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Another Bushy Fox Guarding the Henhouse!!!

A

Anonymous

Guest
At the time Goldman was doing all this, Paulson led the firm.

There has been the problem with this entire Administration-- the cronies he appointed to oversee the system and make sure no one was violating the laws- were the same persons that were doing it- and the ones that should have been being investigated..... :roll: :(


Breaking News from MoneyNews.com

Life Turns Ugly for Hank Paulson

While Treasury Secretary Henry Paulson tries to get the home loan industry to clean up the mortgage mess, politicians are piling on.

In some cases, they are tackling the former Goldman Sachs chairman personally. What was recently strictly financial is quickly turning political.

“In the normal case, this is the way markets work,” Paulson told reporters, defending President George Bush’s plan to offer five years of relief to some borrowers.

“There are workouts and there are modifications when homeowners have trouble making their payments. So all this is, is the private sector coming together... to do what they can to avoid foreclosures that are not in anyone's interest,” Paulson said.

Nevertheless, the actual plan - which would freeze rates for borrowers with lower credit scores, while forcing “good” borrowers to pay, even to pay higher rates - came under fire even before it was made public.

Democratic House Financial Services Committee Chairman Barney Frank (Mass.) immediately questioned the wisdom of penalizing borrowers with higher FICO credit scores, saying that credit scare was not a good measure of income or ability to pay.

He’s not alone. Democratic presidential candidates Hillary Clinton and Chris Dodd are airing arguments that there is a price to be paid - and not just on Main Street.

“Some people might say Wall Street only helped to distribute risk. Well, I believe Wall Street shifted risk away from people who knew what was going on to people who did not,” Clinton said in a speech delivered at the Nasdaq Market Site in New York.

No one should be surprised that candidate Clinton would question the role of the financial sector and the Bush administration.

What might be surprising is that conservative economist and commentator Ben Stein directly questions Goldman’s role.

Clinton’s speech echoed some of the comments Stein made in a New York Times column the day before. Stein questioned if Goldman Sachs in particular bears some of the blame since they were among the largest sellers of subprime debt instruments.

Other Wall Street firms were big sellers of these products. But what makes Goldman so responsible, in Stein’s opinion, is that they were also the largest short sellers of these products on the Street.

As Goldman was busy explaining the virtues of subprime investing to some buyers, believed the value of those same instruments would drop.

At the time Goldman was doing all this, Paulson led the firm. That has Dodd promising, if vaguely, to investigate Paulson himself.


"It is in the best interest of resolving this crisis if Secretary Paulson, who was leading Goldman at the time in question. Failure to do so may be cause for a more formal investigation," said Dodd.

While politicians will continue to discuss and debate how much Wall Street is to blame, Stein perfectly summarized the role of Goldman, and every other investment house, in this and any other crisis.

"The people there are not statesmen. They are salesmen,"
Stein wrote.
 

Tex

Well-known member
While politicians will continue to discuss and debate how much Wall Street is to blame, Stein perfectly summarized the role of Goldman, and every other investment house, in this and any other crisis.

"The people there are not statesmen. They are salesmen," Stein wrote.


Goldman shorting the products looks a lot like insider information being used to strategically position the company with financial debt instruments.

Hey, didn't Martha Stewart get in a little trouble for that? Let us see equal justice.
 

MoGal

Well-known member
I still think they came up with this because that judge ruled banks could not foreclose because they couldn't come up with the title to the documents........... if they can get those to sign new mortgage papers then that creates their title that they need.





http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/09/IN5BTNJ2V.DTL&feed=rss.business

New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.

Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.

But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.

The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.

I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."

Despite Thursday's ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?

The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.

The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply - period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.

Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?

What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back. The time to look into this is before the shredders have worked their magic - not five years from now.

Those selling the "freeze" have suggested that mortgage-backed securities investors will benefit because they lose more with rising foreclosures. But with fast-depreciating collateral, the last thing investors in mortgage bonds ought to do is put off foreclosures. Rate freezes are at best a tool for delaying the inevitable foreclosures when even the most optimistic forecasters expect home prices to fall. In October, Goldman Sachs issued a report forecasting an incredible 35 to 40 percent drop in California home prices in the coming few years. To minimize losses, a mortgage bondholder would obviously be better off foreclosing on a home before prices plunge.

The goal of the freeze may be to delay bond investors from suing by putting off the big foreclosure wave for several years. But it may also be to stop bond investors from suing. If the investors agreed to loan modifications with the "real" wage and asset information from refinancing borrowers, mortgage originators and bundlers would have an excuse once the foreclosure occurred. They could say, "Fraud? What fraud?! You knew the borrower's real income and asset information later when he refinanced!"

The key is to refinance borrowers whose current loans involved fraud in the origination process. And I assure you it was a minority of borrowers whose loans didn't involve fraud.

The government is trying to accomplish wide-scale refinancing by tricking bond investors, or by tricking U.S. taxpayers. Guess who will foot the bill now that the FHA is entering the fray?

Ultimately, the people in these secret Paulson meetings were probably less worried about saving the mortgage market than with saving themselves. Some might be looking at prison time.

As chief of Goldman Sachs, Paulson was involved, to degrees as yet unrevealed, in the mortgage securitization process during the halcyon days of mortgage fraud from 2004 to 2006.

Paulson became the U.S. Treasury secretary on July 10, 2006, after the extent of the debacle was coming into focus for those in the know. Goldman Sachs achieved recent accolades in the markets for having bet heavily against the housing market, while Citigroup, Morgan Stanley, Bear Sterns, Merrill Lynch and others got hammered for failing to time the end of the credit bubble.

Goldman Sachs is the only major investment bank in the United States that has emerged as yet unscathed from this debacle. The success of its strategy must have resulted from fairly substantial bets against housing, mortgage banking and related industries, which also means that Goldman Sachs saw this coming at the same time they were bundling and selling these loans.

If a mortgage bond investor sues Goldman Sachs to force the institution to buy back loans, could Paulson be forced to testify as to whether Goldman Sachs knew or had reason to know about fraud in the origination process of the loans it was bundling?

It is truly amazing that right now everyone in the country is deferring to Paulson and the heads of Countrywide, JPMorgan, Bank of America and others as the best group to work out a solution to this problem. No one is talking about the fact that these people created the problem and profited to the tune of hundreds of billions of dollars from it.

I suspect that such a group first sat down and tried to figure out how to protect their financial interests and avoid criminal liability. And then when they agreed on the plan, they decided to sell it as "helping working families stay in their homes." That's why these meetings were secret, and reporters and the public weren't invited.

The next time that Paulson is before the Senate Finance Committee, instead of asking, "How much money do you think we should give your banking buddies?" I'd like to see New York Sen. Chuck Schumer ask him what he knew about this staggering fraud at the time he was chief of Goldman Sachs.

The Goldman report in October suggests that rampant investor demand is to blame for origination fraud - even though these investors were misled by high credit ratings from bond rating agencies being paid billions by the U.S. investment banks, like Goldman, that were selling the bundled mortgages.

This logic is like saying shoppers seeking bargain-priced soup encourage the grocery store owner to steal it. I mean, we're talking about criminal fraud here. We are on the cusp of a mammoth financial crisis, and the Federal Reserve and the U.S. Treasury are trying to limit the liability of their banking friends under the guise of trying to help borrowers. At stake is nothing short of the continued existence of the U.S. banking system.

Sean Olender is a San Mateo attorney. Contact us at [email protected]
 

Tex

Well-known member
I don't think they will have a problem getting the title to the properties, they may be worthless when they are obtained. In most big states like California, they have had a pretty good system of securing the property to the debt, in most cases, requiring a title company to insure the title (title insurance) up to the value of the loan or in some cases, the property. If you want a little more info on that, just pm me.

The real problem comes when the property is no longer worth the value of the loan when it is foreclosed upon. Thus, if you had a property that was worth 300K when the loan was originated (assuming no appraisal fraud) and is now worth 275 K because the market went down, you have a real problem even collecting on the loan when you foreclose. It takes about 20 to 30% of that type property's value just to liquidate it in California when you include the foreclosure process and all the carrying costs in the meantime as well as the marketing costs (real estate fees), not to mention property problems that will have to be corrected in order to sell the property. If you were an investor and had an abnormal amount of these type loans and were only getting 5% on the portfolio to begin with, your whole loan investment could quickly have less value than you bought it at.

If you are a foreign investor, the value of the dollar comes into play and you could really be in trouble with the sub prime loans.
 
A

Anonymous

Guest
Hence, the Fed’s efforts to stimulate economic growth by continuing to lower short-term interest rates could backfire, as such rate cuts will likely cause the exchange-value of the U.S. dollar to continue to fall and for inflationary pressures to therefore continue to rise.

Well, guess what happens when inflation rises? That’s right, bond investors demand higher bond yields.

And when bond yields rise, the prices of bonds fall. However, the Treasury apparently wasn’t content in seeing only modest declines in bond prices, because if mortgage lenders implement the Bush mortgage plan, those lenders will earn less interest on the loans that they made to subprime borrowers.

In turn, those same mortgage lenders will likely raise mortgage rates on loans that they make to future home buyers.

By the way, bond investors tend to be older, retired persons who depend heavily on interest receipts from their bond investments to fund their daily living expenses. So maybe we should assume that Secretary Paulson is planning on donating some of his fortune that he made while serving as the chairman of Goldman Sachs, the investment banking firm that made millions of dollars from selling short investment vehicles tied to subprime mortgages.

If Paulson were to be so generous, I might then be able to believe his comment that “nobody gets hurt” by the Bush mortgage plan.

David Frazier
MoneyNews
 
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