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The Shadow Banking System: A Web of Financial Fraud
The Wall Street Journal reported on January 19th that the Obama Administration was pushing heavily to get the 50 state attorneys general to agree to a settlement with five major banks in the “robo-signing” scandal. The scandal involves employees signing names not their own, under titles they did not really have, attesting to the veracity of documents they had not really reviewed. Evidence reveals that it was an industry-wide practice, dating back to the late 1990s; and it may have clouded the titles of millions of homes. If the settlement is agreed to, it will let Wall Street bankers off the hook for crimes that would land the rest of us in jail – fraud, forgery, securities violations and tax evasion. 
To the President’s credit, however, he seems to have shifted his position on the settlement, in response to protests before his State of the Union address. In his speech on January 24th, he did not mention the settlement but announced instead that he would be creating a mortgage crisis unit to investigate wrongdoing related to real estate lending. Of course, only the future will reveal if this investigative unit will be given the necessary authority or mandate when it comes to criminal prosecutions.
The Deeper Question Is Why
Investigation is needed into not just whether massive robo-signing occurred but why it was being done. The alleged justification—that the bankers were so busy that they cut corners—hardly seems credible given the extent of the practice.
The robo-signing largely involved assignments of mortgage notes to mortgage servicers or trusts representing the investors who put up the loan money. Assignment was necessary to give the trusts legal title to the loans. But assignment was delayed until it was necessary to foreclose on the homes, when it had to be done through the forgery and fraud of robo-signing. Why had it been delayed? Why did the banks not assign the mortgages to the trusts when and as required by law?
Here is a working hypothesis, suggested by Martin Andelman: securitized mortgages are the “pawns” used in the pawn shop known as the “repo market.” “Repos” are overnight sales and repurchases of collateral. Yale economist Gary Gorton explains that repos are the “deposit insurance” for the shadow banking system, which is now larger than the conventional banking system and is necessary for the conventional system to operate. The problem is that repos require “sales,” which means the mortgage notes have to remain free to be bought and sold. The mortgages are left unendorsed so they can be used in this repo market.
The Evolution of the Shadow Banking System
Gorton observes that there is a massive and growing demand for banking by large institutional investors – pension funds, mutual funds, hedge funds, sovereign wealth funds – which have millions of dollars to park somewhere between investments. But FDIC insurance is designed to protect individual investors and covers only up to $250,000. The large institutional investors want an investment that is secure, that provides them with a little interest, and that is liquid like a traditional deposit account, allowing quick withdrawal.
The shadow banking system evolved in response to this need, operating largely through the repo market. “Repos” are sales and repurchases of highly liquid collateral, typically Treasury debt or mortgage-backed securities—the securitized units into which American real estate has been ground up and packaged, sausage-fashion. The collateral is bought by a “special purpose vehicle” (SPV), which acts as the shadow bank. The investors put their money in the SPV and keep the securities, which substitute for FDIC insurance in a traditional bank. (If the SPV fails to pay up, the investors can foreclose on the securities.) To satisfy the demand for liquidity, the repos are one-day or short-term deals, continually rolled over until the money is withdrawn. This money is used by the banks for other lending, investing or speculating.
All Behind the Curtain of MERS
The housing shell game was made possible because it was all concealed behind an electronic smokescreen called MERS (an acronym for Mortgage Electronic Registration Systems, Inc.). MERS allowed houses to be shuffled around among multiple, rapidly changing owners while circumventing local recording laws. Title would be recorded in the name of MERS as a place holder for the investors, and MERS would foreclose on behalf of the investors. Payments would be received by the mortgage servicer, which was typically the bank that signed the mortgage with the homeowner. The homeowner usually thinks the servicer is the lender, but in fact it is an amorphous group of investors.
This all worked until courts started questioning whether MERS, which admitted that it was a mere conduit without title, had standing to foreclose. Courts have increasingly held that it does not.
Making matters worse for the servicing banks, Fannie Mae sent out a memo telling servicers that in order to be reimbursed under HAMP—a government loan modification program designed to help at-risk homeowners meet their mortgage payments—the servicers would have to produce the paperwork showing the loan had been assigned to the trust.
The hasty solution was a rash of assignments signed by an army of “robosigners,” to be filed in the public records. But the documents are patent forgeries, making a shambles of county title records.
Complicating all this are tax issues. Since 1986, mortgage-backed securities have been issued to investors through SPVs called REMICs (Real Estate Mortgage Investment Conduits). REMICs are designed as tax shelters; but to qualify for that status, they must be “static.” Mortgages can’t be transferred in and out once the closing date has occurred. The REMIC Pooling and Servicing Agreement typically states that any transfer significantly after the closing date is invalid. Yet the newly robo-signed documents, which are required to begin foreclosure proceedings, are almost always executed long after the trust’s closing date. The whole business is quite complicated, but the bottom line is that title has been clouded not only by MERS but because the trusts purporting to foreclose do not own the properties by the terms of their own documents.
Systemic Risk
Not only has the system destroyed county title records, but it is highly vulnerable to bank runs and systemic collapse. And that is what happened in September 2008 following the bankruptcy of investment bank Lehman Brothers. Gorton explains that it was a run on the shadow banking system that caused the credit collapse that followed. Investors rushed to pull their money out overnight. LIBOR—the London interbank lending rate for short-term loans—shot up to around 5%. Since the cost of borrowing the money to cover loans was too high for banks to turn a profit, lending abruptly came to a halt.
Interestingly, countries with strong public sector banking systems largely escaped the 2008 credit crisis. These include the BRIC countries—Brazil Russia, India, and China—which contain 40% of the global population and are today’s fastest growing economies. They escaped because their public sector banks do not need to rely on repos and securitizations to back their loans. The banks are owned and operated by the ultimate guarantor—the government itself. The public sector banking model deserves further study.
47 Comments so far
Show All"The banks are owned and operated by the ultimate guarantor—the government itself. The public sector banking model deserves further study"
Or rather one could also see it the other way round: the Banks own and operate the government. The Fed Reserve consists of private banks, they simply rig the system to further consolidate their power. This they have done like never before and they have done a helluva job. (for example, good ol Jamie Dimon is not only head of JPMorgan Chase, he is chair of the NY Fed and the too bigs are even bigger than ever).
In this "inverted totalitarian" system, private interests have merged with public power. Public power has been made subservient to narrow private interests. The banking/finance sector is at the center of this. They are rigging the entire debt Ponzi scheme in their favor and banksters have avoided any consequences for their corruption because they pull many puppet strings in Warshiton.
The current course we in the "Western World" are taking will result in catastrophe on many levels: political, economic, environmental.
Obama's way, way too late idea of setting up a " mortgage crisis unit to investigate wrongdoing related to real estate lending" is most certainly bogus, because there are already in place investigative elements in the FBI that would/could do the job. Obama is just in "campaign mode" again.
A realnewsnetwork commentator stated that it was possibly a move to forestall the state investigations/actions already taking place.
The Fed Reserve consists of 12 Federal Reserve Banks, not private banks. The Fed offers many services to private banks, and all private banks have accounts at the Fed. More and more the Fed, just like the rest of US gov't, has become corrupted by the money power of the 1%. Is it too late to turn this around? I don't know, but if the Fed worked the way it was designed to do, we wouldn't be in this mess.
The Fed works exactly the way it was designed to. It steals from the public!
Cathy, the Federal Reserve is a very PRIVATE corporation, subjected to no oversight...please read the chapter on the Federal Reserve in the book "The Score". It will give u a comprehensive overview of the hows, where's and who's of the Fed Res bank...Its a sham owned and controlled by the Zionists...
What book is "The score"? - Pls supply further info: full title, author, etc. As it is, it cannot be found on Amazon.
You are profoundly uninformed. Dig a bit deeper. Again: who is the chair of the NYFED?!!!
Who is the chair? That's who is the chair? Who's the mayor?
"All in all/It's just another brick in the wall. . ."
Who's the chair? That's it. Who's the chair? Who's the mayor?
"All in all/It's just another brick in the wall. . ."
Cathy Mason is correct. The problem is not with the Fed, it is with who gets appointed to the Fed. This is true of all of the government agencies. It is right wingers who are co-opting people's outrage with the corruption of government into a extreme right wing libertarian anti-government agenda.
The problem is that all of the government agencies have become corrupted by wealthy privater interests. The solution to that problem is not to dismantle government - dismantle the public infrastructure - and so turn everything over to the wealthy private interests. But that is exactly the direction that naive people are being led now, by the Paul campaign, for example.
The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years. One term begins every two years, on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office.
The Chairman and the Vice Chairman of the Board are named by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman.
Current chairman:
Ben S. Bernanke
Other board members:
Janet L. Yellen, (Vice Chair)
Elizabeth A. Duke
Daniel K. Tarullo
Sarah Bloom Raskin
Federal Reserve Bank of New York
President: William C. Dudley
William C. Dudley took office on January 27, 2009, as the tenth president and chief executive officer of the Second District Federal Reserve Bank, at New York. In that capacity, he serves as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.
Prior to being named president and chief executive officer, Mr. Dudley had been executive vice president of the Markets Group at the Federal Reserve Bank of New York, where he also managed the System Open Market Account for the Federal Open Market Committee. The Markets Group oversees domestic open market and foreign exchange trading operations and the provisions of account services to foreign central banks.
Prior to joining the Bank in 2007, Mr. Dudley was a partner and managing director at Goldman, Sachs & Company and served as the firm's chief U.S. economist for a decade. Earlier in his career at Goldman Sachs, he had a variety of roles including a period when he was responsible for the firm's foreign exchange forecasts. Prior to joining Goldman Sachs in 1986, he was a vice president at the former Morgan Guaranty Trust Company. Mr. Dudley was an economist at the Federal Reserve Board from 1981 to 1983.
For a list of directors for the 12 federal reserve banks -
http://www.federalreserve.gov/generalinfo/listdirectors/
Cathy Mason & Two Americas should read this article's author's book called "The Web of Debt" where you guys might learn a little more about what you are talking about. The Federal Reserve Act which was signed into law by Woodrow Wilson in 1913 privatized the 12 Federal Reserve Banks in essence making our central banking system a private cartel. That was almost a hundred years ago. Her book will enlighten you not only about this private cartel which consist of 12 Federal Reserve Banks but also the Banks too big to jail. The book will also open your eyes about fractional reserve banking, short selling, mini bail outs that happen all the time without the knowledge of the public (via the PPT - Plunge Protection Team among other bailout schemes which shovels free money to 5 of the largest banks that are supposedly too big to fail for the purpose of prodding them to invest in the Stock market to avoid a crash), among other things.
Ellen Brown points out the answer to our economical problems is by nationalizing the Feds which you say has already happened. Once nationalized the Feds, which would be a part of the government, should be the only place that money could be originated. No private bank should be allowed to use the fractional reserve formula to create money. Only the people owned Federal Reserve Banks should be able to coin and print money and in turn loan those funds to private banks. No person should own stock in this central banking system except all the citizens of the USA. The profits of our(The Peoples) investment in the central bank could pay for healthcare, education, housing for the poor and rebuild and maintain our infrastructure.
If you guys are right about the Feds being our central bank why has it been so difficult to get the Feds audited or Why is it so hard to get the feds to invest in Main Street(.99%ers) building the infrastructure putting people back to work instead of letting the Wall Street (the .01%ers) pegeon hole over a trillion dollars that could be rejuvenating our economy? Why all the secrecy? She gives a small history lesson on banking going back centuries revealing their sly schemes like the origination of fractional reserve banking. If you just checked out her website you could participate in an on going debate about the gold standard. Ellen Brown is also the founder of Public Banking Institute. Her two websites are: http://publicbankinginstitute.org/ and http://www.webofdebt.com/. Get you a book and learn! :?) and spread the word.
tp:?]
Apparently you did not read my post.
Cathy Mason said, "The Fed Reserve consists of 12 Federal Reserve Banks, not private banks."
You said, "Cathy Mason is correct."
I said the Feds has been a private cartel since 1913.
Who is correct?
I have no problem with your statements. The system is corrupt. But to solve the problems you have to know and speak the basic truths. The Federal Reserve Banks are not owned by our government(the people), which it should be, but private investments.
Maybe you were saying that the government isn't owned by the people but rather by the banksters. That is basically the corrupt truth of which you speak as the lobbyist pay for their office. But according to our constitution which says we are governed by and for the people. It said nothing about being governed by corporations and their lobbyest. The constitution starts off "We the People of the United States, in Order to form a more perfect Union, establish..." and goes on to say what ''WE'' authorize through our representatives.
In article I section 8 # 5 It states our constitutional right ... "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; " So according to our constitution, until 1913 there was no rights to coin or print money given except to our government." That means that fractional reserve banking should be illegal for private companies such as Chase who has been known to multiply its assets by 70 when 11 is the lawful exponent using the Fractional Reserve Rules. But none should be lawful.
Every thing changed in 1913 when President Wilson ratified the Federal Reserve Act. That is the date we lost our revolution which had given us the power over the banks until that point in history. We thought we won in 1776 but empirical King Georges European Banking System, basically the Rothschild banking family, kept hacking away at our banking and freedom until they got them even after repeated warnings of Thomas Jefferson, Andrew Jackson and Abe Lincoln. John F Kennedy tried to nationalize and he was assassinated just as Abe Lincoln was.
So, you see over the last century where The Federal Reserve Act has gotten us. We have become the ultimate Empirical nation. It was the thing We The People fought against until we relaxed and forgot we were fighting. We got lured into debt slavery.
The first demand OWS had was to nationalize the Federal Reserve Banks and the second was to prosecute those that gamed the system. It seems that Obama listened according to his State of the Union rhetoric. He is sly running for office with the promise of prosecuting banksters.
tp
I support eliminating private banks.
The private banks had immense power before the Federal Reserve Act.
The revolution was lost - so far as working class people are concerned - long, long before 1913.
I reject the old right wing theme you are presenting here - the narrative of America the beautiful, hijacked by the Rothschilds and a secret cabal of bankers, and the demand that we return to some noble and virtuous America of the past.
Did you read what " I " wrote?
I really don't see how you came to the conclusion that what I wrote was some right wing theme. As a democrat to the left of anything representing us today, except maybe Bernie Sanders and Dennis Kucinich, I am deeply offended. But, you don't know me other than our little disagreement of whether the Federal Reserve Banks are public or private. So I'm very forgiving:?)
I think you and I are on the same page politically. But I don't know you either.
The only thing I was trying to point out was that the Federal Reserve Banks are private banks. I may have gone off the deep end with my opinions of the Banksters of the past and present, which I would have thought that you'd of agreed. I think the banks too big to fail or jail are pure evil and are behind most of the destruction on earth.
As for private banks I don't have anything against private banks as long as they lend what their deposits equal plus their assets --- you know - the old fashioned way. They should be regulated for the safety of their depositors and the health of our economy. As I said I don't think they should have the right to use the Fractional Banking rules which allows the bank to multiply their assets, which is a total of their deposits & collateralized loans multiplied by 11. That's counterfeiting. I really -'really'- don't like the idea that 'OUR' central bank, which has the constitutional right to coin money, should be a privatized institution, which it became in 1913 when Woodrow Wilson signed the Federal Reserve Act. Profits go to wall street while we 'the people' pick up tab.
Ellen Brown has suggested several ways in her book how we could solve our economic problems "IF" the Feds were privatized. Minting 13 trillion dollar coins, since printing wasn't mentioned in the constitution, was a suggestion that she passed on in her book made by a reputable economist who she named in her book.
But, she is a realist. She knows that privatizing the Feds is next to impossible now. So, she started a campaign for State owned central banks using their assets like The Bank of North Dakota has been doing since the early 1920's. She is making real progress now. Check it out > http://publicbankinginstitute.org/.
It's a slow process changing the system. But she is working on it. All she needs -- We the people need is for people like you and me to learn, agree and help each other and others by helping her and people like her promoting this publicly owned central banking idea which is the root to all our problems.
Imagine the profits of a central bank. It could fund the programs you are passionate about like education, healthcare, the deteriorating infrastructure, clean energy(solar etc..), homelessness and employment for all. All these things will become possible to fix once banking profits are returned to the treasury by our public owned banking utility at the center of our country's finance. Instead the profits going into the pockets of these huge banks to big to fail and their bankster executives that are too big to jail while we funnel even more money into their pockets than their mere profits of their 12 privately owned Federal Banks, through bailouts by taxing the children of the people into oblivion.
Understand what a Public Owned Central Bank could mean for all "The People" and what a privately owned Central Bank means for wall street banksters.
Hopefully OWS, having demands the first of which was to nationalize the Feds and the second to prosecute those responsible for the crash of 2008, will hasten the campaign to Nationalize the Central banking system and any bank too big to fail.
tp
Not sure if you read mine. The Fed is exactly as I described it. Is it privatized? Yes, as are almost all government agencies to one degree or another.
I agree with most of what you say here. I stand on my previous remarks.
Why would you be "deeply offended?" Your position gains nothing by talking about the "Rothschilds," and that is in fact an old theme of the extreme right wing.
I was being overly dramatic with the term "Deeply Offended". I could never be offended by remarks by anyone who don't know me. But, if you was a friend you would know that I lean to the left but I believe capital which is a necessary driving force for innovation and growth but only if there is fair competition. Monopolies of any kind are not fair including patents, copy rights and secrets. That is quit off the subject and into my own personal opinion about a subject that would take too much space here. But my short statement is that capitalism should be regulated dramatically to make it fair for everybody. That would make me sort of a left wing capitalist.
Now, I didn't know that talking about the most powerful banking family - probably - ever, the Rothschild banking family, was supporting, in any way, a right wing capitalist agenda. They have been as deceptive, conniving and as down right fraudulent as any of today's banksters during the coarse of their history, and I think much much more so.
Well, your not buying that. But, I don't see that an argument in favor of socialism, or 'left wing capitalism' would include support for the Rothschild banking family considering the way their fortunes were made-- example gaming the stock market the day after the Battle of Waterloo was like insider trading when Nathan Rothschild tricked most investors into thinking the Napoleon had won - almost all stock was sold to him at penny's on a dollar.
However, your points about the appointments by our presidents to head the Federal Reserve Banks are not surprising since they dictate the presidents agenda. They in essence move his lips with their proverbial strings of counterfeit money. If the Federal Reserve was privatized the presidents lips could be speaking his own words depending upon his character. Those banks to big to fail might have been nationalized, and their profits there after could have gone back to the source which was our treasury instead of in to the pockets of those banksters who ran us over the edge of bankruptcy in 2008.
I think we agree. But, what is the reason you defend the Rothschild banksters? Could it be the projects they financed, like the Niagra Falls dam which supplies power to the eastern sea board, which gives them credit for giving us light while they made a fortune. Our Central banks could have done that and kept the profits to build other projects. With a public owned central bank we don't need Rothschild money or Morgan/Rockefeller money. With public owned central banking system the presidential appointment to head of Federal Reserve would mean something for 'the people' instead of for the private banksters.
tp
Thanks for that. I understand what you are saying better now.
There is the one area where we disagree, as it turns out. I do not think that Capitalism is necessary; that is to say I do not think that "capital is a necessary driving force for innovation and growth." Nor do I think "growth" is necessarily a worthwhile goal. Nor do I think there could ever be "fair competition."
There can be no such thing as a "left wing capitalist." You may as well say "royal peasant" or "slave owning slave."
Much of liberal and progressive politics in the US is advocacy for and promotion of Capitalism, disguised to look vaguely left wing. The purpose for that is not to combat the political right wing, but rather to suppress and eradicate the political left wing.
Another good analogy to understand this is to look at the house slaves during the era of plantation slavery. The house slaves lived in master's house and enjoyed a higher standard of living when compared to the field slaves, in exchange for defending and protecting master and his interests and assisting master in managing and controlling the field slaves. That is the role that liberals and progressives play in US politics.
I agree that left wing & capitalist in the same phrase is an oxymoron. It is like saying we need cruel kindness. But in a since that is reality. That's why we need government to regulate like an impartial referee deciding what is fair and acceptable.
You are right that fairness is impossible. We all come from different origins each carrying either gifts or baggage. And we all have a different history filled with pitfalls and traps throughout life. When it's games and pleasures we've pursued, it don't matter. But, when it comes to making a living and raising a family there aught to be ways to even the playing field. If a person falls ill there should healthcare that don't penalize. Education should be there for all without cost or political propaganda. We should all have a roof over our head, enough to eat and the basic dress for each season.
That's why we need a public banking system which belongs to all of us. The burdens of society could be solved and funded by a public banking system and paid for with the profits there of.
Your point is well taken about growth. If anything we need to shrink. I think it is in Norway where people are proud of their collective low expectations in life. They have a community and environment first attitude instead of competing to see who can accumulate the most stuff which causes places like that giant man made island of plastic and toxic garbage the size of Texas in the Pacific Ocean.
I agree with you that we need to get back to the basics but convincing the general public of that will be a real job. You might find yourself banished from the kingdom if you go against the almighty greedy gold fever me me me attitude. I hope we, the people, can solve our problems before it's too late.
I'm counting on change from the Occupations for change. OWS has the right attitude right - now. I hope it don't morph into something ugly or get swallowed up by the right wing bankster supported tea party!
I am a firm believer that the first step to make a real change for everybody is in a Public Banking System as Ellen Brown promotes over and over.
Thanks for responding! We ARE on the same page!
terry p:?)
Very good. Thanks for giving my posts thoughtful consideration.
The public function of the Treasury or the central bank is to keep the economy running smoothly by matching the available money supply optimally to the needs of the real economy (goods and services) for liquidity. The privately owned Federal Reserve System creates money out of nothing and loans it into existence. Every time they create more money they create more debt. Access to this stream of money and debt created out of nothing makes possible the current situation of 1% vs 99%. The money is not real, the debt is not real and therefore a complete and total manipulation. Is there any wonder that the 1%ers think the rest of us are stupid? We allow them to own the money system, which they use to indenture us, imprison us, control us, us, and start wars for profit. The creation of money and the operation of the monetary system should serve the public as a utility, not as a way for 1% of us to own the rest of us.
Yes, the powerful few are manipulating the system for their own benefit, Yes, banking should be a utility and publicly owned. But money and debt are never "real" and are always "created out of nothing," and access to the stream of money is an effect and not a cause of the rule over us by the few.
"access to the stream of money is an effect and not a cause of the rule over us by the few." Actually isn't it more of a chicken and egg thing? Access to the stream of money creates more power and privilege which creates more access and so on and on.
Yes. Both are true. The question is where to attack it.
You need to do some real research on the subject of the Fed and money creation. You’re just parroting memes like the one that the Fed is privately owned. That’s completely untrue. The Fed was created by Congress; it consists of a 7 member board of governors in DC appointed by the president and confirmed by Congress, and of 12 Federal Reserve Banks located across the country. The Fed has considerable independence from government compared to other agencies, but it’s certainly not in private hands. The fact that Timothy Geithner was chairman of the NY Fed and is hand in glove with powerful private banking interests like Goldman-Sachs is not evidence the Fed is privately owned, any more than the fact that most members of Congress are beholden to the 1% means that Congress is privately owned, but evidence that the Fed and Congress are peopled by corrupt officials.
“Every time they create more money they create more debt.” Another meme that actually doesn’t really mean much of anything. Since the Fed controls its own currency, when it creates money by having the Treasury issue dollars and then spending or lending the dollars (thereby increasing spending power in the economy, since lending creates deposits) it is not “going into debt” by doing this. The federal government is not at all like an individual or household that needs to bring in money to pay its debts (as repeated ad nauseum in the MSM and by most politicians including Obama). The Fed can always create as much money as it needs. The federal deficit is merely a record of how much spending power the Fed has been pumping into the economy. The US can’t go bankrupt, can’t default.
“The creation of money and the operation of the monetary system should serve the public as a utility, not as a way for 1% of us to own the rest of us.” That is right and it’s what the Fed was created to do and does do every day in many ways. Go to the moslereconomics website and read there his free book, “The Seven Deadly Innocent Frauds”.
The original Federal Reserve Note a dollar issued in 1913 is worth three cents. The intentional inflation of the money supply is theft.
Most assuredly the banksters have rigged the game to suit themselves. But if ever there was a method to keep our money out of their predatory claws it would entail a banking system owned by the public and run for the public. It is time the population at large stood together and demanded this.
The evidence against the banks keeps mounting while Obama does his best to sideline the only people who could bring the crooks to justice. Schneiderman has done himself and everyone else a disservice by becoming part of an already compromised team.
". . . it was an industry-wide practice, dating back to the late 1990s; and it may have clouded the titles of millions of homes."
So that means many people out there who think they own their homes may not because of MERS. I don't like it. It undermines the bedrock of society -- the right to own a home. It leaves the door open for them to be confiscated. I don't understand why, as soon as MERS started its shell game, counties didn't immediately demand that the law be followed, that their fees be paid and the paperwork signed. Better late than never -- this article wakes people up to the criminality.
Actually the title to their homes are in their name(s). It is the lien holder(s) aka MERS/investors who's chain of title is corrupted. However, your comment was reminding me of agenda 21 which I read a while back and was drawn back to with the recent Qs in re: sorso and ows co opting.
i dont think we need a public banking system.
bank runs can be eliminated with 100% reserve requirements across the board for all financial systems.
100% reserve makes it impossible for banks to create the money supply by loaning it into existence.
fractional reserve banking is actually a special case of maturity transformation which should be banned.
we should never allow overnight loans to finance 30 year mortgages. maturity should always match.
see http://www.upsanddowns.com/natrightsofo.htm#loans
The problem with a 100% reserve system is that it further chokes credit. If you can only lend what you have, and you can't lend demand deposits (since the depositors think they can come for them at any time; you'd be double-counting them), and all loans have to be repaid with interest (i.e. more always has to be repaid than was lent out by the bank), the result is money supply contraction and depression. Bank-created credit can be a good thing -- if the banks are public utilities, so that the interest returns to the people.
I can't say enough about your excellent article. Very well done, and very informative and inspiring. Thank you.
Also, I have a tremendous amount of respect for authors who take the time to interact with the readers here. Again, thank you.
Latest article from Dr. Michael Hudson - it is a great compliment to this one by Ellen Brown.
What Would a “Good” Banking System Look Like?
Banks Weren’t Meant to Be Like This
http://www.counterpunch.org/2012/01/27/banks-werent-meant-to-be-like-this/
Since their inception, roughly "half" of all mortgages in the country have been recorded under "MERS" as Trustee. ..........
As a former Title Examiner, I thought that MERS was created not only to avoid the cost of recording Assignments after taking an assignment recording fee from the mortgagor, but also to allow the big banks to fudge their quarterly earnings figures while no one would be able to verify those figures because MERS kept hidden exactly who owned those $Billions/Trillions worth of property.
...........I suspect that more fraud could be found in this area. Imagine being bank "A" and able to say that today you hold $600 Billion in real estate assets on your "public" quarterly report. Tomorrow, however, you transfer those assets to bank "B" who will use them on their quarterly report which became public a day or two later. Nice scam, isn't it?
...........In fact, this kind of "shareholder" fraud could easily be found by going to the registry of deeds and finding "pools" of mortgages that were recorded by bank "A" within a day or two after their quarterly reports were made public.
One more dark area of the system exposed to the light of day by Ellen Brown! "Shadow Banking System" indeed!
>>"From the article: "To the President’s credit, however, he seems to have shifted his position on the settlement, in response to protests before his State of the Union address. In his speech on January 24th, he did not mention the settlement but announced instead that he would be creating a mortgage crisis unit to investigate wrongdoing related to real estate lending. Of course, only the future will reveal if this investigative unit will be given the necessary authority or mandate when it comes to criminal prosecutions."<<
Well, isn't that the catch here? Ralph Nader already commented on this very aspect when interviewed by Democracy Now!:
"He Says One Thing and Does Another": Ralph Nader Responds to Obama’s State of the Union Address
www.commondreams.org/video/2012/01/25-0
So, we'll see!
As for Ellen Brown's praise of the banking systems in the BRIC countries, I just want to point out that they are NOT all that immune to predatory attempts from outside. And it also looks like the policy-making elite in India belong to the same international network, or at least share the same "priorities".
In the case of India, anyone following the developments there will have to wonder who really is running the show and whether the international bankers' takeover is in a fairly advanced stage there as well.
For at least two decades now, India has been run by technocrats with international education and tenures at the World Bank and the IMF. While governments at the federal level come and go, these top level bureaucrats with enormous power and influence in setting the policies have been more or less a permanent fixture. And even with the routine change in governments, the policies have not changed much, and the elite ministers in charge of certain critical policies also seem to have questionable agendas and loyalties. But one cannot tell by a reading of the popular media and most certainly not by reading the economic news media in India. They all seem to be well-integrated into the global system, and what is good for this system is good for India --- in their view.
Here's a random list of articles that talk about the creeping changes in the Indian banking system:
"One-way street", by Jayati Ghosh (Dec. 1997 - Jan. 1998) :
www.frontline.in/fl1426/14260390.htm
-- The WTO agreement on financial services paves the way for a handful of large, monopolistic firms in developed countries to seize control of the market in developing countries, which cannot hope to compete.
"The foreign threat in banking": (March 2002)
www.frontline.in/fl1905/19051250.htm
-- The clearance granted for a major expansion of foreign bank presence in India will hit priority sector lending overall, reduce the Reserve Bank of India's regulatory authority over banks and lead to a situation where the banking sector will be left vulnerable in the face of an economic shock.
"What is happening to Indian banking?" - by C.P. Chandrasekhar (Feb. 2005):
www.frontline.in/fl2204/stories/20050225004210500.htm
-- The sector is undergoing fundamental changes that have diluted its traditional role of protecting small deposits against capital and income risk and facilitating the conversion of savings into investment.
"Ring-fencing banks" by V. Sridhar (Oct. 2007):
www.frontline.in/fl2419/stories/20071005502703500.htm
-- The RBI expresses serious reservations about the new kinds of corporate structures planned by banking institutions.
"Fatal attraction" by C.P. Chandrasekhar (May 2009)
www.frontline.in/fl2609/stories/20090508260904100.htm
-- There is evidence of growing fragility in India’s financial sector as a result of its transformation to approximate the Anglo-Saxon model.
"Negative signal" - by G. Srinivasan (Jan. 2012)
www.flonnet.com/stories/20120210290204100.htm
-- Moody's issues a raft of revisions (downgrades) on ratings of Indian banks.
Thanks - very helpful! I'm writing a book on public sector banking now.
No, thank you, Ellen Brown, for your efforts to educate the public on something that has largely remained hidden in plain sight for so long. I have greatly enjoyed your book "Web of Debt" and have recommended to others, including here on CD.
If you are writing about public sector banking and are planning to talk about India, AND if you haven't already done so, may I suggest that you try and get some information on the nationalization of the 14 largest banks in India in 1969 by the then Prime Minister, Indira Gandhi. She's a fascinating woman, IMO. While she clearly had an authoritarian streak in her, some of her policies and actions clearly showed that she had the larger public good in mind.
This is where laying your hands on good historical accounts can get a bit tricky, especially if you have to rely on the internet more than on books. The information you'll get on this person and on this subject will be totally influenced (tainted?) by one's prejudices and particular affinity, and so to write from a POV of the larger public good, and about a period 40+ years ago, about events in a far away country, one would have to search that much harder. And that is especially considering all the "roll back" in the last two decades, of so many of the policies from the time of Indira Gandhi and her father, Jawaharlal Nehru, the first prime minister of India, and various attempts at rewriting history in recent times. Add to that, the inconsistent positions adopted by the politicians to suit the mood of the time on public sector banking. With examples of opportunistic talk by politicians (in the Indian context), and also containing a broad defense of public sector banking, here's another general article:
"The importance of public banking" by C.P. Chandrasekhar (Dec. 2008)
www.frontline.in/fl2525/stories/20081219252504800.htm
I just thought I should make this suggestion, because there is this dominant view among the elite in India today that the accelerated growth of India was made possible precisely by the roll back or even dismantling of the earlier policies, while clearly ignoring or downplaying the unsustainable and risky nature of some of the changes in recent times. It is that much harder to warn people of these things when things "appear to be" going well for them and when the risk is spread around or passed on to other people, especially those lower down in the social and economic rank. For some reason, loss of sovereignty over a nation's economy and finance does not bother the elite so much.
"In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to [CFTC] regulate the secretive [shadow-banking,] multitrillion-dollar [OTC] derivatives market whose crash helped trigger the financial collapse in the fall of 2008.
Born's battle behind closed doors was epic, Kirk finds. The members of the President's [Clinton] Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born. "I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assist Treasury Secrty] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"
Greenspan, Rubin and Summers [Obama pushes for World Bank President,] ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."
Now, with many of the same men who shut down Born in key positions in the Obama administration, [yes, now Obama CFTC OTC Derivatives Regulator Head Gary Gensler,] The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one. "It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.""
http://www.pbs.org/wgbh/pages/frontline/warning/view/#morelink
Huh?! In other words, I don't get any of this.
But I'm certainly familiar with the phrase 'shadow banking'. I do the best that I can without formal education past grade 10, but the simple idea of offshore tax havens, and a lack of transparency (which you only get when you've got something to hide), I do get. I've read "A Game As Old As Empire," and did not find it so hard to grasp. This article was far too specialized for me to sink my teeth into.
But, Learn in order to know what, in the main, you need to know. Don't learn in order to become an expert. When the house is on fire we require sufficient lighting to make our way to the exits. For those who have a foundation of formal education and/or specialized knowledge sufficient to make their way through the burning house in the dark, Good for them.
There are many trillions of dollars in offshore tax havens - and this is not okay nor is leaving it alone in order to prop up a destructive mafia capitalist system that consigns the majority to unpleasant austerity while a parasitic minority party - and loopholes for the rich and corporations that can easily fill many volumes (See Mark Zepehauer's "Taking The Rich Off Welfare" http://www.markzepezauer.com/ or anything by the Canadian author Linda McQuaig http://bit.ly/X7tFM). Corporations find numerous ways to simply not pay their fair share of taxes (to the point where some actually don't pay any taxes some years) and regular people (the 99%) have to pick up the slack. Corporations employ 'trade mispricing' for example (see page 49 of "A Game As Old As Empire") utilizing offshsore tax havens thereby "massively reducing their tax bill." They're pirates, because when they "massively" reduce their tax bills the way they do, they steal from me and you. Like lying, psycopathic, puppet American presidents, corporations drape themselves in the flag of any country where the citizens may be watching them for some reason and would have us all believe that they are patriotic wealth creators buttressing a capitalism that goes hand in hand with democracy and peace (which theory Naomi Klein nicely demolishes in her recent book "The Shock Doctrine"), whereas their own loyalty is to "Richistan," or the corporatocracy. (Robert Frank wrote "Richistan." See: http://amzn.to/yUwZ7G)
*Canadians For Tax Fairness" - http://www.taxfairness.ca/
*Tax Research UK - http://bit.ly/A5stEO
*Business And Investors Against Tax Haven Abuse - http://businessagainsttaxhavens.org/
*John Perkins's (rather inactive) blog - http://bit.ly/mp2CZU
The only thing Obama shifted was a few words in his speech. We all know by now that Obama says things to appease the so-called democrats but does things to appease his true party -- the republicans.
"The public sector banking model deserves further study"
No. The public sector banking model she's talking about is cathedral-style banking, where the state runs the bank. While that idea is much better than privateer/profiteer banks, it's nowhere good enough. It keeps the bank intact as a lucrative target for abuse, public instead of private, but still a lucrative target for the greed-stricken thug side of human nature.
I guess we know human nature well enough to see the real solution. In fact, the real solution has been embraced most enthusiastically this past summer - credit union membership quadrupled. Liberals are so drunk on power these days, they tend to forget what we the people know:
We don't need no big korporations. We don't need no big goverments. We don't need no big banksters, big kredit, big mortgages, big casinos, high-rolling stakes, global trade, "great games", big monopoly, big boss, "dear leader", "supply-side" ekonomic growath.
All we need is our local communities, and THERE WE HAVE NON-PROFiT CREDIT UNIONS and we need no more. They can't distract us. Try as they may.
If "Slick Oily" really intended to do right by the people, the first thing he would have done would be to kill the giant get out of jail free scheme he and his administration had cooked up to protect the banksters. Sorry Ellen, but you people have to realize that "Slick Oily" is owned, lock, stock and barrel by the too big to fail monstrosities that he and his administration coddle! Hope and change? Stick a fork in it, it's over done!
Good article, gal. Keep up the good work.
Thank You Again Ellen:
There are so few people in this country that speak truth to power, please continue your educational campaign for the education of financial dolts.
I always enjoy the comments that are posted after articles on the common dreams web site. It was a surprise to see that even authors read their reviews.
I wonder if Ms Cathy Mason could expand on her views of the Fed.
I noticed that 7 people are appointed by the president and confirmed by the senate. What I also noted is that there are TWO vacancies on the Fed at this moment.
That means there are only 5 appointed members on the open market committee along with 5 members from the 12 regional branches.
The 5 bankers, that are on the open market committee got there from the one dollar one vote system of appointing chairs for the 12 regional banks (this is the private side of the fed).
The net effect for the moment is a 50-50 split between Private-Public.
Has anyone noticed the lack of media coverage over President Obama's choices to fill two of the MOST powerful jobs in America. How about Paul K
or Joe S for the job.
So Ellen, could you get someone to write an article about how the open market committee works at the fed. Could someone explore who the 15 people are that control Fed policy. Perhaps we even could get a discussion going on how the 5 of 12 get chosen to be on the open market committee.
education is a path to freedom,
wolfie
I'll bet you wouldn't have to dig too deep into this "shadow banking system" to find very ugly activities like drug and weapon financing by the US, Israel and others and the money laundering that goes along with it.
Dig a little deeper and it might get nasty-ugly such as organ trafficking (which Israel is also involved with) and ritual murders.
Ellen
I appreciate all your work. 'BUT', it's getting complicated! The thing that I admired about "The Web of Debt" was that I understood it. I'm not an economist. I'm not a banker. And yet I was fully capable of understanding. You made it very simple. Thanks for that.
Now, as Ybra posted on Jan 27 2012 - 8:11pm "Huh?! In other words, I don't get any of this."
The whole idea is to teach. You guys are talking over our heads in the comments:?\
You can settle a minor disagreement here by answering this question. Are the Federal Reserve Banks private or public banks? If they are public then your work is done - right:? )
I am your loyal fan and a pusher of your book when ever possible.
Thanks again for your work.
terry p