CHINK IN THE ARMOR…THE COPS COME CALLING…SEC HEARS ABOUT MORTGAGE SECURITIZATION SOFTWARE
The SEC Enforcement Division called me because I had filled out a form online about 60 days ago telling them I knew something about the securitization of real estate which might be helpful in their investigations. Apparently I was intriguing enough yet vague enough to warrant a real live person.
There is an image amongst certain circles that government workers are fat, lazy, stupid and motivated only by a pension. One can become that way because our normal daily experience is with low life low levels who are fat, lazy, stupid and motivated only by a pension.
I assure you, though, that is not the case when you get up to the higher GS levels. Granted, there will always be a level of incompetence at all levels, but I can tell you from firsthand experience that there are times when you know you dealing with smart, competent, albeit highly controlled agents. The by the book control mentality is what gives them the aura of ineptness. This gal had the feel of someone who knew how the reins of her power rested in her hands and was real comfortable with it. It was as if The Postman had finally arrived.
“We’d given up on you.”
“Don’t give up on Uncle Sam just yet” was her tired reply. I could almost hear a wry grin on her face. Jack Ryan to the rescue.
It took a bit as the realization set in that there was a woman on the other end of the phone with the power of the SEC behind her calling me for follow up information. Once I got over a short silence, I asked how I could help.
“You contacted me.”
Where to start? There is so much. So, I started at the end, the place I have been studying for so long but haven’t yet begun to write about and in relaying this conversation with the SEC Enforcement Division, I relay it to you.
After a certain amount of time studying the other side, you come to realize that what you are dealing with is a computer database. The database runs the whole show. A computer database sets the final assignment and price of a house moments before sale on the courthouse steps, a computer database sets in motion all of the paperwork which leads to the courthouse steps, a computer database trades the mortgage backed certificates in the shadow banking system while you were current, a computer database arranged for all the pieces of your mortgage to come together all at the same time so you could sign off on the security instrument which also had been prepared in advance by a computer database.
It’s time to take another look at what is really going on. It isn’t people using computers to make their jobs easier, it is people tending a machine giving it the inputs it needs so the software can complete its job. The software’s job was to originate a mortgage, securitize a mortgage, trade a mortgage based security on the shadow market, trade derivatives off the mortgage security on the shadow market, start default and foreclosure proceedings on mortgages, set the price of the real asset on the courthouse steps at the same time making the final assignment according to the needs of a bond on Wall St. all the while hiding behind the cloak of MERS secrecy.
It’s a machine, and if you can determine the machine’s control mechanism, you can divine intent. The controlling software is often patented as allowed under the State Street decision. If it is patented, the logic has to be on file at the USPTO which is an open source.
The people you are talking to were merely tending a machine. They all have plausible deniability. No one is culpable. Look at the machine, not the people tending it. The machine will show the intent of the people who designed it.
That’s what I told her.
Then I told her that all of the originating banks and their affiliates all the way down to the storefront in your hometown were running the same software. Countrywide called it CLUES. You should call it Mindbox (www.mindbox.com). Everyone was running the same machine. Citi, JP Morgan, Wells, Morgan Stanley, everyone. They still are. It is called Mindbox.
I stopped talking. She was quiet.
“I see what you mean,” she said. “I’ve never looked at it that way before.”
There was another silence.
We agreed she would write up her report on the call and she asked if I would be willing to add a couple of paragraphs in addendum to her report. I said yes. I wrote up essentially what is above and added that there is a whole sub-group of Americans who have been studying this subject for quite a while who would probably be interested in helping and that there isn’t much which happened which we aren’t privy to. Why reinvent the wheel?
I hope they pick up this angle about examining the software which controlled all the processes. This is the point of view which came flying over the transom some four – nearly five months ago. Come to find out that in the 90’s there was a HUGE push to automate all of the mortgage banking processes so they could shed jobs and overhead. Let the database do the things the database can do. Put all of this information to work for you. Be more efficient~!
It ran the wheels off the wagon if you want to know the truth. But another piece of the truth is you need to quit looking for a person to blame, someone who can be frog marched. The system was built so there is no one person. Everyone did their part attending the machine, the database, so the software could accomplish what the designers wanted it to do – from origination through securitization to foreclosure sale.
It’s a huge story. It really does cover the whole thing. I hope to be the one who gets to tell it. There is even a villain, couple of them really. Is there enough to make them do the perp walk? I don’t know. That is for others to determine. Perhaps the SEC Enforcement Division will come to see the things I see and will go look at the software …see if they can divine intent.
I wager they can … and, if they are allowed, they will.
If they aren’t allowed, it doesn’t matter. I’ll finish what I started.