Mortgage "Settlements" Protect Mortgage/Derivatives Fraud
January 11, 2013 • 10:31AM

Three big mortgage/foreclosure settlements have been announced so far: the $25 billion settlement announced in February 2012; and the $8.5 billion settlement reached with 10 banks and the $10.3 billion deal reached with Bank of America earlier this week. That makes for good headlines, but what is actually going on here?

In effect, the crimes which these bankers committed are still being covered up.

What crimes? To answer that question, it is necessary to understand that the issue from the bankers' perspective is not mortgages, not even foreclosures, but the protection of the fictitious values of mortgage-related derivatives — the mortgage-backed securities and the securities piled atop them. That means protecting a whole string of fraudulent acts, from improper issuance of mortgages to failure to comply with laws regarding the transfers of mortgages and their related promissory notes, which invalidates most of the mortgage-backed securities and the derivatives based upon them. Which in turn means that the banks and the mortgage trusts lacked the legal standing to foreclose on homeowners — a problem they tried to remedy with widespread falsification of documents and the filing of those false documents in court.

The systematic criminality of this scam is stunning. An honest investigation of any part of it would quickly expose a vast criminal conspiracy, and also reveal the entire mortgage-derivatives portfolio to be worthless. Which would reveal the bankruptcy of the financial system as a whole and trigger runs which would immediately blow out that system.

That is why we see these phony settlements, which appear to be punishing the banks but actually protect them. Were the truth to see the light of day, the system would be gone by nightfall.