Rule of Law Versus Bank Profits: Mortgage Fraud Edition

The battle lines are forming.

In the last two years, local attorneys working for the small minority of borrowers who contest foreclosures have reported a wide range of what in spin doctor land would be called irregularities. These reports were so widespread and consistent as to suggest that malfeasance was endemic, but without corroborating evidence that these abuses were happening on an institutionalized basis, it was easy to dismiss them as anecdotal.

The admission by GMAC that it produced improper affidavits, followed by suspension of foreclosures by GMAC, Chase, and Bank of America in 23 judicial foreclosures states, is the tip of the iceberg of widespread foreclosure abuses. Yet comparatively few members of the media have asked the right question: why would servicers and law firms engage in fraudulent activity on such a widespread basis?

The ugly answer, as we have detailed long form in earlier posts (see here and here for more detail) is just as the front end of the mortgage securitization pipeline broke down, with originators increasingly simply pumping any deal through in the interest of pulling out fees, the same behavior spread to the back end.

Evidence is mounting that the various parties responsible for getting the notes (the borrower IOU into the securitization trust, failed to perform a series of tasks that were clearly set forth in the governing contract, the pooling and servicing agreement. These procedures were designed to thread a path through a complex thicket of multiple legal considerations (state real estate statutes, federal securities law, trust law, IRS provisions, to name a few). The failure to do it right means any retrospective fixes run afoul of multiple boundary conditions. Thus to industry participants, fraud, bizarrely, looks to be less bad than admitting to their colossal failures to respect contractual obligations and legal requirements.

We are seeing more recognition of the consequences of this clusterfuck, which in more polite company might be called, “My dog ate your mortgage.”

While commentators so far have focused on the implications for borrowers, the real bagholders are mortgage securities investors. As the Wall Street Journal notes:

For mortgage investors, the recent suspension of foreclosures could potentially cause further losses in the already-battered $2.8 trillion market for residential mortgage-backed securities…..

While it is unclear whether the delays will have a deep impact on the market for bonds, the changes are already creating some unexpected outcomes, say investors.

When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

The latest events thus set up an odd circumstance where junior bondholders—typically at the bottom of the credit structure—could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off.

This is the first time we’ve seen a reference to the role servicer advances play, an issue we highlighted last week. And the story also mentions potential servicer liability:

Typically, mortgage servicers enter into contracts called pooling and servicing agreements with bondholders that spell out the servicers’ obligations to manage the loans in the best interests of the investors. These agreements provide that the servicers be reimbursed by funds in the trust for all costs related to litigation and extra processing of foreclosures, provided they follow standard industry practices….

But the problems could be magnified if the reviews uncover a lack of proper documentation or other substantive problems rather than simple procedural errors.

With the stakes so high for the various parties to securitizations, the first line of defense of the incumbents is to try to minimize the problem. But the fact that more extreme measures are being readied suggests they are coming to understand that this cesspool might be plenty deep.

One sighting (hat tip 4ClosureFraud) is the effort by the Ohio Secretary of State to enlist support against a proposed measure to allow for electronic notarizations. The Secretary hints strongly that this measure being put forward is directly related to the revelation of affidavit improprieties, which further suggests that the banks might regard this as a remedy for this particular, um, lapse:

H.R. 3808 is known as the “Interstate Recognition of Notarizations Act.” It passed the House under a suspension of the rules in April 2010. It requires federal and state courts to recognize any notarization that is lawful in the state where the notary is licensed. Now, in one day, it passed in the Senate.

When I learned of it last Thursday, it sounded innocuous to me, but then I started looking at the timing of the bill. GMAC, owned by Ally, had just suspended its foreclosure actions in 23 states, including Ohio. I had already referred Chase Home Finance, LLC, on August 23, 2010, to the U.S. Department of Justice, asking it to review and investigate Chase’s document notarization practices in home foreclosures (18,000 documents per month were being notarized by 8 people, along with other irregularities). I license notaries in the State of Ohio. Even though I don’t have the power under state law to investigate or prosecute, I couldn’t stand idly by without acting. That’s why I’m asking you to email or call the President at 202-456-1111 to ask him not to sign the bill.

Last Wednesday, the day before I announced the DOJ referral, JPMorgan Chase announced it was having third party counsel review its document procedures for foreclosures. Just two days before, the U.S. Senate had rushed through H.R. 3808. Something didn’t seem right. Since then others agree with me.

Yves here. This development reveals how this battle is likely to play out. Now that judges in some states are starting to take these dubious, potentially fraudulent measures seriously, the next line of attack is to get the more bought and paid for Federal government to intercede on behalf of the banks. As the e-mail by the Ohio Secretary shows, this is a state versus Federal rights issue. And the problem is that these solutions will be depicted as “efficient,” just as securitizations and other “innovations” were.

And while efficiency in theory is a good thing, it must always be kept secondary to the overall integrity of the system, otherwise, you run the risk of breakdown. Using dubious arguments to overturn well settled law to get the banking industry out of a monster mess it created is a Faustian bargain. It makes it abundantly clear what is really at stake here, which is the rule of law. Banks that were quick to defend unjustifiable pay deals by invoking “sanctity of contract” have no inhibition about ignoring their own contracts to pad their bottom line, and ultimately, the wallets of top executives.

Rather than deal with the considerable consequences of these abuses, the banks are prepared to bulldoze well settled state laws to give them an easy way out. And I’m not basing my view on this story alone; I had a conversation yesterday with a Congressional staffer who matter-of-factly said (but with little understanding of the underlying issues) that Congress would intervene on behalf of the industry, via its authority over national banks.

The result is that we institutionalize kleptocracy while keeping largely gutted forms of due process as theater. The powers that be hope that the broad public will remain unaware of what is really at work.

However, the battle is not yet lost. Elizabeth Warren has said she will stand up for consumers and is a vocal advocate of contracts as a mechanism for protecting the interests of American families. This issue could serve as an opportunity for her to demonstrate that her appointment as de facto head of the new financial services consumer protection agency is not mere Obama Administration window dressing (or more accurately, that her appointment was a PR ploy, but Warren is able nevertheless to turn it to her advantage).

In addition, an increasing number of Congressmen, as least at this juncture, are lining up in this fight in favor of borrowers and against well funded business interests who provide hefty campaign donations is a hopeful sign. It may be that there is enough left of what passes for propriety in this country that even the Congress can’t be rolled so easily on this one. Per the Washington Post:

House Speaker Nancy Pelosi, Rep. Zoe Lofgren and other California Democrats are calling for a federal investigation into the processing of thousands of foreclosures by some of the nation’s largest mortgage lenders.

In a letter to Attorney General Eric Holder, Federal Reserve Board Chairman Ben Bernanke and U.S. Comptroller John Dugan, the lawmakers said recent reports that Bank of America, J.P. Morgan Chase and Ally Financial may have improperly approved thousands of foreclosures “amplify our concerns that systemic problems exist.”

Banks “have repeatedly misled and obstructed homeowners from receiving the help Congress and the Administration have sought to provide,” they wrote. “The excuses we have heard from financial institutions are simply not credible three years into the crisis.”

Sen. Robert Menendez (D-N.J.) this week called for the Government Accountability Office to investigate “the role of all government entities – including federal regulators, involved in overseeing mortgage servicing companies and affiliated banks – and identify any regulatory problems that may have permitted this misconduct to occur without detection until now.”

Note that these Congressmen are not aiming at the narrow issue that gave this story prominence, the robo signers, but the broader patterns of abuses. Let’s hope they have the resolve to make an investigation a serious undertaking, rather than a mere photo op.

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70 comments

  1. readerOfTeaLeaves

    Will Congress continue to do the bidding of those forces that ultimately end up devouring them?

    1. Psychoanalystus

      Congress surely will. Personally, I am more interested to see if our bringer of “hope you can believe in” will sign H.R. 3808. Being the corrupt double-crossing coward he’s proved to be, I expect he will.

      Psychoanalystus

      1. PJ

        You are spot on with HR.3808… that is why we are seeing all the smoke and mirror’s from elected official’s. Let Polosi, Franken, etal. come out , demand and go on the record that the POTUS VETO HR.3808. Until then their letter writting and chest puffing is meaningless.

    2. marblex

      Well for the present Obama “vetoed” the bill. I’m sure it will be re-presented after the election, at which time he’ll sign it.

      The problem with federalizing notary is the same problem with federalizing anything — you get the lowest common denomenator. (LCD) Case in point:

      Congress “federalized” usury laws, previously exclusively the jurisdiction and bailiwick of states. As a consequence of federalizing usury, the banks shopped around and ultimately bought off the South Dakota legislature, which ABOLISHED usury. Having thus set the LCD standard, this change in law is why we are paying THIRTY NINE PERCENT (39%) and more interest on credit. What anyone with sense would recognize as usurious is no longer illegal in the USA. Thanks, federalization!

      If HR 3808 or its soon-to-come progeny become law, the substantive requirements for notarizing a document will cease to exist and be replaced by a rubber-stamp pro forma procedure that will in fact be NO notarization. Wait and see.

  2. Psychoanalystus

    Excellent reporting. This should be the story of the century.

    Since this behavior is driven by the same desire to extract fees, my naive question is, What will happen with the actual foreclosed homes? Obviously nobody will buy them with defective titles. So, will they just sit there abandoned, quickly turning into eye-sores? Is that the future of American cities? Very sad.

    Psychoanalystus

  3. psychohistorian

    Rule of law has been abrogated in more areas than the financial arena in America. It would be heartening to see it restored to the financial sector but I am skeptical that it can be.

    I commented before that Warren could be at the right place at the right time but until I hear of some banksters in jail it will continue to be all kabuki to me.

  4. albrt

    The Hopemeister is legally allowed to murder you with a remote control drone, and you’re worried that electronic notarizations will erode the rule of law?

    I appreciate your efforts, Yves, but it seems as though events may have overtaken and surpassed your attempt to draw a line in the sand.

    The time for ammunition, junk silver and dried beans in the bunker is fast approaching.

    1. Yves Smith Post author

      It’s the same slippery slope, just a different front. We don’t have nasty little drones killing civilians in the US (yet), we are perfecting our technique on those supposed-bad guys-because-they-are-all-Muslims in Pakistan.

      It’s the speed and stealthiness of the bank action on electronic signatures that is troubling (and this has JP Morgan’s fingerprintes all over it). The very fact that a lot of the pieces of this can be depicted as “minor” and “technical” is perfect cover for the bigger problem, that there is virtually no way to bring a servicer to heel if it has made an error or is engaging in dubious tactics (trying to break the bankruptcy reliefs of stay). I did a quick back of the envelope calculation based on the level of foreclosure “improprieties” in Florida and the horror stories coming out of its courts. With what I think are pretty conservative assumptions, 2000+ people have had their homes stolen from them.

      The banks are engaging in the exact same sort of thinking that brought us the exploding Pinto: why do it right, which is in this case legally? That’s just an option, not a requirement. They have implicit (I’d bet at some places explicit) calculations of the cost of doing things right (as in legally) versus doing things cheaply and bearing the cost of occasionally getting caught.

      And as we can see from what has resulted, the banks have determined that crime pays.

          1. Neil D

            And yet few Americans bother to actually protest either. Blog comments and votes for Republican congressional candidates don’t count. Speaker Boehner won’t be helping you get a mortgage mod. Don’t forget the Santelli rant…

            “Why don’t you put up a website to have people vote on the internet as a referendum to see if we really want to subsidize the losers mortgages? Or would they like to at least buy buy cars, buy a house that is in foreclosure … give it to people who might have a chance to actually prosper down the road and reward people that can carry the water instead of drink the water? This is America! How many people want to pay for your neighbor’s mortgages that has an extra bathroom and can’t pay their bills?”

          2. Skippy

            I responded to your limited comment (difference with out distinction), of which when confronted with your simplistic idealism…you attack the weak again and for what purpose, I might ask….maybe your perceived reduction…having to show leniency to the uninformed over penalties to the architects in this on going global disaster. Have ye chosen carefully even if thou are bereft of others suffering or take advantage of it.

            Skippy…Ive worked in small teams, in death filled fields and only one thing goes, the life expectacy of said team, I have expaned this youthful observation to include all of us…including you…can you offer the same…eh.

        1. DownSouth

          The difference is HUGE.

          The pitchfork an icon of the American heartland, immortalized by this painting by Grant Wood, which is perhaps the most famous painting of all of American art:

          http://www.google.com/imgres?imgurl=http://www.thenic.org/DiscoveryCenter/CurriculumGuides/Images/wood_lg.jpg&imgrefurl=http://www.thenic.org/DiscoveryCenter/CurriculumGuides/Bradley.html&h=720&w=603&sz=50&tbnid=55WA74J5c3eXdM:&tbnh=245&tbnw=205&prev=/images%3Fq%3Dphotos%2Bof%2Bpainting%2Bby%2Bgrant%2Bwood&zoom=1&q=photos+of+painting+by+grant+wood&hl=en&usg=__9s_X_g8ncPSzx4uFzNZJzfiDNZY=&sa=X&ei=EaKsTI-vOYGdlgea5-3BCA&sqi=2&ved=0CB4Q9QEwAA

          The pitchfork has also become a metaphor of the type of weapon peasants armed themselves with, since the peasants lacked the guns and cannon that the monarch’s and aristocacy’s forces had.

          Surprisingly, the pitchforks prevailed over the more powerful firearms and cannon of the monarchs and aristocracy in a surprisignly large number of cases. You see, soldiers have feelings, and, as Skippy notes, the soldiers found it difficult to look their mother or father or brother in the eye and then pull the trigger to put a bullet in their head.

          Drones don’t have these shortcomings. They can be directed against the putative “enemy” without any personal interaction or personal feelings involved whatsoever. For those using them, killing becomes little more than playing a video game.

          Furthermore, as Yves says, the drones haven’t been used against American civilians, “yet.” Up until this time they have been deployed against “the other,” which makes the killing more acceptable.

          1. i on the ball patriot

            Well I married a drone in the month of june,
            Married her up by the light of the moon.
            We live down on cripple creech.
            We’re killing now with unlimited reach.
            Im a-goin down to cripple creech, Im goin on a run.
            Goin down to cripple creech to have some fun.
            Goin down to cripple creech, Im goin on a run.
            Goin down to cripple creech to have some fun …

            Here’s a scam ‘rule of law’ party to keep an eye on. Very little corporate news coverage and few even know about Creech AFB …

            “Vegas Drone Trial Makes History
            Submitted by ujpadmin on Sat, 09/25/2010 – 10:17pm.

            posted by Jason Whited – Tuesday, Sep. 14, 2010 at 10:24 PM

            Drone Fourteen anti-war activists may have made history today in a Las Vegas courtroom when they turned a misdemeanor trespassing trial into a possible referendum on America’s newfound taste for remote-controlled warfare.

            The so-called Creech 14, a group of peace activists from across the country, went on trial this morning for allegedly trespassing onto Creech Air Force Base in April 2009.”

            More here …

            http://www.justicewithpeace.org/node/1763

            And drones ARE deployed on the Canadian and Mexican borders.

            Deception is the strongest political force on the planet.

      1. albrt

        Yves, I agree with much of what you’re saying, but I don’t see any political alternatives currently on offer.

        Although I think the consumer side of this story has been overblown, I do hope you’ll keep focusing on the securities side, where massive systemic fraud has been committed and willfully covered up by the current administration.

        From a broader economic standpoint, it seems pretty clear to me that people in the non-judicial foreclosure states are better off in the aggregate because the market is clearing and people are walking away, voluntarily or otherwise, from loans they can’t afford. Of course, the non-judicial foreclosure states also tend to be non-recourse states.

  5. Koshem Bos

    If a drastic action is not taken by the administration, it will be a symbolic gesture that we have turned into a bona fide banana republic. Institutionalized lawlessness give the oligarchy a veto power over any action that attempts to deal fairly with the middle class and the poor. This resembles the admonition by the prophet Isaiah.

    If that happens, we are throwing in the towel and heading to the exit.

  6. attempter

    If Warren’s ever going to try to be this public advocate so many people think she intends to be, this is the issue and the time. There’s never going to be a better.

    When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

    The latest events thus set up an odd circumstance where junior bondholders—typically at the bottom of the credit structure—could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off.

    That helps clarify the tangle of contradictions as far as bank interests go. (I.e. rushing to foreclose continues the downward trend for housing prices and for whatever “real” MBS price there is.)

  7. jbmoore

    The foreclosure fraud seems to be the latest attempt to cover up the mortgage fraud mess. It’s just using one fraud to cover up the extent and illegality of the first fraud from the banks’ perspective. From some lawyers’ and other third parties’ perspectives, it’s an opportunity to make money. Lawmakers can’t ignore it any longer because if the law is violated, then there is no law any more, and they are out of jobs. They may as well be puppets like the Roman Senators became after Rome became an empire. I don’t think the Legislative Branch is quite at that point yet where it’s be a puppet or be dead.

  8. Neil D

    Lots of hyperventilating in the comments as usual.

    Anyway – keep up the good work Ms. Smith. Be careful, though. I’ve already sworn off ever buying a house because of the corruption. Do you dare risk alienating an entire generation of potential buyers for your over-priced McMansions and crappy ranches? Something to think about.

    1. Skippy

      Monkey sees stick…will it bash its self or another or maybe in your case both.

      Skippy…Neil D says: “Lots of hyperventilating in the comments as usual”… = control language…faux deflection stuff..never filled out, argument with out substance but tastes great and is less filling.

      PS…Neil D says…Be careful, though…be careful your self, you have an IP which can be extracted (personally in my book only the cowardly make this kinda threat incognito post ad hominem rubbish)…eh I smell your fear…reduction.

      1. Neil D

        Are you kidding me with this? My IP address? WTF is wrong with you?

        I was merely pointing out that there is a fine line to walk when dealing with economic confidence. Get over yourself, skippy.

        1. Skippy

          You throw stones with out acquired aim (pray and spray stuff), wildly pronouncing your dis pleasure to events on going, yet no focus save government largess to your lament, or other distractions of distinction (some one else’s fault save you and yours as thee are virtuous).

          Skippy…although we disagree at this point in time…I will not ask you to get over your self…but would be inclined that we get over our selves (in totality ie masters of our own universes…mentally and figuratively…as a hole…moving forward…eh.

          PS good luck to us all.

      2. DownSouth

        Skippy says: “Monkey sees stick…will it bash its self or another or maybe in your case both.”

        Eric Hoffer said: “People who bite the hand that feeds them usually lick the boot that kicks them.”

        Skippy says: “…I can smell your fear….”

        Eric Hoffer said: “You can discover what your enemy fears most by observing the means he uses to frighten you.”

  9. Kevin de Bruxelles

    While I have little doubt who will win this single battle, what gives me a slight bit of hope for the outcome of the ongoing war is the sudden flipping of traditional political tools. Many have already commented about how the old right / left dividing lines may be morphing into a elite vs. people (or corporations vs. you) paradigm. In this mortgage case we have corporate power trying to make all states accept any states rules which is taking a page out of the gay rights movement’s attempts to have gay marriages in one state accepted by all states. On the people’s side is the demand for … cough …“state’s rights”. Those of us of a certain age grew up convinced those were just code words. That doesn’t seem to be the case any longer.

    What is happening is that over the last thirty years there has been a major shift in power within the United States which can be described using a triangle of societal power concept. The three points on this triangle correspond to the power of the One, the Few, and the Many. The One used to be the king but now is represented by the State. The Few used to be the aristocracy but would now be powerful financial corporations and other power nodes associated with wealth. The Many were and still are the people.

    These three power nodes exist in any complex tribal society and above. In any healthy society there will be a relative balance of power between the nodes. It is a powerful tool to analyse various nations by looking at the current status as well as the trend lines. Europe in general has a healthy balance between each node although perhaps weighing a little too strongly with the One. China has a very powerful One, a growing Few, and a weak Many. Latin America has a powerful Few, a weakish One, and a very weak Many.

    America was founded in the shadows of the battles in England between the One and the Few. The Few won and their influence is seen in the American constitution, where the central state is to have limited power. A balance of power between the Few and the Many is achieved through Rights, which include the right to bear arms by the Many to ensure that the Few do not dominate them.

    Over the years in America, quite often the power of the Few became excessive and in response, instead of resorting to their arms, the people often resorted to the One. The Few did likewise with for example the Federal Reserve Bank. During the Great Depression the One came to the aid of the Many against the Few.

    Over recent years, the Left especially, has found it expedient to go to the One to enforce their policy goals. But two can play that game and as money has taken over the electoral process, the Few have now a stranglehold on the One and are using it to increase their own power whenever necessary. But they also understand the danger of allowing the One to gain too much power and risk it getting recaptured by the Many so they will try to maintain a delicate balance of having it powerful enough to come to their aid in times of crisis but not so powerful that it would represent a serious risk if it fell into enemy hands.

    So as we fall into a corporations vs. you paradigm we will see some confusion as the battle lines are redrawn. The appeal to Elizabeth Warren is a traditional appeal by the Left to the One to come to the Many’s side. If my theory is correct this appeal will fall on deaf ears, or at best will lead to a little Kabuki performance. The appeal to state’s rights is a defensive move to try to ward off the attack of the suddenly combined One and Few. This seems a quite logical move to make.

    But what will really decide this and future battles will be the cohesion of the Many. While we are a long way from seeing any improvement on that front (the Many are hopelessly divided at this point), the very fact that State’s Rights are even being discussed with an open mind on this blog is a very good sign.

    1. Externality

      “Over recent years, the Left especially, has found it expedient to go to the One to enforce their policy goals.”

      It is no mistake that multinationals are among the largest direct and indirect supporters of identity politics, funding groups and activists that often unnecessarily exacerbate inter-group tensions among the Many. As the saying goes, divide and conquer.

      This approach has three benefits to the Few:

      (1) It encourages some of the Many to support the centralization of power in the One and the Few, at the expense of others of the Many. Those of the Many who benefit from government imposed, but locally unpopular, policies are beholden to the One and the Few.

      (2) It exacerbates tensions among the Many, as the funded groups are constantly accusing other parts of the Many of being racist, sexist, nativist, ethnocentric, homophobic, Islamophobic, etc. This has the effect of shifting the Many’s frustration from the Few and the One to others among the Many. This is __NOT__ just a “racist White” issue. Non-elite members of every subgroup hold negative views of other some groups and subgroups, and blame the “other” groups for their problems.

      (3) Talented and contentious activists among the Many are given jobs that focus their attentions on groups other than the Few. It also allows them to be managed: the groups they work for can be threatened with the loss of funding, or other sanctions, if they start to cause problems for the Few.

      Lest I be misconstrued, I am not saying that civil rights and other activist groups are inherently bad. They often do worthwhile work. I am saying that the oligarchs often use them to pit the Many against each other in such a way that the Many cannot pose a threat to the Few’s authority. Why? Because the Many are too busy fighting among themselves.

      1. DownSouth

        Externality,

        You might enjoy reading Peter Skerry’s Mexican Americans: The Ambivalent Minority. He gives concrete examples of the things you talk about as they exist in California politics.

        One thing you don’t mention that Skerry does is how cultural politics served as the incubator for what he calls “elite-network” politics. Poor and working-class people (Mexican Americans are disproportionately represented in this demographic) tend to be conservative when it comes to cultural issues—gays, women’s rights, immigration, etc. Wealthy gays and feminists would bankroll campaings in the districts where poor and working-class Hispanics live, what Skerry called “rotten burroughs” because so few people vote. Thus these reps would vote liberal when it came to cultural issues, even though most of their constituents weren’t.

        Being a liberal myself, I thought this was good.

        But then the banksters got wind that they could start bankrolling the campaigns in these rotten burrougs themselves. So the end result is that you had reps from these “rotten burroughs” voting contrary to the economic interests of the people who lived in their districts.

        And being a liberal, I thought this was bad.

        We’re all searching for ultimate goodies and ultimate baddies, but more often than not it doesn’t work that way. This became evident on a recent tour to the National Portrait Gallery. Standing in front of the magnificent portrait of Andrew Jackson, the guide explained that Jackson was a mixed bag. He —-a true populist. On the other hand, he was the onendians off their land and subsequent genocide that became known as the “Trail of Tears.” Furthermore he saw absolutely nothing wrong with slavery and was an extremely harsh slave-master. The guide said there was no freeing of the slaves, nor did they receive anything in his will, as was the case with George Washington.

        And I don’t know if he originated the idea, but he was one of the first to embrace

        1. DownSouth

          Screwd that up, but here’s the other points:

          Jackson championed the change to expand the voting franchise to include all white male adult citizens, rather than only land owners.

          He was also a huge proponent of Manifest Destiny, which favored geographical expansion across the continent.

    2. EmilianoZ

      In a democracy, at least in theory, the One is just the representative of the Many. They should be one and the same thing. If the Left managed to enforced some policies through the One, wasn’t it because the Left was the majority amongst the Many?

      1. Kevin de Bruxelles

        No, the Few have their place and will always have a strong voice in any healthy society. The political architecture of the US reflects this in microcosm with the House represents the Many, the Senate the Few, and the executive the One. This was an attempt by the founders to further dampen the power of the State (One) on the macrocosm scale.

        The political model which attempted to function without the Few was Communism and if we ignore China, where the jury is still out, it obviously ended in failure.

        The ideal balance of power between the One, the Few and the Many is an equilateral triangle, with each of the three nodes having more or less equal power. But another critical factor is the productive value of each of these three players, and especially the Few. Just as Aristotle made the distinction between aristocracy and oligarchy, there is a distinction between a productive Few and a parasitical Few. An archetypical example of the productive Few would be Sweden where up until several years ago this small country was sporting a plethora of internationally recognized companies, such as Ericson, ABB, Volvo, Saab, Elecrolux, Atlas-Copco, Sandvik, Tetra Pak, Alfa-Laval, SKF, IKEA, Bofors, Skandia, Husquvarna, Securitas, SAS, H&M, etc. While working class people were vital to the success of these endeavours, usually they were started and certainly run by the wealthy few. A balance of power was struck between the Many and the Few with generalized negotiated labour agreements and everyone benefited. The Social Democrats couldn’t do it alone, just as the Many needed an engine of wealth in order to be able to spread it fairly, the Few needed a productive Many to not only man these companies, but to buy their products as well. They were in a healthy, co-dependant relationship.

        One way here in Belgium that they try to ensure the Few will be productive is through a very rigorous elite schooling system. Any prospective member of the Few has the pass through the gauntlet of these schools, which are amazingly enough (to an American at least) free and open to all who dare.

        An example of a useless parasitical Few would be Latin American oligarchs, who for the most part were happy just to collect rent and not actually produce any jobs or wealth.

        And similar to the Few, the Many can also be either productive or parasitical.

        I think it is obvious which way the American Few are moving on the Sweden – Latin American continuum. And at the same time these Few are pounding more and more of the Many into the parasitical category. This is not a good trend.

        1. EmilianoZ

          What you say about the Belgium elite schooling system sounds s lot like France. Do they also call their elite school “Les Grandes Ecoles”? Is KU Leuven part of the system? Do they have something called Polytechnique?

          In France, the students of those schools all want to go into finance. I don’t know how productive that makes them. I think the French Golman Sachs guy, Fabulous Fab, was from one of those schools. You’ll find plenty of them in Wall Street and London.

          1. Kevin de Bruxelles

            No, I mean primary and secondary schools.

            What you are talking about are universities and here they are totally different than France and would be considered quite bizarre to most Americans. There is no elite university system here (super duper rich people send their kids to American universities). Au contraire, for most majors, EVERYONE with a secondary school certificate is accepted to university. In other words there are no entrance barriers; to get into Law School for example all you need is a High School diploma! But of course life is not that simple. In a form of radical Darwinian meritocracy, before the first year is over they wipe out 50% of the students. The second year they kick to the curb another 25%. After this you are pretty sure of passing. For those who fail you only get two more Mulligans before you have to go to remedial education. This system is why they have an elite primary and secondary school system; rich kids here don’t get legacied into elite universities — they have to fight their way through just like the rest. It helps thin the aristocratic stock and allows entry for talented working class kids.

            For a few majors though like medicine and art there are entrance exams.

            Try introducing this system into America and heads on both sides of the political divide would explode!

  10. Nick

    Your articles are great, but your headlines are often quite dreary. For example, “my dog ate your mortgage” at least as the beginning of the headline is far better than the slightly flaccid that we have here. Otherwise, keep up the excellent work!

  11. dojero

    While I understand the anger at the financial institutions that have participated and even orchestrated the collapse of the economic system, I’ve got to ask why throughout this and similar threads no one ever mentions the absurdity and unfairness of the result of judicial decisions against the mortgage holder: that people get to keep their houses without ever paying for them.

    The rule of law presumably exists to enforce fairness in a society populated by people who won’t be fair if left to their own devices. It seems to me that any time we get unjust results, the rule of law has failed. So it fails, certainly and commonly, every time it gives unfair power, profits, and other benefits to the rich and powerful who control the system. But it also fails if, in correcting that unfairness, it provides unfair benefit and money to other people.

    That’s why we should object, for example, to the punitive damage awards in civil litigation being given to the plaintiffs in the case. The victim of malpractice is fairly entitled to compensation for injury and costs associated with living with that injury. And society fairly wants to punish the person(s) guilty of the malpractice. But the punitive component ought not to go to the victim; it should go to the state.

    The same problem exists here: society should expect that the banks and other mortgage industry participants should be punished for their breaches. But the homeowners who agreed to pay for their homes ought not to be the beneficiaries of that punishment. Let’s have huge fines imposed on everyone who has committed these frauds or errors. Let’s even put people in jail if you want. But someone really lent money to the home buyer. And the home buyer agreed to pay for the house. And the lender and buyer should fairly continue to honor the agreements they made.

    No rule of law should be allowed to disguise this underlying need for fairness. Else the rule of law becomes nothing more than a club for one side or the other to batter one’s opponents.

    1. Skippy

      BS…this entire global debacle was cooked to a recipe (it was baked in) the marks were set up, slow roasted too preserve the stupidity and you have time to argue fairness…give my back side a rest cuz its sore from the pounding that industry apologists spew.

      Skippy…how fair is it that one country aka America has 350’ish billionares…swinging their big ideological fiat valued cocks (the boys with the most toys win bumper sticker a la 80’s) / (sorry not too many women) around and call it a sovereign nation…go fish.

    2. Francois T

      “no one ever mentions the absurdity and unfairness of the result of judicial decisions against the mortgage holder: that people get to keep their houses without ever paying for them.”

      Why are so many people so worried about that? (I smell a freaking urban legend here) First of, do you have any DATA (anecdotes do not matter) that inform us on the proportion of judicial decisions that portend this outcome you so despise?

      While were at it, please provide a bit of context too; what would motivate a judge to decide such an outcome to begin with? What are the laws involved? How do you know that all or almost all these judgments necessarily involve a deadbeat homeowner? As a matter of fact, the first (and very few) cases that gave homeowners the right to own their house free and clear were the result of absolutely egregious bad faith mistakes and behaviors from lenders who just couldn’t be bothered to respect the law vs. borrowers who HAD respected the law every step of the way.

      But, this is yet another sign and symptom of sliding into a Banana Republic; the masses blame the lack of morality of their equals and automatically absolve the profiteers, rent seekers and cronies who do totally lack morality.

    3. fog Horn Leg Horn

      dojero,

      No one has ever said, “get your house for free”, we simply say, will the real party in interest please step forward and assert your rights. In most cases, the problem is that nobody knows, or better, can prove, whom that party may be.

      It is a simple concept really, if you are in business (say TBTF banks) and do such a shitty job of record keeping, that when it is time to enforce your rights, you can’t! Well, I call that capitalism 101. Shitty record keepers have a place in the World, we call it bankruptcy court. If you are that stupid, you get exactly what you deserve. Please don’t show up at my court house and ask for my house – using the law as your club – when you haven’t bothered to do what the law requires, in order to take same.

      You are right, the law should work equally for both sides – that is SUPPOSEDLY why the bitch is blindfolded, not so that she doesn’t have to see Timmy and Bernacke’s ugly mugs!

      1. ByTor

        Precisely. If you want to use the law as a club to enforce your contractual rights, then you had better live up to your obligations under the contract. Even though it may result in a windfall to some, I don’t see how it is really unfair that the parties (banks) that screwed this up have to pay, and that dearly.

        Mind you, I am paying my huge, now underwater, mortgage and plan to continue doing so. But I am PLENTY pissed that these a**clowns may have caused such a cloud on the title with their criminal buffoonery that I cannot even convey title when I want to sell and take my losses.

  12. MolemanUV

    Sad isn’t it. The U.S. House and Senate, without public involvement or comment, can quickly pass H.R. 3808, the Interstate Recognition of Notarizations Act, to assist the TBTF banks and their corporate enablers in their efforts to sidestep centuries of well-established state real estate law relating to the recording and transfer of property interests. Yet, “we the people” have to fight for (and lose on) such “controversial” notions as universal health care. We are truly living in the time of the corporate oligarchs. I cannot imagine that all this will end well.

  13. i on the ball patriot

    The Maw

    The rule of law,
    Is a rich man’s scam,
    Like arsenic in a jar,
    Posing as jam,

    Tasty on your toast,
    So easy to get down,
    You barely notice,
    As the poison goes to town,

    And rots your gut,
    And melts your soul,
    And kills your spirit,
    And drops you in the hole,

    Fuck the lawyers!
    Fuck the scam rule of law!
    Fuck the crooked cops!
    That make up the maw,

    Of the rule of law,
    The rich man’s scam,
    Like arsenic in a jar,
    Posing as jam …

    The law is the maw,
    Of the greed ridden beast,
    You think that it nourishes you,
    But you are the feast …

    Deception is the strongest political force on the planet.

    1. pjwrites

      The rule of law?

      I have recently begun studying business law, not in school, just online at various law blogs and government sites. The reason for this is that I am facing, on a very personal level, the very thing this country is facing: Over a period of many years, I was quite deliberately defrauded by people I once trusted implicitly and for many years.

      In an effort to achieve justice and wholeness, I have studied our state and federal business laws and the information has been chilling. Business laws protect the criminal and make legal the defrauding of others.

      Actions truly do speak louder than words. Our system is not simply corrupt, it is ruinous, and it must be changed if we are to survive as a civil society.

      1. i on the ball patriot

        “Actions truly do speak louder than words. Our system is not simply corrupt, it is ruinous, and it must be changed if we are to survive as a civil society.”

        Good comment.

        As more and more folks like yourself are drawn into the court system they will see that the ‘rule of law’, and its enforcement body, is a hijacked by the wealthy exclusionary scam with results proportional to wealth. Work hardest in the court of public opinion — it is your best, and really your only, venue. Good luck!

        Deception is the strongest political force on the planet.

      1. i on the ball patriot

        Ah yes … the metering laws … break those metering laws and you are sure to get attention … could there be a lesson here? … feel free to suggest revisions …

        Deception is the strongest political force on the planet.

  14. Alviec

    You guys need to stay focused.
    Even those who are paying their “illusional” mortgages are caught up in this. Read instead of arguing about something you no nothing about.
    The banks scanned your paperwork, eliminated the paper and is using electronic images. Do you not realize this? The banks have admitted to this. Read 09-1460 in the Florida Supreme Court.
    What is wrong with this you say? There is no law in the U.S. to support these electronic notes and security instruments. Read 15 USC 7003.
    Most all mortgages in the U.S. and across the globe were forgiven by this destruction of the paper tangibles.
    So, if you want to keep arguing about who is wrong or who is to blame, or who is a deadbeat, look at the banks. They’ve been taking your money for years now and you didn’t even know you were not obligated to pay them. It was a contract. It was torn up, destroyed by them. It no longer exists. Go ahead, keep paying them. I’m sure they enjoy your money you don’t owe them.
    Of course, I suppose distractions are the best thing to keep your mind off of the truth. Read folks. Read. lLearn, understand.

  15. Jim Haygood

    ‘Rather than deal with the considerable consequences of these abuses, the banks are prepared to bulldoze well settled state laws to give them an easy way out.’

    This bulldozing has been going on for a long time — at least since the federal RESPA (Real Estate Settlement Procedures Act) trumped local custom and state law in 1974.

    Now the fedgov intervenes in myriad ways in home sales, from lead paint disclosure to mandating euphemisms to avoid any hint of bias (‘walk to houses of worship’ being a popular circumlocation in my area — wink, wink!)

    If the Tenth Amendment were other than a dead letter, we might have had a more diverse system. And the securitized mortgage bubble might never have happened, or reached the dimensions it did.

    As Albrt alluded to above about the president having granted himself the power to order summary executions, the US fedgov is the pre-eminent wrecker of the rule of law on this planet. A government that can ‘give’ you universal health care also can give you H.R. 3808 and TARP. It ain’t worth it. Big is bad.

  16. 2doorsdown

    Let me purpose this possibility.
    The mortgage packages that were lumped together were transferred to China as collateral for their treasury purchases? No wonder documents were not required or protected. Far fetched for sure but I wouldn’t put it past this illegal system, simply because it has gone beyond normality. This may not be the whole story but it explains some of the behind the curtain transactions.
    2drs

  17. Benedict@Large

    I suppose we can assume that NONE of the banks had ANY IDEA the servicers were shredding the title chains? Well, at least we KNOW that this is what they will claim. Unfortunately, it doesn’t seem that fixing the blame here will do ANYTHING to fix the problem: How do you transfer a title when it can’t be cleared?

  18. Jennifer Hill

    I have the craziest foreclosure story ever. And I know there is fraud involved on several levels. But without any means of legal recourse most of us have been unable to do anything about it. Thanks again Yves for reporting on this fraud consistently and accurately. Bad principles will win out over no principles, and we seem to have lost ours.

  19. Crosseyed Mary

    Probably nothing new in the following, but: When we tried to convince the state courts of the deficiencies, they scoffed publicly, and shook with fear privately. Elected judges are the worst, for obvious reasons. Few had the stones or commercial law expertise (the basic essential law pre-dates the advent of e-docs/securitization, and often the judges’ birth as well) to follow the law, and the borrowers often don’t have the money to fight very far. Judges with “some” mortgage experience often once were bank lawyers, and probably elected in part of it, so they aren’t likely to overcome their blind spots. The only easy reconciliation usually has been when the borrower has the ability and willingness to push through a serious loan mod. There’s not a lot of incentive when the credit is wrecked, and the house market value is less than the note. Even the TRO bond can be out of reach of the borrower, depending on how burdensome the court wants to be.

    RE: the subsequent title issues, I know of at least one case where the borrower couldn’t get a re-fi, necessary to save the house, because the re-fi lender (claimed) it couldn’t identify the proper pay-off lender through the doc trail. Who knows what a title insurer would say?

  20. Hugh

    Great post. Kleptocracy and rule of law are antithetical to each other. Kleptocracy also destroys good governance and good economics. Eventually it consumes itself, but the suffering it causes along the way we should never lose sight of. Measured by that suffering, BoA’s Moynihan, JPM’s Jamie Dimon, Ally’s Carpenter, these, and the other banksters, are the great financial terrorists of our time. They are not businessmen or greedy or stupid. They are criminals, plain and simple, period, full stop.

  21. Cheers Patriot

    This thing went through the Senate with unanimous consent.
    Your Government is at war with you!

  22. Jim the Skeptic

    I sympathize with those dealing with foreclosure. The banks should be required to legally cross every t and dot every i. As I have said before these are not just technicalities.

    None of the alternatives for dealing with residential foreclosure will help the economy in any sustained meaningful way.

    We are not dealing with our real problem.

  23. ECON

    I bend down to the earth beneath and kiss it that I do not live in the Excited States of America where it is in the ranks of banana republics.

  24. Tom Hickey

    I was talking about this with my very savvy cousin over lunch today, and his answer was in essence that the government will simply institutionalize mortgage fraud. Problem solved.

  25. Doug Terpstra

    Amazing post, Yves. H.R. 3808 is passed by the House under a suspension and rushed through the Senate by unanimous consent, when most bills are produced under the agony of exaggerated partisanship. This is a major scandal, which is not very public, thanks to the collusion of corporate MSM.

    It makes Pelosi’s letter of protest look ridiculously suspect, unless she has little control of bills in the house. In fact it’s astonishing that so few in power are raising a stink bcause the whole affair reeks of naked corruption and a unique perversion of fascism: government itself as a openly-criminal enterprise. Surreal.

    I guess we’ll see if Warren is the consumer champion worthy of her rep.

  26. Doug Terpstra

    ZeroHedge has more disturbing details on HR 3808, its emergency bipartisan passage in the Senate, and the (alleged) broad immunity afforded to the banks. If there were any doubts about who actually owns Congress, this should dispel them once and for all. Such rare bipartisan efficiency is encouraging isn’t it?

    http://www.zerohedge.com/article/hr3808-equivalent-tarp-2-and-obamas-get-out-jail-gift-card-high-frequency-signing-scandal

    It is now awaiting the president’s signature. Any bets?

  27. YLSP

    Everyone is wrong, wrong, wrong, madly wrong about HR 3808. This legislation is about giving full-faith and credit across state lines to all notaries. If one believes this is some evil bankster plot to steal the homes of Americans, one would have to go all the way back to 2006! That’s right, the original legislation and a hearing on this were held in 2006.

    The text is the same as the bill introduced in 2006. It has been introduced in the 109th, 110th, and now 111th Congress. Furthermore, this bill says nothing about the fraud or “truthiness” of the underlying documents, rather, the purpose is merely to allow notaries across state lines.

    I’m sorry blogosphere; I hate Congress and their bought off ways as much as the next guy, but to think this is some blank check allowing the banks to get out of this foreclosure mess they have is a while conspiracy theory.

    I’m sorry, but given the fact that everything that goes through Congress is put on line, the fact that the bill had a hearing in 2006, and was passed in two previous sessions of Congress was overlooked is ridiculous. I think the Ohio Secretary of State might be a bit delusional over the purpose of this bill.

    Is it too much to ask that you check the legislative history before sending the blogosphere into high order?

    1. Dr. Pitchfork

      The “legislative history” doesn’t prove what you say it does. The sponsor of the bill (Aderholt?)says he introduced it on behalf of a request from court stenographers. I assume he’s clean. He’s also frankly surprised that the bill got passed through the senate all of a sudden and doesn’t know WTF happened.

      The existing piece of legislation may have just been convenient for the purposes of fixing this particular problem, even if that’s not what it was intended for.

      The bill says that any state court must recognize “any lawful” notarization from another state so long as 1. it relates to interstate commerce (i.e. anything under the sun) and 2. (in the case of an electronic document) it has the electronic “seal” associated with it.

      The only questions are what counts as “lawful”, and can this be applied retroactively?

      Finally, this bill may not in fact solve the problem the banks have, but it’s still possible that they think or hope that it will.

    2. Yves Smith Post author

      Sorry, YOU are wrong here. I’ve spoken to Congressional staffers, no one has done a legal analysis of the bill (very unusual) and more important, no one seems willing to do a legal analysis. There is a big furor. People on the Hill are arguing that the process was flawed because they haven’t reverse engineered the banks’ thinking. Congress needs committee and subcommittee hearings precisely so it can understand what this bill does, and the hearings never got into the foreclosure fraud mess.

  28. YLSP

    I’m sorry, but one would have to believe that Leahy and Conyers are behind this as well and are working to help the big banks steamroll folks in the foreclosure process? No, no, this story is complete and utter rubbish. I’ll eat those words if it comes out that this helps banks steamroll folks in court, but I very much doubt. I’m pretty sure if not Leahy, that Conyers supports the bankruptcy cramdown proposals.

    I’m sorry, this story has no legs and the blogosphere is making a mountain out of a ant hill…

  29. YLSP

    (I attempted to post last night but was unable to)
    Dr Pitchfork,
    December 6, 2006, Sensenbrenner and Conyers passed it in the House.

    Here’s some of their remarks:
    “A notary public administers oaths and serves as an impartial witness when certain documents are signed. Many States require these documents, such as affidavits, deeds, and powers of attorney, be notarized before they can become legally binding on parties. Since the point of legal notarization is to deter fraud, a notary must positively identify the signatory to a document and ensure that he or she signs the document knowingly and willingly.”

    “(Mr. Smith of Texas): Many documents executed and notarized in one state, either by design or happenstance, find their way into neighboring or more distant states. If ultimately needed in any one of the latter jurisdictions to support or defend a claim in court, that document should not be refused admission solely on the ground it was not notarized in the state where the court sits.”

    Here’s the important part:
    “A notarization in and of itself neither validates a document nor speaks to the truthfulness or accuracy of its contents.”

    July 10, 2007; they passed it again.
    “H.R. 1979 is supported by the National Notary Association, countless numbers of notary publics in many States, the academics that follow this arcane area of the law, and we think that they are correct, that we’re making an important revision in how notarized documents are recognized by the courts, all courts. And it’s in that spirit that I introduce or urge my colleagues to support H.R. 1979.”

    “Mr. Speaker, after hearing testimony on this subject before the Judiciary Committee during the 109th Congress, I have concluded that the refusal of one State to accept the validity of another State’s notarized document in an intrastate legal proceeding is just plain provincial and insular.

    Some of the examples were based on petty reasons. For example, one State requires a notary to affix an ink stamp to a document, an act that is not recognized in a sister State that may well require documents to be notarized with a raised, embossed seal. Passing this bill will streamline interstate commercial and legal transactions consistent with the guarantees of the Full Faith and Credit Clause of the Constitution. Mr. Speaker, I urge its passage.”

    This is why I think this is a misunderstanding by the Ohio Secretary of State. Someone can still claim that the person who signed the documents, didn’t verify that they were accurate, the fact that it is notarized is of no import.

    It’s great that blogs enable us to have such a vigorous debate on some arcane areas of law, it’s great that information flows so fast. Do I think the flail and the way the blogs like this and Zerohedge and Huffington Post are characterizing the story is wrong? Absolutely. But, the ability for me to comment on this is also great.

    I don’t even know how much the staffers understand, but I’m also glad to know that someone had good enough contacts to learn that Sessions and Leahy pushed this out of the Judiciary Committee. It would be great if they themselves made a comment on it.

    So, I maintain that this is a bad coincidence. I don’t like the tone of ZH’s article since it basically puts this all at the feet of Obama in such a gross mischaracterization. No one freakin’ looked at the bill and said, “Gee, they held hearings on it in the 109th Congress, and it passed the 109th, 110th, and 111th Congresses… maybe it’s more than the banks trying to slip something through.” It’s awesome that we are so cynical about politicians and rightfully so.

    This is what Zerohedge said: “That’s the theoretical definition: the practical one – the legislation, if enacted, could protect bank and mortgage processors from liability for false or improperly prepared documents. In other words, with one simple signature Obama has the capacity to prevent tens of billions in damages to banks from legal fees, MBS deficiency claims, unwound sales, and to formally make what started this whole mess: Court Fraud perpetrated by banks, a legal act, and to finally trample over the constitution.”

    Where the eff do you get that from this bill!? I know this comment rightfully should go onto Zerohedge, but I read about this first from this site. I’m sorry, but no wonder the politicians love the electorate. Judging by the fact that the ZH story got 148 comments, all of them talking about how there was no record of votes, and there is some grand conspiracy here.

    The notary simply says “yeah verily Person X signed the paper!” Not, “yeah verily everything in this paper is correct.”

  30. YLSP

    Dr Pitchfork,
    December 6, 2006, Sensenbrenner and Conyers passed it in the House.

    Here’s some of their remarks:
    “A notary public administers oaths and serves as an impartial witness when certain documents are signed. Many States require these documents, such as affidavits, deeds, and powers of attorney, be notarized before they can become legally binding on parties. Since the point of legal notarization is to deter fraud, a notary must positively identify the signatory to a document and ensure that he or she signs the document knowingly and willingly.”

    “(Mr. Smith of Texas): Many documents executed and notarized in one state, either by design or happenstance, find their way into neighboring or more distant states. If ultimately needed in any one of the latter jurisdictions to support or defend a claim in court, that document should not be refused admission solely on the ground it was not notarized in the state where the court sits.”

    Here’s the important part:
    “A notarization in and of itself neither validates a document nor speaks to the truthfulness or accuracy of its contents.”

    July 10, 2007; they passed it again.
    “H.R. 1979 is supported by the National Notary Association, countless numbers of notary publics in many States, the academics that follow this arcane area of the law, and we think that they are correct, that we’re making an important revision in how notarized documents are recognized by the courts, all courts. And it’s in that spirit that I introduce or urge my colleagues to support H.R. 1979.”

    “Mr. Speaker, after hearing testimony on this subject before the Judiciary Committee during the 109th Congress, I have concluded that the refusal of one State to accept the validity of another State’s notarized document in an intrastate legal proceeding is just plain provincial and insular.

    Some of the examples were based on petty reasons. For example, one State requires a notary to affix an ink stamp to a document, an act that is not recognized in a sister State that may well require documents to be notarized with a raised, embossed seal. Passing this bill will streamline interstate commercial and legal transactions consistent with the guarantees of the Full Faith and Credit Clause of the Constitution. Mr. Speaker, I urge its passage.”

    This is why I think this is a misunderstanding by the Ohio Secretary of State. Someone can still claim that the person who signed the documents, didn’t verify that they were accurate, the fact that it is notarized is of no import.

    It’s great that blogs enable us to have such a vigorous debate on some arcane areas of law, it’s great that information flows so fast. Do I think the flail and the way the blogs like this and Zerohedge and Huffington Post are characterizing the story is wrong? Absolutely. But, the ability for me to comment on this is also great.

    I don’t even know how much the staffers understand, but I’m also glad to know that someone had good enough contacts to learn that Sessions and Leahy pushed this out of the Judiciary Committee. It would be great if they themselves made a comment on it.

    So, I maintain that this is a bad coincidence. I don’t like the tone of ZH’s article since it basically puts this all at the feet of Obama in such a gross mischaracterization. No one freakin’ looked at the bill and said, “Gee, they held hearings on it in the 109th Congress, and it passed the 109th, 110th, and 111th Congresses… maybe it’s more than the banks trying to slip something through.” It’s awesome that we are so cynical about politicians and rightfully so.

    This is what Zerohedge said: “That’s the theoretical definition: the practical one – the legislation, if enacted, could protect bank and mortgage processors from liability for false or improperly prepared documents. In other words, with one simple signature Obama has the capacity to prevent tens of billions in damages to banks from legal fees, MBS deficiency claims, unwound sales, and to formally make what started this whole mess: Court Fraud perpetrated by banks, a legal act, and to finally trample over the constitution.”

    Where the eff do you get that from this bill!? I know this comment rightfully should go onto Zerohedge, but I read about this first from this site. I’m sorry, but no wonder the politicians love the electorate. Judging by the fact that the ZH story got 148 comments, all of them talking about how there was no record of votes, and there is some grand conspiracy here.

    The notary simply says “yeah verily Person X signed the paper!” Not, “yeah verily everything in this paper is correct.”

    1. Yves Smith Post author

      To repeat my comment above:

      Sorry, YOU are wrong here. I’ve spoken to Congressional staffers, no one has done a legal analysis of the bill (very unusual) and more important, no one seems willing to do a legal analysis. There is a big furor. People on the Hill are arguing that the process was flawed because they haven’t reverse engineered the banks’ thinking. Congress needs committee and subcommittee hearings precisely so it can understand what this bill does, and the hearings never got into the foreclosure fraud mess.

    2. Doug Terpstra

      If this bill is innocuous and pro forma, as YLSP asserts, then why pray tell did it did not pass in 2006, 2007, 2008, or 2009? Why now after four years, just when widespread documented fraud and forgery is surfacing, does a bill to endorse interstate robo-signing suddenly pass the Senate—by unanimous consent and without debate? And why did it pass by voice vote without a record of members votes in either chamber?

      It reeks. At best, it is convenient federalism, like the venue shopping by which credit card banks vitiated state usury laws, making 39% loan-sharking perfectly legal and common. And just as rigged trade and globalization destroyed workers rights and environmental protection around the world, this, at a minimum, nationalizes the lowest common denominator, gutting states’ rights with a federal mandate. This is what Wall Street weasels have been doing now for decades with the financialization of our entire economy, effectively legislating fraud, forgery, bribery, embezzlement, liability and environmental crimes right out of existence.

      From the Market-Ticker.org: “Notarization is an extremely important legal protection. It provides verification that the person who is alleged to have signed a document in “wet ink” actually did so, and actually made a personal appearance in front of the Notary… Once this law is passed they will find some state that needs jobs, and bribe the legislature to enact ridiculously loose notary laws, such that a notary signature will become effectively meaningless.”

  31. ckb

    Yves,

    Thanks for bringing all this to light, and staying on the facts. This is important stuff.

    One thing that I’m a little cautious about, though, is the use of words like “kleptocracy” in many of these cases. I think that may go a bit far. If the paperwork is all fouled up, and the banks have been backdating this and robo-signing that, it’s a serious issue, and I don’t want to downplay it. But if we’re talking about a borrower going into default, and a house going to the lender in foreclosure, I can’t see my way to calling that “kleptocracy.” Not as long as it’s the same series of events that would have happened if all the papers were correct in every detail. In particular, whoever should end up owning the house with the defaulted mortgage, we can be sure it isn’t the borrower. Or at least that’s my sense on this thing at the moment. Where there is fraud–the deliberate representation of a faleshood as a truth for monetary gain–I want to see it punished.

    Keep it up–this is important work.

    1. Paul Repstock

      Whatever the intent; The implications of a unannamous ‘bipartisan’ votes in a legislative body are ominous. The most glaring example I can remember in the US government, is the passage of the original Patriot Act. We all know that one as passed by ‘Three Monkeys’ with political guns to their heads. How did this piece of law get passed so easily? Did the legislators know what they passed? Was there any pressure?

      Whatever the original spirit of HR 3808, I think this sudden resurection and passage suggests that someone has discovered a ‘New Use’ for it. If such a New Use is not urgent, I think it behooves Mr. Obama to reject signing it pending further study. If nothing else, the furror over the law suggests a high degree of stress in the populace, and should in itself promote caution.

  32. Iris

    Maybe I’m being cynical, but I imagine that the fact that the midterm election is only a month away is contributing to lawmakers’ reluctance to side with the banks. The real test will be whether they keep the pressure on after the accountability moment is past…

Comments are closed.