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Today's Stories

October 21, 2009

Pam Martens
The Next Financial Crisis Hits Wall Street: Judges Start Nixing Foreclosures

October 20, 2009

Sharon Smith
Et Tu, Codepink?

Tariq Ali
Farce in Kabul, Tragedy in Pakistan

Mark Brenner
Pensions: the Next Casualty of Wall Street

Bouthaina Shaaban
The Adoption of the Goldstone Report: What Does It Mean?

Michael D. Yates
Down in the Valley With Cesar: Power, Paranoia and Purges in the UFW

Dean Baker
Does Citibank Need China?

Dave Lindorff
Depleted Uranium Weapons: Dead Babies in Iraq and Afghanistan are No Joke

John Ross
Chronicle of a Tormenta Electrica, II

Ricardo Alarcón de Quesada
Cuban Five: a Very Important Liar

Kevin Zeese
Can the Democrats Avoid a Populist Health Care Rebellion?

Gilad Atzmon
Autumn in Shanghai

Website of the Day
A Message From the Gyre

October 19, 2009

Mike Whitney
The Dollar Will Not Crash

Greg Moses
The Cash Cops of Tenaha

John Ross
Chronicle of a Tormenta Electrica

Michael Donnelly
Outside Agitator

Jayne Lyn Stahl
Dick's Fringe Army: Tea Baggers and Birchers?

Eric Walberg
The Battle in Canada

Russell Mokhiber
Pennsylvania, First in the Nation for Single Payer?

Barbara Rose Johnston
War, Peace and the Obamajority

John V. Whitbeck
Zionism: an Anti-Semite's Dream?

Christopher Ketcham
Swine Fools

Website of the Day
Greenspan: Break Up the Big Banks?

October 16-18, 2009

Alexander Cockburn
White House v. Fox News: a War Obama Can Win

Saul Landau
Autumn of the Patriarch

Paul Craig Roberts
The Rich Have Stolen the Economy

Carl Ginsburg
Where $18 an Hour is Too Much

Ralph Nader
Barney Frank the Bankers' Consort

Nikolas Kozloff
Rainforest Beef, Factory Farms and Anthony Bourdain's War on Vegetarians

Carlo Galli
Berlusconi: Still Doing Nothing, Still There

Dave Lindorff
Agent Orange in Vietnam: Ignoring the Crimes Before Our Eyes

Catherine Rottenberg / Neve Gordon
Educating Children in War Zones

Marshall Auerback
Dollar Spasms

Nicola Nasser
The Realistic Way Out of Iraq

Windy Cooler
The Ghost of John Brown

James L. Secor
Why I Miss China

Ron Jacobs
Escalation Unopposed

Wes Jackson
A Way of Knowing

Jesse Lerner-Kinglake
Global Food Fight

David Ker Thomson Against Leaders

Missy Beattie
Dinner With the President

Emily Ratner
Taping Our Mouths Shut to Scream Out Our Dissent

Stephen Martin
The Scorched Earth Mindset of the International Banker

Michael Snedeker
"A Place of Greater Safety"

Charles R. Larson
Cheeta: the Last of the Hollywood High-Rollers

David Yearsley
Judith Leyster's Sensuous Passions

Peter Stone Brown
It's a Bob Christmas for Halloween

Poets' Basement
Keeler, Beatty and Anderson

Website of the Weekend
Elements of Nature

October 15, 2009

Andrew Cockburn
Our Cheap Politicians

Brian M. Downing
Rethinking the Afghan Insurgency

Ramzy Baroud
Abbas and the Goldstone Report: Our Shame is Complete

Danny Weil
A Neo-Liberal Arts Education: Diploma Mills and Debt Peonage

M. Idrees Ahmad
Return to Peshawar: a Journey Home

Margaret Kimberley
Michelle's Family Tree

Ricardo Alarcón de Quesada
Cuban Five: Which Side Are You On?

Harvey Wasserman
Nuking the Climate Bill

Nirmal Ghosh
A Tale of Two Protocols: How Montreal Could Save Us From the Mire of Kyoto

Charles R. Larson
Sarah Palin Bears It All

Website of the Day
Tortured Law

October 14, 2009

Michael Neumann
Fearsome Words? a Suppressed Talk on the Israel/Palestine Conflict

M. Reza Pirbhai
Fighting the Taliban: What, Exactly, is Being Fought in Afghanistan?

Gareth Porter
Hawks Play Up the Taliban's Ties to Al Qaeda

Paul Craig Roberts
War Criminals Are Becoming Arbiters of the Law

John Strausbaugh Fortress Moon

Ralph Nader
The CBO's Flawed Report on Medical Malpractice

Dean Baker
Won't You Please Come to Chicago to Greet the Bankers?

Charles Modiano
White Silence: Where Does Brett Favre Stand on Rush Limbaugh?

Nadia Hijab
Abandoning "Women and Children"

Walter Brasch
An Extension of Her Motherhood: Sherry Carpenter, Journalist and Animal Care Provider

Website of the Day
Nader: Obama Has a "Concessionary Personality"

October 13, 2009

Peter Linebaugh
Putting the Spine Back in the Commonwealth

Shamus Cooke
What Obama Isn't Telling American Workers

John Ross
War on Mexican Women

Brendan Cooney
Ask Awal Khan About Obama's Prize

Frida Berrigan
Operation Enduring Detentions: Losing the Moral High Ground

Yves Engler
Is Canada More Pro-Israel Than the US?

David Macaray
Why the Government Fears Unions

Dave Lindorff
Democrats: Selling Out, But Still Getting Screwed

Mark Weisbrot
Occupying Afghanistan is Making Things Worse

Ricardo Alarcón de Quesada
History Repeats Itself

Binoy Kampmark
That Dirty Colonial War

Website of the Day
The Health Insurance Industry's Latest Doublecross

October 12, 2009

Pam Martens
Secret Deal Between Wall Street and Washington Shines a Harsh Light on Federal Housing Agency

Mike Whitney
A Dollar Rout or More Bernanke Trickery?

Martha Rosenberg
Yale Lab Tech Causes Two Problems for Animal Researchers

Jessica Arents
The Price of Peace: Our Arrest at the White House

Eamonn McCann
Massacre in Ireland, Massacre in Iraq

Bill Hatch
Dairy Industry Goes Down the Tubes

Sen. Russell Feingold
Time for a Timetable in Afghanistan

Niranjan Ramakrishnan
The Siren Song of World Praise

Gideon Levy
Obama's Betrayed Mission in the Middle East

Iyad Burnat
Why Does Obama Get a Prize and Bush Got Shoes?

Alan Cabal
Why Obama Deserves the Nobel

Dan Bacher
The Astroturf Method

Website of the Day
The Palestine Chronicle Needs Your Help

October 9-11, 2009

Alexander Cockburn
War and Peace

James Bovard
Eight Years of Big Lies on Afghanistan

Kathleen and Bill Christison
New Crisis Developing in Palestine

Andy Worthington
Congressional Depravity on Gitmo

Marc Levy
Talking Dirty to the Kids

Tariq Ali
Ahmed Rashid's War

Mike Whitney
The Securitization Boondoggle

Paul Craig Roberts
Warmonger Wins Peace Prize

Alan Nasser
Cockeyed Economics

Jack Z. Bratich
The Twitterest Pill: Policing Dissent in the Information Age

Steve Breyman
Time for a War Tax

David Michael Green
A Hapless Presidency

Dave Lindorff
The WTF Prize

Paul Buchheit
Fear of the Rich

Jim Goodman
Feedlots and E. Coli

Missy Beattie
Theater of the Absurd

Michael Leonardi
Ships of Poison

Nadia Hijab
The Plight of the Right of Return

Mel Packer
The Crackdown on Pittsburgh

David Macaray
The Raiding Game

James T. Phillips
Getting Burned

Charles R. Larson
One Man's Walk Through Hell

Michael Donnelly
Behind the Capitalist Curtain

David Yearsley
The Biggest Blot on Mel Gibson's Rap Sheet

Lorenzo Wolff
Rap That Threatens ... and Endures

Poets' Basement
Heyen, Ames and Buknatski

Website of the Weekend
Jobs Conference

October 8, 2009

Saul Landau
A Late September Morning With Fidel

Paul Fitzgerald /
Elizabeth Gould

Dark Omens for the US in Afghanistan

Linn Washington, Jr.
Pot and Perversion: Judicial Antics Expose Drug War Insanity

Marshall Auerback
Neo-Classical Economics Misses What Matters

Dave Lindorff
A Nation of Snoops

David Rosen
Bankrupt Morality: the Staying Power of Republican Sinners

Chris Darimont / Misty MacDuffee
The Bear Essentials: New Thinking Needed to Save BC's Salmon and Grizzlies

John V. Walsh
Remembering Hinton's Fanshen

Stewart Lawrence
The Edwards / Hunter Affair Reconsidered

Charles R. Larson
Conservatives in the Sandbox

Website of the Day
Et Tu, Code Pink?

October 7, 2009

Brendan Cooney
Are Republicans Breaking US Law in Honduras?

Paul Craig Roberts
Dead Labor: Marx and Lenin Reconsidered

Dean Baker
Bernanke's Recovery: Unemployment Up, Wages Down (But the Banks Have Been Saved ... Sort Of)

Jonathan Cook
A Third Intifada?

John Stanton
HTS: Congress Rewards Failure, Puts Personnel in Harms Way

Joanne Mariner
Tortured Language

Ricardo Alarcón de Quesada
Cherry Blossoms

Stephen Lendman
The Gaza War's Effect on Women

Sen. Russell Feingold
Time to Draw Down in Afghanistan

Mary Lynn Cramer
Doublespeak on Health Care

Website of the Day
How to Bag a Wolf by Aerial Assault

October 6, 2009

Mike Whitney
Dollar Hysteria: Is the Sky Really Falling?

Gareth Porter
The Iranian Rift in the IAEA: Leaked Paper Based on Disputed Intel

Jonathan Cook
How Israel Buried the UN's War Crime Probe

Boris Kagarlitsky
My Hour as Talking Head in Moscow

Iain Boal
The New Crisis at Pacifica

Ron Jacobs
Why Are We in Afghanistan?

John Ross
Wave of Anarchist Bombings Strikes Mexico

Michael Dickinson
Panic in Istanbul: Smoke, Mayhem and the World Bank

Stephen Fleischman
Beware the Predator

Ira Glunts
The Audacity of Nope

Missy Beattie
Outside Looking In

Website of the Day
Round Up the Usual Suspects

October 5, 2009

Pam Martens
Wall Street Titans Use Aliases to Foreclose on Families While Partnering with a Federal Agency

Mike Whitney
Dead Man Walking: Welcome to the US Economy

Paul Craig Roberts
How the Feds Imprison the Innocent

Harry Browne
Ireland Says, "Yes, Please"

Sara Mann
My Little Town: Nothin' But the Dead and Dyin'

Omar Barghouti
Dissolve the Palestinian Authority

Shamus Cooke
A Jobless Recovery?

Brenda Norrell
A Dirty New Low for Peabody Coal

Fred Gardner
Situation NORML: Reconciling Medical Pot Use and Legalization

Binoy Kampmark Copenhagen Blues: McChrystal and the Afghan Trap

Website of the Day
In Goldman Sachs We Trust?

October 2-4, 2009

Alexander Cockburn
Geezer Renditions

Saul Landau
News From Raul Castro

Diana Johnstone
After the German Elections: Is Socialism Really Dead in Europe?

Greg Moses
Cramming for the Downside

William Blum
The Fall of the Berlin Wall: Another Cold War Myth

Brian Cloughley
Iran's Nuclear Program: Where's the Proof?

Russell Mokhiber
Welcome Back, Michael Moore

John Ross
Chomsky in Mexico

Ellen Brown
IMF Catapults From Shunned Agency to Global Central Bank

David Ker Thomson
Cop Shocks

David Macaray
The Audacity of Toyota

Gary Engler
Unions in a Rut

Robert Fantina
Meet the New Boss (Same as the Old Boss)

Lisa Stolarski / Naomi Archer
Pittsburgh: Still a (Coal) Company Town

Anthony Papa
Here is Your Chance to Help End the Failed War on Drugs

Joe Allen
The Good Wife: Bad View of a Corrupt System

Harry Browne
Tarantino Scalps His Audience

Ron Jacobs
Collective Fiction

Charles R. Larson
Cultural Warriors: Austrialian Aboriginal Art Triennial

David Yearsley
Hanns Eisler's Great National Anthem for East Germany is Available: Make It America's

Poets' Basement
Taylor, Gardner and Landau

Website of the Weekend
Wrongful Convictions of Youth

 

October 21, 2009

New Shockwaves From Courts and Accounting Board

The Next Financial Crisis Hits Wall Street, as Judges Start Nixing Foreclosures

By PAM MARTENS

The financial tsunami unleashed by Wall Street’s esurient alchemy of spinning toxic home mortgages into triple-A bonds, a process known as securitization, has set off its second round of financial tremors.

After leaving mortgage investors, bank shareholders, and pension fiduciaries awash in losses and a large chunk of Wall Street feeding at the public trough, the full threat of this vast securitization machine and its unseen masters who push the levers behind a tightly drawn curtain is playing out in courtrooms across America.

Three plain talking judges, in state courts in Massachusetts and Kansas, and a Federal Court in Ohio, have drilled down to the “straw man” aspect of securitization. The judges’ decisions have raised serious questions as to the legality of hundreds of thousands of foreclosures that have transpired as well as the legal standing of the subsequent purchasers of those homes, who are more and more frequently the Wall Street banks themselves.

Adding to the chaos, the Financial Accounting Standards Board (FASB) has made rule changes that will force hundreds of billions of dollars of these securitizations back onto the Wall Street banks balance sheets, necessitating the need to raise capital just as the unseemly courtroom dramas are playing out.

The problems grew out of the steps required to structure a mortgage securitization. In order to meet the test of an arm’s length transaction, pass muster with regulators, conform to accounting rules and to qualify as an actual sale of the securities in order to be removed from the bank’s balance sheet, the mortgages get transferred a number of times before being sold to investors. Typically, the original lender (or a sponsor who has purchased the mortgages in the secondary market) will transfer the mortgages to a limited purpose entity called a depositor. The depositor will then transfer the mortgages to a trust which sells certificates to investors based on the various risk-rated tranches of the mortgage pool. (Theoretically, the lower rated tranches were to absorb the losses of defaults first with the top triple-A tiers being safe. In reality, many of the triple-A tiers have received ratings downgrades along with all the other tranches.)

Because of the expense, time and paperwork it would take to record each of the assignments of the thousands of mortgages in each securitization, Wall Street firms decided to just issue blank mortgage assignments all along the channel of transfers, skipping the actual physical recording of the mortgage at the county registry of deeds.

Astonishingly, representatives for the trusts have been foreclosing on homes across the country, evicting the families, then auctioning the homes, without a proper paper trail on the mortgage assignments or proof that they had legal standing. In some cases, the courts have allowed the representatives to foreclose and evict despite their admission that the original mortgage note is lost. (This raises the question as to whether these mortgage notes are really lost or might have been fraudulently used in multiple securitizations, a concern raised by some Wall Street veterans.)

But, at last, some astute judges have done more than take a cursory look and render a shrug. In a decision handed down on October 14, 2009, Judge Keith Long of the Massachusetts Land Court wrote:

“The blank mortgage assignments they possessed transferred nothing...in Massachusetts, a mortgage is a conveyance of land. Nothing is conveyed unless and until it is validly conveyed. The various agreements between the securitization entities stating that each had a right to an assignment of the mortgage are not themselves an assignment and they are certainly not in recordable form...The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise.” [Italic emphasis in original.] (U.S. Bank National Association v. Ibanez/Wells Fargo v. Larace)

A month and a half before, on August 28, 2009, Judge Eric S. Rosen of the Kansas Supreme Court took an intensive look at a “straw man” some Wall Street firms had set up to handle the dirty work of foreclosure and serve as the “nominee” as the mortgages flipped between the various entities. Called MERS (Mortgage Electronic Registration Systems, Inc.) it’s a bankruptcy-remote subsidiary of MERSCORP, which in turn is owned by units of Citigroup, JPMorgan Chase, Bank of America, the Mortgage Bankers Association and assorted mortgage and title companies. According to the MERSCORP web site, these “shareholders played a critical role in the development of MERS. Through their capital support, MERS was able to fund expenses related to development and initial start-up.”

In recent years, MERS has become less of an electronic registration system and more of a serial defendant in courts across the land. In a May 2009 document titled “The Building Blocks of MERS,” the company concedes that “Recently there has been a wave of lawsuits filed by homeowners facing foreclosure which challenge MERS standing…” and then proceeds over the next 30 pages to describe the lawsuits state by state, putting a decidedly optimistic spin on the situation.

MERS doesn’t have a big roster of employees or lawyers running around the country foreclosing and defending itself in lawsuits. It simply deputizes employees of the banks and mortgage companies that use it as a nominee. It calls these deputies a “certifying officer.” Here’s how they explain this on their web site: “A certifying officer is an officer of the Member [mortgage company or bank] who is appointed a MERS officer by the Corporate Secretary of MERS by the issuance of a MERS Corporate Resolution. The Resolution authorizes the certifying officer to execute documents as a MERS officer.”

Kansas Supreme Court Judge Rosen wasn’t buying MERS’ story. In fact, Wall Street was probably not too happy to land before Judge Rosen. In January 2002, Judge Rosen had received the Martin Luther King “Living the Dream” Humanitarian Award; he previously served as Associate General Counsel for the Kansas Securities Commissioner, and as Assistant District Attorney in Shawnee County, Kansas. Judge Rosen wrote:

“The relationship that MERS has to Sovereign [Bank] is more akin to that of a straw man than to a party possessing all the rights given a buyer… What meaning is this court to attach to MERS's designation as nominee for Millennia [Mortgage Corp.]? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant -- their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage ‘in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.’ ” (Landmark National Bank v. Boyd A. Kesler)

Lawyers for homeowners see a darker agenda to MERS. Timothy McCandless, a California lawyer, wrote on his blog as follows:

“…all across the country, MERS now brings foreclosure proceedings in its own name -- even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home. While up against the wall of foreclosure, consumers that try to assert predatory lending defenses are often forced to join the party -- usually an investment trust -- that actually will benefit from the foreclosure. As a simple matter of logistics this can be difficult, since the investment trust is even more faceless and seemingly innocent than MERS itself. The investment trust has no customer service personnel and has probably not even retained counsel. Inquiries to the trustee -- if it can be identified -- are typically referred to the servicer, who will then direct counsel back to MERS. This pattern of non-response gives the securitization conduit significant leverage in forcing consumers out of their homes. The prospect of waging a protracted discovery battle with all of these well funded parties in hopes of uncovering evidence of predatory lending can be too daunting even for those victims who know such evidence exists. So imposing is this opaque corporate wall, that in a ‘vast’ number of foreclosures, MERS actually succeeds in foreclosing without producing the original note -- the legal sine qua non of foreclosure -- much less documentation that could support predatory lending defenses.”

One of the first judges to hand Wall Street a serious slap down was Christopher A. Boyko of U.S. District Court in the Northern District of Ohio. In an opinion dated October 31, 2007, Judge Boyko dismissed 14 foreclosures that had been brought on behalf of investors in securitizations. Judge Boyko delivered the following harsh rebuke in a footnote:

“Plaintiff’s ‘Judge, you just don’t understand how things work,’ argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process…There is no doubt every decision made by a financial institution in the foreclosure is driven by money. And the legal work which flows from winning the financial institution’s favor is highly lucrative. There is nothing improper or wrong with financial institutions or law firms making a profit – to the contrary, they should be rewarded for sound business and legal practices. However, unchallenged by underfinanced opponents, the institutions worry less about jurisdictional requirements and more about maximizing returns. Unlike the focus of financial institutions, the federal courts must act as gatekeepers…” (In Re Foreclosure Cases)

While the illegal foreclosure filings, investor lawsuits over securitization improprieties, and predatory lending challenges play out in courts across the country, a few sentences buried deep in Citigroup’s 10Q filing for the quarter ended June 30, 2009 signals that we’ve seen merely a few warts on the head of the securitization monster thus far and the massive torso remains well hidden in murky water.

Citigroup tells us that the Financial Accounting Standards Board (FASB) has issued a new rule, SFAS No. 166, and this is going to have a significant impact on Citigroup’s Consolidated Financial Statements “as the Company will lose sales treatment for certain assets previously sold to QSPEs [Qualifying Special Purpose Entities], as well as for certain future sales, and for certain transfers of portions of assets that do not meet the definition of participating interests. Just when might we expect this new land mine to go off? “SFAS 166 is effective for fiscal years that begin after November 15, 2009.” There’s more bad news. The FASB has also issued SFAS 167 and, long story short, more of those off balance sheet assets are going to move back onto Citi’s books.

Bottom line says Citi:

“… the cumulative effect of adopting these new accounting standards as of January 1, 2010, based on financial information as of June 30, 2009, would result in an estimated aggregate after-tax charge to Retained earnings of approximately $8.3 billion, reflecting the net effect of an overall pretax charge to Retained earnings (primarily relating to the establishment of loan loss reserves and the reversal of residual interests held) of approximately $13.3 billion and the recognition of related deferred tax assets amounting to approximately $5.0 billion….” [Emphasis in original.]

I’m trying to imagine how the American taxpayer is going to be asked to put more money into Citigroup as it continues to bleed into infinity.

Citigroup is far from alone in financial hits that will be coming from the Qualifying Special Purpose Entities. Regulators are receiving letters from Citigroup and other Wall Street firms pressing hard to rethink when this change will take effect.

Putting aside for the moment the massive predatory lending frauds bundled into mortgage securitizations, inadequate debate has occurred on whether securitization of home mortgages (other than those of government sponsored enterprises) should be resuscitated or allowed to die a welcome death. If we understand the true function of Wall Street, to efficiently allocate capital, the answer must be a resounding no to this racket.

Trillions of dollars of bundled home mortgage loans and derivative side bets tied to those loans were being manufactured by Wall Street without any one asking the basic question: why is all this capital being invested in a dormant structure? Houses don’t think and innovate. Houses don’t spawn new technologies, patents, new industries. Houses don’t create the jobs of tomorrow.

Also, by acting as wholesale lenders to the unscrupulous mortgage firms (some in house at Wall Street firms), Wall Street was not responding to legitimate consumer demand, it was creating an artificial demand simply to create mortgage product to feed its securitization machine and generate big fees for itself. Now we see the aftermath of that inefficient allocation of capital: a massive glut of condos and homes pulling down asset prices in neighborhoods as well as in those ill-conceived securitizations whose triple-A ratings have been downgraded to junk.

There’s no doubt that one of the contributing factors to the depression of the 30s and the intractable unemployment today stem from a massive misallocation of capital to both bad ideas and fraud. Today’s Wall Street, it turns out, is just another straw man for a rigged wealth transfer system.

Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article other than that which the U.S. Treasury has thrust upon her and fellow Americans involuntarily through TARP. She writes on public interest issues from New Hampshire. She can be reached at pamk741@aol.com

 

 

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