Monday, October 25, 2010

Foreclosure mess and the fraud of it all

TheDC OP-ED: One nation, under fraud | The Daily Caller - Breaking News, Opinion, Research, and Entertainment

This article is perhaps the most important article I have read in years; an articulate non-technical explanation of the foreclosure mess.

It is also the most depressing.


First, these banks shredded mortgage documents and titles? I am gobsmacked.

Unanimous support by government of the 'electronic system' legislation, vetoed by Obama in the 11th hour, highlights that government is way over its head when it attempts to regulate our lives. It is also captured.

My ranting regarding disclosure of financial information just quadrupled down.  For the $233m (mainly in the top 4 'banks') in derivatives on derivatives must carry risk that has been allowed to be off-Balance Sheet. These banks are bankrupt.  This is an incredibly important in this story because if those derivatives were forced to be on the Balance Sheet and valued, any idiot could have seen they were bankrupt.  To say they could not be valued, or they are so 'sophisticated' or 'cool' that they prevent valuation, is its own indictment; if they can not be valued, what are they? Markets require information to work. Markets require simple rules.

Call your bank. Require that they produce a mortgage title. It is that simple. It is your right. If they can not produce one, then the very clear question is whether you should continue to make payments to them. Rest assured, they would do it to you.

Who will take these banks, and their lawyers, to court for this?

The government now has doubled down on its moral hazard. For it has bailed out illegality with taxpayer money. It is that simple.

It is about the debt. The article's comparison to Japan is accurate. It was always about the debt. Bailing out the banks prevented trillions of dollars of debt from being repriced. But that is exactly what the market is trying to do. Almost a generation ago, traders like Soros became rich betting against government intervention to shore up falling currencies, knowing that it was an impossible venture. Governments no longer attempt such folly.

But they have not been above attempting to shore up bankrupt firms. It is the same thing. And the economy will never revive until that repricing occurs.

Can the economy run without the large banks? Does Main Street need them? How many large corporations would fail without them?

We may find out.

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