Current Economic Woes Result of
Massive Fraud By
Junious Ricardo
Stanton
|
During
the years from 2000-2007, the banks took in
securitization products including mortgages
(worth over $1 trillion) and issued
commercial paper. The banks created a great
number of off balance-sheet conduits and
structures. As such, these structures fail
to report full liabilities on the bank’s
balance sheets. This is what I call RahC™
(Randomly Activated Hidden Contingency) and
RahD™ (Randomly Activated Hidden Debt). The
industry created a Shadow Banking System (SBS)
[phrase coined by Paul McCulley, PIMCO].
Yes, you’ve seen this movie before. Remember
Enron? Enron apparently, through a series of
related entities garnered a massive
off-balance sheet contingency that exposed
the company to risks and liabilities in
untold and unknown amounts, not respected by
its investors, the government or society.
Well, with off-balance sheet liability and
exposure related to hedge funds, commercial
paper and derivatives, our formal banking
system is now trying to absorb the assets
burdened with unknown quantities and
qualities of RahC and RahD losses and
liabilities now exposed in our Shadow
Banking System. Moreover, the SBS is not
backed by Federal Deposit Insurance nor does
this system have access to the Federal
Discount Window for liquidity. Not to rub
salt in this wound, but my ‘free market
purists’ friends should now recognize some
need for ‘refined free market industry and
government regulations.’ How many times must
we see this movie of ‘extremes’? Literally,
untold exposure is etched in the fabric of
off-balance-sheet contingencies.”
Shadow Banking System (SBS). |
Once again the Bu$h
crime family is involved in a massive rip off, transfer
of assets, wealth redistribution, fraud, whatever you
choose to call it that will impact ordinary AmeriKKKans
quite negatively. The current
mortgage/credit/monetary/asset meltdown is the result of
massive systemic fraud. Contrary to the media talking
head spin, the so called subprime crisis is not the
fault of irresponsible borrowers. How can someone get a
loan who has no job or get a loan for a house they
obviously cannot afford or secure a refinance loan that
is well over their means without collusion on the part
of the lender?
If it were just one
bank, one mortgage broker or one mortgage company you
could say well, that’s just one unscrupulous banker,
broker or an isolated event. But when it is nation wide
and you see it happening millions of times you know it
is deliberate. When I say nationally and system wide I
mean total collusion/conspiracy involving the Chairman
of the Federal Reserve Bank, the Fed itself, Wall Street
investment banks, commercial banks, the bond rating
services, mortgage companies, their brokers, insurance
companies, real estate agents, the media and insider
investors. This wide scale fraud involved whole
industries coupled with government acquiescence and
encouragement. So don’t fall for the okey-doke and blame
it on Pookie and Shanaynay’s bad credit.
Most AmeriKKKans
are totally unaware a “shadow banking system” even
exists. Certainly most black folks are clueless about
what is going on. That is why I write these types of
articles to let you know what is happening
|
What we
are witnessing is essentially the breakdown
of our modern-day banking system, a complex
of leveraged lending so hard to understand
that Federal Reserve chairman Ben Bernanke
required a face-to-face refresher course
from hedge fund managers in mid-August. My
Pimco colleague Paul McCulley has
labeled it the ‘shadow banking system’
because it has lain hidden for years,
untouched by regulation, yet free to
magically and mystically create and then
package subprime loans into a host of
three-letter conduits that only Wall Street
wizards could explain.
It is
certainly true that this shadow system, with
its derivatives circling the globe, has
democratized credit. And as the benefits of
cheaper financing became available to the
many as opposed to the few, placating and
calming waves of higher productivity and
widespread diversification led to
accelerating economic growth, incomes, and
corporate profits. Yet, as is humanity's
wont, we overdid a good thing, and the
subprime skim milk has soured.”
The Shadow Knows.
Bill Gross founder and Chief
Investment Officer of
Pimco a leading bond investment company
(Pimco.com) |
For an insider like
Bill Gross to admit a shadow banking system exists and
to point out its foibles as the cause of the current
crisis is extremely enlightening. But Gross is not
opposed to a shadow banking system. He just wants one
investors can have confidence in. Unfortunately the
ruling elites cannot be trusted to play fair. They have an
agenda that is not good for the country nor the economy.
Greed and “power” to shape and ultimately undermine the
economy are their motivation but the means is plain old
fraud using the banks, mortgage companies, rating
services and an unregulated shadow financial system of
hedge funds, derivative funds, offshore accounts and the
global market to weave a web of interlocking entities
based on leveraged credit and debt that are now
unraveling like a cheap sweater. This is all deliberate,
it is a variation of the “pump and dump” stock market
themes.
|
To add injury to insult,
on July 9, 2007 the SEC eliminated the so
called ‘Up Tick Rule’ which normally does
not allow traders to bet on the down (tick).
As a result, Wall Street investment banks
bet on the down - that subprime mortgage
investments would devalue and incur great
losses. As their own portfolios lost value
or went bankrupt, great monies were made
shorting same; some would say accelerating
the losses. There is nothing wrong with a
more profitable shadow mortgage banking
model per se. In fact, the economy can and
does benefit from more shadow banking. This
time, it needs to be supported by industry
and/or government minimum transparency,
liquidity and credit safety belts. The fact
that the Shadow Banking System’s model is
neither federally insured nor able to use
the Federal Discount Window makes it
vulnerable to market extremes and
unnecessary loss and asset devaluation
severities. It is simply not healthy to
ignore or deny that our secondary market
system is lacking a certainty safety-net for
the non-conforming (non-agency) loan and
commercial paper markets.
Who’s Zooming Who? Solutions
to the Hollow Promises of Wall Street’s
Shadow Banking System |
Note, the Security
and Exchange Commission the very government agency
charged with looking our for investors by making sure
the system is transparent and fair reversed its policy
and allowed traders to bet the mortgage market would
take a dive! Obviously the fix was in!! It was classic
pump and dump! Especially since they already knew many
of the loans were shaky in the first place. The fraud
was compounded and expanded when the investment banks
repackaged these shaky loans as exotic sounding
investment opportunities and they were given AAA rating
by the rating services. This made them extremely
attractive so the banks and mortgage brokers could sell
them to the suckers looking for huge returns on their
investments. This was systemic collusion and fraud. It
was accomplished by industry wide Wall Street investment
bank cooperation; all part of the ruling elites’ scheme
to tank the economy and reduce us all to debtor surfs
and wage peons.
|
The American
Securitization Forum in June 2007, as well
as most industry and government groups (SEC,
Office of the Comptroller of the Currency,
Board of Governors of the Federal Reserve,
Office of Thrift Supervision, Treasury
Secretary Paulson, FDIC, National Credit
Union Administration, Conference of State
Bank Supervisors, National Association of
Consumer Credit Administrators,American
Association of Residential Mortgage
Regulators, Joint Economic Committee
Chairman Schumer, October 2007, S&P Revised
Guidelines of October 11, 2007, Moody’s
Survey of September 21, 2007, etc.)
recommended loan workouts or “modifications”
as an important immediate step to the
current and impending mortgage meltdown.
However, the September 21, 2007 Moody’s
study entitled: Moody's Subprime Mortgage
Servicer Survey on Loan Modifications
“showed that most servicers had only
modified approximately 1% of their serviced
loans that experienced a reset in the months
of January, April and July 2007.” The
problems are multifold and complex. Not only
do we need to maximize loan workout
modifications by overcoming issues of
conflicting authorizations in Pooling &
Servicing Agreements, and failing lender and
servicing efforts, but we must align and
resolve conflicting disincentives among all
market participants from borrowers to
investors with law makers in between.
Who’s Zooming Who? Solutions
to the Hollow Promises of Wall Street’s
Shadow Banking System |
As you can see by
the extremely low rate of loan modifications
(adjustments) and the feeble plan the Bu$h
administration recently came up with, the ruling elites
have no real intention of resolving the problem or
assisting the millions of folks facing default and
foreclosure. Why should they they’ve already made their
money by selling the mortgages and by betting the bottom
would fall out in their rigged con game!! In fact this
is all part of their plan to destroy the working and
middle classes and the system by siphoning off and
transferring their wealth to the super rich.
This is the same
thing that happened during the depression before
Roosevelt stepped in to save the farmers and home
owners. (For that, the bankers plotted a fascist coup
against him, which failed but not one of them went to
jail! See Franklin Delano Roosevelt vs. the Banks:
Morgan's Fascist Plot, and How It Was Defeated) As
stated earlier the current fiasco is a variation of the
Enron and Savings and Loan rip offs. Only this time the
elites have not come up with a plan that calls for a
taxpayer bailout, probably because they want a deep
recession/depression. This way they can accomplish their
nefarious agenda. Meanwhile the shadow banking system is
imploding and because it is under the radar, the real
damage will go unreported by the corporate media.
Some of you are
saying “this is a bit farfetched”. Not really when you
consider the real US history or the fact 9-11 was an
inside job or that ethnic cleansing was one of the goals
of the Bu$h administration’s responses to Hurricane
Katrina. We need to stop pretending our government and
the people/corporations who bribe, control and tell them
what to do aren’t a bunch of crooks, psychopaths
warmongers and murderers.
* *
* * *
* *
* * *
* *
* * *
posted 13 December 2007 |
