Friday, February 4, 2011

Mike Butler: U.S. bailout rort uncovered

For those who are sceptical of the Obama administration’s bailout of some United States banks, here is a snapshot of some of the rorting that is going on within that bailout. Forbidden Knowledge TV set out “A Clear Explanation of Naked Banksterism” as a video clip and a transcript, which I reproduce here, with acronyms deciphered and financial institutions described:

”Like many banks during the world financial meltdown in 2008, IndyMac (a generally accepted contraction of the formal name Independent National Mortgage Corporation) closed it doors. Months later, its assets were seized by the FDIC (the Federal Deposit Insurance Corporation, which provides deposit insurance which guarantees the safety of deposits in member banks) and sold to OneWest Bank (began operations as a newly formed Pasadena, California-based federal savings bank on March 19, 2009, with its acquisition of certain assets and certain limited liabilities of IndyMac Federal Bank) by the US Government.

”Well, guess who owns OneWest Bank: That would be Goldman Sachs; with bigtime VP Stephen Munchen and bigtime investors, George Soros and John Paulson - of no blood relation to ex-CEO of Goldman Sachs, Hank Paulson - who would be the ex-Secretary of the Treasury.

”All IndyMac's residential property mortgages were purchased by OneWest at 70 percent of their value; all HELOCs were purchased at 58 percent of the value.” (A HELOC is a home equity line of credit is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house. Because a home often is a consumer's most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses. HELOC abuse is often cited as one cause of the subprime mortgage crisis.)

”But just in case the OneWest guys would feel cozy and warm, the FDIC stepped in and decided to cover 80 percent to 90 percent of the losses, due to short sale or foreclosures that they might incur from those naughty IndyMac-mortgaged homeowners...

”The reason why we think you should know about this case is because the Loss Calculations are based on the ORIGINAL home mortgage and NOT the 70 percent of the ORIGINAL value at which it was purchased by OneWest.

”This is an actual sample case from one of our TBWS viewers…now, this is going to get your blood boiling!

”Take an actual loan $478,000 + 6 months of missed payments for a grand total of $485,200. OneWest Bank paid 70 percent or $334,600 for that loan. ($485,200 X 70 percent = $334,600).

”Then, that underwater homeowner got an all-cash short sale offer for his home that netted $241,000 to OneWest Bank. (A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.)

”Now, according to the FDIC formula, you take the actual amount that OneWest paid for the mortgage: $334,600 but instead they get to use the ORIGINAL amount of the mortgage of $485,200 MINUS the short sale offer of $241,000 and you have an "Adjusted Loss" of $244,200.

”Next, according to the sweetheart deal, the FDIC writes a check to OneWest bank for 80 percent of the net loss ($244,200 X 80 percent), so the Taxpayer, courtesy of the FDIC pays OneWest $195,360.

”Now, ADD the $195,360 paid by the Government to the short sale offer of $241,000 and One West Bank just made: $436,360 on a loan that they only bought for $334,600! And all they had to do was sell it for what they wanted to!

”Guys! They can't lose money on this deal! OneWest Bank just profited on this short sale to the tune of $101,760 -- all because of the sweetheart deal they made with the FDIC.

”So, if you ever ask yourself, "Why is it so hard to get a mortgage loan?" The answer is that *there's too much money to be made on short sales and foreclosures.*

”Ready for an encore? The house still was sold for less than the original loan amount and the *borrower was forced to sign a promissory note (promise to pay) for $75,000* to OneWest Bank!

”So who really wins in the end? Well, just let you decide...

”By the way, the FDIC just announced that they would start needing to borrow money from the Treasury -- the Treasury being the place where all those Goldman Sachs guys used to call home before they called OneWest Bank home.”



Anonymous said...

Surprise, surprise. That could never happen here, yeah right.

Anonymous said...

Mike, have you followed Hugh Pavletich on housing affordability? It is all an issue of "supply" and council regulations against "sprawl". By the way, this is not just a few libertarian think tanks saying this; here is a Uni Web Page with a list of academic research into this (and I can tell you there is a lot more not listed there):

Guess who funds conservation activist groups who push for anti-sprawl regulations? George Soros. Guess who benefits when those regulations have caused the biggest bubble and bust in history?



(Commenting as "Anonymous" because I am sick of the system dicking me around when I try to register under Google or whatever).

Anonymous said...

I should add that Soros did not just benefit in the way you are describing; he successfully "shorted" the market all the way down, specifically bet huge against mortgage backed securities in prescribed-planning areas. He netted around $1 billion doing this.

Quite a few smart people did this, but Soros is the only one I would accuse of having funded the very brand of political activism that set the scene for the bubble and crash. Very few people "get it" yet.