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Foreclosure-Gate: Bear Stearns Cheated Clients Out of Billions

Former Bear Stearns mortgage executives who now run mortgage divisions of Goldman Sachs, Bank of America, and Ally Financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while at Bear. According to e-mails and internal audits, JPMorgan had known about this fraud since the spring of 2008, but hid it from the public eye through legal maneuvering. Last week a lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was unsealed. The lawsuit's supporting e-mails, going back as far as 2005, highlight Bear traders telling their superiors they were selling investors like Ambac a "sack of shit." They were selling investors like Ambac a "sack of shit." News of internal whistleblowers coming forward from Bear's mortgage servicing division, EMC, was first reported by The Atlantic in May of last year. Ex-EMC analysts admitted they were sometimes told to falsify loan-level performance data provided to the ratings agencies who blessed Bear's billion-dollar deals. But according to depositions and documents in the Ambac lawsuit, Bear's misdeeds went even deeper. They say senior traders under Tom Marano, who was a Senior Managing Director and Global Head of Mortgages for Bear and is now CEO of Ally's mortgage operations, were pocketing cash that should have gone to securities holders after Bear had already sold them bonds and moved the loans off its books. Mike Nierenberg, who ran the adjustable-rate mortgage trading desk at Bear and is now the head of mortgages and securitization for Bank of America, was a key player ensuring the defaulting loans Bear was buying would move off their books right after they bought them, with little concern for the firm's due diligence standards. He was joined in this scheme by Jeff Verschleiser, his peer and Senior Managing Director on the mortgage and asset-backed securities trading desk and head of whole loan trading. He is now an executive in Goldman Sachs' mortgage division. According to the lawsuit, the Bear traders would sell toxic mortgage securities to investors and then sell back the bad loans with early payment defaults to the banks that originated them at a discount. The traders would pocket the refund, and would not pass it on to the mortgage trust, which was where it should have gone to be distributed to the investors who owned the bonds. The Marano-led traders also cut the time allowed for early payment defaults, without telling the bond investors. That way, Bear could quickly securitize defective loans, without leaving enough time for investors to do their own due diligence after the bonds were sold and put-back any bad loans to Bear.

1 Comments in Response to

Comment by Ed Price
Entered on:

It is time to get the picture here.

Paper has value in 2 areas:
1. The value of the item it represents or is officially tied to;
2. The literal value of the pulp paper itself.

When cash money was backed by gold and silver, there was value besides the value of the paper. Now that it is not formally backed by anything of value, how do you put your finger on what it is worth?

Furthermore, since the Federal reserve Bank simply prints or authorizes the printing of cash money, and since they then loan it to the Government, how is it that they actually loan anything of value, since you can't really put your finger on what backs the money?!

The truth is that NOTHING backs cash money. Nothing was loaned to the Government except some cloth paper that has printing on both sides. And maybe not even that.

No loan, no national debt. No national debt, no need for IRS taxes to repay it. Also, no loan in the form of mortgages.

This whole idea of looking for the paper and the paper trail behind the mortgages, is a clever piece of propaganda designed to take the eyes of the people off the fact that there never has been any LEGAL LENDING INSTITUTION LOAN made since the cash money was taken off the gold and silver standard. And, if you really look at it, you might find that there never was any loan made since the Federal Reserve Bank took over the money systems of the nation back in the '30s.

This whole thing is a HUMONGOUSLY HUGE GIGANTIC SCAM to steal the labor of the people from them. And it is working quite well. The people seem to love it this way.


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