The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments—and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal.
But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.
The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’”
“He’d call me and say, ‘Oh my God, this is a calamity here,’ ” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher.
The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.
As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”
“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.”
This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens.
Read more: http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom/index3.html#ixzz107MEAbpK
First one, now all. Just as we predicted - fan: meet feces.
Fresh off the presses at Bloomberg:
JPMorgan Based Foreclosures on Faulty Documents, Lawyers Claim
JPMorgan Chase & Co. faces a legal challenge next month that could cast doubt on thousands of foreclosures after a mortgage executive at the bank said she didn’t verify documents used to justify home seizures.
Lawyers for a Palm Beach County, Florida, homeowner asked a judge to throw out a foreclosure as a penalty for misleading the court, according to attorney Tom Ice of Ice Legal PA. They’re citing a May 17 deposition in which the JPMorgan executive said she signed thousands of affidavits and documents supporting the New York-based bank’s claims without personally checking loan records. The court is scheduled to hear arguments Oct. 19.
The Chase Home Finance operation supervisor, Beth Ann Cottrell, said in May she was among eight managers who together sign about 18,000 documents a month, according to a transcript of her sworn deposition provided by Ice. Asked how they were prepared, she said she relied on other people at the firm.
“My review is more or less signing the document unless it’s questionable,” she said. That means, “somebody has a question and brings it to me and says, ‘Beth, can you take a look at this?’”
Inaccurate statements by banks in foreclosure documents may give borrowers who have lost their homes a legal basis to challenge the seizures, derailing resales and casting doubts on property titles. A Florida court sanctioned Ally Financial Inc.’s GMAC Mortgage unit for faulty affidavits in 2006, and the firm suspended evictions in 23 states this month after finding employees still signing affidavits without checking the data.
Titles in Doubt
JPMorgan spokesman Tom Kelly declined requests for comment.
Cottrell didn’t return phone calls to her office requesting comment. A lawyer representing her at the deposition, Joseph Mancilla of the Florida Default Law Group PL, didn’t return calls. Cottrell isn’t named as a defendant.
Cottrell signed the affidavit at issue in the case, dated June 2009, while at her previous employer, an outside servicing firm working for JPMorgan, according to court documents. When signing documents there for the JPMorgan unit, she used the title “assistant secretary and vice president” of Chase Home Finance, according to the transcript. She became a JPMorgan employee about three months after signing the affidavit.
Document signers sometimes endorse affidavits on behalf of other firms as a way to streamline the foreclosure process, said Dustin Zacks, an attorney at Ice’s firm.
JPMorgan was the third-largest U.S. servicer of home mortgages as of June 30, with $1.35 trillion or almost 13 percent of the market, according to industry newsletter Inside Mortgage Finance. Ally is the fifth-biggest mortgage servicer, with $349.1 billion. The other three in the top five are Bank of America Corp., Wells Fargo & Co., and Citigroup Inc.
Title Insurers
“I’m sure a lot of title insurance companies are concerned about the potential liability right now,” as borrowers challenge how banks made statements, he said. “The judges could absolutely hold the bank and attorneys in contempt.”
U.S. home seizures reached a record for the third time in five months in August as lenders completed the foreclosure process for thousands of delinquent owners, according to RealtyTrac Inc.
Ice, the founding partner of his foreclosure-defense law firm in Royal Palm Beach, Florida, said some lenders are accepting voluntary dismissal of their cases.
During the deposition, Cottrell said a staff of in-house specialists scrutinize loan documents and prepare affidavits, the transcript shows. If they have difficulties or questions, they come to her. She signs in a notary’s presence, she said.
‘No Knowledge’
During questioning by Ice lawyer Zacks, Cottrell said she had worked at Chase Home Finance for about eight months, according to the transcript.
“As to everything in the affidavit, did you have personal knowledge?” Zacks asked.
“My own personal knowledge, no,” Cottrell answered.
“You stated ‘That plaintiff is entitled to enforce the note and mortgage,’” Zacks said. “Again, did you have personal knowledge of that?”
“No knowledge,” she answered.
Florida Attorney General William McCollum is investigating three law firms that represent loan servicers in foreclosures, and are alleged to have submitted fraudulent documents to the courts, according to an Aug. 10 statement. The firms handled about 80 percent of foreclosure cases in the state, according to a letter from U.S. Representative Alan Grayson, a Florida Democrat.
Judges overseeing foreclosures in the wake of the housing crisis are growing skeptical of banks, said Christopher L.
Peterson, a professor at the University of Utah’s S.J. Quinney College of Law. A surge in proceedings has helped expose a variety of paperwork lapses, he said in an interview.
“Early in the process the judges were very cavalier and they just took the financiers’ word,” Peterson said. “Now there are enough disputes out there about ownership of loans that the judges are starting to feel like they need to hold the financial institutions to the basic rules of evidence.”
Arrowheadlines: Chiefs <b>News</b> 10/4 - Arrowhead Pride
However, there aren't many real stories because of the bye. I'd expect the hype to start soon. We're just a few days from the undefeated Chiefs playing the "struggling" Colts. Here's your Kansas City Chiefs news.
High Court Says No to Gitmo Lawyers « Liveshots
The Supreme Court announced Monday it will not hear arguments about the federal government's.
Record attendance for Eurogamer Expo | <b>News</b>
This year's Eurogamer Expo, which took place in London across October 1-3, has been hailed a.
eric seiger eric seiger
The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments—and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal.
But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.
The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’”
“He’d call me and say, ‘Oh my God, this is a calamity here,’ ” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher.
The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.
As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”
“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.”
This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens.
Read more: http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom/index3.html#ixzz107MEAbpK
First one, now all. Just as we predicted - fan: meet feces.
Fresh off the presses at Bloomberg:
JPMorgan Based Foreclosures on Faulty Documents, Lawyers Claim
JPMorgan Chase & Co. faces a legal challenge next month that could cast doubt on thousands of foreclosures after a mortgage executive at the bank said she didn’t verify documents used to justify home seizures.
Lawyers for a Palm Beach County, Florida, homeowner asked a judge to throw out a foreclosure as a penalty for misleading the court, according to attorney Tom Ice of Ice Legal PA. They’re citing a May 17 deposition in which the JPMorgan executive said she signed thousands of affidavits and documents supporting the New York-based bank’s claims without personally checking loan records. The court is scheduled to hear arguments Oct. 19.
The Chase Home Finance operation supervisor, Beth Ann Cottrell, said in May she was among eight managers who together sign about 18,000 documents a month, according to a transcript of her sworn deposition provided by Ice. Asked how they were prepared, she said she relied on other people at the firm.
“My review is more or less signing the document unless it’s questionable,” she said. That means, “somebody has a question and brings it to me and says, ‘Beth, can you take a look at this?’”
Inaccurate statements by banks in foreclosure documents may give borrowers who have lost their homes a legal basis to challenge the seizures, derailing resales and casting doubts on property titles. A Florida court sanctioned Ally Financial Inc.’s GMAC Mortgage unit for faulty affidavits in 2006, and the firm suspended evictions in 23 states this month after finding employees still signing affidavits without checking the data.
Titles in Doubt
JPMorgan spokesman Tom Kelly declined requests for comment.
Cottrell didn’t return phone calls to her office requesting comment. A lawyer representing her at the deposition, Joseph Mancilla of the Florida Default Law Group PL, didn’t return calls. Cottrell isn’t named as a defendant.
Cottrell signed the affidavit at issue in the case, dated June 2009, while at her previous employer, an outside servicing firm working for JPMorgan, according to court documents. When signing documents there for the JPMorgan unit, she used the title “assistant secretary and vice president” of Chase Home Finance, according to the transcript. She became a JPMorgan employee about three months after signing the affidavit.
Document signers sometimes endorse affidavits on behalf of other firms as a way to streamline the foreclosure process, said Dustin Zacks, an attorney at Ice’s firm.
JPMorgan was the third-largest U.S. servicer of home mortgages as of June 30, with $1.35 trillion or almost 13 percent of the market, according to industry newsletter Inside Mortgage Finance. Ally is the fifth-biggest mortgage servicer, with $349.1 billion. The other three in the top five are Bank of America Corp., Wells Fargo & Co., and Citigroup Inc.
Title Insurers
“I’m sure a lot of title insurance companies are concerned about the potential liability right now,” as borrowers challenge how banks made statements, he said. “The judges could absolutely hold the bank and attorneys in contempt.”
U.S. home seizures reached a record for the third time in five months in August as lenders completed the foreclosure process for thousands of delinquent owners, according to RealtyTrac Inc.
Ice, the founding partner of his foreclosure-defense law firm in Royal Palm Beach, Florida, said some lenders are accepting voluntary dismissal of their cases.
During the deposition, Cottrell said a staff of in-house specialists scrutinize loan documents and prepare affidavits, the transcript shows. If they have difficulties or questions, they come to her. She signs in a notary’s presence, she said.
‘No Knowledge’
During questioning by Ice lawyer Zacks, Cottrell said she had worked at Chase Home Finance for about eight months, according to the transcript.
“As to everything in the affidavit, did you have personal knowledge?” Zacks asked.
“My own personal knowledge, no,” Cottrell answered.
“You stated ‘That plaintiff is entitled to enforce the note and mortgage,’” Zacks said. “Again, did you have personal knowledge of that?”
“No knowledge,” she answered.
Florida Attorney General William McCollum is investigating three law firms that represent loan servicers in foreclosures, and are alleged to have submitted fraudulent documents to the courts, according to an Aug. 10 statement. The firms handled about 80 percent of foreclosure cases in the state, according to a letter from U.S. Representative Alan Grayson, a Florida Democrat.
Judges overseeing foreclosures in the wake of the housing crisis are growing skeptical of banks, said Christopher L.
Peterson, a professor at the University of Utah’s S.J. Quinney College of Law. A surge in proceedings has helped expose a variety of paperwork lapses, he said in an interview.
“Early in the process the judges were very cavalier and they just took the financiers’ word,” Peterson said. “Now there are enough disputes out there about ownership of loans that the judges are starting to feel like they need to hold the financial institutions to the basic rules of evidence.”
Arrowheadlines: Chiefs <b>News</b> 10/4 - Arrowhead Pride
However, there aren't many real stories because of the bye. I'd expect the hype to start soon. We're just a few days from the undefeated Chiefs playing the "struggling" Colts. Here's your Kansas City Chiefs news.
High Court Says No to Gitmo Lawyers « Liveshots
The Supreme Court announced Monday it will not hear arguments about the federal government's.
Record attendance for Eurogamer Expo | <b>News</b>
This year's Eurogamer Expo, which took place in London across October 1-3, has been hailed a.
eric seiger eric seiger
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