Taxing Wall Street Down to Size: Litigation Guidelines

The mistake I detect from those who are not faring well in court is the attempt to treat preliminary motions and hearings as opportunities to prove your entire case. Don’t talk about conspiracy and theft, talk about evidence and discovery.

every debtor is entitled to know the identity of the creditor, the full accounting for the entire obligation and all transactions arising from the transaction, and an opportunity to comply with Federal and State law requiring attempts at modification and/or mediation or settlement with the real parties in interest.
The banking system has become an agent of destruction for the gross domestic product and of impoverishment for the middle class. To be sure, it was lured into these unsavory missions by a truly insane monetary policy under which, most recently, the Federal Reserve purchased $1.5 trillion of longer-dated Treasury bonds and housing agency securities in less than a year. It was an unprecedented exercise in market-rigging with printing-press money, and it gave a sharp boost to the price of bonds and other securities held by banks, permitting them to book huge revenues from trading and bookkeeping gains.

Editor’s Note: Stockman notes the myth (lie) that “a prodigious upwelling of profitability will repair bank balance sheets and bury toxic waste from the last bubble’s collapse.” He questions whether the “profitability” will be there. I don’t question it, I know it — both for the reasons he cites and because the reality is that at least certain institution “in the loop” have tons of money and profitability “off-balance sheet” and I might add, off-shore.

According to published reports, Wall Street is “taxed” on this gorging of money at the rate of 1% while some poor bloke earning $80,000 is paying 16% just for social security, directly or indirectly. Fix the budget, cure the deficit? There it is!

The current profits reported, and the bonuses that come along with them, are being attributed widely in the press to the give-away of the federal reserve is letting them borrow at zero rates and then giving them a much higher rate for money held on deposit. While this is true all it really describes is the cover the laundering the plunder of $24 trillion back into the system where it will be moved around again producing more fees, more “profits”, and greater “liquidity” (proprietary currency).

The significance of this cannot be understated for the foreclosure litigator. We have the SEC in a 10 year confidentiality agreement with AIG so that the bailout and payment to counter-parties is being kept secret while the foreclosures proceed on obligations that have been paid in full, sometimes thirty times over. And we have the treasure trove “off-balance sheet” that was created by a secret undisclosed yield spread premium that should have investors, borrowers, and the regulators screaming. This second YSP as described recently in this blog, dwarfs any other fees, profits or other revenue or capital made during the creation stage of the mortgage mess.

The job of the litigator is to pique the interest of the judge enough to allow you to inquire about a FULL ACCOUNTING from the CREDITOR who is positively identified. Don’t ask the Judge to buy into the whole conspiracy theory aspect of the mortgage meltdown. He or she is not there to listen to “fiction.”

Just use your expert to prove there is an absence of facts and numbers such that the full accounting from debtor through creditor is not present and that under the most basic of premises, every debtor is entitled to know the identity of the creditor, the full accounting for the entire obligation and all transactions arising from the transaction, and an opportunity to comply with Federal and State law requiring attempts at modification and/or mediation or settlement with the real parties in interest.

The mistake I detect from those who are not faring well in court is the attempt to treat preliminary motions and hearings as opportunities to prove your entire case. Don’t talk about conspiracy and theft, talk about evidence and discovery.

Don’t ask the Judge to accept the idea that all these big name banks and other entities are thieves or interlopers, ask the Judge to accept the premise that you have alleged that the real creditor is not present, not represented, and that this action is in derogation of that creditor. Talk about your attempts to identify the creditor (investors) and the stonewalling you have received. Talk about your attempts to get a consistent complete accounting for the obligation and your inability to get it.

TALK ABOUT YOUR ATTEMPTS TO FIND AN ACTUAL DECISION MAKER (CREDITOR) WHOM YOU COULD SPEAK WITH AND ATTEMPT RECONCILIATION, MODIFICATION OR SETTLEMENT. 

Taxing Wall Street Down to Size

WHILE supply-side catechism insists that lower taxes are a growth tonic, the theory also argues that if you want less of something, tax it more. The economy desperately needs less of our bloated, unproductive and increasingly parasitic banking system. In this respect, the White House appears to have gone over to the supply side with its proposed tax on big banks, as it scores populist points against the banksters, too.

Not surprisingly, the bankers are already whining, even though the tax would amount to a financial pinprick — a levy of only 0.15 percent on the debts (other than deposits) of the big financial conglomerates. Their objections are evidence that the administration is on the right track.

Make no mistake. The banking system has become an agent of destruction for the gross domestic product and of impoverishment for the middle class. To be sure, it was lured into these unsavory missions by a truly insane monetary policy under which, most recently, the Federal Reserve purchased $1.5 trillion of longer-dated Treasury bonds and housing agency securities in less than a year. It was an unprecedented exercise in market-rigging with printing-press money, and it gave a sharp boost to the price of bonds and other securities held by banks, permitting them to book huge revenues from trading and bookkeeping gains.

Meanwhile, by fixing short-term interest rates at near zero, the Fed planted its heavy boot squarely in the face of depositors, as it shrank the banks’ cost of production — their interest expense on depositor funds — to the vanishing point.

The resulting ultrasteep yield curve for banks is heralded, by a certain breed of Wall Street tout, as a financial miracle cure. Soon, it is claimed, a prodigious upwelling of profitability will repair bank balance sheets and bury toxic waste from the last bubble’s collapse. But will it?

In supplying the banks with free deposit money (effectively, zero-interest loans), the savers of America are taking a $250 billion annual haircut in lost interest income. And the banks, after reaping this ill-deserved windfall, are pleased to pronounce themselves solvent, ignoring the bad loans still on their books. This kind of Robin Hood redistribution in reverse is not sustainable. It requires permanently flooding world markets with cheap dollars — a recipe for the next bubble and financial crisis.

Moreover, rescuing the banks yet again, this time with a steeply sloped yield curve (that is, cheap short-term money and more expensive long-term rates), is not even a proper monetary policy action. It is a vast and capricious reallocation of national income, which would be hooted down in the halls of Congress, were it properly brought to a vote.

National economic policy has come to this absurd pass because for decades the Fed has juiced the banking system with excessive reserves. With this monetary fuel, the banks manufactured, aggressively at first and then recklessly, a tide of new loans and deposits. When Wall Street’s “heart attack” struck in September 2008, bank liabilities had reached 100 percent of gross domestic product — double the ratio of a few decades earlier.

This was a measurement of the perilous extent to which bad investments, financed by debt, had come to distort the warp and woof of the economy. Behind the worthless loans stands a vast assemblage of redundant housing units, shopping malls, office buildings, warehouses, tanning salons and fast food restaurants. These superfluous fixed assets had, over the past decade, given rise to a hothouse economy of jobs that have now vanished. Obviously, the legions of brokers, developers, appraisers, contractors, tradesmen and decorators who created the bad investments are long gone. But now the waitresses, yoga instructors, gardeners, repairmen, sales clerks, inventory managers, office workers and lift-truck drivers once thought needed to work at these places are disappearing into the unemployment statistics, as well.

The baleful reality is that the big banks, the freakish offspring of the Fed’s easy money, are dangerous institutions, deeply embedded in a bull market culture of entitlement and greed. This is why the Obama tax is welcome: its underlying policy message is that big banking must get smaller because it does too little that is useful, productive or efficient.

To argue, as some conservatives surely will, that a policy-directed shrinking of big banking is an inappropriate interference in the marketplace is to miss a crucial point: the big Wall Street banks are wards of the state, not private enterprises. During recent quarters, for instance, the preponderant share of Goldman Sachs’ revenues came from trading in bonds, currencies and commodities.

But these profits were not evidence of Mr. Market doing God’s work, greasing the wheels of commerce and trade by facilitating productive financial transactions. In fact, they represented the fruits of hyperactive gambling in the Fed’s monetary casino — a place where the inside players obtain their chips at no cost from the Fed-controlled money markets, and are warned well in advance, by obscure wording changes in the Fed’s policy statements, about any pending shift in the gambling odds.

To be sure, the most direct way to cure the banking system’s ills would be to return to a rational monetary policy based on sensible interest rates, an end to frantic monetization of federal debt and a stable exchange value for the dollar. But Ben Bernanke, the Fed chairman, and his posse are not likely to go there, believing as they do that central banking is about micromanaging aggregate demand — asset bubbles and a flagging dollar be damned. Still, there can be no doubt that taxing big bank liabilities will cause there to be less of them. And that’s a start.

Tags: creditor, David Stockman, DEBTOR, evidence, evidentiary hearing, Federal reserve, full accounting, identity, mediation, modifications, New York Times, off balance sheet, off shore, reconciliation, yield spread premium
Posted in bubble, Corruption, Eviction, securities fraud |