The Gathering Storm – Part 1

Sorry for the silence but there is so much to read, things breaking so thick and fast, that it seems unwise to rush to judgement.  So consider this just a dispatch from the storm front.

Any of you who have been watching the gyrations of the markets over the last week will have seen, as I have, the warning gusts that precede an approaching storm.  Stocks surging up and plunging down. Apple, riding waves of turbulence up, down and up again.  Netflix, rising like a rocket, propelled faster and faster until it reaches, as it must, its parabolic moment of stillness before its fall.  Fools see only the upswings and seem blind to the significance of the down blasts.

This isn’t recovery. This is the in-rushing, gathering of opposing forces into what is going to be a vicious thunderhead of social, financial and legal violence.  I truly believe the storm is now above us, still growing, threatening and darkening.

It is the same storm as in ’08. It has gathered again, because we have let it.

The centre of it, is STILL, U.S. mortgage backed securities.  NOTHING has been done about them.  And nothing has been done, because they are the currency that the immense debt-denominated wealth of our rulers is held in.

The actions taken in the last two years have NOT been primarily about recovery.  They have been first and foremost, about protecting, not just the treasure hoard of debt backed wealth itself, but much more importantly, it has been about vociferously defending the legitimacy of the financial system that is based on , creates and is made all powerful by, debt backed securitized wealth.

The last two years have been about  fighting off any questioning of the legitimacy of the system of securitized, debt backed wealth. But the system of securities and debts is once again in critical danger of disintegrating. The securities and the system that created them are literally unravelling.

It may seem perverse, lunatic even, to make such a claim while markets are endlessly rising and governments are succeeding everywhere in pushing through crippling cuts to better protect the pyramid of debts and power.

But beneath the surface, the basic elements of which it is all made, the securities, are being pulled apart as one aspect after another of their legal force is being questioned and taken to court.  There are now so many different claims and evidence of fraud it is difficult to know where to start.

So let us begin with a thumb nail reminder of the system as is.  At the centre the banks. To their left the people to whom they sold mortgages and from whom they expect mortgage payments.  To their right the people to whom they sold securities based on the mortgages.  The securities buyers paid the banks an up-front lump sum in return for receiving all the rights to payments from the mortgage and rights over the property in case of default.  The banks used the lump sum payment to make more mortgages.

The legal title of the mortgage passed from the banks to the security holders.  Most mortgage buyers, the householders, were unaware of this transfer and to whom they actually owed their money and who actually ‘owned’ the legal right to their payments and their house if they defaulted.

The banks were the middle men in the transaction.

What is happening now is that every single stage in this legal and financial process has been found to be faulty or fraudulent – depending on whose lawyer you read.  Here are just some of the problems uncovered.

The first one concerns a woman called Linda Green. According to The Washington Post,

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.

Linda Green didn’t work for one of these banks after another. She managed to work for them at the same time.  What she did for all of them was sign, as responsible bank employee, on mortgage papers. Her signature was part of the process of the  banks ‘checking’ that all claims made in the mortgages were correct and title was legally able to be transferred.

Linda Green is known to have signed hundreds of thousand of such documents for twenty different lenders.  Her rate of signing was around 2000 per day.  Which, if she signed non stop for ten hours a day five days a week is one every 18 seconds.  In that time she had to do the due diligence the law requires and which the bank guarantees to its customers, the securities buyers, it has done. Which everyone had better hope she did somehow do in those few seconds, because in 2009 alone, according to Lynn Syzmoniak, just working out the signatures per second, Linda Green probably processed over $127 billion dollars worth of mortgages.

A prodigious feat of stamina and dedication – or fraud. You decide. Also, unfortunately, Linda Green didn’t actually sign.  It turns out many different people, with strikingly differing signatures, signed Linda Greens name.  Which is fraud.

And Ms Green is not alone.  Again from Ms Syzmoniak’s work:

Jeffrey Stephan from the GMAC may have produced as many as 2,000 Assignments each day. Bryan Bly of Nationwide Title Clearing – 2000/day, Scott Anderson, sweated out an average of – 2000/day. Herman John Kennerty of America’s Servicing Company – the same. Erica Johnson-Seck, Christina Trowbridge, Whitney Cook, Stacy Spohn, Keri Selman and Renee Hertzler. All of them ordinary Americans, their names could be from any high school year book. They all all part of an endemic culture of fraud.  As the scale of the ‘robosigning’ as it has come to be called, has unfolded the Big Banks have been forced to halt foreclosures.