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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: More ASIC Summer School 2009: Back to the Great Depression & Reach for the smelling salts!!!!

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More from our Gladys:

SUMMER SCHOOL ASIC 2009

Our program this year is very much focused  on the financial markets and this morning, we will focus on what went wrong and what we’ve learned...........the principals—taxpayers, shareholders, bond holders and so on—are being very badly let down by their agents— the regulators, supervisors, central banks in some cases (not here in Australia I hasten to add), treasuries, CEOs, Boards and so on............ there were many, many things going on over many, many years that basically led toincreased debt versus equity throughout the system........going back to the 1986 tax reform in the US, we also had the concession that allowed things like mortgage-backed conduits to become possible—where the entity wasn’t taxed and could operate like a ‘pass through’ certificate—which greatly encouraged the use of those conduits to make mortgages. They didn’t give that concession to equities and other assets, they gave it to mortgages, and that created an asset allocation distortion......... and, of course, we had through the 1990s into the late 1990s and, finally in 1999, removal of Glass-Steagall................

 Then there is the whole Basel process, although with John Laker in the audience I fear to go into this topic (we have already clashed and discussed this issue ad nauseam)................there is a dam above the village filling up with water and the dam is getting too much pressure and it’s getting overfilled: this is global liquidity...........and of course, the wall has got some cracks in it—the wall is like the regulatory structure—and water always finds its way into the weakest parts and into the cracks and eventually forces its way through...........it’s spread beyond this because of incompetence—and I don’t mince my words—the incompetence with which this crisis has been handled. If you look at that chart, you see residential mortgage-backed securities (RMBS)............these are the ones that include all those subprime, Alt-A, and other loans that these days they call ‘toxic assets.............you will see that around 2004, that pool of securitised toxic assets went parabolic............did the banks change their risk models and use bad ones after 2004?............. No, they used the same bad ones they had in 2003............a number of banks, a good couple of dozen banks, participated in this..........Iif you look at that row for mortgages, you’ll see there down towards the bottom in the middle column—depending on whether you look at the mean or the median—that they were telling the regulators we are going to shift because mortgages are less risky..............

 

Mr Applegarth, why was it decided a month after the first profit warning as late as the end of July (he’s talking about 2007) to increase the dividend at the expense of the balance sheet?’ ............Mr Applegarth replied: ‘Because we had just completed our Basel II two-and-a-half year process and under that, and in consultation with the FSA, it meant we had surplus capital that could be returned to shareholders through increasing the dividend...............so the Board sits down and they discuss what they are going to do.............. one alternative is  to say  and do nothing—we just report to shareholders next time that we have got a big gap in our revenue and we see the share price go down and our bonuses go down.............alternatively, we could create our own Fannie Mae and Freddie Macs, OR AT LEAST ACCELERATE OUR CREATION OF FANNIE AND FREDDIE's—these are special purpose entities and so on, Cayman Island type stuff.........AND that’s exactly what they did............ with UK North Rock

 

 History teaches you if you go back to the Great Depression............there are some very basic things you have to do to handle the solvency aspect, such as guarantee the deposits.....separate the good assets from the bad, and put the bad assets on the public balance sheet........you can’t rely on private money..........ONLY THE GOVERNMENT CAN ISSUE RISKFREE ASSETS AND EXCHANGE THEM FOR A RISK ASSET.............you have to recapitalise the asset-cleansed banks................ Now, what did they do?............... Why did I make that joke about you can be relied upon to do the best after everything else has been tried first? ....................well, they jumped from Step 1 to Step 3 and of course you just can’t do that............you just can’t do it, because as the economy goes down, unemployment flows increase, more assets get impaired, the banks need more capital..............you’re just chasing a moving target the whole time.............In terms of the toxic assets—and this is the point I’ve been discussing, and one which a lot of politicians have been talking to me about in Paris—some of these conduits involve toxic assets that are never going to be conforming ones, and they are just very complex things........they’ve got ‘knock-ins’ and ‘knock-outs’ and they’re an absolute mess...............

 If you can’t unlock the pools of saving that there are around the world from sovereign wealth funds, Chinese reserves, and so on, then you’re going to have a really big problem dealing with this in a sensible way.............Investment banks will be smaller in the future in my view and that’s exactly what they should be. If that means we don’t have great innovations like securitised products that take mortgages off guys in singlets sitting on verandas without jobs and securitising them, well, so be it...........that’s what comes when the cost of capital is wrong.

Pension systems have been smashed to pieces over this..................public confidence in pension systems around the world is really in a major crisis.........

We have the Reserve Bank coming out and saying to those in the financial sector, ‘Guys, you are being dumb...............some of the real estate lending that is going on is wrong.............there is a real estate bubble that’s occurring..............one difficulty has arisen though, even if for very good reasons......... the Australian Government came in and guaranteed deposits in the banks and that’s actually distorted the savings market (broadly defined) and, as a result, a lot of other products have actually really, really suffered because no one trusts them, as they’re not government-guaranteed..........WE ALL KNOW WHY THEY DID IT THOUGH..........

Certainly from an offshore perspective, it’s really only been predominantly residential mortgage-backed securities that have been issued into the marketplace................ more recently, I think we have seen some auto securitisations cross over into the offshore markets..........clearly, we have had CMBS (or commercial mortgage-backed security) transactions issued into the domestic marketplace.............

 

https://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ASIC-summer-school-report-may-2009.pdf/$file/ASIC-summer-school-report-may-2009.pdf

 

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  • doyla66
    doyla66 Friday, 07 March 2014

    " like securitised products that take mortgages off guys in singlets sitting on verandas without jobs and securitising them"

    So ANZ boss (and the rest of the Banksters) can go out and sell his shares for millions of dollars to buy his beach side estate, all from basically telling bank shareholders "nothing really" about how ANZ actually makes most of their money.... from predatory lending scams......

    Also what good timing.. bank share prices peaking??... In the share market timing is everything. What does Mr Smith know??

  • doyla66
    doyla66 Friday, 07 March 2014

    Just write off our stupid fraud loans with the Banks' excess credit now

    Share market usually goes through a seasonal adjustment coming up to EOFY.
    For all the hype, most are adding to their private gold collections, in such a way that it won't cause a run or adversely affect the Bank share prices.
    Small businesses and individuals all over Australia are ensuring they have reserves of cash in hand, just in case ...
    Overall no one knows for certain whether there will be a bang or a whimper so they're hedging their bets.
    None of that helps any of us.
    Credit retailers are still disregarding sound principles of risk while the BDM whips them on to sell more credit.
    In a competitive mortgage market which is heating up why not use some of that excess credit to dissolve our fraud loans?
    Instead Banks, with the ok of the Government are flogging off loans and pieces of our country to any non-resident overseas buyers stupid enough to think they're onto a good thing here.
    By the time some of them end up at BFCSA for help Denise will be running a major international operation with multiple translators! .... unless the Australian Government and the Senators now heed her timely warnings.

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