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Thoreau, Rico & Mortgage Fraud

By Jim Willie CB      Printer Friendly Version Bookmark and Share
Oct 6 2010 1:23PM

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

Some significant events are in progress, extremely important developments in the grand pathogenesis that reflects the deep decay and deterioration in the US financial structure. The most recent events pertaining to mortgage loans, home foreclosures, and disclosed fraud carry great potential to open wide cracks in the American social order. Revealed fraud is slowly coming into the open by the big banks. Civil disobedience has already taking form in popular protest. However, the recent events surrounding illegal home foreclosure seizure of properties elevates the exposed fraud to a new level. This is a boil ready to break open upon the society. The cases where people have been removed from their homes, even when no bank loan exists (as in owned free & clear), by means of fraudulent and forged documents, has finally provoked RICO law provisions. Witness the prima facie case of organized crime extended from Wall Street, whose roots lie most likely in Fannie Mae itself. The legal industry has finally joined the fray in class action lawsuits. Defense citing errors made have been met with accusations of fraud, quite a different game.

The Racketing Racketeer Influenced & Corrupt Organizations Act of 1970 was designed to fight organized crime. RICO has been invoked in class action lawsuits in at least two states in the past month, each related to mortgage fraud, securities fraud, and illegal property seizures. At the center of the firestorm lie JPMorgan Chase, Bank of America, and GMAC (now called Ally). Little did the USCongress realize that RICO laws might be used to oppose criminal activity on Wall Street. When tracked with some forensic analysis, the roots are found in REMICs, those perverse financial instruments that functioned as umbilical cords to Fannie Mae in past years, funding its powerful centrifuges. They fed the housing bubble and mortgage finance bubble, each valued over $10 trillion in size. Bear in mind that RICO has been used primarily against mafias and crime organizations dealing with gambling, drugs, murder, and prostitution, where property seizures are routinely carried out. Abuses have been seen in states like Florida, where motorboat owners guilty of owning small bags of marijuana have lost their boats in legal seizure. It seems that selective enforcement is obvious. The target within the crosshairs has moved to Wall Street banks and their servicer arms. These are dangerous times.

Recent cases threaten to encourage the Strategic Loan Defaults and highly charged Civil Disobedience which could actually contribute in powerful ways to commercial chaos, popular disorder, public disruptions, creeping distrust, and even systemic failure. Hundreds of thousands of people are not making their mortgage payments, intentionally stopping payments, many when they do have the ability. Over 250 thousand Bank of American mortgage holders have stopped making monthly payments, in open defiance, reacting to financial distress. The maneuver of Strategic Loan Default, together with challenges (even with attorneys) to the banks to produce legal property titles, has grown sharply in practice. The RICO cases underway threaten to toss an accelerant on that fire. Henry David Thoreau would certainly be observing closely, perhaps smiling, at the current developments of citizen action against corrupt bank practices, mortgage bond fraud, and forgery of securities as well as critical legal documents. His essay had a profound effect on me when young, when cruel abuses were endured within my catholic school locally and observed in the Vietnam War globally. Of course, the Jackass does not sponsor, endorse, or encourage any such action, believing that the highest level bankers should receive their due. The question is what is due? Objective reporting of the news, such as the viral news of the fraudulent home foreclosures, seems to have escaped the mainstream news, a consistent theme that hints of concealed sympathy. The last thing a network news systems wants is to encourage civil disobedience, since banks lose from widespread social protest.

For four years, the Jackass has placed focus upon Fannie Mae, reportedly the central clearing house for diverse USGovt agency fraud. Their tools are mortgage loans, mortgage bonds, REMICs, and more recently the MERS title database. Real Estate Mortgage Investment Conduits were a necessary piece to the housing and mortgage bubble, through which is laced colossal fraud. The REMIC acted like a mortgage futures contract, clear of any supervision or regulatory oversight. Imagine a leveraged futures contract on twin bubbles where unbridled fraud was common. Recall that $1500 billion went missing from 1988 to 2000 in two HUD regional offices. One was Houston and the other was Oklahoma City, the home grounds for sitting presidents. The missing funds have fed black bag funds, even financed the highly active Working Group for Financial Markets. It and high frequency trading keep the stock market afloat. The entire set of prima facie and expanded aspects of the mushrooming story are to be covered in the October Hat Trick Letter reports. But honestly, this is a huge moving target, whose capture is better described as herding cats on an open field.


The event mushroom has a primary point of vulnerability that has received very little attention. The Mortgage Electronic Registration Systems (MERS) was originally an innovative process that simplified the way mortgage ownership and servicing rights were originated, sold, and tracked. MERS is a property title database, intended by Wall Street and Fannie Mae to serve as a repository that kept order when mortgage bonds were traded fast and furious. In recent court cases in at least three states, the MERS database failed to attain legal standing in mortgage foreclosure challenges. The holder of the note (home loan) could not combine with the MERS database (title holder) to win property control within the courts. The system began to unravel. Now in at least one state, the MERS database is directly cited in a criminal fraud class action lawsuit that invokes the RICO statutes. MERS is the financial system's Achilles Heel in my view. Maybe a big bank might fall into ruin in the wake of some assets confiscated after demonstrated racketeering. With clarity increasing over time, several big banks have been dead since October 2008. If not for the lax and complicit accounting rules by the Financial Accounting Standards Board, the big banks would undergo liquidation. They cling to control of the USGovt financial purse and its valuable USDollar printing press. Big bank liquidation is tantamount to liquidation of the entire US financial structure from the top down, in plain words.

MERS has gained unwanted damaging attention in the legal arenas, and it will not go away. The class action lawsuits will establish the high ground, and gain attention. The proof of the malfeasance, fraud, and forgery will be incredibly easy, breathtaking in implications, and shocking to the public. The risk of civil disobedience is acute. The directly associated risk of commercial degradation within contract law is also acute. The domino effect carries risk to the business and the social fabric of the American society. The United States is on the verge of events leading to potential systemic failure. Few attribute causality to the Fascist Business Model broad implementation and secretive endorsement, but it lies at the center. The permitted criminal activity, not just with bond fraud, mortgage fraud, and property theft, extends far beyond white collar crimes. Take for instance some suspicious suicides inside the fortress, like Freddie Mac. My sources tell of a wave of middle level murders, where bankers have been systematically eliminated. The victims knew too much about the money trails, but lacked a critical level of protective support from rank. MERS is the errant tool. RICO is the thick cloud. Fannie Mae (FNM) is the grand toxic pit laced with fraud. In a strange attempt to force an equation from a disorderly situation, let it be simply stated that



One is left to wonder to what extent foreign creditors can invoke RICO laws and take over assets as part of a wider default process. The process might start with Wall Street. By next year, national parks and lands will be sold off to creditors. The movement of prosecution and perhaps restitution will begin with private homeowners, the vassals in the lost field of dreams. Somewhere along the line, the USGovt could be liable for restitution. A crucial connection on legal obligation is the formal USGovt guarantee of USAgency Mortgage Bonds, which make them full blood brothers to USTreasury Bonds. They just pay a different yield, although we are witnessing a convergence between mortgage rates and USTreasury yields. The smears on Fannie Mae are certain to drag down the global confidence and prestige of the USTreasury Bond itself, a process underway. Perhaps the USCongress can hastily include a rider on some war appropriation bill or jobless insurance bill or some other bill that is approved but not examined, which exempts USGovt agencies and Wall Street firms from RICO prosecution, even ex-post facto. Harken back to Hank Paulson as USTreasury Secretary, trying to explain Wall Street bond fraud as errors of judgment. The ploy did gain some traction, but the recent lawsuits over mortgage fraud, forged foreclosure documents, and more, run the risk of opening the RICO window at a more pervasive level. Its three loci of activity are the USFed, Goldman Sachs, and JPMorgan. Oligopoly and its consolidation enables naughty behavior. With size came power and connections.

The Fascist Business Model is so broadly affecting the USEconomy, like a grand mezzanine latticework, one considered part of the American landscape. It is diverse. A culture of fraud is engrained nationally, clearly perceived from foreign vantage points. The original roots of the Fascist Business Model are difficult to trace in the United States. They could be from Big Oil, Wall Street Finance, Defense Contractors, even Big Pharma, but with timing in the 1970 or 1980 decades. Full blossom of the business model, identified by a merger of the state with large corporate interests, took place in the last decade, amidst the dominant terrorism theme. Witness the ruinous fruit of the tight embrace endemic to the fascist business model. The exposure has finally come into the arena of state courts, even some Supreme Courts like in Florida, Kansas, and elsewhere. The defendants claim errors and mistakes, when the prosecutors attempt to prove fraud, forgery, and illegal seizure. A series of public spectacles comes soon. At great risk is ruin of the threads, tissue, and fiber of the nation. Many have called it the moral hazard in countless citations. The USDollar rests on the faith and trust of the USGovt. If systemic fraud and organized criminal activity are demonstrated in open court cases, the faith and trust vanish. The same trust and faith underpin the USTreasury Bond complex, the debt securities for the USGovt debt. When the Fannie Mae & Freddie Mac failed toxic pools became adopted son & daughter in September 2008, the USTreasurys took on added risk.

The MERS database and countless home foreclosures are at the center of legal investigations. Even a sitting US Senator has called for investigation of JPMorgan, Bank of America, and GMAC, regardless of their size, prominence, influence, or prestige. The TARP Fund has been declared a victory, saving the US human strain from depression and extinction. Please! Give me a break! Often mentioned in the TARP Fund disbursement is how the $700 billion did not go to mortgage portfolio relief, but instead to Wall Street firm preferred bank stock, typically held by executives. The TARP Funds still remain without an independent audit. As Paul Volcker said in his unprecedented diatribe harangue last week, the Financial Regulatory Overhaul Bill started out with strong motive to reduce the US Federal Reserve powers, but ended up giving it even more power. Credit goes to the $200 million lobby budget by Wall Street firms handed to the USCongress, a truly sordid sorry bunch.

At great risk is the breakdown of faith and trust in the USDollar and USTreasury Bond internationally, from a climax collapse of the Fascist Business Model itself. The deep hidden costs of the Fascist Business Model are diverse inefficiency, layered cost to the privileged corporate elite, crushed middle class, interrupted capital formation, lost income engines, and the social effect of a recognized two-tier justice system. At great risk is the breakdown of contract law and legal obligation, a cornerstone of American commerce, even commerce globally. At risk is the revenue stream for the big banks, where bond fraud creation is next likely to be demonstrated, in addition to document forgery and duplicate mortgage titles in bond securities. If a significant portion of the American public decides to scoff at their legal obligation to pay on loans, initially here with home loans, but later possibly with car loans and credit card loans, then the US financial system will plunge into darkness and risk a collapse.

The nation is at the doorstep of systemic failure, greatly at risk of the social accelerant of Civil Disobedience tossed on the fires of social angst. Capitalism has failed in the United States of America, simply put. Its capitalist spirit was crushed by unsound money managed by a foreign owned central bank, raids upon the national gold treasury, abandonment of industrial plants, wretched economic theories, labor union backlash, the high cost of military pursuit, price inflation (in particular labor), and banking policy that encouraged a series of asset bubbles. The population is vulnerable to elite backlash of uncertain origin. The nation has never been closer to class war in its history. The nation is witnessing a climax of a systemic debt cycle. The Macro credit cycle is in the process of declaring the USGovt debt condition as unfixable and growing worse each year, a macro bankruptcy process at work. We finally see the USGovt dealing unsuccessfully with insolvency. Inescapable is the Macro credit cycle, where the USEconomy is drowning in oceans of debt, the US banks are stuck with toxic debt, the US households are weighed down by excess debt, US industry with its legitimate income is long gone to Asia, and the USGovt new debt issuance is as much a burden as debt service. The nation is plunging slowly into the Third World. Systemic failure has advanced in a grand tragic pathogenesis. The escalating gold price is urgent response.


The increasingly visible vote of no confidence in the fast failing USGovt financial structure, and in the missing capital formation apparatus that was once Wall Street, and in the entire avalanche of paper in debt monetization to undermine valuation, is the GOLD & SILVER PRICE. Both metals are breaking out to the upside. They are registering votes of NO CONFIDENCE. Gold & Silver are put in investment portfolios to hedge against monetary system breakdown. They are insurance policies for private wealth, to protect from erosion of money through sponsored sanctioned monetary inflation. A deep problem with the current strategy of monetizing debt and inflating debt to a reduced level, is that it betrays creditors. It forces a debt writedown on creditor investments in USTreasurys and US$-based securities. It invites retaliation in trade war, whose financial expression is COMPETING CURRENCY WAR.

The financial friction is reaching a higher level each month. On Tuesday, the Bank of Japan announced a cut to 0% interest rate, this being done a full 20 years after their financial crisis stuck them with the dead-end 0% interest rate. The advantage of a trade surplus helped Japan for two decades. That surplus has disappeared, handed over to their Asian rival China. The two nations are in hot disputes in the last month. The ramping Competing Currency War is better described as a race to the bottom, in which only GOLD & SILVER win. Anyone wondering why an inert metal would prevail over investment in a financial structure or debt parade is simply obtuse and of dull mind. Gold represents money in a land where money has been systematically debased. Money today is nothing more than debt in disguise, and legal tender is nothing but denominated debt. The system is on the verge of failure, complete with failure of state, due to the cancerous nature of its faulty money. The high priest apologists have lost credibility after regular justifications for a sequence of failed theories. Gold & Silver are refuges.

My forecasts in the past have been for a $1300 gold price, now achieved. My forecasts in the past have been for a $21.50 silver price, now achieved. The two precious metal markets are in a clearly recognized bull market breakout. The big banks are on the defensive, covering shorts, almost their entire positions being underwater. They will strive to shove their portfolios into some USGovt closet, like Fannie Mae or AIG or a hidden USDept Treasury device. The deceptive commentary has become humorous, about gold being in a bubble. Be amused by it, if not horrified by it. Alarm systems are never bubbles. Gold is indeed a hedge, but against many misfortunes.

  • The gold market represents a hedge against the USTreasury bubble.
  • The gold market represents a hedge against the breakdown of the monetary system.
  • The gold market represents a hedge against coordinated wreckage of the currencies by the central banks, resulting in uniformly lower purchase power of money.
  • The gold market represents a hedge against a ripple effect from a global spread of sovereign debt writedowns, defaults, and their extension to the currency system.
  • The gold market represents a hedge against the insolvent banks.
  • The gold market represents a hedge against an extended banking system shutdown.
  • The gold market represents a hedge against heightened trade war and great destruction.
  • The gold market represents a hedge against the loss of wealth, plainly stated.
  • The gold market represents a hedge against the US systemic failure in progress.
  • The gold market represents a hedge against the inevitable USTreasury default, whatever final form it takes.
  • The gold market represents a safe harbor for money, since it is true money.

Gold & Silver are investments in legitimate money. Gold & Silver are votes of NO against the Fascist Business Model and its trappings. Gold & Silver are investments in bullion whose price in no way properly reflects the diverse shortages and contract shorting by official chambers without benefit of metal collateral. Gold & Silver are investments in grossly under-priced bullion whose move toward equilibrium will bring about price advances of multiples higher, not just hefty percentages higher. Prepare for $3000 gold and $80 silver. Support of the US$ DX index at the 78 level is not holding. A further slide below 77 will invite calls for direct global USDollar intervention, and another upward thrust in the Gold price. The huge move in the Gold price over $25 and the huge move in the Silver price over $1.00 in a single day on Tuesday was triggered by the Bank of Japan, which registered commitment to the Competing Currency War. The issue is not inflation versus deflation, but rather of systemic breakdown and the focus on tainted money, if not lost store of value. The Gold price will show a mid-term top only when anything is fixed. The USTreasury Bond rally is a loud signal of systemic failure. There is liquidity all around, supposed at zero cost, but it is all hemlock. It is not INFLATE OR DIE, but rather INFLATE & DEFAULT. The stock market is the distraction steeped in irrelevance, since stocks could rally, but money is losing value.

In case sleepy observers have not noticed, Team Obama in the economic dugout just disbanded. Nobody is left except a hologram inside a great void. In the president's hip pocket is found a copy of "Dialectical of Materialism" without much public notice. The helm is empty. The Ship of State is adrift, a derelict vessel. Peter Orszag is gone (broken budget, spiraling deficits). Christina Romer is gone (wise mediocrity but ignored). Lawrence Summers is gone (loser preppy). Cindi Sparks is gone (stimulus plan architect). One can only hope that Tim Geithner departs too. Although not on any economist team, the exit of Rahm Emanuel should be interpreted as meaning that Obama is a political liability. Running for Chicago Mayor might raise difficult questions on his resume, best not asked, since he wears two hats. The legacy of US economic counselors in the past two or three decades has been heresy reinforced by rationalization, embellished by obfuscation, touted as erudite, ignorant of history. They stand atop unsound money, having lost the concept of money, industry, and income. In the current pathogenesis of systemic failure and debt default, Gold wins!


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Jim Willie CB
Editor of the "HAT TRICK LETTER"
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October 06, 2010



Jim Willie CB is a statistical analyst in marketing research and retail forecasting.   He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at For personal questions about subscriptions, contact him at