BUYBACKS CONCEAL SECOND WALL STREET BAILOUT

Jan 5, 2011

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

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This is like a matching grant paid to a home invader. First they get money for just entering the yard, then they get everything they want hurting and scaring the residents, then the government gives them a matching grant for the money they made just getting into the yard (from “investors”) and now they are giving them a matching grant for the theft of personal property from the home invasion. The thought that maybe the victims should simply get their stuff back is not in the equation. The idea that taxpayers should fund these home invaders seems to make sense to enough people that it has become policy.

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THE VERY SAME “MORTGAGE-BACKED SECURITIES” THAT HAVE NO MORTGAGE BACKING BECAUSE THERE WAS NO TRANSFER AND IS NO MORTGAGE AND THERE IS NO ENFORCEABLE NOTE — THAT IS WHAT FANNIE AND FREDDIE SETTLED FOR PENNIES ON THE DOLLAR.

A direct bailout of Wall Street AGAIN is a politically impossible feat. It’s deemed necessary because the megabanks are about to go under, this time for good, if they are required to purchase back the mortgages and mortgage backed securities that investors were bilked out of by direct deception by the investment banks and the rating agencies operating in conjunction with mortgage brokers and appraisers. These “investors” include the Federal Government, including the Federal Reserve and U.S. Treasury.

The potential liability is quoted very low in the hundreds of billions just like the run-up to the last financial crisis. It’s really in the trillions because the first bailout was not applied to the real liabilities and is largely sitting on Wall Street but the Federal government either does not understand that or is in league with the banks. My guess is it is a little of both. What to do? The interest in savings the banks is clearly a higher priority than saving the citizens, so they are creating a scenario where the taxpayers take another hit for assumption of nearly all the liabilities on bad or non existent Fannie and Freddie guaranteed mortgages and mortgage backed securities.

So rather than let the banks take the hit for worthless mortgages, notes, receivables and mortgage backed security debt, they devised a scheme wherein Fannie and Freddie would settle with bank of America for pennies on the dollar, or even less depending upon which liabilities you are counting. Not only did this let BOA off the hook for hundreds of billions of dollars in liability the highly publicized settlement created an index of value for the claims of investors. So all the other BOA settlements with investors are going to look a lot like the Fannie and Freddie settlement — and so will all the other settlements by all the other banks with Freddie, Fannie and other “investors.”

That leaves Fannie and Freddie sitting with a deficiency on its balance sheet amounting to at least many hundreds of billions and probably trillions of dollars. Who pays for that? The Federal Government, as per law. Where do they get the money? From you and every other taxpayer. So once again the U.S. taxpayer is being secretly assessed approximately $3,000 to be paid out with interest over many years. And somehow that “policy” makes more sense — giving trillions to banks whom you already knew misused the last money you gave them instead forcing the hit on the banks and restoring homeowners to the position they were in before they were hoodwinked by Wall Street.