The Underlying Fraud In Banking

Karl Denninger, recently awarded the Accuracy in Media Award, has out-done himself tonight with his latest "Ticker"

It is too long to post in it's entirety here, so please follow the link. What you read will open your eyes to the media and political lies we have been fed regarding the economic crisis.

Ok tinfoilers, this is not what you think it is; I'm sure many of you came here and started to read because you thought I was going to rant about fractional reserves or the lack of "sound money."

Sorry, no dice.

No, I'm going to talk about the inherent fraud over the last five or so years in the housing (and other lending) markets, and it is NOT where you think it is.

Rest at top link.


Mod Edit: Big Quote – Please Review This Link.


[edit on 1-3-2009 by Crakeur]

Wow, and no one cares?

No wonder we are in this mess

the double standard that exists is just amazing how did anyone allow this to happen

i wish i got a job at a bank i guess if you work for them you can really do no wrong and the laws do not apply

nobody watches nobody cares steal all you want
and when you mess up real bad the gov will rush in and give you money
then take that money and give yourself bonuses

i think everyone should pull there money out of the banks and collapse them

Nice Find!

I've been reading some of Karl Denninger's writings, and watching youtube vids he uploads.

kdenninger's channel


This man seems to me to be knowledgeable, forthright, trustworthy...He also seems to have genuine concern for We The People.

All the traits that one would look for in a responsible financial leader...

Admittedly I am no finance wiz... I trust what this man tells us.


It's a shame our once Great Republic hasn't had forthright, trustworthy, responsible, financial leadership for quite some time, much less ANY genuine concern for We The People

Is it time for REAL change we can believe in...the change the founding fathers knew would inevitably come to pass?

You do the math...

With fractional banking available to these banks which too me seems like easy money for the banks only an idiot would put themselves in the positions these banks have wound up in. I think the people understand this much and I think the people strongly voiced thier disagreements with the very first bailout at what a 90 to 1 ratio against?
I dont want to derail this thread but should our Country be at the mercy of the FED for money,private money? Just how sound can the Fed be at this time with all the hemmoraging of cash its been doling out?
Should not we the people be in control of the issuence of money that we"re responsible for paying back as Jefferson warned us about?



“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from banks, and restored to the people.” Thomas Jefferson

Back on topic though isnt this why we are getting so hot about this because the greed and incompetence of the banks is being rewarded and the people too who've been irresponsible in taking loans they couldnt afford.
When the very first bailout was pushed through and the people spoke up loud and clear against it,I feel that point, that day, was the tipping point with representative government. I actually called the representatives of my state before and after voicing my opinion against the bailouts and after they passed it I actually called back livid this time asking if they were having a constitution burning party in congress. I guess that puts me on the red list huh?
I'm still livid with this issue,I dont have alot of money left because I felt like well I'll do my part and paid of all credit cards and cancelled them, I'll never to use credit again. The money these banks have recieved should be set up on a repayment plan identical to thier credit card policys.I know one card I had payed off had bumped my interest to 32% in the end!
My goal now as one other poster said is one watch closely who votes for what in my district and come voting time lets clean house.Step two no longer play the credit game,ever, pay cash or do without thats what were doing. Some things if you want them you may need to finance like a car or a house and for most thats unavoidable but you could buy a Ford as far as I know they havent asked for a bailout. Work against these vipers in this manner and together we can make those responsible pay and yes if you know your bank is recieving bailout money bail out of that bank because they have proven themselves irresponsible. Absolutely there should be a bank run on the banks who have failed let spiderwebs grow on thier doors for lack of customers.How glorious a victory for the people that would be if we worked as one it could be done. We could make sure these irresponsible institutions fail.
I know of one bank that I was a customer of I had already left, BOA, because I found out they were issuing credit cards to illegal immigrants which I knew was a bad policy and look where they are now. One of the largest recepiants of OUR money.
Yep, I'm still livid, I will do my part in non support for recipients of these monies will never do business knowingly with these companys ever no chevy no chrysler no credit in time it will work they will have no choice but to fail and like politics there will be no vacume. If there is money to be made a more fiscally responsible entity will take thier place. Yes let your money be your voice abandon ship from all recipients.

“Whoever controls the volume of money in any country is absolute master of all industry and commerce. And when we realize that the entire system is very easily controlled, one way or another, by a few very powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
U.S. President James Garfield. A few weeks after making this statement,

Laws were put in place, in the 30's, to stop the criminal offense of a bear raid.
What is a bear raid?
It is when people with large capital, for there own reasons, to try to control governments and countrys and economy's.
Sell the market constantly in order to manipulate it.
They just keep selling and selling and selling like a vacuum cleaner sucking all the money out of the market.
The assets of the company's who's stocks are falling.
Are worth much much more than the value of the stock.
It is market manipulation at its finest.
They can drive whole country's to there knee's and basically blackmail them.

They put a rule in place for this, that they would need an uptick, to sell.
It didn't stop bear raids, but it made it alot less profitable and attractive and harder to do.
What happened in 06-07?
The SEC, permanently removed the uptick rule.
This was at a time when the sub prime mortgage problems started to hit hard.
In fact they started the bear raid before they removed it.
But as I saw, it was making it alot harder for them to outright crash the market.
They needed this corrupt edge.
The SEC, the people who run it, are corrupt.
I was trading the markets in 05-06-07, and I watched this happen.
Now the markets are like only 1 person, completely owns them however they choose.
Many financial analysts and guru's and economists.
Like Jim Cramer.
Have been calling for this rule to be put back since then.
These people have 30 years + in the markets, they are not stupid.
Yet nothing is done.The SEC do nothing.
The problem I have is this.
How can the SEC, just remove and add major laws to stop crimes, without congressional approval as they see fit?
Ask yourself this.
The problems we are seeing now, are being MADE.
They are NOT an accident.


[edit on 1-3-2009 by BorgHoffen]

reply to post by BorgHoffen


I starred that post BorgHoffen because I believe you are right there was a run on the market and the banks by some very rich people. As a matter of fact I watched a video of a congressman on c-span saying that very thing. I only wish I had saved it or could remember who he was so I could find it again and share it with ats.
I also believe that this was absolutely no accident and we really really need to expose those who done it to the world. I have no problem with capitalism and making a buck or fractional banking but excess debt to liquidity is just stupid business and they should not be bailed out for lousy business practices. Its like poker if you lose you lose you fold when your busted you dont get to stay in the game.
I'm no invester or no money manager but I aint broke niether, nor do I want or need a bailout all I want is an opportunity to earn a decent living for my family and I expect our government to act just as responsibly with MY money as I have to in order to keep my house and possesions.

I believe it was FDR that said there are no accidents in politics and I dont believe this was no accident either something massive had to trigger it but nobody seems to know what or they aren't telling one. Either case I think we somehow need to find out what the trigger was and who pulled it.

Well today Karl Denninger provides a Solution:

REMEDY FOR "The Underlying Fraud In Banking"

I received a letter this morning from a chief lending officer at a small mutual savings bank.

He asserts that they are levered at a moderate 10:1, and their ROE ranges from 4-6% depending on the economy. They are profitable - today.

Their bank makes loans held on their books - the way bankers of old before securitization operated, and the only way to guarantee that actual underwriting takes place. Their delinquencies for 1-4 family homes are elevated at 1.2%, but are resulting from job loss, illness and other similar life events - which happen in both good times and bad.

There are literally thousands of banks and credit unions just like this across the nation.

The FDIC on Friday mandated what amounts to a 20 basis point "levy" on deposits. From all banks. But their shortfall, both actual and predicted, comes from willful and direct violations of Title 12, Chap 16 Sec1831o.

Specifically, IndyMac bank (and one other), it has now been learned, was permitted to improperly treat capital by a member of the OTS, which is a federal regulatory agency run by Treasury. This is not conjecture it has been discovered to be fact and in addition, the person responsible did the same thing during the S&L crisis.

This is not an "accident" folks.

But PCA requires:

(a) Resolving problems to protect Deposit Insurance Fund

(1) Purpose

The purpose of this section is to resolve the problems of insured depository institutions at the least possible long-term loss to the Deposit Insurance Fund.

(2) Prompt corrective action required

Each appropriate Federal banking agency and the Corporation (acting in the Corporation’s capacity as the insurer of depository institutions under this chapter) shall carry out the purpose of this section by taking prompt corrective action to resolve the problems of insured depository institutions.

Not requests, REQUIRES.

The word shall in statute is an important "term of art" in legislation; it is not subject to interpretation or desire. It means what it says - SHALL.

Among other violations there are institutions such as GMAC (and IndyMac and WaMu before them) that have been offering above market-rate CDs, which is one of the practices in 12/Ch16/Sec1831o that is subject to regulation and is required to be curtailed by any institution that is in trouble.

Further, the compounded cost of TARP money (under the old rules) is close to 9%, and you have to look at compounded cost just as you must look at compounded returns.

Now go look up above at "SoundBank's" ROE. 4-6%.

It is not possible for that bank to take TARP money and make a profit from it unless it was to engage in the very unsound practices that got us into this mess!

This leads to the following inescapable conclusions:

1. The entirety of TARP is in violation of PCA as it is not possible through prudent lending to earn more than this capital costs. TARP IS AND WAS UNLAWFUL.
2. The actions of "troubled institutions" such as GMAC, IndyMac and WaMu (some of which have failed, some of which have not - yet) is directly contrary to the requirements of the PCA law and yet regulators have willfully ignored these requirements.
3. OTS in particular has been caught with people on their staff that improperly permitted reclassification of capital as a means of avoiding PCA; since these people acted in concert with one or more persons at the bank involved they conspired to commit this act. Is there a "bank fraud" prosecution in here? If so, where is it?

I wrote on the underlying "Bezzle" in our banking system yesterday.

Today is about remedies.

I strongly urge the sound banks in this nation to consider filing for "writs of mandamus" en-masse in the courts to compel the federal government to follow the law, and ask for injunctive relief to put a stop to these programs along with their underlying malfeasance and misfeasance now.

As these sound local and regional banks are the ones harmed, they clearly have standing in the courts to bring this action.

One of the challenges that I have had from the beginning of this mess is finding an angle under which legitimate, impossible-to-challenge standing can be established in order to urge that someone use the legal resources available in this country to stop it.

I think I may have just discovered that crucial link.

Now it is up to our sound community and regional banks to take action before their capital basis are eroded by these outrageous actions, directly contrary to statute, to the point that they fail as well.

The post does have some imbedded links in it, so please visit the link above

I'll just repost what I posted here:

REMEDY FOR "The Underlying Fraud In Banking"

I received a letter this morning from a chief lending officer at a small mutual savings bank.

He asserts that they are levered at a moderate 10:1, and their ROE ranges from 4-6% depending on the economy. They are profitable - today.

Their bank makes loans held on their books - the way bankers of old before securitization operated, and the only way to guarantee that actual underwriting takes place. Their delinquencies for 1-4 family homes are elevated at 1.2%, but are resulting from job loss, illness and other similar life events - which happen in both good times and bad.

There are literally thousands of banks and credit unions just like this across the nation.

The FDIC on Friday mandated what amounts to a 20 basis point "levy" on deposits. From all banks. But their shortfall, both actual and predicted, comes from willful and direct violations of Title 12, Chap 16 Sec1831o.

Specifically, IndyMac bank (and one other), it has now been learned, was permitted to improperly treat capital by a member of the OTS, which is a federal regulatory agency run by Treasury. This is not conjecture it has been discovered to be fact and in addition, the person responsible did the same thing during the S&L crisis.

This is not an "accident" folks.

But PCA requires:

(a) Resolving problems to protect Deposit Insurance Fund

(1) Purpose

The purpose of this section is to resolve the problems of insured depository institutions at the least possible long-term loss to the Deposit Insurance Fund.

(2) Prompt corrective action required

Each appropriate Federal banking agency and the Corporation (acting in the Corporation’s capacity as the insurer of depository institutions under this chapter) shall carry out the purpose of this section by taking prompt corrective action to resolve the problems of insured depository institutions.

Not requests, REQUIRES.

The word shall in statute is an important "term of art" in legislation; it is not subject to interpretation or desire. It means what it says - SHALL.

Among other violations there are institutions such as GMAC (and IndyMac and WaMu before them) that have been offering above market-rate CDs, which is one of the practices in 12/Ch16/Sec1831o that is subject to regulation and is required to be curtailed by any institution that is in trouble.

Further, the compounded cost of TARP money (under the old rules) is close to 9%, and you have to look at compounded cost just as you must look at compounded returns.

Now go look up above at "SoundBank's" ROE. 4-6%.

It is not possible for that bank to take TARP money and make a profit from it unless it was to engage in the very unsound practices that got us into this mess!

This leads to the following inescapable conclusions:

The entirety of TARP is in violation of PCA as it is not possible through prudent lending to earn more than this capital costs. TARP IS AND WAS UNLAWFUL.
The actions of "troubled institutions" such as GMAC, IndyMac and WaMu (some of which have failed, some of which have not - yet) is directly contrary to the requirements of the PCA law and yet regulators have willfully ignored these requirements.
OTS in particular has been caught with people on their staff that improperly permitted reclassification of capital as a means of avoiding PCA; since these people acted in concert with one or more persons at the bank involved they conspired to commit this act. Is there a "bank fraud" prosecution in here? If so, where is it?

I've said it before, I'll say it again, there are a lot of Madoff's and Stanford's out there. Many of them using entire institutions like Stanford. The government, for some reason is bankrolling all of this. Will rampant fraud uncovered as this depression gets worse destroy the banks? Big and small are under fire. Many of the banks closing in this economy are small, most have been responsible, but it is the large fraudulent ones that are saved, and flushed with tax payer money. We're covering fraud losses for those who committed the fraud to begin with.


I can't believe what is happening in this country. It really scares the hell out of me that we let it get so bad, so out of control that it now threatens the very fabric of what America is. What its stated purpose is. We are being hijacked as a nation, there is a coup taking place right now and both democrats and republicans are in on it. They profit from loss, they always have, and this is the fruits of their labor, the result of our willful ignorance, our willing to argue about what Inalienable Rights mean. While such rights were being taken from EVERYBODY. Partisan squabbling dragged the entire country into a state of fear, addicted to it we did nothing to change it. We elected a democrat instead. That's change? The whole country has been screwed for 100 years now and we're still being duped into thinking that Republicans and Democrats know what the hell they're talking about?

America indeed needs change. We need a third party. A champion of the Constitution. Some one who will ACTUALLY shrink government, who will remove these stupid restrictions on our freedoms, these illegal taxes, this criminal foreign policy. I'm done arguing about which of the two national parties have it right, because neither do. It is two opposing dogmas in the face of daunting and inescapable realities. You cannot fight a problem of fact with ideology and lying to justify the means of ideology. That will destroy us. The Constitution is a guideline. WE guarantee our rights with everything we are and whatever we are armed with. It is our country, and we're letting such a small group of people who are very stupid make decisions for 300 million of us, and billions around the world by extension. This is NOT freedom it is fascism, it is despotism, and it has to stop.

I love this country to much to let political zealots flush it down the toilet for childish, selfish notions of reality. One only they seem to justify. It is about time responsibility fell on our shoulders. It is about time we demanded that the line be drawn, this far-no further! It makes me truly sad to what this country, that took me in and opened opportunity to me, the nation who I now give a brother to, fall to pieces. And I feel helpless in not being able to do anything about it. It kills me to see Americans fight each other over political ideology when they should be fighting for the Constitution, which makes no mention of political parties, and the only ideologies are that of Life, Liberty, and the Pursuit of Happiness. To be free to PROTECT OUR SELVES however we see fit, to have what we work for. To have a Fair Represented Tax policy, a small government that respects our self governance and allows us to take care of our needs as we see fit.

We live in a world that could blow up tomorrow in a series of mushroom clouds because we let the government get way to big, and the foreign policy that arose from that has been arrogant, self righteous, and downright evil. This policy must be reversed. We cannot continue to run an antagonistic empire. Doing so puts the world at risk of annihilation and it is no one nations prerogative or right to destroy the world at the whim's of political or religious zealots. To make that decision is inherently immoral and evil, and that's the decision we've allowed our leaders to make for us and billions of others. All while the rob us. They tax wealth that hasn't even been created yet, and people think they're getting tax cuts? Neither party has EVER cut taxes. They only move them from place to place depending on where the wind blows, or whoever is paying the least attention.

Government sponsored fraud and murderous foreign policies need to stop. We need to return to the constitution with expediency and clarity or we will lose our nation to idiots like this. I hope God does bless America, because everyone else is cursing us, and rightly so, because of idiots like this.

reply to post by projectvxn


snip from your reply:

... America indeed needs change. We need a third party. A champion of the Constitution. Some one who will ACTUALLY shrink government, who will remove these stupid restrictions on our freedoms, these illegal taxes, this criminal foreign policy. I'm done arguing about which of the two national parties have it right, because neither do. It is two opposing dogmas in the face of daunting and inescapable realities. You cannot fight a problem of fact with ideology and lying to justify the means of ideology. That will destroy us. [...]

Yourself and many others had a chance to cast a vote for Nader...

\no, he's not as academic as Ron Paul, but the nation didn't need a
philosopher/professor as the CorporationUSA CEO...
we needed a person in the model of Ralph Nader, & the Constitution Party

we've instead gotten the socialist tandem of Obama+Emmanuel,
while their American Stimulus and Reinvestment act itself has adequate
oversight/transparency regulation... the administration however, is keeping a hands-off policy as the Fed+Treas run hog-wild over the national landscape, with little restraints on the multi-trillions being funneled into the favored institutions & the executives sitting on boards.

I want someone honest. The two parties are not honest. I don't have any particular love for Nader, but I know he's honest. I'd prefer to see Ron Paul in Office. Even Jesse Ventura.

Interesting article.

My question would be the following: "If the banks are required BY LAW to be put in receivership BEFORE they become insolvent, why doesn't someone file an injunction to force them to be put into receivership?"

Interesting question.