BEAN HEAD LOGIC (January 3, 2008)

I had a chance to read some beanhead logic and see an opportunity to prove he is a retard. "How is that banks created money by fiat meaning they really did not loan any money, and were compensated the loan amount by the Fed, how is it they are going broke because of the defaults on all the loans?" That is a good question! The banks cannot go broke and any one that does is a political ruse to maintain the confidence with the public that the lies they believe are the truth. Citibank got an influx of 7 billion not because they needed it but because they can. That is the power of the master over the government they own. The local banks create the money on the spot and are not compensated from the Fed. It is not a loan!

"First, the "banks" didn’t create the money by fiat. Your gross oversimplification is based on some mythology you’ve heard or read about from scammers like Johnson and Gashler." The banks do create by fiat. It is actually outside "oversimplification" the monetization of money deposited in the form of a promissory note. This is not exactly a fiat process in being created out of thin air but taking the wealth of another and through a conversion process making it your own. The trial transcript of Walker Todd on the witness stand in the scammer's trial made this clear as a matter of fact validated by his nearly 20 years of experience at the Fed window. What was your experience again? Was it mystical economic theory?

"They don't want you to understand that mortgage lending may or many not have anything to do with a "bank" or the Fed. Mortgage lending involves a large number of financial institutions some of which have nothing to do with the Fed or FD1C." This is brilliance at its best. Mortgage lenders for the most part are not banks, financial institutions, or related to the Fed in any way. Most are mere paper pushers without an interest in the transaction. But what do they really do? They have a warehouse line of credit generally with a "bank" or financial institution that has an association with the Fed. This line of credit is a promise of extension of credit based upon the deposit of promissory notes. It is still the promissory notes that fund the transaction and they all end up on a banker's ledger with the one small exception of a real mortgage by a real lender.

"The "banks" aren't going broke from defaults, nor did they or any other lender get paid back by the Fed. You’re mixing apples and oranges with basketballs. Just because they are round doesn’t make them a suitable point of reference. Mortgages have little or nothing to do with the Fed sources of money because the funds for most mortgages ultimately come from the bond markets. In between are specialized lenders who do the short-term lines of credit for the days or weeks required to collateralize the pools." The Fed have nothing to do with the source of mortgage money but they have everything to do with deriving a benefit from its creation. Mortgages are not funded by anything other than the promissory notes deposited. The specialized lenders, bond markets, and institutional investors that generally purchase through a GSF, are all secondary market lent against a pool or package which is another promissory note product. That product is the height of fraud because they represent they have rights, title, and interest in the original promissory notes they have pooled. This is the government protected scam at its best. This process is different than the monetization and is called securitization. Securitization is not at all relevant to the moneys available to the mortgage borrower. It is merely a secondary ruse to create a scenario so lemmings can create their fraudulent theories around false economic realities. Some people don't like smoke blown up their ass and some do I guess.

"Most mortgage lenders rarely make loans on residential mortgages using their own deposits or even their own capital. There are some "hard money" lenders but their share of the market is tiny." Almost all mortgage lenders never use their own capital. Their capital is tiny and they all use warehouse lines of credit from an actual bank ultimately. A hard money lender in the traditional sense is an actual mortgage lender in that they will take their capital and attempt to make a small spread between the cost of their money and the sale of it. This is the scenario of actual lending that everyone gives as factual to the mortgage industry which does not do it that way. They say they do and that appeals to the sentimentalities of the good moral man whose father told him to be honest. Who's father also told them not to be stupid but that gets ignored. No father will tell his boy to let men steal from you and be a sucker every chance you get.

"The process of originating and then selling off the loan into the RMBS conduit can be more profitable than making loans and holding onto them over time." No shit Sherlock! One they most sell them as an average mortgage lender to restore their lines of credit and reduce their cost. They really have no interest in holding them because they are only working for the commission or origination fee. If we go to the ultimate lender the bank, they want to sell it for two good reasons. One they net a total profit of the amount of the stolen wealth of the promissory note minus the commissions and sales cost. Generally about an 80-90% net profit depending on the discount. Even if this process takes 90 days you can't beat that pleasure in business. Two they create legal hurdles to their advantage by the conversion into commercial paper "money" where the judiciary will do all they can to avoid its overturn. The holder in due course and good faith transfer issues come into play. Of course the fraud that originated the entire process would bust through this charade if justice and equity were alive in the courtroom.

That should be enough! You are the one passing silly advice. The investors were lied to more than you can imagine in that the overstated assets alleged to back their investments that is now being exposed is far worse. The actual asset sufficient or not was not within the power of the seller to transfer. They had no rights, title, and interest. Your GSE's are the major facilitators of this investment or should I say securities fraud. Oh that's right those who make the laws don't have to abide by them. If you are so smart that you can see the securities fraud, I'll add with such compassion, why don't you look to the banking mechanics, contracting law, and the UCC to figure out there is a ruse of epic proportions? I think because you are not honest or afraid to admit you've been duped all your life by lemming juice.

A side note: Happyjack; you don't appear too happy!