Small Law Firm’s Big Role in Bundling Mortgages

In recent years, as subprime lending proliferated, a small law firm played a big role on Wall Street.

The young firm, McKee Nelson, helped investment banks and mortgage lenders bundle home loans into securities — lots of them. Since 2000, McKee has been involved in almost 3,300 deals totaling $2.7 trillion, according to Asset Backed Alert, an industry newsletter.

The Wall Street banks and lenders hired McKee Nelson, which is based in Washington and New York, to write or review prospectuses for the securities. It was a lucrative arrangement, helping to generate $202.5 million for the firm in 2006, the latest year for which figures are available.

Now, with losses on bad mortgage investments exceeding $135 billion, questions are growing about whether prospectuses like these adequately disclosed the risks to investors.

Mark H. Adelson, a co-founder of Adelson & Jacob Consulting, a securitization and real estate consulting firm, said offering documents in general lacked clear warnings about the deteriorating quality of home loans. “That’s what was missing,” Mr. Adelson said. Most of these documents, however, did detail the mechanics of the investments and the kinds of loans backing the securities, he said.

Reed D. Auerbach, a structured finance partner at McKee Nelson, stands by the firm’s work.

“We get paid to write good disclosure,” Mr. Auerbach said. “We think that the offering documents we’ve written disclosed all the risks to investors.”

New York state prosecutors are investigating whether Wall Street banks withheld crucial information from investors about the risks posed by subprime loans. McKee Nelson has not been subpoenaed in the investigation or accused of any wrongdoing.

But as investors’ losses mount, companies across the financial services industry are coming under scrutiny. Bankers, auditors and lawyers are bracing for a wave of lawsuits. One law firm, Cadwalader Wickersham & Taft, is already fighting a $70 million malpractice suit over its mortgage securities work.

“Anybody who touched the security in the process of creating or selling it is going to be subject to litigation,” said Joseph A. Grundfest, a business and law professor at Stanford and a former commissioner of the Securities and Exchange Commission.

The Internal Revenue Service, meantime, recently opened an inquiry into the special trusts that are typically used to issue mortgage securities. A McKee Nelson spokeswoman declined to comment.

McKee Nelson burst onto the scene in 1999 and quickly grabbed lucrative Wall Street work from long-established rivals. William F. Nelson, one of its co-founders, said the firm, which is known for its sophisticated tax work, did not employ any special legal maneuvers to outflank its competitors. “There’s no secret, magic elixir that we sprinkled,” Mr. Nelson said.

In any case, the mortgage turmoil is now hitting the highly regarded McKee Nelson hard. The firm recently pared its structured finance department to 80 lawyers from about 115 through buyouts, sabbaticals and transfers to other departments. More cuts are unlikely, a spokeswoman said.

Across Wall Street, the structured finance industry is hurting. Just this week Merrill Lynch, which has lost billions of dollars on mortgage investments, said it would pull back from the business.

But after profiting from the mortgage boom, McKee Nelson is now positioning itself to profit from the bust by riding the coming wave of lawsuits. In January, the firm flew its partners and their spouses to Charleston, S.C., aboard four Delta commuter jets, to map out its strategy.

“We’re heavily committed to doing more litigation,” Mr. Nelson said. The firm hopes to represent investment banks, hedge funds and other financial companies, as well as their executives, in a variety of litigation, he said.

More Articles in Business »

Get the full newspaper experience, and more, delivered to your Mac or PC. Times Reader 2.0: Try it FREE for 2 full weeks.

Double Dip In Housing Largely Caused By Failure to Prosecute Mortgage Fraud

There's a double-dip in housing prices (and see this).

As CNN points outs:

U.S. home prices fell 2% in the third quarter after having gained steadily since early 2009.

The S&P Case-Shiller Home Price Index has recorded gains in four of the previous five quarters, including a 4.7% jump between April and June 2010. That leaves national home prices down 1.5% year over year and off 2% compared to the second quarter, according to the Index, which was released Tuesday.

***

The inventory of homes is high with nearly 3.9 million on the market in October, according to the National Association of Realtors. That means it would take 10.5 months to sell through all of the current inventory. In a normal market, there is usually a six-month supply.

Plus, there's a massive shadow inventory of homes waiting in the wings. These are homes that are deeply in the foreclosure process or even repossessed by banks but not yet put back on the market.

Much of the massive shadow inventory of homes is due to the fraud involved with mortgage documents.

CNN notes in a second article:

Big banks are having trouble restarting the foreclosure process after this fall's "robo-signing" scandal, and the once booming market for foreclosed homes has been hit hard as a result.

According to ForeclosureRadar, the number of properties coming to auction in hard-hit western states -- Arizona, California and Nevada -- has dropped more than 30%.

***

Investors had been doing brisk business, buying distressed properties on the cheap, sprucing them up and flipping them. But now they are being far more cautious.

"Their concern is that homeowners will be more aggressive in fighting foreclosures even after the auction sale," said Sean O'Toole, CEO of ForeclosureRadar.

For vulture investors, speed is essential -- they do not want to tie up investments for months while attorneys argue.

They are also worried about being able to unload the property.

***

Pressure on the market for distressed properties could last if delinquent borrowers are less likely to give up on their homes, according to Duane LeGate, CEO of Georgia-based House Buyer Network.

***

LeGate says his business dropped more than 30% the week after news of the robo-signing scandal broke, and has stayed down since. His theory: homeowners think the bank will have a tough time kicking them out in this environment, and that they can live for free for a while. He says he's got two friends who intend to do just that.

Reuters reports:

Shadow inventory is seen as one of the chief threats to the fragile housing market that is showing new signs of weakening.

***

Adding to the problems are errors in processing tens of thousands of foreclosure cases at Bank of America Corp, the largest U.S. mortgage servicer, and other financial institutions.

The massive failure to provide proper documentation in court has resulted in delays to an already lengthy processes of repossessing homes, leading to a backlog in paperwork and repossessions as the companies fix their procedures. The banks are also facing a nationwide probe by state attorneys general.

***

What's more, buyers of distressed properties have become gun shy due to the foreclosure processing problems, according to a Campbell/Inside Mortgage Finance survey of real estate agents.

The poll found 14 percent of owner-occupant homebuyers and 6 percent of investors refused to view foreclosed properties in October.

And Zack's Investment Research writes:

Foreclosures have slowed recently, but that is only because of the fraudclosure scandal, where the banks have proved to be exceptionally incompetent in handling the paperwork related to securitized mortgages. Basically, they can’t really prove that they hold the mortgage, and thus don’t have the right to foreclose.

It remains to be seen just how big a problem that will prove to be. It could just be a technical glitch that will gum up the works for a few months, or it could be a HUGE problem that once again undermines the solvency of the entire banking system.

***

What is clear is that what [Bank of America, Wells Fargo and other big banks] were doing was illegal and at least technically constituted fraud and misrepresentation to the courts.

There should be more than a handful of bankers who end up with long terms in prison as a result. Just because there should, however, does not mean that there will be. White-collar crime is simply not taken seriously in this country relative to blue collar or street crime, even though the amount stolen with a pen far exceeds the amount stolen with a gun.

For those who doubt that fraud is rampant in the mortgage paperwork mess, see this, this, this, this, this and this .

There are obviously other factors responsible for the softening housing market, such as the end of government stimulus programs regarding housing, and poor employment conditions. But as I've pointed out early and often, these problems are all interrelated. See Another Nobel Economist Says We Have to Prosecute Fraud Or Else the Economy Won't Recover.

For Liberty!!!! Crash JP Morgan Buy Silver

Click this link ...... http://www.youtube.com/watch?v=akF1jXant7g&feature=player_embedded

It’s The Bankers or Us – An Update to the Crash JPMorgan BUY SILVER Report

An UPDATE to CRASH JPMORGAN BUY SILVER Report

You can access Avalon’s Blog Here

This article will be updated as time permits. The financial movement termed CRASH JPMORGAN BUY SILVER is well underway and represents a GLOBAL REVOLUTION to take back the True Financial Wealth that millions have worked for and are now seeing destroyed right before their eyes.

The number of videos and articles are too numerous to include here, but briefly this article represents a brief update with additional information and videos – do additional research and think for yourself. No endorsement is made to take any action, however, information is vital to make informed decisions.

Video by SGTbull07 | December 03, 2010

Thank you all so much. Here’s an update: The Comex is running out of Silver & the whole world knows it. Let’s keep the pressure on the criminal Bankers: Buy PHYSICAL silver!

Music Courtesy Kevin MacLeod:
Titles: “Desert City, Dragon & Toast, Cambodian Odessey, Impact Alegretto, Impact Intermezzo”; Kevin MacLeod (incompetech.com) Licensed under Creative Commons 3.0

The content in my videos and on the SGTbull07 channel are provided for informational purposes only. Use the information found in my videos as a starting point for conducting your own research and conduct your own due diligence (DD) BEFORE making any significant investing decisions. SGTbull07 assumes all information to be truthful and reliable; however, I cannot and do not warrant or guarantee the accuracy of this information. Thank you.

Max Keiser Site

COMEX, a gold trust owned by iShares

On 16 March 2009 Barclays confirmed that it was planning to sell iShares to CVC Capital Partners, a private equity firm that had agreed to pay more than $4 billion. However, under a 45-day “go shop” clause, a later bid by BlackRock was announced on June 11, 2009 for the whole of the parent division Barclays Global Investors including iShares, in a mixed cash-stock deal worth around $13.5 billion (37.8 million shares of common stock and $6.6 billion in cash).

BlackRock is a global investment management firm based in New York City. The company acquired Barclays Global Investors in December 2009 under the BlackRock name, making it the largest money manager in the world.

Max Keiser & Mike Maloney Talking Sliver in Paris, France

Meet The 35 Foreign Banks That Got Bailed Out By The Fed (And This Is Just The CPFF Banks)

Submitted by Tyler Durden on 12/01/2010 17:11 -0500

One may be forgiven to believe that via its FX liquidity swap lines the Fed only bailed out foreign Central Banks, which in turn took the money and funded their own banks. It turns out that is only half the story: we now know the Fed also acted in a secondary bail out capacity, providing over $350 billion in short term funding exclusively to 35 foreign banks, of which the biggest beneficiaries were UBS, Dexia and BNP. Since the funding provided was in the form of ultra-short maturity commercial paper it was essentially equivalent to cash funding. In other words, between October 27, 2008 and August 6, 2009, the Fed spent $350 billion in taxpayer funds to save 35 foreign banks. More…

TRUSTEE FOR LIQUIDATION OF BERNARD L. MADOFF INVESTMENT

SECURITIES CHARGES JPMORGAN CHASE, MADOFF’S PRIMARY BANKER,

WITH “ENABLING” MASSIVE FRAUD

NEW YORK, NY, December 2, 2010 – Irving H. Picard, the Trustee for the liquidation for

Bernard L. Madoff Investment Securities LLC (“BLMIS”) today announced the filing of a complaint

in the United States Bankruptcy Court for the Southern District of New York against JPMorgan

Chase & Co., JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and J.P. Morgan Securities

Ltd. (collectively “JPMC”).

Madoff Trustee Sues JPMorgan, Others For $6.4 Billion

Madoff Trustee Sues UBS, Investors For Ponzi Profits

Bernard L. Madoff Investment Securities LLC Liquidation Proceeding

Irving H. Picard

Irving Picard focuses his practice primarily on representing unsecured and secured creditors, commercial landlords, bankruptcy trustees and other parties in interest in bankruptcy reorganization cases, as well as in out-of-court restructurings. Mr. Picard also serves as a court-appointed trustee in securities brokerage house liquidations under the Securities Investor Protection Act (SIPA). He is currently serving as the court-appointed trustee under SIPA in the liquidation of Bernard L. Madoff Investment Securities LLC. Click here to visit the Madoff Trustee website.

ADDITIONAL VIDEOS

Max Keiser 1.2 Crash JP Morgan with Silver Campaign – Alex Jones Tv
Max Keiser 2.2 Crash JP Morgan with Silver Campaign – Alex Jones Tv

Peter Schiff: US dollar has lost its strength

Click this link ....... http://revolutionarypolitics.tv/video/viewVideo.php?video_id=13285

Mukasey Declines to Create a U.S. Task Force to Investigate Mortgage Fraud

WASHINGTON — Attorney General Michael B. Mukasey rejected on Thursday the idea of creating a national task force to combat the country’s mortgage fraud crisis, calling the problem a localized one akin to “white-collar street crimes.”

Mr. Mukasey made clear that he saw the mortgage fraud problem at the root of the nation’s housing crisis as a serious one. But he said he was confident that the Justice Department’s current approach — using local prosecutors’ offices around the country to oversee separate F.B.I. investigations — was adequate.

Since he took over as attorney general last November, Mr. Mukasey has grappled with how best to deal with the law enforcement side of the growing housing crisis. He said in March, for instance, that the Justice Department was still struggling to determine whether there was a “larger criminal story” behind the housing crisis.

He gave his most definitive answer on Thursday in a briefing for reporters, saying that he did not think that the kind of national task force created at the Justice Department in 2002 to investigate the collapse of Enron was “the proper response” to the current crisis.

Some critics have called for the same sort of broad federal law enforcement response seen in the Enron case and a wave of other corporate scandals earlier this decade, or in the collapse of the savings and loan industry in the 1980s and 1990s.

“This is disappointing,” Representative Barney Frank, the Massachusetts Democrat who leads the House financial services committee, said in an interview about Mr. Mukasey’s remarks.

Calling the mortgage crisis, “worse than Enron,” Mr. Frank said, “Enron didn’t cause a worldwide recession. This has more innocent victims.”

Mr. Frank noted that a $2.4 billion bill to prevent mortgage foreclosure, which has already passed the House, includes a provision backed by Republicans to provide an additional $300 million for law enforcement officials to fight mortgage fraud. He questioned how that money could be spent without a more centralized effort.

But administration officials maintain that they are aggressively investigating fraud allegations growing out of the housing crisis, with or without a national task force to coordinate the effort.

The Federal Bureau of Investigation is investigating 19 major corporate fraud cases related to the mortgage crisis. The targets of most of those investigations have not been disclosed. In addition, the F.B.I. has 1,380 small mortgage fraud investigations now open in field offices around the country, a sharp increase over previous years, officials said.

Christopher J. Dodd, the Connecticut Democrat who leads the Senate banking committee, said Mr. Mukasey’s comments suggested that the administration “vastly underestimates the scope of this problem.”

Mr. Dodd said in a statement that “millions of borrowers were lured into mortgages they could not afford by unscrupulous lenders and brokers, resulting in a housing crisis that has affected neighborhoods across America. The administration ought to be aggressively pursuing the perpetrators of these abusive practices.”

John C. Coffee, a professor at Columbia Law School who specializes in corporate law, said that so far, the office of the New York attorney general, Andrew M. Cuomo, appeared to have adopted a more aggressive approach to investigating possible mortgage fraud by major Wall Street firms than have his federal counterparts.

“One area the attorney general should be concerned about is securities fraud at the core of our investment banking system,” Professor Coffee said. “The allegation that deserves attention is that these firms were knowingly packaging these securities with the knowledge that the quality of the collateral had materially deteriorated without disclosing that change.”

The practice, he added, appears to reflect “a systemic problem, with the red lights blinking.”

Mr. Mukasey, in his comments to reporters, acknowledged that particular markets had problems at almost every stage of the housing process. Mortgage holders were not told the true terms of their loans, homes were overvalued, and investment firms put together mortgage-backed securities packages in ways that inflated their true value.

“That has happened over and over again,” Mr. Mukasey said of the problems. “Someone that I met with characterized it as white-collar street crime.”

But the attorney general said local jurisdictions were in the best position to investigate, and he noted several major prosecutions had already been brought in federal court in the Eastern District of New York.

“There will be more and we will prosecute it, where we see it,” he said. “There’s always more we can do. That said, I don’t see what you call the Enron-type task force. This isn’t that type of phenomena.”

Mortgage Fraud Report 2006

This house was used in a Mortgage Fraud Scheme

Key Findings

Top Areas for Mortgage Fraud

• Analysis of available law enforcement and industry resources indicates that the top ten mortgage fraud areas are California, Florida, Georgia, Illinois, Indiana, Michigan, New York, Ohio, Texas, and Utah. Other areas significantly affected by mortgage fraud include Arizona, Colorado, Maryland, Minnesota, Missouri, Nevada, North Carolina, Tennessee, and Virginia.
• There is a strong correlation between mortgage fraud and loans which result in default and foreclosure.

Emerging Schemes

• Recent statistics suggest that escalating foreclosures provide criminals with the opportunity to exploit and defraud vulnerable homeowners seeking financial guidance.
• Perpetrators are exploiting the home equity line of credit (HELOC) application process to conduct mortgage fraud, check fraud, and potentially money laundering-related activity.

FBI and Industry Respond to Escalating Mortgage Fraud

• The FBI is proactively working with the mortgage industry in an effort to curb mortgage fraud crimes. The FBI signed a memorandum of agreement with the MBA to promote the FBI’s Mortgage Fraud Warning Notice.

Introduction

The Prieston Group, a risk management solutions provider that administers an insurance product covering losses due to fraud and misrepresentation, calculated that losses attributed to mortgage fraud will most likely reach $4.2 billion for 2006. This figure does not take into account another estimated $1.2 billion spent on fraud prevention tools. - The Prieston Group, 2006 Data, 16 February 2007,and 2 April 2007.

Mortgage Fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan. Although no central repository collects all mortgage fraud complaints, statistics from multiple sources indicate that mortgage fraud is on the rise. Some industry explanations for this increase point to recent high mortgage loan origination volumes that strained quality control efforts, the persistent desire of mortgage lenders to hasten the mortgage loan process, the escalation of home prices in recent years, and the introduction of non-traditional loans which contain fewer quality control restraints such as low documentation and no documentation loans¹.

Mortgage loan fraud is divided into two categories: fraud for property and fraud for profit. Fraud for property/housing entails minor misrepresentations by the applicant solely for the purpose of purchasing a property for a primary residence. This scheme usually involves a single loan. Although applicants may embellish income and conceal debt, their intent is to repay the loan. Fraud for profit, however, often involves multiple loans and elaborate schemes perpetrated to gain illicit proceeds from property sales. It is this second category that is of most concern to law enforcement and the mortgage industry. Gross misrepresentations concerning appraisals and loan documents are common in fraud for profit schemes and participants are frequently paid for their participation. Recent events likely resulted in an increase in mortgage fraud as higher housing prices tempted borrowers to commit fraud for property in order to qualify for a mortgage loan. Also, mortgage fraud perpetrators likely seized the opportunity to take advantage of the relaxed lending practices to commit fraud for profit.

The most common form of mortgage fraud is illegal property flipping which entails false appraisals and other fraudulent loan documents (see figure 1). Combating mortgage fraud effectively requires the cooperation of law enforcement and industry entities. No single regulatory agency is charged with monitoring this crime. The FBI, Department of Housing and Urban Development-Office of Inspector General (HUD-OIG), Internal Revenue Service, Postal Inspection Service, and state and local agencies are among those investigating mortgage fraud.

Figure 1: Illegal Property Flipping Scheme

Mortgage fraud is a relatively low-risk, high-yield criminal activity that tempts many. However, according a May 2006 Financial Crimes Enforcement Network (FinCEN) report, finance-related occupations, including accountants, mortgage brokers, and lenders, were the most common suspect occupations associated with reported mortgage fraud². Perpetrators in these occupations are familiar with the mortgage loan process and therefore know how to exploit vulnerabilities in the system.

Victims of mortgage fraud may include borrowers, mortgage industry entities, and those living in the neighborhoods affected by mortgage fraud. Lenders are plagued with high foreclosure costs, broker commissions, reappraisals, attorney fees, rehabilitation costs, and other related expenses when a mortgage fraud is committed³. As properties affected by mortgage fraud are sold at artificially inflated prices, properties in surrounding neighborhoods also become artificially inflated. When property values increase, property taxes increase as well. Legitimate homeowners also find it difficult to sell their homes as surrounding properties affected by fraud deteriorate.

During boom periods, high mortgage loan volume impacts expedited quality control efforts which often focus on production. Therefore, perpetrators may submit loans based on fraudulent information anticipating that the bogus information will be overlooked. On the other hand, loan officers, brokers, and others in the industry are paid by commission and may be tempted to approve questionable loans when the housing market is down to maintain current levels of income.

Analysis of mortgage originations indicates a decrease in demand. As a result of the declining housing market, mortgage fraud perpetrators may take advantage of eager loan originators attempting to generate loans for commission. Mortgage loan originations, including purchases and refinances declined during 2006 across the United States. The Mortgage Bankers Association (MBA) estimates that mortgage loan originations will reach $2.28 trillion during 2007 (see figure 2)⁴. According to an MBA December 2006 report, total home sales during 2006 decreased by approximately 10 percent from 2005 sales. New home sales declined by 17 percent and existing home sales dipped by 8 percent. In response to a decrease in demand for housing, builders reduced single-family starts (through November 2006) which were 14 percent lower than during the same time period in 2005. The MBA estimates that the oversupply of housing will continue to affect new home construction, home sales, and home prices until mid-2007⁵.

Top Areas for Mortgage Fraud

Data was compiled and analyzed from law enforcement and industry sources to determine those areas of the country most affected by mortgage fraud during 2006. Information from the FBI, HUD-OIG, FinCEN, Mortgage Asset Research Institute (MARI), Federal National Mortgage Association (Fannie Mae), RealtyTrac Inc. (foreclosure statistics), and Radian Guaranty Inc., indicate that the top ten mortgage fraud areas for 2006 were California, Florida, Georgia, Illinois, Indiana, Michigan, New York, Ohio, Texas, and Utah. Other areas significantly affected by mortgage fraud include Arizona, Colorado, Maryland, Minnesota, Missouri, Nevada, North Carolina, Tennessee, and Virginia (see figure 3).

Analysis of available information indicates that mortgage fraud is most concentrated in the north central region of the United States. The north central region is followed by the southeast and west regions.

Regional analysis of FBI pending mortgage fraud-related investigations as of FY 2006 reveals that the north central region of the United States led the nation with the most pending investigations. The north central region was followed by the southeast, west, south central, and northeast, respectively (see figure 4).

The aggregate amount of ARM loans containing fraudulent misrepresentations is unknown. However, since mortgage fraud perpetrators hope to inflate the value of their properties and quickly sell them, they would likely gravitate towards mortgage loans that offered low and short-term interest rates such as those offered by ARMs.

Delinquency, Default, and Foreclosure: Potential Fraud Indicators

Mortgage loans based on fraudulent information usually result in delinquency, default, or foreclosure in a bear market. According to the MBA, both delinquency and foreclosures rates increased during 2006 and were largely concentrated in adjustable rate mortgage (ARM) loans, especially sub-prime ARMs. This is partly attributable to the recent rise in interest rates, placing a strain on ARMs borrowers⁶.

BasePoint Analytics, a fraud analytics company, analyzed more than 3 million loans and found that between 30 and 70 percent of early payment defaults (EPDs) are linked to significant misrepresentations in the original loan applications⁷. Radian Guaranty, Inc. is a leading provider of mortgage insurance which protects lenders against loan default. Of the top ten states Radian Guaranty Inc. ranked highest for mortgage fraud, seven of them also ranked in the company’s top ten for EPDs. This suggests that EPDs are a good mortgage fraud indicator.

During 2006 there were more than 1.2 million foreclosure filings nationally, which represents a 42 percent increase from 2005 figures. The foreclosure rate for 2006 was one foreclosure filing for every 92 households⁸. Foreclosures for 2006 surpassed foreclosures for 2005 during every month of the year⁹.

Emerging Schemes

Foreclosure Fraud

Recent statistics suggest that escalating foreclosures provide criminals with the opportunity to exploit and defraud vulnerable homeowners seeking financial guidance. The perpetrators convince homeowners that they can save their homes from foreclosure through deed transfers and the payment of up-front fees. This “foreclosure rescue” often involves a manipulated deed process that results in the preparation of forged deeds. In extreme instances, perpetrators may sell the home or secure a second loan without the homeowners’ knowledge, stripping the property’s equity for personal enrichment.

While foreclosure scams vary, they may be used in combination with other fraudulent schemes. For instance, perpetrators may view foreclosure-rescue scams as a new method for fraudulently acquiring properties to facilitate illegal property-flipping and equity-skimming.

Home Equity Lines of Credit

According to a DOJ press release, Mi Su Yi and her husband, Paul Amorello, were sentenced in California in July 2006 for operating a $3 million bust-out scheme involving business lines of credit and HELOCs. The couple accessed lines of credit that had been obtained by others and paid the balances with worthless checks. They subsequently withdrew cash from the lines of credit before the checks were returned for insufficient funds. The couple laundered their proceeds through bank accounts opened under three false identities. In an attempt to avoid detection, the couple deposited cash amounts of less than $10,000 into these accounts. -US DOJ, “New Jersey Residents Sentenced to Prison for Running a $3 Million ‘Bust-Out’ Scheme,” Press Release, 25 July 2006, available at http://www.usdoj.gov

Individuals and criminal groups are exploiting the home equity line of credit (HELOC) application process to conduct multiple-funding mortgage fraud schemes, check fraud schemes, and potentially money laundering-related activity. HELOCs differ from standard home equity loans because the homeowner may borrow against the line of credit over a period of time using a checkbook or credit card. HELOCs are aggressively marketed by lenders as an easy, fast, and inexpensive means to obtain funds. HELOC funds are normally withdrawn on an as-needed basis to conduct home repairs or to pay bills, but fraud perpetrators may withdraw the entire amount within a short time period. Lenders typically focus on property equity prior to funding HELOCs. As such, many lenders do not demand a full property appraisal or a full property title search.

Perpetrators apply for multiple HELOCs to different lending institutions for a single property within a short time period. Prior to providing the funding, lenders conduct searches to determine if the property is encumbered by a lien. However, liens on a property may not be recorded for several days or months and thus cannot be immediately verified. Consequently, lenders do not discover that they hold a third, fourth, or fifth lien on a property (rather than the expected second lien) until later. The money obtained from the multiple HELOCs totals more than the original property purchase price, exceeding the out-of-pocket expenses incurred to secure the property.

Perpetrators conducting check fraud schemes may manipulate HELOC accounts and cause lenders to incur losses. For example, a perpetrator secures a HELOC and withdraws the entire allotted amount. A fraudulent check is then used to pay the balance owed on the HELOC. However, the perpetrator quickly withdraws the check amount from the HELOC before the bank realizes the check is worthless. When the check is returned for insufficient funds, the line of credit surpasses its maximum limit and the lender experiences a loss. HELOC accounts have also been used in common check frauds where perpetrators stole HELOC checks, fraudulently completed them, and deposited the funds into their own personal accounts.

HELOCs may also be used as a means of depositing and withdrawing laundered proceeds to further conceal the original funding source. As long as withdrawals from the HELOC do not exceed the line of credit limit, payments deposited into the account may be withdrawn later.

FBI and Industry Respond to Escalating Mortgage Fraud

The FBI is proactively working with the mortgage industry in an effort to curb mortgage fraud crimes. On March 8, 2007, the FBI signed a memorandum of agreement with the MBA to promote the FBI’s Mortgage Fraud Warning Notice (see figure 5). The Notice states that it is illegal to make any false statement regarding income, assets, debt or matters of identification, or to willfully inflate property value to influence the action of a financial institution. Under the agreement, the MBA and the FBI will make the notice available to mortgage lenders to use voluntarily as a means of educating consumers and mortgage professionals of the penalties and consequences of mortgage fraud.¹⁰

¹Mortgage Asset Research Institute, “Eighth Periodic Mortgage Fraud Case Report to MBA,” p. 3, 11, 12, April 2006.
²FinCEN, “The SAR Activity Review Trends, Tips and Issues,” p. 15, May 2006, available at http://www.fincen.gov/sarreviewissue10.pdf
³Bits Financial Round Table, “Fraud Production Strategies for Consumer, Commercial, and Mortgage Loan Documents,” A Publication of the Bits Fraud Reductions Steering Committee, p. 7, January 2005.
⁴Mortgage Bankers Association Mortgage Finance Forecast, 13 March 2007, 8 November 2006, 7 December 2005, and MBA 1-4 Family Mortgage Originations 1990-2005.
⁵Mortgage Bankers Association, “Year in Review: Normalization of the Housing Market,” 29 December 2006.
⁶Mortgage Bankers Association, “Year in Review, Normalization of the Housing Market, 29 December 2006.
⁷BasePoint White Paper, “New Early Payment Default-Links to Fraud and Impact on Mortgage Lenders and Investment Banks,” p. 2, 2007.
⁸RealtyTrac Staff, “More Than 1.2 Million Foreclosures Reported in 2006,” RealtyTrac Inc. Press Release, 25 January 2007
⁹RealtyTrac Incorporated, 2005 and 2006 Percent of Households in Foreclosure, data provided 17 January 2007.
¹⁰Mortgage Bankers Association, “MBA Signs Memorandum of Agreement with FBI to Promote Use of FBI’s Mortgage Fraud Warning Notice,” Press Release, 8 March 2007.

Criminal Investigative Division, Criminal Intelligence Section

WALL STREET'S MORTGAGE-BACKED SECURITY FRAUD DESTROYED BOTH THE US AND EU ECONOMIES!

Click this link ...... http://www.justin.tv/michaelrivero/b/275008660

« Bernie Sanders: 'Will You Tell The American People Which Banks Got $2.2 Trillion Of Their Dollars?' Bernanke: 'No' »

http://tinyurl.com/23zmjxj

Video - Sen. Bernie Sanders scolds Helicopter Ben

---

More clips from this day of testimony are here...

Text from Youtube page -- Great exchange! Bernie demands to know who got the $2.2 trillion in loans from the Fed. Bernanke won't tell him. He's also angry that banks that get taxpayer funds for nothing, are charging credit card customers 25% interest. Also discusses A.I.G. and credit default swaps.

---

Related story...

FED Is 'Central Bank of the World' After UBS, Barclays Aid

Federal Reserve data showing UBS AG and Barclays Plc ranked among the top users of $3.3 trillion from emergency programs is stoking debate on whether U.S. regulators bear responsibility for aiding other nations’ banks.

UBS was the biggest borrower under the Commercial Paper Funding Facility, with $74.5 billion overall, more than twice as much as Citigroup Inc., the top U.S. bank recipient, according to the data released yesterday. London-based Barclays Plc took the biggest single amount under another program that made overnight loans, when it got $47.9 billion on Sept. 18, 2008.

“We’re talking about huge sums of money going to bail out large foreign banks,” said Senator Bernard Sanders, the Vermont independent who wrote the provision in the Dodd-Frank Act that required the Fed disclosures. “Has the Federal Reserve become the central bank of the world? I think that is a question that needs to be examined.”

The first detailed accounting of U.S. efforts to spare European banks may add to scrutiny of the central bank, already at its most intense in three decades. The Fed, which released data on 21,000 transactions, said in a statement that its 11 emergency programs helped stabilize markets and support economic recovery. The Fed said there have been no credit losses on rescue programs that have been closed.

The growth of the U.S. mortgage-backed securities market and the dollar’s status as the world’s reserve currency enticed overseas banks such as Zurich-based UBS to buy assets in the country before 2008. They paid for the holdings with U.S. dollars, and when funding seized up, the Federal Reserve refused to take the risk that European firms would unload the assets and further depress markets for housing-related investments.

http://www.bloomberg.com/news/print/2010-12-02/federal-reserve-may-be-central-bank-of-the-world-after-ubs-barclays-aid.html

---

---

Check out this slideshow - 25 Great TSA Cartoons

I hand-picked the best 25 from a few hundred. They are in no particular order.

• Start the TSA Cartoon Slide Show

I spent a few hours putting this together, so your clicking is appreciated.

---

« You Won't Believe What Bernanke Said About Bailouts At His 2005 Confirmation Hearings »

This story was first published 1 year ago, in December of 2009, during Bernanke's Senate reconfirmation hearings. Absolutely nothing has changed.

---

Scroll down for VIDEO of this exchange...

---

Jim Bunning was the only Senator who had the courage to vote 'no' in the 99-1 shellacking that officially seated Bernanke in 2005.

In response to a question from Sen. Jim Bunning in November of '05, Bernanke said the following:

• “I believe that the tools available to the banking agencies, including the ability to require adequate capital and an effective bank receivership process are sufficient to allow the agencies to minimize the systemic risks associated with large banks."

• "Moreover, the agencies have made clear that no bank is too-big-too-fail, so that bank management, shareholders, and un-insured debt holders understand that they will not escape the consequences of excessive risk-taking. In short, although vigilance is necessary, I believe the systemic risk inherent in the banking system is well-managed and well-controlled.”

Bunning entered the '05 quotes into the official record for Bernanke's 2009 reconfirmation hearings:

• "That should sound familiar Mr. Chairman, since it was part of your response to a question I asked about the systemic risk of large financial institutions at your last confirmation hearing in 2005. I’m going to ask that the full question and answer be included in today’s hearing record."

• "Now, if that statement was true and you had acted according to it, I might be supporting your nomination today. But since then, you have decided that just about every large bank, investment bank, insurance company, and even some industrial companies are too big to fail. Rather than making management, shareholders, and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard."

Bernanke's denial in 2005 of what came to pass just 24 months later, and the fact that the Fed's response to the crisis turned out to be the polar opposite of what he promised, is substantial, and in a world where Congress were not so beholden to Wall Street, it would be sufficient grounds for any Senator to vote 'no' on Bernanke's re-confirmation.

But there is no doubt about this battle of transcripts -- Bunning wins; Bernanke loses. B-52's laughable words are now repeated for emphasis:

• Moreover, the agencies have made clear that no bank is too-big-too-fail, so that bank management, shareholders, and un-insured debt holders understand that they will not escape the consequences of excessive risk-taking. In short, although vigilance is necessary, I believe the systemic risk inherent in the banking system is well-managed and well-controlled.”

Ouch. Bondholders were made whole in every case except Lehman, and we learned that several banks were judged too big to fail. The Chairman's words have never been cheaper.

We deserve better.

---

Now sit back and enjoy the beatdown...

Video - Bunning destroys Bernanke

---

Check out this slideshow - 25 Great TSA Cartoons

I hand-picked the best 25 from a few hundred. They are in no particular order.

• Start the TSA Cartoon Slide Show

I spent a few hours putting this together, so your clicking is appreciated.

---

Fed Report Reveals Multi-Trillion-Dollar “Shadow Bailout”

The US Federal Reserve on Wednesday posted details of its multi-trillion-dollar “shadow bailout” programs, showing that nearly every major US financial institution benefited from billions in unreported government loans.

The data from 21,000 Fed transactions carried out between December 2007 and July 2010 involves eleven special lending facilities set up by the US central bank at the height of the financial crisis to funnel trillions of dollars into large financial companies. The money was lent at close to zero interest with no strings attached. The banks and corporations on the receiving end of the massive bailout were not required to even report what they did with the government cash.

The vast scale of the bailout underscores the fraud of the endless claims that “there is no money” for jobs, mortgage relief or even extended unemployment benefits. The publication of the Fed data simultaneously with the refusal of Congress to extend long-term jobless benefits, Obama’s pay freeze for federal workers and the preparations to extend the Bush tax cuts for the rich while slashing social programs and tax benefits for the working class, highlights the naked class interests pursued by the government and both big business parties.

The figures were released in accordance with a provision of the Dodd-Frank financial overhaul law, passed in July, which was included over the objections of the Fed. The provision required the central bank to release by December 1 the list of banks and other corporations that benefited from its emergency lending facilities.

The figures released Wednesday cover only loans made by the Federal Reserve and do not include the Treasury’s $700 billion Troubled Asset Relief Program (TARP) or the Federal Deposit Insurance Corporation’s guarantees on bank debt.

The total in outstanding loans at any one time from the Fed’s various bailout programs reached $3.3 trillion, or more than one fifth of the gross domestic product of the United States. The aggregate amount loaned out, however, is in the tens of trillions. The loans provided by the Term Auction and Primary Dealer Credit facilities alone added up to nearly $13 billion.

The Primary Dealer Credit Facility, the largest program by transaction volume, made an aggregate $9 billion in overnight loans to the largest investment banks. The program, which started in early March 2008, made 1,381 transactions, averaging $6.5 billion.

Every major investment bank, including those that claimed to be healthy, used the facility. Goldman Sachs borrowed money from the facility 84 times between March 18, 2008 and November 26, 2008, with the largest transaction, amounting to $18 billion, taking place on October 15, 2008. Its loans under the program totaled $600 billion.

Merrill Lynch used the facility 226 times. Its largest overnight transaction, carried out September 26, 2008, was $35 billion.

Citing the repeated recourse of Goldman Sachs and Morgan Stanley to the Fed’s low-cost overnight loan facility, the Wall Street Journal editorialized Thursday: “This news makes it impossible to argue that either bank would have survived the storm without the Fed’s cash.”

The Journal went on to note that non-bank corporations also dipped into the government till: “The same goes for General Electric, which from late October to late November 2008 tapped the Fed’s Commercial Paper Funding Facility 12 times for more than $15 billion.”

Among the beneficiaries of the Fed’s program were foreign banks, including the London branches of Goldman Sachs and Merrill Lynch and the US subsidiaries of UBS, Deutsche Bank and BNP Paribas.

The Term Auction Facility, which provided longer-term loans to a broader range of banks, lent a total of $3.8 billion. The average loan was $900 million.

The New York Times on Thursday noted that hedge funds and big investors made huge speculative profits from the Fed lending programs. One of these programs, the Term Asset-Backed Securities Loan Facility (TALF), extended low-cost loans for firms to buy securities backed by mortgages, auto loans, student loans and other forms of commercial credit. Among those who profited from such loans, the Times reported, was Kendrick R. Wilson III, a former executive at Goldman Sachs who had been a top aide to Henry Paulson, Bush’s treasury secretary and author of TARP and other bank bailout schemes.

The data also shows that 40 percent of the Federal Reserve’s lending to American International Group, the failed insurance giant, went to its life insurance subsidiaries, which were engaged in wild speculation and would have failed without the Fed bailout. The central bank provided these firms with billions of dollars in financing despite the fact that it had no mandate to regulate or assist them.

While the Federal Reserve insists that virtually all of the money given to the banks has been repaid, this does not alter the fact that upwards of $20 trillion of public funds was doled out to rescue Wall Street from the results of its own recklessness and criminality, and these virtually free loans enabled the banks to continue their speculative ways and reap hundreds of billions more in profits. No small portion of the windfalls underwritten by the Fed and the Bush and Obama administrations went into the personal accounts of bank and hedge fund CEOs and top executives.

One of the ways the banks profited from the crisis was by using their low-cost government loans to buy Treasury securities, in other words, to lend the cash back to the government at double or quadruple the interest rate at which it was borrowed.

The scale of the bailout reflects the scale of the financial elite’s criminality. The entire boom of the Clinton and Bush years was based essentially on a Ponzi scheme. When it came crashing down, as it was inevitably bound to do, the public treasury was looted to make good the financial aristocracy’s losses.

While most of the Federal Reserve emergency programs were wrapped up by 2010, the government has continued to hide losses incurred from them. For instance, the Federal Reserve is holding over $1 trillion of largely worthless mortgage-backed securities on its balance sheet, insisting that they can eventually be sold at full price.

The direct beneficiaries of these policies were the super-rich. Wall Street used its repayment of the TARP loans in 2009, at least in part with money loaned by the Fed, as an excuse to award itself record bonuses. The largest Wall Street firms set aside $145 billion for compensation that year, breaking every previous record.

Nov. Jobs Report Far Worse Than Expected; Unemployment Rate Up to 9.8%

The economy added merely 39,000 jobs in November, according to the Bureau of Labor Statistics, far worse than expectations of around 140,000. The unemployment rate edged up to 9.8 percent.

The economy had 1.3 million discouraged workers in November who gave up looking for work because they don't think there are jobs available to them and are thus not included in the headline number. The broader measure of unemployment held steady at 17 percent.

While there have been encouraging signs here and there (incidently, October's number was upgraded to 172,000 job gains), the labor market has just not been able to build any momentum, or string together several months of strong job growth.

JPMorgan Says Crude Oil Price Will Reach $120 a Barrel Before End of 2012

Oil will advance to $120 a barrel before the end of 2012 as consumption grows in emerging economies, according to JPMorgan Chase & Co.

The Organization of Petroleum Exporting Countries, which is responsible for about 40 percent of global supplies, is unlikely to increase production in the first half of next year unless prices surge through $100 a barrel, the bank said in a report today. Futures traded around $87 a barrel in New York today, near their highest price in two years.

“Strong emerging oil demand growth over the next 24 months is very likely to lift the call on OPEC production to levels last seen at the peak of the oil price spike in 2008,” analysts led by Lawrence Eagles in New York said. “We expect oil inventories to continue their drawing trend over the first quarter.”

JPMorgan boosted 2011 price forecasts for oil contracts in New York and London. West Texas Intermediate on the New York Mercantile Exchange will average $93 a barrel next year, up 3.6 percent from a previous estimate of $89.75, it said. Brent crude traded in London will average $95 a barrel next year, up from an earlier assessment of $91.75.

The bank said the North Sea benchmark, used to price two- thirds of global crude, will average $105 in 2012. It expects futures to reach $100 a barrel in the first half of 2011.

Brent crude for next month is trading at a 4-cent premium to the February future, a price situation known as backwardation that suggests immediate supplies are more in demand than later deliveries. This is a “structure that is likely to remain in place for much of 2011 and 2012,” JPMorgan said.

China issues warning over US-S.Korea-Japan talks

BEIJING — China, after being snubbed in its call for six-way talks on North Korea, has warned the United States, Japan and South Korea not to "intensify confrontation" at a meeting next week in Washington.

North Korea's nuclear-armed regime last week launched a deadly artillery attack on South Korea and boasted about a new uranium reprocessing plant, deepening international concern about its intentions.

China, under pressure to bring its ally to heel, proposed to hold multilateral talks in Beijing in early December.

But that was rejected by the United States, South Korea and Japan, which will meet themselves in Washington on Monday.

"We'll keep a close watch on this meeting," Chinese foreign ministry spokeswoman Jiang Yu said in a statement issued late Thursday.

"As the situation on the Korean peninsula is highly complicated and sensitive, we expect the meeting to ease tensions and promote dialogue, rather than heighten tensions and intensify confrontation," Jiang said.

"We expect the three countries to take into account regional peace and stability and Korean peninsula denuclearisation and give a positive consideration to China's proposal" for emergency six-way talks, she added.

Washington, Seoul and Tokyo have pressed ahead with major naval drills in a show of force against North Korea, prompting China Thursday to assail countries "who brandish weapons" while rejecting its own call for dialogue.

Beijing has proposed a meeting of the six envoys to stalled negotiations on North Korea's nuclear drive, which bring together the two Koreas, China, Japan, Russia and the United States.

But US Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, has said China needs to "step up" pressure on North Korea and that its call for the six-nation talks "will not substitute for action".

US Secretary of State Hillary Clinton, who will meet the foreign ministers of Japan and South Korea in Washington, said Thursday she had consulted with senior Chinese and Russian officials ahead of the meeting.

"The US is very concerned about North Korea and we want to work with countries in the immediate region" she said, listing China, Japan, Russia and South Korea.

Copyright © 2010 AFP. All rights reserved.

China Is `Scared' of U.S. Monetary Policy, Rogoff, Rickards Say

Policy makers in China, which holds $883.5 billion in U.S. Treasuries, are concerned the nation with the world’s biggest economy is debasing its currency, according to Kenneth S. Rogoff and James Rickards.

The world is in the early stages of a currency war, said Rickards, chief financial and administrative officer of Oro Capital Advisors LLC. Rickards, Rogoff, a professor of economics and public policy at Harvard University, and Laurence H. Meyer, co-founder of Macroeconomic Advisers LLC, spoke today at the Bloomberg Hedge Funds 2010 conference in New York.

The Federal Reserve’s “good old-fashioned monetary policy” does not intend to devalue the dollar, said Meyer, a former member of the Fed’s Board of Governors.

“The U.S. is not competitively devaluing its currency, that is total garbage,” Meyer said.

Meyer also said Fed Bank of St. Louis President James Bullard isn’t a proponent of raising interest rates to keep inflation from accelerating. Investors who have that perception have misread his comments, he said.

The Fed last month expanded its asset purchase program to buy $600 billion of Treasuries in six months in an effort to bolster the economy. The measure may prompt U.S. legislators to draft trade legislation with countries such as China, which limits movement in its currency, Rogoff said.

“The idea that China is this monster, gorilla in the world economy, is not true -- they are very scared,” Rickards said. “They made one very large mistake, that they trusted the U.S.”

International leaders including Chinese Premier Wen Jiabao have criticized the Fed, saying its policy will cause instability and faster inflation. U.S. Treasury Secretary Timothy F. Geithner has called on China to end its limits on the yuan and let the currency rise against the dollar over time.

Crisis-Hit Banks Flooded Fed with Junk

Banks flooded the Federal Reserve with billions of dollars in “junk bonds” and other low-grade collateral in exchange for much-needed liquidity during the crisis, as the financial sector struggled under a crippling credit crunch, new data show.

More than 36 percent of the cumulative collateral pledged to the US central bank in return for overnight funding under the Primary Dealer Credit Facility was equities or bonds ranked below investment grade. A further 17 percent was unrated credit or loans, according to a Financial Times analysis of Fed data released this week.

Only 1 percent of the collateral was Treasury bonds, which are normally used in transactions between banks and the monetary authorities.

The Fed created the PDCF in March 2008 after the demise of Bear Stearns to ease investment banks’ liquidity problems. At the time, it allowed banks to pledge only investment grade-rated collateral. But after the failure of talks to save Lehman paved the way for its bankruptcy, the Fed broadened the collateral requirements to include any asset that could be used in the tri-party repo system.

Investment banks responded by using their inventory of equities and other low-grade securities to borrow from the Fed. The Fed protected itself by imposing larger “haircuts” on riskier securities and emphasizes that all of its emergency lending was paid back in full with interest.

Within a day of easing the collateral requirements, Credit Suisse had borrowed $1 billion from the PDCF, using it for the first of only two times, against a collateral portfolio that was made up of 91 percent equity.

Credit Suisse declined to comment but people familiar with the situation said the two deals were tests to check whether the system was working.

By the following Monday, 41 percent of all collateral pledged against PDCF borrowing by several banks was equity, and another 11 percent was sub-investment grade bonds. At its peak – on September 29, 2008 – the Fed had exposure to $86bn of equity and sub-investment grade debt as PDCF collateral.

Morgan Stanley [MS 25.64 0.03 (+0.12%) ] and Merrill Lynch were among the largest pledgers of low-grade collateral in the turbulent weeks that followed the collapse of Lehman Brothers in September 2008.

Morgan Stanley and Merrill declined to comment, but people close to the situation stressed that the loans had been repaid in full and that the collateral met the Fed’s requirements.

Copyright 2010 The Financial Times Limited

Bloomberg Dec 1 2010

Click this link ...... http://www.youtube.com/watch?v=rTPa1hGtpJs&feature=player_embedded#!

Greek students clash with police

Students clash with police in front of the Greek parliament during a protest on Dec 2, 2010. Reuters photo

At least five people have been arrested in fresh clashes between student protesters and police outside of parliament in Athens over government austerity plans.

Security forces used tear gas to disperse a crowd of approximately 1,500 students attempting to march to the British Embassy in Athens.

The demonstrators showed unity with British students by holding banners which read, "Solidarity to the struggle of British students," Reuters reported.

British university students are facing an almost tripling of their tuition fees by the Conservative-Liberal Democrat coalition government.

The ongoing demonstrations in Greece were sparked by public outrage against economic reforms, which include eliminating over-time pay and bonuses.

The government agreed to the measures in exchange for a EUR 110 billion rescue package from the European Union (EU) and International Monetary Fund (IMF).

In return, the Socialist government has also slashed pensions and salaries, increased taxes and made it easier for the private sector to sack workers and cut wages.

Trade unions are strongly opposed to the measures and have been organizing demonstrations for months now.

They are calling for a nationwide general strike against the EU-IMF bailout on December 15 -- the seventh this year.

Student groups are planning sit-ins on university campuses around the country.

Protests will also be held on Monday, December 6, to mark second anniversary of the police shooting of a teenager, which led to nationwide riots.

LF/MB

War games in Northeast Asia not helpful for peace: China

The US nuclear-powered aircraft carrier USGeorge Washington leaves for joint naval and air drills with South Korea at a naval port in Busan, South Korea, July 25, 2010. South Korea and the United States on Sunday began their large-scale joint military drills off the east coast of the Korean Peninsula as scheduled. (Photo:Xinhua)
Shortly after concluding its naval war games with South Korea in the waters off the west coast of the Korean Peninsula this week, the US sent the carrier USGeorge Washington to Japan to participate in another joint military exercise. Analysts say this move can serve only to worsen the tense situation on the divided peninsula and threaten regional stability.

US Major William Vause, chief of operational plans, training and exercises, said in a statement that the drills, codenamed "Keen Sword," will last from today to December 10 in Japanese waters off its southern islands, close to the southern coast of South Korea.

The drills involve around 34,000 Japanese defense personnel with 40 warships and 250 aircraft, as well as more than 10,000 of their US counterparts with 20 warships and 150 aircraft, forming the biggest-ever war games between the two countries, according to Vause.

Integrated air and missile defense, base security, close air support, live-fire training, maritime defense, and search and rescue will be covered in the drills, AFP reported.

The joint maneuvers between Washington and Tokyo followed those between Washington and Seoul that concluded Wednesday amid rising tensions on the Korean Peninsula.

The two Koreas exchanged fire last week in waters off the peninsula's west coast, resulting in at least four deaths.

A Beijing-based military strategist who spoke on condition of anonymity told the Global Times Thursdaythat "North Korea's hard-line moves are attempts to pressure the US into holding bilateral talks. Pyongyang is confident that it can keep the situation from evolving into war. China's influence is limited in the face of such an independent North Korea."

Responding to the US-Japan joint exercise, Ministry of Foreign Affairs spokeswoman Jiang Yu said Thursdaythat "the US-Japan alliance should not damage the interests of third parties, including China, and the international community does not support actions that escalate tensions."

She reiterated Beijing's belief that dialogue and negotiations are the only solutions for the Korean Peninsula issue.

The joint maneuver between the US and South Korea mobilized a combined 7,300 troops, the 97,000-ton aircraft carrier George Washington and about 10 navy ships.

In an interview with the Hong Kong-based Phoenix Television, Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, said the military drills with South Korea had been planned a month ahead of time, and the US had informed China of their objective and how long the drills would last.

By Guo Qiang, Global Times
【1】 【2】

Chinese train breaks speed record in trial use

A train of China Railway High-Speed (CRH) is ready for a test running at a railway station in Xuzhou, east China's Jiangsu Province, Dec. 3, 2010. In September, the China-made CRH380A train hit a speed of 416.6 kilometers per hour on a test run to set a new world train speed record. It is expected to exceed the record at this test running, which will be held at a section of the Beijing-Shanghai High-Speed railway. (Xinhua/Chen Shugen)
One of China's high-speed trains broke the world record for unmodified commercial use on Friday during trial service, the Ministry of Railways said.

The train CRH380A hit a speed of 486.1 kms per hour on the tracks between Zaozhuang City of Shandong Province and Bengbu City in eastern Anhui Province, which form a segment of the world's longest high-speed rail line linking Beijing and Shanghai.

The train's previous speed record was 416.6 kms per hour set on Sep. 28 during its run between Shanghai and Hangzhou, capital city of east China's Zhejiang Province.

"It not only marks a milestone in the construction of the Beijing-Shanghai high-speed railway, but also is a major achievement of China's technology innovation," said Wang Yongping, spokesman of the Ministry of Railways (MOR).

It shows China leads the world in high-speed railway development, he said.

Source:Xinhua

【1】 【2】 【3】 【4】 【5】

Madoff Trustee Sues JPMorgan For $6.4 Billion: "They Were At The Very Center Of Madoff Fraud" »

Two comedy clips included - Ballad of Bernie, Madoff Recovery Plan.

---

Bloomberg -- The trustee liquidating Bernard Madoff’s former investment firm sued JPMorgan Chase & Co. for $6.4 billion over claims the bank aided and abetted the imprisoned con man’s fraud.

Irving H. Picard, the lawyer appointed as trustee by a New York bankruptcy court, said in a statement that he sued JPMorgan yesterday seeking $1 billion in fees and $5.4 billion in damages.

• “JPMorgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” David J. Sheehan,” counsel to Picard, said in the statement. “JPMC was at the very center of that fraud, and thoroughly complicit in it.”

Any money recovered from JPMorgan will be returned to Madoff’s victims on a pro rata basis, said Picard, who has so far recovered about $1.5 billion for Madoff creditors.

• Picard’s complaint “blatantly distorts both the facts and the law in an attempt to grab headlines,” JPMorgan, the second- biggest U.S. bank, said yesterday in a statement. “JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff.”

The suit is the second-biggest filed by Picard in the Madoff bankruptcy, after a $7.2 billion claim he filed against investor Jeffry Picower in May 2009. Picower died in October 2009. In addition to the Picower suit, Picard filed at least 18 other court claims seeking the return of $15.5 billion paid to Madoff friends and family, feeder funds, favored investors and others.

Over the past week, Picard has sued hundreds of so-called “net winners,” investors who withdrew more from their Madoff accounts than they invested. Picard, supported by a ruling in the case from U.S. Bankruptcy Judge Burton Lifland, claims such fictitious profits must be returned to the bankruptcy estate and paid out to all of Madoff’s victims with valid claims.

Picard faces a Dec. 11 deadline for filing suits to recover false profits.

At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent balances. Investors lost about $20 billion in principal.

Read the whole thing at Bloomberg...

---

Now enjoy a laugh...

The Madoff Recovery Plan

Comedy - In lieu of returning everyone's money, the Department of Justice figures out a way to bring closure to Madoff's victims.

---

Song - Ballad of Bernie Madoff

---

Homeland Security Compiling TSA Enemies List

TSA protesterThe Department of Homeland Security is gathering names and information about anti-Transportation Security Administration activists, members of the media, and other supposed troublemakers for investigation and possible tracking, according to an internal DHS memo cited by security expert and Northeast Intelligence Network Director Douglas Hagmann.

Hagmann’s report, first published last week on the NIN website and in Canada Free Press, is causing widespread condemnation and ridicule of the U.S. regime across the internet. According to the article, Hagmann was contacted by a source within the DHS following publication of a previous article on TSA abuses entitled “Gate Rape of America.”

The secret memo was written “in response to the growing public backlash against enhanced TSA security screening procedures and the agents conducting the screening process,” explained the DHS document’s introductory paragraph. It was issued in the form of an “administrative directive” after high-level meetings between American “security” bosses like Janet Napolitano and TSA overlord John Pistole. And Obama apparently approved.

The memo reportedly labels opponents of the TSA’s heavy-handed groping, naked-body scanners, and other procedures as “domestic extremists.” Federal bureaucrats are actually instructed to identify and electronically report individuals falling under the “extremist” classification — including “any person, group or alternative media source” opposed to the TSA’s Fourth Amendment violations — to the Homeland Environment Threat Analysis Division, the “Extremism and Radicalization” branch of the Office of Intelligence & Analysis section of the DHS. The dragnet also includes anyone who “supports and/or elicits support” for people causing “disruptions.”

“It would appear that the Department of Homeland Security is not only prepared to enforce the enhanced security procedures at airports, but is involved in gathering intelligence about those who don’t. They’re making a list and most certainly will be checking it twice,” wrote Hagmann in the article, entitled "DHS & TSA: Making a list, checking it twice."

“Meanwhile, legitimate threats to our air travel security (and they DO exist) seem [to be] taking a back seat to the larger threat of the multitude of non-criminal American citizens who object to having their Constitutional rights violated,” he added. “As I have written before, it has nothing to do with security and everything to do with control.”

The week before the release of Hagmann’s report, the TSA actually did open an investigation into a passenger who opted out of the naked body scanner and then refused the “enhanced” groping, which he compared to sexual assault. “You touch my junk and I'm going to have you arrested,” he warned the TSA bureaucrat. Now, the would-be passenger is facing possible criminal charges and a potential $11,000 fine.

Anger at the TSA and its invasive procedures has been boiling over in recent months as news reports continue highlighting abuses — undressing toddlers, forcing mothers to drink their own breast milk, naked body scanners, invasive groping of genital areas, and worse. That sentiment led to the national “Opt Out Day” movement calling for airline passengers to opt out of naked body scanners across America during the busy Thanksgiving holiday.

But is the bureaucracy really compiling an “enemies list” of Americans who peacefully object to the violation of their rights? Hagmann responded to doubts about his assertions in a follow-up piece entitled "Proof Positive that the government rates body scanner resisters as 'Non-Islamic Domestic Terrorists'." In it, he cites the infamous DHS and MIAC documents — labeling as a potential domestic terrorist virtually every American with an opinion — as proof that the regime is capable of such a feat and has, in fact, already done worse.

He declined to publish the full memo, saying “the document cannot be posted or published” and that “dissemination of the document itself is restricted by virtue of its classification, which prohibits any manner of public release.” But one thing is certain; the reaction to his report has been enormous. It has been reposted across the Internet and is right now being discussed in numerous forums by countless people.

One concern expressed repeatedly is the notion that the TSA, not content to trample on just the Fourth Amendment rights of Americans, is now moving to stifle the right to free speech as well. “The First Amendment is in more serious jeopardy than one might have previously imagined,” noted author Edward Cline, a contributing editor to Family Security Matters.

“Do not cave in to the TSA’s 'conditioning' to make your silence a measure of normalcy,” Cline concluded. “The government’s intention is to inure Americans to living in a state of obedient and submissive servitude.”

Press TV's Nargess Moballeghi with Max Keiser, Jeoffrey Hall & Keith Pilbeam P02

Click this link ....... http://www.youtube.com/watch?v=DgNM6EbEPLQ