Financial Crisis Hits Wall Street; Judges Start Nixing Foreclosures

New Shockwaves From Courts and Accounting Board

The Next Financial Crisis Hits Wall Street, as Judges Start Nixing Foreclosures

The financial tsunami unleashed by Wall Street’s esurient alchemy of spinning toxic home mortgages into triple-A bonds, a process known as securitization, has set off its second round of financial tremors.

After leaving mortgage investors, bank shareholders, and pension fiduciaries awash in losses and a large chunk of Wall Street feeding at the public trough, the full threat of this vast securitization machine and its unseen masters who push the levers behind a tightly drawn curtain is playing out in courtrooms across America.

Three plain talking judges, in state courts in Massachusetts and Kansas, and a Federal Court in Ohio, have drilled down to the “straw man” aspect of securitization. The judges’ decisions have raised serious questions as to the legality of hundreds of thousands of foreclosures that have transpired as well as the legal standing of the subsequent purchasers of those homes, who are more and more frequently the Wall Street banks themselves.

Adding to the chaos, the Financial Accounting Standards Board (FASB) has made rule changes that will force hundreds of billions of dollars of these securitizations back onto the Wall Street banks balance sheets, necessitating the need to raise capital just as the unseemly courtroom dramas are playing out.

Article was published HERE also.

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The Hill: The Dow topped 10,000 for the first time in a year yesterday. Are there any political points to be scored by Obama's team? By anyone?

JFM: The Dow Average is like the Consumer Price Index. When the CPI rises too dramatically, the items measured for it are changed to reflect a smaller increase. When some of the companies included in the Dow average go belly up or nearly so, they get dropped and others are inserted. The name of the game is manipulation of figures. We can be sure that some in the Obama administration will delight in the Dow again reaching 10,000, but foreclosures are up, unemployment remains very high, the dollar's value continues to sink, and the average American knows the nation is still in deep trouble. Anyone who points to the higher Dow Average as some sort of indication that the nation is pulling out of the recession — President Obama included — is either daft or dishonest.

The Hill: Some on the left are growing increasingly frustrated with President Barack Obama. How will this affect the 2010 elections and do you think Obama will need to move left next year to help turnout at the polls?

JFM: The mood in the country is one of fright and disgust and it is growing. It will have a definite impact on the 2010 elections. There will likely be a duplication of the 1994 GOP surge into Congress. One can dearly hope that it will not be taken off track by something like the generally meaningless "Contract with America" concocted by Gingrich. As for Obama moving leftward to appeal to voters, it's hard to imagine he could move any farther leftward without falling off the planet.