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October 18, 2010


Melinda Romanoff


If there's going to be trimming, have at it like Lizzie Borden.


Melinda R--

Mr. deninger is certainly-- uh-- colorful. But he does address the issue I raise, in fact it is the subject of a RICO suit in kentucky, which like NY is a 'record' state. Deninger blogs:

Specifically, right here:

Ladies and Gentlemen:

In accordance with Section 2.02 of the above-captioned Trust Agreement (the "Trust Agreement"), the undersigned, as Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on the attached Document Exception Report) it has received:

(A) The original Mortgage Note, endorsed in the form provided in Section 2.01 of the Trust Agreement, with all intervening endorsements showing a complete chain of endorsement from the originator to the last endorsee.

(B) The original recorded Mortgage or a certified copy thereof.

So, sir, here's my question: Is the original mortgage note present at the Trustee's office, bearing each and every intervening endorsement?

Notice that the CNBC guest said "endorsements in blank are fine and it's legal to pass them around like a $2 hooker." Well sure, just like a check to cash is fine on a base legal level.

But it's only fine if the Pooling and Servicing agreement says it's fine.

And that agreement and the certifications by the Trustee, which are legal documents and an inherent part of the agreement with MBS buyers, say it is not fine.

That's the beginning and end of the discussion, and Pooling and Servicing Agreements are public documents for bonds which were publicly traded or offered - they're filed with the SEC. I have read a bunch of them and they all contain language that is materially identical to the above.

Then there's the issues raised in the Kentucky RICO suit - the issue of State Law.

Property law and recording requirements are a state law issue. In some states it is indeed legal to play all sorts of electronic games. Indeed, in Minnesota MERS recordations are perfectly legal - they amended their property law to make it so, with that specifically in mind.

But Minnesota isn't the nation. And in the Kentucky RICO suit the allegation is made that recordation of each assignment is required by Kentucky Statute.

I'm not a lawyer - nor licensed in Kentucky to practice law - but the attorney who filed that is both.

Who's right? Well, that's what courts are for. But this much is certain - if you make a claim in a security offering that you will do a specific thing, and then you do not do that specific thing, you've committed - at minimum - securities fraud.

Melinda Romanoff


I completely agree.

I especially like that most of these securities contain a buy-back provision, at PAR, in the prospecti.

Two of my favorite words come to mind.

"Unlimited" and "Liability".

naked capatilism is also all over this.

I'm about two and a half years late to catching on to the problem.

I hope this goes viral before the election.


Melinda R--

MBSs and elections? I don't think these note and recording problems have a big political impact, except help the Tea Party message of a pox on all big shots. Where this does become political, I think, is what happens when the screwed MBS bondholders want compensation? Who do they sue? Goldman/JPM/MS/Deutsche-- I bet they all protected themselves, so who's left? Who bought the non-performing mortgages which can't be foreclosed on? Hold on-- Fannie and Freddie!! Who owns Fannie and Freddie?? The taxpayers!!! Another backdoor TRILLION DOLLAR bailout brought to you by Helicopter Ben, TurboTax Timmie,and Bahnee Fwank. Lovely.

Ignatz Ratzkywatzky

--but as William Buckley so famously put it, the trouble with capitalism is capitalists--

Precisely. And the reason they are the trouble with capitalism is because they incessantly seek state intervention to hobble the competition which they are unable to eliminate via the free market.

I note you didn't provide a cite of a monopoly formed via a free market rather than though some direct or indirect state intervention.


I think Ignatz and Hanes are to some degree arguing the same side of the coin. 19th century electric companies and railroads were 'natural' monopolies that arguably created market failures. BUT, Con Ed and Cornie Vanderbilt immmediately ran to the nearest corrupt Tamanny politicians in order to cement their fledgling business monopolies with the force of law. So, the issues become blurred and to some degree inseparable in the real historical record.

Melinda Romanoff


The TARP was supposed to help make this "go away". All it did was buy time, and bonuses, of course. Also, disposing of the pesky mark-to-market removed any risk to Tier 1 Capital.

And now the tide is going out again.

They are NOT protected. JPM just upped it's litigation loss reserves to $1.5B and launched a $3B bond offering.

$5.5B ain't going to cover this s@#tstorm.

Citi has done nothing, they're still Fed owned.

BAC, and Ally(GMAC still Fed owned), has resubmitted all docs to force the court to say they're lying.

Ballsy move. We'll see how it works out.

Ignatz Ratzkywatzky

Some businesses are more amenable to easy government granting of monopoly power but there was nothing natural about either industry that prevented competing power lines and tracks.
It was the local, state and federal government grant of property and easements to only one company that created the monopolies not just cemented them.
Emergent companies and technologies can for a time appear to be on the way to becoming monopolies but they can never develop into such in a free market without state intervention.

Melinda Romanoff

There's talk of PIMCO trying to get B of A to buy back it's MBS portfolio.

Melinda Romanoff

and using the NY Fed to force the issue.


Ignatz-- I understand your argument. Just not sold that the issue is that clear cut.The AC/DC electric fight was an example of a 'natural'monoply resulting from competition: ONLY one system would ultimately prevail, leaving a monopoly anf the other tranmission system out of business. But it is an interesting discussion.


Melinda R-- Ugh. Bailout nation, and this is the biggest, and LEAST democratic Bailout. That's it I am joining the Tea Party.

Melinda Romanoff


And was the one "biggie" Edison got wrong. He lost out to George Westinghouse and his Serbian Whiz Kid, Tesla.

Melinda Romanoff

No bailout yet, PIMCO's just taking a cop with them to the "Returns" counter.

Melinda Romanoff

Blackrock too!


Melinda R/Ig--

yes he did. But the story doesn't end with Edison losing the technological war. Ig's point is to a degree made by the Epilogue. After losing the techno fight, Edison used his economic and political connections to get political muscle to stay in the game. That's why subway and railroad current -- to this day-- in the Northeast is DC, and Westinghouse/Tesla had to fight a lot of political opposition to get their AC lines in. It's a muddled business/government story, and that's why I say it's not as clearcut a picture as Ig claims. Cheers.


I can give one small example of Ignatz's statement:

It was the local, state and federal government grant of property and easements to only one company that created the monopolies not just cemented them.

We have a grain elevator on Burlington Northern "ground" that we have to pay rent on even though the railroad tracks have been gone for decades.
Does BN have the right to collect rent on property no one is certain it owns?
Yes they do.

Melinda Romanoff

Forgot about that!



Just a fast note because I more bureaucratic paperwork that has to be submitted at 2.

From Ignatz's link at 12:15 PM

"About 60 percent of mortgages in this country show up in local records as being owned by the service. In fact, none are owned by MERS"

What else do you need to know, to know that MERS equals Fraud? This country will slide further and further toward Chavez-Venezula
type law making until MERS is done away with.

Melinda Romanoff

I'm going to lunch.

This is just one of the actions I was expecting.

Ignatz Ratzkywatzky

--That's why subway and railroad current -- to this day-- in the Northeast is DC--

Didn't know that.


Just double checked-- Subway/commuter rail cars ARE STILL powered by 600 volt DC current, signals and other computerized gear were converted to 220 volt AC.

So Ig this subject is even more complex than you thought. Good stuff.

JM Hanes


Can you name a free market which satisfies your definition for comparative purposes?


This just on CNBC--BofA owns a chunk of Black Rock.

Melinda Romanoff



I'm center libertarian.

Ignatz Ratzkywatzky


Can you name a free market which satisfies your definition for comparative purposes?--

There is no need for comparison. My contention is that in any market it is not the mechanisms of the free market which produce and maintain monopolies it is always the intervention of the state.
Wherever there are humans there are free markets and free market mechanisms at work, whether forced underground in totalitarian societies, mixed in with the state in welfare states or somewhat free in more open societies.
The less free the society the more dominant and numerous the monopolies, which in itself is an indicator of their origin.


A monopoly is not stable unless it is protected by government.

When a monopoly exists, except a natural monopoly like a utility, there is a great opportunity for a sufficiently enterprising company -- namely a large market of people who would LOVE to pay less and/or get better service.

These opportunities do not get missed. The nation is full of people constantly looking for slight advantages, new markets, and opportunities missed by others.

You have the only camera on the market? Someone develops a different one, and whoosh, these goes your monopoly.

You have the only retail mail order business? Someone else sets up a warehouse, prints catalogs, and whoosh, there goes your monopoly.

You have the only car on the market? Someone builds a different kind, and whoosh, there goes your monopoly.

Monopolies come and go. The ones that live on do so because they have government on their side.

JM Hanes


"Wherever there are humans there are free markets and free market mechanisms at work.

The impulse toward moanopolization clearly exists wherever there are humans too. You, yourself, agree that monopolizing a market is a corporate imperative, yet you insist that governmental intervention is the only mechanism by which it can come about? Are you really contending that absent any form of government intervention, monopolies simply could not exist?

It seems to me that to make such an assertion, you have to set the bar for what constitutes government intervention so low that it is virtually universal or, as you essentially did, define free trade as the absence of monopoly, et voilá. On the other hand, even if competition is forced underground, it remains competition, which means your putative totalitarian monopoly is not (by definition!) actually a monopoly.

It seems much more plausible to say that competition and monopoly are always, and naturally, in tension. Government can certainly tip the balance towards monopolies. It can also bust them up, of course. Prohibitions on the exploitation of children are a form of government intervention in the market place too, no? Assuming we can agree that such laws are a necessary restraint, everything else, as the saying goes, is just haggling over the price. The ideal "free market" is a far more abstract concept than most of those who find it politically useful seem prepared to admit.

None of which is to say that governments themselves (being human!) aren't naturally inclined to monopolize everything they can, or that a government with a monopoly on the use of force is not in need of the most powerful restraints we can conjure up, both in and out of the commercial marketplace.

JM Hanes


"So, the issues become blurred and to some degree inseparable in the real historical record."

That pretty much sums it up. :-)


If you expect to have a meaningful discussion about progressivism, liberals and the ideals and policies they espouse, you have to at least be honest enough with yourself to distinguish between liberals/progressives and Marxists.
Unfortunately, few if any on this blog are honest enough to do that, or perhaps what intellectual honesty they do possess is overwhelmed by the emotional need to "win" arguments against phantom progressives of their own creation.
I, for example, point out repeatedly that I support free market policies as the foundation of a sound economy. Moreover, I support the Bill of Rights and all it stands for and vehemently defend the civil and human rights of all people, be they astroturfing petro-propagandists or Jordanian cab drivers accused of terrorism.
It's telling to see the hypocrisy here as regards "trolls" and flaming. No one seems to notice that the vast majority of responses to may comments are routinely insulting, personal, juvenile and, hilariously often, homoerotic. Yet when a "troll" comes on and wields the same sort of juvenality, suddenly it's, for shame, the "liberal" way of arguing and something that's anathema to the blog.
So tell me again, clarice or dot or chubbo, that I'm in the basement playing with my fat self or so on. Then keep right on typing and tell us that insults and juvenality are the province of progressives. You're just giving your game away, and so cheaply...


And re: monopolies: what about organized crime? Wherever government power is insufficient to help develop and maintain monopolies and oligopolies, mafias step in and do exactly the same.
Free-market purism is utopian in the sense that it has never been attempted, let alone achieved, while it has served as a powerful propaganda tool for oligopolists and monopolists alike. It's much like Marxism in that sense. In reality, pure Marxism was never attempted, it was always "poisoned" along the way by human nature, and Marxists purists, to this day, insist that, if only real Marxism were implemented, it would succeed. You hear the same anti-historical claims from free market purists.
The reality is that only mixed economies -- part capitalism, part socialism -- have thrived and, even, survived. Wherever government power ebbs, the power of organized crime rises to take its place. That's human nature. Complex systems, like economies, require structure and that structure requires authority. In wealthy, deomocratic countries, the government is able to maintain a monopoly on that authority and obtains it by consent of the government and wields it according to checks and balances.
In most poor, undemocratic countries, there are no such checks and balances and either the government wields absolute power, or shares it with organized criminals.

Mel writes:
``I'm going to lunch.
``This is just one of the actions I was expecting.''
Nice one, Mel. I take it you are repenting at leisure after betting big on Obama to crash the stock market....lol

Ignatz Ratzkywatzky

--You, yourself, agree that monopolizing a market is a corporate imperative, yet you insist that governmental intervention is the only mechanism by which it can come about?--

Yes. Because all the mechanisms of a free market effectively counter the capitalists' intentions.
If I'm wrong then someone please give me an example of a monopoly that was established through the mechanisms of a free market rather than through the state.


Ig, you are not wrong.

Melinda Romanoff


Nice try playing catch up in class!

Keep searching. You can only hope to figure out what I mean.

Especially regarding the Manganese 53 trade, which I am working over the swaptions as I write.

lift chair

Looking forward for more regarding this. Such a relevant one.


Comment spam! Ptui!


Thanks Mel, good to know you're not letting your politics affect your trading decisions. That would indeed be disastrous.

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