May 2011

Deutsche Bank Sued by U.S. Government

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Bloomberg is reporting Deutsche Bank is being sued by the U.S. government for $1 billion over mortgage fraud lending.

Deutsche Bank AG, Germany’s biggest bank, was sued for more than $1 billion by the U.S. government for allegedly selecting mortgages “recklessly” for inclusion in a government insurance program.

The Frankfurt-based bank and its MortgageIT unit violated the U.S. False Claims Act by presenting fraudulent data to obtain mortgage insurance from the Federal Housing Administration of the U.S. Housing and Urban Development Department

Seems Deutsche Bank hoodwinked the government and used them to insure a host of worthless mortgages and then collected on the insurance when those mortgages defaulted.

$1 Billion is a drop in the bucket, but the fraudulent amount in question is $386 million in FHA insurance claims, paid by HUD.

The Wall Street Journal reports mortgage reviews were stuffed into a closet by Deutsche Bank. And you thought your receipts in a shoebox were bad.

More than 39,000 mortgages that Mortgage IT endorsed for HUD’s mortgage-insurance program, FHA, about one third of them defaulted. The government says that when an outside auditor showed MortgageIT its findings about serious problems in its mortgages, the auditor’s findings were literally shoved in a closet.

In other words, an outside consultant group reviewed the underwriting of these mortgages and instead of even reading the reports, they were stuffed, unopened, into a closet.

Osama Bin Laden: Sui Generis?

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Originally published on The Agonist

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The non-state actor. That’s what he was called in the 1990s, before he became universally known as a mass murderer. Academics used it as a euphemistic term for an individual who took on state power, before they came up with the phrase ‘asymmetric warfare.” Osama Bin Laden was, if not the inventor of asymmetric warfare, the master of the technique, the man who single-handedly took on the world’s hyperpower.

How much more asymmetric could you get by spending $200,000 to bring down the globe’s colossus? In one terrifying morning Osama Bin Laden killed nearly 3,000 Americans, some of them tortured to death - forced to choose between being burnt alive or jumping to their death from 96 stories. In the process, he sent the United States on a path of self-destruction, as the nation lost its way between two schizophrenic and conflicting impulses: living in perpetual fear of terrorists, or strutting about the world stage with military bravado, killing hundreds of thousands of invisible, innocent men, women, and children because they were Muslims.

Bankruptcy Hell - The Sequel to ForeclosureGate

Michael Collins
charon
You're headed for bankruptcy court tomorrow. It's been a long and difficult road. You and your husband both worked. You made decent money. Then your husband became ill. There was no sick leave because he worked for himself. His disability insurance had a six-month delay and only covered half of the lost income. That was all you could afford. (Image Wikimedia Commons)

His condition was critical and required medication three times a day at a monthly cost of $2500. Your company plan covered your husband but it didn't cover the medication because the insurance company termed it experimental. It was the sole option for the crippling illness according to the three specialists consulted.

Your husband contributed 40% of the family income. The loss was a big hit but you persevered. You couldn't sell the house, even if you wanted to. It was $150,000 upside down. There was no federal or bank program to relieve that burden. After four months of cashing in a modest 401(k), it became obvious that you couldn't make it. You needed relief and time for your husband to get well.

You consulted your accountant. On his advice, you decided to file for bankruptcy.

Geithner Exempts a $30 Trillion Derivatives Market From Regulation and Oversight

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On Friday, the witching hour of government press releases they want no one to read, the Treasury Department announced they will block regulation of large classes of derivatives:

Treasury is today issuing a Notice of Proposed Determination providing that central clearing and exchange trading requirements would not apply to FX swaps and forwards.

This proposed determination is narrowly tailored. FX swaps and forwards will remain subject to Dodd-Frank’s rigorous new trade reporting requirements and business conduct standards. Additionally, the Dodd-Frank Act makes it illegal to use these instruments to evade other derivatives reforms. Importantly, the proposed determination does not extend to other FX derivatives, such as FX options, currency swaps, and non-deliverable forwards. These other FX derivatives will be subject to clearing and exchange requirements.

The entire press release is almost burying the announcement for no regulation of FX swaps and forwards. Multinational corporations use FX swaps to hedge on currency fluctuations. According to Better Markets, this will bring out the financial engineers for some sort of derivative trickery fiction:

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