The troubled American housing industry has just been racked with more problems.
Foreclosures have been halted in many states as allegations surface of widespread fraud by the banks and mortgage companies in expediting foreclosures.
Now there are mounting calls for a national moratorium on foreclosures. But many fear that such moves could deteriorate the ailing housing market.
The following is the transcript of an interview Press TV conducted with Max Keiser, a money markets analyst.
Press TV: How could this have happened?
Keiser: I worked on Wall Street for many years and the practice of forging documents is pretty common but what we see here is an "assembly line approach" where thousands of documents are being forged, all the mortgagers have been fraudulently reconceived.
There is actually another dimension to the crime. After they sold these fraudulent mortgagers, they wrapped them up into securitized, collateralized mortgage obligations and sold them on to banks, yet another fraudulent part of this escapade.
I am hearing from my sources in Europe and in the Middle East, the Hedge Funds and Big Money, they plan to attack the US dollar tomorrow in a very substantial way. They are completely fed up with Walls Fargo, J.P. Morgan and the Federal Reserve Bank, they want to take the American economy offline completely, they are sick and tired of the fraud, they are sick and tired of the Treasury Secretary Tim Geithner who is a financial terrorist and they are going to push the price of gold up to 1400 dollars an ounce, possibly tomorrow, as a result of this fraud. The big money is sick of it and they are going to take American economy offline.
Press TV: Who has the money, where has all the money gone?
Keiser: First of all let's be clear about something. In a lot of scandals, you can point to one guy, Hank Paulson. When he was the CEO of Goldman Sacks, before he became the treasury secretary. As CEO of Goldman Sacks, he unwound many of these mortgage contracts from the Goldman banks, they were the only bank that didn't get caught up in this scandal and then as treasury secretary, he made sure that Goldman Sacks got bailed out from their positions through AIG and other foreign interests.
So there is a clear oligarchy in America, Hank Paulson is from that oligarchy, they are working against the interests of the people of the US. To reiterate my point, Americans at this point don't deserve to have their own country. A lot of big money around the world is going to drop the dollar and basically disenfranchise the US economy. This is not just a remark in passing, this means that the US economy goes belly up effectively and the dollar gets completely wiped out the face of the earth and gold goes to 1400, 1500, 1600 dollars an ounce because the big money in the world is sick of the liars, Tim Geithner, Barack Obama, Ben Bernanke, they are sick of the financial terrorism, they are sick of the grand standing, and they are going to drop kick them over gold post into a sea of their own bad debts. So forget about the specifics here, we are talking about wholesale countrywide loss of their sovereign credit. The US government bond will be about as valuable as garbage.
Press TV: What about the bottom dollar falls for the person who took out the loans themselves?
Keiser: This is a kind of propaganda that is going to disserve the American people, and we are talking about 1400, 1500 dollars an ounce tomorrow on its way to 5000 to 10000 dollars an ounce as the US dollar loses its place as the world reserve currency. It is openly being discussed by the IMF, the World Bank and other institutions today.
Read the newspapers, the people who took out these loans were not to blame for taking out these loans, if the bank that gives them the loans immediately sells them in the open market, thus completely absolving itself from any risk of owning that loan. Then, in 2008 Hank Paulson goes to Congress and say, "Well, we sold a lot of loans that we cannot make good on, we sold them off to secondary market, give us 750 billion dollars or we are going to threaten martial law in the US."
That is the kind of shenanigan that Paulson and his partners are up to. It is a completely asymmetrical relationship. The people who took out these loans were not taking the same risks as the people who gave them these loans and these folks, the bankers, are in the firing line, like the IRA in Ireland is now reconstituting itself and they are targeting bankers. Why? Because bankers are the terrorists now and they are going to have to face the music.
Press TV: Financial institutions were at the brunt of the problem of the subprime market fiasco and it was found that there had been widespread lending abuse. Former Federal Reserve Chairman Alan Greenspan said that he had been aware of some of these practices but realized the significance of it late, in 2005 and 2006. So why wasn't anything done at that time? How could an industry such as the financial industry in the US be so unregulated that something like this could happen again?
Keiser: The phrase that is used in economics in "moral hazard." There is always a bit of wiggle room in economics where you allow a bit of criminal behavior to go unnoticed because you benefit in terms of liquidity.
But what has happened is that this moral hazard becomes the only thing at which the US is good at the moment. Without the moral hazard, the banks would not be making any money whatsoever and this has become a cancer in the US financial system. It started off with saying, “Well, we are just going to look the other way and let some morally reprehensible behavior not be prosecuted. This has become the de facto sole business of the US where the financial sector accounts for 30 to 40 percent of the other line GDP if you are to count all the financial ancillary parts the financial sector is involved with.
America has become a huge Ponzi scheme, the foreclosure market is effectively dead and we are going to have a moratorium on all foreclosures. This means that banks are going to write off hundreds of billions more debts, they are going to have to disclose that these debts are not worth 100 cents on the dollar, they are worth zero cents on the dollar. This is causing a huge collapse in the banking sector which is going to mean that the banks go back to Congress looking for another huge bailout and then there is going to be a popular uprising.
Press TV: There are many analysts who say megabanks are the main problem of this whole scenario, how do you see it?
Keiser: Well, once again the government is not stepping in to support these large banks. It has become an industrial policy, it has become like the US government is not allowing for free competition to exist in the banking sector whatsoever. They now own the banking sector outright. So they are not allowing for the machination of business to progress as you would normally assume that they would. So they are in fact propping up. Institutions like Freddie Mac right now are trying to artificially keep the house prices high. The original mandate of Freddie Mac was to keep home prices low. Now they are trying to keep home prices high to avoid having the banks to disclose that there are massive debts on their balance sheet. That is moral hazard.
There is a complete pandemic across the entire banking sector where they have no idea what any of these bonds are worth. Now the market is saying hold on we are not going to trade these bonds whatsoever and the global banking community is saying to the dollar which is now trading at a 15-year low against the yen, dropping against every major currency in the world, heading down to oblivion. It will no longer be the world reserve currency. They are saying we do not want any part of this US economy which is caboose, preventing the rest of global economy from going forward. The US economy is the biggest drag on the rest of the economy. It is the caboose that is keeping the globe from growing and the rest of the world is saying we want to get rid of it.
Press TV: Besides the forging of the information that kicks home owners out of their property prematurely, some analysts are saying that the opposite is taking place, meaning that some home owners have actually been allowed to live in their homes over a year after not paying their mortgages because the federal government wanted to deflate the number of actual foreclosures. What do you say about this possibility?
Keiser: It is up to mortgage writer to make sure that the date of the information on mortgage form is accurate. It is their responsibly which they clearly overlooked and then you enter this period where fraud and general criminality and racketeering between Walls Fargo, J.P. Morgan, the rating agencies, the fund managers, it is a racket. The only way we can get to the bottom of this is to take them down to court and prosecute them as a racket because this is a case of racketeering.
The underlying damage to the US economy is quite significant and I don't think American people understand at this hour how damaging this is going to be. Going forward a week from now even, when we talk about that, we will be discussing this in a completely different terms. This is effectively a bank holiday we are talking about where the banking sector had to shut down while they sort this out as was done in the 1930s which was also the last time the US was going through a depression as it is going through right now.
So the events are playing out as they did historically once again and you can talk about it in rosy terms and pretend that that is not the case but the global hedge fund community is saying that we don't want to be in dollars any more, we don't trust American economy any more and this is going to completely undermine American ability to compete even though it can hardly compete now as it is.
