Tweet
The story from Housing Wire sounded pretty formal: the Federal Reserve Bank of New York was stepping up with a plan to fix the looming securitization and chain of title problems in housing, which could cost the big banks tens of billions, if not more, to fix. Given that the FRBNY is essentially controlled by Wall Street banks, the result of these meetings will undeniably be some kind of legal reverse engineering that will indemnify violations of the law and cure the system.
There’s only one problem with this. The Federal Reserve Bank of New York has about as much control over the legal issues in securitization as I do. They have no jurisdiction whatsoever over the process. State courts are the arbiter of these transactions and whether they were done legally.
I appreciate the FRBNY’s spunk in trying to legalize MERS, but they simply have no jurisdiction to do so.
But the New York Fed said solutions are on the way. The Uniform Law Commission and the American Law Institute, which facilitated the recent meetings, seek to clarify and update federal and state laws governing the securitization process.
They “have joined forces with various stakeholders, including the Federal Reserve Bank of New York, to deal with the legal complexity and the fact that much of the applicable law no longer adequately reflects modern financial practice and technological developments,” the N.Y. Fed said.
The two organizations also drafted a report to guide judges and lawyers involved in the transactions, and, the central bank said, should make the application of present laws more transparent.
This is about as important to the state courts dealing with the chain of title fallout as if Ashton Kutcher and the London Philharmonic joined forces and wrote up a report for judges and lawyers on how to deal with the issue. I’m sure the NY Fed really wants to affect the process for their big bank paymasters, but they are essentially powerless in this regard. You could maybe expect some judges to listen to them on one or two points, as the issues are complex and perhaps new to some courts. But that’s on the judges. In truth, this is a con job, where a group with an official-sounding name tries to bully the legal system into doing their bidding.
To better follow the ups and downs of MERS, you should check out SourceWatch and their MERS page. It’s an extensive listing of the latest developments.
14 Comments
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
When I read this, the first thing that came to mind was “a draft of model legislation to present to Congress to enable MERS to keep operating.”
Now FRBNY can recommend legislation, can’t it? And legislation does constitute what Washington calls a “a solution”, doesn’t it?
Oh, and state laws too? Amendments to 50 state real estate laws that make registers of deeds irrelevant? And with 50 states, much harder to overturn.
“Fix” is the correct verb, David. And jurisdiction is irrelevant.
This is a great piece, David.
From time to time in our lives an untenable situation comes up in gov’t, quasi gov’t, or proxy gov’t, and some entity without juridsiction but the how-to knowledge steps in to save the day.
Then the courts are summoned, but they figure out there is no alternative way to meet a need, so it goes forward anyway. At that point it was something the courts might not have jurisdiction to decide, no? And yet, . . .
The problem is really Congress, I think, which too often avoids accountability or always makes clear who can do what, and allow for most any contingency imaginable
Upstairs – FDL Book Salon. Andrew Kolin, State Power and Democracy, Hosted by Marjorie Cohn.
That sounds more like the NY Fed – Timmy Geithner’s old stomping ground – continuing to do what Geithner made his role in life: protect the MOTU. The idea that it would change its spots in order to rein in their most damaging, but profitable, excesses does not pass the smell test.
Besides, why on earth would normal people want to legalize MERS’s existing practices? Its reason for being and its conduct is to simplify securitizations – making money for Wall Street, which comes from homeowners – by sidestepping a raft of state laws that exist to protect and fund state and local community interests.
“There’s only one problem with this. The Federal Reserve Bank of New York has about as much control over the legal issues in securitization as I do.”
Not to worry! They’ll just invoke the Interstate Commerce Clause and, voila!
That’ll give them “jurisdiction” plus whatever tools they care to invent to hammer out a solution.
Hey, it works for the DEA and numerous other federal agencies even when a matter is completely INTRASTATE!
” The Uniform Law Commission and the American Law Institute, which facilitated the recent meetings, seek to clarify and update federal AND STATE laws governing the securitization process.”
Excellent post, David. It may indeed be a con job – at one level. It seems to me to intend much more. With powerhouses such as the Uniform Law Commission and American Law Institute now willing to tackle “updating” the laws of 50 states “governing the securitization process” in ways that presumably please the N.Y. Fed, it’s pretty clear that the proposed changes are meant to last a long time, and not by any means to help homeowners.
It will be interesting to see what, specifically, this bunch have in mind.
I could have sworn that within the month I read that Tim Geithner, otherwise known as the Obama Administration’s Treasury Secretary, just proposed an exemption for some of the most egregious investment vehicles, derivatives, from enforcement under Dodd/Frank. By egregious, I mean that many of these vehicles were previously paid out in the previous bank bailouts. Tim doesn’t see any reason to inhibit or disrupt these markets or he suggests dire economic consequences. Yet if he’d done his job and reined in the banks before they so blatantly demanded a bailout or they’d crash the whole economy, we might not be having this problem today.
In fact, one wonders whether the Obama Administration understands that it is their function to enforce and administer the laws created by Congress. It is not for Obama’s Treasury Sec’y to rewrite rules that the Congress has already made and the President has already signed. Geithner needs to go!
It seems to me that they cannot streamline laws on securitization in a way that suits business without trampling on individual ownership rights of the homeowners. Nor do I think they could or should make MERS legal for the same reason. But then again, anybody think these sellouts won’t try?
What I find most alarming is that the plutocrats no longer bother to conceal what they are doing. It isn’t just the Left any longer: The plutocrats have become contemptuous of the American People altogether. They don’t even feel the need to pretend to care what anybody thinks anymore.
“Not to worry! They’ll just invoke the Interstate Commerce Clause and, voila!
That’ll give them “jurisdiction” plus whatever tools they care to invent to hammer out a solution.
Hey, it works for the DEA and numerous other federal agencies even when a matter is completely INTRASTATE!”
…And now you don’t even have to be engaging in commerce to be hit with it!
They “have joined forces with various stakeholders, including the Federal Reserve Bank of New York, to deal with the legal complexity and the fact that much of the applicable law
no longer adequately reflects modern financial practice and technological developments, has too damn much accountability” the N.Y. Fed said.Fixed it for ya.
Congress will get Fed suggestion on MERS and make it legal.
State registrars of real estate will be unable to charge fees for actions involved in securitization – but they will still exist. Mortgage Ins will be totally Federal if the private fellows put up too much fuss about the change caused by securitization or raise ins prices to high.
Hard to see how it ends in any other way. The grand court case, the fines, the settlement, the free house – are just not going to happen – mainly because – in equity – the harm to the homeowner that has defaulted is not as great – in dollars – as the potential harm to the giver of the loan. The legal rights problems will be brushed aside – with the current USSC we have few real rights in any case.
This wouldn’t be the first time these jerks have broken the law. It’s become their schtick.
The only real surprise is that it took them this long to do it.
This is actually a good first target for FDL’s membership. Is FDL or can FDL begin to game out an amicus brief that will short circuit any of the arguments the FRBNY or its minions come up with. Starting with the FRBNY’s non-jurisdiction up to and including the fact that finding in any way for the banks would upend more than 700 years of property law. I think it would help for us to have something prepared to go, written in common sense and easy to understand language, that a judge will find hard to ignore.