Polis23 - Illegale beleggingsfondsen

Catherine Austin Fitts served as Assistant Secretary of Housing and Federal Housing Commissioner in the first Bush Administration. Her company Hamilton Securities Group served as lead financial advisor to the Federal Housing Administration during the Clinton Administration. She is a former managing director and member of the board of the Wall Street investment bank Dillon, Read & Co. Inc.

The challenge that U.S. Treasury Secretary Hank Paulson faces when working out the problems with Fannie Mae or Freddie Mac is that a significant number of mortgages that serve as collateral for U.S. mortgage-backed securities markets are not real. They do not exist.

The problem is not that the people who bought the house and borrowed the money cannot afford to pay it back or that the house they bought has dropped in value. If these were the problems, we would not be watching the debt the U.S. government is responsible for increase by $5 trillion dollars. We would not be watching the National Bank of Australia announce a 50% loss rate on their mortgage-backed securities.

When my company served as lead financial adviser to the Federal Housing Administration (FHA), we surveyed industry loss rates to compare them to FHA's high rate of 35%. The highest we found in the industry was 25%, and this was at the end of the last housing bubble bust, when loss rates would be expected to be high. As we due diligenced the FHA nonperforming and foreclosed portfolios, trying to understand a 35% loss rate, we started to find symptoms of fraudulent collateral practices. Indeed, we found portfolios with 50% loss rates, and the losses had nothing to do with income levels or housing prices.

Here is a story that I have told many times before:
"In 1994, after the first FHA/HUD financial audit was published, a mortgage banker came to see me. He was a serious engineering type who clearly worked hard and had mastered the details of his business. He was distressed, he said. For decades he had been keeping a tally of total outstanding FHA/HUD mortgage insurance credit. He had brought printouts of his database for me. It turned out that the government’s published financial statements showed the amount outstanding was substantially less than the actual amount outstanding. He was sure. I assumed that the guy was crazy. If what he said were true, then the U.S. Treasury and the Federal Reserve would have to be complicit in significant fraud, including securities fraud."

After I began researching HUD fraud in the late 1990s, I would be contacted by people with experience with HUD fraud. They insisted that the same home was being used to create ten or more mortgages that were placed into different pools. They alleged that Chase as the lead HUD servicer and the other big banks were implementing such systems. This was why we would see the same house default two, three, or four times in a year, they claimed. FHA mortgages had to be churned through multiple defaults to generate the cash to keep all these fraudulent pools afloat. This, they insisted, was all going to finance various secret government operations and private agendas.

This issue of collateral fraud was repeated in other markets. As I started to learn more about precious metals and the commodities markets, I would hear story after story about precious metals arrangements in which what investors really had was a bank credit—there was no bullion behind the arrangement.

I have come to believe that the allegations of mortgage collateral fraud are true—not just for FHA and Ginnie Mae at HUD but across the board throughout the mortgage markets as well.
What this means is that Freddie Mac's and Fannie Mae's obligations must be converted to what is essentially government debt. Such conversion means that investors simply don't care if the mortgages have a lien on anything real or not (at least for the time being). Otherwise, there would need to be a process by which all the defaulted mortgages can be sorted through to determine which of the mortgages are legitimate and which are not.

Creating and managing such a process would indeed crash the global financial system. It is hard for a multi-trillion-dollar financial system to maintain liquidity when contracts and laws are meaningless.