By Karl Denninger
The Market Ticker
Most of you have probably heard by now about the family that was foreclosed on in California, their home was resold, refurbished, and they then effectively “stole it back” with their attorney and a locksmith breaking in and re-taking possession.
Conejo Capital Partners has published “the other side of the story”, and it makes several good points – some of which I believe deserve exposition and discussion:
“On January 28, 2010 the property was sold thru a public auction at the trustee sale held at the Ventura County Court House. Each month this same process occurs thousands of times across the nation as a method for banks to take back or dispose of the property that is not being paid for. Conejo Capital was the “successful” bidder. Shortly thereafter the former bank issued the title and it was legally recorded with Conejo Capital Partners LLC as the new owner of the property. At the time all we knew about the property was that the former homeowners purchased it in 2001 for $539,000, and that they later refinanced it, pulling equity out, resulting in debt of roughly $1,000,000.”
We start here. How do we wind up with someone who purchased a home for $500,000 then pulling another $500,000 in what amounts to phantom equity out?
Well, that’s simple: We had Wall Street banks that were more than happy to trade on this phantom, false, and maliciously-inflated “equity”, driven by a central bank and cronies in Washington DC that were all too happy to look the other way at rampant lawlessness for nearly a decade.
The genesis of this problem came there, but nobody – and I do mean nobody – wants to talk about that or take responsibility for it. Why not?
There are hundred of billions of reasons why, and they’re paid to Wall Street “talent” every year.
On Saturday October 9th the Earls and their attorney followed thru with their previous threats and took the law into their own hands. They hired a locksmith to break into the Mustang home. They had arranged to have t.v. news cameras filming their actions, and then proceeded to hold a press conference stating that they were within their rights and that we (Conejo Capital Partners) had somehow violated the law. All along the Simi Valley Police Department sat idle and refused to get involved no matter how much proof was offered supporting our legal rights and position. We were told that we needed to resolve it in front of a judge even though it had already been decided.
Why are you surprised? More to the point, why is anyone surprised?
Look, this is what happens when you sit idly by and countenance rampant and outrageous lawbreaking: The people decide they’ll do it too!
As for the police telling you that they won’t get involved, cry me a river. There’s a lady here in Florida who was not in foreclosure, the bank did not have a judgment of possession, and they hired a company to break into her home and change the locks – with her inside. That’s breaking and entering anywhere, it’s a serious felony, and in Florida at least a homeowner confronted with this is within his rights to shoot the people doing it. Yet when the Sheriff responded he refused to arrest the perpetrators.
It sounds like Conejo ran into the same problem. I’d be sympathetic, but I can’t be so long as they do not demand that the same sanction attach to all the illegal bank activities in regard to these repossessions as well.
Of course, Conejo didn’t do that.
Two wrongs don’t make a right – just more wrongs. But the lesson here isn’t that a couple and their kids “re-took” possession and claim their original foreclosure was “illegal.” I don’t know if it was or wasn’t – what I know is that the chain of lawlessness didn’t start with them, and it is impossible to condemn their actions standing alone.
If the foreclosure was unlawful and initiated with “robosigned” and bogus documents then it was. The Earls apparently attempted to demand a jury trial on the facts (including these facts) and were told to go to hell. Someone hasn’t read their Constitution lately – it says that for all controversies exceeding $20, you have a right to a trial by jury (7th Amendment). It doesn’t say that if it’s inconvenient for a bank and might expose criminal fraud for which bank officers could be imprisoned the judge can tell you to pound sand. That, standing alone, broke the chain of lawful behavior in the instant case.
This is where lawlessness leads us – to more lawlessness. Once you commit a lawless act against someone and are not punished for it you have invited them to retaliate with complete disregard for the law in their response. You are only required to deal ethically and morally with an ethical and moral entity across the table – one who ignores the law loses their right to demand that respect in return.
This mess begins with the securitization and sale of these mortgages in the first instance. It begins with whether or not the original banks actually transferred the notes at all (there’s plenty of evidence they did not) and whether the representations and warranties were complied with when these securities were sold to investors (we know in many cases – if not all – they were not, from FCIC sworn testimony.)
We have turned a blind eye to these lawless acts for the better part of a decade – not one indictment has issued for securities fraud over these matters. And it’s not just mortgages – we know banks were involved in ripping off communities such as Jefferson County, we know they are alleged to have been involved in rigging municipal debt offerings (which raised the cost of living for everyone through higher taxes) and yet not one bank officer or bank itself has been placed under indictment for any of it. Further, the FBI warned in 2004 of an “epidemic” (their words) of mortgage fraud, and instead of it being prosecuted the agents were pulled and reassigned.
We have had two sequential administrations – Bush and now Obama – that have intentionally refused to prosecute any of this lawless behavior. This refusal continues to this very day with admissions in depositions under oath of the commission of literal tens of thousands of felonies per month (each instance of falsely swearing before a court is a separate count of fraud upon the court and, in the case of “robosigning”, forgery – affixing a notary’s signature by other than the actual notary.) Yet despite this having been confirmed in multiple depositions going back several months not one indictment has issued thus far and Attorneys General talk about not wanting to “upset” the banks or the “economy.”
The message could not be more clear: So long as you make lots of tax revenue (and money for yourself), it’s ok to rip people off, subvert justice and mislead courts and we won’t send you to prison even though your conduct is felonious.
The media and others wish to spin this as “technical errors.” Nonsense. These are serious crimes. They do not become “technical errors” because some large financial institution committed them. Breaking and entering is a felony irrespective of who does it – the offense does not suddenly disappear if a monster bank is the perpetrator who directs an agent of theirs to commit the offense.
Until and unless all of these lawless acts receive indictments in response I will not condemn anyone who chooses to act in exactly the same form and fashion as is done to them, and in my opinion neither should anyone else. It’s that simple – either the law applies to all or it applies to none. There is no middle ground.
I cannot countenance what the Earls’ have done. But at the same time, a trial by jury is a civil right respected in the US Constitution. The moment they were denied their civil rights they were left with no recourse through lawful behavior and thus had only the choice of a stick in the teeth or to act with the same lawlessness that was served upon them.
They decided upon the latter course and I argue that was their right to do in the instant case. The government can change my opinion on that any time they’d like – it can remove the Judge who refused their right to a trial by jury, restoring same, and it can indict and place in the dock the robosigners who forged documents in their original foreclosure. Due process of law and Constitutional Rights are not suggestions, and until they apply to all I refuse to selectively endorse their application against only “little people.”
Forgery and fraud are not complicated offenses, nor is breaking and entering. The lawless behavior began with the financial institutions involved and if lawless acts resulted in an alleged conveyance of a title from a standpoint of justice – whether a gavel banged or not – from an ethical and moral standpoint it simply never happened.
No person should be buying Real Estate or proceeding with foreclosures until (1) the lawlessness stops and (2) those who violated the law all the way back to the origination of these securities are indicted and put in the dock for their offenses. The conveyance of real property interest is both a state matter and subject to strict scrutiny – so says 200+ years of jurisprudence in The United States. Those who buy allegedly in good faith but have received nothing due to these “robo” enterprises have no gripe with the people who did not get their fair day in court – their gripe is with the firm(s) that contracted with the robosigning outfits along with the quite-possibly bogus title chains they were trying to cover up.
We are not far away from a complete and total breakdown of lawful behavior among the population of this nation. If it happens, it will not be because of people like the Earls. While I cannot recommend a lawless response to any insult suffered by people like them I will understand what has happened and why – and who’s to blame.
This has and will in the future occur because the government has refused to enforce long-standing laws against “favored people”, allowing the general public to be asset-stripped mercilessly through various connivances and frauds, even though such conduct is blatantly unlawful – and the people have simply had enough of being treated like a turkey drumstick at an amusement park.
The blame for this incident and those like it rests squarely with Mr. Holder, President Obama, Tim Geithner, Ben Bernanke, President Bush, Hank Paulson and the 50 States Attorneys General who have all refused, collectively, to prosecute the rampant lawlessness in our financial system for the previous two decades – and are still refusing today.
Ed. Also see Bank of America resumes foreclosures.