Of blogging, denial of service attacks and some very dirty dealing

A blogger calls out some very powerful people for breaking the law and then suffers a denial of service attack.  Coincidence or conspiracy?   You decide.

The blogger in question is the feisty and indomitable Yves Smith of naked capitalism and the attack happened yesterday.  A Wall Street insider she has been fearless in exposing the ugly side of US capitalism and how it has gone to the dark side in recent years.  Earlier this year she published the excellent “Econned: How Unenlightened Self-interest Undermined Democracy and Corrupted Capitalism”  (if you are reasonably financially literate this is a must read).   Possibly it is the accumulation of many things that has brought about the DoS attack but the suspicion has to be that it’s the latest series of exposures that have triggered it.

For what she and others have been documenting in recent days is no less than the widespread flouting of the law in the US by the big banks and their minions and the accompanying corruption of due process and the courts.  That this is happening – and that it has reached epidemic levels right across the USA is no longer in doubt.

The story starts for present purposes with the mortgage boom leading up to the crash.  We’ve heard most about the sub-prime element of it but that was only the tip of the iceberg – in fact the boom in mortgages and second mortgages that were subsequently sliced and diced into residential morgage-backed securities (RMBS) went far beyond sub-prime as ordinary folk came to view their homes as ATMs and cashed in on the boom (which was not a boom but a bubble).   It has long been obvious that a huge part of the mortgages written in the boom years were fraudulent.  The FBI warned of the problem in 2004 (and even before but I don’t have a reference), a few individuals were arrested but the fraud express roared on.  The difficulties were compounded by the slicing and dicing process for there are strict laws evolved over centuries about property transactions; the recording and registering of changes of title and of loans secured against a property is crucial to a property-owning democracy and must be done right.  But, of course, fraudsters have no particular interest in paperwork.  For them it’s just an unnecessary expense; the name of the game is to write as many mortgages as possible as fast as possible, pocket the commission and clear off before anyone notices.

So, now that people are inevitably defaulting on their mortages on a large scale there is a very real difficulty; just who owns the mortgage and who is therefore entitled to foreclose is not at all clear in the absence of a proper paper trail.  This matters or just about anyone could foreclose (or, more accurately, purport to foreclose and hence steal the property) on just about anyone else and that would spell the end of law and order as we know it. 

Fortunately the big banks didn’t get to be big by worrying too much about legal niceties.  So if you don’t have the paperwork you, well, you forge it or forge signatures or whatever it takes.  At last, and because of bloggers efforts rather than the mainstream media, some mortgage companies including firms such as Bank of America and J P Morgan Chase have had to suspended their foreclose activities in many states and state Attorney Generals are starting to take notice and, belatedly, ask questions.

This is only the start of the problem for the banks, for America and for all of us; it’s a kind of slow-motion explosion that will very possibly usher in a new and ugly phase of the crash.   How long can it be before those who incautiously bought RMBS from the banks during the boom years thinking that they were properly secured work out that this gives them justification to sue to recover their losses – which are in the tens of billions?  And that’s only for starters.  

The ramifications are literally incalculable but unfortunately there will be an lot of collateral damage before it’s over.

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One response to this post.

  1. […] noticed that there is a problem with the foreclosure business in the US as I reported in my last post, but entirely fails to convey just how very big and very bad the problem […]

    Reply

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