California Real Estate Fraud Report

The Securities and Exchange Commission (SEC) has filed a civil complaint against Goldman Sachs alleging that the financial giant worked with one of its key clients to create collateralized debt obligations (CDOs) consisting of subprime mortgage-backed securities. Goldman Sachs then sold the CDOs to investors knowing that the client was betting heavily against the very same product.

The SEC’s complaint says that Goldman Sachs vice-president Fabrice Tourre, who was personally charged in the complaint, put the plan into operation in 2007, bragging in an email to a friend that he was “the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!” Fabrice Tourre has since been promoted to executive director of Goldman Sachs International in London. Mr. Tourre also has a profile on LinkedIn.

John Paulson, the hedge fund manager of Paulson & Co. was involved in choosing which securities would be part of the portfolio, according to the SEC’s complaint, but neither he nor Paulson & Co. have been charged with any crime. The SEC also alleged that Paulson took a short position against its ABACUS 2007-AC1 CDO in a bet that its value would fall spectacularly.  Here is Paulson & Co.’s response to the SEC’s civil complaint.

More than $1 billion was lost by ABN Amro and IKB Deutsche Industriebank AG, two of the European banks that bought these toxic securities. According to the report in Yahoo News, John Paulson’s hedge fund ended up with the profits from those two banks’ losses.

Informed readers know that Goldman Sachs, which earned a staggering $4.79 billion in 4th quarter 2009, was one of the top recipients of corporate welfare at the largesse of taxpayers through the generosity of the Bush and Obama administrations. Rolling Stone writer Matt Taibbi, in his 2009 expose of Goldman Sachs, refers to the firm as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

And derivatives expert and Huffington Post blogger Janet Tavakoli, who also is the founder of Tavakoli Structured Finance, accuses Goldman Sachs of “malicious mischief” and of creating “bad securities”. Further, “the SEC itself has shirked its responsibilities in these matters for years” she said, adding that the SEC’s “hands have been forced by public voices” rather than its regulatory mandate to protect investors.

Read more on Yahoo and MSN. You can also read the SEC’s complaint against Goldman Sachs here.

This article was also published in Examiner.com by Monique Bryher.

OneWest Bank FSB is once again going to profit from its friends at the FDIC, who yesterday shut down all ten branches of La Jolla Bank FSB.

La Jolla Bank began in 1985 and grew its business by investing heavily in land and development deals and apartment construction, precisely the hardest-hit sectors once the real estate boom tanked.

Although it was reported that OneWest will “manage the loans and share the losses”, readers can be relieved to know that they are the gift that keeps on giving, as the FDIC has generously showered taxpayers’ dollars on billionaire OneWest owners George Soros, Steven Mnuchin (of Dune Capital), Michael Dell (of Dell computers), J. Christopher Flowers and John Paulson.

The Los Angeles Times reported today that OneWest, which rose from the ashes of IndyMac, has managed to turn a profit of $1.6 billion, which was more than they invested a year ago. Amazing what hand-outs can do to the bottom line.

Read the full article in San Diego’s North County Times. To learn how IndyMac, oops, OneWest, became a powerhouse by absorbing toxic loans, read this article and the video link on the California Real Estate Fraud Report.

Here’s  a YouTube video by a couple of real estate professionals in Fairfield, California, whose business is called ThinkBigWorkSmall.

The Troubled Asset Relief Program, aka TARP, has been the biggest piece of corporate pork ever bestowed by both Republicans and Democrats, Congress and presidents alike, on the never-too-rich obscenely wealthy.

After watching this video, you will have an understanding of what the new math is and why the concept of loan modifications is a pure con perpetuated on the taxpayer by the cooperation of Wall Street and our elected leaders.

Click here to watch the Indymac / OneWest rip-off.

Now that the ferocious and inevitable finger-pointing has begun as to who is to blame for the $700 billion corporate welfare bail-out, it’s time for those with cool heads and common sense to review the simple laws of nature in business - who controls the purse strings - to see how predictable the mortgage crisis was.

Fact: as home prices kept rising and banks and other lenders had lent to everyone who was credit-worthy, the quest began to write loans to anybody with a verifiable pulse. Centuries of underwriting standards were thrown out in the race to write loans. Hence the birth of the NINJA loan: No Income No Jobs or Assets.

Fact: borrower stupidity (and investor greed) aside, it was and still is the lending institution that decides whether the loan should be written or not. These decisions directly led to, and are therefore responsible for, the massive real estate fraud, mortgage fraud, appraisal fraud and other real estate crime such as foreclosure fraud that occurred and are which now occurring in new forms to take advantage of both real estate market chaos and the lack of sufficient law enforcement capabilities to respond.

Fact: Former Fed Chairman Alan Greenspan lied when he stated that he had no idea that large-scale defaults and price re-setting to numbers roughly equivalent to the days leading up to the lending splurge. So did Secretary of the Treasury Henry Paulson of Goldman Sachs. They both knew this was a great opportunity to make a lot of money for their industry, they knew the inevitable fall-out, and they knew that Congress - which had eagerly accepted industry largess for their own campaign coffers - would ride to the rescue with the taxpayer skewered at the end of its lance.

Fact: Congress willingly put no conditions on the bail-out: not on golden parachutes, not on year-end bonuses - some amounting to $600,000 EACH to managers and executives in “failed” lending institutions receiving bail-out money, not on corporate pork. Both political parties are as guilty as Greenspan and the Fed, Paulson and his Treasury (it’s apparently not yours and mine) and the lenders, who have not let up a bit on rewarding themselves for a combination of incompetence and fraud. See the many articles below on WaMu / Washington Mutual in the California Real Estate Fraud Report.

Fact: did you - or Congress - ever ask how Henry Paulson came up with the $700 billion figure for the bail-out? As opposed to $600 billion or $800 billion? This is just the start - there will be more bail-out money demanded by continuing to manipulate public fear and the markets.

Fact: this further leap into enormous deficit spending by the federal government is inevitably leading to the bankruptcy and selling off of the United States. Treasury bills and bonds are being sold to foreign interests because America has not lived within its means and there are few American takers for those financial instruments. Bulk sales of banks’ REOs are also finding primarily foreign purchasers as investors’ confidence in the dollar’s value continues to erode. Don’t be surprised if the next “tsunami” is uncontrolled inflation.

This is the biggest con of the 21st century.

For an excellent write-up on the man-made mortgage crisis, read this article by real estate broker Madeline Zook.

WaMu apparently doesn’t need the taxpayers’  assistance to bail it out of its incompetent business practices. Alan Fishman, the CEO of Washington Mutual Inc. for only 17 days before the Seattle-based thrift failed, is entitled to $19.1 million in severance and bonus pay, which includes his $7.5 million signing bonus.

WaMu was seized by federal regulators and sold to JPMorgan Chase & Co. Sept. 25 following more than a year of takeover rumors.

According to a WaMu filing with the Securities and Exchange Commission, Fishman is not the only WaMu executive who will have a Merry Christmas. The WaMu executive with the biggest termination package is Stephen Rotella, president and COO. Rotella stands to walk away with a cash severance of $12.7 million if he is terminated or quits with “good reason.”  CFO Thomas Casey would receive a cash severance of $6.3 million if he is fired or quits with “good reason”.

Read the Full Article in the Pacific Business Journal.

Stressing that Wachovia did not fail, but that its buy-out by Joe Taxpayer and Citigroup was accomplished with “government assistance” (a new euphemism for corporate welfare), FDIC Chairman Sheila Bair announced the latest takeover.

Citigroup will acquire the bulk of Wachovia’s assets and liabilities while assuming senior and subordinated debt. Under the agreement, Citigroup will take the first $42 billion of losses on Wachovia’s $312 billion mortgage portfolio. The FDIC (middle- and working class taxpayers) will absorb losses beyond the first $42 billion (my emphasis). To compensate the FDIC for the risk, Citigroup will pay the agency $12 billion in preferred shares and warrants.

Read the Full Article in the Mortgage News Daily.

Galloping in after the gate was closed:  the Associated Press reports that the FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers and insurance giant AIG (American International Group, Inc.). According to FBI Director Robert Mueller, they and up to two dozen other large financial companies are also under investigation to determine whether any of them have misrepresented their assets.

Also under the FBI’s microscope are failed bank IndyMac Bancorp Inc. and Countrywide Financial Corp.

Read the Full Article published on Yahoo News

Finally, somebody with common sense is speaking and acting.

Rewarding executives for exceptional performance has been replaced with shoveling obscene amounts of cash into their bank accounts no matter how poorly their companies performed under their leadership. Angelo Mozilo of Countrywide Home Loans is a perfect example of someone who has been overly rewarded for greedy and inept management at the costs of thousands of homes and jobs.

News that former CEOs Daniel Mudd (Fannie Mae) and Richard Syron (Freddie Mac) would be receiving multi-millions of dollars for guiding the financial giants has been greeted with outrage by taxpayers.

On September 14, the conservator appointed to administer the affairs of Freddie and Fannie Mae press release summarizing the FHFA’s (Federal Housing and Finance Authority) decision that “‘golden parachute‘ payments contemplated under (the executive’s) contracts would not be paid. The Agency, serving as conservator, determined that under applicable statute and regulation, the Enterprises should not make such payments to these individuals and directed the Enterprises accordingly.”

Read the Full Article in Mortgage News Daily.

In a move that should surprise no one accustomed to hypocrisy by the Bush Administration, the Fed (that means you, the taxpayer) has stepped in to bailout Bear Stearns, one of Wall Street’s oldest investment banks. After finally admitting today that the economy is in trouble, President Bush, who has resisted bailing out homeowners under the guise that that would be “overreacting”, opened the taxpayers’ pockets via the Fed:

“It was strong action by the Fed and they did so because some financial institutions that borrowed money to buy securities in the housing industry must now repair their balance sheets before they can make further loans,” the president said.

Bear Stearns is the nation’s fifth-largest investment bank. Its troubles stem from having levereged itself heavily in mortgage-backed securities, resulting in its accumulating an astounding $2.75 billion in write-downs since last year.

Apparently, the Administration is comfortable with homeowners going out of business (being foreclosed) but not its corporate contributors.

Read both articles here and here.