Let’s talk about sex baby! just kidding; let’s just talk about consensual...interest

UCC article 9 covers instruments of commerce including Mortgages.
Article 9 of the UCC, uses the term “mortgage” to include a consensual interest in real property to secure an obligation whether created by mortgage, trust deed, or the like. It says a mortgage includes a “consensual interest” in real property to secure an obligation (to repay the debt) whether created by a mortgage, trust deed (deed of trust) or the like. See the link here to the UCC PEB November 14, 2011 document”

So back in the day, when everyone who had a pulse got a mortgage, did mortgage applicants, who later became approved borrowers, know, consent to, WHEN (AT the time) they were signing their mortgage docs (promissory note and mortgage, deed of trust and the like) the real, indispensable and fraudulent cause of house prices rocketing further and further north and out of their reach?

Has anyone ever mentioned the CSE program to you? Let me cut to the chase.
See the attached testimony from Kyle Bass, January 2010 to the FCIC – go to page 13, flip it sideways, and print it out. You will see about half way down the line that says gross leverage to tangible common equity; that my friends is a fancy term for a financial shock absorber. You might ask “How could this be – when for decades such leverage was kept to the single or low double digits?” Keep this handy; I’ll explain why in one sentence with 15 bullets: One note, not all were CSE's but the majority were.

In 2004, your friends at the SEC (Securities Exchange Commission) approved the CSE program for only the “largest, most sophisticated investment banks;” (that’s a verbatim quote and I recall that it was stated more than once). The CSE program, enabled the investment banks to:
1) figure out their own capital cushions – overturning a 30 year old rule;
2) use their own models to determine #1;
3) use their own values for securities they held for their own profit;
4) is it a surprise, that as a result the amount of assets (and contingent liabilities) surged to over 30 times their capital, and as of 2008 it got worse than that?
5) Who were the CSE’s?
6) You’ve heard of the CSE program before right?
7) You know it was created when? Answer 2004. And it was terminated on? September 26, 2008 exactly five days after two CSE’s applied for a sex change to a BHC – no, silly that means a Bank Holding Company; (so they could borrow on the sly AND on the cheap from the Fed’s discount window);
8) Why has it taken until now, New Years Day 2012, fully 3 plus years AFTER the so-called financial crisis to tell you that if it weren’t for the CSE’s we wouldn’t have a foreclosure crisis or much less a financial crisis; just good ole; plain vanilla, safe and sound banking system;
9) But the bonuses (based on model values) were just a little too tempting for some at the CSE’s, now called TBTF banks or officially known as SIFI's;
10) Oh, I forgot to mention the answer to question #5; I’ll just provide the link and you can read for yourself here -
11) And if you have 4 minutes you can listen to the excellent narration of the CSE program by the NY Times’ Stephen Labaton here
12) If you have 55 minutes you can actually listen to the 2004 hearing wherein the 5 SEC commissioners prompted by the Staff and a 400 plus page briefing book, approved the CSE program – go back to the link under #10, scroll down the left side bar, there’s a VERY tiny link – you have to click where it says “(mp3)” At about the 20 minute mark you will hear who the CSE's had building the models; fascinating stuff.
13) In case you hadn't noticed - the word "market" did not appear in items #1, #2, or #3 above - and why is that? Because the CSE's proprietary computer MODELS led to the housing bubbles - the two of them - price and overbuilding. MARKETS which we all know are transactions among arms-length parties, for MBS, CDOs etc. did not occur on anything like a regular basis. What if a few extra trillions (plural) of supposedly Mortgage backed securities were to trade; i.e. to hit the market? Like the Japanese tsunami, the extra trillions washed away the trillions of paper wealth just as swiftly and as surely as the flood waters overtook northern Japan; except this, my friends, was no act of God.
14) If you were listening carefully to the 55 minute hearing ; you did hear that the "models" were 1) supposed to be approved in advance and 2) monitored and 3) adjusted over time - correct? Want to take a guess what happened in reality? I'll bet you might know, NOW, the answer.
15) I just found a fitting quote for the last bullet:
During 2008, [ALL] the CSE institutions failed, were acquired, or converted to bank holding companies which enabled them to access government support. The CSE program was discontinued in September 2008 by former Chairman Christopher Cox.
Testimony to US Congress' House Financial Services Committee, Mary Schapiro, Chair, US Securities and Exchange Commission, April 2010 [emphasis added].

More to come on the 2004 SEC CSE program too…

Happy/ier 2012!