Tag: banks

Monday column

Fixing the Mortgage Fraud

It is both extraordinary and amusing to see how fast Washington and the Wall Street lapdogs that presently pass for our financial media have been forced to turn on a dime by the exposure of pervasive criminal activity on the part of mortgage-backed security sellers. The summer-long collusion of the Republican and Democratic Parties in passing H.R.3808 on an off-the-record voice vote, which would have permitted some of the financial institutions that committed loan title fraud to retroactively hide their misdeeds, was shut down by a furious reaction across the blogosphere that sparked the Obama administration to act in a single day.

And the initial response to the fraud by the market cheerleaders that the whole story was essentially a great big “nothingburger” has rapidly subsided into desperate attempts to change the focus from the widespread fraud committed by the security-selling banks to the possibility that defaulting homeowners might inadvertently profit from this pervasive criminal activity on the part of the banks that offered them mortgages. But it’s not about the foreclosures. The foreclosures are merely the deadly tip of a four-part iceberg that involves mortgage-writing fraud, mortgage-backed security-selling fraud, title-transfer fraud and finally, in a futile attempt to cover up the preceding three frauds, the much-discussed foreclosure fraud.
The column continues at WND

ADDENDUM: As further evidence that the foreclosures are merely a consequent issue rather than the central one in the great mortgage fraud, here is a copy of a letter reportedly sent to Bank of America from the Association of Financial Guaranty Insurers asserting that BOA must repurchase as much as $20 billion in mortgages due to its fraudulent representations and warranties and that “well more than half” of the securitizations from 2005 through 2007 “qualify for repurchase by BOA.

ADDENDUM II: Just so we’re all clear, “clerical mistakes” and “the real issue is deadbeat borrowers” is Wall Street’s official propaganda line: “”Don’t you think, out of 10 million data points, there will be 500 unbelievably screwy examples? It’s a little bit so what. I don’t get it. It doesn’t feel like this is fraud. Maybe there is sloppiness, but at the end of the day, people took out mortgages they can’t pay back. Now I worry that if anything, the government is making something that is just a clerical error into something that would be nefarious or whatever.”

But the government isn’t inventing anything, in fact, all the federal government has done to date is play enabler and incompetent defense attorney. Now ask yourself one question. Does Wall Street’s interpretation of the current situation explain in any way why the GSEs, pension funds, and bond insurers are filing very large financial claims against the mortgage-securitizing banks?

Two wrongs and the Rule of Force

Karl Denninger explains why it is justifiable for people to begin seizing property on their own behalf:

Look, this is what happens when you sit idly by and countenance rampant and outrageous lawbreaking: The people decide they’ll do it too!… Two wrongs don’t make a right – just more wrongs. But the lesson here isn’t that a couple and their kids “re-took” possession and claim their original foreclosure was “illegal.” I don’t know if it was or wasn’t – what I know is that the chain of lawlessness didn’t start with them, and it is impossible to condemn their actions standing alone.

If the foreclosure was unlawful and initiated with “robosigned” and bogus documents then it was. The Earls apparently attempted to demand a jury trial on the facts (including these facts) and were told to go to hell. Someone hasn’t read their Constitution lately – it says that for all controversies exceeding $20, you have a right to a trial by jury (7th Amendment). It doesn’t say that if it’s inconvenient for a bank and might expose criminal fraud for which bank officers could be imprisoned the judge can tell you to pound sand. That, standing alone, broke the chain of lawful behavior in the instant case.

This is where lawlessness leads us – to more lawlessness. Once you commit a lawless act against someone and are not punished for it you have invited them to retaliate with complete disregard for the law in their response. You are only required to deal ethically and morally with an ethical and moral entity across the table – one who ignores the law loses their right to demand that respect in return.

Two wrongs don’t make a right, but they do create both a justification and a motivation for human action. Once the government refused to enforce the law that protected the people from the fraudulent depredations of the banks and then denied them their Constitutional right to a jury trial, it abrogated its right to demand that those same individuals behave in a reasonable and law-abiding manner. It’s not a question of the Rule of Law since it is an observable fact that there is no law as such in the United States anymore, there is nothing more than the public pretense of law and the sporadic enforcement of that pretense on parties who do not belong to the government-favored classes. The Rule of Law has been replaced by the much weaker and more delicate Rule of Force.

This is nothing new, as Cicero’s letters make it clear that the latter days of the Roman Republic featured a similarly dynamic and amorphous pretense of law. America as you knew it, as you imagined it to be, is no more. It has been gone for some time now and it was laid to rest by the same cancerous forces of greed, lawlessness, and ambition that have brought every other great society in human history to its eventual end.

A dialogue with Ilana (UPDATED)

In which we discuss the Great MBS/Foreclosure Fraud. Keep in mind that Ilana and I are not only WND colleagues, but like-minded libertarians as well, so please note that this isn’t the least bit personal on either side. I think Ilana’s objections are important and illustrative of the challenge in accepting the existence of an institutional fraud of this magnitude, hence this detailed response.

It must be obvious to readers of this site that I would strongly disagree with the case my colleague Vox Day makes against the strict rule of law and for grand-conspiracy….

Distilled, the argument for all-out sweetness and love for the foreclosed upon is that, because the banks are embroiled in the fractional reserve system, they should suffer the worst of fates.

That’s like saying that because the legal system is generally corrupt, murderers should go free; or because an owner who sells a parcel of land partakes in the property tax theft, the buyer should not have to pay him. Or because businesses often act like exuberant idiots during a phase of the business cycle—some as offenders; others as victims—their customers need not pay them. And on and on.

This is chaos theory; create chaos, and out of it, something good may come. And never mind that not all bankers are crooks; that not all of them understand the theoretical aspects of the system in which they are embroiled; and that not nearly enough bad things are said about the defaulters.

As to Vox’s point, it does not follow from “the mere fact of their focus on the borrowing parties rather than the banks,” that this “is proof that they are intentionally evading the real issue.”

Not in logic, at least.

Finally, the laws of economics are natural laws. Whoever is involved, it is categorically good that responsible buyers get to pick up foreclosed properties, and that the mortgage miasma is cleared and cleansed away.

To be honest, I completely missed her statement about my supposed opposition to “the strict rule of law”, otherwise I would have addressed that in my following email by pointing out that the “strict rule of law” completely forbade everything that the mortgage banks did in ignoring the land title system in favor of pushing 65 million mortgage transfers through MERS in only six years instead. But here was my actual response to her:

With all due respect, it is clear you don’t understand the issues at stake in the “foreclosure fraud” issue. You’re missing the relevant point because you’re only looking at the second wave of the frauds, rather than the first. The greater portion of the fraud occurred long before the very first defaulting homeowner was late on his first payment. There is absolutely no question – none – that the banks are
guilty of massive amounts of criminal and tax fraud prior to their subsequent commitment of the foreclosure-related frauds.

What happened was that the banks wanted to create mortgage-backed securities, but selling the securities legally required transferring the notes and titles as per the land title system. But that would have cost a lot in filing fees and all but eliminated their profits, so they simply ignored the law, created an electronic registry called MERS, and thereby ripped off large financial investors by selling worthless paper. The foreclosure-based fraud about which you have such doubts is merely the cover-up that resulted from the way in which a need to foreclose exposed the initial fraud.

I haven’t gotten permission from Ilana yet to post her email verbatim, but I will summarize it as follows, (and either replace the summary or correct it depending upon her preference.)

“We have a 3-stage process, not a 2-stage process. Bankers, most of whom really don’t know squat about Austrian theory, were compelled by law to grant rotten loans to the protected species of the politicians. They invented a product to do that.

Sounds quite creative; sounds like the unintended consequences of politics.

I began reading the column you recommended. It begins with a one-case study as its proof. This is statistically worse than insignificant. It graduates to assertion. Then adds another one-case study. You may be right, but the data in the column you provided does not prove your case.

Understand: I am not a partisan here; I’m not pro-banker. So far, I just don’t see good evidence for your case.”

This was my response:

I’m afraid you’re still a little too under the influence of the banking industry’s defense theory. You are repeating some of their talking points and focusing on some irrelevant side issues instead of the salient matters. What is irrelevant about the “one-case study” and the anecdotes being “statistically worse than insignificant” is that they are merely illustrative examples of an easily provable fact that applies to more than 60 million mortgages. It is quite clear that you do not know what the local land title laws are, (and being a Canadian by way of South Africa, I certainly wouldn’t expect you to; I’ve been in Europe for a decade and I have absolutely no idea what the local property laws are), so your attempt to use general principles to try theorizing around that gap in your knowledge is doomed to failure.

It’s not even possible for you to suggest that “the unintended consequences of politics” compelled the bankers to provide the loans to the favored classes because a) most of the relevant land title laws involved are older than the United States; they derive from the English common law, b) the MBS-selling preceded most of the laws that “compelled” them, and b) the number of loans that were fraudulently transferred far exceed the number of mortages sold that required any compelling. To quote Wikipedia: “What the case law is consistently holding is that MERS cannot do what it has purported to do (and has done in what appears to be over sixty (60) million mortgage transactions nationally).” The lawyers for MERS have even admitted this in court! “During the course of the hearing, the Court repeatedly raised the “MERS as nominee” issues to counsel for the Defendants, [MERS and OneWestBank] with said counsel finally admitting, upon repeated inquiry by the Court, that MERS cannot transfer promissory notes.”

So, this isn’t a case of bad politicians causing bad behavior by the banks. In fact, the bad politicians, the bad bureaucrats, and some of the bad state and federal courts have been repeatedly attempting to cover for the bad behavior by the banks. The banks are absolutely not on the side of freedom and capitalism here; they are deeply and actively involved in the corrupt politics themselves. Natural law also points to the guilt of the banks; they forgave the mortgage debt through their actions, then attempted to retroactively claim they had not forgiven it.

On a related, note, Jim Sinclair shares some interesting information.

I had dinner with my former partner, then lead director of and CEO of Bear Stearns. I could not contain myself so I asked him why he did so much business in OTC derivatives which were certain to bankrupt them. The answer I got was it was more than 50% of their profit. The right answer should have been it was more than 80% of their earnings.

UPDATE I: Ilana wrote back to note that she intends to further contemplate the matter. She added:

“You know very well that my problem with your argument, Vox, is that it teeters on grand conspiracy. One of your readers in the comments section picked this up quite well. The state and its cronies preside over the disintegration of civil society, but they do so reflexively, rather than as a matter of collusion and conspiracy.”

Perhaps it does teeter on grand conspiracy. But as I have pointed out in the past, calling something conspiracy doesn’t make it go away and the undeniable fact is that 65 million mortgages were transferred through MERS since 2004. Furthermore, it is highly probable that many of them, and perhaps even all 65 million, were transferred illegally according to laws that predate the Carter administration by decades, if not centuries. My skepticism is well known to readers and critics alike and it NEVER occurred to me that the mortgage fraud could possibly run this deep and this wide. I was sure that the reason the banks were mysteriously reluctant to foreclose upon properties in default was because doing so would expose their accounting irregularities with regards to the book value of the defaulting properties. It almost defies imagination that any bank would ever knowingly destroy the paper trail that is the only security for its interest in the loans it has made. And yet, we now know that many of them, including all the big, bailed-out banks, did.

Mailvox: In which a solution is proposed

The prophetic tale of the Great Home Distribution:

“The house next door has stood empty for four months now, ever since our neighbors were foreclosed on and evicted. The bank isn’t even trying to sell it. Instead, a week or
two ago they sent over a crew to blow out the waterlines, fill ’em with antifreeze, and basically winterize the place, as you would do if you had a cabin in the deep north woods and were planning to close it up for the winter.

The kicker: the bank involved is one of those “evil” banks that’s currently in the news for possible mortgage fraud.

So here is my question for you: how soon do you think it will be before the fed.gov starts seizing such houses (since the title trails are hopelessly f*cked-up anyway), declaring them Affordable Housing, and redistributing them to the Deserving Poor?

After all, it’s worked so well in Zimbabwe and Venezuela. If you can seize the property of wealthy landowners and redistribute it to the peasants, you can count on the loyal support of the peasants in the next election — or riot.

Can’t you just see The Chosen One and his teleprompter up there on the podium? Thundering, “If we lose this election, the Republicans will take away your home!” (Because after all, once the gov’t has given it to you, it’s yours, right? Even if you didn’t work for it, don’t deserve it, and they had to steal it from someone else to give it to you?)

Interesting times, indeed. Figure the first couple such houses will go, with great fanfare, to the widows and families of Iraq and Afghan war casualties, or to a few wheelchair-bound disabled vets themselves. After all, who could object to giving extravagant gov largesse to widows, orphans, and cripples?

Then, once it becomes old news, the Great Redistribution begins…”

One nation, under fraud

An excellent article that not only sums up the relevant issues, but provides some stunning examples of how deep and pervasive the banking fraud is:

Tomorrow, a bank—not your bank, but any bank—could evict you from your home. Even if you didn’t know the bank was foreclosing. Even if your mortgage is paid off. Even if you never had a mortgage. Even if the bank doesn’t hold a single piece of paper that you signed. And major banks not only know this fact, but have spent millions of dollars to defend it in court. Why? The answer starts with a Jacksonville homeowner named Patrick Jeffs.

In 2007, Deutsche Bank sued Jeffs for his home, which is a necessary step in the process of foreclosing on a homeowner in the state of Florida. Curiously, despite the fact that he immediately hired a law firm to defend his property when he found out about the foreclosure, neither Jeffs nor his attorneys were at the trial. That’s because it had already happened. Deutsche won by default because Jeffs wasn’t able to travel backwards in time to attend, even though the trial featured a signed affidavit indicating that he had been served his court summons.

The only problem with the summons Jeffs supposedly received was that it had been conjured out of thin air.

In June of this year, a Florida court ruled that the document was fraudulent, as the person who was supposed to make sure Jeffs was served had mysteriously received a copy of the summons before the lawsuit had even been filed, and Jeffs never even saw the copy. The text of that ruling was posted on various financial news websites in September. The lawyers that Jeffs hired to defend his case say that fraud such as this is not uncommon. It’s a widespread problem, and it has cost countless families their homes.

“I think it’s safe to say that 95% of the foreclosure cases in Florida involve some form of fraud on the part of the bank,” David Goldman of Apple Law Firm, PLLC told The Daily Caller in a phone interview. “It’s probably closer to 99%. And the court system is helping them get away with it.”

…Banking officials happily told the Florida court system in 2009 that the documents had been shredded. At the time, lenders were trying to prevent some foreclosure rule changes, so they sent a letter to the Florida Supreme Court. Among other things, the letter stated that it was standard practice to destroy mortgage papers once the mortgages were sold into MERS in order to avoid confusion. (“A” for effort on that front.) Something funny happens when tearing up a contract, and it might best be explained by a certain common phrase. That phrase is, “Tearing up a contract.” Unless very specific conditions are met, the contract becomes null. Void. Not worth the paper it is printed on.

It is now totally impossible and downright dishonest for anyone to attempt to somehow blame the ongoing collapse of the U.S. financial system on irresponsibly indebted homeowners or minor clerical errors on the part of low-level bank employees. Exposing the full extent of the fraud and placing the financial responsibilities where they belong will bring the housing system to a screeching halt, as indeed it must. But it is not a question of risking the breakdown of the system nor can the banks threaten to hold the system hostage because the system is already broken, having been fatally sabotaged by the mass mortgage transfer fraud (it’s far more than mere foreclosure fraud) of the mortgage banks.

Someone asked the other day if this explosive situation was really all about the short-sighted greed of bankers and if the bankers could really have been so incredibly stupid. To which the only answer is: yes, apparently. This is an object lesson in repeatedly looking the other way and NOT enforcing the rules; all that accomplishes is to teach the offending parties that they can up the ante on their offensive behavior.

Read the whole thing. It’s very informative and not a little eye-opening, even for confirmed cynics.

Bankrupting the big banks

The Great Foreclosure Fraud is not about clerical errors or defaulting homeowners. It never was. It’s about the way in which the U.S. banks selling mortgage-backed securities fraudulently ripped off the pension funds the taxpayer-owned GSEs, and the foreign banks.

In addition to Fannie and Freddie, there are millions… billions… trillions of dollars in mortgage-backed securities out there that are now very much in doubt. And the pension funds have been pushing for some time now for information about the securitizers, the big banks who bought the mortgages and put them in pools and sold the MBS, whether they should have to buy back the mortages for not meeting the contractual requirements. Those may have varied from contract to contract, but I guarantee that every one of them required that there be proper paperwork and a right to foreclose if the debts aren’t paid. If those banks have to buy back all that stuff, it’s a big liability….

There’s a pretty good chance that if they had to buy back a lot of those mortgages because they did not meet the contractual representations and warranties as it’s called, the mortgages were not what they were required to be and in almost every contract if they weren’t what they were required to be the back was required to buy them back, that’s probably more than they can buy back. We may be back where we were two years ago. There was an article in the Washington Post yesterday morning where someone said this is going to be so bad for the banks we might have to have another TARP. That ain’t gonna happen, not in this lifetime…. we certainly aren’t going to give the banks, or lend the banks, more money to get them back to solvency.
– Congressman Brad Miller (D-NC)

The reason the giant banks are desperately trying to avoid turning over the mortgage-backed security documents and resisting subpoenas is because they will be forced into bankruptcy as soon as any of the investors get their hands on them.

UPDATE: Citi delineates the three possible outcomes:

Levitin articulated three possible outcomes to the aforementioned issues and assigned an equal likelihood to each. In his best case scenario, these issues are deemed merely technical in nature and are successfully resolved but it takes at least year to do so and all foreclosures are delayed by at least a year. Levitin disputed the claim by banks that these issues can be resolved in a month or so and attributed the banks’ claims to “legal posturing.” In the medium case scenario, litigation ensues and it takes years to sort out these matters. In the worst case scenario, the aforementioned issues become a “systemic problem” which causes the mortgage market to grind to a halt as title insurers refuse to insure mortgages involving existing homes.

He left out the fact that in the medium scenario, all of the MBS-selling banks go bankrupt. Which is to say, the big four with their $7 trillion in assets, (45% of which I have estimated are worthless), at the very least.

WND column

A Den of Vipers and Thieves

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.”
– Andrew Jackson

The French famously say that the more things change, the more they stay the same. While the particular form that the latest banking fraud has taken is different – there were no option ARMs, mortgage-backed security tranches or electronic mortgage registration systems in the 1830s – the United States found itself similarly afflicted by the financial predations of a private central bank.

ADDENDUM TO THE COLUMN: Unsurprisingly, those freedom-loving Republicans and champions of the Rule of Law in the conservative media are following the grand tradition of presidential candidate John McCain by rushing to the wrong side of the issue and the defense of the impoverished bankers of Wall Street.

Talk about a financial scandal. A consumer borrows money to buy a house, doesn’t make the mortgage payments, and then loses the house in foreclosure—only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine? The affidavit was supposed to be signed by the nameless, faceless employee in the back office who reviewed the file, not the other nameless, faceless employee who sits in the front.
– The Wall Street Journal

The No. 2 House Republican, Rep. Eric Cantor of Virginia, said a national moratorium would remove the protections that lenders need. “You’re going to shut down the housing industry” with a national stoppage, Cantor said. “People have to take responsibility for themselves.”
– The Associated Press

This is pure banking propaganda. The idea that the foreclosure fraud is simply a little clerical error and that homeowners are attempting to capitalize on a minor issue of missing paperwork is a blatant and shameless lie. The mere fact of their focus on the borrowing parties rather than the banks is proof that they are intentionally evading the real issue. Karl Denninger, who has been on this for three years now, explains it more succinctly than anyone. “The issue is not about which paper-pusher signed documents. The issue is whether the origination and securitization of this paper in the first instance was fraudulent, and whether we now we have a Watergate-style coverup of what a gang of brigands did to steal literal trillions of dollars!” As he further elucidates, there are three primary parts to the problem; notice that the latter two have absolutely nothing to do with the borrowers that the Republican Cantor declares must “take responsibility for themselves”. But if a poor Hispanic family living in an overpriced house have to take responsibility for themselves, why don’t the bankers who are holding Cantor’s leash have to do likewise?

1. Borrowers overstated income, assets or both. In some cases they did so willingly and knowingly. In others loan officers changed numbers to “ram it through” the computer-operated approval systems, submitting files multiple times while doctoring figures. In the latter case perhaps the borrower knew, perhaps not – many people didn’t read the entire 100+ page stack of paper at closing. That’s dumb but it’s not criminal. Changing the figures or lying, on the other hand, is criminal.

2. Lenders stuffed paper they either knew was bad or had the ability and legal duty to verify the provenance of but intentionally did not into securities sold to investors. This has been disclosed in FCIC hearings and is no longer speculative, although as I noted in 2007 it had to be the case because it was the only way the deals that were being done could have possibly been done. This was an act of deception and in my opinion (along with many others, including plenty of attorneys) meets the legal definition of fraud.

3. The land title system in this nation was intentionally subverted and corrupted by both intentional act and intentional laziness, all driven by the motive of profit. Original paperwork was either shipped overseas or intentionally destroyed. In even more cases it was not conveyed as legally required by the trust documents. This has massively-corrupted the chain of title for perhaps as much as one third to one half of all residential housing units in this country and if not corrected will render these homes unmarketable in the future. This is the vastly unappreciated problem with what has been done to date.

If the Republican leadership is dumb enough to attempt to defend this large-scale banking fraud against the interests of defaulting homeowners and responsible taxpayers alike, they’re going to risk throwing away the entire advantage that they have derived from two years of Obama’s political incompetence. This is the one thing they could do that would force the Tea Partiers to leave the Republican Party and transform into a genuine third party. And it’s not impossible; remember, it was a Republican who introduced HR3808 and it was the Republican leadership that was complicit in allowing it to pass on an unrecorded voice vote.

The media wakes up

The Washington Post finally notices that there might be a little problem in the housing market:

Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation’s housing market and economic recovery…. With foreclosed properties comprising one in every four homes sold in the United States, the spreading moratorium could disrupt real estate deals in progress, slow down the process of clearing the backlog of troubled home loans and prolong the economic recovery, analysts said.

A freeze would also strike at the financial sector, just two years after it suffered one of the worst crises in its history. One government official who has been in discussions with several big financial firms said the banks are bracing themselves for a wave of lawsuits from homeowners who are fighting to keep their homes and from investors who had bought mortgage loans on Wall Street. On Friday, while the Dow Jones industrial average crossed 11,000, most major bank stocks fell.

Translation: Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure salesallowing the big insolvent banks to go bankrupt may be inevitable, despite their grave reservations about the impact a broad freezefailure to enact a second banking bailout would have on the nation’s housing market and economic recoverydepression.

Yesterday’s post about the 13.3% decline in bank credit didn’t really do proper justice to the seriousness of the situation. One also has to factor in the historical 8.4% annual increase in bank credit. This means that there is presently a $2.2 trillion gap between the current credit supply and the $8.477 trillion in credit that a nominally healthy economy would have at the end of 2010.

That is the gap that the massive increase in Federal outlays are attempting to fill. In other words, the magnitude of the problem isn’t defined by a 13.3% decline from where we were, but rather, the 25.8% shortfall from where we should be.

“Potential flaws”

It sounds so much nicer than “massive criminal fraud“

Potential flaws in foreclosure documents are threatening to throw the real estate industry into a full-blown crisis, as Bank of America on Friday became the first bank to stop sales of foreclosed homes in all 50 states. The move, along with another decision on foreclosures by PNC Financial Services Inc., adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers.

If Obama isn’t completely insane, he’s going to shut down the recent attempt of the House and Senate to immediately make all of this grand theft housing ex post facto legal. I am no green shoots optimist, but this is much, much worse than even most confirmed economic pessimists had been expecting. If Washington doesn’t break with Wall Street soon and jail the guilty bankers, it won’t be long before they find themselves facing crowds of the size of the Beck rally storming the barricades. Nor is this foreclosure fraud the only blatant chicanery. Consider the decline in commercial bank credit since its peak in December 2008.

Notice the immense and unprecedented $452 billion leap in loans that supposedly took place in the last week of March.  And immediately, the decline continued at much the same rate it had shown before.  Now, here’s how TOTLL would look without this reported one-week borrowing orgy.

As of the latest Fed report, correctly adjusted TOTLL is now to $6.297 trillion, down from $7.294 trillion; that is a $993.6 billion collapse in credit.  13.63% of the commercial bank credit in the country has vanished, even without counting all of the defaulting and foreclosed properties that may not even belong to the banks trying to claim them.   Keep in mind that the most TOTLL had ever previously declined in a two-year period was -0.76% in 1974-75.   Here’s the punchline.

“Here are seven predictions concerning economic-related events I expect to see by December 31, 2010

5. Commercial bank loans and leases (TOTLL) will fall below $6.3 trillion.”

After the March 31 report, I was thinking that I’d have to call shenanigans in defense of that prediction, but given the likely fallout from the Great Foreclosure Fraud of 2010, it’s quite possible that TOTLL will fall below $6.3 trillion despite the “potential flaws” visible in the Fed’s statistical reporting.

UPDATE – Apparently Obama isn’t a complete moron. He has made it clear that he will not permit HR 3808 to go forward and cover the mass foreclosure fraud by the banks preparatory to yet another bailout.

Presidential Memorandum–H.R. 3808

It is necessary to have further deliberations about the possible unintended impact of H.R. 3808, the “Interstate Recognition of Notarizations Act of 2010,” on consumer protections, including those for mortgages, before the bill can be finalized. Accordingly, I am withholding my approval of this bill. (The Pocket Veto Case, 279 U.S. 655 (1929)).

The authors of this bill no doubt had the best intentions in mind when trying to remove impediments to interstate commerce. My Administration will work with them and other leaders in Congress to explore the best ways to achieve this goal going forward.

To leave no doubt that the bill is being vetoed, in addition to withholding my signature, I am returning H.R. 3808 to the Clerk of the House of Representatives, along with this Memorandum of Disapproval.

BARACK OBAMA

THE WHITE HOUSE,
October 8, 2010.

Interesting that such a firestorm blew up fast enough to force Obama to show his hand in public this way. This is a very serious situation; it’s arguably more serious than when Paulson was threatening Congress with the image of tanks in the streets and martial law.