“Keep your fingers crossed but I think we will price this just before the market falls off a cliff,” a Deutsche Bank manager wrote in February 2007

Internal emails indicate Deutsche Bank knew they were bankrolling toxic mortgages by Ameriquest and others

Internal emails indicate Deutsche Bank knew they were bankrolling toxic mortgages by Ameriquest and others

iWatch

In 2007, the report says, Deutsche Bank rushed to sell off mortgage-backed investments amid worries that the market for subprime loans was deteriorating.

“Keep your fingers crossed but I think we will price this just before the market falls off a cliff,” a Deutsche Bank manager wrote in February 2007 about a deal stocked with securities created from raw material produced by Ameriquest and other subprime lenders.

Deutsche Bank Analyst: Overpay For Our Assets, Or You’ll Regret It

By Zachary Roth – February 12, 2009, 3:49PM

For a while now, it’s seemed like Wall Street’s message to government has been: We screwed up. But if you don’t rescue us on our terms, you’re all gonna be in trouble.

But you don’t usually see that expressed quite as clearly as it was in a research memo sent out yesterday by a senior Deutsche Bank analyst, and obtained by TPMmuckraker.

In the memo — one of Deutsche’s daily “Economic Notes” sent out to the firm’s clients, and to some members of the press — Joseph LaVorgna, the bank’s chief US economist, essentially, appears to warn that if the government doesn’t pay high prices for the toxic assets on the books of Deutsche and other big firms, there will be massive consequences for the US economy.

Writes LaVorgna:

One main stumbling block to the purchasing of troubled assets has been pricing, specifically how does the government price a diverse set of assets in a way that does not put the taxpayer on the hook. However, this should not be the standard by which we judge the efficacy of the plan, because a more prolonged deterioration in the
economy will result in a higher terminal unemployment rate and a greater deterioration of the tax base. As such, the decline in tax revenues will crimp many of the essential services provided by the government. Ultimately, the taxpayer will pay one way or another, either through greatly diminished job prospects and/or significantly higher taxes down the line to pay for the massive debt issuance required to fund current and prospective fiscal spending initiatives.

We think the government should do the following: estimate the highest price it can pay for the various toxic assets residing on financial institution balance sheets which would still return the principal to taxpayers.

One leading economist described the memo to TPMmuckraker as a “ransom note” to the US government. And David Kotok of Cumberland Advisors, who writes such research memos for his own clients, acknowledged that the memo, like all such communications, could be interpreted as an attempt to influence policy-makers.

Still, seeing the memo as a threat to the government to drive the softest of bargains wouldn’t be entirely fair. Kotok that cautioned that the effects of a single analyst’s memo are limited: “Joe LaVorgna doesn’t have enough clout to hold the US government hostage.”

LaVorgna himself was blunt: “I don’t write editorials,” he told TPMmuckraker.

At the very least, the memo can be seen as a frank statement of position from the chief economist of a major bank: if the government doesn’t cave and buy up all the banks’ toxic assets at inflated prices, the country will suffer.

Nice fix we’ve got ourselves into.


15 Responses

  1. Joe laVorgna is best described this Easter as the AntiChrist, a sack of scum working for the utterly amoral sack of pond-scum DoucheBank. He is so revolting that he makes decent men’s stomachs churn. What garbage! We can hope that he ends up in jail, to penitent on his having thrown in his lot with DB scum.

  2. i have a duty to all of you.. my brethren
    please take a moment to view this & consider the consequences , WE together take back OUR REPUBLIC!
    http://usofavus.com/2011/01/27/the-way-home-v2/

  3. hkcon, that’s what that whole rant was about….why pay the fed when we the people can control our own currency without a go-between. Screw the fed and bernanke.

  4. “The minimum wage has been slashed, services for women and children curtailed, and government workers laid off, and, as Max says, “The people of Ireland have been carpet-bombed with debt.”

    Here’s my response to you debt enslavers————-

    ……………………´?)………
    …………………,/…./……..
    ………………../…./ ………….
    …………./´?/’ …/´?/ ?/\……
    ………./’/…/… ./…/…/./?\….
    ……..(‘(….(…. (….(.. /’…)….
    ………\…………….. ..\/…./….
    ……….\……………………/..…
    ………..\…………………./……
    ………….\………………./….…

  5. It’ has happened all over the world………….

    substitute Irish Banks with JPM, AIG, BOFA, GOLDMAN SACHS, CITI…………

    substitute IMF/BIS with Federal Reserve………………

    “We were shocked to learn that, unlike here in the United States, default on mortgages is a crime in Ireland, which has resulted in the incarceration of hundreds of hapless Irish ex-homeowners no longer to pay their monthly tabs even though the houses have reverted to the lienholders.”

    http://richardbrenneman.wordpress.com/2011/04/21/max-keisers-sober-look-at-ireland%E2%80%99s-collapse/

  6. If this guy gets elected, I think I’ll move to Miami Dade County.

    hmmm, state bank, no property taxes, low interest loans………………

    “A publicly-owned bank is not unprecedented. The State of North Dakota has owned a bank since 1918. North Dakota has the lowest unemployment in the U.S. (less than 4% compared to MDC’s 13+%), and a budget surplus of over $1 billion, because they do not rely on WALL STREET for money”

    http://investmentwatchblog.com/an-economic-solution-for-miami-dade-county/

    listen to his video:

    http://www.khavariformayor.com/

    From Max Keiser:

    http://maxkeiser.com/2011/04/22/viewer-emails-max-keiser-please-help-us-de-centralize-our-community-miami-dade-county-florida/#more-26088

  7. e-tolle you are close, but it is the fed who is in charge of this massive scheme to control the people of the U S of A. Wall street benefits peripherally from the Fed’s tyrannical money scheme. Kill the central bank and all this goes away. Head of the snake so to speak. Any politician that does not see this as the number one threat to American national security is an actor paid to do their bidding. Vote accordingly.

  8. Is this a case of the fox guarding the hen house?

    Iowa’s Democratic Attorney General Tom Miller is known for taking on big business. Elected to eight four-year terms, he led a multi-state anti-trust case against Microsoft in 2001 and filed a suit against 79 drug companies in 2007, alleging they illegally profited by inflating prices for drugs purchased through Medicaid.

    Most recently, Miller took the lead on the investigation by all 50 state attorneys general into the “robo-signing” foreclosure scandal, where several big banks allegedly approved taking away people’s homes without adequately verifying the facts in court, as required by law in some states.

    Last fall, just after he made the announcement that he would look into the foreclosure mess, contributions to Miller’s campaign coffers for November’s election soared, thanks in large part to out-of-state lawyers who make a living representing big banks, a new report from the National Institute for Money in State Politics finds. “Nearly half of the money Miller raised in 2010,” NIMSP reports, “was donated after the October 13 announcement that he would be coordinating the 50-state attorneys general investigation.”

    Two Miller contributors have become directly involved in defending the banks in the probe. One, Meyer Koplow of Wachtell Lipton in New York, gave Miller $5,000 and is representing Bank of America in direct negotiations with Miller, the attorney general tells TIME. Another, Elizabeth McCaul of Promontory Financial Group, gave Miller $10,000 and is consulting Bank of America in the negotiations, Miller says. Bank of America was one of the first and most prominent institutions accused in the foreclosure investigation. It gave more than $80,000 to the Democratic Attorney Generals Association, which spent more than $200,000 on Miller’s campaign, Miller says.

    Miller says Kaplow and McCaul are old friends and professional associates, and that they were not working for Bank of America before election day. He says neither has discussed the campaign contributions with him since they began work for the bank.

    The NIMSP report and revelations of campaign contributions by those working for Bank of America come at a sensitive moment, as Miller is in the thick of far-reaching negotiations with the banks. Though the case started as an investigation into robo-signing, it has broadened. The talks are aimed at a settlement that could set the terms by which banks service current and future home loans, and determine how they foreclose on properties. That could complement, or supercede, a settlement between banks and federal regulators reached earlier this year.

    Talks over monetary aspects of a potential settlement between the AGs and the banks are just getting under way. New rules for banks writing down mortgage principal and the establishment of a bank-paid fund to help with loan modification are on the table. Some reports have potential bank payments reaching $20 billion but sources on both sides suggest that number is high. The breadth of the negotiations has caused seven Republican attorneys general to split with the 43 other AGs.

    In early March, American Banker published a 27-page term sheet that Miller and the other attorneys general had presented to the banks in the talks. “We’ve had negotiations and have agreement on some of the terms but no overall agreement,” Miller says.

    Miller objects strongly to the NIMSP report. “It is extremely false and misleading,” Miller says. He disputes the report’s assertion that many of his campaign contributors have a “vested interest in the final terms of the settlement.” Other than Koplow and McCaul, none of the other lawyers named as campaign contributors in the report are involved in the case and none has an interest in the settlement, Miller says.

    Miller also says the report commits “an omission of material fact” in its description of his fundraising by comparing 2010 fundraising to prior races. “This race was unlike any race I’d been in before,” Miller says. “It was a race where the other side had $2.2 million. The most any of us ever spent in this race before was $300,000 or $350,000,” he says. Miller says he didn’t have a competitor in 2006 and that in 2010 he and his supporters eventually raised and spent around $1 million.

    Kevin McNellis, the author of the report, says the fact that he compared 2010 to 2006 without mentioning that there was no competitor in that race was “an oversight on my part.” Though the report argues that the campaign contributors’ interest in the outcome of the settlement of the foreclosure investigation is “vested,” which means “guaranteed” or “unconditional,” McNellis says he does not know which individuals or firms are directly involved in negotiations.

    But McNellis asserts that, “When they were contributing last fall, I’m sure that it was something they were very keenly aware of, that Miller was leading the investigation.” They would have an interest in the outcome, McNellis says, “even if they weren’t directly involved in the negotiations.”

  9. neidermeyer

    All depends on who holds collection rights on their books.

    cubed2k

    No one should pay anything on delinquent credit cards or in a mortgage loan modification unless you definitively know your current creditor and do not relinquish your legal rights. And, should first consider BK as all are unsecured debt.

  10. At the risk of yet again hijacking a thread, I’m going to offer this comment from another thread as a resolution to the problem:

    Sovereign nations can: make their own laws, levy their own taxes and issue their own currency.

    The United States is a sovereign nation.

    Therefore, the United States can issue its own currency.

    Borrowing Federal reserve money is expensive; issuing American money is free.

    “How expensive,” you ask? In the twenty years between 1991 and 2010 the government borrowed $9.9 trillion while paying $7.4 trillion in interest. Seventy-five percent of the increase in the national debt went to pay the interest on that debt. This year the interest on the nation’s debt will be around $500 billion – more than $5 trillion in the next decade.

    These interest payments benefit only the banks, banksters and Wall Street bond traders. What logic can justify such a large expense for the benefit of such a small number of our citizens? Never have so many paid so much to so few for so little.

    The U.S. government can issue all the money we need or want debt and interest free.

    The government is our only hope of stability. It is the only institution that has the authority, power, and flexibility to create a stable currency necessary to generate a sustainable economy. It can create money by fiat, lend money like commercial banks, pass laws to regulate the value of our currency, and it can fine-tune the money supply with taxes. No privately owned institution can do that job.

    Given the above, why do we continue to pay these Wall Street firms to tally up America’s needs? Save for that fact that lobbyists have slipped through back door….let’s not call it a revolving door any more, that makes it sound occasional, it’s anything but that. It’s pass keys freely given. Screw them all.

  11. Anonymous,

    “and the government is not (yet) pulling their cover. With everyone here — this will not last very long.”

    Yes, I agree. They want time and other distractions to go forward. Obama was hired because he said we need to look to the future. AND he is still saying that. Oh it’s education that will pull us forward. They have been saying that for a decade now and more money pumps into education and yet nothing changes. But one thing changes, those seeking education get more in debt.

    I’ll say it again, if you engage with your debt servicer, loan servicer via loan mod and spill the beans on your financial situation as opposed to “prove it”, you moght be opening up a can of worms. I don’t know, I have not responded to unlimited letters and calls on my defaulted credit card debt and nothing has occurred. My mortgage I have not responded per se but only asked via QWR but I have not agreed to the debt. CC’s has been two years, mortgage one year.

    ?????????????????????????

  12. ANONYMOUS ,

    I understand what you’re saying (not at the same level as you) but I’m unsure which of the remaining players have the most to lose at this point when the general public awakens to the unsecured nature of the loans and the music stops. Will it be the servicers such as LPS , the TBTF banks (excluding the sanitized ones on your list) or another entity ..

  13. Anyone whose loan “collection rights” were disposed of prior to early 2008 can be assured collection rights are with a hedge fund/distressed buyer.

    The government purchased the toxic SECURITIES from the banks who had converted the loan assets into securities (all pass-through securities remained with the banks — only lower trust tranches and CDOs were sold to investors).

    While some whole loans were also purchased, for the most part, the loan itself remained on the off-balance sheet books of banks until the loans were taken back onto balance sheet — or, until the bank or government disposed of collection rights. All in effort to rid the banks of the “toxic security/assets” and related derivatives. All orchestrated to buy time for the banks to restore their capital requirements. .

    As time progressed — many banks were able to rid themselves of the toxic assets, or the government did it for them. Since government owned most of Citigroup — Citigroup has little of the “assets” left. Same goes for Chase. BofA is a different story.

    Under any scenario, the servicer, trust, trustee — are not the creditor — and they were never the creditor. And, neither were the security investors.

    Have suggested many times that we define “investor”. An investor in securities is never the creditor — an investor in collection rights/distressed debt/default debt — IS the current creditor. And, these were the ONLY investors who ever “funded” the subprime mortgage loans (not really a mortgage — nothing more than a large credit card debt). THESE current creditors/”Investors” are in hiding — and the government is not (yet) pulling their cover. With everyone here — this will not last very long.

  14. Matt Weidner Esq. The Florida Foreclosure Defense Hero describes a Florida Rocket Docket Court.
    To see the pictures in the blog , click on this link http://www.mattweidnerlaw.com/blog

    UNBELIEVABLE !!!….in a courtroom, the judge has a big, serious imposing mechanical stamp…it’s HIS OFFICIAL STAMP!…. In my mind it’s like the king’s stamp. It’s sacrosanct….it’s holy. But in this courtroom, the troglodytes were just passing this thing around like….well, I could only come up with a profane metaphore, so I’ll just say, they were just kachuning away, “signing” orders and I didn’t like it. The whole scene felt like some acid trip scene straight out of The Big Lebowski…
    ——————————————————————-

    OUTRAGE OF THE DAY- Exactly Who Runs The Courtroom?
    April 20th, 2011 · Foreclosure
    I have to take many deep breaths before I write this and really restrain myself. I started to write this right after it happened this morning, but I’ve learned that I must exercise some restraint unless I’m ready to pay the ultimate price for exercising my rights to free speech. Even when you’re speaking the truth, reporting facts and standing up for much larger and critically important constitutional issues, I’ve learned that one cannot rely on the quaint and naive notion that such controversial speech is protected or that my attempts to stand up for the larger good will go unpunished.

    So with that as the preamble, the story begins that I headed off to battle early this morning in a courtroom outside my home territory. Because I had done my homework, I knew I was headed into hostile territory. One of the most open-minded of my colleagues had recently gone to this particular courtroom with an example of crystal clear, undeniable fraud which was just totally ignored, dusted off, disregarded and dismissed by the court. This particular attorney was not exactly a partisan fighter. He was not exactly a true believer of all the well-documented stories of fraud and impropriety. He was more or less an agnostic…at least until his last experience in this particular courtroom where he presented crystal clear, undeniable fraud that was just totally ignored, dusted off, disregarded and dismissed by the court….and that just pushed him totally over the edge. (Welcome to the very, very dark side of your profession my good colleague.)

    Anyway, with his experience fresh in my mind, I knew I would have to really be on my game in order to protect my client’s rights. So I got to court way, way early. One of the things I learned long ago was how important it is to arrive early. The first chapter of the Art of Foreclosure War says, Survey the battlefield. Size up the opposition and get a read on the interpersonal and subtle dynamics of the battlefield. (although truthfully the Fraudclosure Rocket Docket Courtrooms are not really like battlefields, they’re more like World Wrestling Federation Octagons)

    So I picked out a neutral spot in the courtroom and sat and waited for my case to be called. While I’m waiting, in rolls the Jackals from the Fraudclosure mills..I say roll because they don’t walk into court like real soldiers. They wheel in their putrid piles of lies and fraud in cases with wheels built right in. These troglodytes cannot muster the strength to carry their weapons into battle, they wheel their manure in and because they’re way, way to comfortable they don’t select neutral real estate, they just consume and infect the prime real estate right up in the front of the courtroom spreading all their toxic filth all about wherever they please like a prisoner spreading…(okay, I’m getting too heavy on the hyperbole here). Anyway, if you’ve never seen what I’m describing, here’s kinda what they looks like:

    So first up was a “trial”. The troglodyte moves right through it all lickety split and before you know it…BAM! Foreclosure Granted! But she wasn’t done yet, there were several other cases that she might have had something to do with….there was some amount of confusion because once she started talking about “her” cases another troglodyte stood up and she was apparently there on the same cases as well. So the whole courtroom sat there while these two sorted out who was on first and what was on second…at this point in time I drifted out because I’d seen this movie before…..remember in Star Wars when Han Solo was in the bar….it was this weird., otherworldly scene with all manner of unsavory characters:

    But wait, I’m mixing way, way too many metaphors here. The point is at some point in time I emerged from the worm hole I slipped down and when I did, the Trial Attorney from the Fraudclosure Mill had rolled her wheeled black box back behind where the clerks and the court personnel live and planted herself right there among them. All her files and documents were spread out on the court’s desk and she was pumping away…feeding documents here, there and everywhere. She owned and consumed all that real estate….the court’s real estate, the people’s real estate…what should be neutral territory.

    But here’s what really got me…in a courtroom, the judge has a big, serious imposing mechanical stamp…it’s HIS OFFICIAL STAMP!…. In my mind it’s like the king’s stamp. It’s sacrosanct….it’s holy. But in this courtroom, the troglodytes were just passing this thing around like….well, I could only come up with a profane metaphore, so I’ll just say, they were just kachuning away, “signing” orders and I didn’t like it. The whole scene felt like some acid trip scene straight out of The Big Lebowski…

    but it wasn’t….it was a courtroom….sort of. It took me several minutes, but after a while, I became convinced that I had not been drugged and that what I was seeing was actually….occurring right in front of my eyes. The foreclosure troglodytes were stamping and kachunking orders and stuffing envelopes and it was all just chugging along….not the court….the troglodytes.

    So now I was awake and alive and acutely aware of what was happening in this courtroom. My case had not been called, but I wanted to jump over the rail, out of my neutral territory, I wanted to stand up and say, ‘WAIT A MINUTE. STOP! HOLD ON! WHAT’S HAPPENING HERE?!”…remember that scene out of “The Wall”….

    But I’m already facing real trouble for daring to speak out against the machine. So I sat there and watched the meat grinder grind away….but I did not like it. I thought to myself, “what would a pro se person think of this courtroom?”, “What would any one of our white haired founding forefather’s think of this courtroom?” But still I sat there, snorting and huffing and squirming on the Group W bench. I tried to rally some outrage from the other guerrillas who were in the room, but they explained to me (under their breath) that this was the way things operated here.

    And then, finally my case was called. The case was sounded and I stepped forward. I spoke, and the court replied, “SUMMARY JUDGMENT GRANTED!” but then I said, “Your honor, I’m here for the defendant”, to which the court replied, ‘YOUR MOTION IS DENIED”. So then I explained, it’s the court’s order I seek to enforce…and my motion was granted.

    I should have just turned around and headed back to the office… I won. I’m already in enough trouble for caring enough about things and people that I’m not paid to represent…..but somewhere in my fighter’s mind, I remembered that Oath I took. I spoke up….I bowed…I curtsied, I begged, I deferred….

    “May I approach your honor? May I speak? Thank you. Your honor, as an officer of the court, begging your pardon, pleading for your mercy. I have a real problem with what is occurring right over there beside us. Forgive me, but it just strikes me as a bit inappropriate when parties are taking your stamp and kachunking orders. What would this look like to the general public? Is this what our forefathers had in mind when they conceived of our fair and independent judicial system?”

    To which the court replied (more or less):

    “You’ll have to take that up with the legislature….we don’t have proper funding and we cannot bother with your concerns. We don’t have staff. We’re doing what we have to do here….move along please.”

    And so it goes, and so it goes. And all of this in the shadow of a very significant lawsuit filed by the American Civil Liberties Union that more or less documents with excruciating evidence and particularity, the claims and allegations that I describe in this post. I will suffer for daring to publish these facts and for sharing these thoughts, but is this not the very highest calling of my profession?

    If you have not done so already, please read the lawsuit that has been filed by the ACLU:

    florida_foreclosure_20110407_0
    https://www.aclu.org/files/pdfs/racialjustice/merrigan_appendix_20110407.pdf

    Please log onto their website and take in the full specter of the fight that they ACLU has picked. Please share this with criminal attorneys, with family law attorneys, with press and with anyone who cares about what they think they know about our court system.

    ” They” are going to come after me for this post (how dare I speak the truth), but there are far bigger and more important issues at stake….I’m in this for the long haul and the deeper fight. Bring It On.

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