While this is an interesting first step, the DOJ and the media are still overlooking the most basic fatal flaw in the sale of mortgage backed securities, to wit: the certificates were not mortgage-backed, and in fact were bogus certificates from a non-operating entity controlled by the Investment Bankers. It was the perfect crime — invent a company, do an IPO and keep the proceeds.
The Trusts were created on paper but never used, never funded, and never did any business. In fact they never had a bank account. The certificates were sold as securities and were not protected by exemption because while they claimed to be mortgage-backed, they were not.
So the issue of the bad loans that were being hyped by the “ladders” of conduits and sham entities is the second point, not the first. The DOJ needs to do what people in litigation have been unable to accomplish — investigate the money trail and arrive at the same conclusion I did — that the money never flowed through or for the Trusts.
The entire securitization scheme was a scam. The money trail will show money flowing from the investors to the investment banks to various conduits and sham entities. It will also show that some of the money was put into a large cesspool of of the proceeds of sale of the certificates from which the banks covered their tracks by making enough loans so that it would not be apparent that this process was for the banks — in a program that was adverse to the interests of the real parties without adequate disclosure. If DOJ wants convictions, they should get to the root of the matter and start at the beginning — not plunge into the middle of the scam and try to make sense of it.
And such an investigation would reveal that the certificate holders were left without any rights to the notes or mortgages despite assurances to the contrary. Once DOJ puts the pieces in place they will see that the securitization scam was in fact a PONZI scheme where the payments received by investors were taken from a pool of money that consisted of their own money.
Filed under: foreclosure |