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New York AG Eric Schneiderman says the lawsuit against JPMorgan over MBS is just the beginning...
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Tuesday, October 2, 2012, 3:36 PM ETNew York AG Eric Schneiderman says the lawsuit against JPMorgan over MBS is just the beginning of a wave of cases against a number of financial firms. Noting the case stems from actions at Bear Stearns long before it ever got involved, JPM no doubt plans to run the 4-corners drill until November, after which it can hopefully write a check to make the case go away.
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Maybe if Bernanke keeps pumping the money out to them, they can pay off the last group of victims before they start down the road to create more.
After all, these banks do have expertise, in the area of dropping all underwriting standards, throwing money at anyone who will sign on the dotted line, and then passing the resulting toxic assets off as high quality...with everybody doing what they do best, the economy will be humming in no time at all.
Class-action suits result in huge windfalls to the lucky firms handling the cases and "recoveries" for the "victims" that average less than the cost of the postage necessary to inform them they're victims.
We're stuck with, and I know you love Latin, let the buyer beware.
When does the Kahlid Sheik Mohammed trial begin?
In many cases the statutes have been tolled, in that various parties have already brought suit. The statutes of limitation in the SEC Act of 1934 are too short, the use of multiple levels of securitization and synthetic collateral made it hard for the injured parties to discover the problems. Seven years would be more appropriate.
There is no requirement of due diligence in the case of fraud, nor in the case of breach of contract. These big banks made warranties and representations, which required them to buy back the defective collateral, in the event of breach. They have steadfastly refused to honor their contractual obligations. BAC has been saying it's too late for years. They have this theory, if the mortgage was paid for 24 months, they're off the hook. This is a non-contractual idea they have introduced into the mix, and paid lawyers billions to try and make it stick.
We're not talking about class actions of the type that you're talking about. I get the mailings from time to time, some stock I owned years ago, it isn['t worth the time to dig out the records and fill out the paperwork.
We're talking about many billions of dollars owed to those who bought these fraudulently created monstrosities. Simply honoring their R&W obligations would suffice to make most of the injured parties whole. If this takes down JPM, or BAC, or Citigroup, it will be a cleansing of the systme, a genuine episode of creative destruction. From the ashes, an honest banking system will emerge, one that serves the needs of the real economy. The big banks as financial parasites will be ancient history.
As far as the crack about Latin, that is a personal attack, and not useful in a factual discussion.
Your last paragraph is incomprehensible and meaningless, so I can't comment on it.
"When does the Kahlid Sheik Mohammed trial begin?"
It was intended to convey in one sentence a paragraph's-worth of comprehensible information. To put it plainer: If the government can't try the mastermind of 9/11 in New York, site of the outrage, within 10 years, then people who rely on the Schneidermans and the Holders and the Spitzers of the world to exact justice are fools.
Hope that's comprehensible.
have your personally read any of the various bonds or CMO prospectuses?
I've read CDO prospectuses, as long as 300 pages, limits on the amount of synthetic collateral (CDS) that can be included, massive disclosure of an almost infinite variety of conflicts of interest. The worst of them were filed with the Irish regulatory authority. Sadly, they can no longer be located on line. Apparently a judgment was made, they were of no further interest to anyone.
Probably the best one was for a synthetic bond referencing the Kaupthig bank (in Iceland) about 2 weeks before it collapsed.
You really want something that will churn your stomach, look up some of the complaints filed by investors or bond insurance companies. As much as 80% of the collateral in many deals did not meet warranties and representations.
After reading your profile I assumed that you had read a lot of material.
I saw the GNMA fiasco of the 1970's and I never approved of mortgage instruments.
thanks
Well said!!
It just might be a good idea to let these banks get back to loaning money instead of fighting law suits. The small banks are being regulated out of business. The economy needs these banks.
If this was you or me, the fines would cripple our businesses. I wonder if that has ever been thought about at the mega corporate level: make the fines really sting....not just the $500 million that GS was assessed for their fraudulent CMO's or whatever they were, but a real fine like $20 billion that would discourage the firm from ever trying to break the law again, lest they completely annihilate the firm.
Or does 'politics' preclude such a meaningful outcome?
You hit the nail on the head. They need to have the legal power to prosecute these big white collar criminals via RICO laws. Which essentially would give them the power to take all assets and all ill-gotten gains from both the corporations as well as the senior executives who managed the crimes. Until they make the penalties so severe, it literally does pay to steal trillions and only pay billions in fines or settlements.
As for the suit; I agree with those thinking its "all just too convenient", & has nothing to do with truth, fairness, righting wrongs, & all those other warm fuzzy things!
That people cheer on this kind of never-ending populist, political grandstanding and outright public money-grubbing is a testament to how fast and how far we are moving toward complete dominance by Big Government.
its a cesspool of the following. socialism, fascism, and /or mercantilsm. set all 3 on stun, and there you have it.. ....
call it what you want BUT STOP CALLING IT CAPITALISM, for god sakes.......it is NOT....
But most people believe that we live in a capitalistic system and that the capitalistic system IS the problem. Your point should be made on big billboards in every major city and in every campaign advertisement. Well said.
As long as you consider the system is the problem, I wanted to mention that if the capitalistic system would be fully implemented
most all our economic problems go away.
Medicaid, welfare and government workers pensions would go away. Most of the cabinet departments would go away.
social security and Medicare would be reduced to a reasonable payout based on what was paid in without regard for minimums.
My point of view is the socialism component that was built into the Capitalism system has started to corrupt that system.
When 1 in 3 has no skin in the game, reasonable adjustments must be made
Remember as they say be careful what you wish for
Unfortunately, today thanks to Obama, it is nearly 1 in 2 that has no skin in the game.
The second fact is that they are going to be disappointed at some time regardless of what happens. Either is happens now and we save the system, or it happens later when we run out of money and then the system is so broke that we'll see decades of poverty and loss of freedom (that will be given up for political promises of improvement.) That is exactly how socialism/dictatorism works to rest control/power from the people to benefit the political elite.
fixed it for ya...glad to help out...:)
It's good to see political comments trump economic logic
capitalism is the UNFORCED!!!!! exchange of goods/wealth,and or services between 2 parties. FULL STOP,
Did you miss the part in high school where they explained the defintions of various economical models.
your definition fails
capitalism is the UNFORCED!!!!! exchange of goods/wealth,and or services between 2 parties. FULL STOP
Where does government come in
upps I guess you forgot that part
people cheating and lying ,nor hedge funds come under the capitalist system. your making a political statement not an economic one.
Well said & concise! You are spot-on!
Madoff theft falls in the same category & has been against "regulations" since, oh I don't know, the beginning of time! But many of these folks slamming capitalism are the same ones calling for more regulations, mind-you not replacement regulations, just more! As though added regulations is the absolute answer to the perversion of capitalism. There was a time when we learned from Japanese industry that it made sense to comprehend the root-cause of a problem before you try to fix it. Just a quaint notion for the pols of today or the financial markets leaders, although the hatred of the latter doesn't provide for much say on the subject.
anywhere you want.
How about giving us your basic understanding of Capitalism without any political overtones.
by the way if that "something " has been obtained by lying, fraud or other illegal means its not capitalism.
The enlightened version features regulation restricting monopoly, manipulation, fraud and abuse. We developed a system of that kind here in the US, after the Market Crash and Depression, in an effort to avoid a repetition. Unfortunately, laissez faire ideology prevailed and regulation was reduced to the point where we experienced a very close call on repeating the Depresson scenario. It is not completely clear that we have escaped. The harm done by the failure of regulation will not be easily repaired, particularly when Dodd-Frank is not restoring regulation of the type needed to avoid a repeat.
What we have now in this country is more accurately described as Jungle-Ethics Financialism. It is not free market capitalism.
if you listen to the politicians Dodd-Frank would reign in the large banks now many are finding the unintended consequences. The middle market will in many areas needs to merge to survive. Only the big banks can pay for regulation.
on the personnal side my experiences the regulators are not up to the job.
I did see many good bank examiners but in general we do not get what we pay for
Regulation needs to focus on the critical area of credit risk transfer, which is the source of the problems. By abusing securitizaton and CDS, the banks thought they had transferred all of the credit risk created by their lending practices to innocent investors elsewhere in the financial system.
In reality the representations and warranties applied to a lot of what was sold into securitization, and the banks didn't actually transfer the risk. Naked CDS should never have been permitted at all.
I think if regulations just prescribed some airtight language and streamlined court processes for R&W, the risk of bad underwriting would remain with the banks, where it belongs. CDS are insurance, and should be regulated as such, with a requirement of insurable interest for the buyer and adequate capital for the seller, as well as a loss definition that doesn't transfer market or liquidity risk.
The above doesn't require a lot of examiners permanently located at the client bank. An conscientious clerical type could review a random sample of mortgages, about 120 of them, looking for 98% compliance with underwriting standards. It might take a week, thoroughly done. There is more to it, but that would take care of what caused the problems.
It seems to me that all too often, even on this investing oriented web site, there are those ready to throw out the capitalism baby with the bath water.
using one of your statements
sunlight is running amok during the day
how would you describe a solar flare.
we all try to communicate correctly but when one group
does not have the vocabulary knowledge they tend to run amok.
Tom, your last sentence is correct. say no more....
My second to last sentence is more important. I did an article, about 4 years ago now, on the difference between free-market capitalism and jungle-ethics financialism. Here' a link:
http://bit.ly/KaJGUI
Simplistic views of capitalism, such as those espoused by Ayn Rand and her acolyte Alan Greenspan, create massive turmoil and hardship if put into practice, as Greenspan did. Free markets are not self-regulating. It doesn't work that way.
Suggest you read "The Malign Hand of the Markets" by John Staddon. It's a good antidote to the current version of invisible hand ideology.
the quasi-crony/mercantili... system that existed before the great deprssion has very little to do with 'capitalism' .
neo-crony-cryptofacsis... bla bla...quit , just quit calling basic criminal , market rigging , frauds, capitalism....it is not...
Those activities are prevented by regulations
If you truly believe the above I have some research for you.
1]madoff case (govt advised multiple times and years before he was caught)
2] the new york gun law that at the time mandated a year in jail for carrying an illegal gun(they stopped because the black community was in chaos as 90%of the fellons were minorities)
You are right take general motors they made terrible cars and terrible decisions. If we were truly Capitalist no government intervention would have happen and in the long run we would be better off. I understand many would have lost jobs to start but many would be rehired by the remaining car companies. I know many don't want to hear it but how many people in financial services lost their job since 2008.
read what you just said, slowly.......
Think of it this way if a person convicted of murder was never allowed out the murder rate would be cut as there would be no recidivism. If that also applied to rapist a 1/3 decline would happen again because of recidivism.
You are aware that the leading foreign plate auto companies are larger than gm and Chrysler in production here in the USA.
Lets see your statement
Bear Stearns, Lehman etc. didn't suffer from government intervention.
This article is about JPM be sued as a result of the government pushing Bear Stearns on them.
Lets see your statement
They didn't go bust selling something, they went broke with their own products stuffed in their own hedge funds.
You need to see who is the end looser for each product.
the hedge fund loosers were not the stockholders but the stockholders lost because no one would work after the terrible decisions that were made. the investment banks management believed their own BS being over leveraged. you worked for drexel burnham and you might have seen the junk bond mess but do you remember the gnma operational nightmares 7 years before.
investment banks have been living on the edge for decades and they never learn. And take the SEC,OCC,CFTC and many state regulators they never follow their own rules.
Good post, well stated & informed. I won't even try to add to it.
As for the discussion regarding the U.S. auto business....a lifetime of business in the midwest I have many friends & contacts in, or associated with the auto business. So here's how we thought it would come down; a bankruptcy reorganization for GM & Chrysler, stockholders wiped out, management, & UAW certainly changed. Leaner & meaner, some impact to suppliers, but the smart ones here had already diversified, JCI & BWA are good large-cap examples here. The companies would have continued to operate. As you know that is not what happened! The Obama administration in order to leave the UAW intact bastardized the bankruptcy process, necessitating a government role in the company, & wiping out senior debt holders many of them state government pension funds.
It is also an urban myth that there was no private or corporate equity interested in the assets. But, no one was interested if they could not have a free hand downsizing & running the company.
I suggest Chrysler may have turned a corner but, GM is kicking the problem can(s) down the road.
no where in that entire scenario can capitalism be implicated.
thats all i'm saying.
I worked bank and brokerage most of my life, saw so many stupid things like the GNMA operations disaster of 1973.
I started with chase part time in 1963 while in high school,
worked until drafted out in Dec1968. returned in Jan 1971
with WE Hutton & co. When WEH was being merged I was with the Suez Group(credit agricole today) until 1995.over those years I acquired several licenses including insurance and options principal.
I went to ANZ as risk manager (middle office) until the y2k project was completed in 1999. I was diagnosed with malignant cancer. After 9/11, I worked for the US Treasury until my retirement in 2008. I do pro bono work helping people understand risk and trading styles. I also trade for friends and family. At the moment I have a little over 32m that I review & manage
I HAD LARGE CELL B NON HODGKNIS LYMPHOMA, I'VE BEEN WITH MY COLLEGE SWEATHEART FOR 45 YEARS ON 10/28.
GOOD HEALTH AND GOOD FORTUNE.