JP Morgan Chase, Goldman Sachs, Bank of America, Citigroup and Wells Fargo invest over 6 million dollars to defeat major bank reform.
The nation's five largest and (as consumers feel), least credible banks which currently dominate the derivatives market; are in Washington armed with carpet bags full of cash. They have marshaled a contingency of trade groups, paid lobbyists and their own executives to convince senators that excluding banks from the derivatives business would make markets less safe.
Just how, is a curious oddity?
The banks reason, that the derivatives are a way of protecting their investments from failure, as they lay off the question of performance on third parties, like AIG for example, well that may be a bad example! But we get the point.
But the notion of excluding banks from the derivative market isn’t the issue. The issue is regulation and transparency of this 100 trillion dollar market.
The financial legislation proposed by the Obama administration and as passed by the House would require “most derivatives” to trade on public exchanges, in the belief that a transparent marketplace will be safer and cheaper. The scope of the exchange trading requirement has been the focus of the debate for months. Opponents argue that the bill would limit the industry's ability to customize derivatives to match the needs of clients. But in most cases they are their own client, except when they sell an instrument that an investor questions.
But, so far it has been the banks that have made small fortunes from the derivatives market, the most recent reminder AIG counterparty contracts with these same 5 banks receiving a concealed bailout from the Obama administration, and timothy Geithner’s requirement that AIG pay the banks 100 cents on the dollar. (Another story here)
According to the Office of the Comptroller of the Currency, Banks reported $22.6 billion in derivatives revenue in 2009. No doubt they used taxpayer bailout money to invest. Goldman Sachs was paid $13bn alone from AIG in 2009
Derivatives are contracts whose value is determined by something else. Trading in derivatives is dominated by these five banks, they were largely used in connection with Mortgage securitization instruments and were a form of insurance against a mortgage default, it is because of this “insurance” that the banks were made whole after a borrower defaulted, and it is because of these same instruments that the banks have NO incentive to work out a loan modification with a defaulting borrower, as they are made whole by these CDS’s (credit default swaps)
The five banks together have assembled more than 130 registered lobbyists, including 40 former Senate staff members and one retired senator, Trent Lott to water down and in most cases, (after their success in defeating the most concerting elements of the reform bill circulating congress), to defeat the latest round, unregistered Derivatives. Included in the list are also former staff members for the Senate majority and minority leaders, the chairmen and ranking members of the banking and finance committees, and more than 15 other senators.
The real issue and the one the banks are prepared to fight no matter how much money they have to throw at our congress, is control of their industry, this is something they will not tolerate, and after all they “are” the real masters of Washington .
Showing posts with label Wells Fargo. Show all posts
Showing posts with label Wells Fargo. Show all posts
Friday, May 14, 2010
Tuesday, April 13, 2010
Banks have made every excuse not to help borrowers stay in their home
Four major banks have made every excuse not to help borrowers stay in their home, but this excuse will make your day.
First we need to understand the real problem!
Beginning around 2003 every bank began to make creative loans. Loans that they knew would never be repaid. They created ARM and option ARM loans, no doc loans and like the military, don’t ask and don’t tell loans, these were also no qualifying loans, stated loans, and if you were breathing you got a loan.
In fact one potential borrower actually had a heart attack while signing his mortgage papers, and the first question from the borrower when they were advised of the incident, “did he sign the loan docs”
In short it didn’t matter whether the borrower was even alive as long as the docs were signed the deal would be funded.
Washington Mutual even loaned money to an unlawful immigrant making $900.00 a month, he was financed for a $616,000 mortgage in southern California
But even better, New Century Mortgage actually loaned several million to a prison inmate in Colorado based on a no qualifying loan
All of these loans were sold up line to companies like JP Morgan, Citigroup, and Deutsch Bank. The loans were then securitized as mortgage backed securities and packaged into trusts where they were sold to anxious investors. However, since all these banks knew the loans were in reality NO good they opted to take out insurance. These policies came in two different formats, one was a derivative now known as a Credit Default Swap, the other was a standard form of default insurance.
Most borrowers were placed in ARM type of loans, ARM is an acronym for Adjustable Rate Mortgage.
By 2007 when these rates began to adjust upward, borrowers began a systematic default. That was when the banks began their ferocious bout of foreclosures.
Between 2007 and 2010 we can only speculate on the number of properties the banks have taken back. Why, because sufficient information to make a tally is being withheld. However we can approximate that number to have been realistically more than 7million. We do know that currently 7.9 million homes are seriously behind with their payments. And from information released recently another 15 million are right behind this group.
Ok now you have the picture.
The banks created the problem, and just about every bank was on the verge of collapse, they borrowed from the FED and they borrowed from us, the US taxpayer to stay afloat.
The Federal government came to the banks rescue, providing $787bn in funds, to bail out the entire financial community and the Federal Government failed to attach, as they usually do, any strings to these funds.
Who is suffering? All of America!
The banks used their own appraisers to establish the then current home Value, those appraisals were inflated because the banks wanted to loan as much as they could, the more they loaned the more they made.
The true value of the property was obscured by the appraisal, and without doubt most all properties were at least 30% to 40% over appraised.
As borrowers sought help from the banks, they found themselves speaking to deaf ears. No one was listening, and no one at the banks even cared, instead the Banks, began a systemic liquidation of the property through the foreclosure process. In short, the banks foreclosed on so many homes in such a short time that they actually ran down the values of these properties below their norm.
All the borrowers were asking for was some help and some decency and integrity, they found none. Instead borrowers were foreclosed, many were then sued for a deficiency and if there was a second mortgage, which there was in most cases, they sued for breach of contract. These punitive acts on the part of the banks forced hundreds of thousands of borrowers into bankruptcy, currently there are some 6,000 filings a day.
Now we understand what happened, we understand who created this financial disaster, and we would expect that after bailing out the major banks, that\ they would reciprocate. But alas, that is not their agenda.
Obama has come up with several plans, yet none have been a success. The banks don’t want to keep borrowers in their homes, they want those homes. Apparently it is more profitable for the bank to foreclose than to help the borrower. Evidence of this has become apparent when we look at the FDIC sales agreement with these banks that are now deemed “too big to fail”
Now for the part that you have been waiting for!
JP Morgan, Citibank, Wells Fargo and Bank of America feel that to reduce the mortgage amount on home loans for borrowers currently behind, or in fact to offer any help to borrowers, is not in the best interest of those who are making their payments. Consumers they say, who are paying their mortgages on time, are likely to see such reductions as unfair. In short, these illustrious banks would continue to take the homes away from the very people they defrauded. And they will continue to come up with excuse after excuse for not offering any real help. That is unless forced to help, and sadly the likelihood of that in this administration is a far fetched illusion.
First we need to understand the real problem!
Beginning around 2003 every bank began to make creative loans. Loans that they knew would never be repaid. They created ARM and option ARM loans, no doc loans and like the military, don’t ask and don’t tell loans, these were also no qualifying loans, stated loans, and if you were breathing you got a loan.
In fact one potential borrower actually had a heart attack while signing his mortgage papers, and the first question from the borrower when they were advised of the incident, “did he sign the loan docs”
In short it didn’t matter whether the borrower was even alive as long as the docs were signed the deal would be funded.
Washington Mutual even loaned money to an unlawful immigrant making $900.00 a month, he was financed for a $616,000 mortgage in southern California
But even better, New Century Mortgage actually loaned several million to a prison inmate in Colorado based on a no qualifying loan
All of these loans were sold up line to companies like JP Morgan, Citigroup, and Deutsch Bank. The loans were then securitized as mortgage backed securities and packaged into trusts where they were sold to anxious investors. However, since all these banks knew the loans were in reality NO good they opted to take out insurance. These policies came in two different formats, one was a derivative now known as a Credit Default Swap, the other was a standard form of default insurance.
Most borrowers were placed in ARM type of loans, ARM is an acronym for Adjustable Rate Mortgage.
By 2007 when these rates began to adjust upward, borrowers began a systematic default. That was when the banks began their ferocious bout of foreclosures.
Between 2007 and 2010 we can only speculate on the number of properties the banks have taken back. Why, because sufficient information to make a tally is being withheld. However we can approximate that number to have been realistically more than 7million. We do know that currently 7.9 million homes are seriously behind with their payments. And from information released recently another 15 million are right behind this group.
Ok now you have the picture.
The banks created the problem, and just about every bank was on the verge of collapse, they borrowed from the FED and they borrowed from us, the US taxpayer to stay afloat.
The Federal government came to the banks rescue, providing $787bn in funds, to bail out the entire financial community and the Federal Government failed to attach, as they usually do, any strings to these funds.
Who is suffering? All of America!
The banks used their own appraisers to establish the then current home Value, those appraisals were inflated because the banks wanted to loan as much as they could, the more they loaned the more they made.
The true value of the property was obscured by the appraisal, and without doubt most all properties were at least 30% to 40% over appraised.
As borrowers sought help from the banks, they found themselves speaking to deaf ears. No one was listening, and no one at the banks even cared, instead the Banks, began a systemic liquidation of the property through the foreclosure process. In short, the banks foreclosed on so many homes in such a short time that they actually ran down the values of these properties below their norm.
All the borrowers were asking for was some help and some decency and integrity, they found none. Instead borrowers were foreclosed, many were then sued for a deficiency and if there was a second mortgage, which there was in most cases, they sued for breach of contract. These punitive acts on the part of the banks forced hundreds of thousands of borrowers into bankruptcy, currently there are some 6,000 filings a day.
Now we understand what happened, we understand who created this financial disaster, and we would expect that after bailing out the major banks, that\ they would reciprocate. But alas, that is not their agenda.
Obama has come up with several plans, yet none have been a success. The banks don’t want to keep borrowers in their homes, they want those homes. Apparently it is more profitable for the bank to foreclose than to help the borrower. Evidence of this has become apparent when we look at the FDIC sales agreement with these banks that are now deemed “too big to fail”
Now for the part that you have been waiting for!
JP Morgan, Citibank, Wells Fargo and Bank of America feel that to reduce the mortgage amount on home loans for borrowers currently behind, or in fact to offer any help to borrowers, is not in the best interest of those who are making their payments. Consumers they say, who are paying their mortgages on time, are likely to see such reductions as unfair. In short, these illustrious banks would continue to take the homes away from the very people they defrauded. And they will continue to come up with excuse after excuse for not offering any real help. That is unless forced to help, and sadly the likelihood of that in this administration is a far fetched illusion.
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