Posts Tagged ‘toxic mortgages’

Last week the U.S. Department of Justice announced the formation of the new Financial Fraud Enforcement Task Force. Among other things, this task force is charged with bringing to justice those individuals who caused the worldwide economic collapse. Ummm… OK.  So…does that mean that nobody was minding the store before this? Does this mean that until now there were no laws governing the financial industry or does it just mean that the Department of Justice just wasn’t paying any attention to those existing laws?  Well, let’s see…if they are planning to find and prosecute those people who created the meltdown by deliberately misrepresenting the value of mortgages on the resale market, or if they will be going after the people who deliberately gave out “liar loans”, knowing full well that the people who were being granted the loans could never pay them back, or if they will be going after the people who fraudulently misrepresented their ability to pay for the mortgages in order to play “buy and flip”, I guess that means that there were already laws against these practices. Otherwise they would have to create new laws outlawing past practices, which I believe is frowned upon.

So…if there were already laws on the books that made it illegal to do all the things that led to the meltdown, I have a small question. What were the agents of the Department of Justice doing while the world was collapsing?  What were they doing in the years leading up to the collapse?  Come to think of it, what were all those guys over at the Securities and Exchange Commission doing while the world was hurtling toward the cliff edge?  I think we all know.  They weren’t doing anything to prevent it. Which is why when several people reported Bernie Madoff’s Ponzi scheme to the SEC they were ignored.  Of course, when Bernie’s scheme collapsed and a bunch of rich people lost everything, well…the government had to step in.  Didn’t they?

OK. So how many of those people at the SEC who deliberately ignored Bernie Madoff’s practices over the years have lost their jobs? Better still, how many have been prosecuted for allowing a massive Ponzi scheme to exist when it was their sworn duty to prevent such things from happening?  Or are we saying that no one had the duty to protect us from this sort of fraud? Or are we just that we’ll overlook this dereliction of duty this time?

OK, since we are on the subject…how many people at the Department of Justice are being investigated for doing nothing to prevent the worldwide economic collapse when it was their job to detect and prevent all the sorts of fraud that led to the meltdown?

And, if we want to start looking within the government for people who are culpable (and why shouldn’t we?) should we just confine our investigation to the ranks of the Department of Justice? Does that make sense?  Let’s face it.  This was a truly massive exercise in deception. Our big banks (the ones we saved because we can’t live without them) were selling billions (trillions?) of dollars worth of worthless mortgages to any sucker in the entire world who would be foolish enough to invest in them. Now, I find it hard to believe that there weren’t a lot of people higher up in the former administration who knew exactly what was going on. I expect that most of the wealthy bankers knew too.  All the rich folk were playing a sort of real estate roulette via misrepresented values of U.S. real estate and the mortgages that encumbered these properties.

So, now we have a new Task Force.  Oh, good.  But somehow, I just sort of feel that this small effort is not going to clean out the Augean Stables of Washington or Wall Street.  More likely, it will be more of the usual Washington window dressing.  Oh sure, they’ll probably nail a few unfortunate suckers who were stupid enough to get caught, but the big racketeers who were behind this gargantuan fraud? I don’t think so.  The oligarchs are too deeply embedded, the invisible wealthy have too much power. The real perpetrators will not only get away with the destruction of the world’s economy, they will retain the profits they made at our expense.  It’s just how our system works.

So, to the newly rejuvenated DOJ, I say, “Give ’em Hell!”

But for me, frankly, I feel a bit like poor Vladimir and Estragon, waiting endlessly for Godot.


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The news for Bank of America and Citibank  today is grim. Their stock values are tanking, investors have lost confidence, and many fear nationalization.  I guess they think that nationalization would cause them to lose all of the value of their investments in these banks. Wait a minute. In the last five years Bank of America stock has dropped about 92% and Citi has dropped about 96%. How much more is there left to lose? These two banks, and others too, are on life support.  They are being fed on an I-V of our tax dollars, otherwise known as the Great Bank Bailout.  It’s time to take a step back and review the patients’ prognosis.

They are suffering from massive infections.  Their circulatory systems are infected with toxins for which we have no cure.  It’s like bank-eating bacteria.  These patients are going to die without more truly massive transfusions, but no one wants to donate any more blood. And why should they? What have the banks done for us lately? Aren’t they largely responsible for this massive infection that has crept around the world, destroying the economies of country after country?  Can massive blood infusions even save the patients? They not only need new blood, they also need some sort of antibiotic to kill the infection and to prevent future infections. But the banks say they’ll take the blood, but their religion prevents them from taking antibiotics.  No medicine for them; just blood please.

It’s time for the doctor to tell these poor infected banks the truth.  They’re going to die.

OK. So now what do we surviving relatives do? Should we immediately take over the banks, i.e. nationalize them, before they die? And if we do that, what to we do about the infected, toxic tissues in their vaults?  And what about hidden toxins we may not even know about yet? Does it make sense to pour new blood into these son-to-be dead banks and then get the infection ourselves? No, it doesn’t. It’s like there’s plague on Wall Street.  We can’t help them anymore.  Let them and their investors go and meet their maker.

Meanwhile, while the banks take their last, gasping breaths, we (meaning the government – remember government of the people, by the people, and for the people?  That’s us.) start our own National Banks. We start fresh with new blood, that is to say: money.  Sure, it’s our tax dollars, same as in the bailout thing.  But this time we are not buying toxic waste or flushing money down the toilet. We are creating our own banks with no toxic assets, nothing hiding in the closet, nothing lurking in the dark corners. Just a brand new, government-operated set of banks that will meet all of our banking requirements in a completely honest way while the sick banks dissolve into pools of coagulated ooze.  Thankfully, unless we are investors in those pathetic banks ourselves, its not our problem.

Now here’s the real beauty of my plan: the Republican Party has to wholeheartedly endorse it because it is founded on two of their fundamental guiding principles: 1) You Are On Your Own 2) We are not paying to get you out of a mess you got yourself into.

Imagine that. I kind of always thought of myself as a Democrat, but now that I look at it this way, maybe I have some Republican values too.  Maybe I’m actually more like President Obama: I think I have found a truly bipartisan solution to the banking crisis.  President Obama, are you listening? I think the Republicans will go along with us on this one. No, really. How could they say no?

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OK, so Treasury Secretary Geithner has revealed his plan to save us from the toxicity of the banks.  Sort of anyway.  He was a little short on details, but he seems to have a vague, multi-pronged, approach that has, more or less, scared the Hell out of Wall Street.  One of the ideas that doesn’t exactly seem to have people clamoring to be first in line is the “bad bank” sort of idea that would buy up all those toxic mortgages from the dying banks. You know, the ones with those executives who made all those idiotic investment decisions, for which they were only paid about $30 million or so each year.  Maybe they should have been paid more. I’ll bet they would have exercised better judgment if they had only been paid a lot more.  Right?

Speaking of better judgment, I wonder who’s going to actually buy all those toxic assets that might be worth anything from zero to a million dollars or more?  Imagine being able to buy the mortgage for a foreclosed property in Detroit that sold for $200,000 three years ago.  Of course the building is sort of a fixer-upper now, I guess you might even say that about the entire neighborhood too, but I would bet you could get it really cheap. Just don’t ask me who you could sell it to or when.  Anyway, that’s the plan to get the poisoned banks off of life support.  The best part is that you too, yes you, the average American citizen, will soon be able to buy these toxic offerings so that the government won’t be the only ones propping up the U.S. banking industry.  Think about it – it could be the steal of a lifetime! The question Wall Street is asking is: who’s doing the stealing and who’s getting robbed?

While Geithner is striving heroically to save the banks, it seems that the smart money is betting against him. The Dow fell almost 5% today after he revealed his plan, which, it would seem, is sort of a vote of no confidence, I think.  The crowd is voting with their feet and heading for the exits. Elvis has left the building.  But nobody wants to say out loud what they all know inside: it’s the banks. You know, the banks that gorged themselves on all those delicious mortgages and then found out they were toxic? Really toxic?  Trillions of dollars toxic?  They’re dying. The banks are dying.  I guess it’s like eating ten pounds of arsenic or cyanide or fast food and still hoping you’ll somehow live, but everyone knows you won’t make it because you just took in too much poison and no one has the cure.

The simple fact is that trillions and trillions of dollars have been lost by the rich folk, and Secretary Geithner and the U.S. Treasury just don’t have enough money to save them. The poisonous real estate loans are slowly killing them, but no one wants to admit that the patient can’t be saved.  The only solution is to let them go, Secretary Geithner. Let them go to that big vault in the sky. They’ll be happier there.

But for us who are left behind, there is hope!!! We’ll bury the banks deep underground with all their toxicity and start fresh all over! We won’t have to eat their toxic mortgages! We’ll begin again with brand new National Banks! Banks with rules and regulations that are enforced! Banks that exist for the benefit of all the people and not to enrich the rich folk! What a novel idea!

The signs of death are all there Secretary Geithner. You don’t have enough anti-toxin in all of D.C. to cure the banks, and neither do the American investors.  You just have to let them go.  I know it’s difficult to see them die, but they’ve been bit by their own deadly snakes and there’s nothing we can do now.

Don’t worry, just let them go and try to get some sleep, you’ll feel better in the morning. Tomorrow is a new day.

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Messrs. Paulson and Bernanke peered into their crystal ball late in the dimming day and, instead of seeing the tidy balance sheet of the U.S. Financial Market they had hoped for, they instead saw a frightening vision of certain doom.  Huge quantities of Old Wall Street Wealth were going up in flames. Distinguished banks, with names that hearkened back to the glory days of Scrooge and Marley, were being swallowed up in darkening pools of coagulating, red ink.  The largest insurance company in the world had collapsed into a quaking heap of rubble, its management suddenly realizing that it might actually have to pay out billions, or even trillions, of dollars in claims for millions and millions of toxic mortgages that would never, ever be repaid. Anxious investors were about to make a run on the money market funds of the biggest investment houses and everyone at the investment houses knew they couldn’t possibly be paid. The gilded facades of the brokerage houses were literally melting, and little rivulets of pure gold were turning into gushing torrents as they spilled over the curbs and drained into the dirty gutters of The Street.

An emergency, late-night, meeting of the leaders of the financial arm of the government and the leaders of Congress was convened.  The President was consulted for well over a full minute!!  Something had to be done, the solid, upper class, millionaire and billionaire investors of the United States who had expected to at least quadruple their wealth by owning vast amounts of poor people’s mortgages with ridiculously high interest rates, had instead accidentally swallowed something more deadly that Rasputin’s arsenic, something more smelly than an old cat’s hairball, something alive was living and eating them from inside their stomachs!  Something truly Alien.  They knew their sin.  They had fallen from Grace and gorged on the forbidden fruit of toxic mortgages.

The intrepid Messrs. Paulson and Bernanke addressed the crowded room of government servants and Congressmen and told them of their horrifyingly prophetic visions and the wide-eyed, quaking servants pleaded, almost with one voice, “Lords of Finance, tell us what to do!”

“Feed the toxic mortgages to the taxpayers!” was the reply.  “Feed them to the taxpayers!  It is the only way to save the Elite of the Street.”

“The taxpayers?” the servants said with a smile and looked at each other in wonder at the wisdom of the Lords.

“Indeed, but it must be done quickly for our vision is clear: before the first rays of today’s sun alight on the golden bull of the Street the damned must devour all the toxins, and it will be a burden on them and their children and their childrens’ children till the crack of doom. It must be done, or we, the Wealthy Elect, shall perish, penniless and without power.”

A hideous groan rose up from the very bowels of the servants. “Ahhh! Stop! In the name of all Republican wealth, stop! It shall be done! It shall be done!”  And so it was…

Tonight, all good Republican children can sleep soundly in their little mansions knowing that Daddy and Mommy’s millions and billions of dollars are safe once again.  The lowly Democratic taxpayers, who don’t get the life-saving tax breaks of the wealthy, have eaten the toxic mortgages by the millions, indeed they have been ingested by the hundreds of millions of taxpayers with hardly a whimper – and this is as it should be, for everything is once again in its proper place.

And now children,  all is well again all over the world.  The sun hastens to return to the the place where it last arose.  A new day is dawning, another glorious, money-making day in the golden streets of the land of the free and the home of the brave. And wealthy Republicans can breathe a sigh of relief while they dream dreams of even newer and better ways to grow and reap their fields of gold.

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