Thursday, October 7, 2010

Obama Defies Banks with Pocket Veto

You know it's a slow news day when all there is to report on is what didn't happen, and that would be President Obama not signing HR 3808, the Recognition of Notarizations Act, which would have forced federal and state courts to recognize notary signatures - including digital signatures - from other states, and was widely seen as an attempt by the banking lobby to do an end run around the "robo-signing" foreclosure mess they've created by having bank and processing firms' employees sign off on enormous rafts of affidavits without reading them.

In the midst of a foreclosure moratorium by Ally Bank, JP Morgan Chase and Bank of America, the timing of the passage of the bill raised eyebrows and brought forth derision from homeowner advocates.

The bill was passed by the House and Senate and presented to Obama on September 30. The bill had failed to pass the senate on two previous occasions, but spurred on by last-minute wrangling by senators Pat Leahey (D-VT) and Jeff Sessions (R-AL) the measure passed the senate without debate on a voice vote by unanimous consent. No record of the vote in either house was recorded, so the criminal congress, which gets much of its funding from the criminal enterprise known as the Too Big To Fail Banks, gets a free pass on this one with plenty of plausible deniability.

Though the bill was unlikely to ease the pain of the banks as they wade through hundreds of thousands of foreclosures, many of which will now be contested since their paperwork has been exposed as faulty at best and outright fraudulent at worst, the President opted to send the bill back to the congress, citing, in Press Secretary Robert Gibbs' words, "unintended consequences," obviously referring to the foreclosure scandal that's been accelerating over the past two to three weeks.

That was big news for homeowners in foreclosure in the 23 states that are defined as "judicial" foreclosure states, who will likely be allowed to remain in their homes without having to pay their mortgage nor be hounded by the servicing banks for up to a year or longer, according to sources such as Business Week.

Originally downplayed by the banks, the extent of the fraud - with much of the underlying paperwork in the affidavits referring to title and ownership, and thus, standing in foreclosure at fault, attorneys general from a handful of states have already called on the banks to halt foreclosures. Ohio AG, Richard Cordray, has already started a lawsuit against Ally Bank (formerly GMAC) and is close to suing Bank of America and JP Morgan Chase.

Late Wednesday, US Attorney General Eric Holder, after being prompted by House Speaker Nancy Pelosi and other prominent Democrats, has ordered an investigation into foreclosure practices under the auspices of the financial fraud enforcement task force, formed last year in the aftermath of the market meltdown, TARP and the associated issues stemming from the original subprime crisis in 2008.

All of this didn't move markets much at all, though both JP Morgan Chase (JPM) and Bank of America (BAC) were lower at session's end.

For the most part, traders were patiently awaiting the release of the September Non-Farm Payroll report from the Bureau of Labor Statistics, due out Friday morning at 8:30 am ET. Consensus estimates are for a gain of 60,000 jobs between the private and public sectors. On Wednesday, ADP reported a September loss of 39,000 private sector jobs in their monthly survey.

Dow 10,948.58, -19.07 (0.17%)
NASDAQ 2,383.67, +3.01 (0.13%)
S&P 500 1,158.06, -1.91 (0.16%)
NYSE Composite 7,425.01, -23.32 (0.31%)
NASDAQ Volume 1,856,212,625
NYSE Volume 4,056,364,500


Declining issues held a small edge over advancers, 3114-2568. New highs led new lows, 423-37. Volume was anemic, the worst in two weeks, and the past two weeks haven't been particularly strong. Equities have been hovering around their highs for most of the week, so the jobs report Friday may provide some direction to this listless market, though it would be no surprise to see it just languish within a tight range until after the midterm elections on November 2nd, which also coincides with a FOMC meeting at which the Fed is widely assumed to announce some new QE plan, thrusting billions of dollars into the moribund credit system.

After weeks of rallying higher, commodities performed an abrupt change of direction on Thursday, with crude oil futures hammered $1.56 lower, to $81.67 at the close on the NYMEX. The latest print for gold was at $1333.60, down $15.50, though it traded as high as $1365 on the day. Silver also took a header, losing 69 cents, to $22.50.

Chartists and fundamental analysis predicted some kind of easing in the precious metals especially, as they have been on an historic tear since the middle of August without so much as a 3% pullback. Oil also had escaped its longtime range between $70 and $80, though the move above the high end might be nothing more than naked speculation as supply-demand dynamics do not support higher prices. Mostly, the move up in oil was tied to the decline of the US dollar, which has fallen 14% in the past three months against other major currencies.

Not bad for a slow news day.

Wednesday, October 6, 2010

QE2, TARP2 Signal Beginning of End for Global Currencies

The mortgage/foreclosure mess created and exacerbated by the banks is still news, big news, but in the long run it is only a symptom of what is really crushing the global economy, and the US in particular.

That would be the failure of unwinding the toxic debt created by the nation's largest banks in the most magnificent swindle in the history of the world that not only allowed the banks and financial institutions to not only profit from their spendthrift, shifty, illegal ways, but to profit from it and then to prop it up when the house of cards began to crumble.

A report from the IMF released yesterday, calls for more quantitative easing by central banks and another round of bailouts for impaired, decrepit banks amounting to another $4 Trillion wasted on the very entities that started the entire mess, calling the banks the "Achilles Heel" of global recovery.

With apologies to the great Achilles, the banks aren't only the heel (though one could maintain that the bankers are "heels"), but the head, neck, shoulders, chest, torso, arms, legs, hands and feet of the financial crisis. They are all of it and they need to be forced to own up to their liabilities, stop the mockery of accounting known as mark to model and head directly into receivership or, more appropriately, to bankruptcy courts.

Not that it isn't where they're headed anyway, but this evil, crooked gang of thieves populating the banks and the halls of congress must not be allowed to rape and pillage the global economy one more day. If there's any time that the US public should be taking to the streets in protest, it is now, or, whenever they try to sneak the next bailout by us, for they truly cannot announce it very publicly or loudly.

There should be a minimum one year moratorium on all foreclosures, evictions and repossessions. Naturally, that will crush the real estate industry, but, at some point, there has to be a mechanism for price discovery. All the mortgages sold during the years 2003-2007 should be examined, documented and written down or forgiven, mostly to alleviate the strain on the courts and the public, but more realistically because the vast majority of these loans were originated under false pretenses or have been or are being foreclosed upon fraudulently, or both.

The banks and the note-holders will take significant hits to their bottom lines, but none could be more deserving. It's certainly a better solution than what's gone on for the past three years, a la foreclosure gone wild. Keeping people in homes, in communities, whether they're paying rent or mortgages or whether they have jobs or don't is the first step toward restoring the nation to some semblance of wholeness, though admittedly, it may already be too late, the pain and suffering inflicted on people and the economy are severely deep wounds which will not heal overnight.

We must, as a people and a nation, take positive steps toward recovery and that begins with thre truth finally being told about the banks, and the crimes they've committed. Most of the hot-shots running the major banks should already be behind bars, but we must start now before the statutes of limitations begin to expire.

No more bailouts, no more quantitative easing and maybe no more Federal Reserve. The time has come that desperate solutions are the only answers to the desperate situation into which the banks and the government have put the nation.

Stocks were basically flat, despite a pumping of $5.5 billion this morning by the Fed in yet another POMO. This amounts to nothing less than QE on the cheap, funding the banks with fresh cash every few days because they simply cannot roll enough notes to keep them going.

Dow 10,967.65, +22.93 (0.21%)
NASDAQ 2,380.66, -19.17 (0.80%)
S&P 500 1,159.97, -0.78 (0.07%)
NYSE Composite 7,448.33, +14.15 (0.19%)


The markets remain chaotic, bifurcated, as is the case today. Decliners took out advancers, 3157-2552. There were 454 new highs to 33 new lows. Volume remained at depressed levels.

NASDAQ Volume 2,127,381,000
NYSE Volume 4,205,435,500


Crude oil lifted 41 cents, to $83.23, but the real story was in the precious metals, which continued to rise in explosive fashion. The latest print for gold was $1348.50, up $7.90, while silver added 30 cents to $23.17. Precious metals prices are moving in direct inverse action to the crumbling currencies of the major industrialized nations, as the race to the bottom ramps up to include the US, all of Europe, Japan and other major nations.

More will be posted about developments in the mortgage foreclosure miasma, since today's news is more than enough upon which to chew for one day. The threat of another round of bank bailouts - which didn't work the first time around - is simply incomprehensible. The global economy will not sustain it.

Tuesday, October 5, 2010

Title, Standing at Heart of Foreclosure Disaster; Stocks Don't Care, Rally

Finally, the truth about affidavits which are at the heart of the "robo-signing" scandal comes to light, courtesy of a must-read, NY Times front page story by Gretchen Morgenson.

The key passage:
"The byzantine mortgage securitization process that helped inflate the housing bubble allowed home loans to change hands so many times before they were eventually pooled and sold to investors that it is now extremely difficult to track exactly which lenders have claims to a home.

Many lenders or loan servicers that begin the foreclosure process after a borrower defaults do not produce documentation proving that they have the legal right to foreclosure, known as standing.

As a substitute, the banks usually present affidavits attesting to ownership of the note signed by an employee of a legal services firm acting as an agent for the lender or loan servicer."

Now we know that what mid-level employees at GMAC (now Ally Bank), JP Morgan Chase, and Bank of America were signing off on were attestations of mortgage assignments between banks and securitization trusts, i.e., the supposed note-holding investors. The sad truth is that the original notes have been lost, misplaced, trashed or somehow dispossessed, and the servicing banks - which have no standing to foreclose - have been scrambling for alternatives. In light of the fraudulent manner in which the banks have been handling real estate business for the past five to ten years, it's entirely possible that even the information in the robo-signed affidavits is faulty, incorrect or woven entirely from unwholesome cloth.

This issue has not escaped the notice of some quick-draw attorneys in Kentucky, who have filed a class-action RICO lawsuit on behalf of all Kentucky homeowners in foreclosure, against Citigroup, Ally Bank and MERS (Mortgage Electronic Registration System), claiming that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

Lender Processing Services (LPS), one of the foreclosure mills at the heart of the controversy and unfolding legal drama, traded as high as 44 within the last year, but has been in decline lately. Over just the past three trading sessions, the company's stock - which went public just two years ago - has fallen from a high of 33.50 on Friday to a low of 25.50 today. Company executives were busy explaining discrepancies in signatures on various foreclosure documents.

The issue was discussed in a heated segment on CNBC's "The Kudlow Report" Monday night, with host Larry Kudlow calling the situation "chaos." Note Kudlow's shocked and animated appearance during the segment below. Obviously, he's aware of the potential long-term ramifications of these developments.



At issue is nothing less than the credibility of the banks and the legal system. In Florida, where foreclosure cases are being heard in courtroom hallways and by retired judges due to the overwhelming volume of cases, the "rocket docket" has given the banks the benefit of the doubt when the reality may be that many servicing banks didn't actually have standing to foreclose and may have used forged, fraudulent documents to take homes from unsuspecting owners.

None of this was worthwhile news on Wall Street, however, as investors took advantage of a weak US dollar and hints of more QE by the Federal Reserve to boost stocks in a day-long rally.

Dow 10,944.72, +193.45 (1.80%)
NASDAQ 2,399.83, +55.31 (2.36%)
S&P 500 1,160.75, +23.72 (2.09%)
NYSE Composite 7,434.18, +161.65 (2.22%)


Advancers buried decliners on the day, 4682-1078. New highs towered over new lows, 550-32. For a change, volume was actually quite robust.

NASDAQ Volume 2,234,181,500
NYSE Volume 4,932,642,500


Commodities made enormous moves on the back of the declining dollar. Crude oil for November delivery soared $1.35, to $82.82 on the NYMEX. Gold advanced $23.50, to $1,340.30 another all-time high, while silver rose an astonishing 70 cents, to $22.74, a 3.18% move.

The moves in the stock market may be fleeting however, as investors brace for the release of key jobs data. At 8:15 am Wednesday the ADP Employment Change will hit the wires. Expectations are for a feeble number of just 20,000 private sector jobs created in September.

On Friday, the Bureau of Labor Statistics reports on non-farm payrolls for the prior month with expectations for a loss of 18,000 jobs overall and an unemployment rate of 9.7%. The figures are distressing to most people but seem to have little effect on Wall Street as continued high unemployment simply doesn't seem to be a metric most traders wish to look at with any kind of fundamental analysis.

With earnings beginning to take center stage, employment data may be simply overlooked, something investors will do at their own peril. With the true unemployment rate hovering around 18-20%, one has to wonder how long Wall Street can remain in denial as the underlying US economy continues to deteriorate.

As we've learned from the dotcom explosion, the subprime disaster and the general market malaise of 2008, denial can be an ongoing condition until well after the crisis has become severe. As elections loom ever closer, stocks seem to be in a highly volatile state, with valuations not reflective of economic realities.

Today, stocks seem like no-lose investments. The key question is how long will they remain floating on a bubble of cheap or free money when the underlying debt conditions appear to be creaking and groaning for relief.

Monday, October 4, 2010

Wall Street Sell-Off; Foreclosure Fraud Issue Grows

Investors weren't interested in buying much of anything on Monday. In fact, the selling pressure persisted from the opening bell to the close as the major indices took a turn lower.

Selling was broad-based with most of the blame placed upon the rising US dollar, as inside players unloaded some of their more profitable trades built up over the past month. With stocks up roughly 9% in September, October should, by shear market dynamics - or, what's left of them in this low-volume regime - revert to the mean, suggesting a 5-7% decline in stocks overall, though a complete reversal cannot be ruled out.

Dow 10,751.27, -78.41 (0.72%)
NASDAQ 2,344.52, -26.23 (1.11%)
S&P 500 1,137.03, -9.21 (0.80%)
NYSE Composite 7,272.53, -63.38(0.86%)


Decliners finished well ahead of advancing issues, 4312-1529. New highs maintained their large edge over new lows, 304-41. Volume was dull, at best.

NASDAQ Volume 1,922,075,250
NYSE Volume 3,770,310,500


Oil, which had traded higher through most of the session, fell victim to heavy selling pressure, losing 11 cents, to $81.47. Precious metals took a bit of a breather, with gold off $1.00, to $1,316.80, and silver losing 2 cents, to $22.04.

Gaining momentum was the ongoing foreclosure fraud story, which is larger than the mainstream media wishes to believe. Late Friday, the nation's largest mortgage servicer, Bank of America, announced that they were halting foreclosures in the 23 states which have judicial foreclosure processes. This news came late in the day, on a report that one of their employees admitted to signing as many as 8000 affadavits in a month without reading their contents.

This was the same kind of issue which caused Ally Bank - formerly GMAC - and JP Morgan Chase to halt foreclosure proceedings in the same states earlier last week.

Over the weekend it was learned that title insurers were in communication with officials from Fannie Mae and Freddie Mac, over the issue of clouded titles on homes sold post-foreclosure, some even going so far as to deny writing title insurance on some properties.

The issue enlarges when one considers the overall ramifications of falsifying documents. The very banks which began the mess by issuing bad mortgage products to unqualified buyers - knowing they had a high risk of default - and then packaging the mortgages into security instruments sold to equally in-the-dark investors, are now attempting to rush through the foreclosure process with another round of fraud, in the form of faulty paperwork submitted to courts across the country.

At the very heart of the issue is ownership, or title, to the properties. When the banks securitized these mortgages, they separated the mortgage from the note, a practice long held to cause title issues, and never before attempted.

Allegations that the banks had this purpose in mind all along, defrauding the note-holders as well as the home-buyers, are gaining traction in legal circles. Some states are calling for complete moratorium on foreclosures until the depth of the fraud is revealed.

What is not occurring are calls for criminal prosecution of the banks which engaged in the practice of defrauding courts, though it appears clear that the practice of rushing paperwork without due diligence - thus denying due process - was as widespread as the subprime and 80/20 loans the banks were pushing and securitizing years earlier.

There should be no downplaying of the seriousness of the issue, though there was no mention of the scandal - and a scandal it indeed is - on any of the Sunday talk shows, weekend nightly news shows nor Monday morning talk programs from the major networks.

If titles to homes are in such a state of confusion that the chain of ownership cannot be maintained, identified and indemnified, the variety and scope of claims and counter-claims threatens to clog the court system for years, which, in a cynical way, might be what the unscrupulous banking interests wanted from the very start.

Without oversight and regulation, this is what happens to money and markets. Insidious operators will take advantage of loose regulations and loopholes and drive billions through them in dirty transactions, which is what appears to have happened on Wall Street, in county clerk offices and courtrooms across the country.

In a perverse kind of way, this overhanging, unresolved issue, one which threatens the entire banking and credit system again, may have been the hidden catalyst behind plenty of today's equity sales.

This scandal is only beginning, with much more to be revealed in coming weeks and months. with elections front and center, and a questionable terror alert being issued by the US, conspriacy theorists are having a field day trying to tie all of this together. It does make perfect sense that politicians and banksters, working in cohort behind the scenes, would attempt to either delay more allegations of fraud or blow them up prior to the elections, depending on the style of tin-foil of your particular hat.

Fraud should be taken seriously, however, though when it comes to banks, they apparently can get away with just about anything, calling it "procedural errors" or "paperwork issues." In the end, the truth will come out, and the US economy will be the worse for it.

Friday, October 1, 2010

Mortgage, Foreclosure Mess Broadens, Deepens

Following up on yesterday's post, "Should American Homeowners Stop Paying Mortgages?", despite the issues involving apparent widespread fraud by banks originating, servicing and now foreclosing on mortgages being hushed up and brushed aside by the mainstream media, others have taken notice, specifically the Office of the Comptroller of the Currency (OCC), which issued a directive on Thursday ordering seven major banks to review their foreclosure procedures..

The banks include the largest originators and servicers in the industry, including JP Morgan Chase, Bank of America, Wells Fargo, HSBC, PNC Bank, US Bank and Citibank.

That list should be familiar to most Americans, as they are some of the same entities who shared in taxpayer largesse via the $700 billion TARP program and are known collectively as "too big to fail" (TBTF).

Now under closer scrutiny in the aftermath of the most enormous and hastily-prepared bailout in our nation's history due to passage of new financial regulatory legislation, the banks are apparently not yet well enough feted on taxpayer money and have resorted to outright fraud against homeowners in an effort to enlarge their racketeering activities.

The one question that should be asked, but isn't, is "where is Eric Holder and the Department of Justice?" noticeably absent from even the hint of a comment, inquiry or investigation. The DOJ should have been on the banks like lightning, but instead have turned a blind eye to obvious criminal wrongdoing at some of the nation's most "trusted" companies.

Americans are becoming wise to the idea that these major banking institutions should be trusted with nothing, much less anyone's hard earned dollars being deposited in their vaults. Meanwhile, with elections looming, Attorneys General in a handful of states - like New York, where this post is being written - are too busy running for office to be bothered with mundane details such as protecting the rights of citizen homeowners. Specifically, Andrew Cuomo, the NY AG, is busily running for governor when his office should be calling for a complete and total stoppage to all foreclosure proceedings.

It's not like there haven't been enough flags raised in the state. In Brooklyn, State Supreme Court Justice Arthur Schack has earned a national reputation as a friend of homeowners and adversary of foreclosure mill attorneys, routinely tossing out cases wherein the plaintiffs have skirted or short-cut legal requirements in foreclosure actions.

Also weighing in on the mortgage mess is Florida Senator Alan Grayson, who released a video outlining the roots of the national catastrophe. Readers can follow the link above or view the embedded clip at the end of this post.

Minnesota senator Al Franken has chimed in with a letter to Fed Chairman Ben Bernanke, FDIC Chief Sheila Bair and Attorney General Eric Holder, seeking criminal prosecution in the Ally Bank matter.

If it weren't the height of election season, there might be within a few days of a nationwide moratorium on foreclosures, but, with the rhetoric already reaching super-nova status in a number of races, the Obama administration is keeping its distance from this issue, for now.

Once the election is over, expect a flood of moratoria from state leaders and AGs, and a more serious posture from the administration, depending upon the outcome, of course. Our elected leaders don't do anything unless they see a political benefit, so that does not preclude some sort of action by President Obama or the congress in the form of an "October Surprise."

It's a political hot-button issue that has more than its share of adherents and opponents. While the millions facing foreclosure or already having been through that mess, would cheer any kind of action by the federal government, the conservative tea partiers would surely spin it as another bailout or handout and a display of more fiscal irresponsibility.

The upshot is that whatever occurs, expect this issue to continue to explode. Class action lawyers are certain to sniff out the potential for enormous profits in overturning the hundreds of thousands - if not millions - of foreclosure sales made over the past two years, creating a further backlog for already over-stretched courts in the most affected states.

As for the play on the markets this Friday, stocks were buoyed by a number releases off the economic calendar, including the University of Michigan Consumer Sentiment Index, which checked in at 68.2, above consensus, and the ISM Index, below estimates at 54.4.

Pushing stocks more than anything else, however, is the continued promise of cheap money supplied by the Fed, sacrificing the value of the dollar with their inflationary death-wish.

Dow 10,829.68, +41.63 (0.39%)
NASDAQ 2,370.75, +2.13 (0.09%)
S&P 500 1,146.24, +5.04 (0.44%)
NYSE Composite 7,335.91, +54.84 (0.75%)
NASDAQ Volume 1,937,217,000.00
NYSE Volume 4,457,833,500


Advancing issues clobbered decliners, 3627-2069. There were 410 new highs to a paltry 27 new lows. Volume remained depressed as the trade is being led almost entirely by Hedge Funds, Primary Dealers and High Frequency Traders. Individual investors are nowhere to be found, having been scared off by the 2008 meltdown and the May 6 flash crash.

Speaking of which, the SEC released their preliminary findings into the cause of the flash crash, pinning the blame on an unnamed midwest broker-dealer (Waddell and Reed) in a 151-page report, full of charts and data, though devoid of conclusion or recommendations on how to fix the maze of electronic trading at the heart of the issue.

Commodities went completely bonkers, with oil flying another $1.61, to $81.58; gold setting another record at $1,317.80, up $8.20; and, silver up 24 cents, to $22.06, making another 30-year high.

Savvy investors would be therefore holding gold and silver, plus a raft of foreclosed properties on which they would be paying no mortgage, rent or taxes and use to store oil by the barrel indefinitely, or at least until somebody offers them cash for keys or starts foreclosure proceedings.

We certainly do live in interesting times.