A taste of the future is already here in the form of foreclosure fraud. In the midst of the "financial crime wave," Goldman Sachs sat and profited mightily from the collapse in sub-prime mortgage bonds by short-selling mortgage-backed securities. Goldman create CDOs, sold them to unsuspecting investors and then made large amounts of money betting against them. Surely they are guilty of more than just civil fraud and should do more than make miniscule payments for their unethical behavior.
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Third World America 2011: Forget "Fast Tracking to Anarchy" We've Arrived
By Janet Tavakoli - Huffpost, Chicago
A taste of the future is already here in the form of foreclosure fraud. In the midst of the "financial crime wave" sat Goldman Sachs knowingly securitizing sub-prime loans and selling them to unsuspecting investors before the investments turned bad. Goldman profited from the collapse in subprime mortgage bonds by short-selling mortgage-backed securities.
Last summer I wrote about Arianna Huffington's latest book, Third World America: How Our Politicians are Abandoning the Middle Class and Betraying the American Dream and talked about the Great Recession, the Great Bailout, and the Great Cover-Up of financial crimes.
I also wrote that municipal financial problems spelled a lower quality of life. Downtown Chicago crime escalated, along with attacks on officers in the Chicago Police Department. An officer who spoke up about the low morale of the undermanned and rudderless police force endured official retaliation. ("Third World America: 'Fast Tracking to Anarchy")
This year, all hell has broken loose in downtown Chicago. Years of under-hiring have resulted in a police force that is unprepared for wildings and gang violence. Moreover, concealed carry in Chicago is illegal, unless one follows the Constitution.
Tourists and residents have been attacked by mobs of youths on buses, on beaches, on bicycle paths, near the shops of the Magnificent Mile, and outside their homes. Mobs of shoplifters plagued "Mug Mile" stores. The irony is that these disenfranchised youths are turning to crime -- and if justice is done, prison sentences --a gainst innocent targets. Their focus is misdirected. Participating in a peaceful five million man march -- a true show of force and power -- against elected culprits in Washington would get them better results for lasting change.
The Spring of Anarchy: "A City At War With Itself"
It is still technically spring in Chicago, and wildings have made Chicago and its beaches unsafe. Poorer neighborhoods have long been war zones. The murder rate and gang violence in Chicago has been unacceptable for years.
Yet the police force was gutted, handcuffed, and muzzled. ("In Third World America Expect to be Investigated, as Lt. John Andrews Is Being Investigated, for Speaking Up") Police officers -- some off duty and still in uniform -- have been gunned down in the streets. Their crime-fighting abilities are severely hampered by years of irrational policies and genuflecting to politically power hungry special interest groups.
Of course, we want police officers to follow proper procedures at all times, but we also want them to make fast decisions in violent chaotic circumstances, defend themselves, and get home safely to their families and friends. Local media hounds come out in force against police work. It's time they came out in favor of superior training and hiring.
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Ongoing Mugging by Wall Street Banks
After the largest bank bailout in world history, we now have a national epidemic of foreclosure fraud. In March, Judge Moshe Jacobius stayed 1,700 foreclosures due to altered documents in Illinois' Cook County.
A complaint of alleged fraud on the part of Goldman Sachs detailed its close relationships with Countrywide, New Century, and Fremont. The complaint showed Goldman knew of "an accelerating meltdown for subprime lenders such as New Century and Fremont." Despite known serious loan problems, Goldman continued to securitize the loans and sell them in packages of residential mortgage backed securities. Goldman Sachs Alternative Mortgage Products (GSAMP) was "garbage sold at mythical prices."
The complaint alleged that Countrywide employees in a Chicago office inflated incomes on 90 percent of reduced documentation loans, also known as "liars' loans." One of Countrywide's mortgage brokerage arms "routinely doubled the amount of the potential borrower's income ... so that borrowers could qualify for loans they could not afford." The complaint alleged that brokers, not borrowers, engaged in massive fraud to push loans through the system and earn commissions. Illinois Attorney General Lisa Madigan told First Business Morning News: "Countrywide broke the law, homeowners did not."
Arianna Huffington explained that our elected officials allowed banks to thwart usury laws:"Every day, Americans, faced with layoffs and tough economic times, are forced to use their credit cards to pay for essentials such as food, housing, and medical care -- the costs of which continue to escalate. But, as their debt rises, they find it harder to keep up with their payments. When they don't, banks, trying to offset losses in other areas, turn around, hike interest rates, and impose all manner of fees and penalties." Third World America, P. 77.
Even when banks initiated foreclosure fraud, they refuse to bear the costs of delays and bad deals of their own making. After pumping up appraisals and falsifying borrowers' income on applications, banks are walking away from abandoned homes and sticking taxpayers with the bill to clean up the mess they left behind.
Banks claim that it is mortgage lenders or mortgage servicers who are guilty, but these are bank affiliates and business partners funded by the banks.
Banks supplied the money (via private label phony securitizations) that fueled this problem. Banks engaged in widespread massive mortgage securitization fraud. As underwriters, banks were responsible for doing adequate due diligence on the underlying loans. Banks were responsible for making sure the representations about risk in their financial products were accurate. Instead, the representations were materially misleading.
According to a local study by the Woodstock Institute, the mortgage servicers and trustees most often associated with abandoned properties are Bank of America, Wells Fargo, U.S. Bank, Deutsche Bank, and JPMorgan Chase.
We Need the Mother of All Reforms
Doing nothing ensures a relentless downward slide into financial and social chaos for great swaths of the country. Washington's political corruption and mismanagement has the same roots as Chicago's. As Arianna points out, on a national level, we need "the mother of all reforms:"That is why the first step toward stopping our relentless transformation into Third World America has to be breaking the choke hold that special interest money has on our politicians." (Third World America, 172)