Guest post by Charles Seavey
The Federal Reserve owns $849 billion in mortgage-backed securities. Total reserves are $2,872 billion, so mortgage-backed securities comprise 30% of reserves. (No wonder the dollar can’t bounce, even with Europe falling apart.)
To give a sense of the scale of this unprecedented investment in questionable private securities, currency in circulation is $1,052 billion so the Fed owns almost as many mortgage-backed securities as there are dollars in existence.
These mortgage backed-securities, we now know, are thoroughly fraudulent. They don’t have legal recourse to the underlying mortgages, which were never properly transferred into the trusts. Second, even to the extent that the Federal Reserve owns any of the mortgages that it thinks it purchased, those mortgages were extended on the basis of fraudulent underwriting (including forged income verification and the like), predatory lending, and fraud in the securitizations regarding the underwriting characteristics of the pools. Finally, any equitable ownership interest that the Fed used to have in the mortgages has by this point been further obscured and sullied by widespread forgeries on the part of the servicers and lawyers for the trusts. Accordingly the Fed bought $849 billion in joke fraudulent private securities that were the subject of at least four different levels of criminal and fraudulent behavior.
What are the implications of this unprecedented situation?
One is that the Fed must disclose which specific mortgage-backed securities it purchased on behalf of the American people.
A second is that the Fed must pursue securities fraud claims on behalf of the American people for $849 billion.
If Federal Reserve officials fail to do these things, they become accomplices-after-the-fact. As extreme as this sounds, the law is clear and Federal Reserve officials have no immunity protections. If the Fed does not pursue damages on behalf of the American people, they become part of a conspiracy and cover up where the Fed’s role was to buy up and hide the evidence.
Charley Seavey has been an analyst, a portfolio manager, an advisor for start-up companies, and a forensic accountant for plaintiffs attorneys on the Halliburton case. He subsequently a JD at the University of California, Berkeley, and has since developed and authored numerous original securities class action complaints, served as CFO of a private company, and written on topics in international law and business, including The Anomalous Lack of an International Bankruptcy Court, which was published in the Berkeley Journal of International Law.