"Despite its financial sophistication and expertise (including in the housing market, where it is a leading insurer), Allstate now suffers from buyer's remorse and has sued the counterparties with which it traded at arm's length, claiming in separate actions that each of the eight sellers of RMBS misled it as to characteristics of the securities," Goldman Sachs wrote in its 25-page motion.It appears to me that at the root of Allstate's case is the fact that the RMBS issues they invested in - 8 of them to the tune of $8 billion - had all received "investment grade" ratings from independent rating agencies. Investment grade ratings - basically AAA - means that the possibility of failure is limited and virtually next to nothing. In other words, a very safe investment unless a neutron bomb hit us all - imploding the securities but not the buildings.
The other banks sued by Allstate based on LegalNewsline.com are:
JPMorgan Chase & Co., Credit Suisse Group AG, Bank of America Corp.'s Merrill Lynch unit, Citigroup Inc. and Deutsche Bank AG
Allstate's complaint alleged that the certificates it had purchased received investment-grade ratings by independent rating agencies.This allegation is not a new revelation. In fact, as far back as 2008 our very own main stream media carried stories and interviews of executives from the various rating agencies who admitted on air that they basically "rubber stamped" these issues AAA. The rating agencies - Moody's, Standard and Poors and Fitch - are paid by the banks to provide these ratings. In other words, the rating agencies appear to be independent but in reality are clients of the banks.
Now of course, Goldman is saying there is no substance to Allstate's law suit. They claim that with all of their savvy and expertise they should have had the ability to investigate these issues themselves before they invested.
However, it argued that the securities were even riskier than described because of alleged "deficiencies" in disclosures.Not difficult to believe if you truly understand how it all worked, how the Wall Street banksters perpetrated this massive fraud over the entire world. One of the major crimes this author has been writing about since 2007 - the year the real economic crisis began. I will give an explanation later in this post.
Once again, Goldman Sachs - the emissary of God - can do no wrong and feels it has divine powers to stave off any attempts at miring their holier then everything attitude.
The court, the bank says, should dismiss Allstate's complaint for six reasons.
Those six reasons can be found in the article posted on LegalNewsline.com
Not having seen or read Allstates law suit I would not be able to comment on the basis for GS's motion to dismiss. Even with a copy of the suit, not being an attorney would certainly disqualify any legal opinions I might make and rightfully so. However, being familiar with Allstate's basic claim of fraud and deception in the sale of these securities worldwide, I feel qualified to continue my march towards justice in exposing this real issue which became the basis for the real estate bubble and the ultimate burst throwing the entire world into a financial crisis.
In Goldman's second claim for dismissal it writes;
"Allstate ignores the specific disclosures in the offering documents that underscored that many of the loans underlying the certificates were issued pursuant to alternative -- and inherently risky -- loan programs under which originators issued loans with limited, or no, verification of information provided by borrowers," ...What GS is trying to say here is that Allstate should have read the fine print on the volumes of disclosures they always provide with each investment transaction. You know the ones I am speaking of - like the disclaimers you receive from your credit card company telling you they can do what they want, when they want and you have no recourse but to pay back what you owe and stop doing business with them. A disclosure most dismiss because they want the card and after all they trust "the bank".
I am sure that over the years Allstate - truly a sophisticated financial firm - has done billions upon billions of dollars worth of transactions with the likes of Goldman Sachs and the others they have sued. As sophisticated as they are, there was an element of trust built over the years along and the falsified investment grade (AAA) ratings that they relied on only added to this trust.
One major comment in the quote above truly disturbs me and is the reason I am here publishing and writing this blog along with the others I have since 2007.
"that many of the loans underlying the certificates were issued pursuant to alternative -- and inherently risky -- loan programs under which originators issued loans with limited, or no, verification of information provided by borrowers,".It is the emphasized portion of the above that makes me cringe. From the very beginning of the financial crisis - the so called mortgage meltdown in 2007 - these banks have tried to convince the general public that it was the originators that issued loans with limited, or no, verifications...provided by the borrowers. It was precisely statements like that from most all of the major banks that destroyed the mortgage broker industry and created the very first massive wave of unemployment in this country. Here now the explanation I mentioned above.
The truth about how these loans were originated and why no verifications of income or employment was required was NOT due to originators but due to the banks who were creating the RMBS's. You see, it was the securitizing banks who established the loan programs and guidelines - the rules for qualifying people - not the originators. The originators could only sell the programs made available to them by the banks. Originators did not created loan programs or guidelines (rules). The Wall Street banks who securitized did.
This is important to know because I believe that is where the merit to Allstate's case is.
The banks being sued by Allstate all knew what quality and types of loans were bundled and packaged into these security issues. They knew that there were sub - sub prime loans in them with no verification of ability to repay or even of employment- the basis of any mortgage loan from the beginning of mortgage loan time.
The banks that created these programs, sent qualifying data as well as rates out to all mortgage professionals daily and had "Account Exec's" out in the field peddling these programs to the tens of thousands of loan originators in this country. Even Fannie Mae and Freddie Mac were involved in this fraud.
Banks like Wells Fargo and hundreds of others created non bank subsidiaries in order to be able to sell these Wall Street newly created - toxic - mortgages to the public. You see, FDIC insured banks could only sell Fannie/Freddie products but their non bank subsidiaries could sell these new sub prime loans. Even our friends Goldman Sachs bought a sub prime mortgage lending company so as to participate in the retail side as well.
The main creators of these toxic loans originally were Bear Stearns, Merrill Lynch, Lehman Bros and Deutche Bank. We all know how Bear Stearns was purchased (???) in a Sunday midnight meeting after declaring they were broke. The meeting consisted of JPMorgan/Chase's Jamie Dimon, then Treasury Secretary, Hank Paulson and then President of the New York Federal Reserve Bank and current Treasury Secretary, Tim Geithner. A deal made, signed and monies delivered before America woke up on Monday morning. No one had a chance to review or comment - not Congress, not the public - NO ONE! A deal made as a cover up.
Merrill Lynch, while still in business was also quickly tossed over to Bank of America. Another coverup, I believe. I have often wondered how a bank (BofA) claiming to be broke and taking Federal TARP funds (another midnight Sunday deal) could buy a broke company (ML) and somehow began to be profitable.
And as to Lehman Bros, the main competitor to Goldman Sachs - Henry Paulson, as U.S. Treasury Secretary and past CEO of Goldman Sachs decided to let them fail - eliminating their biggest compeitor. A slam dunk. A too big to fail that was allowed to fail causing a major financial disaster...why?
Basically, knowing what I know of the mortgage industry and having been directly involved in it for so many years, I saw the fraud these banks were perpetrating. But, the need for greed in the investment markets created by marketing fraudulent AAA ratings and presented to investors - large and small - worldwide, only served to perpetuate the fraud. The more investors lined up to by RMBS's the more mortgage notes the banks needed to package and to accomplish that they kept lowering the guidelines so as to qualify more and more people.
It was not the American Dream the likes of Goldman Sachs and the others were peddling. It was paper - mortgage note paper - needed to fill the packages of RMB Securities long lines of investors were salivating to get their hands on. High yielding securities backed by the safest collateral known to man - real estate - and guaranteed by virtual no risk ratings (AAA) by supposed independent rating agencies.
I believe Allstate is correct in the allegations of their law suit. I applaud them for taking the action which appears would expose much of the fraud that I have attempted to explain above and have talked about for years.
There was fraud. We have seen hard evidence of this fraud. We have been told by people with first hand knowledgable of this fraud yet no one seems to want to do anything about it. It has all been covered up by certain individuals of our government in conjunction with certain individuals of the private sector (The Federal Reserve I put into the private sector as it is a privately owned non government company).
I certainly hope that there is enough legal issues at play that will cause the court to deny Goldman's Motion to Dismiss. If not, I fear that this fraud will never be exposed and the perps brought to justice.
We are still seeing the affects of what I deem to be the largest fraud ever in the history of mankind. We will suffer the affects of the bankster fraud for some years to come. I truly believe that I, in my lifetime will not see the end of this crisis. I fear that the opportunities that once existed for most of us will not exist for the 99% who have been victimized and that my kids, my grandkids as well as yours will have more struggles and a lesser lifestyle then we..
An estimated 13 million children in the U.S. go hungry. (see stats...click here) and a once proud and productive middle class is homeless and in food lines while another 5 million homes are to be foreclosed on in the next few years. Huff Post reports:
The number of people using food stamps hit an all-time high in May 2011. According to the USDA, 45,753,078 Americans and 21,581,234 households use Supplemental Nutrition Assistance Program (SNAP), more commonly known as food stamps.In my court of public opinion, Goldman Sachs along with all the other banks complicit in this fraud are guilty based on the evidence presented over the past 4 years and results we see on the streets everyday.