60 days, BNY Mellon should declare Countrywide in default on its servicing contracts, Patrick said.

Do you believe that Bank Of America has $47 BILLION to buyback those mortgage derivatives?

Bank Of America is the next Enron.

Continue to buy the Precious Metals dips in price at support.

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