Tuesday, September 30, 2014


Banking Regulators Could Use a Lesson in Humility 

from Hayek

Hester Peirce is a senior research fellow with the Mercatus Center at George Mason University

Forty years ago, Friedrich August von Hayek received the Nobel Prize in economic sciences for his "pioneering work in the theory of money and economic fluctuations" and for "penetrating analysis of the interdependence of economic, social and institutional phenomena."Officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, it was first awarded only five years earlier.

In his banquet speech, Hayek mused that perhaps such an award never should have been created, lest its recipients think too much of themselves. He told the Nobel Committee that he was "almost inclined to suggest that you require from your laureates an oath of humility, a sort of Hippocratic Oath, never to exceed in public pronouncements the limits of their competence." Our regulators should take a similar oath, and I nominate the financial regulators to be the first to take it.

Reshaped by the Dodd-Frank Act, financial regulation has taken a decidedly anti-Hayekian turn. The legislative response to the financial crisis consisted primarily of handing more powers to expert regulators in the hopes that they would prevent the next crisis. A group of these regulators, for example, are part of a new regulatory body, the Financial Stability Oversight Council. The FSOC — informed by the Office of Financial Research, a new governmental data aggregator — must "identify gaps in regulation that could pose risks to the financial stability of the United States."
The FSOC also picks out financial institutions that "could pose a threat to the financial stability of the United States" so that the Federal Reserve can watch over these companies, guide their every move, and try to ensure that they never fail. If the Fed slips up, the Federal Deposit Insurance Corp. stands by to design a special rescue plan under Dodd-Frank's so-called orderly liquidation authority to protect the institution and its favored creditors.

Viewed through the lens of Hayek's Prize Lecture, entitled "The Pretence of Knowledge," this financial regulatory regime is troubling. In his lecture, Hayek observed that:

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.
Dodd-Frank's financial stability regime, however, is built on the belief that a group of regulators can gather and comprehend enough knowledge to manage our complex financial system. These regulators are charged with using their allegedly superior knowledge to override decisions made by countless individuals and firms in the marketplace. Dodd-Frank is by no means the first statute to displace market-based decision-making. The pre-crisis financial markets were shaped by a messy tangle of market and regulatory forces. But Dodd-Frank allows regulators an even freer hand to substitute their own thinking for the "free efforts of millions of individuals."

The FSOC, the OFR, the Fed, and the FDIC employ very well-educated lawyers and economists, but all that education still leaves them decidedly less knowledgeable than the markets they regulate. Hayek, in his Nobel lecture, remarked that "[w]e are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based — a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed." Even after all these years, we still cannot fully appreciate the market's ability to collect and process information. Consequently, we must assess any proposed interference in the market with skepticism.

Defenders of the new regime speak of bringing financial activities out of the shadows and into the regulatory light. Allowing regulators a better view of what is transpiring in the financial markets is fine, but it is more important for regulators not to stand in the way of market participants' access to the information, because they are able to act on it. Regulators are often inclined to keep information from market participants for fear they will act on it. (Think bank to crisis-era regulatory commands that healthy banks take TARP money so that the banks that actually needed it would look as if they were healthy too.)

Especially after a deep financial crisis, it is tempting to believe that we can avoid another by giving regulators additional controls over the financial markets. A more radical — and more effective — approach would have been to acknowledge regulators' limits and embrace the markets' superior ability to make the tough live-or-die, expand-or-contract decisions for financial firms. Doing so would have required eliminating government guaranteessubsidies, and barriers to entry that interfere with the market's ability to collect, communicate, and act on information.

Four decades after Hayek received the Nobel Prize, there are many corners of the world that have yet to absorb his message of humility. To change that, financial regulators and their legislative benefactors should commemorate this two-score anniversary milestone by revisiting Hayek's pioneering work.

Hester Peirce is a senior research fellow with the Mercatus Center at George Mason University. The center's F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics will be hosting an event and roundtable discussion with several Nobel Laureates to celebrate the 40th anniversary of Hayek's prize on Oct. 2 at the university's Arlington campus.

Hmmm, Does Wells Fargo use overbearing, unlawful bill collection tactics? Sure.

Elderly Eugene woman accuses Wells Fargo of overbearing, unlawful bill collection tactics

PH.Sessions.jpgView full sizeAnne Sessions of Eugene has filed a civil lawsuit seeking $1,055 in economic damages and $250,000 in punitive damages.
Like so many Americans, 85-year-old Anne Sessions got behind on a credit card bill and took calls from cranky debt collectors. But none prepared her for the phone call that put three cops on her door and forced her into an emergency "suicide evaluation" for which she was billed $1,055.

The trouble began on Feb. 6, 2011, when Wells Fargo debt collector Charles Gajewski rang her at home in Eugene. He took a "contemptuous tone" about the tardiness of her payments on a Master Card, according to a lawsuit Sessions filed last week in Multnomah County against the bank, Wells Fargo Card Services and Gajewski.

He wasn't the first to call. Wells Fargo reps had been calling since 2010, when financial setbacks put her in arrears. She told them her modest pension and Social Security covered only basic needs. But she agreed to a payment plan to bring her card current and, she hoped, keep the dogs at bay.

Gajewski called six days later, telling Sessions he wasn't honoring the payment plan and wanted to settle the debt before he left for vacation, the suit alleges. Sessions told him calls like his were bad policy and could make people abandon their homes or even commit suicide.

"Throughout the conversation," the lawsuit says, "(Sessions) told defendant Gajewski that she was concerned about other people who might be enduring the same kind of harassment."

Gajewski asked Sessions if she were considering suicide -- "of course not," she said -- then asked how, if she were considering it, she might kill herself, the suit alleges. Sessions told Gajewski she expected to catch up on her payments within five months, hung up and began washing her breakfast dishes.

Thirty minutes later, she found three Eugene police officers on her door. They said Gajewski had phoned 911 and reported she had made multiple suicide threats.

Officers "forcibly" took her to an emergency room and left her with a warning not to leave, the suit alleges. A doctor and a crisis staff member evaluated Sessions, found her no threat to herself or anyone else, and released her.

Wells Fargo spokesman Tom Unger said he couldn't comment on details of the lawsuit. But he noted that employees who handle collections are told to report threats of suicide or violence to police. "In this case," he said, "our team member was genuinely concerned about the customer and did what he thought was in the best interest of the customer."

One of Sessions' lawyers, Jay B. Derum, said his client begged police not to take her to the emergency room.

"After the S-word was mentioned," he said, "everyone was doing their best to cover their, uh, own interests."

Sessions later got a hospital bill of $712, then a a doctor's bill for $343. Outraged, she called the Wells Fargo collection center to speak to Gajewski. A woman said he wasn't around, so Sessions explained to her what had happened.

The employee laughed, her lawsuit alleges, and she heard her call out something like, "Hey Chuck ... that woman you called the police on got taken to the hospital by the police." Then, Sessions claims, she overheard the woman congratulated Gajewski.

Weeks passed before Sessions reached the supervisor of the collections department by phone. She wanted Wells Fargo to accept responsibility for her hospital bills and she demanded a written apology from Gajewski.

The supervisor told her the situation was not Wells Fargo's problem, according to the lawsuit, which seeks $1,055 in economic damages and $250,000 in punitive damages.

California Appellate Court is Fed Up with Bank of America: Homeowner’s Claim Upheld Even Though Not in Proper Form

Neil Garfield posted: " This appeal represents another example of what is becoming a well established and predictable pattern. A homeowner in distress because of the meltdown of the financial markets applies to a lender for mortgage relief. The lender approves the homeowne"
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California Appellate Court is Fed Up with Bank of America: Homeowner's Claim Upheld Even Though Not in Proper Form

by Neil Garfield
This appeal represents another example of what is becoming a well established and predictable pattern. A homeowner in distress because of the meltdown of the financial markets applies to a lender for mortgage relief. The lender approves the homeowner's participation in a government-funded program meant to lower mortgage payments and avoid foreclosure. The homeowner tries to comply with the terms of the mortgage modification program. He or she contacts the lender to make sure everything is proceeding according to plan and either receives assurances that it is or is passed from person to person, each of whom professes to know nothing about the loan in question or its modification. Sometimes both. Then the foreclosure notice is posted on the door, and the house is sold.
Neil Garfield | September 29, 2014 at 4:05 pm | Categories: foreclosure | URL: http://wp.me/p7SnH-6tI
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Powers of Attorney — New Documents Magically Appear

Neil Garfield posted: "For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counse"
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Powers of Attorney — New Documents Magically Appear

by Neil Garfield
For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don't be too quick admit the loan exists nor that a default occurred and especially don't admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.
BONY/Mellon is among those who are attempting to use a Power of Attorney (POA) that they say proves their ownership of the note and mortgage. In No way does it prove ownership. But it almost forces the reader to assume ownership. But it is not entitled to a presumption of any kind. This is a document prepared for use in litigation and in no way is part of normal business records. They should be required to prove every word and every exhibit. The ONLY thing that would prove ownership is proof of payment. If they owned it they would be claiming HDC status. Not only doesn't it PROVE ownership, it doesn't even recite or warrant ownership, indemnification etc. It is a crazy document in substance but facially appealing even though it doesn't really say anything.
The entire POA is hearsay, lacks foundation, and is irrelevant without the proper foundation be laid by the proponent of the document. I do not think it can be introduced as a business records exception since such documents are not normally created in the ordinary course of business especially with such wide sweeping powers that make no sense --- unless you recognize that they are dealing with worthless paper that they are trying desperately to make valuable.
They should have given you a copy of the settlement agreement referred to in the POA and they should have identified the original PSA that is referred to in the settlement agreement. Those are the foundation documents because the POA says that the terms used are defined in the PSA, Settlement agreement or both. I want all documents that are incorporated by reference in the POA.
If you have asked whether the Trust ever paid for your loan, I would like to see their answer.
If CWALT, Inc. or CWABS, Inc., or CWMBS, Inc is anywhere in your chain of title or anywhere else mentioned in any alleged origination or transfer of your loan, I assume you asked for those and I would like to see them too.
The PSA requires that the Trust pay for and receive the loan documents by way of the depositor and custodian. The Trustee never takes possession of the loan documents. But more than that it is important to distinguish between the loan documents and the debt. If there is no debt between you and the originator (which means that the originator named on the note and mortgage never advanced you any money for the loan) then note, which is only evidence of the debt and allegedly containing the terms of repayment is only evidence of the debt --- which we know does not exist if they never answered your requests for proof of payment, wire transfer or canceled check.
If you have been reading my posts the last couple of weeks you will see what I am talking about.
The POA does not warrant or even recite that YOUR loan or anything resembling control or ownership of YOUR LOAN is or was ever owned by BONY/Mellon or the alleged trust. It is a classic case of misdirection. By executing a long and very important-looking document they want the judge to presume that the recitations are true and that the unrecited assumptions are also true. None of that is correct. The reference to the PSA only shows intent to acquire loans but has no reference or exhibit identifying your loan. And even if there was such a reference or exhibit it would be fabricated and false --- there being obvious evidence that they did not pay for it or any other loan.
The evidence that they did not pay consists of a lot of things but once piece of logic is irrefutable --- if they were a holder in due course you would be left with no defenses. If they are not a holder in due course then they had no right to collect money from you and you might sue to get your payments back with interest, attorney fees and possibly punitive damages unless they turned over all your money to the real creditors --- but that would require them to identify your real creditors (the investors who thought they were buying mortgage bonds but whose money was never given to the Trust but was instead used privately by the securities broker that did the underwriting on the bond offering).
And the main logical point for an assumption is that if they were a holder in due course they would have said so and you would be fighting with an empty gun except for predatory and improper lending practices at the loan closing which cannot be brought against the Trust and must be directed at the mortgage broker and "originator." They have not alleged they are a holder in course.
The elements of holder in dude course are purchase for value, delivery of the loan documents, in good faith without knowledge of the borrower's defenses. If they had paid for the loan documents they would have been more than happy to show that they did and then claim holder in due course status. The fact that the documents were not delivered in the manner set forth in the PSA --- tot he depositor and custodian --- is important but not likely to swing the Judge your way. If they paid they are a holder in due course.
The trust could not possibly be attacked successfully as lacking good faith or knowing the borrower's defenses, so two out of four elements of HDC they already have. Their claim of delivery might be dubious but is not likely to convince a judge to nullify the mortgage or prevent its enforcement. Delivery will be presumed if they show up with what appears to be the original note and mortgage. So that means 3 out of the four elements of HDC status are satisfied by the Trust. The only remaining question is whether they ever entered into a transaction in which they originated or acquired any loans and whether yours was one of them.
Since they have not alleged HDC status, they are admitting they never paid for it. That means the Trust is admitting there was no payment, which means they were not entitled to delivery or ownership of the note, mortgage, or debt.
So if they did not allege they are an HDC then they are admitting they don't own the loan papers and admitting they don't own the loan. Since the business of the trust was to pay for origination of loans and acquisition of loans there is only one reason they wouldn't have paid for the loan --- to wit: the trust didn't have the money. There is only one reason the trust would not have the money --- they didn't get the proceeds of the sale of the bonds. If the trust did not get the proceeds of sale of the bonds, then the trust was completely ignored in actual conduct regardless of what the documents say. Which means that the documents are not relevant to the power or authority of the servicer, master servicer, trust, or even the investors as TRUST BENEFICIARIES.
It means that the investors' money was used directly for fees of multiple people who were not disclosed in your loan closing, and some portion of which was used to fund your loan. THAT MEANS the investors have no claim as trust beneficiaries. Their only claim is as owner of the debt, not the loan documents which were made out in favor of people other than the investors. And that means that there is no basis to claim any power, authority or rights claimed through "Securitization" (dubbed "securitization fail" by Adam Levitin).
This in turn means that the investors are owners of the debt but lack any documentation with which to enforce the debt. That doesn't mean they can't enforce the debt, but it does mean they can't use the loan documents. Once they prove or you admit that you did get the loan and that the money came from them, they are entitled to a money judgment on the debt --- but there is no right to foreclose because the deed of trust, like a mortgage, is made out to another party and the investors were never included in the chain of title because the intermediaries were  making money keeping it from the investors. More importantly the "other party" had no risk, made no money advance and was otherwise simply providing an illegal service to disguise a table funded loan that is "predatory per se" as per REG Z.
And THAT is why the originator received no money from successors in most cases --- they didn't ask for any money because the loan had cost them nothing and they received a fee for their services.
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If you would like to receive information on how you might avoid the foreclosure of your home, please e-mail me your name, address, and phone number. Someone from our office will be in touch right away to assist you. With Warm Regards, Kelly L. Hansen, HOMEOWNERS HELPING HOMEOWNERS, ctsmyhon@yahoo.com
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