Loading ...Is not Weimar the classic definition of inflation? And what happened to assets then? Farmers had more pianos than they could play with both hands, feet and with their children helping. The classic case - an entire hotel bought by a bell boy who was given a piece of gold.
THE SUBPRIME TRUMP CARD:
STANDING UP TO THE BANKS
Ellen Brown, June 25, 2008
www.webofdebt.com/articles
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
– Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)
Jefferson had it right. More than 1.5 million homeowners are expected to enter foreclosure this year, and about half of them are expected to have their homes repossessed. If the dire consequences Jefferson warned of 200 years ago have been slow in coming, it is because they have been concealed by what Jerome a Paris calls the Anglo Disease – “the highly unequal economy whereby the rich and the financial sector . . . capture most of the income but hide it by providing cheap debt to the middle classes so that they can continue to spend.” He calls “finance” the “cannibalistic” sector in today’s economy. Writing in The European Tribune this month, he states:
“[O]ne of the more attractive features of the financial world, for its promoters, is its ability to concentrate huge fortunes in a small number of hands, and promote this as a good thing (these people are said to be creating wealth, rather than capturing it). . . . [O]f course, the reality is that such wealth concentration is created by squeezing the rest, as is obvious in the stagnation of incomes for most in the middle and lower rungs of society. This is not so much wealth creation as wealth redistribution, from the many to the few. But what has made this unequality . . . tolerable is that the financial world itself was able to provide a convenient smokescreen, in the form of cheap debt, provided in abundance to all. The wealthy used it to grab real assets in funny money, and the rest were kindly allowed to keep on spending by tapping their future income rather than their insufficient current one; in a nutshell, the debt bubble hid the class warfare waged by the rich against everybody else . . . .”1
Now the debt bubble is bursting, with the anticipated real estate crash, banking crisis, foreclosures, and inevitable recession. “The income capture mechanisms set up during the bubble have not been reversed, so the pain is falling disproportionately on the poorest,” writes Jerome a Paris. Meanwhile, finance is being bailed out. What’s to be done? “[T]he financiers . . . will say that more ‘reform’ and ‘deregulation’ and tax cuts are needed,” he says, but “maybe it’s time to stop listening to what is highly self-interested drivel, and take back what they grabbed: it’s not theirs.”
Good idea, but how? The financiers own the media, and their massively funded lobbies control Congress. How can we the people get enough clout to take on the giant financial and corporate giants? What can we do that will make politicians sit up and take notice?
How about swarming the courts? New case law indicates that a majority of the 750,000 homeowners expected to lose their homes this year could have a valid defense to foreclosure. As much as $2 trillion in real estate may be vulnerable to this defense, providing a very big stick for a lobby of motivated debtors. Mobilizing that group, in turn, could light a fire under the investors in mortgage-backed securities — the pension funds, money market funds and insurance companies holding these “orphan” mortgages. These investors also wield a very big stick, in the form of major law firms on retainer. When the embattled banks demand a bailout because they are “too big to fail,” the taxpayers can respond, “You have already failed. It is time to try something new.”
The Legal Trump Card: Make Them Produce the Note
A basic principle of contract law is that a plaintiff suing on a written contract must produce the signed contract proving he is entitled to relief. If there is no signed mortgage note or recorded assignment, foreclosure is barred. The defendant must normally raise this defense, and most defaulting homeowners, unaware of legal procedure and concerned about the expense of hiring an attorney, just let their homes go uncontested. But when the plaintiffs bringing subprime foreclosure actions have been challenged, in most cases they haven’t been able to produce the notes.
Why not? It appears to be more than just sloppy paperwork. The banks that originally entered into these risky subprime arrangements generally did so because they had no intention of holding the loans on their books. The mortgages were immediately sliced and diced, bundled up as mortgage-backed securities (MBS), and sold off to investors. Loan originators sold the mortgages to financial institutions or other banks, which then sold the rights to the monthly mortgage payment income to investors, while transferring the responsibility to collect these payments to specialized mortgage servicing companies. The result has been to slice up the mortgage contract, with no party really having ownership of the original paperwork. When foreclosure has been initiated, the servicer or trustee acting as plaintiff now has trouble proving that it originated the mortgage or owned the loan. In order for a second bank or financial institution to have standing to bring a foreclosure lawsuit in court, it must have been assigned the mortgage; and with the collapse of the housing market, many of the subprime lenders have gone out of business, making it impossible to contact the originating mortgage company. Other paperwork has just been lost in the shuffle.2
Why weren’t the mortgage notes assigned to the MBS holders when they were first sold? Apparently because the investors aren’t even matched up with specific properties until after default. Here is how the MBS scheme works: when the mortgages are first bundled by the banks, all of the subprime mortgages go into the same pool. The bundled mortgages are chopped into “securities” that are sold to many investors — banks, hedge funds, money market funds, pension funds — with different “tranches” or levels of risk. The first mortgages to default are then assigned to the high-risk “BBB-” tranche of investors. As defaults increase, later defaulting mortgages are assigned down the chain of risk to the supposedly more secure tranches.3 That means the investors get the mortgages only after the defendants breached the agreement to pay.
It also means the investors weren’t a party to the agreement when it was breached, making it hard to prove they were injured by the breach.
The investors have another problem: the delay in assigning particular mortgages to particular investors means there was no “true sale” of the security (the home) at the time of securitization. A true sale of the collateral is a legal requirement for forming a valid security (a secured interest in the property as opposed to simply a debt obligation backed by collateral). As a result, the investors may have trouble proving they have any interest in the property, secured or unsecured.4
The Dog-Ate-My-Note Defense
When the securitizing banks acting as trustees for the investors are unable to present written proof of ownership at a time that would entitle them to foreclose, they typically file what’s called a lost-note affidavit. April Charney is a Florida legal aid attorney well versed in these issues, having gotten foreclosure proceedings dismissed or postponed for 300 clients in the past year. In a February 2008 Bloomberg article, she was quoted as saying that about 80 percent of these cases involved lost-note affidavits. “Lost-note affidavits are pattern and practice in the industry,” she said. “They are not exceptions. They are the rule.”3
In the past, judges have let these foreclosures proceed; but in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess.4 That started the ball rolling, and by February 2008, judges in at least five states had followed suit. In Los Angeles in January, U.S. Bankruptcy Judge Samuel L. Bufford issued a notice warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies. In Ohio, where foreclosures were up by a reported 88 percent in 2007, Attorney General Marc Dann was reported to be challenging ownership of mortgage notes in forty foreclosure cases.5
Few defendants, however, are lucky enough to have advocates like Charney and Dann in their corner, and most defaulting debtors just let their homes go. A simple challenge can be filed to the complaint even without an attorney, and some subprime borrowers have successfully defended their own foreclosure actions; but retaining an attorney is strongly recommended. People representing themselves are often not taken seriously, and they are likely to miss local rule requirements. With that warning, here is some general information on challenging standing to foreclose:
Some states are judicial foreclosure states and some are non-judicial foreclosure states. In a judicial foreclosure state (meaning the matter is heard before a judge), if a promissory note or recorded assignment naming the plaintiff is not attached to the complaint, the defendant can file a response stating the plaintiff has failed to state a claim. This can be followed with a motion called a demurrer to the complaint. Different forms of demurrers can be found in legal form books in most law libraries. In essence the demurrer states that even if everything in the complaint were true, the complaint would lack substance because it fails to set out a copy of the note, and it should therefore be dismissed. Ordinarily there is no need to cite much in the way of statutes or case law other than the authority reciting the necessity of showing the note proving the plaintiff is entitled to relief.
In a non-judicial foreclosure state such as California, foreclosure is done by a trustee without a court hearing, so the procedure is a bit trickier; but standing to foreclose can still be challenged. If the homeowner has filed for bankruptcy, the proceedings are automatically stayed, requiring the lender to bring a motion for relief from stay before going forward. The debtor can then challenge the lender’s right to the security (the house) by demanding proof of a legal or equitable interest in it.6 A homeowner facing foreclosure can also get the matter before a court without filing for bankruptcy by filing a complaint and preliminary injunction staying the proceedings pending proof of standing to foreclose. A judge would then have to rule on the merits. A complaint for declaratory relief might also be brought against the trustee, seeking to have its rights declared invalid.7
An Equitable Settlement for Everyone
These defenses can help people who are about to lose their homes, but there is another class of victims in the sub-prime mortgage crisis: investors in MBS, including the pension funds and 401Ks on which many people depend for their retirement. If the trustees representing the investors cannot foreclose, the lucky debtors may be able to stay in their homes without paying. However, the hapless investors will be left holding the bag. If the investors manage to shift liability back to the banks, on the other hand, the banks could go down and take the economy with them. How can these tricky issues be resolved in a way that is equitable for all? That question will be addressed in a followup article. Stay tuned.
_____
I can recommend some good books for a start on our economic situation, hope this helps, I would at least start here.
For Derivatives: When Genius Failed
For general current conditions and possible outcomes: Bad Money by Kevin Phillips
And of course the list would not be complete without
In The Footsteps Of Giants Compilation, Editing and Commentary by Michael J. Kosares of USAGOLD
I apologize for my tardiness to your question.
hard rock
c’mon down. you may be impressed with the redneck lifestyle. if you visit me and winedoc, you can experience opposite ends of the lifestyle spectrum! ever done any noodling?
rno
Inflation is debasement of your currency/credit. When you bought your house there were fewer currency units/credit in circulation. Now Ben and Paulson increase the dollars/credit in circulation by 7-16% per year hence it takes lots more dollars to purchase a defined product (your house). This debasement doubles the dollars in circulation every 4-7 years, at current levels. Do you have to have currency/credit debasement prior to Deflation? Absolutely! When is the switch made from debasement to deflation? There are several points of view, my personal view is we have made the change. Can this be discussed without the insults? I would have hoped so. Another definition or as Jim Dines so aptly put.
“Dow is not “fueling inflation” which the dictionary defines as an increase in the money supply and credit, but society universally, albeit mistakenly, uses the word inflation to mean the same things as higher prices and TDL has never been able to stop this misconception”.
FGC I am not attempting to be insulting but I truly don’t know how to say it any clearer. Inflation is an increase in currency/credit. Which is reflected as a price increase of goods and services. Not the other way around.
hard rock
Disinflation -Downward movement of inflated prices to a more normal level.
Inflation -a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency .( As compared to other currencies, gold ,silver, ?? As compared to food and fuel items??)
Deflation - a fall in the general price level or a contraction of credit and available money. (Definately a fall in the available credit these days and ain’t nobody tossing any dollar bills at me and saying take that you *%*%^$$&$) (What things are falling? )
These definitions right? (They do come out of the dictionary)
Not trying to be cute or funny, there seems to be both happening at the present.
In the following article are some charts from credible sources.
snip:
‘As a matter of fact, if Washington really intended to stabilise the Dollar or, more ambitiously, to push it up against the other currencies, there would only be one way (5), in two parts: raising significantly the Fed’s interest rates, and lowering drastically the pace of money printing. But if the government decided to implement this type of policy, the US economy (both real and financial) stops dead a few weeks after : the real estate market falls to zero by lack of affordable credit and as a result of soaring interests on Adjustable Rate Mortgage loans, consumption becomes negative (i.e. shrinks back each month), corporate failures multiply exponentially, Wall Street collapses under the burden of innumerable debts and succumbs to the instantaneous implosion of the CDS market due to counterparties default…’
‘ (2) The Bank of International Settlements is beginning to worry about a risk of global Great Depression. Source: Banking Times, 06/09/2008′
===================
snip:
‘
The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.
In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.
According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.
The report points out that between March and May of this year, interbank lending continued to show signs of extreme stress and that this could be set to continue well into the future.’
from www.bankingtimes.co.uk/09062008-central-bank-body-warns-of-great-depression/
flooded new orleans property .. can be had for 10 cents on the dollar .. is tha deflation in the proper use of language .. or asset loss.
what .. thanks eq,, i have asked that question to many about their pocket book cost.. and you are one of the first to admit price increases..
a disconnect i would say.. yelling deflation in a crowded theater as the cost go up.
in reviewing the ment posts
please replace cpi in all posts with crb.. stage fright made me do it. cpi is distorted .. and ment was thinking of the commodity community as he mistyped ,,
crb.. is reflecting inflation ..
fiat purchasing power changes on both sides of the sea that separates us.
p.s. the ‘Tall Ships”, beautiful they are, are in Victoria this weekend. When they dont turn on their back-up petroleum-powered drive units, they enjoy an inflation-free ride over the waves thanks to the wind, and the wind is thanks to thermal gradients set up by inflation-free radiation from the sun and oceans that have been heated by the sun. What a wondeful world we live in, if we could just figure out how to leave the fiat system out of what the sun and the wind and the minerals and the soil offer us.
What a gift of the universe, and we have screwed it up with our systems which get us involved in whether our artificial creations are deflationary or inflationary. Who cares if it is deflationary or inflationary? Why dont we just work out how we can go with the wind, and the sun, and the soil and the mineral riches of the earth? Cheers. Equiz.
what do you call the price of an asset going down.. you call it the price of an asset going down ..
if it is a slum it can go down ,, by a lake go up..
if its overrun by termits down covered with clover up/
inflation is money supply going up .. cause by governments printing ,,
one hundered years in usa no inflation on the gold standard .. comes off as the fed takes over .. price inflation ,,printing with no set standard ..
the guy can call it any thing he wants ;; flubber, it sucks . deflation // rats..
but it is not deflation in the classic sense
oh no strictly my imagination .. the yield curve you know .. seattle doesn’t read sabres work ..
things are going up here .. i suspect all the money in seattle chasing fewer goods ..
even a fine loaf of bread cost 4.50 .. and the grapes organic 3.99 a pound
I have an understanding of both inflation and deflation.
What do you call it when the value of what you hold goes down. IE House, 401K, cars, boats,flat screen tv’s? Deflation Correct?
And inflation is cereal, milk, eggs, gas, etc. etc. Correct?
What aggrevates Mr. Average Joe American the most?
He’s loosing his butt on the house and the 401K.
Then he goes to the grocery store or the gas station , and sees that he’s paying a much higher price for his day to day things.
Is he not experiencing both? Deflation on investments (House, 410K) and inflation at the pump and greocery store?
And of course everything manufactured in CHINA is on sale, and a buy of a lifetime. (LOL)
Again, just wondering which is aggrevating the average American the most. Because both do seem to be occuring at the same time- inflation and deflation- all depends on what you look at.
Figure the dow is off it’s highs of 14,000 + That’s a big chunk of change that has disapeared - 20%. Got to be close to a gazzillion dollars (approximately)
…So if a 1 Trillion loss in the markets is Deflation…what was the 80 thru 00 period in the Stock market…where it rose from 1000 to 12000…was that not massive Inflation by your standards….?…and if it was How Come Gold and Commodities in general languished in that same period…
…assets …whether your Real Estate or your Stocks and Bonds….wain and ebb in values..but is that really Inflation and Deflation in the true meaning of the words?…when I think of Inflation ….I simply think of the Cost of Living…..not the value of my assets….
…true if my assets depreciate I will spend less and the Economy will set back…but if the price of oil is high and rising….I will be suffering twice…less money to pay higher prices…