Chapter 8 “Foaming the Runway” – Hero Neil Barofsky’s BAILOUT

Neil Barofsky is the author of the new book “BAILOUT: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.”  If you read anything in Neil Barofsky’s new book – BAILOUT, you MUST read
Chapter 8 “Foaming the Runway”.  

Neil Barofsky gave up his job in 2008 as a prosecutor in the U.S. Attorney’s Office in New York City where he had convicted drug kingpins, Wall Street executives, and perpetrators of mortgage fraud, to become the special inspector general in charge of oversight of the spending of the bailout money… TARP – the program American homeowners thought Congress and President Obama had constructed for their rescue. Wrong.

The New York Times book review describes Mr. Barofsky as “the idealistic alien sent in an emergency to Planet Washington, where he does battle with the self-important, self-serving powers entrenched there or simply taking a spin through its revolving door to Wall Street. He is SIGTARP (in Washington-speak, the Special Inspector General for TARP). But ultimately he is outmatched, and evil triumphs over good.

Mr. Barofsky writes early on that “I had no idea that the U.S. government had been captured by the banks,” and at another point describes his strategy to use the press to get the attention of Congress, and by extension an obstreperous Treasury: “Our message was simple: Treasury’s desperate attempt to bail out Wall Street was setting the country up for potentially catastrophic losses.””

It’s hard to put the book down – it is definitely a page turner and mind burner.  Certainly, Chapter 8 – “Foaming the Runway” vindicates every homeowner and foreclosure defense attorney and we should all shove this book at the foreclosure judges and tell them to read it first and THEN we’ll discuss the modification abuses, emotional distress and damages! Right after we closely examine their Financial Disclosure statements.

We knew there was an intended systemic abuse with the modification programs. Too many people told the same stories. However, we didn’t know why the government and our President and Congress would allow such abuses but after you read Chapter 8 – it becomes quite clear. Geithner was saving the banks – not America.

Geithner Must Go!

Mr. Barofsky writes, “One particularly pernicious type of abuse was that servicers would direct borrowers who were current on their mortgages to start skipping payments, telling them that they would allow them to qualify for a HAMP modification.  The servicers thereby racked up more late fees, and meanwhile many of the borrowers might have been entitled to participate in HAMP even if they had never missed a payment. Those led to some of the most heartbreaking cases. Homeowners who might have been able to ride out the crisis instead ended up in long trial modifications, after which the servicers would deny them a permanent modification and then send them an enormous “deficiency” bill.”  Sound familiar? Yeah, it was a disaster.

“Making matters worse,” Mr. Barofsky continues, “Treasury all but paved the way for outright fraud by ignoring my recommendations that it kick off HAMP with a broad  nationwide television and radio advertising campaign that would educate homeowners about program details and warn them of the dangers of program-related fraud. [. . .]

They failed to do so, and, as I had predicted, the chaos of HAMP lured a host of criminal predators running fraudulent advertisements for “guaranteed Obama modifications” from coast to coast.” … including Hawaii and Alaska.

“Geithner apparently looked at HAMP as an aid to the banks, keeping the full flush of foreclosures from hitting the financial system all at the same time. Though they could handle up to “10 million foreclosures” over time, any more than that, or if the foreclosures were too concentrated, and the losses that the banks might suffer on their first and second mortgages could push them into insolvency, requiring yet another round of TARP bailouts. So HAMP would “foam the runway” by stretching out the foreclosures, giving the banks more time to absorb losses while other parts of the bailouts juiced bank profits that could fill the capital holes created by housing losses,” Neil creatively details.

As the pieces of the puzzle fall together the picture unfolds for Mr. Barofsky he describes the plan, “HAMP was not separate from the bank bailouts; it was an essential part of them. From that perspective, it didn’t matter if the modifications failed after a year or so of trial payments or if struggling borrowers placed into doomed trial modifications ended up far worse off, as long as the banks were able to stretch out their pain until their profits returned.”

The Wall Street securitization Ponzi scheme flattened and destroyed the American economy starting with housing, construction, construction manufacturing and labor. On top of that it depleted the retirement assets of unions, teachers, firemen, policemen, corporate 401ks and gov’t workers by conning financial officers into investing Trillion$ in the unregulated securities scam. That money is gone. See THE SUCKER PUNCH.

The majority of Americans are depressed, mentally and financially, and they don’t know why. They have suffered at the hands of our very own Treasury.  This is where the core of the problem sits. It can begin to be fixed by calling a moratorium on foreclosures, evictions and deficiencies from defective loan products sold to over 84 million homeowners from 2003-2008 and investigating the fraud by the banks… Inflated appraisals, fraudulent LIBOR rates, systematically abandoned underwriting guidelines, unauthorized sharing of privacy information – the list goes on.

“And that includes handcuffs”

The more we research why our lawmakers have ignored fixing the problem in favor of America – the more we learn how they are protecting their own assets. Just take the time to review the financial disclosures of the loud mouths in Congress and on the Supreme Court when they argue in favor of protecting the banks.

There is such an appearance of impropriety that certain lawmakers in Congress probably shouldn’t even be voting on these issues – or discussing it. Their own assets are so highly invested in the banks and Wall Street they’ll be completely ruined when the banks go under… it’s just a matter of time.  And you can’t feel sorry for them – you’d have to be an idiot to still be invested in Wall Street and their banks when you know there is $600 Trillion in paper debt out there… but, then again some judges still think a Pooling and Servicing Agreement relates to a swimming pool.

Stimulus starts with fixing the core of America. Stabilize the core and we can begin to concentrate on growth. As long as the roots are eroded the tree will continue to fail.

P.S. Geithner Must Go!

Thank you Mr. Barofsky – BAILOUT is certainly an affirmation!

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23 thoughts on “Chapter 8 “Foaming the Runway” – Hero Neil Barofsky’s BAILOUT

  1. I agree we must get rid of Geithner. The Conservatives and Liberals need to be on the same page or 80% of us must be fighting for the same cause of there will be no change. Neil Barofsky is the best and honest too. William Black is another. Let’s combine the two and have them run for President and Vice President. We need good prosecutors in office.

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  3. We propose an immediate halt to all foreclosures until new, mandatory guidelines are established and that these guidelines be overseen by a new Consumer Protection Agency, which was recently recommended by President Obama and endorsed by Sheila Bair, chair of the FDIC. We also demand that these guidelines include not only a simple 31% of the borrower’s gross monthly income, but that the Net Present Value (NPV) test: (a) be created and administered by the government, not the banks, (b) have its data, assumptions and formula published so that they may be verified by the public, and (c) be made available at http://www.makinghomeaffordable.gov in a calculator form so that people can learn immediately, with the other eligibility questions available there now, whether they’re eligible for HAMP. We are also strongly advocating that additional guidelines be formulated that would open the door for modifications at an even a lower rate in significant hardship conditions and for rightdowns of principal when homes are severely underwater .

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  5. I just received word of permanent mod after almost three years of fighting one of the Big Three TBTFs. (Want to remain anonymous because I hear they monitor social media for signs of defamation.) I faced the usual abuse and victimization: placed in a trial mod in 2010 after being “advised” to fall behind. The trial mod went nowhere yet they collected on it while it was “under review” for 11 months. Asking once, twice, three times, four…. at least six times for the same documents as the they allegedly never received the originals. I finally was advised BY THE BANK that the permanents were in the mail ….. and to look out for them.. Fed Ex trucks arrives….but what to my wondering eyes does appear instead??? REQUEST DENIED: MISSING DOCUMENTS. Within five days… Notice of Intent to Accelerate Foreclosure… WHAT?? Has to be a mistake! No mistake. Call up, “Not to worry, you are still under review for a modification.” (just the standard mandatory in-house review they give everyone)… more denials…. Refused payments…Sale dates!!! More foreclosure notices! No one to listen! I am but a voice in the wilderness!!!!! Laws change in Hawaii… all NJFs are cancelled as Fannie and Freddie regroup… I am offered numerous strange mod’s… alll very high and unaffordable… predatory terms>…. Meanwhile, I fall further and further behind… accruing huge fees, etc. Well fast forward to present… I find someone willing to help me by standing up to the bank! I didn’t realize you could stand up to them… !!! Long story short she has media contacts in Hawaii… I also have the ear of my legislators… as well as Hawaii Attorney General, who personally writes me, wanting to follow my case… The good news is, I have a mod. BUT the bad news is, I am being stuck for the bills for three years of their stalling, the wrongful foreclosure proceedings (those robo-signers have to be paid you know) and litany of fees and penalties which they cannot explain… and now I have the honor of buying back my property for $366 when it couldn’t even be sold for 250K and when my original loan balance was $350 and was paid down to $320 when I was advised to fall behind. All of these are their fees. I know I have missed 17 payments… only because they were REFUSED. I made 11 trials which were not credited correctly. The bank says I am 25 months behind which is PHYSICALLY IMPOSSIBLE. That is over 2 years! I am to take their deal or lose it all. Refinance plus pay for all their years of delays. I have been nothing but RIPPED OFF by this terrible bank that is TBTF…. I will be 94 when it is all paid off, yes 94. I hate them so much, they have tormented for years, calling me a liar when it suited them, implying I was a deadbeat who was difficult to work with. Yes my mod paperwork is here but I should never have been put through three years of hell in the first place. I hate hate hate them so much… I still do, I always will. I never chose them to be my servicer, I hate their hold music, I hate the way they say they “Reach Out” to everyone. They ripped me off for tens of thousands, ruined my credit and did it systematically and WITH INTENT.

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