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AOFM Retrospective: Banksters' RMBS Toxic Waste Dump $11+billion & counting

Posted by on in RMBS SECURITISATION
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AOFM - Retrospective:

When financiers investing their own money won’t touch an investment "laced" with fraud, it’s fair to say the government shouldn’t be either, let alone be seen to be profiting from an investment fraud on a grand scale [$607 million in the year to June 30, 2011] - channelled directly back into Treasury

BoQ, [which recently reported exponential mortgage arrears], Bendigo, Adelaide Bank, ResiMac - as non-bank lender, & Macquarie Group,  are the biggest users of the 'ii-conceived' AOFM government program, with Industry Funds-backed lender ME Bank the active seller of bonds to the AUS Gov., more than $1.7 billion worth [as of 30 June, 2011].

Despite the lessons that should have been learnt from the GFC, the Australian government is not only condoning securitisation, but actually using taxpayer money to undertake it. 

If there is a problem with these mortgages, and the borrowers default on the loans, or worse still, were the RMBS mortgage derivatives 'product', sold en mass to the  engineered by the 36 parent-lenders declared "illegal & unenforceable" by way of bank incubated fraud — it will be the poor old taxpayer left to carry the can.

The Australian Office of Financial Management [AOFM], under the auspices of the world’s greatest Treasurer, Wayne Swan, has been spending billions of dollars of taxpayer money propping up the non-bank mortgage sector. Since October 2008, the AOFM has “invested” $13.37 billion in RMBS.

The AOFM noted that the investment had generated a “return” of 6.07% — barely more than a term deposit. Bear in mind, these were securities purchased from second-tier banks and non-bank institutions including Bank of Queensland , Resimac and Macquarie Group.

If there is a problem with these mortgages, and the borrowers default on the loans — it will be the poor old taxpayer left to carry the can.

The problem should have been quite obvious. If a bank lends money to a borrower and the loan remains an asset on the bank’s balance sheet, it will be careful to ensure that the borrower can repay the loan. If it sells the loan to a third party, the lender would be less concerned about default. In fact, all it would be concerned about would be making the loan and finding someone to purchase it.

AOFM's MR Nicholl, the chief executive for the government's financing arm has defended its $11(+) billion investment in the nation's home loan market, denying it has bought "sub-prime" assets as part of its purchase of residential mortgage-backed securities.

"Even in the most "catastrophic" scenario [notably: excluding 'systemic fraud'] he said the agency would lose 0.5 per cent of its assets because of the extensive safeguards in place.

The agency is only able to invest in AAA-rated assets [fraud = junk 'toxic' status regardless of 'ratings agency' manipulation], and Mr Nicholl said default rates in its portfolio were lower than the broader home loan market[notably, mentions no specific details = spin].

The AOFM's $11(+) billion mortgage bond investment is part of a total pool of mortgages worth $25 billion – of which $400 million are sub-prime loans", as affirmed by Clancy Yeates [Andy - likes Clancy's & Adam Schwab's accurate view points].

#Refer to Judgement: (Wingecarribee Shire Council v Lehman Brothers Australia (in liq) [2012] FCA 1028 at 14).

September 21, 2012

Clancy Yeates

Clancy Yeates

Business correspondent, Canberra

View more articles from Clancy Yeates

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Read more: http://www.smh.com.au/business/aofm-brushes-off-subprime-claims-20120921-26bl0.html#ixzz27XGkNxqv

 

_____________________________________________________________full story below + more!!! (set of steak knives for carving up banksters)

Is there an industry with a shorter memory than politics? Other than perhaps the investment community? Merely three years after US mortgages almost caused a global economic meltdown, the Australian government has quickly forgotten the lessons learnt, proudly spending taxpayer dollars propping up the mortgage sector.

One of the key reasons underlying the collapse of the US housing market was the way the mortgage sector operated and the willingness of the government, and investment banks, to “securitise” mortgages. Quasi government bodies Fannie Mae and soon after Freddie Mac played a large role in the securitisation process, with investment banks (led by Solomon Brothers and Lewis Ranieri ofLiar’s Poker) supercharging the sector soon after.

The principle underlying securitising mortgages is that it allows banks to lend more money, by removing risk from their balance sheets. In basic terms, lenders no longer carry the risk of a default of the borrower, instead, that risk became borne by an investor looking for a slightly higher yield.

The problem should have been quite obvious. If a bank lends money to a borrower and the loan remains an asset on the bank’s balance sheet, it will be careful to ensure that the borrower can repay the loan. If it sells the loan to a third party, the lender would be less concerned about default. In fact, all it would be concerned about would be making the loan and finding someone to purchase it. That is pretty much what happened.

Of course, the situation in the US was worsened by the use of CDO and synthetic CDOs (which were basically bets on whether home owners would default), but essentially, the issue arose courtesy of securitisation and the separation of risk and responsibility.

How does this all relate to Australia?

Despite the lessons that should have been learnt from the GFC, the Australian government is not only condoning securitisation, but actually using taxpayer money to undertake it. Bizarrely, the government is even boasting about the “returns” it is getting from risking public money, as a recent article by Eric Johnston in Business Day shows.

Most Australians wouldn’t realise this, but the Australian Office of Financial Management, under the auspices of the world’s greatest Treasurer, Wayne Swan, has been spending billions of dollars of taxpayer money propping up the non-bank mortgage sector.

Since October 2008, the AOFM has “invested” $13.37 billion in RMBS. The AOFM claimed that “without this funding, new lending by financial institutions other than the major banks would have been lower and their ability to provide competition to the major banks, now and in the future, would have been curtailed”.  That of course is true — but that certainly doesn’t make the investment a wise one. When financiers investing their own money won’t touch an investment, it’s fair to say the government shouldn’t be. The AOFM noted that the investment had generated a “return” of 6.07% — barely more than a term deposit. Bear in mind, these were securities purchased from second-tier banks and non-bank institutions including Bank of Queensland (which recently reported a doubling in mortgage arrears), Resimac and Macquarie Group.

If there is a problem with these mortgages, and the borrowers default on the loans — it will be the poor old taxpayer left to carry the can.

In trumpeting its purchase of residential mortgage backed securities, the AOFM proudly noted that “there has never been a credit-related loss on a rated prime Australian RMBS”. Like those who believed that US housing prices would never fall, the Australian government has dived headlong into funding the Australian residential property sector oblivious to the risks of a housing downturn.

While many are quick to blame capitalism and the free market for the global financial crisis, the US mortgage sector was far from a free market. Fannie and Freddie were operating with an implied government guarantee (that guarantee become somewhat less implied and more explicit when the US government had to spend $US150 billion (with plenty more to come) bailing out the appallingly managed organisations). A free market doesn’t have taxpayers subsiding the purchase of assets. If the market were really free, rational players would have stopped providing finance for housing purchases, which would have prevented the housing bubble and subsequent bust.

In Australia, our housing market is equally far from free. The Rudd government did its best to prolong the housing bubble by creating the first home owner’s grant, at the same time, our perverse system of negative gearing capital gains tax encourages speculating on housing, rather than investing in productive assets. If that isn’t enough, the federal government guaranteed retail deposits (thus lowering the cost of funds for banks) and also wholesale lending (allowing them to borrow more by relying on the government’s credit rating).

But the government’s intervention in the RMBS market is by far the most risky use of taxpayer money to bankroll an asset that has long been removed from its intrinsic value.

If non-bank lenders are unable to finance their lending activities from the market, they should not be lending money at all. The solution isn’t for the government to place at risk taxpayer dollars when the market is clearly saying something very different.

ADAM SCHWAB | NOV 07, 2011 

_____________________________________Andy says;

# "AOFM are ostensibly purchasing tax payer sponsored "Queen Mary" boarding passes in favour of banksters lavish junkets; whilst conversely being sold (to return the favour), open tickets to embark upon the voyage of a lifetime - the "Titanic"; and BFCSA's glacial evidence of the bankster's colossal AOFM 'endorsed' RMBS scam, is merely a 'tip' of the proverbial iceberg, full engines running, no 'binoculars' in hand - catastrophic consequences for all & sundry, bar 100banksters sitting on banana lounges and not juxtaposed to Titanic's infamous "deck chairs".

Please, will some nice lady 'race-goer', hand up a pair to Rob Nicholl[AOFM CEO] and implore him to with haste to place all engines in 'neutral' - pending;

# BFCSA's 'on-line' Royal Commission!!! "

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Comments

  • doyla66
    doyla66 Wednesday, 26 September 2012

    But the government’s intervention in the RMBS market is by far the most risky use of taxpayer money to bankroll an asset that has long been removed from its intrinsic value.
    If non-bank lenders are unable to finance their lending activities from the market, they should not be lending money at all. The solution isn’t for the government to place at risk taxpayer dollars when the market is clearly saying something very different.


    Thankyou Andy, Thankyou Adam Schwab.
    We're not imagining it. This is real. So is the illusion by the banks and other lenders that we owe them money on a securitised loan, which they're already being paid for anyway and when they don't even have a contract. When is someone going to point that out in the Storm cases? It could all be over by the end of the week! - title deeds returned, loans extinguished, all borrower's money returned ab initio.
    This is not the easiest concept to argue with the lenders at FOS.
    Could someone please create a fact sheet that explains in simple plain English why borrowers don't owe the lender a single cent due to the RMBS fraud scam they perpetrated on their 'in good faith' loan agreements (if that is the case). That would be the cream on the coffee of the rest of the fraud scam case submissions to FOS. I'd like to see these cases nailed shut, permanently and quickly. :D

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