Cobble, Whistle Blower on NATIONAL SECURITY: Causes of the Economic Collapse
This document: 38 pages as a Word-file filed in court, approx. 17 web pages. For proof of authentication, only the signature pages from the Petition are posted; the remaining text is translated to html for reduced usage of memory and for easier print-out and reading.
(Chairman Benanke), Respondent HENRY PAULSON is Secretary of the U.S. Dept. of Treasury (Secretary Paulson), and Respondent CHRISTOPHER COX is Chairman of the Securities & Exchange Commission (SEC). Respondents GOLDMAN SACHS & CO., FANNIE MAE and FREDDIE MAC have transactional relationships with the U.S. Federal Reserve Bank (Feds), of which those relationships are now improper and threatening the economic security of the United States. And Respondents LAMAR ALEXANDER and HERB KOHL, as U.S. Senators of Congress, have been advised of this matter, but they have not responded functionally to resolve this national threat. Therefore, the Court has jurisdiction in this matter to grant relief.
ISSUES: The STRUCTURAL DEFECTS THREATENING NATIONAL SECURITY
(1) Size of bailout with unsecured dollars will collapse the U.S. dollar; anti-trust violations already committed.
(2) Reversing the credit crunch w/ equitable forgiveness-of-debt and shake-out of bad mortgages (resetting the economy).
(3) Shaking-out bad mortgages would resume payouts from mortgage pools on mortgage-backed securities.
(4) Bank-operated Hedge Funds (BOHFs) worsens the inflation-trap (the unlawful taking of money and property) and creates a damaging conflict-of-interest between banks and consumers.
(5) Full collateralization by banks will prevent inflation; it's otherwise the unlawful taking of consumer dollars.
(6) Bailout of Fannie Mae & Freddie Mac (FM & FM) must surely fail with faulty mortgage-backed securities.
(7) Mammoth sizes of FM & FM is imminent threat to economy / national security.
- Fannie Mae & Freddie Mac -> FM & FM
- Bank-operated Hedge Funds -> BOHFs
- Securities & Exchange Commission ->SEC
- Federal Reserve Bank (central bank) -> Feds
- mortgage-backed securities (issued by banks, investments, etc.) -> MBSs
- mortgage pool (a pool of mortgages that pays on MBSs) -> pool
- Unsecured loans - Loans issued by the Federal Reserve (the U.S. central bank, or a foreign central bank) to banks of which little or no collateral is required; also known as unsecured dollars and free money.
- The inflation-trap - Consumers caught-up in paying continuously rising prices due to unsecured dollars issued by the Feds.
- Hedge funds - An investment company that buy, holds, and sell commodities (oil, grains, natural gas, livestock, metals, etc.).
- Statement Setting Out the Seven Issues
- The Facts
- Relief Sought from the Court
STATEMENT SETTING OUT THE SEVEN ISSUES
B. Chairman Benanke's and Secretary Paulson's current bailout proposals will destroy the U.S. economy. Amongst the six other structural problems / issues identified below, the largely unsecured (not fully collateralized) $700 billion - $1 trillion will cause massive inflation, leading to collapse, or near-collapse, of the U.S. dollar. This inflation-trap can only be resolved by full collateralization of that cash OR not to do the bailout at all.
C. It is critical for the Court and Congress to understand that propping-up a few banks will surely not fix this problem. Since the credit crisis is system-wide, the $700 billion is merely a "band-aid," as the economy must continue to slide. As this lawsuit recommends to the Court, the approach must be system-wide; fundamental, structural changes must take place. For example, as explained below, debt-forgiveness from the wrongful, capricious, institutional debt committed by the Feds will quickly resolve the credit crisis.
D. IN ADDITION, there has been no discussion of how Government will unload the bad mortgage-back securities (MBSs), since the genus of Wall Street has not been able to do so. Whereby, Paulson's and Benanke's proposals are not viable. Even more dubious, they do not explain MBSs for the public's discernment. -- This lawsuit provides other practical approaches to correcting this problem without involving detrimental bailouts that would threaten our national security. EQUALLY SO, these solutions would be of minimal cost to taxpayers. (MBSs are typically owned and issued by banks, mortgage companies, investment houses, etc.)
E. If the Feds will not responsibly abide by the Federal Reserve Act of 1913 for protecting the public and the economy, then that "corporate law" must be deemed unconstitutional by the Court, as well as be repealed by Congress. Through unsecured loans, the cause of hyper-inflation, the Feds are transferring wealth to well-connected investors from American consumers. This is interstate consumer fraud.
F. On May 23 and June 3, '08, Petitioner Cobble sent registered letters marked "EMERGENCY LETTER TO CONGRESS" to four U.S. Senators informing them that it is the ill-advised policies of Chairman Bernanke and Secretary Paulson that caused the home mortgage crisis. They gave-out the trillions of dollars of unsecured loans throughout our financial institutions leading to the crisis, that's now manifested into a freeze-up in credit. This restraint on the credit markets, causing severe restrictions in trade throughout the nation, is in violation of anti-trust statute, 15 USC § 1. (This dissemination of the massive unsecured debt was investigated and first reported by Paul Solman, on PBS News Hour, Mar. 28, '08. The report, on DVD, was sent to Congress w/ Cobble's letters.)
G. Even further, with their proposals for bailing out Fannie Mae and Freddie Mac (FM & FM) without absolving the defunct mortgage-backed securities (MBSs) as continuing investment vehicles, Chairman Bernanke and Secretary Paulson are committing wanton neglect, of which their true intentions must be called into question. For, FM & FM will surely fail without converting or removing MBSs from their business model. (See notarized copy of 6/3/08 letter to Sen. Lamar Alexander as ATTACHMENT #1.)
H. After sending those letters to Congress, Cobble stated on his website (www.pro-se-litigants.org) that their policies were leading to the collapse of our economy. On May 27, Cobble sent [yet another] letter to Sen. Barak Obama (his senior advisors), asking him to file a lawsuit for injunctions to stop the actions of President Bush and Chairman Bernanke. The Senator did not respond to these issues.
I. The matter that's so scary, here, is Secretary Paulson's request to Congress for discretionary powers / decisions that cannot be reviewed by Congress or the courts, irreversible acts. Yet again, as one example, without redoing the FM & FM business models re: MBSs, FM & FM will surely fail. Thereby, Secretary Paulson's proposal for FM & FM is untenable, un-equitable, and provably doomed for failure. Again, what are his intentions? Is this yet another planned crisis?
J. Other huge questions are: Why are President Bush, Chairman Bernanke, Secretary Paulson, and some Republicans in Congress so resistant to mortgages being renegotiated? Wouldn't resumed mortgage payments again allow positive cash-flows from the mortgage pools on MBSs? Cobble believes the single answer to these questions is "greed." Rather than Wall Street go through the trouble and expense of re-negotiations, they want to shift this time-burden and expense onto Government and taxpayers. It once again exemplifies Wall Street's "something-for-nothing" mentality, and how this bailout is unworkable for the nation. There is no Spirit of the Law to abide by the Federal Reserve Act. The investors / banks are unreasonable in not wanting to lose any value from their holdings, but intend to shift all losses onto taxpayers, at approx. $3200 per citizen.
K. On Sept. 23, '08, Economist, Allan Meltzer (Carnegie Mellon University), said in effect that Secretary Paulson's plan is wrongheaded and does not address the fundamentals of the problem. He said, "No one has said if [Paulson's] plan would solve the problem."
L. On Sept. 25, '08, U.S. Sen. Richard Shelby announced his receipt of a five-page letter from leading economists who say that Secretary Paulson's plan is a bad idea, will not solve the problem, and will only make matters worse. This COMPLAINT gives material evidence of that assessment.
M. Wherefore, it is a matter of national security that those polices and practices be reversed by the Court (and Congress) and placed on a "course of equitable commonsense," as Cobble's written predictions have proven to be accurate. There is still time to prevent economic disaster. Below are the issues w/ resolutions in equity, balance and justice that addresses the apparent consumer fraud for acquisition of property (induced hyper-inflation), wanton neglect, injurious conflicts-of-interest, and inducement of capricious, odious debt.
1. Size of bailout with unsecured dollars will collapse the U.S. dollar; anti-trust violations already committed. It is Petitioner Cobble's understanding of the Feds' operation that only 10% of the $700 billion will be collateralized. The 90% will not. If so, then such massive amounts of unsecured cash will greatly worsen the current problem of inflation to surely reduce the value of the U.S. dollar to ZERO worth. It will collapse the economy, while Wall Street would walk away, scot free to use those fiat dollars as they would choose. The Federal Reserve Act of 1913 was never meant for exploiting our monetary system in this manner.
1A. As discussed, the policies of Chairman Benanke and Secretary Paulson have already compromised the economy; since 2000 the Feds have loaned-out trillions of dollars in unsecured loans causing severely overleveraged financial institutions, leading to the current credit crisis that's restricting trade. This violates 15 USC § 1 of the anti-trust laws. Whereby, their current proposal, as shown, can only be more detrimental to our fragile economic state. Should Congress approve the bailout, this Court must intervene in the name of national security, these anti-trust violations, as well as violation of the Federal Reserve Act. Again, this massive debt being created by the Feds is injurious, unjustified and capricious.
1B. A case-in-point: Troubled financial institution, A.I.G., is greatly overleveraged from the unsecured debt issued by Chairman Benanke and Secretary Paulson. Though other private investors have submitted three offers to buy A.I.G., these offers have been refused as Chairman Benanke and Secretary Paulson are still proposing to bailout A.I.G. with taxpayer dollars. This, too, is un-equitable and abuse of the Federal Reserve Act; A.I.G. may stay in the private sector and be sold.
2. Reversing the credit crunch w/ equitable forgiveness-of-debt and shake-out of bad mortgages (resetting the economy). The current crisis in credit was caused by the Feds quite irresponsibly lending-out trillions of dollars in unsecured loans to financial institutions. This, of course, began when the SEC allowed banks to operate hedge funds for buying-up commodities. Therefore, the condition of super-tight credit can be reversed by the Feds simply forgiving much of that unsecured debt, and without the requirement of bankruptcies so that companies / lenders may continue to operate without interruptions or costs. Participating lenders,in turn, would forgive much of the debt held by their customers. This forgiveness-of-debt would quickly return our economy to balance.
2A. The ratio / percentage of forgiveness should be determined equitably by beginning with the largest percentage of relief given to a single entity, such as a large bank. For example, if Chase Bank is forgiven for $40 billion that equals 90% of its debt load, then for public equity and justice, all other companies and individuals should be forgiven at that rate. Debts for individuals would be forgiven only by those participating lenders who directly or indirectly received unsecured loans from the Feds. -- Debt forgiveness is a way of resetting the economy.
2B. The following PARAGRAPH 7 explains how damaged mortgage pools may be returned to positive cash-flow, though their values would be reduced by each bad mortgage that's removed from the pools. As described, the "shake-out" of pools would comprise yet another opportunity to recoup losses for easing the credit crunch.
3. Shaking-out bad mortgages would resume payouts from mortgage pools on MBSs. Chairman Bernanke and Secretary Paulson are proposing to reverse auction bad mortgage pools for MBSs to the government. But at the Sept. 23, '08 hearing, Congress asked them, "How would we know the amount to bid on these MBSs if you cannot determine the value of the pools w/ their bad mortgages?" Chairman Bernanke responded by telling Congress that governmental bidders would have to guess at those values.
3A. For those who do not yet understand MBSs and mortgage pools, visit: www. pro-se-litigants.org/mortgage_backed_securities.
3B. With that question from Congress, you can easily discern, here, that accepting these bad MBSs by reverse auctions would not be equitable for the government, because they would be worthless so long as their pools' values cannot be assessed. President Bush, Secretary Paulson and Chairman Bernanke are asking us the to continue holding the bag of these worthless securities. ? And yet, the solution to this problem is simply to remove all the bad mortgages from the pools and return them to the neighborhoods of their homes, to allow local banks to bid on them with guarantees from the government (or FM & FM). This is called shaking-out the bad mortgages. Homeowners would then have the right to re-negotiate their mortgages. In this way, these bad mortgages will establish immediate value that can be assessed and appraised. (Again, the non-profit role of FM & FM can conduct this work.)
7C. With the bad mortgages removed from the pools, the pools can then be quickly valued, though obviously their adjusted values will be less with the losses of these mortgages. But at least payouts can again flow from the pools. In fact, these variable-adjusted pools would be quite feasible as investment instruments, but MBS-holders must be "formally warned" on their downside payouts for if and when bad mortgages occur. -- As bad mortgages are dropped from the pools, the pools, of course, are re-calculated for reduced payouts on MBSs.
3D. As alluded, Government or other entities may take-on the task of processing these bad mortgages through the local venues. If Government would guarantee re-negotiated mortgages, then the bad mortgages are released from the pool owners free-and-clear, though they should be allowed as tax write-offs for owners.
3E. As a matter of course, even pool owners, themselves, may process their own bad mortgages, after shaking them out from their pools. They may be sold to the local banks where the homes are venued for re-negotiations. Foreclosed homes may be placed on the open market.
3F. Here again, it is believed that mortgage pool owners (banks, investment houses, etc.) are aware of this option of variable-adjusted MBSs, but they want the easy way out of leaving taxpayers holding the bag of bad MBSs. It is a matter of inequity and violation of the Federal Reserve Act that Secretary Paulson's proposal cannot be legally accepted, but where these practical, credible options / applications in-equity are available to mortgage pool owners.
4. Bank-operated Hedge Funds (BOHFs) worsens inflation (the unlawful taking of money and property) and creates a damaging conflict-of-interest between banks and consumers. The Securities & Exchange Commission's (SEC) 1999 allowance for BOHFs provided a direct pipeline of unsecured public dollars from the Feds to purchasing commodities and investments. This process is what's creating the artificial product demand that's keeping prices rising (hyper-inflation).
4A. Investors borrow money to purchase commodities and other investments, without putting-up any money of their own. These purchases then create artificial demands that cause prices to rise. Consumers then pay for those unsecured loans by paying higher prices, so that investors acquire this property essentially for free.
4B. SINCE STARTING THIS PROCESS OF PROPERTY EXTRACTION IN 2000, with their BOHFs, banks are now interested in keeping interest rates dangerously low so as keep their trading costs low. -- But too low interest rates is chasing money away from our financial institutions (towards foreign markets) and thus diminishing economic activity. Thereby, it is within the public's interest to have competitively higher interest rates so as to attract investments from foreign venues, as well as keep U.S. capital in U.S. institutions. (Competitively high rates is defined as rates that are slightly higher, lower than- or matching the highest rates of another country's central bank.)
4C. This capricious, odious practice is circumstantial evidence of President Bush's and Chairman Benanke's persistent policy of keeping the prime interest rate so low, currently at 2.25%. By contrast, President Clinton kept the prime rate well above 5.25% during the boom years of his tenure. -- When President Bush came into office in Jan. 2001, the prime rate was 5.84%, and he promptly began to reduce it.
4D. It's reasonable to presume that BOHFs are making more money on a single commodities trade than doing the work of multiple consumer transactions of banks. The persistently low interest rates is evidence that banks prefer commodities trading rather than looking after their retail consumers. It again exemplifies the injurious conflict-of-interest between consumers and BHOFs.
4E. On May 2, '08, the Feds announced that investment banks, such as Respondent Goldman Sachs, may now borrow directly from the Feds, whereas before, only commercial banks could do so. So that now, investment banks also have a direct pipeline to acquire public funds, by unsecured loans, for channeling into their investments, that includes commodities trading. Once again, this is why prices keep rising, an improper use of public funds that is transferring wealth into the hands of well-connected private investors.
4E. Wherefore, 1) BOHFs must be abolished, so that banks will once again want competitively higher interest rates and stop generating artificial demand that keep prices rising by buying-up commodities and investments with unsecured Feds funds. 2) The restriction of the Feds exclusively supplying cash to commercial banks must be resumed.
5. Full collateralization by banks will prevent inflation; it's otherwise the unlawful taking of consumer dollars. As specified, when loans from the Feds are not fully collateralized by banks (unsecured loans), they cause an inflationary rise in consumer prices that cycles-back to paying for those loans for investors who put-up little or no money. Hence, these well-connected investors, in effect, acquire their property (commodities, investments, etc.) for free on the backs of consumers that pay ever-higher prices.
5A. property acquisition and force everyone to live within their means. This otherwise inequitable practice is a fraud that imposes capriciously deceptive surcharges upon consumers. To stop this, banks must be required to put-up full collateral for their loans for the Feds.
6. Bailout of Fannie Mae & Freddie Mac (FM & FM) must surely fail with faulty mortgage-backed securities. Secretary Paulson's current proposition of public bailouts of FM & FM are not equitable for American taxpayers, because the mortgage crisis has proven that mortgage-backed securities (MBSs) are not workable, the underlying cause of the crisis. The mechanics of MBSs in current form are inherently faulty. Therefore, their current format and mechanism must be outlawed and abolished.
6A. EQUALLY SO, both FM & FM are failing due to their diametrically-opposed mandates of being non-profit operations (guaranteeing its mortgages to lenders) and for-profit entities (paying dividends & guaranteeing liquidity of the MBSs for investors). Taxpayers cannot be legally held to underwrite this unworkable business model where they are left holding the bag. Secretary Paulson is legally required to propose fully equitable options where taxpayers may endure minimal losses so long as the investors are also enduring losses. -- Please see ISSUES 6 and 7, below, showing how MBSs may be converted for positive cash-flow, or be safely eliminated w/ retained equity.
6B. The bottom line here is that before FM & FM can equitably and reasonably ask for governmental assistance, they must decide their discernable mission and practical business function. They cannot simultaneously be non-profit and profit entities. And again, MBSs in their current form must be abolished. (See PARAGRAPH 7, below, for how bad MBSs may be converted to positive cash-flows.
7. Mammoth sizes of FM & FM is imminent threat to economy / national security. It's simply not true, as proposed by Secretary Paulson, Chairman Bernanke, and some Congressmen, that FM & FM must remain intact as-is to prevent more havoc within the economy. To the contrary, the sheer mammoth sizes of FM & FM in their fragile financial states are just as dangerous for the mortgage industry as MBSs have been. If either company fails, then the economy will follow with deleterious downturn. Therefore, it is only common sense, for national security, that FM & FM be broken-up into much smaller companies. OR these FM & FM should be dissolved with their mortgages dispersed back to the communities where their respective homes are venued. Bad mortgages may be re-negotiated with local banks (w/ governmental guarantees, of course). Our nation remains vulnerable with FM & FM at their current sizes.
7A. Since Secretary's Paulson's bailout plan would preclude Congressional and court review of even his discretionary actions, there is every reason to believe that FM & FM will collapse, because the defunct
MBSs are still in use. Again, no effort is being made by Secretary Paulson to convert this business model of FM & FM. Therefore, the eventual collapse of FM & FM is imminent.
7B. If FM & FM are broken-up: To preserve U.S. credibility, current investors of FM & FM may continue to receive payments from mortgages attached to their defunct MBSs, until those MBS-values are paid-out. (See ISSUES 6 and 7, below.)
8. In or about the year 1999, the Securities & Exchange Commission (SEC) gave approval for allowing banks to operate hedge funds (BOHFs). This provision provided a direct pipeline of unsecured public dollars from the Feds to purchase commodities and investments. Feds dollars are now divided between private investors and consumer needs.
9. Shortly after President Bush took office in Jan. 2001, his administration promptly began a policy of reducing the Feds' prime interest rate, and he has continued that policy of low interest rates throughout his tenure.
10. When taking office in Jan. 2001, the Feds prime interest rates was approx. 5.84%. As of the date of this COMPLAINT, the prime interest rate was 2.25%.
11. The policy of low interest rates reduce the trading costs for hedge funds (commodities) trading for managers who borrow money for those trades; it conflicts with the need for higher competitive rates needed for economic growth.
12. BOHFs prefer low interest rates to reduce the costs of their commodities trading. They make more money from a single commodities' trade than from multiple consumer transactions.
13. On or about May 2, '08, the Feds announced that it would begin to loan money to investment banks, but where Feds' loans had previously only been given to commercial banks.
14. On May 23, '08, Petitioner Cobble submitted by registered mail two letters to Congress marked "EMERGENCY LETTER TO CONGRESS," respectively addressed to U.S. Senators Arlen Spector and Barak Obama (RE 283 467 845 US and RE 283 467 859 US). Those letters explained the pending onslaught of the current crisis.
15. On June 3, '08, Petitioner Cobble submitted by registered mail two letters to Congress marked "EMERGENCY LETTER TO CONGRESS,", respectively addressed to U.S. Senators Lamar Alexander and Herb Kohl (RE 283 449 775 US and RE 283 449 784 US). Those letters explained the pending onslaught of the current crisis. See the notarized copy of Cobble's letter to Senator Alexander as ATTACHMENT 1.
(1) Size of bailout with unsecured dollars will collapse the U.S. dollar, anti-trust violations already committed.
16. unsecured dollars issued by the Feds cause hyper-inflation.
17. The greater the amount of unsecured dollars issued by the Feds, then the greater the inflation that shall result.
18. Since approx. the year of 2000, the Feds have loaned-out trillions of dollars of unsecured loans to banks, leading to the current credit crisis that has severely restricted trade throughout the nation.
19. Chairman Bernanke and Secretary Paulson approved the Feds to loan-out trillions of dollars of unsecured loans to banks that were then lent to other financial institutions. These institutions became so overleveraged in debt that it froze-up their lending to the public at-large, leading to the current credit crisis that has severely restricted trade throughout the nation.
20. Troubled financial institution, A.I.G., is greatly overleveraged from the unsecured debt issued by Chairman Benanke and Secretary Paulson.
21. Though other private investors have submitted three offers to buy A.I.G., these offers were refused by A.I.G. as Chairman Benanke and Secretary Paulson are still proposing to bailout A.I.G. with taxpayer dollars.
(2) Reversing the credit crunch w/ equitable forgiveness-of-debt.
22. The current crisis in credit was caused by the mortgage-selling frizzy resulting from the Feds lending-out trillions of dollars in unsecured loans to banks; these banks then provided unsecured loans to other investors and financial institutions. (This is called the channeling of Feds dollars.)
23. The channeling of Feds dollars, as unsecured loans, accelerated after the SEC started allowing banks to operate hedge funds (BOHFs).
24. Secretary Paulson and Chairman Benanke allowed the unfettered Feds' policy of giving-out trillions of dollars in unsecured loans that lead to the current mortgage and credit crisis. That odious, unlawful policy is why so many financial institutions are overleveraged in debt.
25. The forgiving of the Feds odious, irresponsible debt would quickly return the accounting records of financial institutions to balance, so that credit would then become available for businesses and consumers.
26. Secretary Paulson and Chairman Benanke have not taken responsibility for their unfettered policy of giving-out trillions of dollars in unsecured loans.
27. Secretary Paulson and Chairman Benanke have not taken responsibility for their neglect of giving-out trillions of dollars in unsecured loans.
28. On Mar. 28, '08, Paul Solman reported on PBS Television that many banks provided trillions of dollars of unsecured loans to financial institutions, to finance MBSs, other securities, mortgages, hedge funds, and derivative funds. This massive amount of unsecured dollars can only be originally issued by the Feds.
(3) Shaking-out bad mortgages would resume payouts from mortgage pools on MBSs.
29. Chairman Bernanke and Secretary Paulson are proposing to reverse auction bad mortgage pools for MBSs to the government. But on Sep. 23, '08, Congress asked them, "How would we know the amount to bid for if you cannot currently assess the value of the pools and their bad mortgages?" Chairman Bernanke responded by telling Congress that governmental bidders would have to guess at the values.
30. Accepting bad mortgage pools by reverse auctions would not be equitable for the government, because their MBSs would be worthless so long as their pools' values cannot be assessed.
31. However, bad mortgages may be removed from a pool and returned to the neighborhoods of their homes, to allow local banks to bid on them with guarantees from the government. The pool can then be easily valued, though obviously that adjusted value will be less than its original value. This is called shaking-out the bad mortgages. Payouts can once again flow from the pools to MBS-holders, or pool owners.
32. Homeowners could have the right to re-negotiate their mortgages. These bad mortgages would then establish immediate value that can be assessed and appraised. Foreclosed mortgages can be re-sold on the open market. Here, additional cash-flow is generated.
33. Bad mortgages may be dropped from the pool as they occur and the pool's value be re-assessed accordingly. Since the government could take-on the task of processing and guaranteeing the bad mortgages, these mortgages may be released from the pool owners free-and-clear.
34. Pool owners, themselves (banks, investment houses, etc.), may also choose to process their own bad mortgages after shaking them out from their mortgage pools. They may be sold to the local banks where the homes are venued for re-negotiations. Foreclosed homes may be placed on the open market. Here, too, FM & FM or Gov'mt may guarantee these mortgages.
(4) Bank-operated Hedge Funds (BOHFs) worsens inflation (the unlawful taking of money and property) and create a conflict-of-interest that harms the economy.
35. Competitively high interest rates attract capital into U.S. banks and financial institutions.
36. Since approx. the year of 2000, the Feds have loaned-out trillions of dollars of unsecured loans to banks; the banks then provided these dollars to BOHFs as well as other financial institutions for investments that include mortgage pools in the housing markets and other commodities.
37. The purchasing of commodities and investments from unsecured loans, of which well-connected investors put-up little or no money, artificially increases demand for those commodities, etc. and thus their respective prices rise. These loans are paid back through the increase in prices that consumers pay.
38. This practice of BOHFs trading in commodities has created an interest in their banks wanting to keep interest rates as low as possible, so as to reduce the cost of commodities trading. By contrast, prior to 2000, banks have always sought to keep interest rates as high as possible for consumer transactions.
39. President Bush's policy of keeping interest rates low facilitates the commodities trading of BOHFs.
40. Banks provide unsecured loans to investors of their BOHFs.
41. Respondent Goldman Sachs provide unsecured loans to its premier investors.
41A. Respondent Goldman Sachs acquires unsecured loans from the Feds.
42. Respondent Goldman Sachs is a member of the Intercontinental Commodities Exchange.
(5) Full collateralization by banks will prevent inflation and stop the unlawful taking of consumer dollars.
43. When loans from the Feds are not fully collateralized by banks (unsecured), they cause an inflationary rise in consumer prices that cycles-back to paying for those loans for investors who put-up little or no money. This is an unlawful taking of money and property by investors that has not been identified for the courts.
44. Requiring banks to collateralize would, in-turn, would force bankers to require collateral from investors who borrow from them. Therefore, the discipline of collateralization (also called monetization) reduces the run-up in buying commodities, because then investors would have their own property at risk, and be restricted to the collateral that they can put-up.
45. The Feds do not require full collateralization of their loans to banks.
46. Full collateralization by banks would prevent inflation, to eliminate the inflation-trap.
(6) Bailout of Fannie Mae & Freddie Mac (FM & FM) must surely fail with faulty mortgage-backed securities.
47. At www.pro-se-litigants.org/mortgage_backed_securities, Cobble graphically illustrates how mortgage-backed securities (MBSs) failed the financial markets. Wall Street bankers and investors attempted to package home mortgages into pools, similar to traditional commodities (livestock, oil, metals, grains, etc.) for hedge fund trading. They thought that MBSs allowed for selling U.S. mortgages to foreign investors.
48. But after a few short years of implementing MBSs, Wall Street bankers realized that they are not workable, because each mortgage develops its own financial history affecting the value of the "pool." Thereby, with numerous foreclosures, it's virtually impossible to determine the pool's value, because each foreclosed home must be individually appraised and continuously evaluated for determining its value at-large for the pool. This includes tracking the titles of foreclosed homes.
49. As a result, the maintenance costs of valuation, as well as the homes' inherently fluctuating values, makes it tenable and almost impossible to assess the value of the pools after investors pull-out of their initial MBS-holdings. The pools cannot be resold, because their values cannot be actualized at any given time for sale to new investors.
50. FM & FM are unique to the mortgage crisis for two important reasons. First, they guarantee that their investors will not lose money on MBSs. This is called an arbitrage, and is the reason why both companies keep loosing so much cash.
51. Second, both companies guarantee the mortgages held in their mortgage pools. When a home is foreclosed, then FM & FM must reimburse the lender for that mortgage at its remaining balance that's not paid by the borrower.
52. FM & FM have not changed their business model from using MBSs that would make its business model viable.
53. Secretary Paulson and Chairman Benanke have not proposed a change in FM's & FM's business model that does not use currently structured MBSs.
54. Secretary Paulson, Chairman Bernanke and Congress are proceeding with bailing out FM & FM with the use of MBSs that are not functional and causing the companies to bleed money. It is safe to presume that FM FM will continue to bleed cash until they collapse, or unless there is a indefinite feed of cash from taxpayers. FM & FM may be caused to collapse just by stopping the in-flow of tax dollars.
55. It is safe to presume that MBSs will cause FM & FM to collapse by continuing to bleed money from its arbitrage for investors, and foreclosures.
56. The option of shaking-out bad mortgages is available to pool owners for returning to positive cash flows.
57. FM & FM cannot function successfully with dual-mandates of non-profit companies that guarantee its mortgages and as for-profits for paying dividends and guaranteeing MBS payouts.
(7) Mammoth sizes of FM & FM is imminent threat to economy / national security.
58. Upon FM & FM collapsing while in their currently huge formats, they will cause a great economic disaster within the housing markets, as well as upon the nation, at-large.
59. Secretary Paulson and members of Congress have expressed their intentions of keeping FM & FM intact as two huge companies. They have not expressed interest in breaking-up these two companies into several smaller companies as a matter of national security.
60. During the past months, Secretary Paulson and members of Congress have stated that collapse of FM & FM would completely collapse the housing market as well as possibly push the economy into an acute economic recession, or depression. If so, then why does the Secretary and Congress not insist that FM & FM be divided into several companies to reduce their threats of a national disaster?
61. Secretary Paulson and members of Congress have insisted that FM & FM must be preserved, but they have not rebutted that mortgages may exist in a safer business model that includes returning them to the venues / neighborhoods of their homes.
Violation of the Federal Reserve Act of 1913
62. Chairman Benanke and Secretary Paulson have abused the Federal Reserve Act by distributing trillions of dollars of unsecured loans to banks, that has caused hyper-inflation of the housing market, and now has spread into other markets. Banks and other financial institutions have become so overleveraged in massive debt that has caused the current credit crisis that's restricted trade / economic activity.
Violation of the Federal Reserve Act of 1913
63. President Bush, Chairman Benanke and Secretary Paulson have abused the Federal Reserve Act by proposing to bailout financial institutions from heavy debt of which they themselves caused those institutions to become overleveraged in debt.
Violation of the Federal Reserve Act of 1913
64. President Bush, Chairman Benanke and Secretary Paulson have abused the Federal Reserve Act by proposing to bailout A.I.G. from heavy debt of which they themselves caused A.I.G. to become overleveraged in debt. Their proposal is not equitable, because private investors have submitted three offers to purchase A.I.G. A.I.G. has refused these offers so that it can be bailed-out by taxpayers, as proposed by President Bush, Chairman Benanke and Secretary Paulson.
Restraint of Trade, Anti-trust Statute > 15 USC § 1
65. Chairman Bernanke and Secretary Paulson approved the Feds to loan-out trillions of dollars of unsecured loans to banks leading to the current credit crisis that has severely restricted trade throughout the nation. These are violations of 15 USC § 1, restraint of trade.
Bailout Plan Not Equitable; Crisis Resolved w/ Debt Forgiveness
66. Chairman Benanke and Secretary Paulson have abused the Federal Reserve Act by distributing trillions of dollars of unsecured loans to banks, that has caused hyper-inflation of the housing market, and now has spread into other markets. Banks and other financial institutions have become overleveraged in massive debt that has caused the current credit crisis that's restricted economic activity. This damage to the economy can be largely corrected by the Feds simply forgiving much of that bad debt, so that finance companies may free-up and restore balance to their accounting. This means free-and-clear forgiveness without the requirement of filing bankruptcies.
Conflict-of-interest is Damaging U.S. Economy
67. When allowing banks to operate hedge funds, the SEC created a persistent conflict-of-interest between BOHFs and U.S. consumers. BOHF want the lowest interest rates they can get, and Fed policy and President Bush have happily facilitated low interest rates. On the other hand, too low interest rates chase investment capital away from U.S. financial institutions to diminish economic activity, for losses of: capital for business, jobs to consumers, and credit availability.
67A. This conflict-of-interest should be eliminated by abolishing BOHFs, so that banks can only benefit from the prosperity of U.S. consumers. The Feds' mandate does not intend for Banks to benefit from consumer
misfortunes of a diminished economy.
Unlawful Acquisition of Property Through Hyper-inflation
68. Each time we pay a higher price for something, that payment goes for the acquisition of property by an investor who [did not] put-up money to acquire that property. This process of property extraction, of course, is accomplished through hyper-inflation, the issuing of unsecured loans originating from the Feds, for investors to buy-up commodities and investments to cause artificial product demands for respective rises in prices that consumers pay. (See the practical example of inflation as ATTACHMENT #2: The Wayward Wrist-watch.)
68A. Government cannot compel this unlawful "inflational surcharge" for enriching private investors at the expense of consumers. Hyper-inflation is virtually eliminated by simply requiring banks to fully collateralize the dollars they borrow from the Feds. When bankers then require investors to collateralize their borrowing for investments, no unsecured dollars are issued that can cause inflation.
Bailout of FM & FM is an Un-equitable, Capricious Contract
69. Chairman Benanke's and Secretary Paulson's proposal of bailing out FM & FM without resolving the unworkable mortgage-backed securities (MBSs) will cause these companies to fail. FM & FM have very many bad mortgage pools that are not yielding for their MSBs, and so these companies can only continue to spill-out cash until they collapse.
69A. The Chairman and Secretary must eliminate MBSs from the business model of FM & FM, most especially since other options are available. They
cannot legally engage U.S. Taxpayers into a contract that they know will not save FM & FM, a capricious contract.
Bailout Plan for FM & FM Threatens National Security
70. Chairman Benanke's and Secretary Paulson's proposal of bailing out FM & FM without resolving the unworkable MBSs will cause these companies to fail. FM & FM have very many bad mortgage pools that are not yielding for their MSBs, and so these companies can only continue to spill-out cash until they collapse. When these companies fail, they will very likely cause the mortgage industry to collapse, as well the currently fragile U.S. economy.
70A. The Chairman and Secretary cannot legally engage U.S. Taxpayers into a critical contract with glaring evidence of failure, and that threatens the U.S. economy, most especially with viable options available.
71. Chairman Benanke's and Secretary Paulson's proposal of bailing out FM & FM without resolving the unworkable MBSs is wanton negligence.
Retaining Sizes of FM & FM Threatens National Security
72. Chairman Benanke's and Secretary Paulson's proposal of bailing out FM & FM without breaking them up into smaller companies, or dissolving companies to fail. FM & FM have very many bad mortgage pools that are not yielding for their MSBs, and so these companies can only continue to spill-out cash until they collapse. When they fail, it will be disastrous for the U.S. economy, too.
72A. The Chairman and Secretary cannot legally engage U.S. Taxpayers into a contract that they know will not save FM & FM, and thus threatens to further damage or destroy the U.S. economy.
73. Chairman Benanke's and Secretary Paulson's proposal of bailing out FM & FM without resolving the unworkable MBSs is wanton negligence.
Retaining Sizes of FM & FM is a Threat to National Security
74. Chairman Benanke's and Secretary Paulson's proposal of bailing out FM & FM without breaking them up into smaller companies, or dissolving the companies and returning the mortgages to their home localities, is a threat to national security. If either of FM & FM fail in their currently giant sizes, then such failure will cause the housing industry to collapse. To avoid this threat, these companies cannot remain their currently mammoth sizes, but must be broken-up or dissolved.
75. Chairman Benanke's and Secretary Paulson's proposal for bailing out FM & FM without breaking them up or dissolving them is being wantonly neglecting national security.
SEC & Banking Industry Commit Consumer Fraud
76. In or about 1999, the SEC approved for banks to operate hedge funds (BOHFs). That action allowed banks to draw on unsecured loans from the Feds and channeled into BOHFs and other investment houses, for the buying-up of commodities and other investments; those massive purchases created artificial demand resulting in the ongoing hyper-inflation of consumer prices. Such as the mortgage crisis, the more unsecured dollars pushed into the economy then the higher the prices climbed. This consumer fraud is an unlawful manipulation of prices that the banks are using to acquire property from the higher prices that consumer pay.
Bailout Plan Not Equitable
77. Chairman Benanke's and Secretary Paulson's proposal to buy-up $700 billion of bad MBSs is un-equitable, because these securities are worthless unless value can be assessed for them. They are asking taxpayers to hold the bag on these securities, while the banks walkway with taxpayer dollars. But as a matter of equity and responsibility for reducing taxpayer exposure, these leaders are required to adopt an equitable solution that will at least match taxpayer exposure with the banks' exposure. For example, banks may shake-out bad mortgages from their mortgage pools to again effect positive cash flow. Bad mortgages can then be individually re-negotiated or re-sold for additional positive cash flow.
Bailout Plan Threatens National Security
78. Chairman Benanke's and Secretary Paulson's proposal of supplying $700 billion - $1 trillion will cause accelerated hyper-inflation if those
dollars are not fully collateralized / backed (monetized). That scenario is what lead to the hyper-inflation of the mortgage market, and has now spread to all other markets. Therefore, implementation of their proposal will exacerbate this current crisis to surely reduce the value of the dollar to NEAR ZERO, to cause collapse of the U.S. economy.
Relief Sought from the Court:
AA. Stop the Inflation-trap. For once-and-for-all the Feds and Wall Street's practice of the inflation-trap is unlawful and must stop. Banks must be required to fully collateralize their loans from the Feds of which would prevent hyper-inflation, the acquisition of property by well-connected investors from constantly rising prices that consumers are forced to pay.
BB. Repairing mortgage-backed securities. Abolish the proposal of President Bush, Chairman Benanke and Secretary Paulson, that wants to bailout banks and finance institutions, on the basis that their proposal is not equitable. They want taxpayers to hold the bag of worthless securities while the banks walk-away with the cash. But the pools of MBSs can otherwise be converted into positive cash flows by shaking-out bad mortgages. For additional cash-flow for banks, require re-negotiation of these bad mortgages and re-sale of foreclosures w/ governmental guarantees.
CC. Restoring credit markets. Stay the proposal of President Bush, Chairman Benanke and Secretary Paulson, that wants to bailout banks and finance institutions, on the basis that their proposal is not equitable and continue to damage the U.S. Economy. They have violated the Federal Reserve Act of 1913 and 15 USC § 1. Instead, their violations can be quickly corrected by the Feds forgiving that massive unjustified debt held by these institutions. This would quickly help to balance the books of financial institutions and serve to free-up credit markets.
DD. Credit relief for consumers. Those institutions who qualify for relief would be required to give the same level of relief to their consumer-borrowers.
EE. Preserving national security. Abolish the proposal of President Bush, Chairman Benanke and Secretary Paulson, that wants to bailout banks and finance institutions, on the basis that the proposal is a direct threat to the U.S. economy / national security, as aforementioned equitable, less expensive alternatives are available.
FF. Stopping hyper-inflation. Abolish the unfair practice of banks operating hedge funds to stop the channeling of Feds dollars to investors for acquiring property. This will stop hyper-inflation.
GG. Stopping hyper-inflation. Require that banks put-up full collateral for the money they borrow from the Feds. This will stop inflation, by bankers also requiring investors to collateralize their loans for investments. Investors can then only purchase what they can afford, eliminating the excess unsecured dollars that cause inflation.
HH. Stopping hyper-inflation. Abolish the practice investment banks getting dollars from the Feds. This conflict-of-interest and capricious practice give investors unfair access to public funds. Investors should be compelled to use their own money / assests for investments.
II. Stop the injurious conflict-of-interest caused b BOHFs. Abolish the practice of banks operating hedge funds to stop the conflict-of-interest between banks wanting low interest rates for their commodities trading and consumers who need competitively-high interest rates for healthy economic activity.
JJ. Stop channeling Feds dollars to private investors. Abolish the practice of banks operating hedge funds. This gives unlawful pipelines of unsecured dollars to investors that buy-up commodities and other investments, that are paid-for by the inflated prices that consumers pay.