William Black With Dylan Ratigan: "There Is Bank Fraud Everywhere And BERNANKE Is Leading The Cover-Up," PLUS Part 2 Of 'Seize Bank Of America'
Video: Dylan Ratigan with William K. Black -- Oct. 25, 2010
Start watching at the 6-minute mark. Bill Black quotes:
- We suggest an immediate moratorium on foreclosures and a requirement that all notes be produced by purported holders of mortgages within a reasonable length of time. If they cannot be found, the mortgages - as well as the securities that pool them - are no longer valid.
- That means that the homeowners are not indebted, and that the homes are owned free and clear. And that, dear bankers, is a big, big problem. It is also the law - without evidence of debt, there is no debtor and no creditor.
- "Fire Holder, fire Geithner, fire Bernanke. Get people in who will enforce the rule of law as intended."
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Scroll down for more VIDEO.
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Below is just an excerpt of part 2. Read the entire piece at the link provided.
By William K. Black
Bill Black Calls On FDIC to Seize Bank of America - Part 1
Holding Banks Accountable - Seize Bank of America - Part 2
Our call for closing down control frauds and stopping the foreclosure frauds typically meets with three objections. First, it is claimed that while there were some bad apple lenders, much of the fraud was committed by borrowers. Our proposal would let fraudulent borrowers remain in homes to which they are not entitled, punishing the banks that were duped. Second, the biggest banks are too important to foreclose. And third, it is not possible to resolve a "too big to fail" institution.
Who is Guilty?
Let us deal with the "borrower fraud" argument first because it is the area containing the most erroneous assumptions. There was fraud at every step in the home finance food chain: the appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers' incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false reps and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct.
That homeowners would default on the nonprime mortgages was a foregone conclusion throughout the industry -- indeed, it was the desired outcome. This was something the lending side knew, but which few on the borrowing side could have realized.
The homeowners were typically fraudulently induced by the lenders and the lenders' agents (the loan brokers) to enter into nonprime mortgages. The lenders knew the "loan to value" (LTV) ratios and income to debt ratios that they wanted the borrower to (appear to) meet in order to make it possible for the lender to sell the nonprime loan at a premium. LTV can be gimmicked by inflating the appraisal. The debt to income ratios can be gimmicked by inflating income. "Liar's" loan lenders used that loan format because it allowed the lender to simultaneously loan to a vast number of borrowers that could not repay their home loans, at a premium yield, while making it look to the purchaser of the loan that it was relatively low risk. Liar's loans maximized the lender's reported income, which maximized the CEO's compensation.
The problem is that only the most sophisticated nonprime borrowers (the speculators who bought six homes) (1) knew the key ratios they had to appear to meet, (2) had the ability to induce an appraiser to inflate substantially the reported market value of the home, and (3) knew how to create false financial information that was internally consistent and credible. The solution was for the lender and the lender's agents to (1) instruct the borrower to report a certain income or even to fill out the application with false information, (2) suborn an appraiser to provide the necessary inflated market value, and (3) create fraudulent financial information that had at least minimal coherence.
When the overburdened homeowner began missing payments, late fees and higher interest rates kicked-in, boosting the stated income of mortgage servicers and the value of the securities. Not coincidentally, the biggest banks own the servicers and could maximize claims against the mortgages by running up the late fees. It was quite convenient to "misplace" mortgage payments, so even homeowners who were never delinquent could get hit with fees and higher rates. And when payments were received, the servicers would (illegally) apply them first to the late fees, meaning the homeowners were unknowingly still missing mortgage payments. The foreclosure process itself generates big fees for the SDI banks.
And, miracle of miracles, the banks would end up with the homes and get to restart the whole process again -- from resale of the home through the financing, securitizing, and fee-for-servicing juggernaut.
Unfortunately, it did not go quite as smoothly as planned. The SDIs were supposed to act like neutron bombs -- killing the homeowners but leaving the homes standing, to be resold. The problem is that wiping out borrowers lowered the value of real estate, crushing not only the real estate market but also construction and through to all associated sectors from furniture and home restoration supplies to big ticket purchases that rely on home equity loans. It also led to questions about the value of the securitized toxic waste manufactured and held directly or indirectly by financial institutions.
Next, a few judges began to question the foreclosures, as they saw case after case in which the banks claimed to have lost the paperwork or submitted amateurishly forged documents. Or, several banks would go after the same homeowner, each claiming to hold the same mortgage (Bear sold the same mortgage over and over). Insiders began to offer depositions exposing fraud and perjury. It became apparent that in many and perhaps most cases, the trusts responsible for the securities (often these are "special purpose" subsidiaries of the banks) never received the "notes" signed by the borrowers -- as required by both IRS tax code and by 45 of the US states. Without the notes, billions of dollars of back taxes could be due, and the foreclosures violate state law. Finally, the Attorneys General of all fifty states called for a foreclosure moratorium.
What to do? We suggest an immediate moratorium on foreclosures and a requirement that all notes be produced by purported holders of mortgages within a reasonable length of time. If they cannot be found, the mortgages -- as well as the securities that pool them -- are no longer valid. That means that the homeowners are not indebted, and that the homes are owned free and clear. And that, dear bankers, is a big, big problem. It is also the law -- without evidence of debt, there is no debtor and no creditor.
As we write this piece, the markets are taking it upon themselves to begin to close down the control frauds -- with homeowners fighting the foreclosures and investors demanding that the banks take back the toxic waste. Unfortunately, following the market solution will be a long-drawn-out and costly process -- both in terms of tying up the judicial system but also in terms of the uncertainty and despair that will persist. At the end of that process, the banks will have to be resolved. No matter how much the politicians dislike it, they will end up with the banks in their hands -- either now or later.
Taking them now is the right thing to do.
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Bonus Video: Ratigan with Black and Inside Job Director Charles Ferguson
I've never posted this clip before, and it's better than the one at the top, in my view. Click here for Ratigan's complete interview with Charles Ferguson.
- "There have been ZERO criminal referrals."
- “None of that is happening because the people in charge don’t look.”
- “If you looked you would have seen fraud incidence in these mortgages in the 80% range and they could not have been sold.”
- “The real losses are being hidden BY THE FEDERAL RESERVE to the tune of trillions of dollars RIGHT NOW.”
5 foreclosure links from today:
Oct 26, 2010 at 7:20 AM
Reader Comments (14)
http://www.huffingtonpost.com/2010/10/25/frank-caprio-obama-shove-it_n_773307.html
http://www.georgewashington2.blogspot.com/2009/09/william-k-black-banks-posing-systemic.html
Dolphins in the wild are teaching themselves to "walk" with their tails along the surface of water, biologists have claimed.
http://www.telegraph.co.uk/earth/wildlife/8080889/Dolphins-walk-on-water.html
Video
agree completely...i've been worried about the collateral since the bear stearns-maiden lane creation...we still don't know what's in there...
The real fraud is in how money is created by private banks. Money for nothing, interest for free. Then they take your house when you can't pay up.
The government is complicit in genocide. The bankers get ever penny ever created, eventually.
Strike the root of this evil or they will just find more ways to confuse, conceal and corrupt.
The jobs won't come back until the bankers leave.
- http://www.youtube.com/watch?v=YGFZ1Jj3ui8
Alice, when you pay for your house you receive the deed, the people you refer to that have paid for houses had the proof, and it was disregarded by the judges as the pure and honest word of the banksters was held by the courts to have been ordained by God in their purity.
Those who really owned their houses proved it and still lost their homes, hence the lawsuits.
Thank you for supporting the greatest robbery and re distribution of wealth there ever was.
http://www.denverpost.com/business/ci_23219936/us-bank-walks-away-from-foreclosure-aurora-woman