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 A Ray of Hope ?

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PostSubject: A Ray of Hope ?   Fri May 20, 2011 11:19 am

The last New York Attorney General who tried got driven out of office over a tryst with a call girl. Yeah, Americans are that naive. Style over substance every time. Based on past experience, this will probably be a replay of that. But, what the heck -- hope is in short supply these days, and we need all we can get of it.
Matt Taibbi wrote:
A new investigation of the banks is apparently being launched by New York State Attorney General Eric Schneiderman, which looks like it might be the first for-real attempt at a prosecution of the systemic corruption that led to the financial crisis.

Schneiderman’s probe reportedly targets the banks’ mortgage securitization process during the bubble years. Morgenson reported that Schneiderman is focused on at least three companies: Morgan Stanley, Bank of America, and old friend Goldman, Sachs.

This investigation has the potential to be a Mother of All Nightmares situation for the banks for a couple of reasons. For one thing, the decision to go after the securitization process is a total prosecutorial bullseye. This is the ugly heart of the wide-scale fraud scheme of the bubble era. Again, the business model during this time was a giant bait-and-switch scam. Sleazy lenders like Countrywide and New Century first created huge masses of bad loans, committing every conceivable kind of fraud to get people into loans (from doctoring income statements with white-out to phonying FICO scores to engineering fake appraisals). They then moved the bad loans quickly to the big banks, which pooled them and chopped them up (this is the “securitization” process), sprinkled hocus-pocus math on them, and them sold them to suckers around the world as AAA-rated securities.

The desire to get some kind of deal done and sweep the mortgage mess under the rug once and for all seems almost universal among high-ranking politicians, and particularly in the Obama administration, which has acted throughout like it wants more than anything to simply get all of this over with and put in the past.

The reason this is such a potentially deadly investigation for the banks is that they seemed to be so close to getting away scot free. There is another investigation into the banks’ mortgage abuses by the states’ Attorneys General, led by Iowa AG Tom Miller, that was rumored to be headed toward a settlement, despite the fact that nothing like a complete investigation has been done. The expectation for some time has been that the banks would eventually have to pay a significant, but eminently survivable, settlement for abuses during the bubble era. Although the Miller probe was focused on practices like robo-signing and other such documentation abuses, it could theoretically have covered securitization as well.

Schneiderman’s investigation throws a monkey wrench into all of this. The banks cannot enter into a settlement with 49 states. They need all 50 at the table. But if Schneiderman breaks ranks and goes off on an end-run investigation that plunges right into the rotten core of the fraud era, then the whole pipe dream of an easy settlement vanishes in an instant. This is particularly true since Schneiderman is the most important AG, being from the state of New York, where most of the crime was probably committed.

The amount of money investors lost in this fraud scheme is probably gigantic. The ill-gotten money the banks made off that same fraud is probably similarly huge. And the damage to society, in the form of mass foreclosures and other losses, is incalculable. If the banks end up being found liable for all of these offenses, they could face truly crippling fines and penalties. This goes far beyond the question of whether one bank like Goldman defrauded a client or two or lied to investigators. This probe could be asking whether the banks’ entire revenue model during the crisis years was based on fraud.

More at

What a Face

Last edited by Yak on Fri May 20, 2011 10:02 pm; edited 1 time in total (Reason for editing : copying/pasting ineptitude)
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Age : 68
Location : Southern Appalachia
Registration date : 2011-01-17

PostSubject: Re: A Ray of Hope ?   Fri May 20, 2011 9:20 pm

See below T.J. quote. Evil or Very Mad
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