The mortgage & foreclosure scandal runs so deep that ordinary observers can conclude the US financial foundation is laced with a cancer detectable by ordinary people. The metastasis is visible from the distribution of mortgage bonds into the commercial paper market, money market funds, the bank balance sheets, pension funds under management, foreign central banks, and countless financial funds across the globe. Some primary features of the cancerous tissue material are mortgage bond fraud, major securities violations, absent linkage to property title, income tax evasion, forged foreclosure documents, duplicate property linkage to single mortgage bonds, NINJA (no income, no job or assets) loans to unqualified buyers, and more. In fact, more is revealed it seems each passing week toward additional facie to high level and systemic fraud. The world is watching. The growing international reaction will be amplified demand for Gold, from recognition that the USDollar & USEconomy have RICO racketeering components extending to Wall Street banks and Fannie Mae mortgage repositories.
The centerpiece question, when the US bond fraud is coupled with European sovereign debt distress, comes down to WHAT IS MONEY? The answer is Gold & Silver and not much of anything else. Other assets like crude oil or farmland are effective hedges against tainted money, but when they contain debt tethers, they too are vulnerable. Huge flows of funds are fleeing traditional asset groups. Some mistakenly still believe the USTreasurys to be a safe haven. A shock of cold water comes to them when that bubble goes into reverse perhaps several months later after reaching 2% yields. The big magnificent epiphany in the last couple years has been that a house is not a hard asset, but rather a debt instrument extension. Important questions have arisen as to what assets are free from counter-party debt risk. The grand demands for physical gold prove that the futures gold contracts are not money either, but tainted Wall Street and London securities contracts that keep the system going.
The Monster: How a Gan...
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The big banks have been called too big to fail. What a ruse! They are too big to plow under without removal from power of the bankers themselves. They are too big to permit their balance sheets to be liquidated without a US banking system seizure together, and a 30% to 50% additional housing market price decline. They are too big to send into receivership without igniting a credit derivative sequence of explosions. They are too big to block the widespread practice of fraud and enforcement of law of regulations. However, a wondrous spectacle has begun to shine light. The mortgage & foreclosure scandal could turn out to be the big US Bank tombstone epitaph, as bank revenues from mortgages halt, as home owners refuse to make mortgage payments, as court cases unfold in full view, as class action lawsuits prove racketeering at a systemic level, as MERS and REMICs are frozen by the courts from further activity. Time will tell. Time will reveal extraordinary efforts by the USCongress to pass ex-post facto laws that legalize the bond fraud and contract violations from the past. Remember back in July 2007 when Bernanke claimed this was just a subprime mortgage problem. The Jackass called it an absolute bond crisis.
THE GIGANTIC ACHILLES HEEL EXPOSED
Two critical elements have been identified. The MERS electronic title registry system was designed to facilitate recording of property titles as associated mortgage bonds traded freely and changed ownership hands. Unfortunately, the title database has no legal standing, as declared by several state courts, including some supreme courts. Banks or financial firms holding the mortgage notes cannot team with the title database and force eviction during the home foreclosure process. That is the first gaping flaw. The second is the REMIC funding facility. The Real Estate Mortgage Investment Conduit was designed to facilitate funding mortgages, in particular Fannie Mae mortgages. Unfortunately, the conduit funding vehicle intentionally omitted citation of the mortgage income stream owner, so as to avoid income taxes. The lack of identification means that the Fannie Mae asset backed securities might lack any legal tie to the mortgage loan income stream.
The Big Short: Inside ...
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If the casual observer concludes that Fannie Mae mortgage bonds have no value, then that observer matches the same thought pattern of the Jackass, and the same as an increasing number of financial experts. The mortgage finance boom was more a racketeering scheme to send financial products through the pipeline, earn fees, set up arbitrage, enable leveraged schemes, and justify executive bonuses. At the same time, the scheme had the perceived benefit of putting money in people’s hands to spend when their jobs were shanghaied on a ship to China. It concealed the destruction of the USEconomy. It made homes very convenient piggy banks to abuse in consumer binges, as people eagerly burned their furniture. Harken back to the Great Macro Asset Economy, a slippery chapter scripted by Greenspan, one of several heretical chapters. Many citizens were turned into paupers who lost all their home equity, while 22% of the nation today lives in homes bearing negative equity overhead. To claim an elaborate Ponzi Scheme seems a fair characterization. The USGovt hands are dirty. The reflection on USTreasurys is filled with risk of a popped bubble. The reflection on the USDollar is filled with risk of downdrafts since a corrosive currency.
The Trillion-Dollar Co...
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The Europeans have their damaged sovereign debt, but the Americans can boast twin beasts in the USTreasury Bond bubble and the USAgency Mortgage Bond scam. The scam involves mortgage bond fraud from improper perfection of property title that ensures revenue stream. The scam involves securities violations from usage of the MERS title database, duplicate properties in multiple bonds, and forged documents. The scam involves faulty finance vehicles (REMIC) with deep intractible flaws in the structure of funding the loans, whose remedy would come with a $1 trillion tax bill due (estimated by bank analysts). Just last weekend, the state of California demanded as part of a class action lawsuit, with MERS at the center, between $60 and $120 billion in unpaid property title recording fees. One might wonder if any potential criminal fraud was avoided in the mortgage industry during the last decade that saved a few bucks and added to bank profit. The MERS & REMIC twins represent the two unfixable banking Achilles Heels. Can the USCongress forgive the fraud with a fresh piece of supercharged legislation?? If they do, then civil disobedience will blossom across the land, in the form of public demonstrations, marches on Washington, non-payment of monthly mortgage bills, and demands to prove property title. The global response will be to sell any bonds with a US$ denomination.
The fallout comes as shattered integrity of the USDollar after broken credibility of the USFed and ruined prestige of Wall Street, all while a sanctioned USTreasury Bond bubble puffs. The full USGovt guarantee of the Fannie Mae clearinghouse cesspool contents bridges the gap between USTBonds and USAgency Mortgage Bonds. One might argue that Agency Bonds differ from USTBonds only in the claim of linkage to mortgage income and ultimately home seizure, except that linkage is being removed in plain view to the public. The USDollar will suffer. Rather than fall versus other major currencies, the wrecked monetary system will take down all major currencies. Each fiat paper currency is being exposed as illegitimate in different ways. The consequences will be:
- All cost structures will rise, causing a worse global recession, a very heavy painful consequence.
- Income levels will not rise to meet the challenge, since monetary inflation destroys capital and erodes wealth engines in corporate structures.
- The US$-based bond markets take on a racketeering glow in global view.
The vast monetization schemes are set to come into motion for the bond market in general. The objects are hardly just USGovt debt securities, not even just Fannie Mae mortgage securities, but big bank Corporate Bonds as well. The scheme will paint the USDollar in a light with a RICO tint, as in racketeering, sanctioned by the US finance ministry and shielded from prosecution by US legal authorities and regulatory bodies. Worse still, the Financial Accounting Standards Board has permitted accounting fraud to the big dead US banks. Since April 2009, they have been permitted to declare any value they wish on their toxic balance sheets. That has enabled them to take advantage of USGovt largesse, direct USFed redemption of toxic bonds, called widely banker welfare. That has enabled them to tap the 0% money tree that produces carry trade profits. The only stipulation was the banks were required to place their excess cash at the USFed itself, which thereby hid the central bank’s insolvency, and distracted attention from the absence of Loan Loss Reserves for the banks. Details on the USFed balance sheet, and big bank vulnerability to further losses, are provided in the October Hat Trick Letter. Toss in the High Frequency Trading schemes, and the US financial markets look to contain more crooked venues than the Las Vegas casinos. The USDollar lies at great risk in the process.
BIG BANK VULNERABLES AGAIN
The next QE2 is a done deal but with the details missing. The next TARP-2 bailout package is having its justification and foundation fashioned from the building blocks of need and desperation, along with the cement provided by banking lobbies. The two initiatives will likely meld paths. A disorderly condition comes. An armada of lawyers is on the job ready to challenge mortgage securities, foreclosure orders, and much more. Class action lawsuits are on the docket. The US financial platforms are unraveling. The USDollar will follow a path to oblivion, locked in a destructive spiral. The Competing Currency War assures that other major nations will undermine, debase, and devalue their currencies rather than seek out, plan, and establish a new monetary system. The investment in a broken system will soon be realized as infinite, with unchecked aid, even $trillions tossed in Black Holes. The sound money experts have always argued that accelerated funds are required to maintain a bubble. Gold will therefore skyrocket in price, as the monetary system will be actively ruined from unchecked money creation. The silver price gains will be at least double the gold gains. Markets are beginning to take control, and kick aside the corrupt control levers. The horizon features a big US bank on death watch. The ripple effects will be shocking even to those who expect it. Other big banks will be dragged down in a chain reaction, while illicit control in certain key markets will be stripped away. Control will be lost by the Powerz. Confusion will rein. The bank stock index BKX signals an imminent breakdown. The dustbin awaits!!
October 29, 2010
