Why do you???

Why does anyone???

Really, why do you???

Think about it, really really think about it…

“I haven’t seen any
widespread problem”


I am not sure why anybody does anymore…

From The Market Ticker ®

The Market Ticker – Why Do YOU Obey The Law?

I’ve got to ask.

It’s a tough question, if you think about it for more than the usual reflexive three seconds that Americans typically put to their endeavors.

And it’s a fair question too.  Especially given this:

As Washington rushed to nationalize the US auto industry with $80 billion in taxpayer “rescue” funds and avoid contested court termination proceedings, the White House auto team schemed to preserve UAW members’ costly pension funds by shafting their nonunion counterparts. The nonunion pensioners also lost all of their health and life insurance benefits.

I wrote about it at the time.  And it wasn’t just the non-union pensioners either – it was also all the bondholders, who got buttsexed while the UAW got put “in front of the line” in terms of preference of claims – a place they were not entitled to as a matter of law.

In other words: Obama’s team of auto-crats — stocked with Big Labor-friendly appointees and self-admitted know-nothings about the car industry — decided to “cherry pick” (one Obama official’s own words) which obligations the new Government Motors company would assume and which they would abandon based on their own political whims and fealty. Due process and equal treatment of union and nonunion workers be damned.


The holders of GM (and Chrysler) debt, who were entitled to preference as a matter of law, also got screwed.  Pensions and retiree medical benefits are not entitled to preference in this instance – the usual path is for them to go into the PBGC and get whatever is there to get.  “Topping up”, as was done in this case, is commonly called “fraudulent conveyance” in bankruptcy parlance and it is illegal.

But this administration, like the one before it, doesn’t give a **** what the law says.

Thousands of non-union workers got illegally ****ed so the union cronies could be paid off.

It doesn’t end there, of course.

As I have repeatedly pointed out, starting with the very first Tickers, this sort of looting wasn’t confined to a few people.  It was pervasive.  Indeed, in one of the very first Tickers I pointed out this fact about all the abusive mortgages:

But under the fully-indexed rate, which he will be required to pay in a year or so, his DTI is 60%! You know in advance that he cannot make that payment because you qualified him originally, and you knew his DTI at the time. What are the odds that he will earn TWICE as much money in a year? For 99% of the borrowers – ZERO.

You’d say “Heh, that’s fraud right up front!” But that’s not really the worst of it, nor is it why I believe that perhaps – just perhaps – these guys might have breached the RICO (yes, Racketeering) laws.

Here might be why you made that loan – You know that Joe, in a year, now owning that house, will be forced to come back and get a NEW mortgage in another year! This will generate fees for you, for the mortgage broker, for the appraiser and for the title insurance company.

Got it?

The “industry” knew full and damn well that these loans were unsustainable.  They were not mortgages in the actual meaning of the word and they were fraudulently contracted in that the originators knew for a fact that 99% of the people who took them could not possibly pay as agreed.

I also pointed this out:

A “1003”, which is the loan origination document on which you state your income and assets, is the key item here. It is a federal offense to lie on one. As an applicant you have to sign it.

Now here’s the problem for the lenders – they have the right to verify the statements you make on these papers. They’ve not been doing it because they know that it would take too much time and further, I believe they know that they’d uncover massive fraud! Further, taking application is a cost. Lenders only get paid if they fund loans! So it is to their distinct advantage not to verify – and thus have to turn down – these loans.


Let me restate that again so that everyone gets it – every single ALT-A lender is at risk of having every defaulted loan – no matter how long it has been since it was securitized and sold off – PUT back on them if there is any material misstatement in the paperwork!

NOW we are starting to see the ****storm I was talking about beginning to happen.

But what we haven’t seen is any sort of prosecution of the lenders, all of whom knew FULL WELL that these loans were being issued fraudulently.

Every last one of the big banks knew.  Not speculatively, factually.

They didn’t care.  They didn’t care because in the 1990s they pulled the same crap with issuing S1s and IPOs with a boatload of knowingly-false claims about Internet growth and not one of them was indicted for doing it.  These claims were the essence of the business plans presented in these filings and IPOs.

Once these loans started to blow up the fraud was compounded though, because these very same banksters had failed to get rid of the hot potato before it began blowing up in their face.


First, by refusing to report the loans as delinquent and continuing to mark them to the fantasy belief that they would be collected in full.  This is fraud too – a fraud that was prohibited under “Mark-to-Market”, and which threatened to sink the banks.  All of the big banks.  So the “industry”, along with Gethner, Bernanke and others, extorted Congress who in turn extorted FASB to make lying about the current values of loans LEGAL, so that nobody would go to prison for doing so.

President OBAMA put his weight in the form of Tim Geithner behind this and refused to stop it – both then and to this very day.

That act – refusing to count loans as delinquent that are, and refusing to report them to credit agencies – is still happening. I get reports almost on a daily basis from people who have failed to pay for months – and sometimes more than a year – without anything being reported late on their credit.  This too is fraud (filing a false report with a credit agency, either claiming a debt is paid when is not or claiming it is not when it has been) but nobody is being prosecuted for it.  There are literal millions of these crimes that have been committed thus far and thousands more care committed each and every day, all by the major financial institutions.  I believe it is being done so as to support the fantasy model marks of these loans on the books.

Finally, when the cash flow runs out we find out that these very same financial institutions are filing affidavits by the literal tens of thousands that they and their proxies in the law firms they’re hiring have not even read.  That’s fraud upon the courts and it’s fraud upon the homeowners and borrowers – all crimes as well.

But there are even more crimes involved here.  The “lost note” affidavits being filed (in place of the actual wet signature documents) are in many cases also frauds.

The loan paperwork in these cases wasn’t lost – it was intentionally destroyed or shipped overseas and is unrecoverable.


There is a dramatic and important legal difference between accidentally losing something (e.g. due to a warehouse fire or similar thing beyond your control) and an intentional act of destroying a piece of paper that under the law of the state in which the foreclosure is being prosecuted you are required to possess in order to foreclose.  In the first case equity demands that the court accept your substitute, as something entirely beyond your control has occurred and it is unjust to penalize you for what amounts to an Act of God.

But in the latter case you’re entitled to no relief at all, any more than I’m entitled to relief if I burn $100 bills and then try to claim they’re “lost.”  Well, lost they may be, but the act of destruction was entirely at my own hand, was intentionally undertaken, and I did so with full knowledge that doing so under the laws of the state in question would render the note and security interest permanently separated.

What we now hear is (finally) some attention from state authorities:

Iowa, which leads an 11-state working group of attorneys general and bank examiners exploring ways to prevent foreclosures, opened an inquiry yesterday.

“The integrity of the foreclosure process is of utmost importance and we are very concerned by the issues that have been raised regarding Ally Financial’s treatment of affidavits”, Iowa Assistant Attorney General Patrick Madigan said.

Texas Attorney General Greg Abbott opened an investigation “early this month,” said Tom Kelley, a spokesman for the office. Illinois Attorney General Lisa Madigan asked for a meeting with the company and requested information about how homeowners in the state have been affected, according to a statement.

The action by officials in the four states follows an announcement by Florida Attorney General William McCollum, who last month said he was investigating three Florida law firms handling foreclosures.

I’ll believe it when I see it.

We’ve already got proof that these foreclosure mills have claimed the same note in two separate actions, which means that one of them is clearly fraudulent.

But what these states must recognize and demand is that for those instances where a “wet signature” and unbroken chain of assignment be demonstrated (and that’s most states), that any entity which intentionally destroyed that chain of assignment and signature has forfeited by it’s own intentional act any right of recovery under the statutes allowing foreclosure.



This does not mean that the debt “goes away.”  To the contrary.  There’s still a debt, but the link to the deed – that is, the unique status that gives the creditor the right to evict someone from their home – has been lost.

It was lost not by random chance, not by an Act of God, but rather by the willful and intentional act of the creditor, who by his own hand intentionally destroyed that connection.

Therefore, what we have is a common signature loan, and I’ve already explained how to deal with this.

  • The debt is in fact unsecured, as a consequence of the willful and intentional acts of the creditor who turned the note, by their own hand through that intentional and willful act, into an unsecured debt.
  • The MBS holders were thus defrauded by willful and intentional acts of either the banks themselves or persons under contract and control thereof, who intentionally destroyed the security interest that they claimed to have held at the time of the issuance of the MBS and further claimed they would continue to hold.  Go look at any of these securitization documents and offering circulars – all contain a representation and warranty that the notes taken are in good recordable form and contain a valid security interest.  In many cases this was false at the point of origination as the deeds and/or notes were taken in blank, which is not permissible in many states in the first instance. In still more cases the linkage between the security interest and the indebtedness was willfully and intentionally broken by these institutions when they intentionally destroyed the original paperwork (for those states requiring a “wet signature”) and/or willfully and intentionally failed to document each and every transfer of same (for those states requiring an unbroken chain of both title and conveyance of the security interest.)  Between the two requirements this covers most of the non-agency MBS out there.
  • The MBS holders have every right of recovery, but not against the homeowners – against the BANKS and their agents in each and every instance where the banks and their agents broke the linkage between the debt and the security interest. Their right of recovery for the debt held against the homeowner is that allowed for a signature loan which is what they now actually hold.  They can sue to collect and the homeowner can file bankruptcy.  In states where a bankruptcy exemption exists for a homestead (e.g. primary residence) the homeowner is free to use it.  The rights and limitations accorded these creditors and debtors must be construed in strict accordance with the law.  Where the trustees or originators intentionally undertook acts that violated the security linkage between the note and deed, homeowners cannot be held legally responsible for the acts of a third party who willfully destroyed his own right of recovery via foreclosure.
  • Those institutions who sold MBS into the market with willful and intentional violations of the covenants and claims in the offering circulars, or who intentionally did so post-sale, must be held to criminal account. These are crimes exactly as if you stole money out of a bank’s vault in that they represent willful and intentional destruction of the value allegedly contained in these MBS for which the securitizers were paid in good funds. For those acts taken post MBS sale the offense is particularly egregious in that the MBS holder certainly neither consented or had a way to know before he or she purchased that MBS that their security interest would be wantonly and willfully destroyed.
  • The states need to start doing their damn job. Where violations of criminal fraud statutes have occurred, including frauds upon the court, frauds upon homeowners where assertion of a valid security interest is made that does not actually exist as a consequence of the willful acts of the creditor and his or her agents, along with other violations of statute criminal indictments must issue and any judgment issued against a person in these states as a consequence of these frauds must be voided. The title issues that have resulted from these willful and intentional acts make it damn near impossible to know that any home sold or resold in the last five years has an actual clean, marketable title.  This has to be resolved and the securitizers and MBS trusts must be held accountable for cleaning it up – financially and otherwise!

If the government – at all levels – state, local and federal – wants we, the little people, to continue to obey the law, instead of declaring that we will act as they have acted, that we will rob and pillage to our heart’s content – then this **** needs to be stopped RIGHT NOW and the millions of Americans who have been repeatedly ass****d as a consequence of this crap must be made whole.

I am well-aware – fully so – that doing the above will likely force Sheila Bair at the FDIC to exercise her alleged new-found “resolution authority” for some, if not all, of the major banks.  I’m also well-aware that there are many large foreign banks that would likely be severely impacted or even collapse as well.  And I’m well-aware that such would produce a significant but short term dislocation in the economy.

Nonetheless, it has to happen if we are going to fix what’s wrong with our economic system.  We must clear the excess debt from the financial system that was originally issued and has been covered up through the direct and indirect machinations of fraud, if we are to ever return to a stable economic path.

Finally, beyond the realm of practical necessity, there is the matter of justice.

You cannot have a productive nation in which a handful of people get to financially **** the population any time they’d like, irrespective of laws allegedly forbidding same, and expect that the population at large will sit still for this on an indefinite basis.  Eventually the pain they are forced to endure as a consequence of this abuse will become so severe that they will judge that they have nothing left to lose – at which point all resemblance of the public’s willingness to live in a fashion that comports with “law and order” WILL VANISH OVERNIGHT.

There IS a breaking point for the people in this country.

There IS a point beyond which the people will simply decide that lawlessness is the best, proper, and highest use of their resource.

The longer the government continues to allow the “big players”, including itself and its favored cronies, to keep abusing the people the higher the risk is that a critical mass of Americans will simply decide they’ve had enough of this **** and will not take it any more.

History tells us that there will be no warning before that critical point is reached, and that once it is reached there is no turning back, there is no ability to apologize or negotiate, and there is no ability to “fix it” – that all such considerations once beyond the “event horizon” go out the window.

I do not know where that point is in America, but this much I do know: I DO NOT WISH TO WITNESS IT.


Source: The Market Ticker

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