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e is that systematically the originating lenders only pledged these loans and didn t actually transfer them to the trusts that are supposed to hold them and issue the securities she explained but only the true debt owner has the legal standing to be a plaintiff in a foreclosure she continued that s first year law school stuff if you re joe and the debt doesn t belong to you it belongs to marjorie then marjorie better be in court not joe don t come in as joe and tell me you have the right to be there when you know full well you don t sketchy documentation yet time and again loan servicers and others have sought plaintiff status often by using affidavits stating that the actual notes had been lost she said i ve seen paperwork filed by lawyers saying we anticipate assignment of the debt she said with a scoff and the loan originators can t appear in court and claim the right to foreclose because they would be in violation of securities laws for not transferring the loan to the trust when they were supposed to she said making an issue out of the actual ownership of the securitized title might strike some as a shameless stalling tactic aimed at abetting a debtor who after all owes the money but charney said that if such basic legalities aren t adhered to a homeowner could pay his or her way out of a foreclosure jam only to wind up in another when a new plaintiff emerges claiming to own the debt she described cases in which homeowners have been sued for foreclosure by two different trusts each claiming they owned their house and cases where trusts have been sent documents on the same case by two different servicers it should be but apparently is still largely not a blinding glimpse of the obvious that financial and market affairs have to be intelligently regulated such regulation can take peaceably only either the form of 1 rational and coherent proactive laws and their extensible administrative regulations or 2 years of en masse retroactive litigation that usually does little more than provide decades of continuing employment for tort laywers ______ rewind an 80 s rumination i am acutely reminded of the reagan era s l debacle president reagan also famously hated government regulation and his administration did its best to unleash unfettered free market forces across the entire economy including especially the financial domain savings and loan institutions s l s previously comprising a relatively sleepy segment of the financial sector had once been known as the 3 6 3 club i e buy money at 3 deposits rent it back out at 6 mostly residential mortgage loans and hit the first tee at the country club golf course by 3 pm this changed dramatically under deregulation first s l ownership rules changed to permit self interested parties such as residential and commercial real estate developers to gain control of s l s second s l s were permitted to traffick in brokered deposits basically bundles of deposits traded back and forth in search of the highest short term return it wasn t long before the phrase 100k hot blocks became a financial commonplace in essence hot blocks were in many ways similar to today s bundled debt securities despite being liabilities rather than assets the 100k part of the moniker referred to the 100 000 federal deposit insurance ceiling backed by the now defunct fslic federal savings and loan insurance corporation similar in government deposit insuror function to that of the fdic that subsequently inherited it freed from regulatory oversight s l s funded all manner of dubious lending and development using monies ultimately backed by the unwitting taxpayers in the event of default and that is precisely what obtained a seminal recounting of this sorry tale is found in the best selling and award winning book by steven pizzo et al inside job the looting of america s savings and loans in the end it did not matter if egregiously unneeded housing tracts shopping malls and office parks got built by s l owner developers and their cronies everyone dined euphorically on massive buffett feasts of deal and fee money while it lasted and then the government finally had to step in to bail things out once the wheels came off sound familiar a personal s l coda living in knoxville at the time i was periphatically personally acquainted with the tennessee banking brothers jake and cecil h butcher jr jake was the president of united america bank uab whose breathtakingly rapid collapse was at the time the largest bank failure in the nation among other things he d bet the farm on the 1982 knoxville world s fair it was a really bad bet brother cecil parlayed his initially tiny savings loan city county bank c c bank into a highly leveraged and short lived financial empire using a classic reagan era no regulation m o buy voting control of an s l with borrowed money use your new board control to authorize buying yet another institution disperse loans from the newly acquired entity lather rinse repeat beyond the recursive funding of s l takeovers and sweetheart conflict of interest developer loans was to me anyway an interesting and telling aside in the late 1970 s i had founded two tennessee private corporations one a sub s the other a c corp filing all of the setup paperwork myself with the irs and the corporate filings office of the tn secretary of state in nashville among the tn attestation requirements was that your corporation had at least the minimum requisite 1 000 of tangible startup assets no subjective nebulous and overstated value goodwill or other malarkey i was scrupulous with respect to adherence to the startup asset requirements in the wake of the uab and c c failures it came to light that more than two hundred tn corporations all of whose principals were butcher kin all had the same west kingston pike address in w knoxville that of a c c bank building moreover all of these no capital asset paper shell corporations had been accorded guess six and seven figure unsecured loans from the various c c banks no one in the tn secretary of state s office found this curious at the outset i m not sure how much of any of these fraudulently dispersed funds were ever recovered but it s likely that a good bit of the money disappeared forever into the financial ether and here we are today almost 30 years later and we seem to have learned nothing current day micro micro madoff case in point while google searching madoff news developments the other day i ran across this story by keriann lynch of the flathead beacon summit owners use clients money to fund owners endeavors exchange business closes prompts criminal investigation by keriann lynch 01 13 09 an oregon based firm specializing in tax deferred land deals collapsed last month after using customers money to fund its owners endeavors leaving at least one local man out more than 1 million and affecting untold more here summit 1031 exchange closed its doors and filed for chapter 11 bankruptcy in late december after announcing it has only about 13 million on hand of the 27 million it owes its clients summit had branch offices in eight western cities including kalispell the shortage according to a posting on the company s web site is the result of loans summit made to inland capital corporation a company owned by the same people who own and run summit inland in turn loaned the money to various individuals and companies that were involved in real estate investments located primarily in central oregon they re supposed to be a trustee and they lent themselves money which is not kosher and now they don t have it available for depositors rolland andrews a local real estate professional said andrews is one of summit s largest creditors the company owes him about 1 1 million it s basically the same thing the guy bernard madoff they just handcuffed and had all over the front pages did he added yeah i rest this part of my case we ve learned nothing maybe things will change for the better with a new administration maybe ______ in the gap between perception and reality there s money to be made that quote utterly embodying the phrase moral hazard is ascribed to the former junk bond king michael milken see the predators ball the inside story of drexel burnham and the rise of the junk bond raiders by connie bruck and increasingly the perceptual gap has seemed to become unbridgeable given the inscrutable nature of today s financial system and its arcane processes and instruments consider this lament by best selling author geneen roth in her recent salon com article i was fleeced by madoff i often asked richard the head of our feeder fund how madoff made such consistently good returns although richard tried to explain it to me it was clear he didn t know either because i d leave our meetings still unable to explain to anyone else how it worked well consider this little excerpt of recent mego financial jargon pertaining to the post crash doings of the now infamously bailed out aig united states securities and exchange commission washington d c 20549 form 8 k current report pursuant to section 13 or 15 d of the securities exchange act of 1934 date of report date of earliest event reported november 25 2008 american international group inc item 1 01 entry into a material definitive agreement on november 25 2008 american international group inc aig entered into a master investment and credit agreement the agreement with the federal reserve bank of new york the ny fed maiden lane iii llc ml iii and the bank of new york mellon to establish financing arrangements through ml iii to fund the purchase of multi sector collateralized debt obligations multi sector cdos underlying or related to credit default swaps and similar derivative instruments cds written by aig financial products corp aigfp in connection with the termination of such cds pursuant to the agreement the ny fed as senior lender has made available to ml iii a term loan facility the senior loan in an aggregate amount up to approximately 30 0 billion the senior loan bears interest at one month libor plus 1 00 percent and has a six year expected term subject to extension by the ny fed at its sole discretion aig has contributed 5 0 billion for an equity interest in ml iii the equity interest will accrue distributions at a rate per annum equal to one month libor plus 3 00 percent accrued but unpaid distributions on the equity interest will be compounded monthly aig s rights to payment from ml iii are fully subordinated and junior in right of payment to all principal of and interest on the senior loan the creditors of ml iii will not have recourse to aig for ml iii s obligations although aig will be exposed to losses on the portfolio of multi sector cdos held by ml iii up to the full amount of aig s equity interest in ml iii upon payment in full of the senior loan and aig s equity interest in ml iii all remaining amounts received by ml iii will be paid 67 percent to the ny fed as contingent interest and 33 percent to aig as contingent distributions on its equity interest the ny fed is the controlling party and managing member of ml iii under the transaction documents for so long as the ny fed is owed any amounts under the transaction documents and aig will not have any control rights over ml iii or under the transaction documents aigfp ml iii and the ny fed have entered into agreements with aigfp s cds counterparties to terminate approximately 53 5 billion notional amount of cds and purchase the related multi sector cdos of these cdos with a principal amount of approximately 46 1 billion settled on november 25 2008 and a corresponding notional amount of cds were terminated settlement on the remaining 7 4 billion notional amount of cds is contingent upon the ability of the related counterparty to obtain the related multi sector cdos and thereby settle with ml iii and terminate such cds with aigfp pending such settlement which aig expects to occur by year end the collateral posting provisions relating to these cds have been suspended such that additional collateral will not be required of aigfp nor will posted collateral be returned to aigfp if a given counterparty is ultimately unable to obtain the related multi sector cdos the related cds will not terminate and the relevant collateral posting provisions will resume in such a case aig will continue to bear market risk and the risk of adverse changes in collateral posting requirements relating to these cds that do not terminate and could incur additional unrealized market valuation losses with respect to the approximately 11 2 billion of exposure to multi sector cdos as to which aigfp ml iii and the ny fed have not executed agreements aig and the ny fed are working to structure the termination of the related cds and or the purchase by ml iii of the related multi sector cdos unless this exposure is terminated aig will continue to bear market risk and the risk of adverse changes in collateral posting requirements relating to these cds and could incur additional unrealized market valuation losses with respect to these cds on november 25 2008 ml iii bought approximately 46 1 billion in par amount of multi sector cdos through a net payment to cds counterparties of approximately 20 1 billion and aigfp terminated the related cds with the same notional amount the aggregate cost of the purchases and terminations was funded through approximately 15 1 billion of borrowings under the senior loan the surrender by aigfp of approximately 25 9 billion of collateral previously posted by aigfp to cds counterparties in respect of the terminated cds and aig s equity investment in ml iii of 5 0 billion aigfp has entered into a shortfall agreement dated november 25 2008 the shortfall agreement with ml iii relating to the approximately 53 5 billion of multi sector cdo exposure covered by agreements with cds counterparties under which i aigfp must make a payment to ml iii to the extent the excess of the notional amount of the cds being terminated over the market value as of october 31 2008 of the related multi sector cdos is greater than the collateral previously posted by aigfp with respect to such cds and ii ml iii must make a payment to aigfp to the extent the amount of such posted collateral exceeds such excess aigfp was not required to make any payments under the shortfall agreement with respect to ml iii s initial purchase of the approximately 46 1 billion of multi sector cdos the summary of the terms of the agreement and the shortfall agreement are qualified in their entirety by reference to the terms of the agreement and the shortfall agreement which are filed as exhibits 10 1 and 10 2 to this form 8 k and incorporated by reference into this item 1 01 _____ well i m a reasonably intelligent person with a master s degree and more than 20 years experience spanning a variety of business domains including credit risk modeling but this kind stuff leaves me bamboozled that s what they bank on we among the great unwashed includi...