Nightmare on Wall Street - HuffPo [View All]

[WillyT]

Nightmare on Wall Street
L. Randall Wray - Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City
Posted: January 12, 2011 10:30 AM

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In a ruling that could be historic, the Supreme Judicial Court of Massachusetts ruled against two fraudster banks, US Bancorp and Wells Fargo, who illegally foreclosed on homes. In short, the two banks stole homes to which they had no legal claim.

This rattled stock markets, causing the broad-based KBW Bank Index to fall by 2.2%, with Wells Fargo's stock prices falling by 3.4% as markets began to recognize that "business as usual" theft of American homes by banksters will be subject to greater scrutiny. Tellingly, the banks have been arguing that they are following industry practice. The ruling in Massachusetts (one of the most respected Supreme Courts in the US) affirms that industry practice is fraudulent. Perhaps as many as 66 million mortgages (those tainted by improper industry recording procedures) could be affected by the ruling.

As I have been arguing in a series of pieces (see here and here and here), in their haste to commit lender fraud, the banks that securitized mortgages also perpetrated tax fraud and securities fraud. The inevitable outcome of those frauds is foreclosure fraud. As Lynn Szymoniak and Ray Brown have written, 2010 became the year in which "'foreclosure fraud' emerged in case law' -- defined as 'fraud by mortgage companies, mortgage servicing companies, and banks servicing as trustees for securitized trusts." Foreclosure fraud is not a matter of some pesky little paperwork problems. It is the designated solution to paper-over the lending and securities and tax frauds that the banksters used to bubble-up and then collapse the US real estate sector. To put it simply, the Court found that the practices followed by the industry have made legal foreclosure impossible.

All of this, in turn, was happily consistent with the Bush "Ownership Society" plan to transfer all wealth to the top few tenths of one percent of the wealthiest Americans. The banksters would simultaneously burden homeowners with so much debt that they'd lose their homes, and would sell to investors fraudulent toxic waste securities while using credit default swaps to bet on failure. Bush's ownership class would end up as the creditors who got all the homes, who got all the financial wealth sucked out of pension funds and other managed funds, and with their gambling winnings from the inevitable defaults.

But in their haste to steal property, the Wall Street banksters ran up against US property law. They thought the judges would turn a blind eye to blatant theft. Unfortunately, courts across the country have awakened and are beginning to rule against them. As I have said, the banks are toast -- as anyone still holding bank stocks will discover in coming months. Losses will easily wipe out all equity at the biggest banks, several times over. Further, the vulture predators now buying up foreclosed properties will find that the titles are not clear. It will take at least a decade to sort out the mess created by Wall Street's securitization of home mortgages and to restore property rights law.

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More: http://www.huffingtonpost.com/l-randall-wray/post_1564_b_807877.html?view=print

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