Guest Post: Some More Thoughts On FDIC And The "Systemic Risk Exception" Clause

Submitted by Tyler Durden, publisher of Zero Hedge

As I dug a little more into the mystery of the amended Bloomberg headline discussing FDIC’s travails, some interesting facts came up. On September 25, 2008, Bloomberg staff reporter David Evans (not to be confused with U2’s The Edge) came out with a piece called “FDIC May Need $150 Billion Bailout as More Banks Fail.” The article reaches its gloomy conclusion based on Chris Whalen’s estimate that by the end of 2009, 100 U.S. banks will fail with collective assets of more than $800 billion, and quotes Richmond Fed director Mark Vaughan in saying “It’s not going to be Armageddon. But it’s going to be bad.” Additionally, Evans discussed the potential fate of uninsured deposits, which he estimated at $2.6 trillion or 37% of the total $7 trillion in deposits held at U.S. FDIC member banks, and concluded that if “the government were on the hook ” to protect these deposits as well, the FDIC’s all in cost for failed bank rescues could swell “to more than $400 billion.”

What is interesting, is that the very same day Evans came out with his FDIC critique, the agency immediately issued a rebuttal in the form of an open letter to Bloomberg News claiming David Evans “does a serious disservice to your organization and your readers by painting a skewed picture of the FDIC insurance fund.” The letter, written by FDIC Public Affairs Director Andrew Gray, makes for a fascinating read as it discloses some curious, and previously undiscovered facts:

Let me be clear: The insurance fund is in a strong financial position to weather a significant upsurge in bank failures.

Even under an amended title, Sheila Bair’s most recent public appearance on March 20, in which she claimed that “Without additional revenue beyond the regular assessments, current projections indicate that the fund balance will approach zero“, does not make it sound like the insurance fund is “in a strong financial position” at all.

The FDIC has all the tools and resources necessary to meet our commitment to insured depositors, which we view as sacred. I do not foresee – as Mr. Evans suggests – that taxpayers may have to foot the bill for a “bailout.”

Luckily for Mr. Gray “do not foresee” will not hold up in court as a determination of guarantees.

Let’s look at the real facts about the FDIC insurance fund. The fund’s current balance is $45 billion – but that figure is not static. The fund will continue to incur the cost of protecting insured depositors as more banks may fail, but we continually bring in more premium income. We will propose raising bank premiums in the coming weeks to ensure that the fund remains strong. And, at the same time, we will propose higher premiums on higher risk activity to create economic incentives for poorly managed banks to change their risk profiles. The fund is 100 percent industry-backed. Our ability to raise premiums essentially means that the capital of the entire banking industry – that’s $1.3 trillion – is available for support.

At the time this letter came out, the TLGP did not exist. However now, in addition to having “the capital of the entire banking industry available for support”, the FDIC, in a poetic flip of words, also has to issue capital to support the entire banking industry. The letter continues:

Moreover, if needed, the FDIC has longstanding lines of credit with the Treasury Department. Congress, understanding the need to ensure that working capital is available to the FDIC to provide bridge funding between the time a bank fails and when its assets are sold, provided broad authority for us to borrow from Treasury’s Federal Financing Bank. If necessary, we can potentially raise very large sums of working capital, which would be paid back as the FDIC liquidates assets of failed banks. As per our authorizing statute, any money we might borrow from the Treasury must be paid back from industry assessments. Only once in the FDIC’s history have we had to borrow from the Treasury – in the early 1990s – and that money was paid back with interest in less than two years.

Interestingly, Chris Dodd’s Depositor Protection Act of 2009 legislation will make it possible for the FDIC not only to borrow from the Treasury but do so with some serious style – to the tune of $500 billion, up from the previous maximum borrowing limit of $30 billion. Somehow I think the FDIC will take a little longer than 2 years to repay that particular loan.

The last part of the letter is most interesting:

Finally, Mr. Evans’ suggestion that the “government” could ever be “on the hook for uninsured deposits” demonstrates a misunderstanding of FDIC insurance. To protect taxpayers, we are required to follow the “least cost” resolution, which means that uninsured depositors are paid in full only if this is the least costly option for the FDIC. This usually occurs when a bidder for the failed bank is willing to pay a higher price for the entire deposit franchise. We are authorized to deviate from the “least cost” resolution only where a so-called “systemic risk” exception is made. This is an extraordinary procedure which we have never invoked. And again, any money we borrow from the Treasury Department must be repaid through industry assessments.

Just what is this Least Cost resolution? And even more so, the ominous sounding Systemic Risk Exception? Here is what a legal dictionary has to say about the former:

§ 360.1 Least-cost resolution.

(a) General rule. Except as provided in section 13(c)(4)(G) of the FDI Act (12 U.S.C. 1823 (c)(4)(G)), the FDIC shall not take any action, directly or indirectly, under sections 13(c), 13(d), 13(f), 13(h) or 13(k) of the FDI Act (12 U.S.C. 1823 (c), (d), (f), (h) or (k)) with respect to any insured depository institution that would have the effect of increasing losses to any insurance fund by protecting:

(1) Depositors for more than the insured portion of their deposits (determined without regard to whether such institution is liquidated); or

(2) Creditors other than depositors.

(b) Purchase and assumption transactions. Subject to the requirement of section 13(c)(4)(A) of the FDI Act (12 U.S.C. 1823(c)(4)(A)), paragraph (a) of this section shall not be construed as prohibiting the FDIC from allowing any person who acquires any assets or assumes any liabilities of any insured depository institution, for which the FDIC has been appointed conservator or receiver, to acquire uninsured deposit liabilities of such institution as long as the applicable insurance fund does not incur any loss with respect to such uninsured deposit liabilities in an amount greater than the loss which would have been incurred with respect to such liabilities if the institution had been liquidated.

[58 FR 67664, Dec. 22, 1993, as amended at 63 FR 37761, July 14, 1998]

And here is an interesting tidbit on the Systemic Risk Exception:

To get a grip on the too big to fail problem, Congress established a difficult-to-trigger systemic risk exception. A least-cost resolution can be foregone – and by implication a resolution method selected that results in uninsured depositors and other creditors being protected – only if the Board Of Directors of the FDIC, The Board of Governors of the Federal Reserve System, and the secretary of the Treasury, in consultation with the president, determine the least-costly approach “would have serious adverse effects on economic conditions or financial stability.”

Personally, I have never encountered any legislative loopholes that need a quorum of these four most critical pillars of the U.S. economy. It is obvious the FDIC and lawmakers realized that there is something of huge value to be protected here in case there is a “systemic risk event.” And while it is likely not deposits over and above the insurance maximum, it might potentially have to do with “other creditors” rights. Which is where, if one were to get conspiracy theory minded, it would be possible to presume that in certain cases bank creditors (maybe even foreign investors who own this debt) would receive a least-cost resolution exemption. But even without that detour, in the case of a consensus that we have crossed the threshold of “systemic risk” (a phrase thrown around a little too freely these days), it is prima facie the case that U.S. taxpayers would be on the hook to bail out not only failed banks’ uninsured depositors but also creditors.

Now while the implications of this very fine print could be potentially staggering to the blissfully ignorant American public, the immediate change in the Bloomberg headline seems to be the least Bloomberg could do to avoid receiving additional angry letters, and to bring the public a step closer to these disclosures. Curiously, all this comes on the heels of Friday’s announcement that the NCUA is putting two massive credit unions into conservatorship after stress-tests disclosed “an unacceptably high concentration of risk from mortgage-backed securities” and the agency’s insurance fund will see a loss of $1.2 billion from the closures, according to spokesman John McKechnie.

Maybe the FDIC was a little early in its allegations that Bloomberg and Evans were doing anyone a disservice, as the reporter’s grim forecast is slowly starting to become reality.


Didn’t even finish typing this, and the FDIC’s troubles are already growing. This just out:

Washington Mutual Sues FDIC for over $13 Billion

In a complaint filed with the U.S. District Court for the District of Columbia, the thrift’s former parent accused the FDIC of having on January 23 made a “cryptic disallowance” of its claims, prompting the lawsuit.

It also accused the FDIC of agreeing to an unreasonably low price in arranging the a $1.9 billion sale of the banking business to JPMorgan on September 25, when regulators seized Washington Mutual and appointed the FDIC as receiver.

JPMorgan did not buy the parent holding company, which filed for Chapter 11 bankruptcy protection the following day.

In its complaint, Washington Mutual seeks to recover as much as $6.5 billion of capital contributions it said it made to its banking unit from December 2007 through the seizure.

Washington Mutual also seeks the return of $4 billion of trust preferred securities it said were wrongfully transferred to the banking unit, and said it may be entitled to as much as $3 billion of tax refunds. It also seeks damages of $177.1 million related to unpaid loans made to the banking unit.

If successful, this lawsuit will not help out FDIC’s increasingly troubled financial state.

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  1. Anonymous

    Who, in this environment, is keeping uninsured deposits in a bank…I mean, by varying the name of the account you can get multiple insured accounts at the same bank e.g. John Smith, John Smith, beneficiary John Smith’s wife, John Smith and wife JTWROS, John Smith Trust, John Smith and Wife trust, etc.

    With hundreds of FDIC institutions and the possibility of numerous accounts at each for up to $250,000 each, I can’t see how someone would not have all their account insured? Does someone know, other than negligence how more than 2 trillion are uninsured?

  2. Anonymous

    “Does someone know, other than negligence how more than 2 trillion are uninsured?”

    Corporate, pension, insurance, and money market deposits.

    But many of the above could do better things with their money, like custodial accounts limited to holding ultra-short term, high grade fed or muni paper, or a ladder of longer term fed or muni paper, or ….

  3. Tyler Durden

    the point here is the pari treatment of uninsured depositors with FDIC bank creditors. the clause puts bank creditors at the most secured level of bank capital structures, subject to taxpayer bailout

  4. Kirkland

    This doesn’t fit with the reports in 2008 that uninsured depositors in IndyMac would get back about 50% of their money, even though the DIP was going to lose $4-8B (now $10B). I did some poking around, and it appeared (although I could be wrong) that the DIP actually splits any recovered assets with uninsured depositors, rather than being ahead of them in line. And the fact that the IndyMac uninsured depositors didn’t lose all their money bears this out. So it doesn’t appear that the systemic risk clause is needed for that. However, it could be needed in order to cover unsecured lenders, which would fit with Tyler’s theory.

  5. Anonymous

    One thing to know. In the TARP legislation that was passed into law last October you will find:


    (a) Federal Deposit Insurance Act; Temporary Increase in Deposit Insurance-

    (1) INCREASED AMOUNT- Effective only during the period beginning on the date of enactment of this Act and ending on December 31, 2009, section 11(a)(1)(E) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)(E)) shall apply with `$250,000′ substituted for `$100,000′.

    (2) TEMPORARY INCREASE NOT TO BE CONSIDERED FOR SETTING ASSESSMENTS- The temporary increase in the standard maximum deposit insurance amount made under paragraph (1) shall not be taken into account by the Board of Directors of the Corporation for purposes of setting assessments under section 7(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)).

    (3) BORROWING LIMITS TEMPORARILY LIFTED- During the period beginning on the date of enactment of this Act and ending on December 31, 2009, the Board of Directors of the Corporation may request from the Secretary, and the Secretary shall approve, a loan or loans in an amount or amounts necessary to carry out this subsection, without regard to the limitations on such borrowing under section 14(a) and 15(c) of the Federal Deposit Insurance Act (12 U.S.C. 1824(a), 1825(c)).


    To cover any depositors (up to the limit of $250,000) The FDIC can borrow an unlimited amount of money through the end of the year

    The reason for the Senate legislation for $500 billion was to obfuscate the purpose (for depositors) of that money. Today the NY Times reported that under the Public/Private partnership toxic asset buying plan it will be the FDIC that will loan 85% of the money to the private equity firms to buy toxic assets.

  6. alex black

    Future generations of American schoolchildren will read about how the Financial Crisis of 2008 was handled – in crumbling schools with 200 students per class all sharing the only textbook.

    But they’ll be happy – there will still be dancing and sex.

  7. Steve

    The need for the approvals under the systemic risk exception (too big to fail) was imposed by Congress because of furor over the handling of Continental Illinois. The idea is simply that Treasury, Fed and the President must risk political capital to keep a dead bank open regardless of cost, and their decision is subject to Congressional (GAO) review. Quaint idea these days — imagine Obama and the Fed actually having to sign a public statement regarding Citi, say. There’s a suggestion in this post that a kind of dark conspiracy is at work in the way a systemic event is certified — the legislative history is just the opposite. Part of the current problem is that once the shit hit the fan, Congress turned all decision making over to the Executive (along with a pile of cash) and to the Fed (grease up the presses, boys), in exchange for the opportunity for sound bites of sterile outrage.

  8. Blissex

    My conclusion is rather different: the only way for the FDIC to raise money is from the banking industry, and they could in theory “assess” the whole of the banking industry capital if necessary. So any loans made to the FDIC under the systemic or TARP exception would have to be repaid from banking industry capital.

    So theoretically the taxpayer is not on hook for a penny — the banking industry capital underwrites the whole of the FDIC risk, and the FDIC is in effect a self-insurance fund for the banking industry, using the same rule as Lloyd’s of London, unlimited liability (down to their last cufflinks).

    There are however two problems with theory.

    The first is made clear inadvertently in the FDIC letter: sure, the FDIC can “assess” in theory the entire capital of the banking industry, some $1.3T; but what if the losses on insured depots exceed that amount, if the whole banking industry is in the aggregate insolvent? In that case the FDIC is bankrupt itself, as there is no backstop from the treasury.

    The second is the practical issue of politics: suppose that insured deposit losses were $450B, or 1/3 of the capital of the whole banking system; that would likely mean that 1/3 of the capital of the banking system has gone in failed banks, and the FDIC would then “assess” half of the capital of the non-failed banks, most likely causing a lot of pain to them. Would they stand by meekly and pay up and halve their capital ratios? Of course not, they would call their delegation in Congress and the law would get changed.

    Basically the idea that the FDIC is essentially a self-insurance fund based on the unlimited liability of any member bank is a legal fiction, that is meant to apply only if the losses are relatively small compared to the whole.

    The FDIC letter seems to me quite hypocritical when they say that they are backstopped by the entire (somewhat imaginary) $1.3T capital of the banking industry and nothing else.

    The rule of law in the USA has never been that secure, and it applies only to the little people; the big guys can buy any law they want, or just have them ignored by the executive.

  9. fresno dan

    Yeah, the FDIC is self funding, just like Freddie and Fannie are not guaranteed by the US gubermint

  10. Anonymous

    Gold, Guns, Groceries, The trillions that are insured by the FDIC which has less then 50 billion. Get real.

  11. DownSouth

    Tyler Durden said: “Now while the implications of this very fine print could be potentially staggering to the blissfully ignorant American public…”

    When I read this it just left me reeling. Inherent in this statement is a pomposity and high-handedness that makes it difficult to distinguish the author from the likes of TurboTax Tim or Murder-the-Planet Larry. Is it really appropriate to hold the public in such low regard?

    I suppose I wouldn’t be so alarmed if it were not for the fact that this is not the first time this sort of thing has been posted here on Naked Capitalsim over the past few days. I discern a disturbing trend, so I am compelled to speak up.

    In the public vs. expert divide, it’s not efficacious, especially in a mixed public-expert forum like this one, to throw gasoline on that schism and then cast one’s lot with the experts. Perhaps the problem is that, while the posters here do exellent economic analysis, political analysis is not their forte.

    Daniel Yanelovich observed in Coming to Public Judgment: Making Democracy Work in a Complex World that: “More often, public opinion makes itself felt indirectly through watershed elections.”

    The 2006 election was an example of such an election:

    The election resulted in a sweeping victory for the Democratic Party which captured the House of Representatives, the Senate, and a majority of governorships and state legislatures from the Republican Party.,_2006

    I don’t recall exactly who, but it was either Andrew Bacevich or Kevin Phillips who said that the American people went to the polls in 2006 to send one message: “End the war in Iraq.”

    Of course when the Democratic congress took power, they immediately betrayed the American people, and we still find ourselves bogged down in Iraq.

    The 2008 election provides another example of such a “watershed” election. The people went to the polls in record numbers to send the message that they wanted a change in direction of the country. And yet again, with the Democrats now in control of congress, the Senate and the presidency, the country continues down the very same path it did under Bush.

    Is this to be blamed on the people because they do not fully understand all the intricacies of the highly arcane and technical world of finance? Or is it to be blamed on the so-called “experts” who use this and their superior knowledge to confuse, exploit and betray the public?

  12. Anonymous


    Tyler did say “blissfully” ignorant American public rofl.

    I have spent my time to date, swimming in both seas, poor and rich. In my experience, the great unwashed have little interest out side the carrot offered at the end of a stick 6 inches from their nose. They will trundle on till death and pass on the stick and carrot to their offspring.

    Grosse Pointe….at least he didn’t say the collective pile of rocks aka American public….sorry was distracted for a moment BOOBS on the TV, stacking whilst I post.

    PS If the American public ever wake up from their post party slumber induced by the easy credit lines of last night. The out rage of date rape by the credit masters will echo for decades.

  13. bebe rebozo

    I don’t blame the American public for being duped or willfully ignorant. However, democracy places serious responsibilities on a people that are basically unable and unwilling to assume. After the JFK coup former President Eisenhower said the people of this country posses great common sense and they are not going to the stampeded or bewildered. I wish that were the truth. Unfortunately the American people have been stampeded and bewildered countless times. It works the same in any country.

  14. Anonymous

    really appropriate to hold the public in such low regard?

    It’s not Durden who is holding the public in low regard–he is pointing it out.
    It’s the people who draft and pass these sneaky provisions (Congress and co.) that guys like Durden have to try to unearth.

  15. DownSouth

    Annonymous at 11:52 A.M.

    Let me begin by aplologizing if my comment was too strident and overwrought. I plead guilty. But in all sincerity, it was meant as constructive criticism. Durden and I are, after all, on the same team.

    That said, I’m not so sure that I would characterize the mood of the American public as “blissful.”

    And I think “experts” of good will, which I certainly consider Durden to be, walk a very fine line here. As Yankelovich goes on to observe:

    If one is not careful, it is easy to fall into the opposite trap: the trap of anti-intellectualism and antirational sentimentality, which endows the folk wisdom of the public with special mystical qualities. Ultimately, this is the path of demagoguery, and it is worse than the distortions it seeks to correct. One should never appear to make being ill-informed a virtue. Information is always relevant. It always plays a role, even though it may be of secondary importance.

    Yankelovich goes on to explain that experts are often “graduates of elite colleges and universities, which indoctrinates them with a noneradicable feeling of superiority to the general public… They assume that they have much of value to communicate to the public, without imagining that the public has much of value to impart to them.”

    “Furthermore,” Yankelovich continues, “even though the nation’s elites complain about the public’s ‘apathy’ and ‘ignorance,’ they resist most efforts to enhance the quality of public opinion.”

    The problem, Yankelovich concludes, is that, if the experts of good will get this wrong, “overreach themselves and further usurp the public’s legitimate role,” then there will be a backlash in which “the public dominates and pushes the experts out of the picture altogether.” Then “we will have demagoguery or disaster or both.”

    If the experts grow too bold, the electorate will express itself in populist fury and launch another episode of native know-nothingness. (Anti-intellectualism runs like a thread through American history.) In political life, abuse breeds abuse…

  16. S

    “The 2008 election provides another example of such a “watershed” election. The people went to the polls in record numbers to send the message that they wanted a change in direction of the country. And yet again, with the Democrats now in control of congress, the Senate and the presidency, the country continues down the very same path it did under Bush.”

    Exactly what was the popular vote split? The 2008 election was a no mandate at all! A marginal vote was gathered by the left and used effectively which is worth something. However to suggest that there is anything more than a massive divide in this country is self delusional and hardly acute political insight, not being a pundit myself.

    As for the FDIC, it is the bank debt backing that is the most pernicious. Notwithstanding the clause this alone raises the creditors in the cap structure. It also creates a perverse incentive for the gov to keep failures alive for it would “cost the taxpayer more.” The US taxpayers are now subsidizing operations at Goldman, BAC, Wells etc.. to the tune of $1B a year or so on the FDIC backed debt. This as the banks raise fees and lower your deposit rates. But it is for your good. While it is hard to disagree with the assessment of the American public, it is noteworthy that the assault rifles shotguns and handguns are flying off the shelves. Note the editorial in the post discussing the neo gentry in westchester saying he is stocking up and there are waiting lists for guns. The American people may be “dumb” but it wasn’t the Harvard MBA, but rather the Brooklyn mechanic, who figured out how to navigate the hedgerows during Normandy. It will surely not be the Ivy MBA, I-banks or Lawyers who rebuild this economy. These are merely the sycophants who feed off (and welcomingly capitalize) the entrepreneurial instincts of the unwashed asses.

  17. Anonymous


    Agreed, it is a hard line to walk between academia and fox news. Yes all here are a team of sorts, and wish for better days ahead.

    Grosse Pointe…maybe we should have Econo 101 and American history classes with chicks in skimpy outfits lol.

  18. Juan

    Yankelovich goes on to explain that experts are often “graduates of elite colleges and universities, which indoctrinates them with a noneradicable feeling of superiority to the general public… They assume that they have much of value to communicate to the public, without imagining that the public has much of value to impart to them.”

    The late Ernest Mandel termed this ‘expert idiocy’ and, if I recall, related it to an overly developed division of labor.

  19. Anonymous or
    Please open’ one of the above report links, plus e-mail attachments are available for additional information.

    Bank One N.A. moved-in March, 2001 {15 Year, 6.5 fixed, never seconded} Loan Transferred to Homeside Lending November, 2001 all posted payment’s achieved timely conformation from April, 2001 to March, 2002, twelve month old timely paid loan was demanding twelve $102.99 Escrow Shortage monthly’s from April, 2002 to March, 2003. Assistance Filing “Proof of Claim” against Washington Mutual’s Bankruptcy is needed before 3/31/2009 deadline.

    November 19, 2004 Washington Mutual requested patience’ promising loan history production’ relating “The Comptroller of the Currency” and “Better Business Bureau” involvement relative to second’ ignored R.E.S.P.A. “Qualified Written Request” telephonically on December 15, 2004 loan management conversed, that Bankruptcy STAY’ was released and loan history was transferred to Washington Mutual archive department in Chicago. Archive department instantly e-mailed unclenched’ loan histories, ending loan manager’s “48 month” covert “Principal Curtailment” concealment, and erroneous Escrow reduction missing fund’s concealment, the Better Business Bureau then removed Washington Mutual’s chief arbitrator chair, expelling for three year’s, “speaking retrospect-fully’ acquiring Credit Report in 2002’ would-have averted Foreclosure Theft’ nothing else!” Case Number 02-xxxxx-H3-13 including Core Adversary Trial’s Appealed award, from at 4541 County Road 138A Alvin, Texas 77511; now at Richard j Pollak 100 Patterson ave. Carnegie, Pa. 15106-2827

    December 2007’ Washington Mutual returned $7,515.98 loan payment funds to Bankruptcy Trustee without Arbitration, Explanation or Accountability, as a precursor to July, 2008 Foreclosure’, Mooting Judgment Ruling’ by equating yet’ another Fiduciary fault/guilt Theft admittance, self assessing, while grossly underestimating actual damage, ignoring commitment clauses Contractual damage, accrued damage’s, Interest and accrued Interest.
    Specifically’ “Deed” commitment damage’s clause, By the Rights granted’ by Benjamin Franklin and The Founding Fathers, in their leading’ Statute’ of the very First Amendment {SCIENTER = meaning or Science of the Contract – Anti-trusting’ exacting Lending Institution’s’ while including certain Contractor’s “stating” Contractor must contractually abide the universal forwarded stipulations of contract offered, cemented with binding Mutual’ Signature’ requirement} Loan Originator and Loan Manager Both’ protectively harbored $778.34 “Principal Curtailment” {evading’ shouldered $10,286.25 Contractual Commitment’s damage Clause’} Also’ protectively harbored the unaccredited $637.22 Escrow reduction {later claimed’ as November, 2001 erroneous Escrow reduction intended for December, 2001 payment} concealing Both’ by protectively harboring loan History for Four Year’s “Principal Curtailment’s” self defining and $637.22 Escrow Reduction’s definitively “Escrow Curtailment” intentionally coveted from loan statement’s by “pencil shading” Void without digits, December, 2001 payment accountability Box’, then stealthy omitting’ from requested, received 2002 Escrow Summaries and Final’ loan history the first “28” November, 2001 after’ loan transfer Day’s, Also’ returning $336.00 Escrow to progress “Escrow in shortage” for preplanned future $175.26 Escrow reduction, claiming the $637.22 I.R.S 1098 without 2001 fund’s received’ Re-taxing, Credit Repository deception, forcing Bankruptcy, releasing Stay, and Foreclosure Theft.

    Washington Mutual Executive Response Center formal December 16, 2005 report’ admitted discovery “Bank One 2001 credited, then suspended, then “Curtailed” $778.34 monthly payment, crediting loans overall Principal only” then transferred loan to Homeside Lending that reduced “Escrow” $637.22 (“claiming” November 28, 2001) explaining’ erroneous misapplication attempt at reversal of “Principal Curtailment.” Loan Management admitted Escrow reduction while denying it vanished unaccredited; singularly defending monthly’s progression concoction.
    Actualities; real-time statement starkly contradicts December 16, 2005 Final’ loan history’s recorded date, because Homeside Lending received loan November, 2001 and November 5, 2001 exacts $1,289.85 Escrow transferred, then Escrow reduced by $637.22 to $652.63, accrediting Principal $253.34, accrediting Interest $383.88, accrediting Escrow $175.26, recoiling back-to overall Escrow balance $175.26 action’. November 28, 2001 loan update highlighted Escrow’s $652.63 balance only’, the erroneous Escrow reduction then vanished before December, 2001, because December, 2001 Principal, Escrow and Interest received “pencil shading” without digit accreditation, mirrored on all loan updates, both’ 2002 requested Escrow Summaries, including Final’ loan history that intentionally covertly omitted first 28’, November, 2001 Day’s, add $336.00 Escrow returned, figure Curtailment and Curtailment’s loan Re-terming’ adjustment, equates the $1,148.48 April, 2002 to May, 2003 $102.99 Escrow Shortage, perfecting the irreconcilable pretzel logic that created the phantomlike December, 2001 unsubstantiated, unaccredited void that blocked outside refinance, with twelve $102.99 Escrow shortage’s, reflecting Homeside Lending used “Mindbox” Data Repository’ and Loan Manager used it’s editing, point and click “Soap” Program’, augmenting date’s to protect stolen Escrow, with historic recreation faltering. Blocking outside refinance by erroneous Credit Repository reporting, Also’ loan manager thwarted’ Washington Mutual’s letter promising loan history production, by releasing Bankruptcy “Stay” selfishly knowing loan history concealment protected Principal Curtailment and missing Escrow Reduction whose production would-have eliminated forced Bankruptcy’, adverted Bankruptcy’, forced Bankruptcy’ reversal, Foreclosure was desired solution, release of Bankruptcy Stay action’ was required, because Bankruptcy protected manager from case-load accountability review, additionally’ Washington Mutual’s inherent case-load accountability review, Fear’ protectively circumvents Justice’ by reimbursing’ half of all “Court appointed Attorney” fee’s’ across Texas, Lobbying courtroom participant’s, insuring prosecution protection!

    Curtailment defined {“liken-to lopping off Horse’s tail” Curtailment = covert’ prepayment deception, Breach of commitment, of accountability, of relationship, emphasizing intentional Breach of Chartered License, here repeated to mask’} Curtailment abandoned December, 2001 and November 5, 2001 Escrow reduction intended Curtailment replacement, evaporated {liken to “Escrow Curtailment” defined = Anti-trusted} diligent loan history harboring became required’ to protect Homeside Lending Data Repository’ “Mindbox” problematic “point & click” power editor “Soap” extremely assessable Program’s’ limitless historic editing ability’s finality from caseload review. Loan Manager testified’ Homeside Lending used {INNUS} Credit Repository, pondering in-house. Prior to release of Bankruptcy Stay’ all loan histories reported December, 2001 unaccredited, requested Escrow Summaries and November 16, 2004 Final’ loan history report, covertly omitted’ the “first 28, November 2001 day’s” following loan transfer, compelling deception intent, in actuality both {Curtailment-theft’s} relates double standard when prosecuting Violent armed bank robbery thief’s’, theft’ and these isolated matter’s expanded universally, damaging unreported multitude’s.

    Payment timeline;
    March, 2001 Bank One N.A. 6.5 fixed 15 year NOTE contracted timely payments are no later than the Fifth’ of the month, each payment received generates posting’ account update statement, including single fixed detachable coupon’ for next monthly payment up-to November, 2001; all agree timely
    Bank One received December, 2001 $812.48 coupon’ payment and properly accredited Principal $246.59, Interest $389.63 and Escrow $176.26, then all became suspended, then overall Principal “Term” commitment reduced $812.48 – $34.14 P.M.I. = $778.34 truncating from “NOTE” overall Principal financed “Principal Curtailment” transferring loan with December, 2001 unsupported
    November, 2001 Homeside Lending received transferred loan with $1,289.85 in Escrow funds
    November, 2001 proof of payment investigation team {loan payment entry Stay’} requested front and back photo-copied canceled check routing # proof that Bank One received December, 2001 payment, posted them U.S Mail
    November 5, 2001 not November 28, 2001 Escrow reduced $637.22 to $652.63, real-time statement documents accrediting Principal $253.34, accrediting Interest $383.88, accrediting Escrow $175.26 recoiling back-to Escrow balance $175.26 action’ {Escrow reduction addressed Principal and Interest replacement = $175.26 un-curtailed, awaiting Escrow shortage fund accumulations for repeating covert Escrow reduction} action’
    November 29, 2001 statement’ only highlight’s Escrow’s $652.63 balance, prior to $637.22 vaporizing
    December, 2001 the $637.22 Escrow reduction has already vanished, amounting four year Curtailed
    December 10, 2001 $1,168.26 County Tax payment, amounted Escrow to minus $515.63 shortage
    December 15, 2001 received $336.00 Escrow Surplus, increasing Escrow arrears to minus $851.86
    December, 2001 Escrow reduction’s $637.22 claimed I.R.S. 1098 taxable in 2001, Re-taxing!
    January, 2002 paid $813.49, February, 2002 paid $813.49, March, 2002 paid $813.49; all agree timely
    January, 2002 requested, “Escrow Summery” report detail’s, December, 2001 without digit entry or itemization, payment box only “Pencil shaded” blank {all other monthly’s itemize Principal, itemize Interest, itemize Escrow} Also’ all loan monthly payment update’s exacted December, 2001 without Principal, Interest or Escrow accreditation “Escrow summery” accounted unrepaired accountability
    April, 2002, payment with Escrow Shortage requirement $813.49 + $102.99 = $916.48; check did I.S.F.
    April 15, 2002, “Escrow Summery” report again requested, received, still’ December, 2001 has no digit entry or itemization, payment box “Pencil shaded” blank {all other monthly’s itemize Principal, itemize Escrow, itemize Interest} Also’ loan monthly payment updated balance’s reflect December, 2001 lack’s any/all Principal, Escrow or Interest accreditation, Escrow accountability remains unrepaired, lender demanded remaining Ten’ x $102.99 = $1,029.90 Escrow shortage arrear “paid in full” prior to additional Escrow Summery loan history reports communicated, payments suspended after May, 2002
    May, 2002 $2,000.00 payment, Loan Manager Testified all payments, charges and fee’s updated current, prior to July, 2002, only’ the Ten’ demanded $102.99 Escrow shortages remained unaccounted.
    July, 2002 to September, 2002 prioritized Credit-card balance reduction, anticipating outside refinance
    October, 2002 all refinance attempts failed, reasoning was then unknown, Credit-cards showed $60,000.00 available credit with low remaining balance due
    November, 2002 Countrywide exposed home loan payment history problem, Credit Repository Report, restriction hobbled their refinance efforts, undersigning dismissed out of hand
    November, 2002 any / all outside refinance offers and term commitments attempted without availability, even high risk, high Interest, refused loan, including without the expanded Principal first desired
    December, 2002 Involuntary Bankruptcy protection forced
    December, 2002 Attorney charged ¼ hour proof of claim, explained additional funds available for loan history research and volumes of loan history documents copied and conversed, numerous office visits and hours expended without loan history resolve
    Early, 2003 Bankruptcy requires finance training class, reviewed check paid loan history problem with Attorney / Scholars/ Teachers proof of claim review suggested
    Middle, 2003 Bankruptcy Conformation Hearing, demanded on the Court recorded record, credit for cashed check payment accountability waving canceled check’s to Judge, Trustee, Homeside Lending. Judge forced Signature then “Stayed” Bankruptcy Conformation for 60 Day’s, reprimanding and ordering Attorney to file “Proof of Claim” for loan history resolve.
    October, 2003 Judge’s 60 Stay time allotment expired, Attorney stated Homeside Lending offered return of Principal Curtailment and Escrow reduction funds, offer denied, without Credit Report itemizing returned funds, some damages and loan history production’s proof of event accountability, fearing unrealized additional damage’s, he conversed quitting, payments halted for court review date.
    February, 2004 received Bankruptcy Attorney’s notice of quitting all Houston, Texas case-load, “he” recommended Bar Association Attorney
    March, 2004 New Attorney formatted loan history from real-time summaries and composed “R.E.S.P.A. “qualified written request,”
    April, 2004 New Bankruptcy Attorney’s R.E.S.P.A. “qualified written request” was being ignored letterhead Dated February 12, 2004, request carries time-line restriction’s with damages {“loan servicer must acknowledge within 20 Days, and resolve within 60 Days”} Attorney backdated letterhead way before our first acquaintance pre-expiring, home loan payments halted for Court review.
    September, 2004 release of Bankruptcy Stay hearing, called Attorney at office, she refused courtroom attendance, in courtroom My Bankruptcy Trustee “Attorney” was busy hearing and releasing Bankruptcy Stay’s and Foreclosure’s ruling from Judge chair, allowing Judge’ Courthouse absentee day, Trustee “Stayed” Bankruptcy until October, 2004 awaiting Bankruptcy Attorney representation, Again canceled check stubs waved demanding accreditation with loan history production
    September 17, 2004 used Attorney’s unanswered / ignored February 12, 2004 R.E.S.P.A. “qualified written request” to craft, format, personal R.E.S.P.A. “Qualified Written Request” posted Certified Mail, Washington Mutual, Bank One and Homeside Lending, Also’ posted First Class B.B.B. Comptroller of the Currency, Office of Thrift Supervision, RESPA and more, e-mailed all-about. “Comptroller of the Currency” forwarded assisting, “Better Business Bureau” forwarded assisting and repeatedly ignored, despite Washington Mutual seating one of their Five Chief’ arbitrator chairs, B.B.B. later reported three Year, Washington Mutual suspension resulted.
    October, 2004 Trustee recommended Attorney file amended Proof of Claim or file Core Adversary, “privately conversed with Attorney and Trustee, Both’ stated Core Adversary filing intended” Trustee related, Judge Ruled, Bankruptcy “Stay” suspended until December 15, 2004
    October, 2004 Year later 2005; Judge ruled Bankruptcy Attorneys ignored R.E.S.P.A. “qualified written request” inadmissible evidence in Core Adversary Courtroom proceedings, actual postings questioned.
    November, 2004 Attorney claimed forwarding with Lender communication for loan history production, possibility of Core Adversary trial avoidance, her filing still pending if loan history production unresolved
    November 19, 2004 Washington Mutual letter requested patience’ promising loan history production while relating The Comptroller of the Currency and Better Business Bureau involvement
    December 15, 2004 called Washington Mutual for status up-date, Management reported Bankruptcy “Stay” released, and loan history transferred to Washington Mutual Chicago Archive department, called Archive department and four year coveted, protected loan history received by e-mail that Day
    December 16, 2004 called archive department disputing loan history received, explaining discovery of Principal Curtailment and Escrow reduced with wowing response
    December 19 or 20, 2004 Bankruptcy Attorney office meeting, Core Adversary filling was pending
    December 15, 2004 Core Adversary filing’s letterhead date

    Clarifications; Bank One loan originator “Principal Curtailment” was a breach of DEED contractual Term commitment preemptive clause’s signed authorization requirement’s, restriction of covert prepayment’s compromising “NOTE” {here fifteen year} final pay-off, that specifies’ instead of damage arbitration, all loan originator received funds and earnest funds returned, supporting DEED 180 month term commitment paperwork’, $12,291.54 but for Insurance, Tax and Inspection Costs related = $10,286.25 amendable with discovery. THIS Specification was the missing top half of preemptive “DEED” Clause’s “Paragraph” that protected “NOTE” omitted by Judge on Judgment rendered, the forward substance of Core Adversary Justice sought, Judgment quoted “NOTE” from the “and therefore” down, only’, Plagiarized by edit, delete, plus’ 10% Interest Bankruptcy Trustee charged, plus’ forced Bankruptcy’ damages, doubled with foreclosure.

    Washington Mutual argues substantiation of Credit Repository, inaccuracies, required. Loan manager testified Homeside Lending used {INNUS} Credit Repository. The three major Credit Repositories report’s’ itemize only twelve most recent month’s’ detailing generalization “no derogatory.” Home loan was hobbled with lender accountability derogatory of December, 2001 phantomlike void of accreditation {pencil shading} matching posted loan history’s and Escrow summaries, accessing itemization of December, 2001 requires release by Homeside Lending {INNUS} Washington Mutual, but Escrow reduction’s only challenge is real-time statement date predates loan history’s recorded date, to alone’ allow Washington Mutual connotation that November, 2001 Escrow reduction’ anticipated December, 2001 payment need, only forwarding their nonsensical slimmer of convince-ability’s baffling relevance,
    Washington Mutual states’ dispute the “No Derogatory” for solution, Assumption’s November 5, 2001 Escrow reduction first credited November, 2001 {assuming and/or December, 2001} then payment discovered, defaulting payment to December, 2001, but December, 2001 was also’ proved paid by check photocopy, then before December, 2001 the $637.22 vanished, Tax payment created Escrow in shortage, at some point the $637.22 was reported I.R.S. 1098 Taxed, $336.00 Escrow returned. Detailed Escrow summery report was demanded, requested, received early January, 2002 and again requested, received April 15, 2002, intentionally all reported December, 2001 “pencil shaded = void”, without accreditation including monthly loan account histories and Final loan summery began Homeside Lending loan history November, 29, 2001 intentionally coveting first 28, November 2001 Day’s following loan transfer, explaining creation of $103.00 Escrow Shortage demand, Credit Repository Report’s void, blocked outside refinance forcing involuntary’ Bankruptcy protection.

    Brief timeline; Closed March, 2001 “Principal Curtailment” theft, loan transfer, “Escrow misapplication, check payment investigation, Escrow misapplication vanishes becoming Escrow Curtailment” theft, December, 2001 unaccredited, Escrow Curtailment Re-Taxed, Escrow Surplus return, requested Escrow Summery received, twelve $103.00 Escrow shortage’s demanded starting April, 2002, April, 2002 first untimely payment {check ISF}, Again requested Escrow summery received, May, 2002 $2,000.00 payment, Prioritized Credit Card balance pay-offs, refinance blocked, Bankrupt, loan history denied, Judge orders Proof of Claim loan history resolve, Staying Bankruptcy Conformation 60 Day’s, Attorney Quits all Houston case-load, New Attorneys R.E.S.P.A. ignored, My R.E.S.P.A. ignored, Comptroller of Currency assistance, Bankruptcy Stay released, Better Business Bureau expels Washington Mutual, paid Trustee to end Bankruptcy, Sued Washington Mutual/ Homeside Lending, Trial ended 100 Days later Judgment received, awarded $1,000.00 for ignored R.E.S.P.A. only’, Attorney received compensation Award, DEED specification Curtailment damages ignored equates Judge allowed Theft, erroneous Escrow reduction’ {is Escrow abuse, without damage award} Escrow reduction vaporized equates, Again Judge allowed Theft, {Congressional “RULE” 2005} timely appeal ruled by Bankruptcy Judge late factually overruling 2005 Congressional mandate, forcing Excusable Neglect court arguing, Second Appeal shouldered {docketed} awaiting Enron Judge, Main Enron Trial’ conclusion, Houston Courthouse Supervising Judge expected to expose Houston Courthouse Judges impropriety’ of ignoring congressional “RULE” 2005 overshadowed Excusable Neglect case merit’s, then Appealed Fifth Circuit to over-rule Enron notoriety Judge’s decision! “Wall Street” protectionism, Appeal’s denied up-to desired U.S. Supreme Court when Appellate Attorney let time expire’ before sending case to printer, never once compiling Core Adversary Merits to Brief, Washington Mutual uses Bankruptcy Trustee to return $7,515.98 without Arbitration, Explanation or Accountability then Forecloses.

    Specific detailing advanced from above; Bank One N.A. “Principal Curtailment” breach of “DEED” term commitment’ signed prepayment authorization Clause “NOTE” protection, Contractually specifies, instead of damage arbitration, all loan originator received funds and earnest funds returned, supporting “DEED” Lender Signed “NOTE” paperwork’, exempting Insurance, Tax and Inspection Costs relative $12,291.54 minus $1,289.85 transferred, best accountability updateable, if arbitrated Attorney advice required! Minus $1,168.26 County Tax, minus $239.00 PMI, minus $308.00 Hazard Insurance, Judgment omitted these specifics, {quoting from middle Paragraph} starting from the “and therefore” altering composers contractual protection intent = $10,286.25 plus’ 10% Interest, plus Escrow reduction that vanished damage’s, plus’ forced Bankruptcy damage’s, plus foreclosure damages, plus homestead return

    Damage was extraordinary and $1,000.00 each Day’s justifiable, even circumstantially shortsighted, once examining premeditatedly misapplication advancements, considering theft admittance was precursor of courtroom fallacious court argumentum, understanding asset division shoulders certain limitations, additional fund sources hold promise that may of may not factor into Washington Mutual asset treasury revaluation, comparatively paling damage’s accounted, first’ help is needed “nonetheless” quest’s, exposing derivative, assumption’s, researchable, learn-ability, prior to April, 2009.

    Damages Sought in Three Day, Core Adversary Trial, and demanded today!
    In accordance with original “forced Bankruptcy damage’s” sought, as a simplification’ Day-rate damages equate, relating arbitrate-able self-judgment $1,000.00 each Day’ was recorded at Core Adversary Trial
    Actual damage’s forwarded without accounting all accrued damage’s or restitution
    Damage’s 2,744 Day’s and 2,744 Day’s Interest require, amendments accordingly, Day-rate’s simplify
    From September, 2001 or from November 5, 2001 to March 31, 2009 all assessed = 2,744 Day’s
    Mindful Trustee charged 10% Interest resulting, so 10% results
    Foreclosure was Homestead Theft doubling overall damage’s if not restored

    Bank One Principal Curtailment, Deed damage’s of $10,277.25 X 10% Interest X 2,744 Day-rate.
    Homeside Lending Escrow reduction $637.22 minus $336.00 Escrow returned = $301.22 X 10% Interest X 2,744 Day-rate, plus forced Bankruptcy damage’s X 10% X 2,744 Day-rate
    Combined = Curtailment damage’s $10,578.47 X 10% Interest X 2,744 Day-rate and 2,744 Day’s X 10% Interest on Curtailment Damage plus forced Bankruptcy damage’s X 10% Interest for 2,744 Days

    Then minus Washington Mutual’s December, 2007 return of $7,515.98 damage reduction that shortsightedly omitted $3,582.75 damage’s from included Theft’s, then Interest accrued and day-rate damage amount’s. Again’ Core Bankruptcy fund return is admitting faults burden of guilt, Both’ Mooting and Muting Judgment while Self accessing restitution that grossly underestimating damage rendered, ignoring all accrued Damage’s and accrued Interest

    Simplified eliminating arbitration and Attorney fee’s = 2,744 Day’s X $1,000.00 = $2,744,000.00 with homestead’s return or with Foreclosure damage doubled, But’ $5,488,000.00 accounts fighting Usury by using = $3,000,000.00 Claim or ironclad $3,500,000.00 defendable Claim.

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