STUPENDOUS

Why is the Media Ignoring the Obvious?  Posted on June 3, 2013 by Neil Garfield 

My consistency should be lauded instead of ignored. I represent one of the few people left who were on Wall Street in the late 1960′s and early 1970′s and who used layered bundling of derivative securities in the 1980′s to finance investments in commercial and residential real estate. Back when I started on Wall Street in my early 20′s I fell right in with those who set the tone and culture of Wall Street that frankly has not changed since the dawn of securitization (the breaking up of an investment into smaller shares so that more people with more money could provide capital to capitalist enterprises). We are talking about 2,000 years of human history where the Romans invented the idea of condominiums and cooperatives, the prejudices against Jews forced them into the jewelry and lending business because they were not allowed to do anything else, and the first appearance of pieces of paper used interchangeably with the actual exchange of goods and services.

When I was on Wall Street, the last thing on our minds was the quality or risk of any deal. We were there to make money move and that is what produced revenue. Eventually in economic history. it was discovered that once you could convince people to leave their gold, or securities with you, there were open ended moral hazards that were made legal by control of the purse strings by Medici, Rothschild, Warburg, Morgan and dozens of others. They did it quite simply through blackmail, bribery and intimidation. Nothing has changed. The result is always the same — the money moves up to the people who already have it while the rest of the population is enslaved. And about every five years, as Mayer has always said, bankers tend to step on a rake — only this time they are getting away with it, which is a first. They never even bothered  to throw a scape-goat under the bus because they didn’t need to — they were immune.

So we have bankers moving with impunity in our society making your money THEIR money by tricks of the trade. Case in point: student loans, where banks were allowed to insert themselves into a system that was already working, rake in enormous profits and leave students’ future mortgaged beyond any hope of repayment. Same as with mortgages. Any economist or businessman will tell you the same thing: without educated, trained workers, developing and evolving in a society, the work and the opportunities are going to shift geographically to where the workers are educated, trained and able to handle the jobs. We currently have 3 million jobs that are unfilled because we have seen education as an expense rather than an investment.

It is like not saving for retirement and then being surprised, when you can’t work anymore (because of physical limitations or because you don’t know a damn thing about how business is conducted by the younger generations) and suddenly you are shocked to discover you are broke and depending upon social security and the largesse of family who are only recreating the same cycle you started and your father started in the first place.

And of course, the student loans won’t be repaid anymore than the mortgage loans are getting repaid. That is because the loans were stupid, they included marketing and sales commissions for people to encourage young, inexperienced people to take out loans for more than they needed with little or no hope of ever repaying the loans. Since they were guaranteed by the government, thanks to the banking lobby, and since they couldn’t be discharged in bankruptcy (mostly) thanks to the banking lobby and since in the last 15 years the loans were securitized removing the last vestiges of risk, the increasing interest rate (set to double soon if congress doesn’t act) and onerous terms of repayment are going to force graduate to seek out anything that provides immediate income instead of find their unique fit and contribution into society and developing new ideas and innovating because of their newly acquired knowledge,  skills and creativity.

Now we have banks reporting profits that are stupendous. I use that word because it is plain stupid. Banks are supposed to make money by lending at a higher rate than their cost of capital. But now they are lending the money of investors with no cost and stealing around 25%-30% of the investor money right off the top (tier 2 yield spread premium). Is it legal? NO! But our attorney general chooses to see it another way or to look away entirely.

The “free” press has slashed budgets for investigative reporters, and is simply parroting what government, Wall Street and big business are telling them to say. So when I am interviewed, my answers are and have been the same since the  1980′s when I was a talk show host on South Florida radio — people, consumers of information from the Press, and citizens who elect public officials must insist on something different. The pronounced apathy of the American voter is equivalent to the boss taking a ten year holiday — what did you think was going to happen in your absence?

Here are some issues I always bring up and those of you who get to speak to other people, the media or government should keep these in mind:

Why are you not investigating the representations on bank balance sheets in view of the fact that they are losing in Foreclosures suits — whenever they are required to show proof of payment and proof of loss?

How can banks be making money when they loan less money? How could banks own mortgage bonds when we know they were only created when they had investors committed and then sold forward without actual loans backing them?

How can the mortgage bonds be “mortgage-backed” when the entity that issued them never received any funding and never received the loan receivables? Why can banks claim the loss when the loss belongs to investors?

Why didn’t the banks instruct the closing agents to name the asset pools as the lender, the payee, the secured party on new or acquired mortgages?

Why are you not asking your own legal department how a mortgage can be perfected lien when the named “lender” never funded the loan and never funded the acquisition of the loan?
How hard is to see that the trail of real transactions (where real money exchanged hands) doesn’t match up with the paperwork given to borrowers and violates the terms of the paperwork given to lenders)?

I could go on with a hundred more questions, as you readily see from my blog www.livinglies.wordpress.com. Believe me, I know what these bankers did. The roots of this crisis were planted in the 1960′s and 1970′s. I was there working on Wall Street as an investment banker and a principal in a small brokerage firm.

I helped create what people now call derivatives and I was there when the bond traders and creative minds figured out how to create junk bonds, replacing the search for undervalued bonds.

I was there when the first flicker was conceived of masquerading junk bonds as investment grade if they were backed by mortgage loans. And I was there when they realized that they could be sure of the failure of mortgage loans and make a fortune betting on it without ever putting up a dime. The trick on Wall Street has always been to take the profits and allocate losses to investors. Why is this so difficult for the media when the facts are all in the public domain?