Internet Anthropologist Think Tank: Criminal banks

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    Friday, September 19, 2008

    Criminal banks

    The Origins of the Scandal

    When it began, "subprime lending" wasn't a term in common usage, let alone understood outside financial circles. One of its late 1990s originators was Obama campaign finance chairperson Penny Pritzker when she served on the Board of the failed family-owned Hinsdale, IL Superior Bank. It cost the FDIC $700 million and depositors another $65 million, while Pritzker made millions on predatory lending now called "subprime" mortgage schemes. One definition is as follows: "the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history." Another in the recent environment was to force-feed them to the largest number of homebuying prospects possible. 

    There's lots of them, and predatory lenders took full advantage until things erupted into scandal, and the economy headed south. Only then did regulators take notice and decide to investigate - into how "banks, credit rating firms, and lenders value and disclose complex mortgage-backed securities." Three areas specifically, according to Reuters: "the securitization process, the origination process and the retail area." Also insider trading, a common illegal practice that's rarely caught or even looked for. However, the scope of the investigation would be narrow, and its aim was "deterrence." Of what, asked Schechter, now that the horse is out of the barn, and investors and mortgage holders are left holding the bag?

    When it's too late to matter, they agree, along with critics, that "inadequate disclosure (or lack of transparency) was at the root of the problem." According to a Senate report, it began in 1997 when house prices began appreciating and registered a 124% gain by 2006. Housing was driving the economy with seven million subprime mortgage loans. Business boomed. Underwriting standards deteriorated, while banks and other lenders invented new ways to make money - "fast" and easy.

    In the 1980s, state usury rate ceilings were lifted, creating a whole new market for people who previously couldn't qualify. At higher interest rates, fees, and other add-ons they did. Most borrowers got so-called "2/28" and "3/27" hybrid adjustable rate mortgages (ARMs). They originated with low fixed "teaser" rates, good for a two-year period. Afterwards, they're reset semi-annually based on an interest-rate benchmark, or the current going rate. For many holders, payments soared 30% and became unaffordable, and by 2004, 90% of subprime loans were these type ARMs. It was well-known in the industry that "these borrowers (are) most likely to default or become delinquent (and) face foreclosure." The idea was to cash in and let holders take the pain.

    Here's how the scheme worked. "So-called 'intermediaries,' unregulated and often unscrupulous mortgage brokers, hustled their way into the housing market" and took over. Using a range of tactics, including "deceptive advertising to block-to-block solicitations to get people to buy and sell, always promising more than they (could) deliver." 

    So-called "birddogs" were used to get prospects, and all kinds of practices were employed - "abusive, illegal and predatory." They pushed, "enticed...seduced (even) threatened." According to the Joint Economic Report, "For 2006, Inside Mortgage Finance estimates that 63.3% of all subprime originations came through brokers....19.4% through retail channels (and) 17.4% through correspondent share increas(ed steadily) from 2003 through 2006." These companies aren't regulated and pretty much operate freely. By 2005, the percent of securitized subprime mortgages reached "a peak value of more than 81%...."

    Housing sales were on a roll, and so was Wall Street, quick to see a lucrative new income stream and ready to cash in. "Now they could make fees originating loans and even more money selling the paper into (the) secondary market, where mortgages could be securitized and sold again for even more money as investments."

    The Finmanac financial blog explained its origination:

    -- when Solomon Brothers launched Mortgage-Based Securities (MBS) in the 1980s - "bonds with bundles of mortgages, bought from bank lenders, as collateral;"

    -- they used a "special purpose vehicle known as Collateralized Mortgage Obligation (CMO);"

    -- monthly installments were used to pay interest; and

    -- others were quick to cash in on the scheme.

    The secondary market became a marriage between "the most reputable financial organizations and the sleaziest grass-roots operators. As is often the case, sleaze moved upwards" because the potential profits were huge but so are the risks.

    "Since anyone can originate a loan and sell it to the Investment Banks (to package and sell as MBS), it tempts originators (to write) risky loans (without) worry(ing) about payback(s):" 

    7 & 13



    Anonymous Anonymous said...

    Gerald: Would like to share with you that a company dubs itself the US BANKS is supposedly a Minnesota based banking company. After my Bank account was embezzled as by their Branch manager in Vernon Hills IL and they wiped my checking and savings acct down to a ZERO balance, at an fdic insured bank. I have never received aLL MY STOLEN FUNDS Back to date( may 09) There was a police report, two witness, documentation and fBi and Sec service report. The FBI has allowed US BANKS not to compensate me and not to reopen the case as to who manipulated this situation from square one. This company is a RUSSIAN OWNED COMPANY, posturing as a reliable united states bank in the USA. There was lots of mishandling and descrepancies to many other customers. STanding in the parking lot asking other customers. 2 in five had problems with deposits not being posted, direct deposits not being posted. Transaction inaccuracies and rerequesting on the bank inquiry forms not being processed. In 2008 I recontacted US banks who sent me a letter stating all my future correspondences would go into a file UNOPENED. After contact with a Saudi operative who has been hired into the US govt. Black females are abusing their authority in a big cover up of the USA hiring people who are loyal to Sauds over the USA. They are pretending to investigate. They are covering up and compelling people to involve themselves in serious criminal activities and leveraging in these situations. My Embezzlement was around $37,000.00 All the attacks are small on lower income people who cannot afford to litigate against the banks. most increments that are ripped off are under $700.00 on the average. The SEC SERVICE FBI AND OTHER BANKING commissions ignore us due to low amounts ripped off. We cannot afford $8,000 lawyer retainers and the Federal govt is offering us no protection. I cite a Case against US Banks in HIGHWOOD IL in 2005 where 1500 Hispanics sued the bank in a class action. My embezzlement was by JAIMIE WILLIAMS The branch supervisor of VERNON HILLS IL branch. He was promoted to the REGIONAL VICE PRESIDENT ANd makes sure i never get my money back to date.
    My name is PAMELA TOLL. the person utiliized to orchestrate this was GREG WILLIAMS who was employed by WILLIAM J WARREN A BARRINGTON HILLS
    REAL ESTATE DEVELOPER. THE WARREN GROUP who has been harrassing me since I was a tenant there in 2001..peacheswrite at yahoo

    8:35 AM  

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