Archive for October, 2010
Or, How To Sweep The Real Issues Under The Carpet
A rising stock market and rising gold price is a product of currency induced cost push inflation.
If you have eyes to see the future is hiding in plain sight.
Click image to open Martin Armstrong’s latest in PDF format
[From Nice Try But No Cigar!]
– by Jim Willie
October 20, 2010
The Chinese are clever people. Their leaders play a good game of chess in the global scramble for commodity supply and financial dominance. Their patient strategy has tied the arms & legs of the USGovt, using their own debt securities as the binding rope. The accumulate almost reached a staggering $1000 billion, the ugly fruit of the Low-Cost Solution to invest in China from a decade ago. While much attention has come to saber rattling over currency manipulation and tiny 25 basis point interest rate hikes, even battles over rare earth metals, something has been happening in Europe of importance that involve a Chinese back door to dump USTreasurys.
To be sure, the USGovt deficits and monetary policy have invited a selloff in the USDollar. In the latter months of 2009 and early months of 2010, the Jackass wrote frequently about the absurd notion of an Exit Strategy from 0% and Quantitative Easing. The USFed lost heavy credibility and looked just plain obtuse and braindead. The Japanese ZIRP and QE twin diseases were not the monogrammed cufflinks the USFed would choose for sartorial splendor. My forecast was for no Exit from 0%, but rather an embrace of QE2, the exact opposite. We have it. Only the details remain on the QE2 initiative, including lapel pins to match the cufflinks for Bernanke. But the lapel pins are pure gold and silver, in complementary style. Bernanke looks scared, haggard, and a little desperate, like a captain on a ship listing to port and taking on significant water in the lower chambers. At least the water is at zero cost.
The Jackass forecast of QE2 was correct and quite easy, since fundamentals drove the call, not wishful thinking or the errant but popular notion that time heals all financial wounds. Not this time, since almost no effort to reform or debt restructure have occurred. The Financial Regulation Bill handed the USFed more power, not less, another correct Jackass forecast. That too was an easy call, since the banker lobby would obviously write the legislation. What the people start, the bankers finish, as the frustration mounts. The Exit Strategy was shown to be a ruse, pure hope laced with wishful thinking and outright deception. My expectation of a Plaza-2 Accord is that it too will never happen, since it requires significant cooperation among the major and some minor nation central banks. To be sure, an orderly decline in the USDollar is urgently needed. It will not happen since the USGovt and USFed policies are utterly hostile and destructive toward the monetary system and in particular toward the USTreasury Bond holders. They are the USGovt creditors, and the USGovt is spitting in their faces, kicking their shins, and elbowing them in the groin, while making wild accusations at them. The Competing Currency War will continue, accelerate, jump tracks, turn more hostile, and even pit former allies against each other. The spirit of cooperation between Japan and China has been totally de-railed. Europe has grown angry over a higher Euro exchange rate, one certain to slow the EU Economy. The upcoming G-20 Meeting in South Korea already has one member planning to shun, Brazil.
PREPARE FOR TARP-2
The mortgage world is collapsing quickly. The big US banks are facing a fall over the precipice again. My expectation is for a grand TARP-2 initiative to bail out the big banks, soon to come, already introduced as a topic of discussion. The USFed will do its usual denial, then in a few months mention its urgency. This second chapter program will cause much more problems and generate extreme anger even with the USCongress. The first TARP was caused by market declines. This TARP will be motivated to aid in contract and securities fraud. The same old arguments will be trotted out about Too Big To Fail Banks, systemic failure, depression, and an end to American society as we know it. The constant is continued dominance of the USGovt finance ministry and Congressional finance committees by the banking industry and war industry, intertwined. Insolvent if not bankrupt entities control the USGovt finance, including its Printing Pre$$. The TARP-2 will pass but not before at least three or four months of haggling. The focal point will be Bank of America and JPMorgan Chase, two important banks. Part of the political cover will be that Bank of America did the USGovt a favor by taking on the Merrill Lynch and Countrywide toxic load of debt, and is weighed down by its burden. Part of the political cover will be that JPMorgan Chase is weighed down by the burden of size and broken businesses. They control the USFed because they run it. The USFed will come out with research on why the TARP-2 is necessary and how the world will end without it, written by JPM analysts. So the USGovt will come to their rescue with TARP-2, perhaps a $1 trillion package of bank aid. One must wonder if Treasury Secy Geithner is being set up for a fall. The put-backs of large blocks of credit portfolios have been demanded by PIMCO, Blackrock, and the Federal Reserve of New York (the Wall Street front). Geithner led the FRB of New York during the entire mortgage bubble episode, the sumo regulator overseeing the bond fraud. The bank mostly on the damaged receiving end is Bank of America.
In the end it will pass with at least $500 billion in new big bank rescue aid, which will require the big banks to provide strong meaningful home loan balance reduction. The package will contain a provision to kick in, which will deliver another $500 billion if & when certain contingencies, all assured to occur, since a ripe $1 trillion bank aid package would cause a firestorm. A key provision to win over public support will be promises by the big banks to finally give home loan balance reductions, what the people demand. That will enable the American public to agree to the package, except one year later they will be shown more revolving doors and dead end corridors. Pennies will be offered to homeowners and their loans, when $100 bills were expected, inciting anger to the point of nationwide demonstrations. The major challenge for the USGovt, and the masters on Wall Street, to interrupt the current flow of cases before the courts, especially the class action RICO cases. They must lure the victims into the revolving doors and dead end corridors. The legal actions have taken center stage, a development that has raised the stakes considerably. Look for Fannie Mae to play a key role in the TARP-2 package. They will likely be the Bad Bank for wrecked home loans to a much greater degree, even the benefactor to court settlements where concessions are given to the victims. They will portray themselves as the New Resolution Trust Corp, from soup to nuts.
Then by the end of 2011, the nation will embark on QE3, since nothing will be fixed and the USEconomy will by then be in a nightmarish whirlwind of price inflation, recession, and declining wages. It was called Stagflation, and it is coming in fierce style. The USFed overlooks the high cost of Quantitative Easing, namely higher price inflation without the benefit of higher wages. In fact, a quantum jump up in the entire cost structure is in the works, along with another wave of corporate shutdowns and failures. So higher costs but lower wages, a monstrous squeeze on corporate profits and household discretionary funds, another chapter in the crisis to be written by architects of failure. Such is the utterly obvious outcome of QE2. Behind closed doors in conference rooms laden with polished marble or hardwood, the banking leaders realize the squeeze coming to the USEconomy from QE2. The movement to have Fannie Mae serve as the Politburo property owner for a sizeable slice of Americana will be in full swing. From capitalism to marxism by way of fascism.
NEW DOLLAR SWAP WINDOW (MADE BY CHINA)
China is dumping USTreasurys by way of the Europe, using a back door whose design was handed to them. Their support of the Greek Govt debt jammed that door wide open. Thus the rising Euro currency without justification, one of a few factors. Usage of the window has led to an indirect Chinese forced devaluation of the USDollar, an extremely clever action. China has never appreciated being improperly called a currency manipulator. From 1999 to 2005, the USGovt gave full support to the Chinese Govt, as the Yuan currency was pegged to the USDollar. The USGovt saw the policy as providing stability to the USDollar at a time when foreign investment by US firms in the Middle Kingdom was brisk and strong. In a three-year period, the US multi-national firms invested $23 billion in Chinese industrial plants, like the 160 Wal-Mart plants. The dimwitted USGovt and nitwit US economists eagerly awaited the great bounty from Low-Cost solutions that exploited cheaper Chinese labor, lower tax structure, even absent regulations. A decade wave of corporate profits evaporated, amidst giant executive bonuses and the housing bust. The US economists did not plan ahead, to a time when the Chinese Govt would accumulate $2.5 trillion in savings, held as USTreasurys for over $800 billion. Suddenly, China is a currency manipulator. However, the vast monetization initiatives enacted by the USGovt and its partner USFed with $1.5 trillion in freshly printed money to support the US$-based bonds which few foreign creditors wanted, that action is highly manipulative to currencies!!
The missing piece is that the Wall Street maestros have tossed gasoline on the currency bonfire is the multi-lateral agreement by USGovt creditors. They have never been consulted on monetary inflation, debt monetization, and austerity measures. The United States acts unilaterally with great privilege, as they claim some of sort of glorified mission to defraud the world. The Chinese apparently have a plan to swap their USDollars for Euros, using the Greek back door. The Greeks have always favored backdoors socially, whether for tax evasion or preservation of certain orientations.
A well placed banker source in Europe passed an opinion along. The Jackass was aware of the Chinese nibbling with purchases of Greek debt. However, the initiative had a clever motive for an expanded role. The German Euro supporters have been caught flat-footed, inattentive to guard the door. By refusing to permit a default in Southern Europe of sovereign debt, the Euro Central Bank and EU leaders have exposed a vulnerable pathway soon possibly to turn into a highway. The banker source wrote, “After having de-facto bought Greece, the Chinese are now members of the Euro system or Greece is now a member of two currency systems, to be used at will. So China will now use its USTreasury Bonds to buy Euros, which will be used to buy Greek Govt bonds. These bonds will be guaranteed by Germany. This is very clever and no one saw the dual usage of the system, except a few very clever people. The politicians in Berlin and bankers in Frankfurt were sleeping at the wheel as usual and now will pay a heavy price.” It goes deeper. Greece has agreed to support EU recognition of full market economy status for China, while China has agreed to support the call by Greece for UN mediation over Cyprus. The Greek narcotics routes to US-run NATO bases will continue.
The Chinese have essentially created a Dollar Swap Window, a small one admittedly. It will grow over time. Imagine a USGovt program started with certain intentions. As the months or years pass, the program is fed, grows, and expands the mandate. Then it flourishes into a huge bureaucratic creature, a monster of sorts. Attempts to rein it in fail, and it receives even fatter budgets and more responsibilities. Everybody questions how it happened. Transfer that runaway thought, the development process of the Greek Dollar Swap Window. The Europeans eagerly opened the window for China to invest money in Greek Govt debt, which European nations did not want to commit to. So China has a small pipeline in which to shove USTreasurys, to convert them to Euros will full blessing and approval of the Euro Central Bank, and to buy a stake in Greece. Beijing could not give a dragon’s big toe of concern for Greece. They wanted a window to dump USDollars. Next look ahead, which is something US economists can never do without deceptive lenses and lying motives. The Chinese might invest in Spanish Govt debt, some Portuguese Govt debt, and later some Italian Govt debt and even some French Govt debt. Leave Ireland alone, a lost cause, too clumsy and foolish in the emerald isle. They adopted the suicidal IMF austerity plan, and are on a crash course with the dustbin. The rescues of their big banks will topple the nation and lead to systemic failure.
So China has found a clever back door Dollar Swap Window. So far it only has a Greek label on the glass with Greek trucks on the dock. Soon the Latin debt will open up adjoining windows in an expanded Dollar Swap Window facility. The USFed and USDept Treasury was not invited to this planned project. The key point upcoming is not the volume of European sovereign debt to be covered by China, even at discount in implied writedowns. The key point is other broader usage of the window. Watch and observe how the Chinese will eventually be accused of swapping far more USTreasurys through the window than purchased Greek Govt debt, or any other sovereign debt. The Chinese will jump to dump as much USTreasurys as they can before the window closes and is shut by Goldman Sachs, errr the USGovt. In the meantime, the Euro currency rose to touch 141 per clownbuck unit two weeks ago. That is a rather impressive run from 127 in early September. The European fundamentals do not justify such a big 11% move. At 140 the exchange rate is still lofty. If the Chinese expand the usage of their clever new Dollar Swap Window, the Euro could rise to 150. Such is the heavy price paid by the EuroCB and EU leadership for refusing to permit a Greek Govt debt default. The Open Door Policy to China found a back door !!!
REVOLT AGAINST THE USDOLLAR
China is dumping USDollars on a relatively hefty scale. They are buying resource properties. The volume is large in absolute standards, but minor when considering the Chinese rack up monthly trade surpluses with the United States over $20 billion. China has agreed to pour another $7 billion into Brazil’s oil industry. A recent deal with Repsol of Spain to buy a 40% of its Brazilian business gave China access to the estimated reserves of 1.2 billion barrels of oil & gas in Brazil. The price premium paid to Repsol Brasil, which values the company at nearly twice previous estimates, is a sign of two factors. China is willing to pay up in order to lock in its future energy supplies. China might regard its USTreasurys as over-valued, and therefore discount them. This year alone, Chinese companies have laid out $billions buying up stakes in Canadian oil sands, a Guinean iron ore mine, oil fields in Angola and Uganda, an Argentinian oil company, and a major Australian coal-bed methane gas company. To be sure, some bids have been interrupted, like with Canada’s Potash Corp and Australian giant mining firms. The aluminium giant Chinalco failed in their attempt to buy Anglo-Australian Rio Tinto in 2009. China must keep itself supplied, and feed its growth. China has grown to become the second largest oil consumer in the world, far outstripping its domestic supplies. The Neptune consultancy estimates that it will need to buy two companies the size of British Petroleum each year for the next 12 years to meet its growing domestic energy demand. Furthermore, its demand for electricity is growing each year equivalent to Britain’s entire output. The volumes in such deals seem big, but compared to USTreasury holdings and monthly trade surpluses, they are small. On the margin, China must find a destination for its new surplus while it dumps some of its bloated US$-based assets. Watch for quiet hidden expansion of their new handy European Dollar Swap Window. It explains in part the Euro currency rise, beyond what many analysts expected, including the Jackass.
The USGovt and USBanking leaders have other USDollar problems. Arab states have launched secret moves with China, Russia, and France to stop using the US currency for oil trading. The demise of the USDollar is clearly an exaggerated claim, but the path toward its long drawn out demise is fast becoming laid out. These nations are planning to move instead to a basket of currencies. It might include the Japanese Yen and Chinese Yuan, the Euro, even Gold and possibly a future unified currency designed by the Persian Gulf states. Confirmation of the talks came to the UK Independent by both Gulf Arab and Chinese banking sources in Hong Kong. Meanwhile, oil revenues to OPEC states have been reduced in value by the USDollar devaluation. OPEC members seek a $100 crude oil price in order to counter US$ exchange rate weakness. The US$ DX index has fallen 13% since June. OPEC member nations are paying little attention to compliance quotas, and much more attention to reduced purchase power of their income. The nominal value of OPEC oil export revenue will be $818 billion in 2011, a nice 10% rise from last year, according to USDept Energy forecasts. However, the entire rise will be eaten up by the US$ devaluation, which no OPEC nation agreed to. They do not vote at Fed Open Market Committee meetings on US monetary policy. That makes them angry, motivated, and defiant. The consensus is growing for a $100 crude oil price, which is considered a reasonable target. Witness the upcoming rise in the entire USEconomy cost structure, led by a rising crude oil price. The only potential detour on the path to $100 oil is the platforms for financial markets eroding, sinking, and possibly collapsing.
GOLD & SILVER BREAKOUT & CONSOLIDATION
Motive should no longer be to capture the cheap artificial price like in 2008 and 2009 under $1000 or $1200 for gold or in the teens for silver. Now the motive is to get out of the USDollar, avoid its sinkhole, and stay clear of dangerous monetary downdrafts and whipsaws. The present day objective should be to preserve money as in avoid the crash. One should prepare potentially for the US$ to lose 30% to 50% more purchase power before end 2013. Gold & Silver are much more than hedges against the lost US$ purchase power, a breakdown in the monetary system, or an insolvent dysfunctional corrupt banking system. They are investments against rigged corrupted controlled Gold & Silver market. Remove the heavy hand in market interference, like with naked short futures contracts, a regular feature on the COMEX and LBMA, and the true equilibrium price for Gold & Silver would be at least double. Gold & Silver are investments that the precious metals can break loose from captured markets. Paradoxically, the same loss of purchase power for all major currencies is in the works. The media wonks are starting to comprehend the risk. They say a rising stock market is required to keep even with the falling USDollar. Exacto mundo!!
One thing for sure, the Western Govts plus the Japanese Govt will go to extraordinary lengths to invest good money after bad in supporting the broken system until it becomes a ruined system. It was clear to the Jackass in September 2008 that the US banks just died. In the last couple months, an increasing number of people among the system control team are realizing the moribund condition bordering on lifeless condition. They recognize the insolvency as growing worse, even for the US Federal Reserve balance sheet. The $1.4 trillion in mortgage related securities held by the USFed, including leveraged mortgage bonds (see Collateralized Debt Obligations) might actually be worth between 60% and 80% less than book value. My rough calculation shows the USFed to be a cool $1 trillion in the hole, an ugly vat of red ink. The role of bond buyer of last resort is very costly. The most insolvent banking institution is not Bank of America, but the USFed itself. The Powerz believes their free money output can bring the big US banks back to life. Each major initiative like QE2 guarantees another $1000 lift to gold and $40 to silver, all in time, as the potential true target. Next up is TARP2, a guarantee, to save the banks whose fraud is being laid out in gory detail for all to see finally.
The MERS property title database has no legal standing. The REMIC mortgage fund vehicle does not achieve assignment and perfection of title. The entire mortgage foundation in the US banking system appears to be fraudulent. Short cuts to enable fast bond trades, short cuts to avoid income taxes, have left the big banks vulnerable to the extreme. When the states imposed moratoriums on home foreclosures, when RICO laws were cited in class action lawsuits, one could safely claim that not only are the big US banks insolvent and dead, but the mortgage securitization industry is dead too. The best protection is Gold & Silver, since sovereign debt paper and mortgage debt paper might soon be recycled into bathroom hygenic paper to wipe hind quarters.
The gold price will consolidate here, enough to enable the powerful buyers in The Dirty Dozen to continue their huge relentless purchases. The group permitted a small pullback in order to grab a much greater volume in the next round of purchases. The $1300 target was met and surpassed. Support can be found at the juncture of the upper rail to the trend channel, meeting the new aggressive trendline from the breakout. Never in 30 years has a breakout occurred with gradual stairstep pattern exhibited in my knowledge for any major price item over a full two month period. A message was made and heard. The message is of the execution of the Gold Cartel in methodical style, without mercy, without respite. Absolutely nothing has been remedied or repaired, no reform whatsoever. In fact, every resistance to reform has been evident, from bankers dug in, with heavy lobby efforts. See the Financial Regulation Bill for instance, at a cost of $200 million in bank lobby costs and worth every cent. The TARP-2 package is being discussed behind closed doors. Instead of liquidating the big banks, they will continue to ruin the USDollar so as to prop the insolvent banks. That is a nice word for dead entities. They do not lend because they suffered a death experience in September and October 2008. They do not lend because they have no equity. They do not lend because their Loan Loss Reserves were indirectly confiscated by the USFed, with interest paid.
THE LAST ASSET BUBBLE
Unlimited USDollars will be devoted to support a broken system, rather than liquidate credit portfolios. They should be plowed under their acidic soil. Some lime would make the soil fertile again, the base of the alkaline being perhaps tears from the millions of households suffering total loss of home equity and next severe loss of pension funds. The USGovt needs the public 401k and IRA funds, and using tax law benefits as inroads, they will someday soon clutch them. They must feed the USTreasury Bond bubble. After that seizure, they will pursue the bank savings. The USGovt needs the public certificates of deposit, and using tax law benefits as inroads, they will someday soon clutch them. The accusations of a Gold bubble are as ludicrous as they are pathetic. They wish to deflect attention from the approved USTreasury bubble.
Given the heavy risk loaded in the mortgage bond arena with all the controversy over home foreclosures, the USAgency Mortgage Bonds are looking highly problematic, as in junk bonds, even worthless bonds. The nationalization of Fannie Mae stretched an umbilical cord from Fannie to Uncle Sam in a marriage made in a Third World chemical factory with massive acid leaks in the pipes. The risk to the USDollar is total and absolute. The USDollar will fall hard, but so will all the major currencies in a round robin of destroyed value. The winner in the Competing Currency War in progress is Gold & Silver. The billboard reads $2000 gold and $50 silver, dead ahead, just a matter of time. The detour only comes with big bank liquidation and debt restructure of their toxic balance sheets. Aint gonna happen!!
THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
home: Golden Jackass website
subscribe: Hat Trick Letter
Jim Willie CB, editor of the “HAT TRICK LETTER”
Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.
[From The Greek Dollar Swap Window]
Air date: 17 September 2010
I am halfway through a new novel that, while not a financial book, manages to satire the coming currency war in an incredibly prescient way.
The book is called Super Sad True Love Story and it was written by Gary Shteyngart. If the name sounds familiar, he is the brilliant and hilarious writer who gave us Absurdistan a few years back, one of my favorite books of the last decade.
In SSTLS, Shteyngart introduces us to our own world a few years into the future. The US dollar has been devalued (several times) and citizens keep up with the state of our decaying empire on CrisisNet, a news service available on the mobile devices that have become almost like actual human appendages. The nation is seemingly held hostage while awaiting a visit from the Chinese Central Banker, a reviled figure who is essentially superior to our President.
Throughout the story, the protagonist and his associates discuss, obsess and worry about money – money that is either yuan-pegged or essentially worthless.
Men and women judge the prospects of potential mates by how much of their money is held in what currencies. The desire and proclivity to spend money becomes the main driver of your social standing in Shteyngart’s satirical world. “Credit poles” are positioned around the city to scan the mobile devices and display the financial situations of those who walk buy them.
The world that serves as backdrop to the story is like a hyper-satirical version of what many of us in finance already believe could be coming. It is amazing to see a novelist take the headlines and hysteria from today’s news and extrapolate it so perfectly into a not-to-distant future that at once seems both plausible and obviously ridiculous.
I don’t know how he does it, but you simply must get this book and read it now – as it is possible that the first shots of the Currency War are already being fired.
Check it out here:
Misrepresentation, fraud and gaming the system are all heavily incentivized in the U.S. culture and economy, and honesty is punished. This truth is finally being revealed on a grand scale. The coming implosion of the U.S. economy has been richly earned.
Today I am publishing a commentary by an accountant with decades of experience in high-level global consulting firms and Fortune 50 U.S. corporations. What he has observed is unknown to the vast majority of Americans.
I have documented the poisoning of the nation’s culture and economy by a “game the system”/exploitation mentality:
With accountability effectively lost, cheating, lying, misrepresention, embezzlement and fraud, both petty and monumental, have all been incentivized. Thus the “little people” game the welfare/entitlement system and the Financial Elites game the mortgage market, and everyone gamed whatever piece of the housing bubble they could grab.
Where does that leave the honest citizenry? At an extreme disadvantage. Lying, sins of omission, misrepresentation and doing the bidding of evil organizations gets you bonuses and career advancement, while refusing to game the system as instructed gets your fired.
How does that make honest people feel? How about righteously angry?
I’d like to provide some context for this commentary from the Survival+ critique.Here is how I would summarize an integrated understanding of our plight:
1. Humans are selected to seek windfalls and exploit them. I call this windfall exploitation. It is neither good nor bad, it is simply a profoundly advantageous strategy in a hunter-gatherer-wanderer environment.
Individuals can maximize their gain by exploiting windfalls alone, but some windfalls are better exploited by groups. This is the basis of cooperation, which is expressed in both capitalist and socialist systems.
2. The natural resources windfalls have all been exploited. In general, the natural resources are in depletion and there is active competition for them which reduces the windfall.
3. Neoliberal Capitalism developed a solution for this paucity of natural windfalls: the partnership of the Financial Elites and the Central State. The Central State gathered powers of taxation and control which enable it to “enforce” the collection of the national income which can be channeled to its cronies in wealthy (and hence politically powerful) cartels.
The investment banking/mortgage banking industries are the example of this dynamic par excellence. (Please see The Coming Collapse of the Real Estate Market for more.)
4. The last significant windfall available to advanced global Capitalism was thefinancialization of the global economy. In the U.S., we see this clearly in the financial share of corporate profits; from a pittance in the “real growth” decades of the 1950s and 60s, finance-derived profits came to dominate Corporate America’s profits.
5. This financialization effected a net transfer of public and private income streams and wealth from the citizenry and State to the coffers of the financial Elites. As actual productivity and wealth-creation declined, so did wages and incomes when priced in purchasing power.
To offset that decline, people, companies and governments replaced income with debt: they borrowed to fill the gap between their desires/commitments/spending and their net income.
The financial Elites were happy to supply the debt and capture the income streams of servicing that debt. By securitizing those debts and writing derivatives against them, the Elites created a stupendously profitable windfall to exploit. The Central State and its central bank were happy to comply, as they are in partnership with the Elites which enrich and empower them.
6. The net result of this expansion of credit is asset bubbles. When the asset bubbles pop, the debts remain, impoverishing the over-indebted holders of the busted assets.
7. Unfortunately for the Financial Elites, this destruction of assets and debt feeds runaway feedback loops which threaten the entire foundation of their wealth and control.
8. The strategy of both the Financial Elites and the Central State (its willing partner in exploitation of the citizenry) is to conjure up simulacra to replace the truth, which is fatally dangerous to the status quo that is now completely dependent on maintaining a culture of financial untruths.
The order of the day is thus necessarily propaganda, bogus balance sheets, toothless facsimiles of “reform” presented as “real reform,” and endless frauds, embezzlements, lies, misrepresentations, omissions, etc., all of which have come to full flower in the credit-housing bubble/mortgage-forclosure debacle.
This is why the Financial Power Elites and the Federal Government are both wedded to lies, half-truths, misrepresentation, omissions, fraud, corruption and the full panoply of propaganda. To tell the truth is to bring down the entire status quo.
Here is our accountant’s commentary:
I belong to a large number of finance organizations and sometimes I even assist clients with hiring a finance person. Since I have a lot of experience with finance and accounting, when I am interviewing these people I know when I am getting a BS answer and unlike most BS recruiters I do not steer away from controversy since I am truly looking for the most qualified for my clients and not who is just most marketable to them. After I start drilling down you would be amazed (or maybe you wouldn’t) how many of these CFO’s and Controller types were basically dismissed because they would not cook the books in some manner.
Now maybe I have told you that I was asked to resign from one of the nations largest companies (a company that I worked hard for and saved from bankruptcy and due to my actions had created) in the US because I refused to book a revenue entry for over a million dollars which was unsupported and the CFO (I had been the CFO up until a merger) blew up with me when I asked him to send a memo telling me to record it. Funny, a few years and one acquisition later it melted down as one of the biggest accounting frauds in US history.
My next gig as the CFO for a NYSE company I basically walked in and found what I would consider a $60 million dollar accounting fraud in one day (once again a mark to market issue draining cash flow and sucking the company into a dark hole). Corrected that accounting problem and the company began to prosper but since I thought the board and upper management was so corrupt I left (Chairman of the Audit Committee was found guilty at another large company for back dating options).
The next public company where not only was I the CFO but prior to that a board member, I was basically asked to resign for BS reasons a couple of weeks later after I pointed out what the board was asking me to do was basically wire fraud and of course they backed off quickly and said they would get a legal opinion from our law firm (one of the top 10 in the US) to cover me. In the same meeting our outside legal counsel said he had a problem giving such an opinion and I pointed out that a legal opinion did not keep me from being both civil and criminally liable. It should be noted that this was another company that 2 years before I came in and took the reins as CFO/COO and pulled the company out of black hole of looming bankruptcy and made it profitable in the first time in its history since it went public and then refinanced the company. In summary a year after I left the company had burned through the money I raised and the Board sold the company for nothing.
There is lots of bitterness out there with the straight shooting finance people. Many of them find themselves unemployable. This stretches from banks, Private Equity, Investment Banking, through the large accounting firms (the average partner in the large accounting firms any more is a pathological liar) to senior finance people in organizations. Right before Enron and MCI blew-up, I actually had a BS HR person tell me I was not flexible enough. I wanted to tell this idiot that I knew where flexibility got me and it was an orange jumpsuit. Bankers and Companies only hire the weakest and most pliable senior finance executives they can find.
One other short story. A while back I was at a networking meeting with a large group of CFO and ex-CFO’s. I asked this group how many thought that most CEO’s wanted a weak CFO working for them. Approximately 70% of the attendees raised their hand! You have to remember that the only person who had steady access to the Board is the CFO.
The point, the middle class is becoming torn and frayed and there is real anger out there. The common belief is that only the liars and thieves are moving ahead in this country.
The anger of the honest will soon know no bounds, and the guilt of the complicit will settle like a silent pall over the nation: guilty as charged. Who will raise their hands to plead the guilt we all see and know?
If you would like to post a comment where others can read it, please go toDailyJava.net, (registering only takes a moment), select Of Two Minds-Charles Smith, and then go to The daily topic. To see other readers recent comments, go to New Posts.
Order Survival+: Structuring Prosperity for Yourself and the Nation and/or Survival+ The Primer from your local bookseller or from amazon.com or in ebook and Kindle formats.A 20% discount is available from the publisher.
Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle
Thank you, Denise S. ($5/month), for your exceptionally generous voluntary subscription to this site– I am honored by your support and readership. Thank you, Susan M. ($10), for most generous contribution to this site– I am honored by your support and readership.
Some profound seismic infarction deep in civilization’s very soul – brought on, no doubt, by the sludgy buildup of vast swindles and frauds – now propels deadly tsunamis toward the land masses where money dwells. And when they break over the shorelines of banking and capital, little may be left standing.
The latest rogue wave broke about ten days ago, when an orgy of foreclosure revealed massive irregularities in mortgage contracts and property titles, suggesting a slovenliness so arrant and broad that even the states’ attorneys general woke from their narcoleptic raptures of golf to shut down transfers of distressed property. But this was only after the banks themselves declared “moratoria” in a perhaps vain attempt to forestall further discovery of their countless misdeeds. And somewhere along in there the title insurance industry had a whack attack.
During this period a new cliché issued from a million pie-holes: the rule of law. Well, as Joni once sang to we happy Boomers, “…you don’t know what you got ’til it’s gone….”
To systematically ignore the niggling, stodgy lawful protocols regarding contract documents – notarization, due diligence, various dotted “i”s and crossed “t”s – was easy on the way up Fraud Mountain. On the ride down, though, it turns out all those niceties comprised the braking apparatus, Now the cargo of swindles is accelerating out-of-control and breaking apart. Suddenly this cliché – the rule of law – begins to assert its meaning for this nation of slobs, morons, and grifters, to the degree that even lawyers begin to understand what’s at stake (as opposed to just how much they can get paid), though the bankers may never learn.
The upshot is that the real estate industry is on ice indefinitely. Nobody dares to buy or sell property because there is no way of knowing who actually owns it, whether the chain of title is on-the-level, whether (or not) there is a document somewhere with coffee mug rings and taco sauce stains denoting the past and current owners of, say, a half acre of sawgrass scrub with an abandoned harlequin brick ranch-house full of mold feasting on damp sheet-rock in the unspeakable South Florida humidity.
The US real estate racket was already in enough trouble with the collapse of bubble pricing and then the consequent effect on untold tons of mortgage-backed securities and derivatives of them buried in the vaults of banks, insurance companies, municipal investment accounts, pension funds, and other repositories of trust. It certainly has been known for years that the value of these clever instruments is somewhere south of where they represent themselves to be – but since the crash of 2008 accounting legerdemain kept a lid on that putrid stew. The new wave of mortgage and title fraud now threatens to drive their value down to zero, that is, quite a bit lower than even the previous worst-feared estimates of mark-to-market apocalypse.
These bundles of bonds of bundled mortgages are now so infected with impropriety that the bundlers themselves might just have to buy them back and eat the losses, and in so doing watch the value of their companies whirl down the drain, and then, after losing their jobs, their incomes, their private jets, and all the other blandishments of the high life, face prosecution and any number of years assigned to a steel slab bed and a ping-pong career in some correctional facility. That is, if we are even able to recover some fragment of the rule of law from the landfill of good intentions.
The trouble is, that the damage is so severe through every institution concerned with the operations of money (including the US government) that none of these fatal monkeyshines can be mitigated. Or, to put it as Barack Obama’s predecessor did, so neatly, “…this sucker could go down.” After all, what are the practical remedies for property the ownership of which can’t be established? And upon which are claims and obligations that underlie the very value of money in this society? The rights of property form the basis of Anglo-American law. Subtract them and all bets are off. Literally.
Schemes akin to a debt jubilee are already being floated – which might sound dandy in theory, but would very neatly thrust the USA back to a standard of living equal to that in the year 1690. In other words, you can shake off your debts, but be prepared to spend the rest of your days picking stones out of your daily lentil ration before turning in on a bug-infested straw pallet next to the hog-pen, care of which is your new career.
Or perhaps your idealism runs along a different track and you would prefer to just let the government come in and take ownership of virtually everything and then decide who ends up getting what? While I am personally not tortured by nightmares of what the Tea-baggers imagine “socialism” to be (i.e. fears that the gubment will insert a computer chip in your gonads, confiscate your Go-Go Ultra X Electric Travel Scooter, and restrict your monthly admissions to the Talladega Superspeedway) I can easily see functional limitations on something like the old dictatorship of the proletariat – especially when said proletariat has been reduced in this country to some kind of a lumpen slobeteriat of methadrine-addled, tattooed psychopaths with axes to grind.
Or maybe you prefer the realm of anarchy, where a few plucky souls decide to stop playing ball with their creditors, on the grounds that they can probably get away with it due to all those slip-ups and oversights in contract review… and the idea goes viral across the nation that nobody has to make his or her payments on anything owed… and screw those bankers, anyway. “You want me? Come and get a piece of me!” Well, that route has its disadvantages, too, pretty much quickly resolving in the end-of-civilization-as-we-know-it, since after the first delirious weeks of non-payment everything based on money comes to a halt. Enjoy that one while you can.
In any event, meanwhile, property transfers will cease and the money bound up in them will not circulate, and interest not paid and – well, it’s a chain of consequence leading to banks not functioning, businesses going down, people not getting paid, goods not being shipped, and something like a long emergency getting underway. The outcome is not any different from the anarchy option, except you must remember that a lot of the things that end up broken will never be put back together again.
This is therefore what the late, great Eudora Welty might have called… a still moment – the boundless interval of grave recognition that something momentous is occurring. Where we stand is something like the doorway of a surrealist painting leading to a blue sky dotted with puffy little clouds – which is deceptively reassuring, until you realize that the solid earth is nowhere in sight. The truth is, nobody has a clue what happens next, most particularly the folks in charge of things.
All we know in this still moment is that the hoary old rule of law no longer obtains. It’s on everybody’s lips because everybody knows that some epochal slippage has occurred, and in the dark maw exposed by that slippage a lot will be lost.
[From The Surrealist Vista]
Brown Brothers Musings on The “Broken Cash Register” And Why Economic Prosperity May Never Again Return
Some essayistic views from Brown Brothers Harriman on the current regime: in what is an elegent symmetry, BBH notes that the current collapse is merely the denouement of the earlier period of success, what the author dubs the Reagan-Thatcher model. “The current crisis is the breakdown of the Reagan-Thatcher cash register. Its own success seems to be the main culprit. It reached some logical conclusion. The leveraging and deregulation, and perhaps the sheer size of the capital stock, overwhelmed the US’s ability to absorb it and, in some quarters, raised Triffin Dilemma-like problems: the magnitude and persistence of the current account itself began undermining the cash register.” Where the narrative is less elegant is the policy recommendation that China, which is perceived as the last great hope for the developed world should adopt the same failed Bismarkian model that is now in its death rattles across the entire developed world: “Ultimately the world economy must generate less surplus capital. The surplus countries need to reduce their savings by boosting consumption. One way China could reduce its incredible savings rate would be for the Chinese government to provide some of the basic public goods that most other countries provide their citizens, such as greater social security, unemployment compensation, and, yes, even national health care.” In a sense, BBH suggests the US should export communism so that the oligarchy can enjoy a few more years of excess returns, after which, the flood. Yet even they realize it is likely too late to set off on such a course: “It is possible that the Reagan-Thatcher cash register cannot be salvaged. That would suggest a rather foreboding future. Yet, just as in 1971, it was impossible to have anticipated the features of the Reagan-Thatcher cash register, so too we may not be able to envisage a new one. Just like China would still have to confront its massive reserves even if they were to shift of out dollars, so too does the challenge of absorbing the vast world savings transcend national or regional focus of the more common dramatic narratives. While some semblance of recovery is possible, without a solution to this problem, economic prosperity may not return — no matter the configuration of geopolitics.” And this will be precisely the final outcome, no matter how hard the Krugmanites push for just another dance with the rotting corpse of John M Keynes.
The Broken Cash Register (pdf)
Attachment Size Brown Brothers Broken Cash Register.pdf 207.81 KB
GEAB N°48 is available! Global systemic crisis – LEAP/E2020’s analysis of 39 countries’ risks 2010-2014: A collective but contrasting dive into the phase of world geopolitical dislocation
– Public announcement GEAB N°48 (October 16, 2010) –
In this issue, our team introduces the annual “country risk” update in the light of the crisis. Based on an analysis incorporating eleven criteria this year, this decision-making tool has already demonstrated its relevance in faithfully anticipating developments over these past twelve months. The identification, at the beginning of 2009, of a new phase of the crisis (the phase of global geopolitical dislocation) forced us to take new parameters into account (nine indicators were selected in 2009) to effectively incorporate trends that are reshaping the global system (1). As 2010 draws to a close, LEAP/E2020 now estimates that the world’s various countries are heading for a collective dive at the core of this phase of socio-economic and strategic geopolitical dislocation (2). Thus our studies enabled us to continue presenting the LEAP/E2020 anticipation of “country risk” for the 2010-2014 period (3), by adapting the categories to the crisis’ development, via four groups of countries (4) characterized by the contrasting impacts of this dive in the geopolitical dislocation phase of the global systemic crisis (5).
On the other hand, in this GEAB issue, we give our anticipations for the progress of Euro-Russian relations between now and 2014. In our recommendations, we pay particular attention to helping our readers deal with a currency market in global conflict, a fallout anticipated over 18 months ago by our team, as a result of geopolitical dislocation. Moreover, on the occasion of the publication of his book “The Global Crisis: The Path to the World After – France, Europe and the World in the 2010-2020 decade “, Franck Biancheri, Director of LEAP/E2020, and Anticipolis editions, have given us permission to publish his analysis of the process of the ongoing global geopolitical dislocation.
The G20’s (or IMF’s) now patent failure to secure effective international cooperation to try and remedy the structural weaknesses of the current international monetary system perfectly illustrates LEAP/E2020’s anticipation which in March 2009, before the London G20 meeting, explained that the summit was the only window of opportunity to fundamentally rethink the global monetary system at the heart of the current crisis. In failing to seize this opportunity, we reported that the world would begin to enter the global geopolitical dislocation phase from late 2009. At that time, by way of an introduction to this new phase of the crisis, the world has seen the mid-flight explosion, during the Copenhagen summit, of the whole international process on global warming. Since then, every month brings a stream of public finance crises in one state or another, drastic austerity measures causing increase in social unrest (6), international meetings leading to reports of disagreement, the proliferation of threats between States over trade imbalances, etc., all against a background of a downward spiral into hell of the global system’s central power, namely the United States (7).
For several months now we have been witnessing the onset of a massive currency world war just like LEAP/E2020 anticipated nearly two years ago and reiterated in its time-frame of the crisis (8). Several weeks hence, the inevitable failure (9) of the FMI/G20 duo to resolve these currency-trade (10) tensions will provide both new evidence while marking a new tipping point of global geopolitical dislocation: every man for himself becoming the rule (11).
Two weeks from now, with the announcement of the actual details of a comprehensive plan to reduce spending, the United Kingdom will eventually have to face an unprecedented (12) socio-economic crisis that it has desperately tried to hide for months (13), and it will have to do it alone (since the United States are unable to help it, and it has put itself outside the European financial rescue system).
And in three weeks, the United States will concurrently expose an unprecedented political paralysis following the mid-term election (14), whilst the US Federal Reserve will launch a new attempt to rescue the US economy by monetizing a stimulus plan that the federal government is no longer able to launch (15). This attempt – whose size will be less than financial markets expect (because the Fed is now forced, in this case by the holders of US Dollar denominated assets: China, Japan, Europe, oil-producing countries (16)…) but more than enough to lead to a further fall in the dollar and plunge the world monetary system into an even worse conflict – will fail anyway because US society has, de facto, entered a phase of austerity that US leaders, in 2011, will have to recognize must also constrain the country’s fiscal and monetary policy (17).
From the world leaders’ side (18), the next four years’ global sequence can be summarized quite simply: last US attempts to “return to the world before the crisis” (stimulating consumption, maintaining deficits, debt monetization) that will all fail (19), last Western attempts to deal with the crisis using “Washington consensus” methods (limiting deficits by reducing social spending, no tax increases on high incomes, privatization of public services, …) which will generate growing socio-political chaos, acceleration of the BRIC countries’ exit from the majority of Western financial and monetary markets (especially the two financial pillars of Wall Street and London) which will increase monetary instability, rising intensity of trade wars (coextensive with currency wars (20)), the coming to power from 2012 of groups of leaders who have decided to try new solutions (21) to exit the social, economic and political consequences of the crisis, taking note of the fact that the “Washington consensus” is dead … because there is no consensus anymore and because Washington is a moribund world power.
As for the rest, the keeping the US debt’s Triple-A rating belongs to the same virtual world as the recent declaration by US economic authorities (22) of the end of recession: the growing disconnect between the words of a collapsing system’s key players and the reality perceived by the majority of citizens and socio-economic players is an infallible indication of systemic decline (23). But the financial markets are not mistaken because with the soaring cost of insuring US debt hot on the heels of Ireland and Portugal with a 28% third quarter increase in cost, the United States has become the third country for which the debt markets fear some very unpleasant surprises (24).
(1) From the beginning of 2006, in the GEAB No. 5, LEAP/E2020 indicated that the global systemic crisis would evolve in 4 major phases. “A global systemic crisis develops in a complex process that can be cut into four phases which may overlap:
. a first “trigger” phase that suddenly sees a whole series of factors, hitherto disconnected, start to converge and interact, and which mainly remain noticeable to alert watchers and the main players
. a second phase called “acceleration” which is characterized by the sudden realization by the vast majority of players and observers that the crisis is here because it starts affecting a rapidly growing number of the system’s elements
. a third “impact” phase which is formed by the radical transformation of the system itself (implosion and/or explosion) under the effect of accumulated factors and which simultaneously affects the entire system
. and finally, a fourth phase called “decanting” that sees the release of the new system’s characteristics resulting from the crisis. Source GEAB No. 5, 15/05/2006
. early 2009, in the GEAB No. 32, LEAP/E2020 identified a fifth phase of the crisis, called global geopolitical dislocation, which begins at the end of 2009, following the G20 failure to launch a credible process of establishing a new international system, particularly in the monetary field. This new phase has been, of course, integrated into the time-frame presented last year in GEAB No. 38.
(2) The ability of states to cope with social unrest that will multiply in the coming quarters and years is closely linked to their ability to contain the most traumatic social effects of the crisis; therefore, our team has introduced a tenth indicator correlated to the tax burden of the past twenty years, whilst an eleventh indicator has been added to assess the resilience to a global monetary war.
(3) Our team has analyzed indicators for 39 countries in addition to Euroland.
(4) These country- risk analyses may be particularly useful for those planning an investment in a given country, intending to settle there or wishing to make an investment in assets linked to that country.
(5) We chose to keep 2014 as an overview because we believe that the changes in political leadership occurring in many important countries (China, USA, Russia, France, …) in 2012, and which are the principal potential positive factor looking at the next four years, will have no appreciable impact on these country-risks before 2014, the time that new policies are starting to yield results.
(6) France gives a striking example with the growing unpopularity of an executive which fails to prevent social unrest against its reforms and which risks turning into a general strike (France 24, 14/10/2010). Meanwhile, throughout Europe, there is a marked increase of extremist political forces. Source: Le Point, 20/09/2010
(7) All the lights are turning red. The road transport volume has started to decline again (Los Angeles Times, 13/10/2010). Foreclosures continued to grow last month, whilst the whole legal system on which they rest has now broken down (for the legal reasons mentioned in the GEAB a year ago) upsetting a real estate market on Fed and Federal Government life support even more (CNBC, 14/10/2010; USAToday, 14/10/2010; USAToday, 11/10/2010). Cities are sinking into vey deep deficits (such as their employee retirement funds estimated at over 500 billion USD, CNBC/FT, 12/10/2010) and are obliged to turn to the states to try and extricate themselves (CNBC/NYT, 05/10/2010), while the latter can no longer balance their budgets and are obliged to pay interest rates higher than developing countries (thus, Illinois must now pay more than Mexico to borrow, Bloomberg, 05/10/2010).
(8) See the GEAB N°43 particularly.
(9) History doesn’t repeat itself. If we pushed so hard (including at the cost of a full page advertisement in the global edition of the Financial Times) for world leaders to seize the opportunity at the G20 in Spring 2009, it was because we were aware that such a set-up would not happen again. Now the US is too weak to continue to steer the global game, no other player is able to take affairs in hand … and therefore, the global financial system looks more and more like the “drunken boat” in Rimbaud’s poem describing the drift towards unexplored beaches, a perfect description of the world’s course today.
(10) As for the negotiations on climate change, a “West” already clearly divided (here between the Dollar, Pound, Yen and Euro), tries to make the emerging countries (the Yuan in particular) pay the cost of adapting a system they invented and which no longer works. And it’s not by ending the game as shown by US efforts to prevent any new Chinese rating agency from operating in the United States that will dissipate this feeling in the BRIC countries. One remembers the performance in Copenhagen. It will pale in comparison to what awaits us at the G20 meeting in Seoul. Besides, the soaring gold price is a very reliable indicator: even the European central banks have stopped their sales. Sources: New York Times, 21/09/2010; Vigile, 29/09/2010; PrisonPlanet/FT, 27/09/2010, Bloomberg, 10/10/2010; ChinaDaily, 27/09/2010
(11) The Telegraph summarized it admirably on 11/10/2010 in “Jobless America threatens to sweep us all away.” Sign of the times, Bloomberg on 08/09/2010 announces the opening of a Ruble-Yuan currency exchange in Shanghai to finance Sino-Russian trade.
(12) There is a growing fear in the United Kingdom over the country’s social and political situation in the context of “super-austerity” planned by the government due to financial and budget crisis: the loss of nearly a million jobs, social crisis, unrest…. Sources: Independent, 02/10/2010; Telegraph, 13/10/2010; Guardian, 11/09/2010; MarketWatch, 21/09/2010.
(13) This was, moreover, the main reason for the “Greek crisis becoming the Euro crisis” in Spring 2010, in particular fed daily by articles in the Financial Times to divert attention from London and the Pound Sterling. See GEAB in the first half of 2010.
(14) Recent statements by Steve Schwarzman, head of the financial giant Blackstone, comparing Barack Obama’s willingness to tax financial companies more heavily to Hitler’s invasion of Poland, illustrates the explosive atmosphere that rules at the core of the US elite. Source: NewYorkPost, 14/10/2010
(15) Because of the magnitude of existing deficits and political deadlock in Washington.
(16) In this regard, our team gives a timely reminder that there is no mystery about the simultaneous rise of different asset classes, like stocks or gold for example: operators are leaving the stock exchanges (as we showed in the last GEAB issue) and selling their financial and monetary assets for gold (or other less dangerous assets) and the Fed (and its partners) are injecting liquidity into the financial markets to prevent a widespread collapse. The only problem, when the music stops: it will be a tragedy for the stock exchanges. Source: CNBC, 08/10/2010
(17) The situation is so bad that a reading of the New York Times of 13/10/2010 started to look like a cut and paste of the GEAB a year or two ago … that’s saying something! The article by Michael Powell and Motoko Rich, which describes the “recovery” as merely a continuation of this recession shows the plight of the middle classes across the country in a harsh light, while the very same day Paul Reyes unveils a remarkable collection of photographs showing the ravages of the “Very Great US Depression” as LEAP/E2020 has called it since late 2006.
(18) Franck Biancheri offers a detailed presentation, with the two likely main scenarios for 2010-2020, in his book “The Global Crisis: The Path to the World after“
(19) Source: SeekingAlpha, 24/09/2010
(20) Singapore’s recent announcement that from now on its currency’s trading band against the U.S. dollar will be wider, is the latest example (each day brings a new one) of increasingly defensive positions taken by individual states. Each one tries to increase its room for maneuver to cope with the unexpected. Incidentally, it is interesting to note that Singapore suffered a 19% third quarter fall in GDP, evidence that the mood in Asia is becoming gloomy. Source: YahooFinances, 14/10/2010; MarketWatch, 13/10/2010
(21) For China, one solution will most probably be to inject the country’s huge US Dollar reserves into the economy as already suggested by the new generation of Chinese bankers. This will not help the US Dollar. Source: Dallasnews, 19/09/2010
(22) The National Bureau of Economic Research (NBER is in charge of “holding a Mass” on this subject.
(23) As MSNBC aptly described on 06/10/2010, it’s once a month at midnight that America’s great depression is revealed in the supermarkets, when tens of millions of food voucher recipients go and do their shopping. According to the study by the Center for Economic and Policy Research published on 16/09/2010, in effect now one in three Americans can no longer make ends meet (one hundred million people ).
(24) Source: CNNMoney, 12/10/2010
[From GEAB N°48 is available! Global systemic crisis – LEAP/E2020’s analysis of 39 countries’ risks 2010-2014: A collective but contrasting dive into the phase of world geopolitical dislocation]
The Same Person Forged Billions of Dollars Worth of Mortgage Documents for Bank of America, Wells Fargo, U.S. Bank and Dozens of Other Lenders and Shells
The Washington Post notes:
In Georgia, an employee of a document processing company, Linda Green, for years claimed to be executives of Bank of America , Wells Fargo, U.S. Bank and dozens of other lenders while signing off on tens of thousands of foreclosure affidavits. In many cases, her signature appeared to be forged by different employees.
Green worked for a foreclosure document company owned by Lender Processing Services. The company is being investigated by a U.S. attorney in Florida for allegedly using improper documentation to speed foreclosures.
Lenders have already started to withdraw foreclosures that had Green’s name on them.
Green also submitted to courts documents that listed “Bogus Assignee” as the owner of a mortgage instead of the real name. In another case, she signed as the vice president of “Bad Bene,” a made-up company.
“There are procedures to be followed in order to get a foreclosure, and you either get it right or not. Either you’re pregnant or not. There’s no in-between,” [Arthur M. Schack, a Kings County Supreme Court judge in Brooklyn,] said
Foreclosure attorney Lynn Szymoniak located numerous signatures of “Linda Green” from pleadings filed in various courts.
StopForeclosureFraud.com has rounded up some examples of “Linda Green’s” signatures in one image:
In February 2010, 4ClosureFraud.org posted one of Green’s declarations regarding assignment of title to “Bogus Assignee”:
Szymoniak pointed out in July:
There are examples of the many different Linda Green signatures/forgeries. Green’s “signature” appears on HUNDREDS OF THOUSANDS of mortgage assignments – as an officer of at least 20 different banks and mortgage companies.
Doing the Math
The total mortgage loan amount on 500 “Linda Green” Mortgage Assignments is $126,956,912, or approximately $125 million for each 500 Assignments. The average output of Assignments from the Docx office in Alpharetta [Green’s actual employer], Georgia in 2009 was 2,000 Assignments per day.
This would be equivalent to (4 x $125 million) or $500 million each day. Assuming that Docx operated 5 days a week for 51 weeks (allowing for holidays), the office was open, producing Assignments, 255 days. It is likely that the Linda Green/Docx crew prepared and filed Mortgage Assignments showing One Hundred Twenty-Seven Billion, Five Hundred Million ($127,500,000,000) in mortgages were Assigned in 2009.
Remember also that Mortgage Electronic Registration Systems – which Green repeatedly signed for – is itself a shell company which holds 60% of all American residential mortgages.
DocX is also the company which published price lists for forging documents, including such gems as:
“Create Missing Intervening Assignment” $35
“Cure Defective Assignment” $12.95
“Recreate Entire Collateral File” $95
Given the above, it is clear why the Florida Attorney General has issued a subpoena to Linda Green’s real employer – DocX – requesting the following documents:
2. Copies of any and all underlying documentation that allows for your employee or ex-employee, Linda Green to sign documents in the following capacities:
a. Vice President of Loan Documentation, Wells Fargo Bank, N.A. successor by merger to Wells Fargo Home Mortgage, Inc.;
b. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for American Home Mortgage Acceptance, Inc.;
c. Vice President, American Home Mortgage Servicing as successor-in-interest to Option One Mortgage Corporation;
d. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for American Brokers Conduit;
e. Vice President & Asst. Secretary, American Home Mortgage Servicing, Inc., as servicer for Ameriquest Mortgage Corporation;
f. Vice President, Option One Mortgage Corporation;
g. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for HLB Mortgage;
h. Vice President, American Home Mortgage Servicing, Inc.;
1. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for Family Lending Services, Inc.;
J. Vice President, American Home Mortgage Servicing, Inc. as Successor -ininterest to Option One Mortgage Corporation;
k. Vice President, Argent Mortgage Company, LLC by Citi Residential Lending, Inc., attorney-in-fact;
1. . Vice President, Sand Canyon Corporation f/kJal Option One Mortgage Corporation;
m. Vice President, Amtrust Funsing (sic) Services, Inc., by American Home Mortgage Servicing, Inc., as Attorney-in -fact;
n. Vice President, Seattle Mortgage Company.
3. Copies of every document signed in any capacity by Linda Green.
Of course, its not just Linda Green.
As Szymoniak points out:
The offices of Lender Processing Services in Mendota Heights, Minnesota, seems likely to also have produced 2,000 Assignments each working day.
Jeffrey Stephan from the GMAC offices in Montgomery County, Pennsylvania also is likely to have produced 2,000 Assignments each day.
Bryan Bly of Nationwide Title Clearing also is likely to have produced 2,000 Mortgage Assignments each day.
Scott Anderson of Ocwen Loan Servicing in West Palm Beach, Florida, almost certainly produced an average of 2,000 Assignments a day.
Herman John Kennerty of America’s Servicing Company in Ft. Mill, South Carolina, also is likely to have produced 2,000 Assignments each day.
Erica Johnson-Seck was almost certainly producing Assignments at this same level for IndyMac.
Christina Trowbridge, Whitney Cook, and Stacy Spohn of Chase Home Finance in Franklin, Ohio likely had the same output.
Keri Selman and Renee Hertzler of BAC Home Loan Servicing (formerly Countrywide) in Texas almost certainly produced an average of 2,000 Assignments a day.
If these nine offices each produced 2,000 Assignments a day, the value of the Mortgage Assignments filed by all nine offices in 2009 was One Trillion, One Hundred Forty Seven Billion, Five Hundred Million ($1,147,500,000,000).