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Tuesday, July 8, 2008

Fraud Permeating Our Society

Fraud is permeating our society today and is not limited to the real estate and mortgage industry. Unfortunately, these industries make up a large part of our economy and become a major focus point and as such require more reporting and investigation. My writings are meant to open minds, to ask questions and to seek the truth.

Fraud comes in many flavors - premeditated, unintentional, uninformed and uneducated, none of which makes it right or lessens the end result. It is also committed by average citizens and high ranking corporate and government individuals.

Many developments and their developers have fallen into the fraud trap. Beazer Homes, a large, venerable and should have been knowledgeable company, was accused of mortgage fraud and will pay the price after all the dust settles on it. Others also fall prey to fraud be it intentional or not.

Many legitimate developers and developments are failing or have failed, not due to fraud but due to market conditions, leaving many contracted buyers with real dilemmas and losses.

Good intentions gone bad does not excuse anyone. Greed and the almighty dollar has overtaken our overall common sense as a society.

The debate as to “good guy, bad guy” is really irrelevant. The situation as it stands today is the only measure. Criminal and fraudulent activities usually do not continue for years. However, at the point it changes from legitimate to fraudulent, the past is erased.

Historians will document these times as maybe one of the most turbulent in our economic history. Economists and sociologists will be studying this for years to come.

Fraud is occurring at the highest levels of Corporate America. Our entire banking industry was and is involved. Little is known about the inner workings of the system both by banks and our Wall Street investment banks. Little is known about the securitization process of loans – not limited only to real estate – but to student loans, automobile loans and commercial loans.

The process of securitization could not have occurred to the extent it did without some shady transactions - case in point, the almost automatic AAA ratings given by the major rating agencies, Standard and Poors, Moody’s and Fitch. The AAA ratings told the investment community that the risk was limited and the gain almost guaranteed. Now how do we explain the daily lowering of ratings to almost “junk” status? In fact, in just two days recently, Moody’s downgraded 1,983 Mortgage Backed Securities. But there still is no admission of wrong doing or guilt. There are literally thousands of MBS issues downgraded. Is it just coincidence that these rating companies who get paid for their ratings, could have erred on each and every issue?

The banking system is manipulating us for their own gain, benefit and possibly control of the entire economic system. Indeed, the secret, almost overnight weekend rescue of Bear Stearns should raise many questions.

Fifty Five Billion Dollars was given by the Federal Reserve to cover losses incurred by Bear Stearns. However, most of this money goes to J.P. Morgan who acquired them. The questions remain, why was this done, with whose knowledge or permission and whose money was it anyway?

An interesting description of what occurred can be read in a post by Ellen Hodgson Brown, J.D. on her web site, The Web of Debt. The story is titled,


What I find interesting about her posts are the references she cites lending a measure of credibility, as she is an attorney, and not just offering assumptions.

In this article she suggests that the Bear Stearns bailout was really a J.P. Morgan bailout. What is little know is that J.P. Morgan owns two to three times the amount of derivitives held by Citigroup causing their liquidity problems. It was believed that Citigroup held the largest amount of derivitives of any other financial institution. The question is raised, was J.P. Morgan broke at the time of the so called “bailout” acquisition of Bear Stearns?

Another article published in, May 26, 2008, further questions this bailout. It can be found by reading the link below authored by Dr. Mark W. Hendrickson, a faculty member, economist, and contributing scholar with the Center for Vision & Values at Grove City College in Grove City, Pa.

Federal Reserve Bailout of Megabank Raises Serious Questions About Motive
What is Fed’s real relationship with JPMorgan Chase?

NOTE: This writer does not necessarily support or agree with the all the policies and political positions of American Free Press - 645 Pennsylvania Avenue SE, Suite 100 Washington, D.C. 20003

In this article Dr. Hendrickson says the following:

“Invoking an obscure, never-before-used legislative provision, the Fed made billions of dollars available to JPMorgan Chase to acquire another investment bank, the essentially insolvent Bear Stearns.

The Fed-engineered JPMorgan takeover of Bear raises startling questions: What is the degree of cooperation between the Fed and JPMorgan? Was this an impromptu alliance, or had it been plotted in advance? Was JPMorgan drafted against its will to absorb Bear Stearns, or did the central bank give JPMorgan a plum that it already coveted? More importantly for the country, what will be the relationship of JPMorgan and the Fed going forward”?

What is even more interesting to note are the Board members of the New York Federal Reserve Bank. Taken from the New York Federal Reserve website, they are:

Class A elected by member banks to represent member banks
Richard L. Carrión (bio) 2010
Chief Executive Officer and Chairman Banco Popular de Puerto Rico

Charles V. Wait (
bio) 2008
President, Chief Executive Officer and Chairman of the Board
The Adirondack Trust Company

Jamie Dimon (bio) 2009
Chairman of the Board and Chief Executive Officer
JPMorgan Chase

Class B elected by member banks to represent the public
Richard S. Fuld, Jr. (
bio) 2010
Chairman and Chief Executive Officer
Lehman Brothers Holdings Inc.

Jeffrey R. Immelt (
bio) 2008
Chairman and Chief Executive Officer
General Electric Company

Indra K. Nooyi (
bio) 2009
Chairman and Chief Executive Officer
PepsiCo, Inc.

Class C appointed by Board of Governors to represent the public
Lee C. Bollinger (
bio) 2009
Columbia University

Denis M. Hughes (
bio) Deputy Chair, 2008
New York State AFL-CIO

Stephen Friedman (
bio) Chair, 2010
Chairman Stone Point Capital, LLC

Note: The year appearing after the name indicates that their term in office expires on December 31st of that year.

Notice the names I have highlighted in red. Mr. Dimon, Chairman and CEO of J.P. Morgan sits on the board of a privately held institution, that can obligate the taxpayers to multi billion dollar debts in order to acquire, at a bargain basement price, one of the main competitors to Lehman Brothers whose Chairman and CEO also sits on the board. In addition, note that there are 6 members representing the public and only 3 members representing the banks. Was the public truly represented here?

Who are the winners and who are the losers in this case? The Bear Stearns stockholders took a beating, the taxpayers have a debt to repay but J.P. Morgan comes out very profitably with Lehman Brothers blessings.

Are we beginning to consolidate wealth and control of our economy to just a few? You know the old saying, if you owe the bank a million dollars, the bank owns you but if you owe the bank billions of dollars, you own the bank.

We all know and read about mortgage fraud. It has been in all the papers and national news media. We have seen an entire industry of mortgage brokers be accused of fraud in originating mortgages and as a result are being eliminated.. Arrests, prosecutions and sentences have been ongoing in this arena. The FBI is inundated with cases and their special mortgage fraud units are investigating the tens of thousands of cases but is there unnoticed or unreported fraud going on at higher levels?

Yes, there is, has been and probably there will always be some level of fraud by loan originators, title companies, bankers, attorneys, real estate agents and many others. As our law enforcement catches and shuts down some, others will find new ways to cheat and steal. Just look at internet hacking. No sooner do we come up with a program to stop a virus as someone creates a variation or new one. However, fraud is occurring and has occurred at higher levels of our business community and possibly government. It is time we begin to look higher and question moves such as was made by The Fed above.

No, this is not a perfect world. But to be fair, we must look at crimes and fraud being committed at all levels of our society. This includes our large corporations, our banks, our investment banks and our regulators. We must also look at our Federal Reserve system. While privately owned, they seem to operate independently with no checks and balances by the citizens or congress. If they are privately owned, then one would have to assume that they are in it to make a profit. But how they do it is what is important. If there is fraud or conspiracy going on then we should be made aware of it and the proper legal actions taken regardless of who it is. In other words, let’s have a level playing field for all.

In the meantime, we should all learn from all the stories that are told. The signs and signals of fraud are being shown to us. It is the beginning of an education process not only for ourselves but for our children as well.

Perhaps one day, we can once again return to a society where business can be done with trust and honesty. To do so we need to level the playing field. We need to stop the blatant transference of wealth to the privileged few. As Ben Stein, leading author and economist, reported on TV not long ago, the top 300 wage earners in this country have combined incomes that are more the other 200 million people combined. A free market, capitalist society would not and could not support such transference.

This is my commentary on the current state of affairs and the obvious pain and grief it is causing everyone. We cannot allow anyone to be above the law. Moreover, we need to look deep into what is occurring, stop being passive and begin to ask for the accountability we are entitled to. We need to correct the wrongs and restore stability to our once great middle class.

1 comment:

  1. Yes fraud comes in many flavors - premeditated, unintentional, uninformed and uneducated, none of which makes it right or lessens the end result. Swindler individual or swindler companies they are like virus wearing almost similar clothes to be look alike the reliable companies so that they can easily go near to penetrate their victim. Some example of this is during 9/11 terrorists attack, many fake charitable institution that came out that their purpose is just to collect the donation from the open handed people for their greediness. They pretend to be helpers but actually they are robbers. And another similar example of this are the lending companies claiming that they are the institutions that offers immediate relief for their financial problems.
    People should properly check all the details and rules so as to avoid any frauds and should have to think it twice before getting into a deal to make sure that the institution you are transacting with is a good one and doesn’t make fraudulent actions.
    Private sector and consumer groups are creating solutions that will help people how to deal with debt problems, agencies like No Fax Payday Loans is one of them. If your financial situation is in danger of becoming serious, do something about it now. You can inquire to NO Fax Payday Loans instant payday advance to give you more information about the dirty secrets of big banks, will help you fight online identity theft and they will give some other suggestion how to deal with your financial problem.