Thursday, September 30, 2010


You need to read the latest article at The Market Ticker today. He reports that he received a bulletin from Old Republic Title that states:

"The Company will not insure title to any property which has been foreclosed by Ally Financial, Ally Bank or GMAC until further notice."

Why is this important? Because it marks the beginning of the end for the banking system in the United States. Most mortgages in this country have been sold into Mortgage Backed Securities by the banks and in the process have had the paper trail needed to establish clear title destroyed. And that's why the title companies will not insure the titles on homes that are being foreclosed. The banks doing the foreclosures have no legal right to do so.

If, as
Market Ticker suggests, the only way out of this mess is to return the funds to all parties involved until ownership reverts to the last party with clear title, the banks that issued the loans originally will be on the hook for the value of the loan. They can't absorb this and will be forced to shut down.

This will leave the owners of the MBS paper with investments of no value because investments supposedly backed by real estate will have become, for all intents and purposes, signature loans. To recover their investments they will have to sue the individual homeowners for the value of the investment which of course will cause filings of bankruptcy making the loans really difficult to collect. And all this times millions and millions of mortgages.

And who owns all these potentially worthless MBS's? You, your parents, the guy next door and millions of other Americans that have bought into mutual funds that include them in their portfolios. So you can kiss that retirement goodbye.

The banking industry has committed fraud on an unprecedented scale in the slicing, dicing and sale of loans that should have never qualified to begin with and the game is starting to unravel. If it is allowed to take its natural and necessary course this is going to result in the collapse of the banking system and along with it the entire U.S. economy. This needs to happen to clear the debt from the system and to return it to stability. We can let the rule of law stand and let the chips fall where they may or, and this is what I'm afraid is going to happen, we can destroy the rule of law in an effort to prop up the banks and protect the bankers from prosecution.

Either way the system collapses. The difference is that with the first way we suffer through hardship and turmoil and come out the other end stronger and healthier. The second way we struggle through hardship and turmoil and come out the other end as something transformed into a system we won't recognize, with our freedom gone and our system of laws destroyed and the people that defrauded us in the seats of power.

If we have to suffer regardless I say make the suffering useful and let the system collapse under the law and reset itself. I've got a feeling that won't happen.

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