Friday, January 7, 2011

More on Massachusetts Ruling on Foreclosure: Foreclosing Banks Sought Quiet Title

It's getting curiouser and curiouser.

It turns out that the two foreclosures that the court voided were just normal foreclosures in a non-judicial state. There was no involvement of the court, and the homeowners didn't even contest the foreclosures. That was 2007. Then, in 2008, the banks - US Bank and Wells Fargo, each acting as the trustee of a REMIC (Real Estate Mortgage Investment Conduit) who supposedly owned the mortgages - sought a quiet title judgment.

Now why would a bank want to do that, if the foreclosure was just as normal as any other?

And what is a quiet title?

An action to quiet title is a lawsuit filed to establish ownership of real property (land and buildings affixed to land). The plaintiff in a quiet title action seeks a court order that prevents the respondent from making any subsequent claim to the property. Quiet title actions are necessary because real estate may change hands often, and it is not always easy to determine who has title to the property.

A quiet title suit is also called a suit to remove a cloud. A cloud is any claim or potential claim to ownership of the property. The cloud can be a claim of full ownership of the property or a claim of partial ownership, such as a lien in an amount that does not exceed the value of the property. A title to real property is clouded if the plaintiff, as the buyer or recipient of real estate, might have to defend her full ownership of the property in court against some party in the future.

New York Times reports:

... The case dates to 2007, when Wells Fargo and U.S. Bancorp began foreclosure proceedings against delinquent borrowers on two separate properties. Neither borrower fought the proceedings — the courts in Massachusetts are not obligated to oversee foreclosures — and both banks quickly seized the properties.

The banks’ problems began in the fall of 2008, when Wells Fargo and U.S. Bancorp sought judgments from the Massachusetts Land Court that would have given them clear title to the properties. In 2009, the court rejected the banks’ arguments, ruling that the banks had not been assigned the mortgages before they foreclosed, as is required. Instead, the banks had acquired the mortgages after they had begun foreclosure proceedings.

According to the article, quoting the lawyer who represented one of the two homeowners, "U.S. Bancorp, as trustee, will either have to pay Mr. Ibanez to buy a deed from him, Mr. Collier said, or walk away from the property, leaving it to Mr. Ibanez."

Thus the question again: Why did US Bancorp and Wells Fargo seek a quiet title when no one was contesting the foreclosure? Their act of seeking a quiet title ended up opening a can of worms for them and they are going to lose the house or have to buy a deed from the homeowners. Who advised them to do so, particularly when the two banks now say they are not responsible for the proper transfer of the mortgages to the trusts for which they serve as the trustee and blame everything on the servicers?

One potentially funny thing is that those servicers could also well be themselves. Wells Fargo trustee service people blaming the Wells Fargo loan servicing people. (Oh wait, Wells Fargo has already done that, between the 1st mortgage people and the HELOC people.)

They should also know damn well that they are very much responsible; the Pooling and Servicing Agreements (PSAs) normally requires the trustee to make sure all the documents are in order, properly endorsed and properly, physically transferred to the trust.

Following the well-established protocol among MSMs reporting foreclosuregate/fraudclosure, NYT has to imply, by quoting "experts", that it is still a matter of "dot[ting] your i’s and cross your t’s" when it is really a matter of outright fraud to issue MBS without any M to back S.

The Massachusetts Supreme Judicial Court also rejected the banks' request to "make its ruling prospective, meaning that it would affect only new foreclosures. The court declined to do so, allowing foreclosure cases that have been completed to be reopened and brought under scrutiny."

Many, many mortgages that were securitized - subprime, Alt-A, prime, whatever the grade - were not transferred properly at the time of securitization. Many of them (I suspect almost all of them, actually) get transferred to the trust AFTER they are delinquent, and after the foreclosure proceedings have started. Good luck believing it is a matter of dotting the i's and crossing t's, and that it is only in Massachusetts.

Be sure to check out my vid, "Foreclosuregate Explained". (In the tiny screen in the right-hand column, or at Youtube.)

Massachusetts (Non-Judicial State) Supreme Court Rules Against Foreclosing Banks Due to Faulty Securitization

Or I should say fraudulent securitization, where mortgage-backed securities were issued without any mortgage in the trust to back the securities. Naked shorting, in a sense.

Bank shares (Bank of America, Wells Fargo, US Bank, J.P.Morgan Chase, etc.) promptly headed south as soon as the news broke this morning, though they recovered much of the loss by the market close.

Reuters (among many others) reports:

NEW YORK (Reuters) - In a ruling that may affect foreclosures nationwide, Massachusetts' highest court voided the seizure of two homes by Wells Fargo & Co and US Bancorp after the banks failed to show they held the mortgages at the time they foreclosed.
And from Karl Denninger [emphasis is his]:
The banks tried to get constructive assignment (e.g. assignment by contract, even though the PSAs said otherwise - that actual assignment and delivery had to take place) recognized by the judge, and failed to produce evidence of actual assignment (because there wasn't any - the notes were originally endorsed in blank and there was no evidence of actual physical delivery to the trustee.) The Judge said no. That's what I was talking about earlier in this case - this has been the pattern and practice in these securitized loans, and the ASF and others in the industry have argued that despite language in the PSAs that required physical delivery they didn't have actually perform in that fashion to have a factually and legally-good transfer.
Yup. And the judge said no. Good for the judge.

I'm curious to see if PIMCO has any insight into the matter. PIMCO, as some of you may know, is loaded with MBS which it seems to have bought just so that it can stick them to the issuing banks. Only two days ago, PIMCO's Rod Dubitsky (Executive Vice President, Global Structured Finance Specialist) wrote a piece in yet another attempt by the big players and financial MSM to cast the whole foreclosuregate/fraudclosure as only moderate "flaws" that are easily fixable.

Calling a fraud a flaw doesn't make it a flaw.

But in many states, particularly the non-judicial states, foreclosures go on uncontested (no easy way for the homeowners to contest anyway), banks getting the homes that they probably don't have title to. Judges are asleep, attorneys either don't know or don't care.

House to Debate Health Care Repeal Next Wednesday

From C-Span:

Today, the House is taking up the rules governing next week’s scheduled debate on a bill to repeal the health care law. Last night, The House Rules Committee met and voted on the rules for debate. It is expected that the debate to repeal the health care bill will take place next Wednesday.

Among the more disputed aspects of the Patient Protection and Affordable Health Care Act is the mandate that all individuals buy health insurance, which will not take effect until 2014.

The White House and Democrats have come out against the repeal bill. Senate Democratic Leaders sent a letter to House Speaker John Boehner earlier this week stating that they have no plans to debate this repeal bill in the Senate and urged him to “consider the unintended consequences that the law's repeal would have on a number of popular consumer protections that help middle class Americans."

President Obama has also stated he would veto any repeal efforts that come to his desk. However, House Republicans say they will then try to repeal the legislation piece by piece.

The mandate that requires, under the threat of fines and jail time, Americans to buy health insurance with the terms and conditions that the federal government decides, has been ruled unconsitutional by U.S. District Judge Henry Hudson in Richmond, Virginia.

The Obama administration has admitted that it's not a health care "reform" but a new taxation. Despite the name of the law, "affordable health care" is hard to come by, when your insurance company raises the annual premium by 40% just this year thanks to this "reform" people call Obamacare.

The Republicans' effort to repeal should be encouraged, even if it's a token gesture. However, the bill that they have no intention of repealing will soon prove more costlier and deadlier to our health: the food safety bill that passed the Senate in the lame duck session in November and was just signed into the law of the land by Obama just yesterday.

Nullification at the state level seems the only way.

Thursday, January 6, 2011

Three-Tiered Obfuscation and Nullification of the Volcker Rule

It suddenly dawned on me that the regulations are not there to regulate. They are spelled out so that the participants - the industry (like financials) and politicians fed by the industry - can do everything and anything that is NOT written and the regulators can safely look the other way.

Case in point: the Volcker Rule (prop trading regulation) in the Dodd-Frank (or DONK) financial "reform" bill.

Financial Times reports:

US regulators want to use techniques pioneered in the fight against money-laundering to crack down on “proprietary trading” by banks as part of new financial reforms, according to bankers and officials.

The question of how to define trading done with banks’ own funds is one of the thorniest for the US authorities in the post-crisis regulatory overhaul as it is difficult to differentiate such activities from market-making on behalf of clients.

The “Volcker rule”, proposed by the former Federal Reserve chairman Paul Volcker and included in last year’s Dodd-Frank law, aims to reduce banks’ risk-taking by forbidding them from placing short-term trading bets.

Draft guidelines for the Volcker rule are being circulated among members of the Financial Stability Oversight Council, the body of regulators charged with defining the rules of the road for the financial system. Publication of a final version is planned in the next two weeks.

After months of internal discussions and talks with banks, which have mounted a vigorous lobbying campaign, regulators are leaning towards a “multi-tiered test” like those used to detect illegal money transfers.

The first tier would involve automated “tripwires” that alert banks’ compliance departments.

People involved in the talks said that, depending on the market and the trade, “tripwires” could be the length of time a trader holds a position, its size, riskiness, or other measurable criteria. In detecting money laundering, banks look at “filters” such as size and provenance of a transfer.

The second tier would see internal compliance and risk management departments quiz the trader on the nature of the position. Finally, regulators, that keep inspectors on banks’ premises, will also be able to see the “tripwires” and monitor both traders and compliance departments.

Banks are likely to welcome this approach, after arguing that a strict definition of proprietary trading based on one-size-fits-all metrics would have cut off liquidity to large swaths of global capital markets.

So, in summary, the three steps are:
  1. "Tripwires" - length of the trade, size, riskiness, and other measurable criteria to be automatically triggered;

  2. Bank's internal compliance and risk management departments ask the trader about the trade;

  3. Regulators may see the "tripwires" and monitor the bank.

I have to laugh out loud. They almost read like sort of a reverse-manual of what to avoid so as to prevent the "tripwires" from being triggered. Besides, how are they going to regulate traders when 80% the trades are done by HFT algo bots? Are they going to regulate only the carbon-based traders?

No wonder Wall Street banks are happy, and Mr. Volcker is leaving the White House.

But not to worry. Obama will be well-managed by his new handler, aka chief of staff, from J.P.Morgan Chase to restore confidence. CONfidence.

Wired: Vote for Your Favorite Sexy Geeks of 2010

Hmmmm. Tyler Durden of Zero Hedge is getting major...

You can still vote at Wired. It's kind of weird to see him up there ...

Wednesday, January 5, 2011

Reuters: Paul Volcker Leaving the White House

I was surprised that he hadn't left already, when the so-called "Volcker Rule" was effectively rendered null and void by the usual suspects on Wall Street that extends to various branches and agencies of this government.

Reuters reports:

(Reuters) - Former Federal Reserve Chairman Paul Volcker plans to leave his role as head of a panel of experts advising President Barack Obama on the economy, sources familiar with the decision said on Wednesday.

The departure of Volcker, 83, as head of the President's Economic Recovery Advisory Board is among a series of changes under review at the White House.

The decision to leave the board was Volcker's. A source close to him said he was ready to continue to advise Obama on an informal basis as often as the president would like.

Volcker, who became a legendary figure on Wall Street when as Fed chief he broke the back of double-digit U.S. inflation in the early 1980s by sharply raising interest rates, began advising Obama during his 2008 presidential campaign and has wielded clout on issues ranging from financial regulation to fiscal policy.

The former Fed chairman was the driving force behind the "Volcker Rule," a provision in last year's financial reform bill that puts limits on Wall Street banks' proprietary trading.

Many on Wall Street vigorously fought the Volcker Rule and some sought to portray Volcker as out of touch with the modern financial system. But he has also received credit for reining in financial industry excesses that helped prompt the global economic crisis.

"My feeling is job well done," said Thomas Russo, a partner in Gardner Russo & Gardner, a Pennsylvania investment manager with assets under management of $2.38 billion.

Job well done, indeed. Wall Street banksters got what they wanted. Prop trading simply changed the name. Insider trading is not only rampant, but that's how Wall Street has operated for decades.

But at least, as Zero Hedge points out, Volcker has fought high inflation. What's left with us is a mad professor from Princeton, printing $100 billion a month to create inflation, thinking he can control it 100%. Oh, and the president who likes to campaign but cannot be bothered to do the actual work of governing (or at least get out of the way and cause no major harm).

We have a bright future here in this country, don't we? Wall Street is left free to defraud the taxpayers - whether it's the foreclosuregate or a bogus settlement with GSEs (by Bank of America), and continue to stash away the money that the mad professor at the Fed gives them almost every single day. In return, they will do their utmost best to prop up the stock market so we can feel rich as we pay $5 for a gallon of gasoline or $8 for a loaf of bread, or $20 for a pair of cotton socks.

Reuters' article above also reports that Gene Sperling is set to replace Larry Summers. Mr. Sperling was a consultant to Goldman Sachs and earned close to $900,000 in 2008.

And the man set to become Obama's chief of staff, William Daley, works for J.P.Morgan Chase, and the brother of Richard Daley.

Volcker is right to leave from this sewage of the White House. He should have left long time ago.

Obama's Ongoing Re-Election Campaign

After having campaigned constantly for the past two years since his election (except for 24 days during those two years when the nation was spared of his appearance somewhere), Obama is apparently embarking on campaigning for the re-election in 2012.

Bloomberg reports that his obnoxious press secretary, Robert Gibbs, is leaving the job to become an outside political adviser (hahahaha, Gibbs as political adviser?) for Obama's reelection campaign.

The same Bloomberg article also floats the rumor that Obama is considering a J.P.Morgan Chase executive who happens to be the brother of the outgoing mayor of Chicago as his new Chief of Staff.

Obama's advisor Valerie "slum lord" Jarrett has a new plan for Obama this year, which is to send him away from the White House to meet Americans, in search of the "adoring crowd". The Hill reported on December 26, 2010:

The president's "biggest regret" was that because of economic turmoil — "He had to spend almost every waking hour in Washington working on solving that crisis," senior adviser Valerie Jarrett said during an interview on NBC's "Meet the Press" on Sunday. "And what he missed sorely was engagement with the American people."

Every waking hour? Really. I guess he doesn't wake up until 10 in the morning. The American people? Define "American" and define "people", Ms. Slum Lord. At this point, no one cares about whether this guy actually works for more than 10 minutes each day.

Tuesday, January 4, 2011

Ron Paul for President in 2012!

Dr. Ron was interviewed by Anderson Cooper of CNN alongside his son, Dr. Rand.

Ron Paul is seriously considering another run for presidency in 2012, saying he's involved in "a revolution".

From Infowars:

Texas Congressman Ron Paul has once again spoke of a potential Presidential campaign for 2012, declaring that is is very seriously considering running, given that all other potential candidates from both parties do not represent any real change.

The Congressman appeared alongside his son, Senator elect Rand Paul on CNN’s Anderson Copper 360 show.

The Congressman again described the odds of such a development as 50/50, but supporters will take great encouragement from his words:

“People ask me if I think about it a lot and I do because I get asked it all the time. But yes. I am giving it very serious consideration, and I know all the pros and cons.” the Congressman said.

“I do listen to many supporters that seem to be so sincere and interested in what I’ve been doing over the many years. They have responded to the monetary issues and the policy issues and the personal liberty issues.” Paul added.

“Because the young people are responding and giving the encouragement, I am really thinking very seriously about it, but at this time I cannot give an answer.” he told viewers.

When asked who Paul believed would be his most formidable challenger if he ran again, the Congressman noted:

“I would consider everyone of them a pretty big challenge because I am involved in a revolution, I want revolutionary ideas, I want to return our country to the original roots of individual liberty.”

“Everyone that I know of, Republican and Democrat, in many ways they represent the Status Quo.” Paul continued.

“They don’t get excited about the Federal Reserve, they don’t get excited about bringing troops home from Japan, they don’t get excited about reducing the government by 50, 60 or 70 percent, and letting college kids get out of social security. No, they would all fit the position of the status quo, and the supporters I have know that we’re talking about something quite different.”

Read the full article at the link.

I went to listen to Ron Paul in 2007 in an event organized by his supporters at Google (hard to imagine now, with that creepy CEO in support of Obama agendas). There were young college students, aging hippies and boomers, an exotic dancer from San Francisco, dolled-up babes from Texas, young managers and engineers at high-tech companies in Silicon Valley - a very odd assortment of people. After a few guest speakers (including Justin Raimondo of, and G. Edward Griffin, author of the book "The Creatures from Jekyll Island", a must read for anyone who wants to figure out what's been going on around us in the past 100 years and where it is headed), Ron Paul went on stage - a thin, slight man who talked in a high-pitched voice.

And this odd assortment of people all went wild over his ideas. And guess which topic got the loudest applause and support from the audience: The Federal Reserve and its fractional reserve banking system. Honestly speaking, I was rather surprised. I thought, "Anti-war, maybe, but not the Federal Reserve, very few people knew about or were interested in the topic." I was so wrong, pleasantly wrong.

After the event, I also attended the $50-a-plate lunch, where Dr. Paul spoke again. At my table, there were a young Indian boy, probably in high school, bringing his dad. And there was another son-and-dad pair from North Bay, who owns an auto shop. There was a very quiet young man who said this was the best $50 he'd ever spent, to which all of us agreed.

And here's the CNN video clip, also posted at the link:

Monday, January 3, 2011

US National Debt Tops $14 Trillion

The number was breached on the last day of 2010. The Treasury Department has "
The Debt to the Penny" page, and we find the following:

The National Debt on:

12/31/2010: 14,025,215,218,708.52 ($1.714 trillion in one year)

12/31/2009: 12,311,349,677,512.03 ($1.612 trillion in one year)

12/31/2008: 10,699,804,864,612.13 ($1.476 trillion in one year)

12/31/2007: 9,229,172,659,218.31 ($549 billion in one year)

12/29/2006: 8,680,224,380,086.18

In two years, the Obama administration racked up $3.326 trillion in new debt.

George the Lesser took slightly over 4 years to do the same. Before that, it took 17 years and three presidents (Bill, Papa George, Ron) to add that amount of debt. (See the chart from Sunday's post.)

At the growth rate of 6.3%, 2011's debt may be $1.822 trillion, bringing the total national debt to $15.847 trillion. The current debt limit is $14.294 trillion.

The US Treasury Department sells slightly under $200 billion notes and bonds per month.

Silver Short Squeeze to Come? Carlos Slim May Enter the Fray...

Today's US market was just as expected, a big pump to start the new year, except oil collapsed after the announcement that the Obama admin will allow some offshore drilling, taking silver with it.

Silver??? They both come from under the ground, but other than that, what correlation could there be between oil and silver?

But don't worry overmuch, silver bugs. The world's richest man, Carlos Slim of Mexico, may soon enter the silver market in a big way by buying into Fresnillo, "the world largest primary silver producer and Mexico's second largest gold producer" whose stock price more than doubled last year, outperforming the North American competitors.

King World News Blog reports:

A source in mergers and acquisitions out of Europe has alerted King World News that Carlos Slim may be looking to enter the silver market in a big way. Gold and silver are in big bull markets and this is attracting the attention of some of the smartest money around the globe. James Turk commented, “If this deal does happen Eric, this is going to make the silver shorts choke.” Fresnillo has a current market cap of roughly $19 billion.

The European source commented, “This deal has been floating around for a while, but I think this time it is going to happen. It’s in his backyard. This is the world’s richest man wanting to get into silver.”

I view this as the only way for the richest man in the world to enter the silver market at this point in terms of any scale, is that your take as well?

“Yes, I agree with that. Let me just add that when he buys into it (Fresnillo) he will have the leverage to silver he is looking for. There are very few ways to get into silver with the amount of money he has, this is the most likely option at this point. He has to pay a hefty price or otherwise the deal will not happen. It is beginning to look like the longer he waits, the more he will have to pay. It is a bull market and things to tend to get more expensive, not less.”

King World News reached out to James Turk to get his comments. When asked about the potential buyout Turk stated, “If this is true he is following in the footsteps of John Paulson and his exposure to gold through Anglo Ashanti. In Carlos’s case, when you have billions of dollars to invest, it is impossible to buy physical silver in any significant quantity with the market so tight.

The point I am making is that Paulson ended up buying 30% of Anglo-Ashanti for a few billion dollars giving him exposure to the gold price.

If you have three, five, ten billion dollars to invest, you cannot buy physical gold or physical silver without sending the price sky high. So what can you do? You can buy a mining company.

Read the entire post at the link.

Just so you know, however, TA-wise, a correction may be due for silver (and gold). Technical indicators I use (MACD, slow stochastics, RSI, CCI, etc.) have been showing a negative divergence vis-a-vis the price action.

Sunday, January 2, 2011

2011 - The Year of Catch 22

A guest post at Zero Hedge by Jim Quinn nicely summarizes the situation that the powers that be have created for us for the year 2011 - Catch 22:

The United States and its leaders are stuck in their own Catch 22. They need the economy to improve in order to generate jobs, but the economy can only improve if people have jobs. They need the economy to recover in order to improve our deficit situation, but if the economy really recovers long term interest rates will increase, further depressing the housing market and increasing the interest expense burden for the US, therefore increasing the deficit. A recovering economy would result in more production and consumption, which would result in more oil consumption driving the price above $100 per barrel, therefore depressing the economy. Americans must save for their retirements as 10,000 Baby Boomers turn 65 every day, but if the savings rate goes back to 10%, the economy will collapse due to lack of consumption. Consumer expenditures account for 71% of GDP and need to revert back to 65% for the US to have a balanced sustainable economy, but a reduction in consumer spending will push the US back into recession, reducing tax revenues and increasing deficits.

He has some interesting numbers for us to ponder:
On January 1, 2010 the National Debt of the United States rested at $12.3 trillion. On December 31, 2010 the National Debt checked in at $13.9 trillion, an increase of $1.6 trillion.

The Federal Reserve Balance Sheet totaled $2.28 trillion on January 1, 2010. Today, it stands at $2.46 trillion, an increase of $180 billion.

Over this same time frame, the Real GDP of the U.S. has increased approximately $350 billion, and is still below the level reached in the 4th Quarter of 2007. U.S. politicians and Ben Bernanke spent almost $1.8 trillion, or 13% of GDP, in one year to create a miniscule 2.7% increase in GDP. This is reported as a recovery by the mainstream corporate media mouthpieces. On September 18, 2008 the American financial system came within hours of a total meltdown, caused by Wall Street mega-banks and their bought off political cronies in Washington DC. The National Debt on that day stood at $9.7 trillion. The US Government has borrowed $4.2 since that date, a 43% increase in the National Debt in 27 months. The Federal Reserve balance sheet totaled $963 billion in September 2008 and Bernanke has expanded it by $1.5 trillion, a 155% increase in 27 months. Most of the increase was due to the purchase of toxic mortgage backed securities from their Wall Street masters.

Real GDP in the 3rd quarter of 2008 was $13.2 trillion. Real GDP in the 3rd quarter of 2010 was $13.3 trillion. Think about these facts for one minute. Your leaders have borrowed $5.7 trillion from future unborn generations and have increased GDP by $100 billion.

That's the government for you, borrowing $5.7 trillion to create $100 billion growth. In other words, $1 increase in GDP was brought about by borrowing $57. Does that make sense to you? It apparently make tons of sense to those die-hard Keynesians who inhabit Congress, the White House, and the Fed.

I know their argument: GDP would have collapsed without $5.7 trillion infusion. We wouldn't know, would we? We didn't get the chance to see if the GDP number would collapse without any government stimulus, fiscal or monetary.

He has a scary chart of the US national debt since 1940. Note the phenomenal increase in the last two years, or ever since Obama became the president. (Oh I forgot. Let's blame Bush for that.)

And Obama's chief economic adviser is threatening a catastrophe if the debt limit is not raised. But a catastrophe is staring at us from this chart, and you don't need no stinkin' debt limit to see it.

And that, I think, how the Catch 22 situation will be resolved - by brute force, as the debt reaches the exosphere and finally comes tumbling down, crushing everything.

Are you ready to get the hell out, before the proverbial s--t hits the fan? I don't even want to know how the s--t hits the fan. Or will you be trusting CNBC and Goldman's Hatzius who say everything will be just dandy?