Episode 132 – The New Untouchables with Patrick Lovell and Eric Vaughan

And so, we have regulators whose only criminal referrals are coming from the banks against private citizens. And we’re not getting criminal referrals from those same regulators because they’re looking at the banks, I would term that systemic victim-blaming.

Macro N Cheese – Episode 132
The New Untouchables with Patrick Lovell and Eric Vaughan
August 7, 2021

[00:00:03.760] – Patrick Lovell [intro/music]

People are going to lose their houses. They’re going to get kicked to the streets. We’re going to see an increase in homelessness. The images we’ve seen all summer from Venice Beach, California, other places around the United States, particularly in the West, with extreme temperatures, of homelessness, people dying and under underpasses, and then crazy, wicked storms in the midst of all of this. Are you kidding me? How close are we to Mad Max?

[00:00:24.760] – Eric Vaughan [intro/music]

The people that rose through the charts are the ones who very quickly figured out, “The more corrupt I am, I’m not going to get stopped. Nobody is going to stop me. My boss ain’t, the regulatory system isn’t and I don’t know, this has been going on for 20 years and so far, nobody’s been prosecuted. So, yeah, I think I’m going to go ahead and do this.”

[00:01:35.200] – Geoff Ginter [intro/music]

Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43.060] – Steve Grumbine

All right, this is Steve with Macro N Cheese. Folks, we’ve been doing a whole lot of different things lately. We’ve been jumping around from MMT to dealing with Haiti and the French Revolution and Russian Revolution and crowd organizing and labor organizing. Today we’re going to do a recap. We’ve interviewed Bill Black where we talked about being a serial whistleblower.

We have talked with Eric Vaughn and Patrick Lovell the protagonist and co-directors of the docuseries, The Con. And we’ve also been doing this through our sister podcast called The New Untouchables. And so today we’re going to blend all three of those worlds and we’re going to talk about what we’ve learned because over the course of this journey, I started out not knowing a whole hell of a lot of this.

In fact, I suffered at the hands of the great financial crisis, the meltdown around my home, around my job, around my life, lost family. And so this is very near and dear to me, but I didn’t understand it. And it has been a continuous reveal. So if you guys didn’t understand it, trust me when I say this, you’re not alone. Most of us don’t understand.

That’s why they got away with it. So with that, I’m going to bring my friends Patrick Lovell and Eric Vaughan onto the show, because these guys really have done the work for the last 10 years. There’s very few people that know what has happened with the elite control fraud from Wall Street to our politicians to every step through the mortgage brokering process to recording deeds.

It has all been corrupt. Our entire economy is sadly tied to an entirely fraudulent scheme that allows the rich to keep getting richer while we continue to lose our homes, our livelihood, and without any prayer of help in sight unless we get ourselves out there, folks. So without further ado, bring on my guest, Patrick and Eric, welcome buddies.

[00:03:47.920] – Eric Vaughan

Hey thanks, Steve. How’s it going?

[00:03:49.600] – Grumbine

It’s going good man. It’s going good. It’s like I talk to you guys every day, and yet I feel like this conversation is a real opportunity to tie up some loose ends, because one of the things that I’ve noticed, I am maniacally driven to look at YouTube comments and Twitter comments, and I like to know what people are saying.

And quite frankly, there’s been quite a few questions because the amount of work that we’ve done with just The New Untouchables, not even talking about The Con, which you guys have done years of work, people are jumping in about the seventh episode and they’re like, where am I? What’s going on? I don’t know what’s happening.

So I figured it was really important for us to maybe lay the groundwork because nobody knows it better than this team right here. And yet at the same time, so few are actually talking about it. So just in general, what do you think about the lack of understanding in the community and the lack of media by it? What do you think about that?

[00:04:48.370] – Vaughan

Well, this is kind of funny. Literally, while you were doing that intro, another outfit called me that I recognize the phone number trying to buy my home in Ohio.

[00:04:59.710] – Grumbine

Wow. Wow. It’s happening, right?

[00:05:02.500] – Vaughan

Yeah, yeah, yeah. And I think that one of the biggest things we’ve been trying to overcome with a lot of the stuff that we’ve been talking about in all the different things that we do is like just now everything that we’ve been talking about from The Con to TNU to the different interviews that we’ve done on Macro N Cheese is that this isn’t stuff that happened in the past.

This isn’t like just 2008. This is literally while we’re recording, you know, going on right this very second, where you have companies probably a front for a hedge fund trying to buy my house at 25 to 50 percent above the asking price because they want the inventory. And there’s a reason for that. And it’s just sorry, we’re kind of jumping in the deep end already by going through this.

[00:05:44.260] – Grumbine

It’s kind of hard not to.

[00:05:45.880] – Vaughan

But, yeah, yeah, no, it’s just hilarious because anybody who says that this isn’t timely or relevant simply isn’t sticking their head out their window. It’s like everywhere, ridiculously everywhere. But I think that that’s one of the biggest things that I feel that we’ve been trying to try this entire time is just to show people that this isn’t a story about 2008 or the immediate thereafter. This is a story about right now in our near future because and between the homelessness that we’re already seeing and homelessness that we’re about to see, we’re living in it.

[00:06:16.810] – Grumbine

They let the moratoriums on the rent evictions go down. In fact, down in Louisiana right now, they had a push to vaccinate all law officers to handle the overwhelming evictions that are about to start in complete and utter tsunami of homelessness in our lands.

[00:06:35.570] – Vaughan

As you were talking about that the thing that flashed through my head was like a variation on that one comedic routine of you might be a neoliberal if . . .

[00:06:45.860] – Grumbine

Patrick, you’ve been complaining about this nonstop. These guys don’t give us the time of day, man. A lot of these media outlets out there, in spite of the fact that we’ve got all this fraud going on within the mortgage market, despite the fact that now we’ve got the moratorium ending on the rent crisis, even, an eviction crisis, nobody’s talking about it. We are, but we can’t get out of our own way, man. These people are picking it up. What do you think? What’s going on?

[00:07:14.000] – Patrick Lovell

Well, Steve, first I want to thank you and your team and everybody that’s actually stepped up to help organize and their valuable time and their efforts to help us get The New Untouchables out there. It’s such a remarkably important ally, if you will, in getting the information out there that The Con puts out there, obviously in the different places.

And the things that were dropping in my mind as you guys were getting us to this moment. It’s shocking to me what I just witnessed today in Miami, Florida, for example. To Eric’s point about a lot of people might initially chime in to The Con, especially if they read the tag line, says the truth about the 2008 great financial crisis. It should have the continuation – that never ended – because it’s your system and it’s what led us to you, Steve. Right?

Because when we met you at SUNY and we went to the MMT conference, we were trying to wrap our heads around MMT, and we’re just surface level guys. I mean, obviously, we’ve got a lot more detailed in terms of where our investigations have taken shape. And it’s mostly in law and policy and real estate and all of the processes that are involved with this mammoth part of our economy, which leads directly to macroeconomics, of course.

But I knew immediately, Steve, that if you were equipped with the truth that we learned on this massive journey, that suddenly you had something for your listeners to go, “OK, look, it’s not just about nice things, right? It’s about corruption. It’s about what isn’t happening to allow us to be able to be the society that we’re supposedly are because of what we revealed in The Con and conversely, The New Untouchables.”

And to bring it kind of in an opening statement, what happened today in Miami, in addition to the moratorium ending on rentals and foreclosures, we’re talking millions of people. I think I saw numbers of seven million people who are on the verge of potentially being evicted. Right? That’s just the rentals.

That has nothing to do with people that are behind on their mortgages, given covid and everything that’s happened in the last several years, in addition to the hot real estate market run by asset managers that Eric talked about. But today in South Florida, in Miami Beach, there’s an elderly woman, Anna Rodriguez, who was a Cuban national that spent 18 years in prison that came to Miami and she ended up getting a house and into a really bad predatory loan by Countrywide.

[00:09:25.730] – Vaughan

18 years in political prison.

[00:09:27.890] – Grumbine

Wow.

[00:09:28.970] – Vaughan

I just wanted to clarify that it was political prison under Castro.

[00:09:32.270] – Lovell

Yeah, but the bottom line is I’m just giving a little bit of context into who this person is. But she was an elderly woman like Addie Polk in The Con, right? And she gets targeted by a predatory loan by Countrywide. And she gets into this loan and she doesn’t understand the terms and what she’s getting into. It’s a half-million-dollar loan.

She’s into it for a whole variety of things. But what happens is Bruce Jacobs, the attorney in this particular case, happening in South Florida today in front of Judge Lopez, basically has brought out all of the documentation fraud that has existed for years in what we call the foreclosure process that involves the triumverate of the foreclosure mills, which are law offices that are in with servicers that are in with other entities that the judiciary is literally ignoring. OK?

And why is that relevant to why we opened up with what’s happening with the rental moratorium? Well, because we all know that I think $47 billion dollars was provided by Congress recently in rental relief assistance across the country, of which I believe three billion has been used so far. That puts a lot of people in the crosshairs that these funds that have already been administered to the states are not going to be the recipients of and they could easily be evicted in short order because of that jam up.

The question is, why that jam up? Well, that brings us full circle. And I’ll finish with this statement. This is such an involved and immense story that the question that I started with when I had to go down this road to begin with, we still haven’t answered in The Con yet, which is relevant to the analogy I just made, because after the foreclosure crisis, after the Troubled Assets Relief Program, after the trillions of dollars that were used to be able to prop up the banks and so-called liquidity, we have $50 billion actually provided by the federal government to prevent foreclosures, to allow homeowners to modify their loans.

That never happened because the servicers, the in-between guys learned how to diabolically get the money by stringing homeowners along and then getting insurance. And there was more money in foreclosures than there was in modifications, which is where the money came from. That’s just one of many pieces of this puzzle. But there you have it.

[00:11:46.340] – Vaughan

Yeah, just sort of a million places where all the incentives are pointing in the exact wrong direction. But one thing I want to point out, because as you were talking and making your point there, Patrick, is that not only is this money that was supposed to help relieve renters not getting out to the renters and they’re facing eviction right now, but also think about all those people who . . . all those homes that are owned by individuals or like your family or somebody like that, not the corporate homeowners who are trying to buy my house.

But like me, if I were trying to rent my house and let’s say that I had a renter in there and they were trying to access this money, well, not only are they going to get evicted if I’m one of those guys, but think of all the people who own the homes that they’re renting their homes who aren’t getting that money to pay back their mortgages.

[00:12:36.480] – Grumbine

So you’re not only losing a home, but a renter is losing their home because the owner will lose their home as well. So you get a double whammy.

[00:12:45.510] – Vaughan

Now, think about how that works on the corporate side, right? Because if you can absorb this as a corporate owner that owns like tracks and tracks and tracks of neighborhoods and multifamily housing and so on and so forth, you can actually get money from the eviction process. Right? Because there’s bonds that are tied with rental properties.

And if you have the short on those bonds and you know exactly when the moratorium is going to go out, so you know exactly when to set your short, you’re standing to make a ton of money through the evictions. And then, oh, by the way, all these mom and pop owners of homes who didn’t get any of that money, that’s supposed to be the eviction relief, the rental relief, now, they’re late on their mortgages and they’re going to lose their homes and guess what? The corporate entities are right there to pick up all the inventory on the cheap.

[00:13:34.680] – Grumbine

Speaking of BlackRock, right. BlackRock has spent since the last go-round buying up properties across the country. And they’re not the only one by the way. There’s a lot of these folks out there snapping up all this property. What’s the end game there? What are they doing?

[00:13:51.660] – Lovell

Look, I can only theorize about this, but I’d like to reverse this into a question for you, because, first of all, for your listeners, everybody needs to be aware that most people just started suddenly finding out about BlackRock, and let’s call it 2020 era. Right. There were pretty much under the radar for a long time. BlackRock didn’t become a real player, quite frankly, until the 2008  great financial crisis.

Their CEO, along with the CEO of Blackstone, they were partners first and they were deeply, deeply embedded with mortgage-backed securities. We had Larry Fink out of First Boston and then Schwarzman. I can’t remember where Schwarzman was initially, but they came together and their asset backers. Right. So what does that mean, Steve?

They also handle the sovereign assets in the sovereign for investments for entities like Saudi Arabia. I’ll plant that for us to think about for downstream. But BlackRock comes out of nowhere, right? They’re, deeply, deeply involved with mortgage-backed securities. And then suddenly in 2007, with the tidal wave that manifested after Bear Stearns collapsed, there was the first round of what would lead to the 2008 great financial crisis.

In fact, what Bear Stearns was involved with is almost precisely what Lehman Brothers was involved with. And now we’re about to have the 13th anniversary of the nine 15 collapse of Lehman Brothers, which at that time was the largest collapse in the history of the world. Prior to that was Bear Stearns. Bear Stearns had a run. Hank Paulson gets the biggest banks in the country behind closed doors and says, “Look, we got to stabilize the markets.

Otherwise, there’s going to be a systemic run” because this guy who used to be former CEO of Goldman Sachs, happened to be treasury secretary and he knows there’s going to be a run. Why is there going to be a run, Steve? Because it’s not just the mortgage-backed security market. It’s the collateralized debt obligations. It’s the CDOs, it’s the CDWs.

It’s the derivatives. So we in our investigation, we were able to unravel all of the policy and changes that took place leading to that moment. And we’ll talk about the trillions of dollars that had magnified throughout this time period to get us to where we are today. But in the collapse of Bear Stearns, we had an emergency stimulus program that was called Maiden Lane. Guess who was the administer of Maiden Lane?

[00:16:06.100] – Grumbine

There’s so many bad guys.

[00:16:08.500] – Lovell

Black Rock.

[00:16:09.310] – Grumbine

Black Rock.

[00:16:10.570] – Lovell

So do you know what Maiden Lane ultimately pumped into backstopping the calamity on Wall Street as a result of what happened in 2008? This all manifests in 2009. It starts in March of 2008. By the time we get to 2009, how much is that increased to, Steve?

[00:16:25.540] – Grumbine

You tell me.

[00:16:26.800] – Lovell

OK, so we had what was known as the Troubled Assets Relief Program that was sold to Congress for $750 billion. At the time, people around the nation were like, “You got to be kidding me.” The Republicans, you remember, they were like, “Not on my watch.” This is called, what is it called? The moral conundrum when Wall Street has to get bailed out by government and it screws up capital markets.

[00:16:47.620] – Vaughan

Moral hazard

[00:16:48.520] – Lovell

Moral hazard. Moral hazard was the thing of the day, right? OK, my friends, Dean Baker taught us and we got this stuff from the Levy Institute, which, of course, our friend Fadhel Kaboub was a part of. And this is where the numbers came from.

Twenty-nine trillion dollars was transferred from the Federal Reserve to the banks of this country, the financial system to backstop this run in the global markets based on illegal reps and warranties, based on fraud at tables in liar’s loans that we set out through both of these programs that we created.

[00:17:20.970] – Vaughan

All right, and don’t forget, we’ve had so many of these conversations, Steve, and so many of these like side conversations and I think it is in one of the conversations that we were having with Dean where we discussed and went and found the footage where he was saying that the Troubled Assets Relief Program, the seven hundred and fifty billion, they knew that that was nothing. Right.

They knew that it was just a drop in the bucket. But they needed to get Congress’s hands dirty because if Congress’s hands weren’t dirty, then it’d be easy for them to ask for the cutbacks and just like beat up on Wall Street. But because they were able to scare them into thinking that if we don’t do this, the entire universe is going to collapse, frightening Congress into basically doing this thing that sounded so huge, they got blood on their hands.

And so now politically, they couldn’t go back on it. They had to carry it through. And one of the things that I remember hearing that was just like one of the things that pissed me off the most was when Bernanke, I think just shortly after TARP was passed, basically admitted that, “Oh, we would have covered it.”

All those bank runs that they were talking about, people not being able to cash their paychecks, people not being able to stroke their credit cards and not being able to buy stuff, none of that would have happened because Bernanke said, Oh, no. We would have covered it.” So it was lies.

[00:18:43.200] – Grumbine

Printing press, no problem.

[00:18:45.550] – Vaughan

Yeah, right, but they got Congress’s hands dirty because they blatantly lied to them and the American public into thinking that you’re going to be in such a disastrous freefall of everything, and the world as we know it is going to collapse. And it was all a lie because they would have made sure that every single one of those transactions would have happened.

They would have made sure that every single one of those paychecks would have been fulfilled. They would have made sure of everything. They had the ability to do so. They knew they did. And Bernanke just had admitted to I can’t remember exactly who it was that the entire argument for getting Congress’s hands dirty was complete and utter bullshit. And they knew that they had Congress politically by the scruff of the neck again because now Congress had to be on their side.

[00:19:30.120] – Lovell

Let me just pick up there real quick, because excellent point, Eric. To further that point, think about the time period, Steve. You’re going through a free fall yourself. I knew I was at that time period. Right. And so we’re desperately looking to government and we have that transition in the campaign where Obama won. And at that time period, there was these emergency meetings between McCain.

They stopped the campaign. It was McCain and Obama coming together to get briefed on what was happening by whom. Obviously, Paulson and company, probably Bernanke, who according to our mentor and really the guiding light of this whole thing, Bill Black informed us, Geithner was probably the most ridiculous head of the New York Fed in history of the world.

[00:20:11.550] – Grumbine

Slime ball.

[00:20:13.110] – Lovell

And so, as Eric had aptly pointed out, all of these things were going on so that Congress becomes kind of the fall guy. Right. But again, to go back to the point that I was making who slipstreams in there to become the administer of the Fed funds?

[00:20:26.850] – Grumbine

That be BlackRock.

[00:20:29.370] – Lovell

So do you know how much BlackRock was worth and what they’re worth now?

[00:20:33.150] – Grumbine

I’m dying to know.

[00:20:34.790] – Lovell

I think I saw it at something like $1.7 trillion versus they’re like $4.9 trillion now. So that’s over the course of this last 13 years, and they’re the asset managers. And what’s going on in terms of real estate prices and asset allocation and all the rest of it, really thinking back. Let’s go to 2019. Right. We’ve spent $11 trillion to backstop the repo markets in 2019.

This is after the $29 trillion we pointed out the Fed was able to digitize into existence based on however you’re going to frame it. But ultimately that goes into the black box casino. And then we end up with an $11 trillion backstop with repo, which brings all sorts of interesting things with Dodd-Frank and all the regulation that had supposedly been transcribed during the Obama administration to fix this problem, which never did.

Ultimately, because we have to talk about enforcement, there is no enforcement because of what Bill Black has taught us as well  – deregulation, desupervision, and decriminalization, which is the key component of all of this. But full circle, people are going to lose their houses. They’re going to get kicked to the streets. We’re going to see an increase in homelessness.

The images we’ve seen all summer from Venice Beach, California, other places around the United States, particularly in the West, with extreme temperatures and homelessness and people dying and under underpasses and then crazy wicked storms. In the midst of all of this, it’s like, are you kidding me? How close are we to Mad Max? Right.

What do we have to do to get people to understand the veracity of the problem, but ultimately, then we have all of the information that leads to the solution;. and the question that you have to ask is, why isn’t that out there?

[00:22:09.340] – Grumbine

Well, let me start with answering a couple of things and then asking what I consider to be the take me home question. So the first thing is most people don’t have enough time in their life. They’re running haggard. They’re exhausted. They come in from work. They’ve got kids who are worried about the pandemic.

They’ve got all kinds of other issues of their own they’re dealing with and alternative media folks like ourselves, we have whatever reach we have, but it’s nowhere near what the mainstream media has. And so they flip on Rachel Maddow, whoever is the talking head of the day, Joe Scarborough, Tucker Carlson, and they get fed a bunch of bullshit. And so this is their narrative.

So the idea of changing someone’s entire paradigm has always been a Herculean task to try to get people to learn this new thing and then take action on it. And so what ends up happening, unfortunately, I think, is you guys who have done that deep dive way deeper than I’ve gotten to at this point and everybody else is still clicking on Rachel Maddow, clicking on Tucker Carlson, clicking on alternative media clickbait. And they’re not hearing this.

Part of it is it’s long. There’s a lot to take in. But in reality, you know that this fraud that we’re talking about is really only four or five key steps in a larger process that you can see how each of these frauds occurred. And we have covered it, us three, through The New Untouchables. However, you have to watch 12 episodes to tie it all together. With The Con, you’ve got to watch five full episodes behind the paywall right now. Most people, because this is so foreign to them,

[00:23:57.430] – Lovell

We’re only halfway there by the way.

[00:23:59.720] – Grumbine

Exactly. Most of them, though, they’re looking for a meme, an infographic that gives them the five steps and then what they can do about it. They’re having a hard time getting their minds wrapped around this because even though everything we’ve done is super necessary, we haven’t done what we’re about to do on this podcast, which is break it down into those easy to understand steps from the beginning where the bad guys get these fraudulent loans and the perverse incentives all the way through the federal government basically turning its head and allowing it to happen.

And so I guess my question to both of you . . . I know Bill Black talks about the fraud recipe, but like I wanna have one of you guys to speak to beyond the fraud recipe is each of these steps through this process where each person has some piece of fraud to commit just so people can see not only how rampant it is, but how systemic it is and how no one’s getting arrested for this is beyond insane. And we can talk about the lack of funding for enforcement, the lack of funding for actual regulatory best practices. And we can go into the Gresham’s dynamic as well. So which one of you guys wants to take a crack at that?

[00:25:19.590] – Vaughan

Well, I’m sure we’re going to be bouncing back and forth a lot here, so think of this as a fast break. I just got the rebound and I’m starting to head down the court, and Patrick’s on the wing. So I can take those first few dribbles right here. So, first of all, I think one of the primary things, something that we did in The Con is that we went from the bottom and worked our way up to the top.

And we did that in order to describe how it affects regular people in such profound ways. But I think when you’re talking about financial fraud and especially systemic fraud, then in the interest of laying blame where blame is due, it starts at the top. It starts at the very top. And so, as it’s been said many times from people far wiser than us, the whole concept that the fish rots from the head. Right.

And so this all starts off with executive compensation. It all starts off with this notion of short-term bonus pay or whatever kind of profits that you show for that quarter. And then after the year you go and you have like this nice bundle of cash and you go and cash out. Right. Or whatever it is that you do. But when you have a CEO who is incentivized by showing the maximum amount of profits on their ledgers, then they’re going to do whatever they can in order to make sure that those profits appear on those ledgers.

And so the interesting thing here is that they don’t necessarily need to explicitly say, “I need you people to go and commit fraud.” All they need to do is basically say, “These are the numbers you need to hit and if you don’t hit them, you’re fired.” And so that’s all they need to do because once that message is sent, you have . . . say it’s like a big Wall Street bank.

And so you have, like all these brokers who are there on the floor who are trying to, like, sell whatever kind of bonds or whatever it is they’re trying to sell. You basically have to meet impossible numbers. So let’s say that you’re like a superstar. You are the guy who can talk anybody into buying anything and you’re trying to actually sell things legitimately.

When you see that you’re not making those numbers, well, you’re going to start cutting corners and it doesn’t take too long before that corner-cutting turns into fraud. And the thing is when the manager of that floor sees those corners being cut and then says, “Atta boy, good job” because you’re bringing in higher numbers, which means that I beat my numbers, which means that I keep my job.

You keep your job and we keep the boss happy, then that encourages that behavior until it gets pushed all the way past the envelope into fraud. And then from there, as long as there’s like no regulatory environment to stop it and there’s no criminal prosecution to prevent it, how does that not just naturally become the system?

That’s a process called Gresham’s dynamic in a nutshell, but that’s like how fraud seeps from the top in through an entire system when it’s not stopped, when there’s no regulation and there’s no law enforcement to prevent that from happening, how fraudulent criminal behavior becomes the system rather than some sort of aberration that gets stamped out.

And then it trickles all the way down to that broker on the street who’s trying to figure out, “What do I need to do to get this person to sign the bottom line? I know I’ll sign it for him.

[00:28:37.080] – Grumbine

So there’s this perverse incentive, which I know we talk about, and maximum volume, high speed, massive volume,

[00:28:45.570] – Vaughan

Yup.

[00:28:45.570] – Grumbine

two components right off the top. Those guys are being beaten over the head with hitting impossible numbers. But the things that they want them to do, these things incentivize these guys. They’ve got this job and they’re like, go do this thing and you’ll make a shit ton of money. “Hell, yeah. I’ll do that.”

[00:29:04.890] – Vaughan

Right.

[00:29:05.280] – Grumbine

And so this is the beginning phase. So we’ve got the CEO wanting to max out his profits. We’ve got him pushing that down to the lower tier, each one of them. To keep your job, you must do X, Y, Z, and oh, by the way, if you do X, Y, Z, there’s going to be a lot of money in there for you. So it’s best to do what I said as well. So you got the perverse incentives now. You’ve got the head rotting from the top pushing it down and you’ve got Gresham’s dynamic. So Patrick, take us to the next step.

[00:29:36.000] – Lovell

Well, I’m trying to maneuver a bunch of questions in my head as if I were one of your listeners just hearing this for the first time, particularly thinking that most of your listeners pay attention to macroeconomics. When you say things like that, and when we lay it out like this, the first question of mine goes, but wait a second.

Come on. You’re trying to tell me that people can lie, steal, and deceit their way to numbers. Come on, man. Isn’t there management that would hold them accountable and they get fired or maybe some kind of criminal prosecution for doing illegal behavior? Well, yeah, that should be what happens. Is what we’re talking about legal?

[00:30:12.180] – Vaughan

In a healthy system it is.

[00:30:13.830] – Lovell

Is what we’re talking about for perverse incentives. So first of all, you’ve got to rewind slightly back. I know capitalism is a big topic for you and your listeners. It’s all about alignment a lot of the time. Right? So when we go back to policy and we start to consider well, what happened in the 90s that changed what Wall Street was.

Wall Street used to have for a very long time after the Great Depression, thanks to our friend Ferdinand Pecora, who’s the namesake of our podcast, was able to prove what was happening on Wall Street to get us Glass-Steagall, the Securities and Exchange Act of 1934, which premised that you can’t lie and steal your way to securities because that’s called illegal reps and warranties, which, by the way, is a felony.

And if it was prosecuted under racketeering and corrupt organization laws, that entire operation would be dismantled. The CEO in jail. All of their money earned during that process paid back.  Is that what happened, Steve? No. So let me pick up on the question, and you made such an incredibly important point here.

First of all, a lot of these laws got reconfigured to where there’s a little bit more emphasis on this law regulation versus what that civil rights law might actually demand. So we used to have laws, for example, truth in lending, right, which is for, quite frankly, the express purposes of people like minorities who might not have an incredible Ph.D. or sophistication in legal contracts and everything else to be able to read 30, 40 different pieces of documentation to know exactly where the emphasis is and what’s happening in their loan.

They just want to know what they’re supposedly paying, which is the way it was sold, and they have no idea what they were getting into. Right? So that entire stack of misinformation and deception is also illegal because of deceptive acts and practices which are on the books in all 50 states. I can’t supposedly go sell you something that I know is going to fail, blow up or defeat for a specific amount of money. And if it does happen and it’s proven, then I end up going to jail or you end up getting your money back, one of the two. Is that what happened in this crisis?

[00:32:14.790] – Grumbine

No.

[00:32:15.870] – Lovell

Take it further. Why would you want to hire a whole bunch that could make more money on one deal than they could an entire year? Why might that be the idea?

[00:32:26.950] – Grumbine

The same reason why the slave trade focused heavily on the illiterate Bosal, if you will, the African slave, because they weren’t able to speak the language. So by doing that, they were completely vulnerable to whatever the master would say. So in this particular case, you’re looking at people who are on the bad end who are susceptible to any number of things. And the fact is, is that it’s easy money in this case. So they’re playing on the worst part of their person.

[00:32:59.350] – Lovell

They’re incentivized to do it. Here’s another thing that Bill Black taught us, which was amazing about this. These guys would get incentivized by higher yield spread premiums, some more money to do everything they could to get the deals done as quickly as they could and packaged any which way they could. And then they got rewarded.

They got the corner office. They got the best parking spot. They got the Ferrari or the Porsche or whatever. They were all completely incentivized. And so what happened was this is what Michael Hudson taught us in “The Monster” was they’d basically go through like, let’s say 97% of the workforce on a monthly basis they recycle them. And the three percent that they kept,

[00:33:37.860] – Vaughan

[inaudible 00:33:37] Yup making any . . .

[00:33:37.860] – Lovell

[inaudible] Namely bad people at this stuff. And so they’re doing the deals. So there you go.

[00:33:43.970] – Vaughan

So the only thing that I want to say is that I think that there’s also another layer to this, too, is that by getting inexperienced people who don’t know anything about mortgages, financials, real estate is that they don’t know any better because I don’t want to necessarily create the notion that these were bad people.

Some of them were, and those are the ones that advance. Right. They were doing what they were told. If you’re like coming in from a low-wage job that required very little education, so on and so forth, and all of a sudden you’re in an office in your cubicle. People are wearing suits. There’s money being flashed around, and somebody is like telling you, “OK, so this is how you do this job.”

What basis of comparison do you have other than that? Now, if you had even the slightest amount of experience and somebody says this is how you do this job, it’s going to be like, “Wait a second, no.” So that’s why you have to remove all experience that you possibly can, any expertise at all,

[00:34:40.890] – Grumbine

A fresh slate

[00:34:41.880] – Vaughan

So that you can tell them anything they want and it’s not going to trigger their moral or ethical firewall because they don’t know any better. Now, as Patrick pointed out, absolutely, the people that rose through the charts are the ones you very quickly figured out the more corrupt I am, I’m not going to get stopped. Nobody is going to stop me. My boss ain’t. The regulatory system isn’t and I don’t know, this has been going on for 20 years and so far nobody’s been prosecuted. So, yeah, I think I’m going to go ahead and do this. They figure that out.

[00:35:10.260] – Lovell

And they get to drive the Porsche.

[00:35:12.030] – Vaughan

Right. And so that’s what happens.

[00:35:13.890] – Lovell

I’ve got the convertible Porsche with the top down and this beautiful babe at my side. And I live on the beach in Orange County, which is where all great fraud start by the way. According to Bill Black, Orange County is the epicenter of this stuff. But seriously, I’ve come out of fraternities. I’ve been a part of this culture where people are competitive, where they’ve got to have things to feel like, oh, I’m somebody that’s important. I got to have a big house.

I got to have all the riches. I got to have the best of everything. And how easy is it to be able to get people that that’s their only objective, to do whatever you put in front of them to get that deal no matter what, especially if there’s no guardrails and there’s nobody stopping? Like Rachel Steinmann says to us, when she was working at Greenpoint was a huge part of the equation with Goldman Sachs.

The only thing she could do was approve, approve, approve loans. She’s an underwriter. When she wanted to stop being able to push these loans through the system to get approved, they fired her. That’s the system we have.

[00:36:20.070] – Intermission

You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter, and Instagram.

[00:37:09.130] – Grumbine

So let me roll this up so far. We have regulatory body that is continuously deregulated the finance sector to the point where regulation is almost comical. It’s almost a veneer to wash your hands. And basically, there’s no real protections. Number two, and we haven’t talked about this yet, but there’s not even enough enforcement of the crappy regulations that are on the books to actually take any kind of meaningful action.

Number three, in this case, is that then the finance organizations, these pop-up mortgage companies, these finance groups, they suddenly realize that if we’re in a deregulated free for all, let’s start doing these perverse, high risk, bad financial games where we’re putting the littlest people at risk while we’re making money hand over fist.

Then number four, we’re hiring people that have no experience in the world whatsoever. So they have no meaningful basis from which to push back on. And so now they’re doing things to save themselves from losing this great job that they did not have five minutes before. And then the next step is that there’s a few of them that the light bulbs go on, that the more corrupt I am, the more money I make. Just open the faucet wide open and just go for it.

[00:38:31.240] – Lovell

They become the bosses.

[00:38:33.130] – Grumbine

Exactly. So the next part of this, though, I would believe, is we got to find some victims to rope into these perverse setups. And that’s where the predation begins, if I’m not mistaken. How do we make these numbers go through the roof while we target the most vulnerable, people that are unassuming, that wouldn’t question whether the system is corrupt because they’ve always followed the rules.

So we see the high end and we see the very bottom of our society dealing with this. So it’s pretty much an end-to-end problem. Talk to me about the victims that are getting signed up for these perverse loans and these wrongful financial deals.

[00:39:13.600] – Vaughan

Well, right. So this is all about hitting numbers. If in order to hit numbers, you need to have the widest swath of people that you possibly can. A bit that occurs in The Con where we’re interviewing Bill Black and he’s talking about the mechanics of this and how it works. And he describes if you’re a lender of any sort, whether you’re a bank or not, and you are trying to maximize the amount of loans that you’re going to sell. Right.

You can’t do that by going after people with great credit and tremendous assets. Right. Because what happens then is that the maximum amount of customers aren’t there. That’s a smaller group of people by definition. Right. And once again, if you’re trying to do this on the straight and narrow and you try to beat your competitors to these people with great credit scores and everything like that, you lower your rates.

Well, if you’re lowering your rates, that means you’re not hitting your numbers back up top and everybody else lowers their rates and now everybody’s not making as much money. So the better thing to do is to not go after those people, but to go and find the people who are really vulnerable because there’s millions and millions and millions more of them.

And if you like go and you design these products that can go and reach them and then you through lie, cheat, steal, whatever it is that you need to do in order to sell as many of those as you possibly can at much higher interest rates, that volume plus the higher interest rates means that your profits go through the roof from the person who the street level broker to the management, to the owner of the nonbank lender all the way through to Wall Street and the CEO at top.

They’re making more money by that occurring. So that’s why when the CEO up top basically has these sales demands that are impossible to meet unless you’re attacking the much larger and much more vulnerable population by giving them products that are far more expensive and then allowing them to sell to those people by any means necessary, that’s how everybody along that trail makes money.

And if they’re never stopped, if the regulator is not allowed to come in to basically make a criminal referral to the FBI, the DOJ, whoever it happens to be, and nobody comes in to stop that, well, then why would they?

[00:41:38.790] – Lovell

So, Steve, I think people misuse these terms all the time. Regulator is the cop on the beat that’s the detective to try to sort out what’s happening by definition from the Securities Exchange Act of 1933. They’re the ones that are there to look at the numbers, to find out what’s going on so illegal activity doesn’t happen so that illegal securities aren’t sold to unwitting investors.

When you have an honest system, the system works brilliantly. And it actually did for a long time. What I talked about earlier in terms of the policy changes and prescriptive changes we went from private partnerships, where all of these guys within these investment banks that weren’t commercial banks right there were separated because of Glass-Steagall.

So their speculation was their own gambling. If they wanted to go invest into a startup software company, that is going to end up becoming Steve Jobs and Apple, great, good on that. That’s their collective ability to be able to invest in something that they can get to market. And if it takes off to become a global phenomenon, hey, that’s great. If they all did the risk-reward situation where they really were on top of their game.

But what we got rid of in the early 90s was we went from that private partnership situation to these public operations that went with these IPOs (initial public offerings) that are now Sfax immediately to the public, raising these insane funds where they got to speculate with other people’s money by getting rid of the walls between investment banking and commercial banking. We all need finance. We all know that. But risk-reward is what we’re talking about.

Ultimately, risk was never dealt with when we got rid of regulation. In fact, risk was centralized, and ultimately it became a sure thing when you put the Federal Reserve in the back of it. Now, I just want a big, broad scope picture to make this situation in terms of like the details of the fraud at every step of the way. Right?

When we talk about the fish rots from the head what Eric left off on was guys incentivized to be able to sell these loans as brokers at the baseline of how they were incentivized because that got insane with what we call liar’s loans, it led to all bets were off because people learn documentation fraud. Why?

Because they were incentivized to do so at places like Ameriquest, which was a shadow bank, which actually Roland Arnall who was the CEO of that operation was George Bush’s largest funder and who ended up being an ambassador of the Netherlands after he had a $490 million dollar class-action lawsuit from 50 AGs for deceptive acts and practices on predatory lending.

They nailed him. But that didn’t stop this process because everybody was in on it. Why? Because there was so much money being churned and burned with other people’s money based on asset valuation because the lenders at the next step of the process, and if you watch The Con, all of the stuff is laid out much more easy to digest than my firehose of information.

But lenders literally would pressure the appraisers in the food chain to be able to continue to hyper-inflate the value of these houses. That’s what they would loan against. And a rolling known knows no loss.  The idea was fees. Generate fees as quickly as possible based on a whole bunch of mythical appraisal value that the lenders needed to get those numbers based on high yield spread premium to get them through the pipeline to create this insane bonus culture for the CEOs on Wall Street.

As complicated as that sounds, that’s probably about a quarter or maybe even a third of what it actually constituted. But the thing that I want to make you guys clear on at this stage of the game, because of the nature of deception at this level, that was so insane, we end up with a thing called straw buying.

Strawbuying enables people that aren’t a part of the process at all to illegally get somebody on the inside of a bank, create fraudulent documentation on somebody else’s property that has equity that they can get loans on. They just have to have a conspiracy of people inside the bank. That happened to so many people through what we call affinity fraud.

So African-Americans were targeted by the system and then banks literally incentivized churches to be able to get kickbacks by targeting people like Addie Polk who had equity, meaning maybe they own their house, maybe they almost completely own their house, whatever, to get these loans because they had to pay money for leaky roofs, driveways.

[00:45:45.110] – Vaughan

The important thing here is, is that also just like it’s not banks, it’s bankers. Just because they don’t want to impugn the character of everybody at churches or anything like that. It just had to be a certain person at a certain bank making a deal with a certain person at a certain church where they can say, “Set up these lending workshops where if people attend, then we’ll be able to take their information down and they’ll be eligible for a loan.” It’s not quite that simple, but basically something along those lines. I just don’t want to say that everybody’s like corrupt or something like that.

[00:46:18.330] – Grumbine

Always never statements.

[00:46:20.460] – Vaughan

It just requires one corrupt person here and one corrupt person here in order to hurt an awful lot of people.

[00:46:27.040] – Grumbine

Absolutely. So what I want to do is step back for a minute for my own good and say so we have a regulatory environment, once again, a legal framework that has been gutted. We have an enforcement network that was never funded. We have a revolving door that we haven’t talked about yet that has these people from industry come into government, set the rules, be the ones that actually enforce it, and inform because most people don’t know how banks work.

So they’re also helping guide Congress in writing legislation. They’re also the informants that help the presidents making decisions. And they also have a hand in these institutions that are doing these perverse methods of predating on people. So you’ve got the regulatory environment, the legal environment, then you’ve got the revolving door that goes between industry and government, making this a very incestuous relationship.

Now you’ve got the next bubble I’ll call business. So business, a.k.a. the shadow banks, regular banks, now blurred, completely nonexistent firewall between investing and saving. And these folks now are trying to figure out how they can make money based on this lax regulatory environment.

So we have the business model, which you’ve just described, but now we’ve got the next layer, the actual boots on the ground, the liar’s loans, all the interactions with the targeting of communities and people to fulfill this pipeline that starts at the top with bad regulation or lack thereof, lack of enforcement, incestuous relationships with the revolving door and industry, and now regular people are in the mix. Take it from there.

[00:48:17.080] – Lovell

And it’s even worse than that, Steve, because at the apex of that regulatory body, we have a thing at this stage of the game in pre-2008 was the Office of the Comptroller of the Currency (OCC), which regulated national banks. We also had the Office of Thrift Supervision, which is where Bill Black came out. He was the general counsel of the Office of Thrift Supervision (OTS) in San Francisco during the SNL crisis.

So in roughly 2002, we had a race to the bottom. We had literally a competitive race that was advertised in the Wall Street Journal by both the OTC and the OTS. We won’t regulate you banks because guess where they were getting paid to do their regulation from? Were they paid by the federal government?

[00:48:57.640] – Grumbine

You tell me.

[00:49:00.040] – Lovell

They were paid by the people they were regulating. So, for example, Countrywide could choose the regulator that it wanted. So we’ve got time? Remind me, Eric, who was the head of the OCC at that time? Was it Linda Thompson?

[00:49:13.560] – Vaughan

She’s the general counsel for a long stretch of that time. There was no, like, official head, but she was the general counsel.

[00:49:21.000] – Lovell

She was the top gal. So Linda Thompson, the head of the OCC, the Office of the Comptroller of the Currency, who regulates the commercial banks, the federal banks. Right. There was a time period when we had this massive consolidation in the late 90s when we got rid of Glass-Steagall, led by none other than Sandy Weill and of course, Jamie Dimon. Right. That was then Citigroup.

[00:49:39.930] – Grumbine

Bill Clinton’s watch.

[00:49:41.310] – Lovell

Exactly. And Phil Gramm comes into play here, as does Wendy Gramm, which all led to the deregulations that I’m about to address that led to all of the Enron era fraud. So if Orange County is one side of the equation, Texas is the other in terms of this race to the bottom for deregulation, but ultimately we’re talking about in terms of origin story. OK?

And this is amazing how it plays back to what we learned from Michael [inaudible] because of what was going on at that time period with Ferdinand Pecora when he actually put Charlie Mitchell on the stand after the Great Depression that led to all of this stuff when Ferdinand Pecora was pointing out all of the inside collusion, insider trading information, the shorts, how they were actually making their money.

And this was basically this large consortium called Citibank, which was a precursor to what became Citigroup. OK, so now I’m going to fast forward to the 1990s. Sandy Weill and Jamie Dimon both got basically booted from Wall Street. They go to Maryland, your neck of the woods. They’re in Baltimore. Their main engine for growth is predatory loans in Baltimore and in Washington, D.C. They’re making a killing on predatory loans.

So what happens is this huge hurricane rolls into Texas, takes out Citibank because of the insurance, and they have an opportunity to combine Travelers with Citibank and they want to create a supermarket bank. This is Sandy Weill and this is Jamie Dimon. And they’re doing exactly what Charlie Mitchell tried to do back in the 30s, have this massive, massive rookie bank that can do all of these things without any regulation whatsoever.

And then what do they do? They get this guy, Phil Gramm, to work on deregulation with Clinton that gets rid of all of these laws at this time period. And I’m bringing back to Linda Thompson. This is the point because we had what was known as Riegle-Neil, which got rid of regulation for interstate banking regulation because we used to have regions. Right.

So let’s say Pittsburgh, you’re neck of the woods might have been steel. Texas is oil. The West is Hollywood, whatever. I mean they had [inaudible 00:51:40] economies at this time. Right. So you never had a massive collapse of the entire country at the same time. But because of the supermarket banking, because of the deregulation at that time period, particularly as it related to ultimately what was called the Commodity Futures Modernization Act, which allowed derivatives trades to go in the OTC market without regulation.

You’ve got this woman, Linda Thompson, AG of the OCC that uses what’s known as preemption. She goes to all the state AGs who know that predatory lending is running amok. They end up getting the largest collective state settlement against Roland Arnall who is one of the worst players in this whole thing – $498 million in 2004 for predatory lending.

Linda Thompson uses preemption to disable the states from using predatory loans against the federal banks because Wall Street writes all the bonds for the cities, too – for example, the Big Dig in Boston at that time period, 2004-2008. Ever been to Boston? You’re trying to drive around. It’s impossible to do anything because it was such a huge mess. It’s Goldman Sachs underwriting, right?

So they say to places like the AG of Massachusetts at that time, “Look, we’re not going to write your bonds if you’re going to prevent us from doing our what is liar’s loans.” And so the OCC comes in and says, “Look, regular people, Addie Polk, whomever, they can win in court if they can prove fraud.

But they would have to go around the country 12 times, spending a whole lot of money and talking to people like Bill Black, Chris Swecker from the FBI, Paul Pelletier from the DOJ, like we did with The Con, to be able to prove the fraud. How many people could do that?

[00:53:15.180] – Grumbine

Just us, baby. Just us. So let me bring us to the next part of this. There’s so much detail that we could add to this. And I guarantee you for the average listener out there, their heads are probably even exploding right now. But with that in mind, we’re starting to go into the next phase of this. They found their Addie Polks. They’ve used the churches.

They’ve used other ways of targeting what they see as high equity, easy wins through liars loans and straw buying. Now we start getting into people, buying these loans, buying these mortgages, and they have good credit and they’re being pushed into really bad loans, loans with ridiculous circumstances, with no alternative provided.

And so now the fraudulent loans that created this whole scheme are now being the primary vehicle for even people with good credit to purchase these loans, and so that starts the fraudulent paperwork that causes the fraudulent documentation, inflating incomes, inflating the assessment of the property values, everything from the folks that are doing the appraisals of the homes, working with local deed recorders and working with the banks.

So we’re talking about working hand in glove with local government to inflate these assets that perpetuate this fraud. And so now people don’t know who owns their loan and they start getting foreclosed on. And the courts are complicit by ignoring the fraudulent documentation, letting it pass through even though they know it’s fraudulent. And well, you know what? Too bad we’re just going to keep the foreclosure mill going. So pick it up from there.

[00:55:06.790] – Vaughan

So one of the interesting things here is that the fraudulent documentation wasn’t just happening during the origination of the loan. It got to a point to where things were moving so fast through the system and the documentation was so bad because so many of these were liar’s loans. Right. So there’s zero documentation that they’re cranking these things through that as they’re going through the system, the paperwork basically gets separated, which is like one of the hallmarks of good documentation.

This establishes that this house exists and this establishes that there’s a lien on this house. This is who owns it now that as long as they’re making their payments, it remains to them. If they don’t make their payments, then it goes over here. It was one of the things that I can’t remember his name. He is an Argentine economist who said that what we lost in 2008 was the greatest recordation of who owns what in the world.

And that because we lost that he thought that America was no longer America. So because the documentation is so screwed up at this point as they’re trying to churn things through the court system and just like crank out foreclosures as fast as they possibly can, a judge has basically become like a rubber-stamping monkey.

They had to have some sort of documentation to show that this bank, this lender, this servicer, whoever it was they decided was going to be the person who was going to be enforcing the foreclosure have what’s called standing, which means that they were the person who’s being hurt by this other person not paying. And so therefore, they’re going to foreclose on them.

[00:56:42.660] – Lovell

That’s the idea of right of assignments – they’re owed the debt.

[00:56:45.360] – Vaughan

Right. And so they would just go to these document mills, companies that were basically set up to create fraudulent documents for all intents and purposes, and they would create these fraudulent documents and send that along to court and say, “OK, so you’re missing this piece of documentation? We’ll tell you what.

We got it here, and Joe Schmoe here who just got back from gym class at their high school has gone ahead now as VP of whatever bank signed it as being the actual real document. And that’s what the whole Robo Signing scam basically was. But then you have operations like MERS, which was an entire other thing, which basically was meant to hide from prying eyes the entire system of documentation.

[00:57:29.900] – Grumbine

Documenting deeds, these important aspects of homeownership.

[00:57:34.940] – Lovell

Well, but that’s the whole point. I made this post on Facebook earlier today and I’ll bring it into this again. We just had this incredible show with John O’Brien and Jeff Thigpen, right. John O’Brien is literally the longest-serving registry of deeds in the country at the oldest registry of deeds in the United States. And it was put to an earlier guest of ours on The New Untouchables, Thomas Cox, who we have for season two of The Con, and he’s the guy that actually blew up the Robo Signing crime.

It’s not a fraud. It’s not a scam. It’s not shenanigans. Shenanigans is Blutarski taking off with Mandy Pepperidge at the end of Delta House, pulling one over on Niedermeier. What we’re talking about is a hugely criminal enterprise in which John O’Brien, at the apex of the situation, discovers thousands and thousands and thousands of documentation fabrication. And he brings it to the fore, and he’s like, “Well, wait a second.” He reaches out to the AG of Massachusetts first, then he reaches out to the NY AG.

What? But he went after Department of Justice and Eric Holder. But before that, he actually went after Rachel Maddow, The New York Times, The Washington Post. None of them wanted to go to the Registry of Deeds to see the documentation evidence of fraud that he had in these worst cases, which were then used by these foreclosure mills in all of these different servicers to foreclose on people like Addie Polk who are, or in the case of what we’re seeing in Miami today, Miss Ana Rodriguez.

[00:59:03.680] – Vaughan

I was just going to say and we know exactly the shot that they didn’t want to have. It’s the shot that we took.

[00:59:10.320] – Lovell

Absolutely!

[00:59:11.040] – Vaughan

Of John sitting in front of that desk with 30,000 fraudulent documents. And those are just the ones in that room. That’s a shot that none of them want to have.

[00:59:20.740] – Lovell

That’s right!

[00:59:20.940] – Vaughan

Because when we say, oh, yeah, you know, Robo Signing, stuff like that. But this wasn’t an aberration. This was something that was happening at a systemic level. And so that’s the crazy thing here.

[00:59:32.100] – Lovell

This is what mainstream media did to obfuscate this whole thing. It just made it a thing. But nobody understood what the thing was, just like they don’t understand what fraud is. Fraud is criminal theft by deception that leads to all sorts of criminal convictions, felonies.

[00:59:46.680] – Vaughan

This all sounds so complicated, but it’s really not.

[00:59:52.050] – Grumbine

Yup.

[00:59:52.350] – Vaughan

It’s not. You’d be hard-pressed to find any regular person in this country who would say that the financial/political system of our country is not corrupt. You’re going to have a hard time finding that person saying that.

But please, when you say that, when you know in your heart of hearts, when you’ve experienced that yourself with like whatever it is that you’ve been dealing with, whether it’s like your own foreclosure, whatever the case might be, that when you are saying that the system is corrupt, remember corruption means that by definition there are felonies occurring.

And if there’s a felony or a whole list of like thousands, hundreds of thousands, millions of felonies occurring, each one of those felonies can be prosecuted.

[01:00:38.260] – Grumbine

Yeah.

[01:00:39.070] – Vaughan

This whole thing is basically just a very complicated, convoluted way of showing all the different ways that felonies were done against regular people, and every single one of these felonies can be prosecuted. Every single one of those corrupt practices can be prevented.

[01:00:57.120] – Grumbine

What we’ve got now is a bunch of fraudulent documents, people put into loans under bad, horrible terms, under predatory conditions, and now we’ve got dual tracking where people, because of situations in the economy, they’re now under duress. They took on loans that they couldn’t take on, which is what most of the people try to blame this on, who got duped into this fiasco.

But we don’t talk about how the regulatory process failed them, how they were being defrauded at the very end of the rainbow that they cracked down. They start sending the threatening letters to the people, beginning eviction processes under the guise that they’re going to help them into some sort of program or if they’re going to help them modify their loan and they don’t even know who owns their damn loan anymore. So they got strange people contacting them.

But all the while, the money was already made. And then the next piece of the money making scheme is the insurance that these mortgages that guarantee these loans get when they say they’re not paying their loan, they get all that money in insurance and then they proceed to still evict the people, even though they have been fully compensated in whole with no help to the homeowner, they double-dip. They not only made money on the front of it, but now they’re making money, stealing the home away from them. What have I got wrong there?

[01:02:27.100] – Lovell

I got to chime in here, Steve, because that’s the whole point of this triumvirate between the three of us. Eric and I went the distance right. I had a question at the very beginning. I went through this madness. We’ve been colleagues for a long time. We were giving away houses on a television show. The economy collapses. We find ourselves scratching our head. What happened? I tried to pull this thread and Eric’s with me every step of the way.

But we uncover the crime, thankfully, because I happened to see initially Bill Black on Bill Moyers and Bill Black said things that suddenly made sense to me that nobody else did. And I called Bill Black and that took us on a journey to understand control fraud, which is what the entire country needs to understand.

And Steve, specifically as it relates to you is I’ve always had this vision ever since we learned about Macro N Cheese and we learned about MMT and everything that you guys talk about from a perspective of fiscal policy and your knowledge and your in-depth understanding of how the Fed operates and so forth, and public policy, especially as it relates to some of these huge programs that we all must get behind – Green New Deal for obvious reasons, Medicare for all some of these other things.

But in Congress controlling the Federal Reserve, which, of course, that’s what they’re supposed to do. But what do we have, all of those things that you just led to, right? That you just checked off the litany of these boxes. And that’s the most important part of this dialog. What people must understand, they got to stop blaming the victim. This entire system, this entire apparatus is baked in to be basically we’ve heard it referred to as a casino. And we all know what happens in casinos.

Most of us go and lose, right? Some of us might get lucky if we know what we’re doing or if we’re lucky on a given day and we might win. But that’s few and far between to all of the other people that are set up to fail quite frankly. That’s what’s going on with every aspect of our government in the five pillars, whether it’s military-industrial, whether it’s agriculture, whether it’s health care, but most precipitously within the housing industry, because I’m going to just touch upon this and I’m going to give it to you, Eric.

We got to understand that we’ve spent $50 trillion from the Fed, transferred three digits into the black box casino to backstop asset valuation in this country that goes into the stuff that we’re talking about. So at the end of the day, when we’re facing this rental moratorium, I want your listeners and everybody to understand that $50 billion, $47 billion was administered to the states for rental relief, of which $3 billion is actually being utilized.

That’s another sequence of events in this thing. There’s a lot of people getting the money except for where it’s supposed to be going. That’s corruption. The whole thing is corrupt. OK, we have got to get a hold of this with people with their hair on fire understanding that every problem that we face in this society emanates from corruption. And the most important aspect of it is the judiciary.

Because I just watched with my own eyes in Miami, Florida, today, a judge literally sitting, refusing to allow evidentiary proceeding in a constitutional case based on what Bruce Jacobs arguments were to hide the fraud because Bank of America attorneys and Bank of New York Mellon attorneys are claiming privilege based on trade secrets.

Now, what’s insane about that is that a lot of that terminology comes from the settlements in 2016 when we saw Bank of America spend $16 billion of fines and $13 billion and so on and so forth. To put it in full scope, there was over $210 billion paid by Wall Street banks for the 2008 great financial crisis in terms of fines through deferred prosecutions that never led to any criminal prosecutions of the largest criminal conspiracy and cover-up in history because we weren’t allowed to use racketeering and corrupt organized laws that, quite frankly, Marc Dann proved in The Con – the only place that happened in the entire country, that because of my colleague Eric Vaughan, we found, which is a miracle in its own right, because I want the world to understand that when we started this whole thing, I used to go for the C Suite because I’m reading The New York Times, I’m reading The Wall Street Journal.

I’m like paying attention to, quite frankly, Matt Taibbi. And he’s putting up a bunch of whistleblowers like Bill Black and Michael Winston and others, Gary Harry, but he’s not connecting the dots. And I’m like, “Wait a second, how does this whole thing fit in?” My original sort of concept was it’s like a Rubik’s Cube. I got to put all these pieces together, the Rubik’s Cube, to make this make sense. And Eric’s like “It’s a street crime. Why isn’t it RICO?”

He literally scratched his head. I’ll never forget the day he said, “Why isn’t it just RICO?” And I thought to back to Giuliani in the 70s and the Mob and the Gotti’s and all the rest of it when the stuff came to be. And how does the mob operate? We know it’s racketeering and corrupt organizations. Most of us with any common sense understands that. That’s what Eric said from the get-go. And then on top of it all, Eric went back to Ohio.

He discovers this case, Addie Polk, and he says, “Hey, Patrick, do you mind if we look into what Addie Polk represents?” I kept looking top-down, right? CEOs, C Suite guys, people that were at the very apex of the situation, telling us what they knew inside the C Suite offices. Eric’s like, “You got to build this from the ground up. It’s about the victims.” And because of that, he allowed the door to open for us to find out this whole thing should have been taken down by RICO.

And that’s the way it should be taken down now. And honestly, that’s by facts. There’s another part of the story. I’ll finish with this Eric. The lobbyists, the big power players, the financiers, all the people that basically run this government back in as early as I think ’98 figured out how to get rid of A – discovery in class action lawsuits, and B – they basically watered down both criminal and RICO cases. And then they use these white shoe law firms to be both the shield and the sword for these huge mega banks.

Look, you got two tiers of law, and I’m going to leave it to you Eric to try to transpose this because really the thing I always come back to was the essay that you wrote at the very beginning of our odyssey when you were just spitball what you thought this whole thing was. And you wrote this incredible treatise called The New Aristocracy. I don’t know how we can after everything we’ve discussed here and after everything we’ve learned for the last 13 years, not understand what we’re looking at. This is the new aristocracy.

[01:08:48.080] – Vaughan

Yeah, thank you for that. And I just want to say that we got here just because of so many efforts from so many people, but most especially you, Patrick. So I want to kind of throw that right back at you. But I think there’s something that you said earlier that I think just hit the nail on the head and that was victim-blaming. Right? In that we have a culture of victim-blaming in this country that is so powerful that it’s to our extreme detriment because we have got to stop doing that.

It’s what allows people to point the finger at Addie Polk as opposed to Angelo Mozilo. Right. And it’s the whole reason why so much of the problem that we have with, say, regulation, it isn’t necessarily that we don’t have regulations that could stop this, but because of the capture that’s occurred, they’re pointing in the wrong direction. So let’s just say that you have two guards who are guarding a treasure, shall we say, and they should be looking out.

Right, to see whoever might be coming to maraud it. They shouldn’t be looking in. That’s a guard being pointed in the wrong direction. And so we have regulators whose only criminal referrals are coming from the banks against private citizens, and we’re not getting criminal referrals from those same regulators because they’re looking at the banks, I would term that systemic victim-blaming.

[01:10:18.570] – Grumbine

Yeah.

[01:10:19.080] – Vaughan

It’s something that’s institutionalized in the way our government functions and we have got to stop that.

[01:10:25.740] – Lovell

Beautiful man. And I got to pick up on that because one thing that’s been crazy lately that I want both of you guys to hear from me because I’ve been getting touched by people all over the country recently. Right. I’m talking Florida to California, to Seattle, to New York and everywhere in between. People are reaching out to me and saying, “Patrick, thank you for waging war on financial terrorism on behalf of those of us who’ve actually been terrorized by it.” And I thought to myself, oh, my God, we’re really beginning to make some strides in the right direction here, because whether it’s Jimmy Dore, whether it’s any number of people in the podcast arena, the ones with the biggest audiences. Right.

Joe Rogan and so forth, they don’t have a clue of what we just covered here. What we talked about is the biggest inside racket, criminal enterprise and cover-up in history. That is the power. It’s like what in the world situation is this? And ultimately, I’ve learned so much from my colleague Eric in this process. It’s about the force. We’re drawn one way or the other.

[01:11:32.160] – Grumbine

I’ve learned so much from both of you guys. And I just want to thank you both for taking the time to be with me. Folks, if you haven’t listened to The New Untouchables or watched the videos of The New Untouchables, please do. The Con is a phenomenal multipart series. Right now currently, season one is five episodes and is available for rent. It’s available for purchase.

And I know coming up in the not too far off future, there’s going to be a wide release for people to be able to get this. Patrick and Eric have been instrumental in driving this home. I’m hoping that I do some service by getting this out to you, all our listeners. And with that, I want to just thank you guys for being my friends and for bringing me along on this journey and helping me wrap my mind around what is blocking us from being able to do many of these great things that we talk about as progressives.

So much of this is wrapped up in fraud than the idea that we don’t have the money to take care of people. And you guys have simply given me so much information to make that case. I cannot thank you guys enough. So with that, I want to thank you both for joining me today. I can’t wait for our next episode of The New Untouchables to come out. Guys, thank you so much.

[01:12:47.310] – Vaughan

Thanks, Steve. And just really quickly, The Con September 21st on Amazon, Apple TV, and Xbox.

[01:12:53.880] – Grumbine

Won’t miss it. Thank you all very much. Have a great day, everybody. This is Steve Grumbine. We’re out of here.

[01:13:06.360] – Ending credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.

Mentioned in the podcast:

BlackRock 

Larry Fink 

Bear Stearns 

Maiden Lane 

The Monster by Michael Hudson 

SFAX 

Roland Arnall 

Sandy Weill and Jamie Dimon 

Phil and Wendy Gramm 

Riegle-Neal Act 

• Download Audio (mp3)