AIG Mystery: Where's the Money?

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3/2/09

Bailouts are going to the perpetrators rather than the victims. The mystery deepens as to where all this money went and where it is going. Something like a trillion dollars (a number with a lot of zeroes) has gone into a black whole called “the financial system.” AIG just received another $30 billion to cover losses from “write-downs.” But is that money actually going to investors who were supposedly insured or is it being pocketed? Like the bank holding companies who took federal bailout money and the never passed it on to the actual banks they were holding, no money seems to come out of this black whole. NO investor gets saved, nor borrower is helped, no foreclosure is stopped even though they were the victims of the largest PONZI scheme in history. (Mortgage backed securities, that is, not Madoff whose scheme was dwarfed by the scope of the Wall Street madness that produced illusory profits, illusory stock prices, and huge bonuses to corporate leaders who were driving hte bus into a ditch).

Here is a reply I entered to a squabble amongst two of our readers:

Glenn and Lynne: Weighing in here just a little. Lynne expresses the frustration a lot of people feel about the legal profession. Some of it is well-founded. Most of the bad results though comes from the usual 80-20 rule — 80% of the people in any profession are suspect at a minimum — not just for integrity but for competence. Glenn expresses frustration because he takes his profession seriously, putting him in the 20% category. So he took homage at being included, along with colleagues he respects, a barrel of monkeys.

To put things in perspective let’s agree that the current mortgage mess was created by a grand PONZI scheme that HAD to fail. The scheme was so large it was beyond the comprehension of even many bright people in law, government and finance. It was enabled by disinterested, unskilled “regulators” at the SEC and other state and Federal agencies. Like the “auditors” who look for TILA violations by comparing a good faith estimate with the settlement statement and a few other papers, the regulators left 99% of the problem on the table.

Most regulators, judges and lawyers left the big problem alone because they didn’t see it. You can’t ask a blind man to see and react with anger when he fails to comply.

Our job is to get mad — not at each other — and get even or even ahead.

In this crisis lies the opportunity for homeowners to reverse in a matter of weeks or months the transfer of wealth that has been boiling to the top of the financial services industry creating illusory profits that were falsely reported as real. Investors in those companies have been hurt badly as have the investors who bought those bogus mortgage-backed securities.

The bailouts of AIG et al have been extended to prevent collapse and to buttress trust and confidence in the financial system. But that can’t happen, and credit won’t start to flow in the private sector until we address the real issue of bailout the victims rather than perpetrators. Investors have been left with nothing, wiped out to actual or near financial extinction. Homeowners have been left with LESS than nothing, leaving them with a liability and no way to pay it off and no asset to provide security to anyone. On these mortgage deals everyone lost including the innocent holder of currency, the pensioner, and the homeowner who has no mortgage but is watching his property value plummet. Let’s work together on righting the wrong because government is too slow to do it. Get the wealth transferred back to where it came from — the consumer. Work out something where investors can recover some part of their investment without begging AIG for their money after the company received hundreds of billions of dollars.

Tags: bailout, borrower, credit crisis, disclosure, foreclosure defense, foreclosure offense, Mortgage, predatory lending, securitization
Posted in Eviction, Modification, securities fraud |