IN THE CIRCUIT COURT OF THE __________________JUDICIAL CIRCUIT, __________________

COUNTY, ILLINOIS

JP MORGAN CHASE BANK, NATIONAL )ASSOCIATION ) Plaintiffs, )

)v. )

) Case No. )

Pro-Se Defendants ))

COUNTERCLAIM )) )

Pro Se Counter-Plaintiffs ))

v. ))

JP MORGAN CHASE BANK, NA )CHASE HOME FINANCE LLC ) DEMAND FOR JURY TRIALWASHINGTON MUTUAL BANK NA )Counter-Defendants )

OWNERS SUPPLEMENTAL EVIDENCE

COMES NOW Defendants and Counter-claimants __________________, (collectively

“Owners”), proceeding pro se hereby files Supplemental Evidence presenting to the Court

pertinent information that has been discovered as a result of further investigation:

THE CONSPIRACY

1. The matters raised by the Owners in their affirmative defenses and counterclaims

cannot be viewed in a vacuum and need to be viewed in the context of what Chase and other

related Bank entities were doing, and are continuing to do, to this day.

2. Defendant and Counter-Plaintiff, __________________has conducted extensive

research into the anomalous events transpiring in our country and the world today, and has sought

to identify the underlying root cause in such a way that these events make sense. Her journey

began in ignorance and naiveté, grew to incredulity, and ended with Truth. She seeks to expose

this Truth so that our great nation can begin to heal. For unless the problem can be identified, we

will be unable to find a solution. One thing is certain: a cancer is infecting our Nation and must be

excised now. This cancer has been present for decades as evidenced in attorney Ellen Brown’s

“Web of Debt”

“The 1890’s were plagued by an economic depression that was nearly as severe as the Great Depression of the 1930s. The farmers lived like serfs to the bankers, having mortgaged their farms, their equipment, and sometimes even the seeds they needed for planting. They were charged so much by a railroad cartel for shipping their products to market that they could have more costs and debts than profits. The farmers were as ignorant as the Scarecrow of banking policies; while in the cities, unemployed factory workers were as frozen as the Tin Woodman from the lack of a free-flowing supply of money to “oil” the wheels of industry. In the early 1890s, unemployment had reached 20 percent. The crime rate soared, families were torn apart, racial tensions boiled. The nation was in chaos. Radical party politics thrived.”

3. Like any investigator, one need simply ‘follow the money’ and ask who benefited

from this crisis, who made off with Trillions and who is NOT being prosecuted, for then one will

be led directly to the culprits. Those culprits are Insiders at the privately-owned Federal Reserve,

Wall Street, JP Morgan Chase, Citigroup, Bank of America, HSBC, and Goldman Sachs (the

“Conspirators”) which are currently engaged in a systematic multi-faceted course of conduct, a

Conspiracy, in every state in these United States of America, and the world to bring about an

economic collapse of the monetary system utilized by most of the countries in this world - a fiat-

based monetary system which is a veritable ticking time bomb due to explode soon. Upon the

inevitable collapse of this system, it is speculated that the Conspirators will unveil a Global

monetary system which will allow them to perpetuate their scam of printing fake money and

charging interest on that fake money thereby having the power and control over the world - a

position they have covertly held for centuries.

4. Indisputable evidence has emerged from investigations by the SEC, FBI, FTC,

FDIC and various other governmental agencies which expose the Conspirator’s scheme resulting

in the greatest shift of assets from the middle class to the wealthiest around the world. Although

these allegations may sound incredulous, the facts and events unfolding in our world fully

corroborate them.

5. The Conspirators, supposedly among the “best and brightest” on Wall Street, the

Federal Reserve and the five largest banks, are paid Millions of dollars for their superior

intellect, but said Conspirators allege that not one of them had an inkling that an economic crisis

was brewing, in direct contradiction to what others on Wall Street were saying.

6. According to Nomi Prins, former Goldman Sachs analyst who authored “It Takes

a Pillage”, Rolling Stone Wall Street reporter Matt Taibbi, who authored “Griftopia”, and

Michael Lewis who authored “The Big Short”, those on Wall Street who were not “insiders”

absolutely knew that something was happening which prompted some to look deeper into the

sale of Mortgage-Backed securities. They soon discovered that even though these securities were

rated AAA, meaning they were low risk investments, they were, as revealed in Congressional

hearings, “pieces of crap”. Any rational person would ask why these highly respected firms

would sell AAA-rated “pieces of crap”? Herein lies a paradox.

7. In fact, many Wall Street “outsiders” felt that a ‘house of cards’ was intentionally

being set up, which was validated in a CNBC documentary entitled “House of Cards” which

cited the following quotation from an internal Wall Street email dated 12/15/2006:

“Let’s hope we’re all wealthy and retired by the time this house of cards falters.”

8. In the January 2011 Financial Crisis Inquiry Commission (“FCIC”) Report - Pg

xx- stated:

“In the years leading up to the crisis many financial institutions borrowed to the hilt, leaving them vulnerable to financial distress or ruin if the value of their investments declined even modestly. For example, as of 2007 the five major investment banks—Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley—were operating with extraordinarily thin capital. By one measure, their leverage ratios were as high as 40 to 1, meaning for every $40 in assets, there was only $1 in capital to cover losses. Less than a 3% drop in asset values could wipe out a firm. To make matters worse, much of their borrowing was short-term, in the overnight market—meaning the borrowing had to be renewed each and every day. For example, at the end of 2007, Bear Stearns had $11.8 billion in equity and $383.6 billion in liabilities and was borrowing as much as $70 billion in the overnight market. It was the equivalent of a small business

with $50,000 in equity borrowing $1.6 million, with $296,750 of that due each and every day. One can’t really ask “What were they thinking?” when it seems that too many of them were thinking alike. And the leverage was often hidden—in derivatives positions, in off-balance-sheet entities, and through “window dressing” of financial reports available to the investing public. The kings of leverage were Fannie Mae and Freddie Mac, the two behemoth government-sponsored enterprises (GSEs). For example, by the end of 2007, Fannie’s and Freddie’s combined leverage ratio, including loans they owned and guaranteed, stood at 75 to 1.”

9. On 3-15-2012 Economist Charles Kadlec, writer for The Daily Reckoning and

member of the Economic Advisory Board of the American Principles Project reported the

following in an article entitled “Tim Geithner Covers for Corruption on Pennsylvania

Avenue”:

“The government through Fannie Mae and Freddie Mac directed $5.2 trillion (that is trillion with a “T”) of capital to increase the supply of mortgages. In addition, it passed a law that required banks to make billions of dollars in loans to individuals that were unlikely to pay off the loans, in the end with 0% down. In 1998, Fannie Mae announced it would purchase mortgages with only 3% down. And, in 2001, it offered a program that required no down payment at all. Between 2001 and 2004, subprime mortgages grew from $160 billion to $540 billion. And between 2005 and 2007, Fannie Mae’s acquisition of mortgages with less than 10% down almost tripled. These loans are now known as “subprime” and “alt A” loans. At the time they were made, Fannie Mae and Freddie Mac encouraged their issuance by lowering their standards and buying them up from the now vilified mortgage brokers, S&Ls, banks and Wall Street investment banks. This activity was not due to a lack of regulation or oversight as you (Treasury Secretary Geithner) claim. Both companies are under the direct supervision of a federal regulator and Congress. At the time these loans were being purchased by these two Government Sponsored Enterprises, their actions were defended by many in Congress who, led by Senator Chris Dodd and Congressman Barney Frank, saw such reckless lending as a successful government initiative. At the same time, the easy money policies of the Federal Open Market Committee, of which you were a voting member, were feeding an asset bubble in residential real estate, providing what proved to be an irresistible lure not only for speculators, but also for American families trying desperately to buy a house before inflation robbed them of their chance for home ownership. Six top executives of Fannie Mae and Freddie Mac have been charged by the Securities and Exchange Commission with securities fraud for hiding the size of the purchases of low quality mortgages from the market. In addition, the normal check on excessive leverage provided by unwilling lenders was overwhelmed by the perception, now validated, that Fannie

Mae and Freddie Mac debt were backed by the full faith and credit of the federal government. This created a willing buyer backed by the federal government with unlimited access to credit markets and a trillion dollar budget. No wonder S&Ls and Wall Street found ways to satisfy the demand. Blaming a lack of regulation for the subsequent losses is political spin meant to cover up the greed and corruption on Pennsylvania Avenue that led to the crisis. these two state sponsored financial giants have cost taxpayers more than $140 billion and are seeking billions more in bailout funds.

10. Any rational person would ask, as the FCIC Report pondered, “What were

they thinking.” And more important: “What are they up to?” These highly questionable

anomalies would prompt any rational person to ask the following questions:

A. Why would the banks create questionable loan products and lure prospective borrowers into these loans, knowing that if interest rates were to rise, these clients would be unable to make their payments;

B. Why would banks sell mortgage-backed securities to investors and then not follow the governing documents and deliver the notes to the investors;

C. Why would the originators of the loans purport to be the lender, when the loans were pre-funded by the investors of the MBS’s;

D. Why would the Depositors fail to record the documents as required by law to at the county level, thus slandering owners titles across America;

E. Why would mortgage servicers promise to modify borrower’s loans and then repeatedly “lose” the paperwork which was sent in multiple times;

F. Why would the Originating “Lenders” stop using standard underwriting to approve loans;

G. Why would originators accept and encourage inflated appraisals;

H. Why would the banks fraudulently fabricate documents and then have robo-signors forge them;

I. Why would the originators not deliver the notes to the trusts thus rendering the MBS non-mortgage-backed;

J. Why would the banks pretend that this economic crisis was a random event that they knew nothing about;

K. Why would the Federal Reserve lower interest rates and keep them low knowing that they would be creating a bubble;

L. Why are the courts pushing foreclosures through as fast as they can, thereby tearing families apart while 20 million housing units in America are vacant and rotting and the banks cannot keep up with this burgeoning inventory of REO properties. Statistics prove that foreclosure breeds foreclosure and creates a vicious cycle: more homelessness, despair, and crime in addition, causes real estate prices plunge further and further thereby affecting all Americans;

M. Why are 90% of all mortgage Originators now bankrupt;

N. Why are banks which were considered too big to fail, growing even larger as they acquire the banks which failed for literally pennies on the dollar;

O. Why are the banks CEO’s and executives paying themselves Millions and Millions for companies they ran into the ground;

P. Why did corporations move manufacturing out of this country;

Q. Why has our free-market economy, which entails risk, eliminated risk through the purchase of credit default swap “insurance”;

R. Why are numerous cases against the largest banks being prosecuted and settled but no one is being sent to jail...

11. The Conspirators reaped, and are continuing to reap, untold Trillions of dollars

while others writhe in misery, anxiety, anguish, and panic. This unconscionable lust for power

and lack of social conscience displayed by the Conspirators has resulted, and is continuing to

result, in millions of citizens being thrown out of their homes oftentimes with nowhere to go, an

increase in suicide, massive unemployment, a lowered standard of living, and trillions of dollars

of wealth stripped from the American public and put into the Conspirators already burgeoning

pockets.

12. This atrocious, flagrant and abominable scheme is ongoing and its final objective

is yet to be realized, but is indeed looming. However, judges across the country have also asked

themselves the aforementioned questions and are finally beginning to see the truth and are ruling

against the Conspirators.

13. The hope for our country is being placed in the hands of our judiciary which was

established by our founding fathers to mete justice equally; to see through the antics that the

Conspirators counsel will undoubtedly try to utilize to divert the judiciary’s attention from the

substantive allegations posed in this complaint, to the trivial and technical, in their attempt to

circumvent the laws of this nation. It is the hope of the Owners that the judiciary will have the

courage to uphold their sacred oaths and deliver a powerful message that will serve to deter the

Conspirators from future violations of the law. For anything less than that can only aid in the

disintegration of our civilized society.

14. This Conspiracy is being waged across the globe and is multi-pronged, however

for the purposes of the instant case, and other victims across America who are similarly situated,

this supplemental evidence will focus on the role that foreclosure is playing in the Conspiracy.

THE FIAT-BASED MONETARY SYSTEM

15. At the core of the Conspiracy is the collapse of the fiat monetary system used by

America and manipulated by the Conspirators. Fiat money is not asset-backed by gold or silver

but instead backed by “faith” and debt where money is printed out of thin air.

16. This faith-based system requires that those at the helm of our largest institutions

operate from a foundation of trust, ethics, honesty, integrity, compassion, morals and social

conscience.

17. The Conspirators have an expertise in the world of finance and economics and

control the world of finance. They have used this expertise and control to exploit the foundation

of trust that Americans and others around the world relied upon, and manipulated the system to

their advantage.

18. History shows that any fiat debt-based monetary system is unsustainable and

every society which based its currency upon this system has collapsed. Its doom is based upon

expanding debt and the compounding interest needed to sustain that debt, thereby driving the

engine of the economy. At some point in time, the debt reaches a point where it becomes so great

that the compounding interest exceeds the revenue coming into the Treasury, at which point, the

system collapses.

“The money meltdown observed in Wall Street is what monetarists have been warning about for some time. What we are witnessing now is the failure of the central banking system. The debt-based fiat monetary system with compounding interest is simply unsustainable and the United States, occupying the pinnacle of the capitalistic model, is being brought down by the inherent fallacies within its own monetary system.” — A. Kameel

Wall Street Meltdown – Failure of Central Banking System by 10/20/08 the Edge

19. The Federal Reserve uses the “magic” of Compounding Interest to fleece the

American people. Debora O'Malley, M.Sc. and Melvin Pasternak, Ph.D. explained how easy it

to do so in their March 15, 2012 article entitled “The Money Making Magic of Compound

Interest”:

“When Albert Einstein was asked: “What is the most fantastic thing you ever realized in all your studies?” He sarcastically responded, “Compound interest.” ...the principles of compound interest can be used to make a substantial amount of money over time. Financially speaking, compounding is the exponential increase of an investment, or the interest you earn on interest. If you put $2,000 in the bank with a 5% annual interest, you will earn about $100 in interest the first year. If you leave that $100 in your account, the following year, your $2,100 will earn $105 in interest. Compound interest is most powerful over a long period of time. Using the above example, your $2,000 initial investment would double in about 14 years. If all the money remained untouched, it would earn twice as much interest between years 15 through 28. In year 29, you'd effectively be earning 20% interest on the original investment (sometimes called "yield on cost"), all without needing to lift a finger.”

20. According to Modern Money Mechanics, a booklet produced by the

Federal Reserve Bank of Chicago:

“Fiat currencies are backed by debt.” (loans).

“As the debt grows, government’s interest burden grows with it. The more our tax dollars are consumed by interest, the fewer dollars are available for discretionary spending. What’s worse, more pressure is then exerted to use tax increases to fund mandatory spending programs, such as Social Security, Medicare, and Medicaid. We all know government spends more than it collects. The federal interest burden exists simply because government must actually service its debt. Interest, of course, represents the cost of debt service.” — Daniel J. Pilla

21. Those who have held the highest offices in America throughout history

have continually warned that our fiat/debt-based monetary system was unsustainable.

“The eyes of our citizens are not sufficiently open to the true cause of our distress. They ascribe them to everything but their true cause, the banking system; a system which if it could do good in any form is yet so certain of leading to abuse as to be utterly incompatible with the public safety and prosperity. The Central Bank (now the Federal Reserve) is an institution of the most deadly hostility existing against the principles and form of our Constitution.” — Thomas Jefferson (1743 – 1826)

“I place economy among the first and most important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. — Thomas Jefferson“World GDP is around $65 trillion but the latest Bank for International Settlements (“BIS”) statistics on outstanding derivatives contracts (Wall Street bets) indicate that they are currently $707* trillion as of June 2011 at face value (the true numbers are in the Quadrillions or more according to some sources). This means that the banks are betting over ten times the worlds GDP against each other, for each derivative (Las Vegas styled bet) is a bet against a counterparty. It is a matter of simple mathematics to realize the western fiat debt-based banking system is doomed. That means for every winner there is an equal loser. Some very big banks have certainly lost more money than exists in the real world”.*See BIS 2008; the notional amount of a derivatives contract refers to the value or nominal amount of the underlying to the derivatives contract; outstanding refers to open derivatives contracts that are held by market participants. 13) See BIS 2008 and WFE statistics (www.world-exchanges.org). — Benjamin fulford

A HOUSE OF CARDS SKILLFULLY ENGINEERED TO BRING DOWN THE ECONOMY

22. The Conspirators meticulously crafted a scheme to control the collapse of our

monetary system through a manufactured Depression in order to control We, the People, for

when the masses are in survival-mode they are far easier to manipulate.

“The Federal Reserve definitely caused the great depression by contracting the amount of currency in circulation by one third from 1929 to 1933.”

—Milton FriedmanNobel Prize winning economist and Stanford University Professor

“It must be realized that whoever controls the volume of money in any country is absolutely master of all industry and commerce. And when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” — President James Garfield

(1831–1881) 20th President of the United States

23. The Great Recession was artificially created by the Federal Reserve through its

ability to control interest rates (which we will explore in detail). The bubble they created and its

subsequent depression caused a panic where people sold, and are currently selling, their assets

for pennies on the dollar in order to survive. The Conspirators then cunningly acquire these

assets with the fake money they create out of thin air, and acquire every commodity needed to

control every aspect of life thus rendering We the People of this world, enslaved to the

Conspirators for “He who has the gold, indeed makes the rules.”

24. The Conspirators scheme was catalyzed by Mortgage-Backed Securities

(“MBS”), Warren Buffet referred to in 2002 as “weapons of mass financial destruction.” These

bonds were styled after Michael Milliken’s high-yield junk bond scheme which he developed in

the 1980’s that landed him in jail. However, the Mortgage-backed securities of the 2000’s

evolved as they were “insured” by Credit Default Swaps which in 2009 Economist and writer for

Atlantic Monthly, Charles Davi referred to as: “the destroyer of economies”.

25. MBS’s were sold to Pension funds throughout the world ensuring that the

cancerous tentacles created by the Conspiracy would spread and cause a collapse so deep and

widespread that We, the People of the world would one day be on our knees begging for mercy

at which time the Conspirators will unveil their new Monetary system which grants to them the

complete and absolute control over our world’s monetary system.

“I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man that controls Britain's money supply controls the British Empire, and I control the British money supply.” — Baron Nathan Mayer Rothschild (1840 –1915)

1984 GRACE COMMISSION REPORT VALIDATES THE IMPENDING COLLAPSE

26. In 1984, President Reagan appointed the Grace Commission to find ways to cut

the waste and inefficiency in the government, instructing its members to "be bold" and "work

like tireless bloodhounds; not to leave any stone unturned in your search to root out

inefficiency." However, what the commission discovered was shocking:

“One-third of all income taxes is consumed by waste and inefficiency in the federal government, and another one-third escapes collection owing to the underground economy. With two thirds of everyone’s personal income taxes wasted or not collected, one hundred percent of what is collected is absorbed solely by interest on the Federal debt and by the Federal Government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on services which taxpayers expect from their Government.”

27. The Commission warned:

“If fundamental changes are not made in Federal spending, as compared with the fiscal 1983 deficit of $195 billion, a deficit of over ten times that amount, $2 trillion, is projected for the year 2000, only 17 years from now. In that year, the

Federal debt would be $13.0 trillion and the interest alone would be $1.5 trillion per year. “100 percent of what is now collected (as taxes) is absorbed solely by interest on the Federal debt and by Federal Government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their Government.”

28. If 100 percent of what was collected as revenue in 1982 was absorbed solely by

interest on the Federal debt, that compounding interest could only grow exponentially with each

successive year even if the national debt were not to increase. The Conspirators were well aware

of this fact but did nothing, as their power is based upon their complete and absolute control of

the monetary and banking systems. Since 1982, our national debt has risen exponentially as a

result of the continual wars we have been engaged in since that time which has brought our

economic system to the brink of collapse.

THE CONSPIRATORS HAVE THEIR FINGER ON THE TRIGGER OF ECONOMIC COLLAPSE

29. The Conspirators have orchestrated events so that they now have their finger on

the trigger of economic collapse. The Conspirators own and control the five largest banks in our

country: JP Morgan Chase, Citigroup, Bank of America, HSBC, and Goldman Sachs. These

banking institutions also control the International Swaps and Derivatives Association (“ISDA”)

which determines when and if a “credit event” occurs in the Derivatives (MBS) market. If a

credit event is “determined”, that determination initiates the pay off of Credit Default Swap bets.

30. These same 5 Conspirator-owned banks hold nearly 95 percent of the industry’s

total exposure to derivatives contracts which now stands at $707 Trillion – an amount far

exceeding their ability to pay off Credit Default Swap bets which now stand at $32,409 Trillion.

Therefore, if the ISDA initiates a “credit event,” determined by a default or write-down of Greek

bonds, for instance, the Conspirators can bring about the collapse of their own banking

institutions, which in turn, will bring about the collapse of the world’s banking systems. Thus,

the world’s economy is now resting upon whether these 5 banks declare a default. In other

words, the system the banks created is a House of Cards just waiting for a single card to fall.

THE “NON”FEDERAL RESERVE

31. Among the critically placed Conspirators are the Insiders at the Federal Reserve

(“Fed”) ; a privately held corporation, a central bank at the helm of the American economy, for it

possesses the power to manipulate the economic system of the United States.

“The passage of the Federal Reserve Act proved every allegation Thomas Jefferson had made against a central bank in 1791: that the subscribers to the Federal Reserve Bank stock had formed a corporation, whose stock could be and was held by aliens; that this stock would be transmitted to a certain line of successors; that it would be placed beyond forfeiture and escheat; that they would receive a monopoly of banking, which was against the laws of monopoly; and that they now had the power to make laws, paramount to the laws of the states. No state legislature can countermand any of the laws laid down by the Federal Reserve Board of Governors for the benefit of their private stockholders. This board issues laws as to what the interest rate shall be, what the quantity of money shall be and what the price of money shall be. All of these powers abrogate the powers of the state legislatures and their responsibility to the citizens of those states.” — Eustace mullins

Secrets of the Federal Reserve pg 35

32. Throughout the history of the United States, many in government fought to oust

the central banking system utilized on and off for hundreds of years, but in a covert move in

1912, the Conspirators devised a plan to seize control the monetary system once and for all and

called it the “Federal” Reserve System. We, the People presumed that the “federal” Reserve was

actually part of our government, but the name was a ruse as the Fed was established solely for

the Bankers so that they could exert Power over our government which, in reality, is not a

democracy but an Oligarchy.

33. According to the Federal Reserve’s website: “The Federal Reserve is independent

within government in that its monetary policy decisions do not have to be approved by the

President or anyone else in the executive or legislative branches of government. Its authority is

derived from statutes enacted by the U.S. Congress and the System is subject to Congressional

oversight.”

34. When the Federal Reserve came into being in 1913 it was opposed by many, but

those voices were not heard because the Conspirators knew that in order to control the masses,

they also had to control the media, which they quickly bought up and to this day, own and

control.

HISTORY IS REPEATED

35. The Conspiracy began long ago as evidenced by the following pamphlet

published by the United States Banker’s Association in 1892:

“We (the bankers) must proceed with caution and guard every move made, for the lower order of people are already showing signs of restless commotion. Prudence will therefore show a policy of apparently yielding to the popular will until our plans are so far consummated that we can declare our designs without fear of any organized resistance. The Farmers Alliance and Knights of Labor organizations in the United States should be carefully watched by our trusted men, and we must take immediate steps to control these organizations in our interest or disrupt them. At the coming Omaha Convention to be held July 4th (1892), our men must attend and direct its movement, or else there will be set on foot such antagonism to our designs as may require force to overcome. This at the present time would be premature. We are not yet ready for such a crisis. Capital must protect itself in every possible manner through combination (conspiracy) and legislation. The courts must be called to our aid, debts must be collected, bonds and mortgages foreclosed as rapidly as possible. When through the process of the law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of the government applied to a central power of imperial wealth under the control of the leading financiers. People without homes will not quarrel with their leaders. History repeats itself in regular cycles. This truth is well known among our principal men who are engaged in forming an imperialism of the world. While they are doing this, the people must be kept in a state of political antagonism. The question of tariff reform must be urged through the organization known as the Democratic Party, and the question of protection with the reciprocity must be forced to view through the Republican Party. By thus dividing voters, we can get them to expand their energies in fighting over questions of no importance to us, except as teachers to the common herd. Thus, by discrete action, we can secure all that has been so generously planned and successfully accomplished.”

36. Equally revealing is the following article posted on December 13, 2011 by

Washington’s Blog entitled: Fraud By The Big Banks – More Than Anything Done By The

Little Guy – Caused The Financial Crisis, as it too reveals that a conspiracy is indeed

unfolding today:

“The U.S. Treasury’s Office of Thrift Supervision Noted Last Year: The FBI estimates that 80 percent of all mortgage fraud involves collaboration or collusion by industry insiders This confirms what one of the country’s top fraud experts has said for years: that it was fraud by the big banks – more than anything done by the little guy – which caused the financial crisis: William K. Black – professor of economics and law, and the senior regulator during the S & L crisis – explained last month before to the Financial Crisis Inquiry Commission why banks

gave home loans to people who they knew couldn’t repay. The whole piece is a must-read, but here are excerpts from the introduction: The data demonstrate conclusively that most liar’s loans were fraudulent, which means that there were millions of fraudulent mortgage loans because liar’s loans became common (Credit Suisse estimates that they represented 49% of new originations by 2006). The data also demonstrate that even minimal underwriting of the loan files was sufficient to detect the overwhelming majority of such fraudulent liar’s loans. No honest, rational lender would make large numbers of liar’s loans. The epidemic of mortgage fraud was so large that it hyper-inflated the housing bubble, which allowed refinancing to further extend the life of the bubble (and the depth of the ultimate Great Recession. In the cases where there have been even minimal investigations (New Century, Aurora/Lehman, Citi, WaMu, Countrywide, and IndyMac) senior lender officials were aware that liar’s loans were fraudulent. Liar’s loans optimized short-term accounting income by creating a “sure thing” (Akerlof & Romer 1993). A fraudulent lender optimizes short-term fictional accounting income and longer term (real) losses by following a four-part recipe: A. Extreme Growth B. Making bad loans at a premium yield C. Extreme leverage D. Grossly inadequate loss reserves. Note that this same recipe maximizes fictional profits and real losses. This destroys the lender, but it makes senior officers that control the lender wealthy. This explains Akerlof & Romer’s title – Looting The Economic Underworld of Bankruptcy for Profit. The failure of the firm is not a failure of the fraud scheme. (Modern bailouts HAVE recapitalized the looted bank and left the looters in charge of it.) The first two “ingredients” are related. Home lending is a mature, reasonably competitive industry. A lender cannot grow extremely rapidly by making good loans. If he tried, he’d have to cut his yield and his competitors would respond. His income would decline. But he can guarantee the ability to grow extremely rapidly by being indifferent to loan quality and charging weaker credit risks, or more naïve borrowers, a premium yield. In order to become indifferent to loan quality the officers controlling the lender must eviscerate its underwriting. There is no honest reason for a secured lender to seek or permit inflated appraisal values. This is a sure marker of accounting control fraud – a marker that juries easily understand. In other words, banks made loans to borrowers who they knew couldn’t really repay because the heads of the banks could make huge bonuses based on high volumes and fraudulent appraisals, and they didn’t care if their own companies later failed . In short, they looted their companies and the economy as a whole. Professor Black brings us current to where we are today: History demonstrates that if the control frauds get away with their frauds, they will strike again. By allowing the banks to use their political power to gimmick the accounting rules to permit them to hide their massive losses on liar’s loans we have made it far harder to take effective administrative, civil, and criminal sanctions against the elite frauds that caused the Great Recession. Hiding the losses also adopts the dishonest Japanese approach that cripples economic recovery and public integrity. Prosecuting the elites control frauds can be done successfully. Create a new “Top 100” priority list and appoint regulators that will make supporting the Justice Department a top agency priority. That’s how we obtained over 1000 priority felony convictions of elite S&L

criminals. No controlling officer of a large, non-prime specialty lender has been convicted of running a control fraud. Only one has even been indicted. The FBI has written that any discussion of the crisis that ignores the role of mortgage fraud is “irresponsible.”But instead of prosecuting fraud, the government just continues to cover it up.”

THE CREATION OF MONEY

37. The Conspirators were able to perpetrate this scheme because few understand the

mechanics of the monetary system employed by the U.S.:

“All the perplexities, confusion and distress in America arise, not from the defects of the constitution or confederation, not from want of honour or virtue, so much as from the downright ignorance of the nation, of coin, credit and circulation.”

— President John Adams (1735–1826)

“I believe that banking institutions are more dangerous to our liberties than standing armies and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks... Will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” — President Thomas Jefferson

The Debate Over The Recharter Of The Bank Bill, (1809)

38. The underlying methods employed by the banking industry began centuries ago

according to Modern Money Mechanics, a booklet published by the Federal Reserve:

“It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their "deposit receipts" whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money. Then, bankers discovered that they could make loans merely by giving their promises to pay, [rigging the system to their advantage] or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment.”

39. Thus, the “fractional reserve” system of banking was born, where a deposit in the

form of cash, or a promissory note can be used by the bank to monetize or create 9X the amount

of the “deposit.” The key to the whole operation lay in the public's willingness to leave their

assets in the bank's vaults and use the bank's notes. This system is based on the faith and

ignorance of the people which allows the banks to use the assets they have on deposit, set aside

10% of those deposits as a reserve (capital requirement) and loan out the remainder thus earning

a profit on the spread between what they paid for the “wholesale” money at the Fed discount

window, and the amount they charged to the borrower.

“The actual process of money creation takes place primarily in banks ... bankers discovered that they could make loans merely by giving their promise to pay, or bank notes, to borrowers. In this way banks began to create money. Transaction deposits are the modern counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could ‘spend’ by writing checks, thereby ‘printing’ their own money.” — Modern Money Mechanics

Federal Reserve Bank of Chicago

40. Throughout history this system allowed the Bankers to get rich while most

everyone else got by. It created an unfair system where those at the top who controlled the

money had the power, while everyone else unknowingly was enslaved.

41. When a borrower takes out a bank loan or mortgage, the bank does not use its

own funds but goes to the Fed where it [electronically] receives 10 times the amount of the loan

in new currency. Ten percent of this money is allocated to the borrower, 10%, held in reserve

by the bank and the remaining 80%, allocated to the bank to lend or invest.

“A deposit created through lending is a debt that has to be paid on demand of the depositor, just the same as the debt arising from a customer's deposit of checks or currency in the bank. Of course they [the banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts.”

— Federal Reserve Bank Chicago, Modern Money Mechanics, p. 6

“Banks create credit. It is a mistake to suppose that bank credit is created to any extent by the payment of money into the banks. A loan made by a bank is a clear addition to the amount of money in the community.” — Encyclopædia Britannica 14th Edition

“What they [banks] do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts.”

—Modern Money Mechanics, pg 6

“The initial $10,000 of reserves distributed within the banking system gives rise to an expansion of $90,000 in bank credit (loans and investments) and supports a total of $100,000 in new deposits under a 10 percent reserve requirement. The deposit expansion factor for a given amount of new reserves is thus the reciprocal of the required reserve percentage (1/.10 = 10). Loan expansion will be less by the amount of the initial injection.” — Modern Money Mechanics

Federal Reserve Bank of Chicago - pg 8

42. In the events leading up to the economic crisis, the Conspirators controlled both

the Federal Reserve (“Fed”) and the banks and used the Fractional Reserve System to rape the

system. The Conspirators used borrower’s promissory notes as “deposits” and monetized 9X

their face value through the Fed. When the Fed issues “credit” to the bank, it sells the

“credit/”money” at a discount interest rate. The bank charges the borrower a higher rate and

profits from the difference. The Fed/Treasury lists the loan as a “demand deposit” – a liability

and the Note as an asset on its books thus canceling each other out. These transactions are

governed by the GAAP (Generally Accepted Accounting Principles) which banks must employ.

However, the Bank must then pay the Fed for the use of this “credit” through the borrowers

mortgage payments, but the Conspirators ledgered the liability on the PUBLIC side (the Fed) and

ledgered the asset on the PRIVATE side, as their own asset and continued to use borrowers

NOTEs over and over again.

43. The Conspirators then used the same Notes and pretended to sell them to

investors of the MBS which had pre-funded the borrowers loans with TBA (“to be announced”)

funds brazenly violating the Pooling and Servicing Agreements established by the MBS Trusts.

The Conspirators held the Notes which should have been delivered to the MBS Trustees

according to New York law which governs the securities, and sold the same notes repeatedly

to multiple trusts. The Notes were simply copied in order to sell these notes to MBS investors

both here and abroad and so they could be used once again to “validate ownership” in

foreclosure cases according to the FCIC report as of January 2011:

“Goldman Sachs alone packaged and sold $73 billion in MBS’s from July 1, 2004 to May 31, 2007. These MBS’s referenced more than 3,400 mortgage securities, with 610 of them referenced at least twice. This is apart from how many times

these securities may have been referenced in synthetic CDO’s created by other firms.”

TITLE CRISIS

44.

public from discovering their Conspiracy prematurely. They accomplished said distraction in

myriad ways, one being the creation of a title crisis. The Conspirators intentionally failed to

record the conveyance transactions of real estate at the county level and bypassed the law

completely by creating their own recording database called the Mortgage Electronic

Registration System (MERS) - a secretive veil which would allow them to hide their crimes.

45. The Conspirators not only failed to record these conveyances, but in failing to

deliver the Notes to the Trusts, in direct violation of the governing documents of the Trust, a

cloud is created on the titles of nearly every property in the U.S. according to Professor Adam

Levitin’s testimony as stated below.

46. In sworn testimony by Linda De Martini supervisor and operational team leader

for the Litigation Management Department for BAC Home Loans Servicing L.P. in Kemp V

Countrywide, “BAC Servicing” testified that Countrywide NEVER delivered the notes to the

trusts. Again, any rational person would ask why.

47. Professor Adam Levitin testified before the House Financial Services Committee

and stated:

“If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact, not be backed by any mortgages whatsoever. The chain of title concerns stem from transactions that make assumptions about the resolution of unsettled law. If those legal issues are resolved differently, then there would be a failure of the transfer of mortgages into securitization trusts, which would cloud title to nearly every property in the United States and would create contract rescission/putback liabilities in the trillions of dollars, greatly exceeding the capital of the US’s major financial institutions….Recently, arguments have been raised in foreclosure litigation about whether the notes and mortgages were in fact properly transferred to the securitization trusts. This is a critical issue because the trust has standing to foreclose if, and only if it is the mortgagee. If the notes and mortgages were not transferred to the trust, then the trust lacks standing to foreclose…If the notes and mortgages were not properly transferred to the trusts, then the mortgage-backed securities that the investors’ purchased were in fact non-mortgage-backed securities. In such a case, investors would have a claim for the rescission of the

MBS, meaning that the securitization would be unwound, with investors receiving back their original payments at par (possibly with interest at the judgment rate). Rescission would mean that the securitization sponsor would have the notes and mortgages on its books, meaning that the losses on the loans would be the securitization sponsor’s, not the MBS investors, and that the securitization sponsor would have to have risk-weighted capital for the mortgages. If this problem exists on a wide-scale, there is not the capital in the financial system to pay for the rescission claims; the rescission claims would be in the trillions of dollars, making the major banking institutions in the United States would be insolvent.

FORECLOSURE CRISIS

48. The Conspirators intentionally created a complex sham intended to create chaos

in the courts thereby burdening them with millions of foreclosures. The defaults began with the

subprime mortgages, but this momentum soon “trickled up” to long-standing mortgages where

borrowers had amassed a great deal of equity in their properties which would soon be lost to

plummeting real estate values.

49. The Conspirators instructed the courts to “accelerate the foreclosures” under the

guise that “the economy would then stabilize.” But sooner or later the public and the courts

would learn the truth, so the Conspirators had to make sure their plan so deeply embedded in

society that there could be no escape from the consequences of the economic collapse, just as the

Bankers pointed out in their 1892 pamphlet:

“for the lower order of people are already showing signs of restless commotion. Prudence will therefore show a policy of apparently yielding to the popular will until our plans are so far consummated that we can declare our designs without fear of any organized resistance.”

LAYING THE GROUNDWORK FOR COLLAPSE

50. The Conspirators methodically laid the groundwork which would create a new

mortgage lending infrastructure where the era of ‘fiduciary’ relationships was thrown out the

window. The values upon which America was founded would be exploited as the Conspirators

knew that Americans and the courts would presume that highly respected lending institutions

operated from a foundation of trust.

51. The Conspirators attempted to disguise their scheme in a “complex language”

they concocted which was designed to confuse, confound and overwhelm the average person

thus enabling them to carry out their plan.

“Monetary science, finance and economics are mired in a convoluted language. Economics experts propagate multiple terms and multiple definitions for those terms. This quagmire hinders the ability of individuals outside the economic elite to reach reasonable conclusions. Because the current system is inherently unsound, unstable and unethical, those who perpetuate it must attempt to keep those it abuses in ignorance, ensuring they are confounded and misdirected from the true issues.” - Trace Mayer

Monetary scientist and author of The Great Contraction

DEREGULATION

52. The objective of the Conspirators could not be realized if the banking industry

was regulated, so in the 1990’s a series of events, beginning with the merger of Citibank and

Travelers Insurance in 1998, illegal at the time, began to unravel the long-standing regulations

which ensured that catastrophes like the Great Depression could not occur again. Because the

merger of Citibank and Travelers Insurance violated the Glass-Steagall Act, enacted in 1934 to

separate commercial banking from investment banking to prevent Wall Street and the largest

banks from gambling and risking the deposits of others, the Conspirators had to repeal the Glass-

Steagall Act.

53. The Conspirators knew that Congress would do their bidding because as Illinois

Senator Dick Durbin stated on April 29, 2009: "the banks, hard to believe in a time when we're

facing a banking crisis that many of the banks created, are still the most powerful lobby on

Capitol Hill. And they frankly own the place." They indeed own “the place” as a result of

paying Billions to lobbyists. New legislation quickly passed which began to dismantle the Glass-

Steagall Act and the Citi-Travelers merger paved the way for the Conspirators’ scheme to

unfold.

54. Furthermore, the repeal of the Glass-Steagall Act effectively opened the door for

the securitization of mortgage loans - the catalyst needed to collapse the economy.

SHIFTING THE RISK FROM THE CONSPIRATORS TO THE SHAREHOLDERS

55. In 1998, the Conspirators shielded any potential risk away from themselves by

converting the once privately-held investment banks on Wall Street into publicly-held

corporations, thereby shifting risk to the hapless shareholders of those companies. As a result of

this paradigm shift, compensation on Wall Street and the largest banks rose meteorically which

afforded the Conspirators the means to “invest” even more Billions of dollars in lobbying efforts

to ensure their control of Washington. By bankrolling the elections of those they wanted in

office, those who would protect their interests, they made sure these people ‘remembered’ who

put them in that office.

DISEMPOWERING THE MIDDLE CLASS

56. The Conspirators sought to deter the American public from recognizing their

scheme by systematically disempowering the middle class of America. In 1994 the Democrats

and Republicans passed NAFTA which sent 50,000 manufacturing plants overseas, hence a loss

of jobs and revenue for the government through taxes, under the guise of fulfilling their

obligation of ‘making profit for their shareholders.” By obliterating jobs, they forced the middle-

class into survival-mode, thereby robbing the American people of their pensions, and assets, thus

rendering them impotent, shamed, humiliated and focused on supporting their families. The

foreclosure crisis, a tactic they had employed in the past, was used to destabilize Americans and

strip them of their assets.

DIVIDE AND CONQUER

57. To distract and divert the attention of the public, thereby delaying the premature

discovery of the Conspiracy and potentially stopping it, the Conspirators have and still are

employing an effective strategy known as “divide and conquer.” This strategy is being carried

out to extreme absurdity today by filling the airwaves with dissension between America’s two

political parties on the most ridiculous, inconsequential and trivial issues which trigger emotion.

As they pit one side against the other, the Conspirators pour fuel upon these issues and maintain

a constant state of chaos in the population.

CREATING A WEAPON OF MASS FINANCIAL DESTRUCTION: MORTGAGE-BACKED SECURITIES

58. The final desecration of the Glass-Steagall Act in 1998-1999 opened the door for

the Conspirators to introduce new ‘innovative’ products into the American marketplace known

as Mortgage Backed Securities (“MBS’s”). These securities played an integral role in the

Conspirators scheme as they were designed to earn high fees, to make money out of nothing,

create widespread fraud which would contribute to lawsuits whose settlements would be so great

and so widespread that said settlements could result in the collapse of the financial institutions;

and over-leveraging the institutions to such a great degree that the Conspirators would have yet

another means of collapsing the economy. These securities were backed by the valuable

promissory notes on borrowers’ homes and considered to be a ‘low risk’ investment as providing

a roof over ones’ family’s head is a priority to American families.

59. After a borrower closed on a mortgage, that mortgage would be combined with

other similar mortgages and converted into a securitized instrument. These instruments would be

pooled together and create a Collateralized Debt Obligation (“CDO”) where pieces of that pool

were sold as bonds to investors all over the world referred to as certificateholders.

60. The Conspirators needed both borrowers and investors, each a pawn in a much

larger game they were unaware of - a pervasive scheme where the Conspirators could exploit

them in order to rob the world and collapse the economy.

61. The Conspirators churned out MBS’s by the millions despite the fact that they

were taking enormous risks which many on Wall Street found to be both incredulous and

irrational. These investments over-leveraged their respective companies with (high-risk) MBS

securities. The risk was clear: if anything were to go wrong in the market, the “investment”

company would fail; exactly what the Conspirators set out to do as it provided a cover of

plausible deniability.

62. The January 2011 Financial Crisis Inquiry Commission (“FCIC”) Report - Pg

230- Commission Conclusions on Chapter 11 -The Bust stated that over-leverage was indeed

a major cause of the financial crisis:

“The Commission concludes that the collapse of the housing bubble began the chain of events that led to the financial crisis. High leverage, inadequate capital, and short-term funding made many financial institutions extraordinarily vulnerable

to the downturn in the market in 2007. The investment banks had leverage ratios, by one measure, of up to 40 to 1. This means that for every $40 of assets, they held only $1 of capital. Fannie Mae and Freddie Mac (the GSEs) had even greater leverage—with a combined 75 to 1 ratio. Leverage or capital inadequacy at many institutions was even greater than reported when one takes into account “window dressing,” off-balance-sheet exposures such as those of Citigroup, and derivatives positions such as those of AIG. The GSEs contributed to, but were not a primary cause of, the financial crisis. Their $5 trillion mortgage exposure and market position were significant, and they were without question dramatic failures. They participated in the expansion of risky mortgage lending and declining mortgage standards, adding significant demand for less-than-prime loans. However, they followed, rather than led, the Wall Street firms. The delinquency rates on the loans that they purchased or guaranteed were significantly lower than those purchased and securitized by other financial institutions.”

INFLATING THE BUBBLE

63. The Fed has the ability to intentionally create a bubble by lowering interest rates,

as credit is then plentiful which opens the market for increased debt. To prevent a bubble from

inflating, the Fed must slowly raise interest rates for if it does not, a bubble will result.

64. According to the Federal Reserve website:

“A higher Fed funds rate means banks are less willing to borrow money to keep their reserves at the mandated level. This means they will lend less money out, and the money they do lend will be at a higher rate since they themselves are borrowing money at a higher rate. Since loans are more difficult to get and more expensive, businesses will be less likely to borrow, thus slowing the economy. When the Fed raises rates, it is called contractionary monetary policy. “

65. The consequence of a bubble is inflation for each new loan “monetizes” 10 times

its amount thereby adding to the amount of money in circulation which in turn devalues the

dollars currently in circulation. According to the inflation calculator at CoinNews.net, validated

by numerous sources, if you were to purchase on item in 1913 for $20.00, the year the Fed was

established, that same item would cost $454.42 in 2012.

66. The Conspirators chose real estate as the vehicle to fuel their bubble because, as

Chairman of the Federal Reserve, Ben Bernacke stated in 2005 amid warnings of a bursting real

estate bubble: “Historically, real estate has never dropped in value and therefore there is no

bubble.” Bernacke made this statement despite the fact that at that time, irrefutable evidence

existed to the contrary.

67. In 2002 the Federal Reserve began to inflate the bubble needed to achieve the

Conspirators objective and lowered interest rates from 6.5% to 1.25% which made credit easy to

obtain. These low rates initiated a “feeding frenzy” and as anticipated, unwary borrowers took

the bait. The market, now flooded with homebuyers, artificially drove up property “values”

which resulted in home prices doubling from 1996 to 2006.

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks... Will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” — President Thomas Jefferson

The Debate over the Recharter of the Bank Bill, (1809)

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens....while the process impoverishes many, it actually enriches some. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

— John Maynard Keynes (1883–1946) British Economist 1919-Economic Consequences of Peace

CREATING LOANS DESIGNED TO DEFAULT

68. To fuel the real estate bubble, the Conspirators needed a great quantity of

mortgage loans which would have a high percentage of default, not if, but when the Conspirators

raised interest rates. Under the altruistic guise of ‘helping more people to achieve the American

dream,’ the non-partisan Conspirators instructed their cronies in Congress to enact laws in both

the Bush and Clinton administrations which created a whole new market of borrowers. One of

those new laws was the Community Reinvestment Act which made it illegal for a bank not to

grant a loan to a “sub-prime” borrower. In the past, these borrowers were unable to secure

mortgages because they did not meet underwriting guidelines designed to protect lenders from

default. But the Conspirators didn’t care about underwriting guidelines as they needed loans

which would default, so they exploited these borrowers.

69. The Conspirators enticed more borrowers into their web of deceit with a bevy of

new mortgage products: no-document loans, stated income loans, 100% of purchase loans, and

adjustable rate mortgages, which allowed borrowers to obtain loans under suspicious

circumstances. To lure even more unsuspecting borrowers into loans they could not afford if

interest rates rose, the lenders offered ‘teaser interest rates’ as low as 1.00% for a specified

length amount of time. These ‘teaser rates’ delayed the onset of the true higher payments which

would go into effect at a specified time in the future determined by the prevailing interest rates at

that specific time. In other words, if interest rates rose, borrowers’ payments would rise -

exponentially. And these loans had a far greater chance of default because they were ‘designed to

default.’

70. These loans were replete with fraud as countless lawsuits have attested, but the

Conspirators did not care. To ensure that the loans would default, the Conspirators set up

conditions which induced bank employees with bonuses, high salaries. If that tactic was

unsuccessful, the employees were threatened with the loss of their jobs if they didn’t produce

loans ...and fast! Bank employees were pushed to relax or completely eliminate underwriting

standards, inflate appraisals; essentially telling borrowers anything to get them to sign loan

documents. *See sworn testimony from bank employees at the end of this document.

71. Borrowers were unaware that their notes were being converted into ‘securities,’

pooled together with other mortgages and sold to investors, with the majority of the loans pre-

funded by the MBS investors who had advanced funds according to the Federal Reserve Bank of

New York Staff Reports entitled “TBA Trading and Liquidity in the Agency MBS Market” by

James Vickery and Joshua Wright, Staff Report No. 468 - August 2010:

“A less widely recognized feature is the existence of a liquid forward market for trading agency MBS, out to a horizon of several months.3 The liquidity of this market raises MBS prices and improves market functioning. It also helps mortgage lenders manage risk, since it allows them to “lock in” sale prices for new loans as or even before those mortgages are originated. The vast majority of agency MBS trading occurs in this forward market, which is known as the TBA market (TBA stands for “to be announced”). In a TBA trade, the seller of MBS agrees on a sale price, but does not specify which particular securities will be delivered to the buyer on settlement day. Instead, only a few basic characteristics of the securities are agreed upon, such as the coupon rate and the face value of the bonds to be delivered. *3 In a forward contract, the security and cash payment for that security are not exchanged until after the date on which the terms of the trade are contractually agreed upon. The date the trade is agreed upon

is called the “trade” date. The date the cash and securities change hands is called the “settlement” date.”

SECURITIZING THE LOANS

72. The process of Securitization was designed to distance the Conspirators from

liability and rob citizens of Trillions of dollars. The following is the securitization process:

A. Mortgages loans are obtained or “originated” by “lenders”: large banks, mortgage brokers etc.

B. The loans are then sold to a “Sponsor” - typically a subsidiary of the originating bank created to distance the bank from potential liability. This sponsor is called a "special purpose vehicle / e ntity" "SPV"/“SPE”, and is a tax-exempt company or trust which forms a passive shell which is “bankruptcy remote”, meaning that if the original “lender” goes into bankruptcy, the assets of the lender cannot be seized by the creditors of the bank. In order to achieve this status, the governing documents of the bank restrict its activities to those necessary to complete the issuance of securities, for once the assets are transferred to the Sponsor/SPV, there is normally no recourse to the originator.

C. The Sponsor assembles the newly-purchased loans into pools consisting of approximately 5,000 mortgages.

D. The Sponsor then sells the pool of loans to a Depositor.

E. The Depositor issues the bonds/certificates created by the Underwriter of a Conspirator-owned Wall Street Investment Bank (Goldman Sachs) backed by the underlying mortgage loan.

F. The depositor establishes a trust and lays out the rules the trust must follow according to a “pooling and servicing agreement.”

G. The depositor typically owns 100% of the beneficial interest in the issuing entity and is usually the parent, or a wholly owned subsidiary of the parent, which initiates the transaction.

H. Each trust issues Certificates which are sold to large institutional investors.

I. The depositor transfers loans to the Trust in accordance with the PSAs.

J. The Depositor works with the Underwriter (Investment Bank such as Goldman Sachs) to sell the securities to investors.

K. Underwriters of Conspirator-owned Wall Street Investment Banks pay the depositor with funds from the MBS Investors.

L. Underwriters convert loans into security bonds.

CREATING MBS BONDS FOR INVESTORS TO PURCHASE

A. Registration statements are filed with the Securities and Exchange Commission (SEC) which includes a description of the offering, a “prospectus” that explains the general structure of the investment. Prospectus supplements contain specific detailed descriptions of the mortgage pool. To lure unsuspecting investors, the Prospectus Supplements purported to provide accurate statistics regarding the mortgage loans in the collateral group and the entire securitization.

B. The investment banks set up the structure of the transaction.C. Underwriters at the investment banks pre-sold bonds before the loans were

originated, which is referred to as forward selling.

D. MBS Certificates/bonds were categorized based upon risk into various levels or tranches. The highest senior bonds carried the lowest risk and were paid first whereas the lower tranches, while paying a higher rate of interest, carried a higher risk.

E. MBS bonds were based upon specific criteria which placed each loan into a specific “tranche” based upon the FICO credit score of the borrower, loan-to-value ratio of the loan, outstanding principal balance of the loans, geographic location, whether the loans were for purchase or refinance purposes, a primary residence, second home, or investment property, and information concerning when a loan would be determined to be delinquent.

F. The most common securitization trusts, having lower yields, were the Conspirator-owned (flagrantly run into the ground by leveraging their assets 75:1) privately-held corporations, Fannie Mae and Freddie Mac. Although these institutions are referred to as government-sponsored enterprises, the title is misleading.

G. Investors desiring a higher yield purchased certificates from private label securities firms, such as Goldman Sachs.

H. Each Certificate entitled the investor to a specified portion of the mortgage payments based upon the level of perceived risk in the certificates which were typically rated AAA.

I. Investors acquired a percentage of ownership interest in the cash flow from the mortgage loan payments and in the promissory notes - the assets of the trust, which were supposed to be held by the Trustee on behalf of the certificate-holders.

J. According to Investopedia, the MBS Trust (its trustee being an agent for the Conspirators) typically purchased credit default swap “insurance” as a “credit enhancement” used to entice investors into thinking they were buying low-risk investments which were guaranteed not to lose. All tranches received periodic payments based on the cash flows from the credit default swaps.

K. If a “credit event” occurred, such as a mortgage default, and reached a specific default percentage, starting from the lowest tranche and working its way up that tranche would be liquidated causing investors to lose their investment. But if the certificates were covered by CDS insurance the investors were compensated for their losses, if the insurance company was not bankrupted as AMBAC (American Municipal Bond Assurance Corporation) was in 2010.

THE MONTH TO MONTH OPERATION FOR BORROWERS

A. The mortgage Servicer, an agent for the Conspirators, collects the mortgage payments, take its fee off the top and passes the remainder to trustee of the MBS trust, another agent of the Conspirators.

B. Servicer’s are responsible for collecting delinquent loans and determining when to charge off a loan by writing down its balance - a conflict of interest as the Servicers fee is based upon the outstanding loan balance in the pool.

C. The Servicer, typically a subsidiary of the Conspirator parent originator, therefore controlled by the Conspirator, has the power to significantly affect the cash flows to the investors because it controls the charge-offs and recoveries on the loans.

D. Any income remaining after payments and expenses is usually accumulated to some extent in a reserve account which is returned to the depositor.

E. The Servicer is required to report key information about the loans to the trustee.

F. According to the PSA (Pooling and Servicing Agreement), when a loans defaults the loss is absorbed first by the lowest most risky tranches, with the upper-level tranches remaining unaffected until losses exceed the entire amount of the subordinated tranches at which point the trust is dissolved and files a 15-15D report with the SEC indicating its probable dissolution.

G. The lowest tranches, most exposed to payment risk, are retained by the Conspirator-owned Originator knowing that when the loans default, they will be first in line to collect CDS payments.

H. The trustee, as alleged gate-keeper of the Trusts’ assets, is part of the Conspirator-owned SPV, which is typically wholly owned by the Conspirator Originator.

GAMING THE SYSTEM THE CONSPIRATORS CREATED

A. The loans made to borrowers were packaged and/or sold to variety of Conspirator players, each earning a profit on each transaction.

B. The prospectus was created, the MBS rated, and the investor’s money pledged before the homeowner ever applied for a loan.

C. Each MBS/Trust was required to keep a list of the individual loans they had allegedly recruited for the MBS. This list has to be publicly recorded with the SEC, however, the SEC did not require any proof that the loans actually existed or were possessed by the MBS.

D. The underwriter earned a yield spread premium: the difference between what the interest rate the loan was sold for and the interest rate paid to the investors of the MBS’s.

E. The originator was simply the liaison between the borrower and the Investor and was paid a “commission” when the depositor purchased the loan from the Sponsor.

F. The Conspirators controlled the Servicer and designed the PSA to ensure that when a loan defaulted the Servicer would then “advance” loan payments on behalf of the defaulted borrower. The Servicer’s fee was based upon the outstanding balance of the pool, so if the loan was non-performing and the Servicer reported it as such, it would earn less money.

G. Servicing rights are considered as assets with recognized value and called Mortgage Servicing Assets (MSA) which are sold, assigned, and securitized.

H. A Master Mortgage Servicer receives a large fee called a service release premium (SRP) when it sells its servicing rights, thus this market is quite active.

I. Additionally, the largest Servicers earn billions on late fees they frequently create through shenanigans.

J. The largest Servicers earn massive fees when a loan defaults: late fees, penalties, etc. Therefore, the longer the loan is in default, the Servicer accrues fees and interest payments which will be paid when the home is foreclosed.

K. The Servicer doesn't care how much the foreclosed home sells for, as any amount which exceeds their expenses is pure profit.

CREDIT DEFAULT SWAPS AKA “OVER THE COUNTER (OTC) DERIVATIVES”

73. The ‘Atomic Bomb’ of the Conspirators scheme, designed to catalyze the collapse

of the economy and rob untold Trillions from the public, were the Credit Default Swap’s,

unregulated “insurance” policies taken out on MBS bonds. Unlike a fire insurance policy where

only one person can take a policy on property in the event of a loss, credit default swap

“insurance” (more like a Las Vegas “bet”) could be sold to many gamblers. And this wasn’t a

true bet, for the game was rigged. The data clearly indicates that the predatory loans sold to

unsuspecting borrowers were designed to default. Therefore, the Conspirators only had to sit

back and wait for the dollars to pour in while the economy collapsed piece by piece.

74. CDS’s had little risk and great reward according to the 2011 Financial Crisis

Inquiry Commission Report:

“...entering into an equity swap that mimicked the returns of someone who owned the actual stock may have had some upfront costs, but the amount of collateral posted was much smaller than the upfront cost of purchasing the stock directly. Often no collateral was required at all. Traders could use derivatives to receive the same gains—or losses—as if they had bought the actual security, and with only a fraction of a buyer’s initial financial outlay.” “The credit default swap (CDS), offered the seller a little potential upside at the relatively small risk of a potentially large downside. The purchaser of a CDS transferred to the seller the default risk of an underlying debt. The CDS buyer made periodic payments to the seller during the life of the swap. In return, the seller offered protection against default or specified “credit events” such as a partial default. If a credit event such as a default occurred, the CDS seller would typically pay the buyer the face value of the debt.”

75. CDS’s were a zero-sum bet; for example, a bet on a MBS tranche that held $100

million in mortgages would cost $200,000. for that “policy.” Therefore, when a specific

percentage of mortgages in an MBS tranche defaulted, each policy holder would be paid $100

Million! Obviously, the insurance company (AIG, for example) which sold the CDS’s would

have to have enough money to pay off the $100 Million to each party who placed a bet which

required that the insurance companies have enough liquidity to pay off the bets. A large

percentage of defaults could easily bankrupt the “insurance” company, for by 2008 the

derivatives market had ballooned to $45 trillion - the reason insurance giant AIG would have

been bankrupt it were not bailed out at the Conspirators behest. What we have learned today is

that the bailout money was used to pay off the bets taken by the Conspirators at 100 cents on the

dollar! On page 347 of the 2011 Financial Crisis Inquiry Commission Report, it was stated:

“On September 2, 2008 the New York Fed’s Danielle Vicente noted: ‘AIG’s current liquidity position is precarious and asset liability management appears inadequate given the substantial off balance sheet liquidity needs.’ Liquidating an $835 billion securities portfolio to cover liabilities [CDS’s] would mean substantial losses and “potentially” affect prices, she wrote. Borrowing against AIG’s securities through the Fed’s PDCF (New York Fed: The Primary Dealer Credit Facility (PDCF) is an overnight loan facility that will provide funding to primary dealers in exchange for any tri-party-eligible collateral and is intended to foster the

functioning of financial markets more generally.) might allow AIG to unwind its positions calmly while satisfying immediate cash needs, but Vicente questioned whether the PDCF was “necessary for the survival of the firm.’ Arguably, however, AIG’s volatile funding sources made the firm vulnerable to runs. Off-balance-sheet commitments—including collateral calls, contract terminations, and liquidity puts—could be as high as $33 billion if AIG was downgraded. Yet AIG had only $4 billion of revolving credit facilities in addition to the $12 to $13 billion of cash it had on hand at the time. Analysts worried about the losses in AIG’s credit default swaps and investment portfolios, about rating agency actions, and about subsequent impacts on capital.”

76. In another excerpt from the 2011 Financial Crisis Inquiry Commission Report it

was stated:

“Credit default swaps (CDS)—fueled the mortgage securitization pipeline. CDS’s were sold to investors to protect against the default or decline in value of mortgage-related securities backed by risky loans. Companies “sold protection”— to the tune of $79 billion, in AIG’s case... helping to launch and expand the market and, in turn, to further fuel the housing bubble.”

77. To create the circumstance of an economic death spiral and thus collect Trillions

on the credit default swap “bets” the Conspirators placed, it was imperative that the loans

default. Moreover, because credit default swaps were integral to the success of the Conspirators

scheme, all obstacles which could derail the success of the scheme had to be eliminated.

ELIMINATING THE OBSTACLES

78. One obstacle that could potentially deride the Conspirators’ scheme was

Brooksley Born, Chairman of the Commodity Futures Trading Commission (“CFTC”), the

federal agency which oversees the futures and commodity options markets. A lauded brilliant

attorney and expert in the field of derivatives, (MBS) Ms. Born analyzed the potential risk of the

unregulated derivative market and became alarmed for she had the moxie to understand that

something major was awry. She then called Alan Greenspan, Chairman of the Federal Reserve of

the United States from 1987 to 2006, who became surprisingly angry with her for recognizing

this fact. Shaken, but undaunted, and fueled by her conviction to protect the American people,

she lobbied Congress and President Clinton in 1998 in an effort to regulate these derivatives and

protect the American economy.

79. However, in Congressional hearings, Conspirators, Alan Greenspan, Larry

Summers, Secretary of the Treasury from 1999 to 2001, and Robert Rubin, Secretary of the

Treasury from 1995 to 1999, all of whom who you would think would want to protect the public,

instead fought hard to keep derivatives unregulated and when challenged, displayed a then

perplexing contempt for Ms. Born as each vehemently opposed her warnings collectively

stating: “We have grave concerns about this action and its possible consequences. . . . We are

very concerned about reports that the CFTC’s action may increase the legal uncertainty

concerning certain types of “over-the-counter” (OTC) derivatives.*” [*credit default swaps] In a

revealing irrational display of emotion shown in the Oscar-winning documentary “Inside Job”,

these Titans of Wall Street accused Ms. Born of wanting to bring the economy of the United

States down, rather than trying to protect it! Alan Greenspan stated: “Aside from safety and

soundness regulation of derivatives dealers under the banking and securities laws, regulation of

derivatives transactions that are privately negotiated by professionals, is unnecessary.”

80. In September of 1998, Greenspan had changed his tune. The Federal Reserve

Bank of New York orchestrated a $3.6 billion recapitalization of Long-Term Capital

Management (LTCM) by 14 major OTC derivatives dealers. LTCM, an enormous hedge fund,

had amassed more than $1 trillion of exposure in derivatives and $125 billion of securities on a

mere $4.8 billion of capital without the knowledge of federal regulators. Greenspan then

revealed that there was enormous risk posed by unregulated derivatives and testified to

Congress that in the New York Fed’s judgment, LTCM’s failure would potentially have had

systemic effects: a default by LTCM “would not only have a significant distorting impact on

market prices but also in the process could produce large losses, or worse, for a number of

creditors and counter-parties, and for other market participants who were not directly involved

with LTCM.”

81. Despite those premonitions, in December 2000, the Conspirator-controlled

Congress passed the Commodity Futures Modernization Act of 2000 (CFMA), which shielded

credit default swaps from virtually all regulation or oversight by both the CFTC and the SEC.

According to the 2011 Financial Crisis Inquiry Commission Report:

“The enactment of legislation in 2000 to ban the regulation by both the federal and state governments of over-the-counter (OTC) derivatives was a key turning point in the march toward the financial crisis.”

EXPANDING THE CREDIT DEFAULT MARKET

82. At year-end 2000, when the Commodity Futures Modernization Act law was

passed by Congress, the global exposure to these outstanding bets was $95.2 trillion, meaning

that when the mortgages defaulted, the amount of money required to pay off the bet was $3.2

Trillion. In June 2008 when the market peaked, this exposure increased sevenfold to $672.6

trillion; with a gross market value of $20.3 Trillion, and in March 2012 stands at $707 Trillion

with $34.9 Trillion in CDS’s.

83. In the aftermath of the economic crisis, Conspirator Greenspan testified to the

FCIC that credit default swaps—a small part of the market when Congress discussed regulating

derivatives in the 1990’s —“did create problems” during the financial crisis. Conspirator Larry

Summers testified that “the derivatives that proved to be by far the most serious, [were] those

associated with credit default swaps [which] increased 100 fold between 2000 and 2008.”

84. If the laws and Congress are indeed intended to protect the public and our society

from potential harm, the irrational, illogical steps which took place paved the way for the

derivative market to grow exponentially, thus increasing risk exponentially. But the

Conspirator-owned Congress passed Laws which allowed banks and hedge funds to hold less

capital in reserve against their exposure to losses if they purchased derivatives. Additionally, to

further inflate the MBS market, the cost on these “bets” was low.

85. According to a class action Federal RICO lawsuit filed in October 2010 in

Kentucky (Foster v. Mortgage Electronic Registration Systems Inc., 10-cv-611):

The Double and Triple Dip and Derivative Contracts:

“Many of the MBS/Trusts were covered by an insurance policy, commonly referred to as a Derivative or Collateral Contract. These Derivative Contracts are not recorded or regulated by the SEC. Upon information and belief, the Defendants have attempted to receive distribution, fees or proceeds or have received distributions from the liquidation of the borrower’s homes, when the actual beneficiaries under the homeowners’ loans, the shareholder/investors have

been made whole by a Derivative Contract. In other instances, the MBS has been “closed” months or years prior. Funds collected from the loans allegedly within the MBS, are no longer being paid to the investors, but are an unearned windfall to the servicer. Additionally, there is no contract between the investors and the foreclosing entity which would allow them so act as a Plaintiff in a Foreclosure even when the MBS is not shut down.

Likewise, the MBS/Trusts themselves became parties to Derivative Contracts. Most times, the actual Derivative contract is for more, up to ten times (10x), the face value of the MBS. More often than not, multiple insurance policies were taken and traded on the MBS. The “double dip” or double compensation of the MBS/Trustee, or Servicer is improper in its own right. The offense is patently egregious when it is viewed in light of the fact that the Servicer has no standing to foreclose, yet they came and continue to come to the Courts with the fabricated and forged documents.”

TOO BIG TO FAIL

86. To ensure the collapse of the economy, the Conspirators had to make sure that the

banks and institutions were so critical to the financial infrastructure of the American economy

(and the world), that a failure would have dramatic, far-reaching consequences, therefore these

institutions had to be “too big to fail” and thereby “rescued” by the government. Hence, for the

10 years prior to the “crash,” numerous mergers had taken place with larger banks gobbling up

the smaller banks thus rendering them as ‘too big to fail.’

87. In the aftermath of the “crash” the Conspirator-owned largest banks have

consolidated the banks which intentionally failed so they could create even larger institutions

which would then be capable of controlling the world’s monetary system. These Conspirator-

owned institutions bought the banks which failed for pennies on the dollar. Washington Mutual

had $307 Billion in assets, but was acquired by Chase for a mere $1.9 Billion, with the officers

of the failing banks retaining their multi-Million bonuses and golden parachutes in exchange for

their Oscar-winning performances where they acted as if they knew nothing.

MERS: THE SECRETIVE VEIL WHICH CONCEALS INSIDER FRAUD

88. To deceive the public and the courts for as long as they possibly could, the

Conspirators devised a secretive veil to hide their crimes. That smokescreen was the Mortgage

Electronic Registration System, or MERS, a privately held corporation created in 1998 by the

Conspirators. MERS was established to circumvent the lawful requirement to record all

documents pertaining to the beneficial ownership of real estate at the county level. And the

Conspirators brazenly created this new entity without going through the legislative process.

89. MERS undermines and eviscerates long-standing principles of real property law,

such as the requirement that any person or entity who seeks to foreclose upon a parcel of real

property: 1) be in possession of the original note, 2) Have a publicly recorded mortgage in the

name of the party for whom the underlying debt is actually owed and who is the holder of the

original Promissory Note with legally binding assignments and 3) possess a written assignment

giving he, she or it actual rights to the payments due from the borrower pursuant to both the

mortgage and note.

90. Most important, MERS operates “in the dark” thus allowing the Conspirators to

conceal numerous violations of the law which could later be used as evidence of their scheme.

Among those violations is having the ability to repeatedly sell and assign borrowers promissory

notes this making even more money the Conspirators used the cover of mers to make it possible

to sell these mortgage notes to multiple MBS pools to make even more money!

91. MERS does not share their registry with anyone and therefore, it has created a

shadow or false registry.  Because MERS and the Conspirator-owned banks refuse to share the

chain of title with any entity, they have the ability to create any document they want.

BRIBING THE RATINGS AGENCIES

92. Large institutional investors have restrictions placed upon them and can only

invest in AAA-rated low risk investments, so according to the Oscar-winning documentary

“Inside Job,” and Michael Lewis’ “The Big Short”, the Conspirators simply paid the Ratings

agencies, Moody’s, Fitch and Standard and Poors, millions of dollars in “bribes.” The

Conspirators singled out the ‘best and brightest’ employees of the ratings agencies and if these

people produced favorable ratings for the MBS’s, they were offered extremely well-paying jobs.

Thus, there was a built-in bias to rate the MBS pools favorably despite contrary data emanating

from multiple sources which indicated that sub-prime MBS’s were indeed an extremely high-risk

investment and contained mortgages which were so bad that they were guaranteed to fail.

93. The majority of MBS were rated “AAA” by Moody’s or Standard & Poors in

order to invoke a sense of confidence to the investors. The rating agencies, currently under

investigation by the Justice Department for their role in the financial meltdown, were controlled

by the Conspirators. The Underwriter/salesman of the Conspirator-owned banks hired and

compensated the ratings agencies.

GETTING RID OF TROUBLESOME REGULATORS

94. To ensure that potentially problematic regulators would not have the ability to

uncover the Conspirator’s scheme, according to the Oscar-winning documentary “Inside Job,”

the Conspirator-controlled Congress quickly passed legislation to cut the Enforcement Division

of the SEC from 146 regulators to 1 lone regulator who remained on staff.

95. The Conspiracy and its Conspirators extended to other countries including Prime

Minister Tony Blair of Great Britain. Economist Charles Kadlec wrote in The Daily Reckoning:

“As former Prime Minister Tony Blair writes in his memoir, A Journey of My Political Life, an important contributor to the financial crisis was a failure “of understanding. We didn’t spot it...it wasn’t that we were powerless to prevent it even if we had seen it coming; it wasn’t a failure of regulation in the sense that we lacked the power to intervene. Had regulators said to the leaders that a huge crisis was about to break, we wouldn’t have said: There’s nothing we can do about it until we get more regulation through. We would have acted. But they didn’t say that.”

ACCOUNTING’S ROLE IN THE FRAUD

96. The governing documents for the MBS Trusts specify distinct rules (the PSA) for

loans in default and how they are to be removed or traded out. Non-performing loans are not

supposed to remain in the trust. According to the PSA, the original “Lender” is required to

repurchase the loan in the event of a default, but the Conspirators ignored those requirements and

instead hastily began the foreclosure process to avoid repurchasing said loans which is the reason

the Conspirator banks rarely modify mortgage loans. 

97. Moreover, if the Servicer wrote the loan off its books, it would be in conflict with

the PSA if it remained in the trust.  A charge-off is simply an accounting device required by

accounting rules when the loan is in default. Therefore, even though a note is charged off, it is

still owned by the Trust.  The charge off allows the trust to be granted a tax write off, nothing

more, but the Trust still owns the note. 

DECEIVING THE IRS

98. Most Trusts were set up as REMICs (Real Estate Mortgage Investment Conduits)

which were created in 1987 as a tax avoidance by the Conspirators Investment Banks. The

REMIC is referred to in the world of finance as an SPV (Special Purpose Vehicle). To avoid

taxation by the IRS, an MBS REMIC cannot engage in any prohibited action.

99. The Trustee for the Trust has sworn under oath with the Securities and Exchange

Commission (“SEC,”) and the Internal Revenue Service (“IRS,”) that as a mortgage asset “pass

through” entity, it cannot own the mortgage loan assets in the MBS. This allows the Trust to

qualify as a REMIC as opposed to a Real Estate Investment Trust (“REIT”). As long as the MBS

is a qualified REMIC, no income tax will be charged to the trust.

100. Although the Trust may be registered with the Securities and Exchange

Commission (“SEC”) and the Internal Revenue Service (“IRS”) as a Real Estate Mortgage

Investment Conduit (“REMIC”), the Conspirators intentionally failed to properly register the

Trust in any state of the union as a Corporation, Business Trust, or any other type of corporate

entity. Therefore, the REMIC does not legally exist and as such, cannot file a law suit in Illinois

or in any other State.

101. Moreover, if the Servicer were to have a financial stake in the mortgage loan, the

MBS would lose its REMIC pass-through tax status.

102. The Mortgage loan was not conveyed into the Trust under the requirements of a

standard REMIC prospectus (all prospectuses are similar in order to qualify for REMIC status),

or the REMIC requirements of the IRS:

ARTICLE II - Conveyance Of Mortgage Loans; Representations And Warranties Section 2.01.  Conveyance of Mortgage Loans:

 (a)    Each Seller concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Depositor, without recourse, all its respective right, title and interest in and to the related Initial Mortgage Loans, including all interest and principal received or receivable

by such Seller, on or with respect to the applicable Initial Mortgage Loans after the Initial Cut-off Date and all interest and principal payments on the related Initial Mortgage Loans received prior to the Initial Cut-off Date in respect of installments of interest and principal due thereafter, but not including payments of principal and interest due and payable on such Initial Mortgage Loans, on or before the Initial Cut-off Date.  

(b)    Immediately upon the conveyance of the Initial Mortgage Loans referred to in clause (a), the Depositor sells, transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor in and to the Trust Fund together with the Depositor’s right to require each Seller to cure any breach of a representation or warranty made herein by such Seller, or to repurchase or substitute for any affected Mortgage Loan in accordance herewith.

103. In order to keep its tax status, fund the Trust and legally collect money from

investors who bought into the REMIC, the Trustee of the REMIC must also have possession of

all the original blue ink Promissory Notes, original allonges and assignments of the Notes,

showing a complete paper chain of title. However, the Conspirators did not bother to properly set

up or register the Trust as a Trust, nor did even deliver the Notes to the Trust, so they were never

properly recorded nor assigned. The MBS’s were simply a cover for the Conspirators theft of

Trillions of dollars from multiple sources all designed to collapse the economy.

CHRONOLOGY OF THE ECONOMIC CRASH

BURSTING THE BUBBLE AND THE ENSUING DOMINO-EFFECT

104. According to the January 2011 Financial Crisis Inquiry Commission (“FCIC”)

Report on Page 65, the Conspirator-owned banks were grossly over-leveraged, guaranteeing that

in the event of a market “correction” i.e. massive mortgage defaults, the banks would be

incapable of absorbing the downturn and would be bankrupted:

“From 2000 to 2007 large banks and thrifts generally had $16 to $22 in assets for each dollar of capital, for leverage ratios between 16:1 and 22:1. For some banks, leverage remained roughly constant. JP Morgan’s reported leverage was between 20:1 and 22:1. Wells Fargo’s generally ranged between 16:1 and 17:1. Other banks upped their leverage. Bank of America’s rose from 18:1 in 2000 to 27:1 in 2007. Citigroup’s increased from 18:1 to 22:1, then shot up to 32:1 by the end of 2007, when Citi brought off-balance sheet assets onto the balance sheet. More than other banks, Citigroup held assets off of its balance sheet, in part to hold down capital requirements. In 2007, even after bringing $80 billion worth of assets on balance sheet, substantial assets remained off. If those had been

included, leverage in 2007 would have been 48:1, or about 53% higher. In comparison, at Wells Fargo and Bank of America, including off-balance-sheet assets would have raised the 2007 leverage ratios 17% and 28% respectively.78

105. 4-28-2004: The SEC votes unanimously to permit the largest broker-dealers (i.e.,

those with "tentative net capital" of more than $5 billion i.e., those in on the Conspiracy: Bear

Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley) to increase

dramatically the ratio of their debt or assets to their equity which was validated by the January

2011 Financial Crisis Inquiry Commission (“FCIC”) Report on Page 114:

“When the Financial Accounting Standards Board, the private group that establishes standards for financial reports, responded to the Enron scandal by making it harder for companies to get off-balance-sheet treatment for these programs, the favorable capital rules were in jeopardy. The asset-backed commercial paper market stalled. Banks protested that their programs differed from the practices at Enron and should be excluded from the new standards. In 2003, bank regulators responded by proposing to let banks remove these assets from their balance sheets when calculating regulatory capital. However, after strong pushback—the American Securitization Forum, an industry association, called that charge “arbitrary,” and State Street Bank complained it was “too conservative”79—regulators in 2004 announced a final rule setting the charge at up to .08%, or half the amount of the first proposal. Growth in this market resumed. Since 2008, many commentators on the financial crisis of 2007-2009 have identified the 2004 rule change as an important cause of the crisis on the basis it permitted certain large investment banks (i.e., Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley) to increase dramatically their leverage (i.e., the ratio of their debt or assets to their equity).[7]

106. 6-2004: The Conspirators began to burst the bubble by raising interest rates 14

times from 2004 to 2006. As anticipated, when the ‘teaser’ low-rate interest rates used to induce

mostly sub-prime borrowers to take out adjustable rate mortgages began to reset to the new

higher payments, oftentimes 4 times the amount of the initial payments, these borrowers began to

default en masse.

107. The defaults triggered a domino-effect: the Wall Street investment banks’ hedge

funds held large portfolios of sub-prime MBS’s. Bear Stearns, the smallest bank on Wall Street,

had massively overly-leveraged their MBS’s despite warnings from many astute traders which

were ignored.

108. 7-21-2005: Economist Michael Lombardi, who holds an MBA in International

Finance, wrote an article entitled “CRITICAL WARNING NUMBER 6”:

“The U.S. lowered interest rates in 2004 to their lowest level in 46 years. And what did Americans do with their access to easy money? They invested in real estate. Looking ahead, perhaps the Fed’s actions (of 2004) will one day be regarded as one of the most costly errors committed by it or any other banking system in the last 75 years.”

109. 11-2006 through 2-2007: WAMU internal documents show that executives started

to see rising delinquency and default rates in its mortgage loans, particularly among Option

ARM loans, and made a deliberate decision at the highest levels to “off-load” these loans

through securitization and sale to investors.

110. At all times as the Conspiracy unfolded, Conspirators Bernacke and Paulson

downplayed the effect of the events so as not to reveal their scheme prematurely.

111. 3-28-07 – Ben Bernanke: “At this juncture . . . the impact on the broader economy

and financial markets of the problems in the subprime markets seems likely to be contained.”

112. 4-20-07 – Paulson: “I don’t see subprime mortgage market troubles imposing a

serious problem. I think it’s going to be largely contained.  All the signs I look at show the

housing market is at or near the bottom.”

113. 6-20-07 – Bernanke: (the subprime fallout) “will not affect the economy overall.”

114. 6-2007- Bear Stearns bailed out two of its hedge funds for $3.2 billion which had

invested heavily in subprime mortgages. By July, both of these funds had little to no value and

filed for bankruptcy. Although Chinese lender Citic tried to rescue Bear Stearns by paying $1

billion for a 6 percent stake in the firm, this gesture did not help as it was not a part of the

Conspirators scheme.

115. 7-12-07 – Paulson: “This is far and away the strongest global economy I’ve seen

in my business lifetime.”

116. 8-3-07 - The secondary MBS market stopped trading most non-conforming

securities as difficulties began surfacing in AAA-rated MBS securities.

117. 8-6-2007 - American Home Mortgage collapsed when Countrywide Financial

Corporation intentionally disclosed to the Securities and Exchange Commission that “these

disruptions in the secondary market could hurt Countrywide.”

118. 8-10-2007 – As anticipated by the Conspirators, a run on investment banks began

as the secondary MBS markets shut down, which, in turn, curtailed new mortgage funding.

119. 8-2007 – The perceived risk regarding Countrywide MBS bonds rose. Credit

rating agencies downgraded Countrywide bonds 1-2 grades, some near ‘junk’ status causing the

cost to insure bonds to rise 22% overnight. Bankruptcy rumors began.

120. 8-2007 - Fifty mortgage lenders filed for Chapter 11 bankruptcy. Countrywide

was then cited as a bankruptcy risk by Merrill-Lynch which advised clients to sell Countrywide

stock.

121. 8-16-07 – The secondary market for MBS’s declined further causing Countrywide

to draw $11.5 billion from 40 banks, including Chase.

122. 8-17-07 – The Fed, with its ability to print money out of thin air, accepted $17.2

billion in re-purchase agreements for MBS’s to aid in liquidity thereby calming Wall St. To the

unsuspecting public, this action, along with a host of others, provided plausible deniability on

behalf of the Conspirators.

123. 8-20-2007 – Incredulously, the Fed waived banking regulations for Citigroup and

BAC and agreed to exempt them from rules which limited the amount federally insured banks

are able to lend to related brokerage companies down to only 10% of the bank’s capital. Until

that time, regulations stated that banks with federally insured deposits should not be put at risk

by brokerage subsidiaries activities.

124. 8-23-07 – CITI, BAC and 2 other banks received $500 million in 30 day loans

from the Fed. Countrywide obtained $2 billion from BAC in exchange for stock.

125. 10-15-07 – Bernanke: “It is not the responsibility of the Federal Reserve – nor

would it be appropriate – to protect lenders and investors from the consequences of their

financial decisions.”  (That was the last time we heard from Bernanke on this subject until

February of 2008.)

126. 10-17-07 - (MarketWatch) - The SEC opened an investigation into stock sales

made by the chief executive of mortgage lender Countrywide Financial Corp., Angelo Mozilo,

who sold at least $130.6 million in Countrywide stock in the first half of 2007 while

simultaneously telling investors what a great deal Countrywide stock was. Since 1984, when

Countrywide was listed on the NYSE, Mozilo sold $406 million worth of its stock, mostly

obtained through stock option grants. $129 million of this was realized in the 12 months ending

August 2007. Gretchen Morgenson (2007-08-29). "Inside the Countrywide Lending Spree". New York Times.

127. 11-26-07 - Countrywide stock plummeted to $8.64 per share, falling 90 percent

and wiping out $20 billion in market value.

128. 12-2007 - Bear Stearns’s “death knell” was uttered when it posted a fourth-quarter

loss of $854 million which added even more momentum to the intended panic.

129. 1-11-08 - BAC offered $5.50 per share for Countrywide stock and purchased

Countrywide Financial for $4 billion in an all stock transaction. BAC knew there would be

lawsuits but stated publicly that they had weighed “Short term pain v. Good deal” for BAC

stockholders.

130. 2-28-08 – Paulson: “I’m seeing a series of ideas suggested involving major

government intervention in the housing market, and these things are usually presented or sold as

a way of helping homeowners stay in their homes. Then when you look at them more carefully

what they really amount to is a bailout for financial institutions or Wall Street.”

131. 2-29-08 – Bernanke: “I expect there will be some failures. I don’t anticipate any

serious problems of that sort among the large internationally active banks that make up a very

substantial part of our banking system.”

132. 3-11-08 – In a brazen emboldened move, an undisclosed inside ‘investor’ on Wall

Street placed a bet for $1.7 Million dollars that Bear Stearns would lose more than one half its

value in 9 days or less! Someone was clearly assisting in pushing Bear off the cliff and

astonishingly, the bet paid.

133. 3-2008 - Federal Reserve chairman, Ben Bernanke, stated that if Bear Stearns

were to fail, the entire U.S. financial system would be threatened. He then orchestrated a deal

between JP Morgan, backed by the Federal Reserve Bank of New York, to buy the firm for a

scant $2 a share.

134. 3-16-08 – Paulson: “We’ve got strong financial institutions . . . Our markets are

the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move

very quickly to address situations in this country, and, as I said, our financial institutions are

strong.”

135. 4-2008 - The scope of Bear’s investment in subprime and other “toxic” assets was

revealed. Although the Conspirators believed the public and the judiciary would not be capable

of understanding their highly-complex scheme, they were wrong. In a Securities lawsuit against

Bear, a very astute Judge rejected Bear’s defense that the suit was a “classic fraud by hindsight

case” alleging “that Bear did not predict the impact of the subprime mortgage crisis.” He

identified misconduct by Bear’s senior officers and directors that was integral to Bear’s decline,

and found that the “competing inference of market implosion had not been demonstrated to

overcome the strong inference of scienter developed by Plaintiffs.” That intentional misconduct

included the inflation of asset values, the overestimation of Bear’s risk management protocols,

the understatement of losses, and the misleading denial of a liquidity crisis. The judge also

allowed securities fraud claims against accounting firm Deloitte based on the allegation that

Deloitte’s audits of Bear “were so deficient that the audit[s] amounted to no audit at all.” The

opinion includes the Court’s acerbic observation that although Deloitte certified Bear’s financials

in 2006 and 2007 without discovering Bear’s true financial condition, “JP Morgan discovered in

the course of one weekend the overvaluation of assets and underestimation of risk exposure in

Bear Stearns' financial statements.”

136. 5-7- 2008 – Paulson: ‘The worst is likely to be behind us,”

137. 5-16-2008 – Paulson: “In my judgment, we are closer to the end of the market

turmoil than the beginning.”

138. 6-2008 – Insider Angelo Mozilo, Countrywide CEO’s “Friends of Angelo” fraud

exposed that he made mortgages to members of Congress at much lower rates than to the public.

139. 6-25-2008 – After numerous complaints from consumers, and class action

lawsuits filed by MBS investors, Attorneys General from all 50 states began to conduct

investigations into abuses by Countrywide Home Loans and after corroborating the violations,

filed lawsuits against Countrywide alleging fraud.

140. 7-1-08 – BAC’s purchase of Countrywide was final.

141. 7-11-08 - Federal regulators seized Countrywide spin-off Indy Mac Bank.

142. 7-16- 2008 – Bernanke: (Conspirator-owned Freddie and Fannie) “…will make it

through the storm,” “… in no danger of failing.  … they are adequately capitalized.”

143. 7-20-2008 – Paulson: “It’s a safe banking system, a sound banking system. Our

regulators are on top of it. This is a very manageable situation.”

144. 8-10-2008 – Paulson: “We have no plans to insert money into either of those two

institutions.” (Fannie Mae and Freddie Mac)

145. 9-8-2008 – Less than 30 days later, Fannie and Freddie are nationalized and

taxpayers are on the hook for an estimated $1 - $1.5 trillion dollars with more than $5 trillion

added to the nation’s debt.

146. 9-9-2008 – Bernanke: “Despite a recent spike in the nation’s unemployment rate,

the danger that the economy has fallen into a “substantial downturn” appears to have waned.”

147. 9-2008 - Ben Bernanke, Tim Geithner, president of the New York Federal

Reserve, and Hank Paulson, Treasury secretary, in Oscar-winning performances, “suddenly”

recognized that the country was on the brink of a catastrophe. The collapse of Bear Stearns could

trigger a financial meltdown, so the Fed took dramatic sweeping action. The New York Times

fell for this ruse commenting that without the Fed’s action, the Bear Stearns crisis "could have

potentially triggered a collapse of the financial system". Mortgage-backed securities with $45

Trillion in credit default swaps bet that the MBS’s would default.

148. 9-15-08 - The Office of Thrift Supervision (OTS) closed WAMU because it was in

an “unsafe and unsound condition to conduct business.” OTS then appointed the Federal Deposit

Insurance Corporation (FDIC) as receiver the same day.

149. 9-15-2008 – New York Times: WASHINGTON MUTUAL GOES BANKRUPT:

Government Seizes WAMU and Sells Some Assets: By Eric Dash and Andrew Ross Sorkin:

“Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history. Regulators brokered an emergency sale of Washington Mutual, the nation’s largest savings and loan with $307 billion in assets, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution. Chase...will create a nationwide retail franchise that rivals only Bank of America. Sheila C. Bair, the chairwoman of the F.D.I.C., said: “It [WAMU] was unique in its size and exposure to higher risk mortgages and the distressed housing market.” As panic gripped financial markets after the collapse of Lehman Brothers, WAMU customers started withdrawing their deposits. The government then solicited formal written bids and regulators notified James Dimon, chairman and chief executive of JPMorgan Chase, that he was the likely winner. The seizure and the deal with JPMorgan came as a “shock” (emphasis by author) to Washington Mutual’s board: the company’s new chief executive, Alan H. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates. While Lehman Brothers and Washington Mutual were allowed to collapse, the government took emergency measures to stabilize Goldman Sachs, Morgan Stanley and AIG, the American International Group, the insurance giant. Washington Mutual reaped big profits quarter after quarter ... catering to lower- and middle-class consumers that other banks deemed too risky. It offered complex mortgages and credit cards whose terms made it easy for the least creditworthy borrowers to get financing. But when the housing market began to crumble...the bank tried to hedge its mortgage bets — but ...that was not enough to deflate ballooning losses on mortgage loans, nor defuse ticking time bombs like interest-only and pay-option amortization products that had reeled in bottom-grade borrowers....

150. 9-15-08 - To provide plausible deniability, the Conspirators decided that there

must be a few ‘sacrificial lambs’ in the form of bank failures and bankruptcies, for when the

public witnessed the repercussions of those failures, We, the People would believe that if more

banks failed, the economy would then fail. This strategy ensured that the remaining banks would

be rescued by the American taxpayer. Moreover, unless they were bailed out within a few days

with no debate on Congress’s part, they would undoubtedly bring down the entire economy!

151. 9-15-2008 - LEHMAN BROTHERS GOES BANKRUPT:

WIKIPEDIA: “Lehman Brothers had borrowed significant amounts to fund its investing in the years leading to its bankruptcy in 2008, a process known as leveraging or gearing. A significant portion of this investing was in housing-related assets, making it vulnerable to a downturn in that market. One measure of this risk-taking was its leverage ratio, a measure of the ratio of assets to owners equity, which increased from approximately 24:1 in 2003 to 31:1 by 2007. While generating tremendous profits during the boom, this vulnerable position meant that a mere 3-4% decline in the value of its assets would entirely eliminate its book value or equity. Since the deregulation of Glass-Steagall of 1999, investment banks such as Lehman were not subject to the same regulations applied to depository banks to restrict their risk-taking. In 2008, Lehman faced an unprecedented loss due to the continuing subprime mortgage crisis. Lehman's loss was a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages. (*no one purchased lower tranche MBS’s unless they had insured them multiple times with CDS’s) Whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. According to Bloomberg, reports filed with the U.S. Bankruptcy Court, Southern District of New York on September 16 indicated that J.P. Morgan provided Lehman Brothers with a total of $138 billion in "Federal Reserve-backed advances." The cash-advances by JPMorgan Chase were repaid by the Federal Reserve Bank of New York.”

152. After the fall of Lehman, a domino-effect of fear washed over the economy and

more and more MBS Trusts began to default. This panic compelled unsuspecting investors

holding MBS bonds to sell their investments at a loss, thus triggering a ‘depression,’ or

contraction in the money supply.

153. 9-19-2008 – Bernanke: “… most severe financial crisis” in the post-World War II

era. Investment banks are seeing tremendous runs on their cash. Without action, they will fail

soon.”

154. 9-21- 2008 - New York Federal Reserve approves a change in Goldman Sach’s

legal status from that of investment bank to bank holding company, enabling it to qualify for a

government bailout.

155. 9-21-2008 – Paulson: “The credit markets are still very fragile right now and

frozen. We need to deal with this and deal with it quickly.  The financial security of all

Americans … depends on our ability to restore our financial institutions to a sound footing.”

156. 9-23-2008 – Paulson: “We must [enact a program quickly] in order to avoid a

continuing series of financial institution failures and frozen credit markets that threaten

American families’ financial well-being, the viability of businesses, both small and large, and the

very health of our economy.”

157. The Treasury used the bailout to steer funds to stronger banks in order for them

to purchase weaker ones.

158. 6-2009 - The SEC filed civil fraud and insider trading charges against Angelo

Mozilo, the former chief executive of Countrywide who agreed to pay a mere $108 million to

settle federal civil charges that it overcharged customers and failed to disclose Countrywide’s lax

lending standards in a 2006 report.

159. 8-2009: Countrywide agreed to pay $600 million to settle shareholder lawsuits

over its mortgage losses.

160. 6-7-2010 – The evidence mounts daily and a pattern of deceit exhibited by the

Conspirators is being exposed: In a U.S. Dept of Justice press release - Clifford White III stated:

(Justice Department Program Director of the executive office of U.S. Trustees) “Over a two year

period, the US Trustee program worked closely with the FTC to carry out parallel investigations

relating to Countrywide’s improper conduct in serving home loans.” The agreement will

compensate homeowners in bankruptcy that were victimized by Countrywide’s improper

business practices, and will help prevent future harm ...”

161. On December 2, 2010 ALTERNET writer Zach Carter wrote an article entitled,

“The Fed Lied About Wall Street” which exposes the Conspiracy after the Fed audit:

“The data from the Federal Reserve audit is full of frightening revelations about U.S. economic policy and those who implement it. When Wall Street went off the rails in the fall of 2008, policymakers told the public we had a certain kind of problem, knowing all along that the actual nature of the problem was very

different—and far more severe. This was a terribly destructive lie. Had policymakers fully explained the scope of Wall Street’s 2008 troubles, today’s problems with foreclosure fraud would simply not exist. Here’s the basic issue. As Lehman Brothers, AIG and other major financial firms teetered on the verge of collapse, the Fed and the Treasury Department insisted that the trouble on Wall Street was one of “liquidity.” That’s a finance term meaning, “the banks are fine, but everybody is confused.” In retrospect, that view was clearly an error. The bank held hundreds of billions of dollars worth of subprime mortgage assets, which were not merely worthless in the panic-stricken view of the financial mob, but worthless, full stop. At the time many people argued that the financial system faced not a liquidity crisis, but a liquidity crisis and a solvency crisis...They were not merely illiquid, but insolvent.... Nobel Prize-winning economist Paul Krugman’s major concern was that the U.S. would end up with a handful of dominant “zombie banks”—firms which were kept alive by government aid, but which were fundamentally insolvent, and unable to support the economy with productive lending... Not only are today’s major banks unable to support the economy, they are actively sabotaging the middle class with fraudulent foreclosures... And what’s worse, it appears that the Federal Reserve was aware of the solvency problem, even as its top officials publicly insisted that the bailed out banks were fine. To fix a liquidity crisis, the Fed has had a longstanding policy of offering short-term, low interest loans. In exchange for these loans, the Fed demands high-quality collateral. That’s as it should be: if a bank is truly experiencing a liquidity crisis, there is a public interest in keeping it afloat so it can meet its financial obligations. And so in 2007 and 2008, the Fed created several facilities to ease liquidity based on this principle. The trouble is, starting on Sept. 15, 2008—right when Lehman Brothers was going under—the Fed started accepting total garbage as collateral for its loans... According to data released by the Fed yesterday, the central bank accepted $1.32 trillion in collateral rated “junk bond” status or lower, starting Sept. 15, through it Primary Dealer Credit Facility alone. That compares to $8.95 trillion in total loans extended through the Primary Dealer outlet from March 2008 through May 2009. From Sept. 15 onward, the Fed lent out $7.60 trillion through this window alone, meaning that a full 17 percent of its lending from this point was backed by junk bonds, or worse. These total figures are somewhat exaggerated—the facility in question offered overnight loans, and many banks chose to roll-over their loans from one day to the next. Nevertheless, the collateral comparison is apt. ..What does all this mean? The Fed knew it was facing a solvency crisis, even as it publicly insisted that Wall Street was merely dealing with a liquidity issue... By denying the solvency crisis, major bank executives who had run their companies into the ground were allowed to keep their jobs, and shareholders who had placed bad bets on their firms were allowed to collect government largesse, as bloated bonuses began paying out soon after. But the banks themselves still faced a capital shortage, and were only kept above those critical capital thresholds because federal regulators were willing to look the other way, letting banks account for obvious losses as if they were profitable assets. So based on the Fed audit data, it’s hard to conclude that Fed Chairman Ben

Bernanke was telling the truth when he told Congress on March 3, 2009, that there were no zombie banks in the United States. “I don’t think that any major U.S. bank is currently a zombie institution,” Bernanke said. As Bernanke spoke those words banks had been pledging junk bonds as collateral under Fed facilities for several months. From March 4, 2009 through May 12, 2009, when the Fed data stops, only two institutions borrowed money from the Fed’s Primary Dealer window: Bank of America and Citigroup. They borrowed almost every day, pledging junk bonds as collateral... Bernanke either knew this, or should have known it as a major public official. This is the heart of today’s foreclosure fraud crisis. Banks are foreclosing on untold numbers of families who have never missed a payment, because rushing to foreclosure generates lucrative fees for the banks, whatever the costs to families and investors... Not only are zombie banks failing to support the economy, they are actively sabotaging it with fraud in order to make up for their capital shortages. Meanwhile, regulators are aggressively looking the other way. But as major banks went insolvent, the Fed and Treasury had a responsibility to fix that solvency issue—even though that meant requiring shareholders and executives to live up to losses. Instead, as the Fed audit tells us, policymakers knowingly ignored the real problem, pushing losses onto the American middle class in the process.

THE CONSPIRATORS COLLECTED ON THEIR CREDIT DEFAULT-SWAP BETS

162. As Brooksley Born had warned, “derivatives could bring down the economy.”

And indeed her prophetic warnings were true, for the Conspirators had bet heavily that the loans

they designed to default, indeed defaulted. This meant that the Conspirators would be paid

trillions of dollars when the market collapsed.

163. According to the FCIC report as of January 2011: “Goldman Sachs alone

packaged and sold $73 billion in MBS’s from July 1, 2004 to may 31, 2007. These MBS’s

referenced more than 3,400 mortgage securities, with 610 of them referenced at least twice. This

is apart from how many times these securities may have been referenced in synthetic CDO’s

created by other firms. Insider, Larry Summers told the Financial Crisis Investigation

Committee that “derivatives (MBS’S) that proved to be by far the most serious, those associated

with credit default swaps, and increased 100 fold between 2000 and 2008.”

164. “The Rape Continues” according to Martin Andelman on 1-13-2012: “HAMP, the

Home Affordable Modification Program, was to be $75 billion… then reduced to $50 billion…

then reduced to $37 billion.  And reported by the Government Accountability Office GAO, $2.4

billion was spent on HAMP and essentially all of that went to Servicers.

THE TROUBLED ASSET RELIEF PROGRAM – “TARP”

165. The $700 Billion in TARP (Troubled Assets Relief Program) funds provided to

those “too big to fail” were meant to pay off ‘toxic loans,’ but were instead used primarily to pay

off CDS insurance bets. The so-called ‘toxic’ mortgages made up a small percentage of the

losses as compared to the CDS’s. Because anyone could purchase a swap for example, on a

$200,000 mortgage, the Conspirators were paid sometimes 40-50 times the amount of that

mortgage or $8,000,000.00 on ONE defaulted home loan! TARP paid the bets off to the

Conspirator banks at 100 cents on the dollar - on mortgage loans destined to default.

166. Moreover, rather than costing American taxpayers a mere $700 Billion, according

to former Goldman Sachs analyst Nomi Prins in her book “It Takes a Pillage,” the bailout totaled

$13.3 Trillion! According to MSNBC host Dylan Ratigan, the bailout actually cost $24

TRILLION! Hence, the $700 Billion in TARP funds which had the stated purpose of

compensating the lenders and investors for losses sustained due to the alleged default on

residential mortgage loans which rendered said loans paid-in-full, was paid to the Conspirators.

FRAUD, FRAUD, AND MORE FRAUD EXPOSED BY NUMEROUS GOVERNMENTAL INSTITUTIONS

167. The pattern of deceit displayed by the Conspirators is becoming blindingly

conspicuous as ongoing investigations and litigation filed by the FHFA against 17 large banks,

lawsuits filed by all 50 states attorneys general, lawsuits filed by the FBI, SEC, FDIC, FCIC, and

numerous lawsuits filed by MBS Holders prove, beyond a shadow of doubt, that Conspirators at

the largest banks, Wall Street and the Fed, engaged in a massive scheme replete with flagrant

fraud, brazen violations of the law and other criminal activities which, after examining the

evidence, indicate that this economic crash was indeed an Inside Job. Moreover, the thousands of

pending lawsuits provide yet another avenue for the collapse the banks, and then the economy, a

fact the Conspirators are well aware of in their multi-pronged attack which provides them

plausible deniability.

168. 3-2012: It appears that the Conspirators have succeeded with their complete and

utter collapse of the American economy according to Economist Michael Lombardi in an article

he wrote entitled “CRITICAL WARNING NUMBER 6”:

“The U.S. is technically bankrupt”: Our budget deficit this year will be $1.3 trillion. Our official national debt exceeds $15 trillion and in the summer 2011 our debt increased to $16.4 trillion. Our unofficial national debt, when you take into account unfunded liabilities and entitlement to our citizens, is closer to $100 trillion. By the end of this decade, according to the White House’s own prediction, the official national debt will surpass $20.0 trillion—not including off-balance-sheet items like old-age security, Medicare, and other government promises to its citizens. And there’s also hidden government guarantees not on the government books…Fannie Mae and Freddie Mac own or guarantee half the residential mortgages in America; the U.S. government owns both of these companies now “censuring” both Fannie Mae and Freddie Mac on September 7, 2008. In effect, the government either owns or guarantees half the outstanding residential mortgages in this country. According to data compiler CoreLogic Inc., some five million home mortgages in the U.S. were either in the foreclosure process or delinquent last month, exposing our government to even more losses by the end of this decade, our national debt will be about 150% of our GDP— Today, Over 44 million people in this country are using some form of food stamps! (Source: National Inflation Association) Since 2008 the U.S. national debt has increased by about $5 trillion dollars—50%. At the same time, the Federal Reserve has increased the size of its balance sheet by $2 trillion. In the end, the U.S. dollar will collapse under a mountain of unsustainable debt. The government is over-extended—if it was a business, it would be bankrupt right now. The Federal Reserve has kept the economy alive the past three years by keeping its printing presses running overtime. The Fed can’t lower interest rates below the zero they are at today. The more money the Fed prints, the greater the risk of inflation, and higher long-term interest rates will stifle the economy. The devaluation of the U.S. dollar that started in early 2009 will accelerate as the U.S. economy deteriorates. 70% of world central banks have adopted the U.S. dollar as their official reserve currency. As the value of the greenback erodes under a mountain of debt and coming rapid inflation, courtesy of too many dollars in the financial system (thank you, Federal Reserve), foreigners will be dumping dollars and moving away from a system where the greenback is the official reserve currency. Thanks to years of monetary policies that promoted artificially low interest rates and printing presses churning out dollars in overtime mode, hyperinflation and American sovereign debt issues will become the biggest obstacles for the United States for the remainder of this decade and well into the next decade.

TESTIMONY FROM BANK EMPLOYEES REVEALS HOW THE CONSPIRATORS DUPED INVESTORS WITH LOANS WHICH WERE ‘DESIGNED TO DEFAULT’

169. The following testimony garnered from Bank employees is taken from lawsuits

filed by Investors of MBS’s, institutions which invested Billions in MBS’s. As you will discover,

numerous confidential witnesses confirm that Countrywide loosened and abandoned its

underwriting standards. Many of the same confidential witness accounts by former Countrywide

employees are featured in the shareholders derivative complaint - In re Countrywide Fin. Corp.

Deriv. Litig., Lead Case No. 07-CV-06293 (C.D. Cal. 2007). In denying Countrywide's motion

to dismiss the derivative complaint, the court held that the "numerous confidential witnesses"-

whose accounts are detailed herein:

"support a strong inference of a Company-wide culture that, at every level, emphasized increased loan origination volume in derogation of underwriting standards." In drawing this inference, the court noted that the allegations of misconduct came from Countrywide employees (i) located throughout the United States; (ii) in varying levels of the Countrywide hierarchy (including underwriters, senior underwriters, senior loan officers, vice presidents, auditors, and external consultants); and (iii) employed at varying times. In the court's words, these witnesses “tell what is essentially the same story- a rampant disregard for underwriting standards - from markedly different angles.”

According to Confidential Witness 1 (“CW1”), an underwriter for Countrywide in the Jacksonville, Florida processing center between June 2006 and April 2007, as much as 80% of the loans originated at Countrywide involved significant variations from the underwriting standards that necessitated a sign-off by management. According to CW1, Countrywide was very lax when it came to underwriting guidelines. Management pressured underwriters to approve loans and this came from “up top” because management was paid, based at least in part, on the volume of loans originated. CW1’s manager directed CW1 to approve as many loans as possible and push loans through. According to CW1, most loans declined by underwriters would “come back to life” when new information would “miraculously appear” – which indicated to CW1 that Countrywide was not enforcing its underwriting standards.

According to Confidential Witness 2 ("CW2"), a senior underwriter in Roseville, California from September, 2002 to September, 2006, Countrywide would regularly label loans as "prime" even if made to unqualified borrowers (including those who had recently gone through a bankruptcy and were still having credit problems). According to CW2, Countrywide's lending practices got riskier in 2006 and the Company was more lax in enforcing its underwriting policies during that year.

According to Confidential Witness 5 ("CW5"), a former senior underwriter at Countrywide in Independence, Ohio, between August 2006 and April 2007, the Company's "philosophy was that you didn't turn down loans." According to CW5, the Company "did whatever they had to do to close loans" including making exceptions to underwriting guidelines - everyone was motivated to increase loan volume and "approv[e] things that should not have been approved."

According to Confidential Witness 14 ("CW14"), a former underwriter at Countrywide in Charlotte, North Carolina between 1997 and 2007, there was "a lot of pressure" on underwriters to approve a high volume of loans in order to keep their job. Underwriters were held to a quota of at least eight files a day - preferably ten - and supervisors preferred more. The Regional VP told underwriters that "as long as you get a CLUES Accept" they should approve the loan, and "if you don't do some bad loans, you're not doing your job." There were incentives at Countrywide to approve as many loans as possible regardless of quality, the primary incentive being "keeping your job." In fact, CW14 stated that s/he was ultimately let go for not approving enough loans.

According to Confidential Witness 13 ("CW13"), a former underwriter at Countrywide's Full Spectrum Lending Division from October 2005 until 2007, the underwriting practices at Countrywide were "pretty much 'anything goes'" and "there's nothing we wouldn't do." CW13 worked as part of a team of eight or nine underwriters at a branch office in Chandler, Arizona. According to CW13, quality restrictions did not slow down this team. And while a quality review group was supposed to evaluate the loans, originators worked on a bonus system where negative quality ratings meant a deduction of bonus points – and negative ratings were "few and far between."

Indeed, according to CW10, it was "evident" that one of Countrywide's goals was to be able to fund any loan. Senior management didn't want to have to turn down any loan application because it wanted to grow market share. According to CW10, loans that did not meet Countrywide's underwriting standards were approved and funded routinely. CW10 added that senior management's philosophy was that if the risks associated with a particular loan were simply ''priced right," Countrywide should be able to fund any loan.

170. The Illinois Attorney General Complaint against Countrywide alleges that

Countrywide employees did not properly ascertain whether a potential borrower could afford the

offered loan, and many of Countrywide's stated income loans were based on inflated estimates of

borrowers' income. For example, according to the Illinois Attorney General Complaint:

“(i) a Countrywide employee estimated that approximately 90% of all reduced documentation loans sold out of a Chicago office had inflated incomes; and (ii)

one of Countrywide's mortgage brokers, One Source Mortgage Inc., routinely doubled the amount of the potential borrower's income on stated income mortgage applications.”

171. The following article by Jeffrey R. McCord of The Investor Advocate on July 25,

2011 details Washington Mutual’s (WAMU) blatant violations of standard operating procedures:

“Private Investor Action Contributed Significantly To Investigations By FDIC, U.S. Senate And U.S. Attorney’s Office To Achieve $208.5 Million Settlement, Plaintiffs Pierced Legal Shields Protecting Financial Meltdown Perpetrators”: “We did a lot of underhanded stuff,” Confidential Witness Number 66, a former officer with Washington Mutual Bank (WAMU), told private attorneys representing ripped-off investors.  “It’s not what’s best for the client, it’s what’s best for the Company [WAMU],” added another Confidential Witness (Number 8 of 89 confidential and more than 400 other “percipient” witnesses interviewed by plaintiffs’ attorneys). In fact, the securities fraud class action complaint confirms that many WAMU executives thought nothing of their clients – neither the unqualified, small wage earners who were bamboozled into signing onto “option adjustable rate mortgages” that the lending officers didn’t even understand, nor the investors who ultimately bought toxic securities backed by such mortgages that WAMU execs knew would end in default.  Confidential Witness 47, for instance, who worked at WAMU from 1997 to February 2008 and served as a Credit Quality Manager, recalled a 2003 conversation with WaMu’s former Retail and Home Loans Chief Credit Officer, in which the chief predicted that within five years, 85 percent of WaMu’s Option Adjustable Rate Mortgage borrowers would not be able to afford their mortgages. The bank had a portfolio of option Arms worth at least $53 billion from 2005-2008, according to the complaint. The consolidated class action lawsuit that defendants agreed to settle in the United States District Court for the Western District of Washington on July 1 accused WaMu’s senior executives and directors of concealing from investors poor real estate loan underwriting, including grossly inflated property appraisals, that enabled overstatement of earnings and inflation of the company’s stock price.  The lawsuit also alleges that the bank’s professional advisors failed to ensure that the truth about the bank’s practices was revealed to investors before the housing market crash.  The defendant WAMU executives and directors, investment banks and Deloitte & Touche agreed to settle the investors’ claims for $208.5 million, including $85 million to be recovered for investors from the investment banks and $18.5 million from Deloitte. The three offerings of Washington Mutual Inc. securities cited in the complaint were allegedly backed by certified financial statements that were false and misleading.  The last such offering sold by Goldman Sachs and other investment banks in December, 2007 that raised $3 billion (for which Goldman Sachs and Morgan Stanley were paid nearly $40 million), was distributed just months before Washington Mutual Inc. would become the biggest bank to go belly-up in American history.

172. In an October 13, 2008 ABC Nightline story by Pierre Thomas & Lauren Pearle

it was stated:

WaMu Insiders Claim Execs Ignored Warnings, Encouraged Reckless Lending With Americans reeling from a global financial crisis, dozens of former Washington Mutual insiders have come forward to expose what they claim were calamitous executive decisions that led to the biggest bank failure in U.S. history. These former WaMu employees, 89 of them who worked throughout the company and around the country, described a bank eager to profit from a housing boom and lending frenzy that seemed to have contributed to the credit crunch and housing bust now plaguing the economy. Some of them spoke to ABC News, all of them are confidential witnesses in a recently filed shareholder class action lawsuit against WaMu. In court documents, the insiders said the company's risk managers, the "gatekeepers" who were supposed to protect the bank from taking undue risks, were ignored, marginalized and in some cases, fired. At the same time, some of the bank's lenders and underwriters who sold mortgages directly to home owners said they felt pressure to sell as many loans as possible and push risky but lucrative loans onto all borrowers, according to insiders who spoke to ABC News. And this is "only the tip of the iceberg," a former high-level executive claimed in the lawsuit. Dale George, a former WaMu senior risk manager who spoke exclusively to ABC News, explained that risk managers are like the brakes on a car. WaMu executives "took the brakes off and drove over a cliff," he said. George described how he said senior management willfully ignored warnings from its own "gatekeeper," the bank's risk management group. He and other company insiders claimed that risk managers were brushed aside while the business units adopted a strategy of dangerous and reckless lending that eventually took down the company. George, an MBA with three decades of experience in banking and risk management, said that the WaMu he joined in 2003, "was all about good old-fashioned banking." He described a company with a rigorous risk management program and sensible loan production. It was a bank he said he was proud to work at. But as the housing bubble swelled and high-risk mortgage lending became more lucrative, the bank changed, according to George. WaMu began approving as many loans as it could. "Everything was refocused on loan volume, loan volume, loan volume," he told ABC News. And to further boost profit, WaMu increased its share of higher-risk subprime and option adjustable rate loans, known as "option arms," said George. These loans offer low introductory rates and let borrowers defer interest payments, but can strap them with significantly higher interest rates and payments in the future. George said WaMu was competing with subprime giant Countrywide, which also imploded. "They were in a neck-and-neck race." and "both went off the cliff together, one after the other," he said. This high-risk, high-return game turned a century-old traditional bank that made steady but modest returns into "just an arm of Wall Street," said George.

173. In two Bloomberg articles, the first entitled SENATE PANEL RELEASES

REPORT DETAILING CAUSES OF WAMU FAILURE stated the following:

On April 12, 2011, a Senate panel released a lengthy report detailing the causes of the collapse of WaMu.  More than 600 pages in length, the report is based on testimony and documents from WaMu executives and the regulators charged with overseeing the bank.  According to the Senate panel, the Office of Thrift Supervision (OTC) (WaMu’s primary regulator at the time) identified hundreds of failings within the bank.  In addition, the OTC was found to impede the FDIC from ordering corrective action to help the bank. 

According to the report, WaMu rewarded bankers for overcharging customers on subprime mortgages and selling subprime loans to investors.  Top loan officers were given free trips to tropical locales in return for increased mortgage origination, despite the fact that WaMu’s loans were quickly deteriorating.  According to one quality-assurance officer in California, when she tried to stop approval of loans that were not up to the banks stated standards, the loans would often be referred to upper-management and approved anyway.  While many deficiencies within the bank were discovered by the OTC, the Senate report concluded that “it failed to take action to force the bank to improve its lending operations and even impeded oversight by the bank’s backup regulator, the FDIC.” 

WASHINGTON MUTUAL INVESTORS REACH ACCORD IN LENDING LAWSUIT -Bloomberg, April 7, 2011. - Investors in Washington Mutual Inc. (WaMu) reached a tentative settlement in a lawsuit concerning the bank’s lending practices.  The contemplated settlement, which must still be approved by U.S. District Judge Marsha Pechman, is in excess of $200 million.  Judge Pechman, after being advised of the pending settlement, issued an order canceling a trial scheduled for 2012 and suspending other action in the case. The lawsuit consolidated more than 20 cases that alleged the bank encouraged questionable lending practices, artificially inflated home-price appraisals, made misleading statements about its financial condition and failed to disclose its deteriorating financial condition when the loans began to fail.  Furthermore, the suit alleges that WaMu’s auditor, Deloitte & Touche, failed to audit WaMu properly and that underwriters who prepared stock offerings did not accurately disclose the company's true condition and risky business practices. WaMu, a Seattle-based bank that had $307 billion in assets at the time of its collapse in September 2008, was sold for $1.9 billion to JPMorgan Chase & Co. in a deal brokered by the Federal Deposit Insurance Corporation (FDIC).  WaMu was the largest bank in U.S. history to fail, with more than 2,200 branches and $188 billion in deposits.  

174. In a lawsuit filed in 2009 by Mortgage-Backed Securities Holders in Seattle

against WAMU in re Washington Mutual, Inc. Securities, Case No. 2:08-md-1919 MJP 12

Derivative & ERISA Litigation it was stated:

“Plaintiffs’ Complaint is preceded by general background allegations concerning four types of allegedly improper activity during the Class Period: (1) deliberate and secret efforts to decrease the efficacy of WaMu’s risk management policies (¶¶ 103-125); (2) corruption of WaMu’s appraisal process (¶¶ 126-306); (3) abandonment of appropriate underwriting standards for WaMu loans (¶¶ 307-420); and (4) misrepresentation of financial results (¶¶ 421-481).These allegations concern WaMu’s home lending business, the “driving force” of WaMu’s operations. (¶ 59.) Once issued to borrowers, WaMu’s home loans were either sold to third parties or maintained in WaMu’s investment portfolios as Company assets. (¶ 62.) WaMu was required to maintain, report, and periodically adjust a reserve amount for

probable losses resulting from these loans (the “Allowance for Loan and Lease Losses” or “Allowance”). (¶ 63.)Plaintiffs describe a secret effort to decrease the effectiveness of WaMu’s risk management group during the Class Period by relegating the group to a “customer service” role. (¶ 103.) Without effective policies for regulation, WaMu’s risk management teams were unable to prevent the practice of irresponsible, volume-driven home lending and failed to function as an independent check against credit risk, allowing the Company to engage in improper underwriting practices and appraisal corruption. (¶¶ 105-125.)Plaintiffs allege that WaMu improperly pressured appraisers and used only hand-picked and pre-approved appraisers to ensure inflated appraisal values for their home loans. (¶¶ 126-28, 167-218, 154-164.) Inflated appraisals allowed WaMu to originate loans that had artificially low loan-to-value (“LTV”) ratios, creating the illusion of lower credit risk. (¶ 127.) The Company publicly presented its low LTV ratios as an example of its protection against potential loss even as it under-reserved for loan losses on the basis of those ratios. (¶¶ 127-31.)

Concurrent with the appraisal inflation, WaMu loosened its underwriting standards in an effort to increase the volume of its lending operations and profit margins. (¶¶ 65-68, 307-08.) These less-restrictive standards, resulting in increased credit risk, were applied to WaMu’s prime and subprime lending practices. (¶¶ 312-15.) Confidential witnesses from different levels and locations of the Company corroborate the use of deficient standards and underwriting practices, such as granting loans to borrowers with low Fair Isaac Credit Organization (“FICO”) credit scores, failing to request documentation or other verification of a borrower’s stated income, and underwriting adjustable rate mortgages (“ARMs”) at an introductory “teaser” rate instead of the fully-indexed rate. (¶¶ 324-375.) In particular, WaMu’s Option ARM loan, classified by WaMu as a prime loan, has a variable interest rate that is periodically adjusted over the term of the loan; when underwritten improperly, the Option ARM presents a high credit risk because of the potential for negative amortization and default. (¶¶ 74-78.) Plaintiffs also allege that WaMu’s underwriting standards for its subprime lending became nearly nonexistent as underwriters consistently allowed exceptions to increasingly permissive standards. (¶¶ 376-411.) WaMu actively encouraged high-risk lending by compensating loan originators for loan volume without regard to quality. (¶¶ 83-102.) Generally accepted accounting principles (“GAAP”) and SEC regulations required WaMu to “increase the Company’s provisioning for its Allowance in a manner commensurate with the decreasing quality of [its] home mortgage products.” (¶ 444.) Instead, Plaintiffs allege that WaMu under-reserved for its credit risk, thereby concealing its true financial state in violation of GAAP and SEC regulations. (¶¶ 421-58.) Plaintiffs allege that WaMu’s Loan Performance Risk Model (“LPRM”), used to determine provisions for the Allowance, did not take into account important credit risks, such as the potential for negative amortization posed by WaMu’s Option ARM loans and the increased credit risk inherent in WaMu’s less-restrictive underwriting standards and distorted LTV ratios. (¶¶ 456-66.) Because the Allowance was directly linked to WaMu’s net income and earnings per share, WaMu effectively misstated its financial results by under-provisioning the Allowance and reporting artificially inflated net income in each quarter during the Class Period. (¶¶ 467-73.)

WAMU Chief Operating Officer (“COO”) Stephen RotellaThe Complaint first alleges that Rotella falsely assured investors on May 9, 2006 that the Company was monitoring the quality of its loan portfolio through its Enterprise Risk Management group, which gave an “independent view of how [the Company was] doing on credit risk.” (¶ 595 (alteration in original).) Plaintiffs allege that this statement was false because the risk management group had been deprived of its regulatory power and existed only to support WaMu’s lending practices. Relying on Confidential Witness 17 (“CW 17”), a Senior Vice President in Enterprise Risk Management, Plaintiffs allege that in late 2005 WaMu’s risk management group was relegated to an advisory role only and that warnings from risk management were “very much ignored.” (¶ 108.) Plaintiffs also allege that an internal WaMu memorandum dated October 31, 2005 announced that the risk management group was to “occupy a ‘customer service’ type function rather than impose a ‘regulatory burden’ on other Company segments.” (¶ 115.) Plaintiffs also allege that Rotella knew of risk management’s inability to provide effective regulation at the time he made the false statement. In early 2006 after the October 31, 2005 memo had circulated, Confidential Witness 18 (“CW 18”), a Vice President in WaMu’s Commercial Risk Department from April 2003 until June 2006, communicated to Rotella his “serious concerns about WaMu’s increasingly lax and inappropriate risk policies.” (¶¶ 112, 116.) Rotella acknowledged the written communication. (Id.) CW 17 alleges that, during 2006, Risk Reports were distributed weekly to Rotella, and one such report “specifically quantified the fact that the Company was exceeding certain risk parameters as dictated by [WaMu’s] risk guidelines,” which Rotella chose to “simply ignore.” (¶¶ 109-10 (alteration in original).)

CW 18 and Confidential Witness 20 (“CW 20”), a Division Finance Officer and Senior Manager of Internal Controls from 2002 until December 2007, provide additional allegations that Rotella knew the true nature of risk management’s role at WaMu during the Class Period. (¶ 121.) The Complaint alleges that Rotella restructured the credit risk reporting responsibilities such that, as President and COO, Rotella himself “was charged with managing both loan production and risk management,” which “[gave] control over the Company’s profits and for the Company’s risk management to the same person....” (Id.) Second, the Complaint alleges that Rotella made false and misleading statements about WaMu’s underwriting standards. Rotella told investors on April 17, 2007 that “[WaMu] ha[s] ... since the beginning of last year been tightening credit in [our subprime lending].” (¶ 656.)

Plaintiffs allege that this statement is false because, since 2005, WaMu had been secretly undermining the quality of its underwriting standards for both prime and subprime loans by making the approval guidelines less restrictive. (¶¶ 307, 381.) Relying on Confidential Witness 65 (“CW 65”), a Senior Underwriter for WaMu’s subprime channel from 2004 through April 2007, the Complaint alleges that Rotella knew of and directed the revision of guidelines in WaMu’s subprime lending group. (¶¶ 382-83.) CW 65 alleges that Rotella or Killinger “would issue internal e-mails and pre-recorded statements [once per quarter] detailing the structure of the guidelines and explaining that the company was changing the guidelines in an attempt to increase volume.” (¶ 383.) Additionally, relying

on evidence from CW 79, who worked directly for Defendant Cathcart and assisted the Officer Defendants in their preparation for WaMu’s 2006 Investor Day, the Complaint alleges that Rotella was “knowledgeable and involved in establishing and approving the Company’s lending policies and guidelines.” (¶¶ 488, 495.)

Plaintiffs also allege that WaMu achieved greater volume in lending by tying compensation for loan staff to loan quantity, not quality. (See ¶¶ 412-17.) CW18 asserts that “Rotella certainly was aware of, if not taking an active role in, decisions made to compensate WaMu employees based on loan volume without regard to credit quality.” (¶ 417.)

WAMU Chief Executive Officer, Defendant (“CEO”) Kerry KillingerAs WaMu’s Killinger made numerous public statements about WaMu and its practices and performance. The Complaint identifies as false certain statements assuring investors that WaMu was using strict underwriting standards during the Class Period. On October 19 and November 15, 2005, Killinger publicly referenced WaMu’s practice of “discipline[] and vigilan[ce] in our underwriting standards” (¶ 559), and the “excellent processes, policies, underwritings, standards and reserving methodologies in place”(¶ 567). Additionally, the Complaint alleges that Killinger made a number of false statements assuring investors that WaMu had been taking “proactive defensive actions” as early as July 2005 in an effort to strengthen WaMu’s loan portfolios in preparation for the softening housing market. (¶¶ 603, 613, 616, 620, 629.) On a July 18, 2007 earnings call, Killinger stated that WaMu had been “tightening underwriting” over the past two years to defend against the risks of subprime lending. (¶ 670.) Again, on September 10, 2007, Killinger assured investors that, over two years earlier, WaMu had begun taking “proactive steps” to prepare for a decline in housing prices, including “a series of major underwriting changes in our home loans lending guidelines.” (¶ 677.)Plaintiffs allege that these statements were false because, beginning in 2005, the Officer Defendants began secretly undermining the quality of WaMu’s underwriting standards for both prime and subprime loans by making the approval requirements less restrictive. (¶¶ 307, 381.) These relaxed standards allowed WaMu to approve prime and subprime loans for borrowers who presented a greater risk of default and increased the number of allowable exceptions for borrowers who did not meet the criteria for creditworthiness. (¶¶ 376-411.) The more lenient guidelines allowed WaMu to increase the volume of its lending but compromised the quality of the approved loans. (Id.)

Based on information from Confidential Witness 65 (“CW 65”), a Senior Underwriter for WaMu’s subprime lending operation from 2004 through April 2007, the Complaint alleges that Killinger knew of and directed the implementation of the increasingly less-restrictive underwriting guidelines used by WaMu’s subprime lending group. (¶¶ 382-83.) CW 65 alleges that either Killinger or WaMu Chief Operating Officer Stephen Rotella “would issue internal emails and pre-recorded statements [once per quarter] detailing the structure of the guidelines and explaining that the company was changing the guidelines in an attempt to increase volume.” (¶ 383.) Additionally, relying on evidence from Confidential Witness 79 (“CW 79”), who worked directly for Defendant Cathcart and assisted the Officer Defendants in their preparation for WaMu’s 2006

Investor Day, the Complaint alleges that Killinger was “knowledgeable and involved in establishing and approving the Company’s lending policies and guidelines.”(¶¶ 488, 495.)

WaMu’s Chief Financial Officer Thomas CaseyCasey was responsible for WaMu’s accounting policies and for reporting financial results. Casey signed and certified a number of financial statements that Plaintiffs allege misrepresented WaMu’s financial results, and falsely stated that WaMu maintained effective internal controls and was in compliance with GAAP.7 Casey also told investors on October 18, 2006 that, in determining the provisions for the Allowance, WaMu “look[ed] at all our loss factors and the performance of underlying portfolio [sic] and continually ma[d]e adjustments.” (¶ 621.) On July 18, 2007, Casey again discussed the Company’s Allowance, stating that WaMu’s provisioning for credit losses “ha[d] been building for quite some time” and “our provision models and our reserving model taken [sic] into account [chargeoffs over time].” (¶ 668.) Plaintiffs allege that these statements were false because WaMu had been improperly provisioning its Allowance and therefore overstated its net income and earnings per share. (¶¶ 424-28.) Because GAAP requires that the Allowance be reported as a reduction to assets, under-provisioning the Allowance resulted in false and misleading financial statements. (¶¶ 424, 427.) Plaintiffs allege that the Company’s model for estimating its credit loss, the LPRM, did not properly account for WaMu’s high-risk loans (specifically the Option ARM loans), causing the Company to under-provision its Allowance and misstate its financial results. (¶¶ 452-57, 463-465.)Confidential Witness 80 (“CW 80”), a Senior Vice President for Accounting Policy at WaMu from June 2006 until November 2007, alleges that Casey knew “that the Company’s risk management and accounting standards had dangerously deteriorated, with material effects on the Company’s financial statements.” (¶ 496.) CW 80 believed that WaMu’s accounting policies were improper and disapproved of Casey’s direct involvement in the reserving process because the Allowance should have been independently managed. (¶¶ 497-98.) CW 80 states that his relationship with Casey “progressively worsened due to disputes over accounting policy.” (¶ 497.)Plaintiffs also allege that Casey received a weekly risk report, and one of those reports “specifically quantified the fact that the Company was exceeding certain risk parameters as dictated by [WaMu’s] risk guidelines.” (¶¶ 109-10 (alteration in original).) Confidential Witness 17 (“CW 17”), a Senior Vice President of WaMu’s Enterprise Risk Management group from August 2001 until September 2006, (¶ 106), alleges that Casey and Defendants Rotella and Cathcart chose to “simply ignore” warnings that risk in the subprime portfolio fell outside of designated ranges, (¶ 110). CW 17 further contends that he pleaded with senior management for corrective action regarding risk in the subprime portfolio, but Casey and Cathcart “simply overruled” his requests. (¶ 111.)

Head Of Wamu’s Enterprise Risk Management Group Ronald CathcartFrom the fourth quarter of 2005 Plaintiffs identify as false a series of statements Cathcart made in September 2006 regarding WaMu’s Option ARM loan product. (¶ 322.) Cathcart told investors that WaMu’s Option ARM loan product was “not made available to subprime borrowers” and the Option ARM portfolio had a weighted average FICO score of 708. (¶ 322.) Cathcart assured investors that the Option ARM portfolio quality was

“very sound” and WaMu was “comfortable with this portfolio” because “at origination, WaMu focuses on an effective underwriting process and borrower disclosures....” (¶¶ 366, 612.) Cathcart also explained that, “[e]ven after maximum negative amortization and with no home price appreciation, the [Option ARM] portfolio should remain well secured and the borrower should have sufficient equity to refinance, should they choose to do so.” (¶ 612.) Plaintiffs allege that these statements were false and misleading because WaMu was offering the Option ARM loan products to potentially subprime borrowers with a FICO score as low as 540, and would underwrite the loans at the low introductory “teaser” rate instead of the loan’s fully-indexed rate. (¶¶ 78, 83, 309, 323-24, 326.) The Complaint describes Cathcart’s role in the risk management group. Plaintiffs allege that, under Cathcart’s leadership, WaMu “secretly discontinued appropriate risk management practices during the Class Period.” (¶ 105.) According to CW 17, Senior Vice President of WaMu’s Enterprise Risk Management group from August 2001 until September 2006, Cathcart restructured WaMu’s risk management group such that its role “was supposed to be ‘advisory’ only” and the group no longer guarded against the credit risk of WaMu’s lending practices.”

SWORN TESTIMONY FROM WAMU BANK EMPLOYEES CORROBORATE THE CONSPIRATORS’ SCHEME

175. The following testimony is taken from the Federal Home Finance Authority V. JP

Morgan Chase - September 2, 2011 - 271 page lawsuit:

Pg 82. ¶238. In its push to generate more risky loan products, WaMu Bank pressed its sales agents to pump out a greater volume of loans with loose adherence to its own underwriting guidelines. WaMu Bank gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and, ultimately, the compensation of the bank’s executives. In a New York Times article published December 27, 2008, Steven M. Knobel, the founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu Bank until 2007, stated that “[i]t was the Wild West . . . If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”

¶239. WaMu Bank pushed its Option ARM loans on borrowers regardless of their sophistication, income level, or financial stability. An Option ARM loan is typically a 30-year Adjustable Rate Mortgage (“ARM”) that initially offers the borrower four monthly payment options: (i) a specified minimum payment (which was typically lower than the interest payment and therefore caused the loan to grow, referred to as negative amortization), (ii) an interest-only payment, (iii) a 15-year fully amortizing payment, and (iv) a 30-year fully amortizing payment. The rate of an ARM loan also adjusts monthly and if the loan rate was higher than the required interest in the payment, the balance of the loan would increase (called negative amortization). Fay Chapman, WaMu Bank’s former Chief Legal Officer, candidly admitted to the Seattle Times in an article published on October 26, 2009, that “[m]ortgage brokers put people into the product who shouldn’t

have been.” In 2003, WaMu originated $32.3 billion of Option ARM loans. By 2005, that number almost had doubled to $64.1 billion.

pg 83 ¶240. WaMu Bank’s employee compensation structure favored these types of high-risk home loans. In a document entitled “2007 Product Strategy,” WaMu Bank noted that it must “maintain a compensation structure that supports the high margin product strategy.” A compensation grid from 2007 shows the company paid the highest commissions on Option ARMs, subprime loans and home-equity loans: A $300,000 Option ARM, for example, would earn a $1,200 commission, versus $960 for a fixed-rate loan of the same amount. The rates increased as a consultant made more loans; some regularly pulled down six-figure incomes.

Likewise, a WaMu Bank “Retail Loan Consultant 2007 Incentive Plan” explained that “[i]ncentive tiers reward high margin products . . . such as the Option ARM, Non-prime referrals and Home Equity Loans . . . WaMu also provides a 15 basis points (15%) ‘kicker’ for selling 3 year prepayment penalties.”

¶241. WaMu Bank could originate so many high-risk loans because its underwriting guidelines had become so loose that they were rendered meaningless. In a recently-surfaced internal Newsletter dated October 31, 2005, risk managers were told they needed to “shift (their) ways of thinking” away from acting as a “regulatory burden” on the company’s lending operations and toward being a “customer service” that supported WaMu’s five-year growth plan.

Pg 83 ¶242. On September 28, 2007, WaMu Bank’s Corporate Credit Review (“CCR”) Team circulated an internal report on first payment defaults in Wholesale Specialty Lending. The report determined that “[c]redit weakness and underwriting deficiencies is a repeat finding with CCR.” It additionally concluded that fraud detection tools “are not being utilized effectively by the Underwriters and Loan Coordinator,” and “the credit infrastructure is not adhering to the established process and controls.”

176. In the FCIC Report: Pg 156, it was stated that “JPMORGAN Knew Its

Representations Were False And Was Willing To Capitalize On Its Unique Knowledge At

The Expense Of Investors”:

“The evidence discussed above not only shows that the representations were untrue, but also that JPMorgan knew, or was reckless in not knowing, that it was falsely representing the underlying origination and securitization process and the riskiness of the mortgage loans that collateralized the GSE Certificates. As discussed above, such evidence includes: The pervasive misrepresentations relating to basic information about the underlying mortgage loans, such as owner occupancy and LTV ratios, and knowledge of inaccurate and misleading credit ratings; Third-party due diligence providers such as Clayton and Bohan informed JPMorgan that significant percentages of loans in the pools did not adhere to underwriting guidelines. For example, Clayton admitted that in the period from the first quarter of 2006 to the second quarter of 2007, 27 percent of the

mortgage loans JPMorgan submitted to Clayton to review in RMBS loan pools were rejected by Clayton as falling outside the applicable underwriting guidelines. Of the 27 percent of mortgage loans that Clayton found defective, 51 percent were subsequently waived in by JPMorgan without proper consideration and analysis of compensating factors and included in securitizations such as the ones in which Fannie Mae and Freddie Mac invested here. JPMorgan’s waiver of over half of the defective loans shows that JPMorgan knew of or recklessly disregarded the systemic failure in underwriting and the fraudulent misrepresentations in the offering materials received by the GSEs.”

177. On November 10, 2011 Video Rebels blog wrote the following article entitled

“The Black Budget And The Leveraged Buyout Of The World Using Stolen Money”

Catherine Austin Fitts said we are witnessing a Leveraged Buyout of the world that will permanently end democracy. The elite has bought all the politicians and the media. They have stolen enough money to earn 2 trillion dollars a year from their investments. She said 2 trillion dollars a year is sufficient to fund a world government. Wall Street and the City of London have been given more money in Bailouts than the total amount of money the United States spent on all of its wars. Wall Street was also allowed to steal 4 trillion dollars from federal spending that we are not allowed to audit. When she was Housing Commissioner in the first Bush administration, she once saw on one city block ten government guaranteed loans on buildings that never existed. Separately from that Jim Willie has said when the Federal Reserve sells Treasury bonds, they sell more than the deficit. This fraud has added trillions more to the LBO Buyout fund. As I have said previously, the banks are allowed to launder a trillion dollars a year in drugs, 400 billion dollars a year in illegal weapons and 500 billion dollars in political bribes. Catherine has written and spoken often of mortgage fraud. The bankers were allowed to sell each mortgage ten times. The Federal Reserve has been busy buying fraudulent mortgage backed securities to keep the bankers out of jail. She said we were all heartened when the House voted against the Bailout in 2008. The bankers reversed that decision through three methods. They were able to donate money and give bribes which most voters are aware of. They are not aware of Control Files which have all the blackmail information on politicians. But with government databases run by private military contractors and smart meters reporting on activities inside our homes to IBM the bankers now have Control Files on everyone. They also have the right to kill anyone with impunity. Catherine said this right to kill with impunity must be taken away from them. The hardest thing for her to accept is to live with people who try to pretend there is no evil force out there. But she added more people are waking up every day. She has suggested basic reforms. One would be for the government to release all expenditures by zip code. This would eliminate a lot of fraud. Another would be to end the practice of allowing defense contractors to form subsidiaries that pay and audit contracts awarded to their parent corporations. She said that centralizing power in the hands of the elite is counterproductive and makes us all poor. She emphasized that as soon as those centralizing controls were lifted, we would have a rapid recovery.

178. As reported in the New York Times on December 14, 2011:

KILLINGER/ROTELLA SETTLE FOR $64 MILLION BUT INSURANCE WILL PAY MOST OF THE FDIC'S LATEST JOKE : The Federal Deposit Insurance Corp. has settled their $900 million lawsuit against three former top executives of Washington Mutual for $64 million (7 cents on the dollar). The FDIC in March 2011 sued WaMu CEO Kerry Killinger, COO Steven Rotella, and home-loans President David Schneider, accusing them of "gross mismanagement" of WaMu's mortgage business that ultimately led to the lender's failure in September 2008. The FDIC accused the executives of pushing Washington Mutual to the brink by making risky bets to reap short-term profits for themselves. Most of the settlement will be paid by WaMu's directors' and officers' (D&O) insurance. Only $400,000 in total will be paid by the executives. Killinger's $133,000 share of the settlement will be a tiny drop in the bucket — he collected $103 million between 2003 and 2008 as his compensation for steering WaMu into the ground.

179. Writer Conrad Black wrote the following article on Feb 15, 2012 in the

Huffington Post:

THE POLITICAL LEADERSHIP, INCLUDING THE REGULATORS, CREATED THE CONTEXT IN WHICH THE DISASTER WAS BOUND TO OCCUR "When the music's playing, everyone has to dance," said Citigroup's Mr. Prince, as the world's largest financial institution descended into insolvency. "We're doing God's work," said Goldman Sachs chairman Lloyd Blankfein, after his firm peddled huge quantities of worthless real estate-backed securities out the front window to its clients with a false investment grade certification from the (unprosecuted) rating agencies which are now sitting in pseudo-Solomonic judgment on the credit ratings of the countries of the world, while short-selling them out the back door for its own house account. (Translation: the ratings agencies: Moodys, Standard and Poors, and Fitch are now condemning the foreign countries like Greece which purchased the intentionally rigged mortgage-backed securities, for living beyond their means.... while selling gamblers credit-default swaps for their own house account...) But in the blame game, the political class locked arms to scream from the Capitol and White House steps that "greed" was the problem, in the private sector of course. And Attorney General Holder and his acolytes in the federal prosecution service set out to end the debate by indicting the opposition debating team, with the enthusiastic collusion of most of America's law and order-deluded national media. Preet Bharara, is in fact chasing after alleged inside traders, an activity which had nothing to do with the economic crisis, as he "collars the masters of the meltdown."

180. On February 16, 2012, Alex Veiga of the Associated Press reported in the USA

Today that: FORECLOSURES TO SURGE 25 PERCENT THIS YEAR TO 1 MILLION

HOMES:

“Banks took back more U.S. homes in January than in the previous month, the latest sign that foreclosures are accelerating. Foreclosures rose 8 percent nationally last month from December foreclosure listing firm RealtyTrac Inc. said Thursday. But RealtyTrac projects

foreclosures will rise 25 percent this year to 1 million homes. Last year, lenders took back 804,000 homes. In New Hampshire, foreclosures jumped 62 percent. In Massachusetts, 75 percent. The settlement between the banks and state attorneys general helps clarify the rules banks must follow to foreclose on borrowers, said Daren Bloomquist, a vice president at RealtyTrac. That will pave the way for more foreclosures, he said. "The settlement will accelerate the foreclosures that are happening this year and it will accelerate the process of lenders catching up on the backlog of foreclosures that has been building up over the last year and a half," Bloomquist said. Credit rating agency Fitch Ratings also anticipates foreclosures will climb nationally this year. "You probably are going to see the pace pick up as the year goes on," said Grant Bailey, a managing director at Fitch. In addition, some states have taken steps to slow lenders down. Throughout the housing downturn Nevada has had the nation's highest foreclosure rate. There, a law that went into effect in October requires that foreclosure documents must be filed in the county where a property is located and a lender must provide a notarized affidavit detailing their legal right to proceed. "There are tons of homes sitting out here vacant that should be in the foreclosure pipeline and are not yet," Herwick said. RealtyTrac said: High unemployment, a sluggish housing market and falling home values remain major factors in homeowners falling behind on their mortgage payments. Many borrowers also have simply stopped paying their mortgage because they owe more on the mortgage than the home is worth. All told, 210,941 U.S. homes received a default notice, were scheduled for auction or were repossessed by a lender in January. The foreclosure rate translates to one in every 624 U.S. households.

181. Bob Livingston of Personal Liberty Alerts reported on February 20, 2012 that

GOLDMAN SACHS RULES THE WORLD FOR THE 1%:

“The U.S. political system — indeed, that of the whole world — is dysfunctional because it is run by Goldman Sachs for Goldman Sachs. It is well-known that Goldman Sachs recommended stocks related to the housing mortgage mania at the same time that it shorted the stocks. Nobody goes to jail, and there are only hand slaps from the Securities and Exchange Commission. Goldman Sachs is the ghost over America, and it is a proxy for the elite crime that has wrecked the country and impoverished the middle class. Because of the heavy influence of Goldman Sachs in our government and in governments around the world, it operates above the law and takes every advantage for its own people. This is getting to be public knowledge, but the American people are paralyzed as far as any action by the lapdog U.S. Congress. There is nowhere for the people to turn in a nationwide system of organized crime under the aegis of private investment banks. The recent collapse and bankruptcy of MF Global is a huge factor in eroding public confidence. It appears that client funds (investors), even though segregated, were used to speculate for MF Global’s own account. Jon Corzine, who ran MF Global into the ground, losing vast sums of investor funds, told a Congressional committee that he “didn’t know where the money went.” Corzine is a former CEO of Goldman Sachs and a former Governor of New Jersey, a bankrupt State. Some people believe Corzine is in line to be the next U.S. Secretary of the Treasury in the Obama Administration. The likes of Corzine, Raj Rajaratnam, Bernie Madoff, Rajat Gupta and a legion of legal gangsters are

gaming the system to enrich the Wall Street club. When widespread corruption is on the public stage, how long before the collapse of the whole system? The pied pipers of Babylon have no clothes and they have no shame. They fear no prosecution because they are the privileged elite. These are the same people who ghostwrite things such as the recent 2012 National Defense Authorization Act and then turn the military loose on the American people whom they brand “terrorists and extremists.” They are not oblivious to the coming economic collapse and the fact that they may be victims of the wrath of oppressed Americans and subject to public hanging. This is the expected pattern that develops in the chaos and crisis of the collapse of a despotic government. All this is in the next chapter of the default of national governments. It is already beginning for those who have eyes to see. All that is needed now is the trigger.

182. On December 31, 2011, Marc Faber wrote in his GLOOM, BOOM & DOOM

REPORT:

“Two other heavyweight members of Goldman’s European network have also figured large in the euro crisis: Otmar Issing, a former member of the Bundesbank board of directors and a one-time chief economist of the European Central Bank, and Ireland’s Peter Sutherland, an administrator for Goldman Sachs International, who played a behind the scenes role in the Irish bailout. Marc Roche then goes on to explain that Goldman Sachs’ trading room benefitted from this “capital of relationships.” That may certainly have been the case, but we need to put this network of “friends” in the proper perspective. The other large financial institutions, and for that matter all major corporations, also have their “friends” in high places, plus their lobbyists who can influence the legislative process. In addition, judged by the performance of Goldman Sachs’ stock, the investment bank’s connections have lately been less useful. So, I am not a member of the Goldman Sachs detractor fraternity, as I know well that Goldman only did what all the other financial institutions have done, which is to use the dysfunctional political system and the money-printing central banks to their advantage. However, I will say that Goldman Sachs perfected the art and was therefore better at it. The point I am driving at is that a reckless meritocracy creates an enormous economic and political mess. Yet, investors are looking at the very same people to solve the problems by implementing appropriate fiscal and monetary policies. But, if one looks carefully at the proposed measures (mostly money printing), it is apparent that they will merely postpone remedying the structural problems and not solve them.”

183. On December 13, 2011, CNN Money reported the following story:

“The Federal Deposit Insurance Corp. is preparing to settle with three former executives who ran Washington Mutual, the biggest bank failure in U.S. history, for the return of $64 million worth of golden parachutes, bonuses and retirement funds. Senior FDIC officials, during a teleconference with reporters Tuesday, said the settlement with WaMu ex-CEO Kerry Killinger, ex-president Stephen Rotella and David Schneider is pending, and is expected to be completed within days. "We have reached an arm's length agreement with the three officers of WaMu," said an FDIC official, adding that the

settlement will "ensure the surrender of the golden parachute." The FDIC officials said the settlement with the executives is in addition to $125 million settlement reached with Washington Mutual. The FDIC was originally seeking a $900 million settlement when it sued the three WaMu executives for managing the bank negligently and hiding assets from their creditors. They are accused of destroying the massive bank through an expansion of risky loans. The collapse of WaMu was due largely to a high-risk lending strategy pursued by the company's management, according to a government report released last year.”

184. On February 22, 2012 Addison Wiggin wrote an article in the Daily Reckoning

entitled Uncle Sam’s Fire Sale. Minimum Investment: $1 Billion”

“The federal government is about to dump millions of the foreclosed homes at fire-sale prices to hedge funds and private-equity firms with government connections. Prior to the calamity of 2008, we might have thought the deal we’re profiling today unthinkable. As many as 10,000 properties might be unloaded in a single transaction during the first quarter of 2012 — thanks to a government program so new it doesn’t have a catchy name yet, only the working title “Enterprise/FHA REO Asset Disposition.” Roger Arnold, chief economist for Pasadena, Calif. based ALM Advisors, has a different name for it — “the largest transfer of wealth from the public to the private sector.” As of last September, there were about 800,000 “real estate owned” or REO homes in the United States — homes repossessed and on the market. Close to one-third of these — 250,000 — sit on the books of Fannie Mae, Freddie Mac and the Federal Housing Administration. That is, 250,000 homes are owned by you and me, the US taxpayers. But that number is about to explode: According to Ken Harney at the real estate industry publication Inman News, “The three agencies face a tsunami-sized shadow inventory that is now heading their way — a combined 1.4 million delinquent loans on their books, at least half of which, they estimate, will end up in foreclosure.” So now we’re talking nearly a million foreclosed homes. Late-stage delinquencies tallied by Lender Processing Services in January approach 2 million. “These [new] investors will come from the private-equity and fund community, Goldman Sachs and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction. “The US taxpayer will get pennies on the dollar for these homes, and then be allowed to rent them back at market rates.” During the first week of January, the Federal Reserve issued a white paper on housing: “A government-facilitated REO-to-rental program,” it said, “has the potential to help the housing market and improve loss recoveries on REO portfolios.” The big boys can smell the money and they are lining up to play. Among the players that expect to profit big from this government-sponsored scam are former high-ranking officials with HUD, the Treasury, FHA and so on. “Once the privatization has occurred,” one analyst observes, “and the properties are generating rental income for the investors, the initial investors will cash out by forming real estate investment trusts (REITs), real estate operating companies (REOCs) or limited partnerships that will be made available to retail investors.” By then the easy money will have been made…at your expense...That’s why we find ourselves longing for returns in places where the

governments are less corrupt and the playing field slopes somewhat less directly toward the pockets of crony-capitalists.

185. On February 24, 2012 Simon Johnson, of Project Syndicate in Washington, DC

wrote:

WHY THE BANKS ARE TOO BIG TO JAIL: “Among the fundamental principles of any functioning justice system is the following: Don’t lie to a judge or falsify documents submitted to a court, or you will go to jail. Breaking an oath to tell the truth is perjury, and lying in official documents is both perjury and fraud. These are serious criminal offenses, but apparently not if you are at the heart of America’s financial system. On the contrary, key individuals there appear to be well compensated for their crimes. As Dennis Kelleher of Better Markets has argued, the recent so-called “robo-signing” settlement – in which five large banks “settled” their legal liability for carrying out fraudulent foreclosures on mortgages – is a complete sell-out to the financial industry. First, there was no serious criminal prosecution – meaning that no one will be charged with a felony, and no one will go to jail. Kelleher, an attorney with extensive experience in private practice and the public sector, tells it like it is: “‘robo-signing’ is massive, systematic, fraudulent, criminal conduct.” Alternatively, as he points out, we could just call it “lying, cheating, and stealing.” Second, the civil penalties in this settlement – a form of fine – are minuscule relative to the size of the companies involved. As Shahien Nasiripour, one of the best reporters on this issue, dryly put it: “None of the five lenders have said they expect to incur a material charge due to the settlement.” In other words, from a corporate perspective, the penalty is a trifling affair. Third, such fines are, in any case, paid by the companies’ shareholders, not by their executives or board members (all of whom carry insurance). In the rare cases in which fines have been levied on individuals, either their insurance policies picked up most of the bill, or the penalties were trivial relative to the cash compensation that they received while committing their crimes – or both. As if all of this weren’t bad enough, the banks reportedly will be able to use government money to write down the value of mortgages, which amounts to subsidizing them to pay their own meaningless fines. The Obama administration and its allies have worked hard to sell its roughly $20 billion settlement with the banks as one that will have a meaningful impact on the housing market. But nothing could be further from the truth. As Kelleher points out, the United States has “more than 10 million homes under water” (the outstanding mortgage exceeds the house’s value). “Twenty billion dollars doesn’t make a dent in that: one million homes at $20,000 loan forgiveness is it.” In fact, the Obama administration’s settlement with the mortgage lenders is consistent with its track record on all of its policies related to the financial sector, which has been abysmal. But it is also puzzling. Why would the administration continue to bend over backwards to be lenient towards top bankers under these circumstances? Mortgage lenders’ criminal activities are another matter. Indeed, at stake in the mortgage settlement are fundamental and systemic breaches of the rule of law – perjury and fraud on an economy-wide scale. The Justice Department has, without question, all of the power that it needs to prosecute these alleged crimes fully. And yet America’s top law-enforcement officials have consistently – and now completely – backed off. The main motivation behind the administration’s indulgence of serious criminality evidently is fear of the

consequences of taking tough action on individual bankers. And maybe officials are right to be afraid, given the massive size of the banks in question relative to the economy. In fact, those banks are bigger now than they were before the crisis, and much larger than they were 20 years ago. Top bankers want to make a lot of money. They also want to stay out of prison. Without a credible threat of poverty and time behind bars, bankers have no reason to comply with the law. The message to bank executives today is simple: build your bank to be as big as possible – and then keep growing. If you manage to become big enough, you and your employees are not just too big to fail, but also too big to jail.”

THE FRAUDULENT FORECLOSURE OF AMERICAN HOMES

186. After receiving Trillions of dollars in CDS “insurance,” selling identical

borrowers Notes multiple times to different Investors, depositing said Notes at the Fed for 9X

their value, being paid TARP funds, etc. etc. etc., the Conspirators want to bleed us dry for now

they are illegitimately seizing homes through foreclosures across America.

SCAM CONTINUES BUT NO ONE IS GOING TO JAIL...

187. “Why would the Conspirators violate a commonly known long-standing law and

bifurcate the mortgage when selling the note?” If the Conspirators secretively held the lien for

three years, then filed an IRS form 1099a and claimed the full amount of the lien as abandoned

funds and deducted the full amount from the Conspirators tax liability, the Conspirators would

receive consideration a second time.

188. Attorney and Expert Witness on Securitization, Neil Garfield states: The fear that

the sky will fall prevents “responsible” journalists and government officials from acknowledging

the pervasive fraud perpetrated by the largest banks. This was a fraud from start to finish and

anything short of reversing it is ignoring established law, decency and common sense. The

foreclosure methods employed by so-called “lenders” were fraudulent because the entire scheme

was a PONZI-like scam. The mortgages and notes are invalid and unenforceable, the liability has

been paid, and any home taken in foreclosure — past, present or future — is an extortion

payment to the financial industry that has already been paid several times over.

189. One need simply ‘follow the money’ and one will be led to the culprits, the

Insiders at the Federal Reserve, on Wall Street, and at the largest banks, JP Morgan Chase,

Citigroup, Bank of America, HSBC, and Goldman Sachs. The cancer created by this Conspiracy

must be excised before we can begin to rebuild the key infrastructures in our world for the

highest good which was the intention of our founding fathers.

190. The hope for our country is being placed in the hands of our judiciary which was

established by our founding fathers to mete justice equally. It is the hope of the Owners that the

judiciary will deliver a powerful message that will serve to deter the Conspirators from future

violations of the law. For anything less than that can only aid in the disintegration of our

civilized society.

Respectfully Submitted,

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