FHFA Sues 17 Banks to Recover Losses

FEDERAL HOUSING FINANCE AGENCY
NEWS RELEASE
For Immediate Release
September 2, 2011

FHFA Sues 17 Firms to Recover Losses to Fannie Mae and Freddie Mac

Washington, DC -- The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), today filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters. The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises.
Complaints have been filed against the following lead defendants, in alphabetical order:

Ally Financial Inc. f/k/a GMAC, LLC
Bank of America Corporation
Barclays Bank PLC
Citigroup, Inc.
Countrywide Financial Corporation
Credit Suisse Holdings (USA), Inc.
Deutsche Bank AG
First Horizon National Corporation
General Electric Company
Goldman Sachs & Co.
HSBC North America Holdings, Inc.
JPMorgan Chase & Co.
Merrill Lynch & Co. / First Franklin Financial Corp.
Morgan Stanley
Nomura Holding America Inc.
The Royal Bank of Scotland Group PLC
Société Générale

These complaints were filed in federal or state court in New York or the federal court in Connecticut. The complaints seek damages and civil penalties under the Securities Act of 1933, similar in content to the complaint FHFA filed against UBS Americas, Inc. on July 27, 2011. In addition, each complaint seeks compensatory damages for negligent misrepresentation.
Certain complaints also allege state securities law violations or common law fraud.

As conservator of Fannie Mae and Freddie Mac, FHFA is charged with preserving and conserving these companies’ assets and does so on behalf of taxpayers. The complaints filed today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings. Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities.
FHFA filed the complaints under the broad authority granted to it by the Housing and Economic Recovery Act of 2008. The U.S. legal system provides for addressing such alleged misrepresentations through the nation’s securities laws and traditional common law. FHFA is following those legal remedies in filing these complaints and seeks to recover on losses to the
Enterprises that are the legal responsibilities of others.
Discussions regarding these matters have taken place with several of the firms receiving complaints and, where constructive, they will continue.

Link to FHFA filings in PLS cases

###
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.
These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.

Submitted by cpowell on Thu, 2011-09-01 19:28. Section: Daily Dispatches

Phantom gold haunts GLD vault tour

By Joe Morris
Financial Times, London
Thursday, September 1, 2011

http://www.ft.com/intl/cms/s/0/d90e9d80-d4ac-11e0-a7ac-00144feab49a.html

The SPDR Gold Trust (GLD) may have sought to defuse conspiracy theorists by opening up its massive London gold vault to CNBC, but instead it opened up a new line of inquiry.

In the segment --

http://video.cnbc.com/gallery/?video=3000043030

-- reporter Bob Pisani was forced to surrender his cell phone before being driven, not unlike a hostage, in what appears to be a cargo van with its windows sealed by black tarp. "We have no idea where we're going," he says over background music reminiscent of the "Mission Impossible" theme.

Once inside, Pisani holds up a random gold bar, its refiner's stamp clearly legible. (This occurs about 2:10 into the video segment.) As Zero Hedge points out in a blog post today --

http://www.zerohedge.com/news/some-observations-bob-pisanis-visit-glds-v...

-- the serial number on that bar, ZJ6752, does not appear on GLD's most recent bar list, dated August 31. Given that GLD tonnage stayed relatively flat over the previous week, when Mr Pisani's visit presumably occurred, few if any bars are likely to have been removed from the vault in the interim, Zero Hedge notes.

There must be an explanation, but the plot thickens.

"Of course, Pisani may have well shot the documentary some three weeks ago, when gold peaked at 1310 [metric] tons, although we assume he would have then said 1,300 tons held by the warehouse, not 1,200 as he did," Zero Hedge says. "If that is the case, there is a small chance based purely on statistics that ZJ6752 was promptly moved out of the warehouse upon a redemption event. The chance is about 1 in 10,000 or so, but still. ..."

The question, or at least one question, is: When did Mr Pisani pay his visit?

Phantom gold conspiracies haven't seemed to dent demand for GLD, despite BlackRock's attempt a year ago to distinguish itself as the only US-listed gold ETF to be fully allocated daily. (Jeremy Charles, global head of precious metals at HSBC, which houses the vault, tells Pisani: "At no point in time is there a risk to the trust." But GLD's prospectus states that up to 430 ounces of gold can be held in the trust's unallocated account overnight, which would seem to constitute a type of risk.)

Still, the CNBC invite suggests GLD is at least somewhat bothered by the whispers. We could see this episode proving a PR tipping point, ushering in either a new era of openness and access or, alternately, even more secrecy.

-----

Joe Morris is a regular contributor to both FTfm and to ETF Central, the Alchemy forum where this post first appeared.

How exchange-traded fund GLD lets you pretend to own gold

Submitted by cpowell on Thu, 2011-09-01 01:04. Section: Daily Dispatches

9:21p ET Wednesday, August 31, 2011

Dear Friend of GATA and Gold:

Doug Hornig of Casey Research yesterday did a pretty good job of confirming the old doubts about the major gold exchange-traded fund, the SPDR Gold Trust's GLD, whose operations long have been questioned by GATA, most expertly by our consultant, GoldMoney founder and Free Gold Money Report publisher James Turk:

http://www.fgmr.com/fractional-reserve-aspects-of-gold-etfs.html

http://www.fgmr.com/where-is-the-etfs-gold.html

And by our former board member, Catherine Austin Fitts, and her lawyer, Carolyn Betts:

http://www.gata.org/node/8600

Having recently had extensive conversations with the trust's officials, Hornig writes:

"Beyond the basics, we don't know much. You will not be allowed to see the vault, whether or not you are a GLD shareholder and no matter how many shares you own. In fact, a high trust official in New York told me that even he isn't allowed inside there. ...

"Now theoretically it is true that you can convert your GLD shares to physical gold and take delivery of it. But practically, you can't. For one thing, you have to be approved to do so (generally meaning you're either a broker or a market maker), and then you have to redeem a minimum of 100,000 shares. And even if you meet those qualifications, buried in the firm's prospectus -- a very tough read, by the way, but you can get a copy at their website if you want to try your luck -- is a provision stating that they have the option of redeeming such shares in cash equivalent rather than bullion."

If GLD's gold was just sitting around doing nothing but backing the shares issued against it, why the need for the escape clause of cash settlement?

Thus it becomes even easier to imagine that the fabled gnomes of Zurich have nothing on the gnomes of GLD, as they scurry about an HSBC gold vault somewhere, a vault secret even from GLD's supposed managers, plugging GLD-designated gold bars (there are supposed to be nearly 1,300 tonnes of them) into the ever-growing number of holes in the Western fractional reserve gold banking system, a system in which, as CPM Group Managing Director Jeff Christian told the U.S. Commodity Futures Trading Commission at a hearing in Washington a year and a half ago, dozens of claims may be sold to any particular gold bar. Christian had candidly explained this fractional-reserve system in detail in an essay published 10 years earlier:

http://www.gata.org/files/CPMGroup-BullionBankingExplained.pdf

This is the primary mechanism of the Western financial system's gold price suppression scheme, the creation of so much imaginary gold, and its acceptance by deluded investors, as to prevent gold from signalling inflation and indeed from even keeping up with official measures of inflation, which themselves are horribly suppressed.

Hornig's conclusion about GLD is terribly polite and subtle: "None of this is to disparage GLD. For ordinary investors, the ETF represents a way to (indirectly) participate in gold 'ownership' without the hassle of actually taking physical delivery and finding a suitable place to vault your metal. Plus, there are no storage fees, bid/ask spreads, threats of theft, or dealer markups to worry about."

Yes, there are no hassles at all in pretending to own gold. And why should you have to pay anything for pretending when someone else thinks he owns your gold? Lethim pay.

Hornig's report on GLD is headlined "Tracking Gold" and follows a preface by Casey Research Senior Analyst Vedran Vuk. You can find it at the Casey Research Internet site here:

http://www.caseyresearch.com/cdd/behind-scenes-gld

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Sign of Things to Come: Riots in Milwaukee

Sign of Things to Come: Riots in Milwaukee (Video)

AmpedStatus, September 1st, 2011 · · Economy, Hotlist, Video

Next week I will have a new report out on the riots that I believe will soon sweep across the US. I see the first phase of riots beginning along the lines seen in the video below, where people who are deeply impoverished look for the nearest person to attack or the nearest store to loot or vandalize. This will eventually lead to clashes with local law enforcement. Much like we have already seen in San Francisco and on a larger-scale in London. Throughout the US, we have also already seen the start of flash mobs, a trend I believe will continue to grow and occur more frequently. After this initial phase, I believe there will be more sophisticated rioting, crime and violence directed at banks, politicians, mega-wealthy individuals and rich gated-communities, as we have started to see sporadically throughout Greece, Germany, France and Italy. There are many terrifying and ominous indicators, such as the percentage of young Americans who are not in the workforce (eligible workers up to the age of 24), which is now at a record high of 51%. As you will see in this video, in the city of Milwaukee the poverty rate is well over the critical threshold of 25%, among male African-Americans in the region 50% are now unemployed. Here is an RT interview with Bob Donovan, an alderman in the 8th district of Milwaukee, concerning a recent race riot that took place at a local fair. Much more to come on this issue…. Related posts: Horrific Arizona Massacre Is A Sign of Tragedies to Come By David DeGraw, AmpedStatus Let This Tragedy Be A Wake... “Tens of trillions of dollars are being extracted from the United States! … The banking system is fully corrupt and defrauding us!” (Video) The one and only member of the AmpedStatus Board of... Can You Hear Them Defying? Can You Hear Them Multiplying? Can You Hear Us Now? (Music Video) Can You Hear? Words and Music by Terry Sherven... RT Interview: Economic World War, US Under Attack (Video) We will be back with daily updates soon. I've been...

Buffett Doubles Down On Another Taxpayer Funded Bailout

Buffett Doubles Down On Another Taxpayer Funded Bailout: Warren Buffett’s Hypocrisy Exposed – Part 2 of 99

AmpedStatus, August 29th, 2011 · · Economy, Politics & Government

Warren Buffett invested $5 billion in Goldman Sachs right before they were bailed out. He then cashed in on the taxpayer funded bailout that followed. Now he drops $5 billion on Bank of America… As I said in Part 1: Warren says he wants to be taxed more by a President who does his bidding. So, essentially, Warren wants the “mega-wealthy” to be taxed more so his puppet politicians will have some more funds to spend on bailing out his criminal partners on Wall Street, thus saving Warren’s personal wealth, yet again…. Warren is a wolf in sheep’s clothing. On the surface, he sounds like a benevolent billionaire who is willing to sacrifice for the good of the country, yet he hasn’t done anything with his money other than invest billions in criminal vampire companies like Goldman Sachs and Bank of America, and buy off politicians. And now, he has his puppet Obama killing investigations into Bank of America as he is blatantly running a political bribery operation and pumping $5 billion of his own money into the bank. Now here’s a recent report from Huffington Post: Warren Buffett’s Bank Of America Investment Shows Faith In Government Support, Experts Say The multi-billion dollar capital injection that Bank of America said it’s getting from Warren Buffett’s company is an extremely safe investment, experts said… but not because Bank of America is a strong company. Berkshire Hathaway’s investment is safe, these finance experts said, because the government has the bank’s back. Although government regulators insist the era of bank bailouts is over, many who study the financial industry say the nation’s biggest banks are still too big to fail, meaning they must be rescued by the government when they face potentially fatal trouble in order to prevent a broader collapse of the financial system. Bank of America, the country’s largest bank by assets, is thought to rank high on this list — a perception seemingly underscored by Buffett’s willingness to put a significant sum into the company. “This is the taxpayer giving Warren Buffett a great return,” said Amar Bhide, a professor of international business at the Fletcher School of Law and Diplomacy at Tufts University. “He knows that Bank of America is too big to fail. If it is too big to fail, then why not?” …. The investment had many drawing comparisons to September 2008, whenBuffett invested $5 billion in Goldman Sachs during the height of the financial crisis and secured a lucrative deal for his company. That was right before the government passed a bailout package known as the Troubled Asset Relief Program, rescuing a range of financial firms and confirming the wisdom of Buffett’s bet. Indeed, experts have argued that Buffett’s company profited handsomely off the government’s largess. Last fall, the investor penned an op-ed in the New York Times, thanking the federal government for propping up the financial system. “Uncle Sam, you delivered,” Buffett wrote. [read full report] In related news: FDIC Objection Throws A Wrench Into Bank Of America’s $8.5 Billion Settlement Bank of America needs more than a $5 billion vote of confidence from Warren Buffett to get back on track. It needs to remove uncertainty over the cost of its mortgage related lawsuits but it looks like the Federal Deposit Insurance Corporation will stand in the way of that. The FDIC filed an objection with the State Supreme Court of New York over Bank of America’s proposed $8.5 billion settlement with mortgage bond holders throwing a wrench in the bank’s efforts to put its mortgage problems behind it…. [read full report] Related links: My open letter to Warren Part 1 of this series

Banks Got Free Money From Fed

North Dakota's Economic “Miracle”—It's Not Oil

North Dakota has had the nation's lowest unemployment ever since the economy tanked. What's its secret?

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by Ellen Brown

YES!Magazine, Aug 31, 2011

Photo by Reto Fetz

In an article in The New York Times on August 19th titled “The North Dakota Miracle,” Catherine Rampell writes:

Forget the Texas Miracle. Let’s instead take a look at North Dakota, which has the lowest unemployment rate and the fastest job growth rate in the country.

According to new data released by the Bureau of Labor Statistics today, North Dakota had an unemployment rate of just 3.3 percent in July—that’s just over a third of the national rate (9.1 percent), and about a quarter of the rate of the state with the highest joblessness (Nevada, at 12.9 percent).

North Dakota has had the lowest unemployment in the country (or was tied for the lowest unemployment rate in the country) every single month since July 2008.

Its healthy job market is also reflected in its payroll growth numbers. . . . [Y]ear over year, its payrolls grew by 5.2 percent. Texas came in second, with an increase of 2.6 percent.

Why is North Dakota doing so well? For one of the same reasons that Texas has been doing well: oil.

North Dakota is the only state to be in continuous budget surplus since the banking crisis of 2008.

Oil is certainly a factor, but it is not what has put North Dakota over the top. Alaska has roughly the same population as North Dakota and produces nearly twice as much oil, yet unemployment in Alaska is running at 7.7 percent. Montana, South Dakota, and Wyoming have all benefited from a boom in energy prices, with Montana and Wyoming extracting much more gas than North Dakota has. The Bakken oil field stretches across Montana as well as North Dakota, with the greatest Bakken oil production coming from Elm Coulee Oil Field in Montana. Yet Montana’s unemployment rate, like Alaska’s, is 7.7 percent.

A number of other mineral-rich states were initially not affected by the economic downturn, but they lost revenues with the later decline in oil prices. North Dakota is the only state to be in continuous budget surplus since the banking crisis of 2008. Its balance sheet is so strong that it recently reduced individual income taxes and property taxes by a combined $400 million, and is debating further cuts. It also has thelowest foreclosure rate and lowest credit card default rate in the country, and it has had NO bank failures in at least the last decade.

If its secret isn’t oil, what is so unique about the state? North Dakota has one thing that no other state has: its own state-owned bank.

Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in North Dakota. The Bank of North Dakota (BND) does not compete with local banks but partners with them, helping with capital and liquidity requirements. It participates in loans, provides guarantees, and acts as a sort of mini-Fed for the state. In 2010, according to the BND’s annual report:

The Bank provided Secured and Unsecured Federal Fund Lines to 95 financial institutions with combined lines of over $318 million for 2010. Federal Fund sales averaged over $13 million per day, peaking at $36 million in June.

Over a 15-year period the BND has contributed more to the state budget than oil taxes have.

The BND also has a loan program called Flex PACE, which allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community services. In 2010, according to the BND annual report:

The need for Flex PACE funding was substantial, growing by 62 percent to help finance essential community services as energy development spiked in western North Dakota. Commercial bank participation loans grew to 64 percent of the entire $1.022 billion portfolio.

The BND’s revenues have also been a major boost to the state budget. It has contributed over $300 million in revenues over the last decade to state coffers, a substantial sum for a state with a population less than one-tenth the size of Los Angeles County. According to a study by the Center for State Innovation, from 2007 to 2009 the BND added nearly as much money to the state’s general fund as oil and gas tax revenues did (oil and gas revenues added $71 million while the Bank of North Dakota returned $60 million). Over a 15-year period, according to other data, the BND has contributed more to the state budget than oil taxes have.

The state-owned bank allows North Dakota to capitalize on its resources to full advantage.

North Dakota’s money and banking reserves are being kept within the state and invested there. The BND’s loan portfolio shows a steady uninterrupted increase in North Dakota lending programs since 2006.

According to the annual BND report:

Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. Earnings were fueled by a strong and growing deposit base, brought about by a surging energy and agricultural economy. We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.

A 19 percent return on equity! How many states are getting that sort of return on their Wall Street investments?

Timothy Canova is Professor of International Economic Law at Chapman University School of Law in Orange, California. In a June 2011 paper called “The Public Option: The Case for Parallel Public Banking Institutions,” he compares North Dakota’s financial situation to California’s. He writes of North Dakota and its state-owned bank:

The state deposits its tax revenues in the Bank, which in turn ensures that a high portion of state funds are invested in the state economy. In addition, the Bank is able to remit a portion of its earnings back to the state treasury . . . . Thanks in part to these institutional arrangements, North Dakota is the only state that has been in continuous budget surplus since before the financial crisis and it has the lowest unemployment rate in the country.

He then compares the dire situation in California:

In contrast, California is the largest state economy in the nation, yet without a state-owned bank, is unable to steer hundreds of billions of dollars in state revenues into productive investment within the state. Instead, California deposits its many billions in tax revenues in large private banks which often lend the funds out-of-state, invest them in speculative trading strategies (including derivative bets against the state’s own bonds), and do not remit any of their earnings back to the state treasury. Meanwhile, California suffers from constrained private credit conditions, high unemployment levels well above the national average, and the stagnation of state and local tax receipts. The state’s only response has been to stumble from one budget crisis to another for the past three years, with each round of spending cuts further weakening its economy, tax base, and credit rating.

Not all states have oil, of course (and it’s hardly a sustainable basis for an economy), but all could learn from the state-owned bank that allows North Dakota to capitalize on its resources to full advantage. States that deposit their revenues and invest their capital in large Wall Street banks are giving this economic opportunity away.

---

Ellen Brown wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ellen is an attorney, president of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are WebofDebt.com and PublicBankingInstitute.org.