Wednesday, 27 October 2010

The Next Lehman.

Baltic Dry Index. 2748 +21
LIR Gold Target by 2019: $3,000.

The same people who caused the last crisis are still in charge. They’ll get us into another. Iceland is taking its ex-prime minister to court for causing the banking crisis. Worse fates await the people who are causing the next crisis. China used to chop off the heads of its failing ministers at the capital’s vegetable market. Maybe we should bring back the practice and globalize it.

Andy Xie. 10.22.2010

More on the next Lehman later, first this. Is Chevron the next BP? After reviewing data from BP’s disaster in the Gulf of Mexico, Chevron has more than doubled it’s worst case estimate of an oil spill off the Shetland Islands. Not to worry though, Chevron says it can’t happen and an “expert from the Health and Safety Committee yesterday told MPs on the Energy Committee that Britain's safety regime is the best in the world.” Luckily, bad weather has halted Chevron’s drilling for now, which is just as well. Were an accident to occur in the winter north of Shetland, there is probably no way of responding to it until the spring or summer. Our world is now playing environmental Russian roulette in its quest for oil. We can only hope that Chevron gets it right.

Shetland drilling could trigger spill worse than BP's

Chevron has admitted its new deepwater drilling campaign off the Shetland Islands could cause an oil spill worse than BP's accident in the Gulf of Mexico.

By Rowena Mason Published: 6:46AM BST 27 Oct 2010

The US oil giant believes that, in a worst-case scenario, the North Sea well could release 77,000 barrels per day – 25pc more than gushed into US waters this year.

Chevron has doubled its worst possible forecast from 35,000 barrels per day, after reviewing all its data in the light of BP's accident.

Richard Cohagan, managing director of Chevron UK, said the high-pressure nature of the area led to the larger estimate.

"Deepwater Horizon has given us a new perspective on how bad things could be," he said. "When we looked at the core pressures and what seismic has shown us might be the producing interval, we calculated what the largest spill rate could be.

"We actually came up with a very large spill rate in that condition of 77,000 barrels - actually more than BP's Macondo."

Chevron is currently drilling the Lagavulin prospect around 160 miles north of the Shetland Islands in 1,569m of water - deeper than BP's ruptured well.

Bad weather conditions recently stopped Chevron's work on Lagavulin for eight days.

Oil companies across the North Sea have been re-examining their operations since BP's Deepwater Horizon rig exploded on April 20, killing 11 men. However, oil companies and an expert from the Health and Safety Committee yesterday told MPs on the Energy Committee that Britain's safety regime is the best in the world.

Below, Bloomberg on the school for Whiplash Willies. Actually, the University course of choice for American lawyers setting out to take on the mortgage fraudsters of Wall Street. The next Lehman’s days are numbered. For more scroll down to Crooks and Scoundrel’s Corner.

A bank is a confidence trick. If you put up the right signs, the wizards of finance themselves will come in and ask you to take their money.

Jules Bertillon. A House of All Nations. 1938. Christina Stead.

Foreclosure Lawyers Go to Gardner’s Farm for Edge on Lenders

Oct. 27 (Bloomberg) -- Consumer lawyers have been traveling to a remote 160-acre farm in the mountains of western North Carolina since 2006 to network, drink Scotch and prepare for legal combat in foreclosure and bankruptcy cases.

They arrive in groups of a dozen or so for a four-day boot camp where they learn how to protect their clients’ assets by exploiting the mistakes of creditors. Attendees these days are especially keen on strategies to fend off mortgage lenders and servicers seeking to seize their clients’ homes.

Their instructor is O. Max Gardner III, a 65-year-old bankruptcy litigator and grandson of a North Carolina governor, who was using flaws in mortgage servicing to stave off lenders years before cases involving shoddy paperwork spurred this month’s investigation of the industry by the attorneys general of all 50 states. He charges $7,775 for the program, which covers 3,000 pages of materials, lodging, food and unlimited wine, beer and single-malt Scotch.

“My time with Max changed the trajectory of my legal career,” Nick Wooten, a 40-year-old Alabama attorney who changed his focus from personal injury to bankruptcy and foreclosure after attending the boot camp in 2007, said in a telephone interview. “Knowledge is power, and one thing he is able to give in his boot camp is a tremendous amount of knowledge about how the other side operates.”

Participants, who are admitted only after a background check confirms that they don’t work for creditors, gain access to a private e-mail distribution list where they share legal strategies, documents and advice. Linda Tirelli, a consumer- bankruptcy attorney in New York and Connecticut and one of the 599 people who have gone through the program, said she feels like she’s now part of a big law firm.

National Issue

While Gardner and some of his graduates have been winning settlements for years, it wasn’t until Ally Financial Inc.’s GMAC Mortgage unit said Sept. 20 it was halting some evictions that foreclosure documentation and the use of robo-signers became a national issue that threatened to stall sales of repossessed homes and gave investors ammunition in their fight to force banks to buy back billions of dollars of mortgage- linked securities.

---- The heart of Gardner’s strategy is to uncover omissions and errors in mortgage securitizations, the process in which thousands of loans are bundled into bonds and sold to investors. Securitizations are plagued by lost promissory notes and missing or inconsistent tracking of changes in loan ownership, Gardner said the interview. Servicers processing default actions papered over the errors with improperly prepared affidavits and after- the-fact assignments of mortgages, he said.

------ One tactic Gardner employs in court is to allow creditors that produce dubious evidence to “dig their own grave.”

“I wouldn’t go in waving documents around,” he said. “The more false documents and inconsistent documents I get the other side to produce, the more legal leverage I have against them.”


We end for today with Greece. Greece puts sovereign debt default back on the EU agenda again. Stay long precious metals. All the fiat currencies are in deep trouble.

Money has no country.

Jules Bertillon. A House of All Nations. 1938. Christina Stead.

Greece reignites Europe debt woes

Europe's debt woes have returned to the fore after Greek premier George Papandreou threw open the door to fresh elections and vowed to liberate the nation from "slavery and surveillance".

By Ambrose Evans-Pritchard Published: 5:49PM BST 26 Oct 2010

Yields on 10-year Greek bonds jumped 31 basis points to 9.57pc and the euro tumbled 2 cents to $1.385 against the dollar as investors awoke to the risk of political upheaval in Greece, not helped by warnings from bond giant PIMCO that Athens will default within three years.

"We have not yet escaped the danger. I am sounding the alarm," said Mr Papandreou.

While he promised to stick to the EU-IMF austerity plan, he threatened to go to the country if upcoming local elections fail to give his socialist PASOK party a clear mandate. "There can no deadlock in democracy, the people have the power to decide," he said.

The main opposition group New Democracy has yet to give a watertight pledge that it would abide by the terms of the EU's €110bn (£97bn) rescue, or the "Memorandum" as it is known.

PASOK itself is fraying at the edges in any case. A socialist rebel candidate from the "anti-Memorandum" bloc leads the polls for the Athens region.

Mr Papandreou is responding with populist gestures, granting pensioners a €300 bonus and rejecting calls by Brussels and his own central bank for further belt-tightening. "There will be no new measures on wage-earners or pensioners, they have paid enough," he said.

The fiscal picture is extremely delicate. Eurostat is expected to raise Greece's budget deficit for 2009 to 15.1pc of GDP from 13.3pc. Public debt will rise to 127pc instead of 115pc, bringing the country closer to a debt compound spiral.

Mohamed El-Erian, chief executive of Pimco, said the EU-IMF package prevents Greece from growing its way out of the crisis and will test political consensus to destruction. He said it would be healthier for both Greece and Europe to opt for orderly debt restructuring.

"To combat depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection or production, we want to create further misdirection- a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end."

Friedrich Hayek, 1933

At the Comex silver depositories Tuesday, final figures were: Registered 52.12 Moz, Eligible 59.10 Moz, Total 111.22 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Fraudclosuregate takes yet another twist. Is Bank of America the next Lehman?

The reason “many firms file lost note counts as a standard alternative pleading in the [foreclosure] complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file.

Florida Bankers Association.

October 26, 2010

Guest Post: How Did the Banks Get Away With Pledging Mortgages to Multiple Buyers?

Washington’s Blog

I’ve repeatedly documented that mortgages were pledged multiple times to different buyers. See this, this and this.

In response, some people (including one of the country’s top bankruptcy lawyers) have told me they don’t buy it.

Specifically, they ask such questions as:

  • With a mortgage sold to two different entities, wouldn’t the income from the mortgage be shown on the books of both entities?
  • Was the interest/principal payments that were made by the homeowner before they stopped being divided between both entities? If so, wouldn’t this have rung alarm bells immediately?
  • If only one was getting it, why didn’t the other entity immediately try to foreclose?
  • If there was one servicer involved, was the servicer covering the difference between what was collected and the payments actually made? If so, how did the servicer do this and still remain in business?
  • If two servicers were involved, why didn’t this come out sooner or were both servicers hiding this fraud?

So I wrote to some of the leading experts on mortgage fraud – L. Randall Wray (economics professor), Christopher Whalen (banking expert with Institutional Risk Analytics), and William K. Black (professor of economics and law, and the senior regulator during the S & L crisis) – to seek their insight.

Chris Whalen told me:

All good points, but the short answer is that nobody may have noticed until now. The issue of substitution and other games played by servicers makes exact tracking of loans problematic. It should show up in the servicers reports and should be caught, but there are a lot of things that go on in loan servicing that nobody talks about. Until about 2006, the GSEs and banks would advance cash and would substitute, but not now. The noble practitioners you heard from are all sincere and want to believe in intelligent design.

-----Professor Black told me:

Double pledges (as they’re typically called, though one could pledge multiple times) are a well known fraud device. It is correct that one of the key purposes of adopting Article 9 of the Uniform Commercial Code (UCC) was to reduce the risk and frequency of this form of fraud. So, double pledges in the modern era require both (A) fraud (on the part of the borrower or purchaser) and incompetence, indifference, or corruption on the part of the original secured lender or their agents if the borrower is the fraudster or the purchasers if they are the fraudsters.

----And professor Wray told me that record-keeping by servicers was terrible, and pointed me to the following article from the Tampa Tribune:

Peter Bakowski, a 58-year-old former Tampa mortgage broker, has admitted orchestrating a Ponzi scheme that involved more than 30 investors and institutions and more than 150 deals, documents show.


Bakowski sold the mortgage assignments to multiple investors, promising high rates of return and using all the money he generated to “keep the scheme afloat,” according to his plea agreement.

Bank of America Sued in Class Action Over Flouting of Foreclosure Rules

Charles Toutant 10-25-2010

Bank of America has been hit with a class action on behalf of homeowners seeking damages for alleged disregard of foreclosure process rules.

The suit, filed Wednesday in federal court in Newark, N.J., accuses Bank of America and two subsidiaries, LaSalle Bank and BAC Home Loans Servicing, of "an undisciplined rush to seize homes" through "pervasive and willful disregard of knowledge, facts and statutes."

Bank of America has filed foreclosure proceedings on many mortgages in New Jersey without holding the necessary rights as the mortgagee or assignee at the time of foreclosure, the suit says.

"Many thousands of foreclosures are plainly void under statute and settled New Jersey case law. Many borrowers never obtain statutorily required notices, and many foreclosure suits are filed entirely based in inaccurate recitations concerning ownership of the mortgage, the note, or the assignment," the suit says.

The putative class in the suit, Beals v. Bank of America, N.A., 10-cv-05427, consists of all named defendants in pending New Jersey foreclosure actions initiated by Bank of America or its affiliates. The complaint includes counts of common-law fraud, breach of the covenant of good faith and fair dealing and violations of the New Jersey Fair Foreclosure Act and Consumer Fraud Act.

"Every normal man must be tempted, at times, to spit on his hands, hoist the black flag, and start slitting throats."

H.L Mencken

The monthly Coppock Indicators finished September:

DJIA: +227 Down. NASDAQ: +321 Down. SP500: +221 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. September is the fourth down month in a row.

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