Two bad loans go around the outside, around the outside, around the outside……………………

Two fraudulent loans go around the outside, around the outside, around the outside. Now, dosie doe your investor.

Looks like investors have finally got hip to the fact that they bought a bunch of fools gold on Wall Street.

Imagine that? These gigantic investment brokerages with their 20 something hot shots wouldn’t do such a thing. They are regulated and governed.

 This isn’t boiler room with Ben Affleck and Vin Diesel. Or is it?

Boiler Room Facts:

The film takes a look at the world of “boiler room” (seedy, dishonorable) brokerage firms. The film centers around college dropout Seth Davis (Ribisi), a budding underground casino owner in Queens whose life turns upside down when offered employment at J.T. Marlin, a less-than-reputable brokerage firm. Davis’ opposition to his disapproving federal judge father drives the plot as Davis goes deeper into the operation at J.T. Marlin than he’d like, learning how the firm scams its clients. The company is a chop shop brokerage firm that runs a “pump and dump“, using its brokers to create artificial demand in pumping up the price of an IPO of a fake company. Though since it is a fake company, it is technically a ponzi scheme.

The Wall Street Journal:

Already burned by bad mortgages on their books, lenders now are feeling rising heat from loans they sold to investors.

Unhappy buyers of subprime mortgages, home-equity loans and other real-estate loans are trying to force banks and mortgage companies to repurchase a growing pile of troubled loans. The pressure is the result of provisions in many loan sales that require lenders to take back loans that default unusually fast or contained mistakes or fraud.

Mistakes and fraud? NO, really?!!!!!!! Imagine that………

More from WSJ:

Many recent loan disputes involve allegations of bogus appraisals, inflated borrower incomes and other misrepresentations made at the time the loans were originated. Some of the disputes are spilling into the courtroom, and the potential liability is likely to hang over lenders for years.

The fraud was rampant and ponzi scheme was world wide. No secret there. The housing circus continues as Wall Street now is playing boiler room and price manipulations with our oil.

What will these guys think of next? Milk arbitrage? 

Arbitrage Fund Manger Arrested

A Messy Squabble Erupts As Bear Stearns Buys Mortgages

A band of hedge-fund managers accuse Wall Street’s Bear Stearns Cos. of attempting to manipulate the market for securities backed by subprime loans by purchasing shaky mortgages. Bear retorts that it has the right to repurchase mortgages and that sometimes it can help a struggling borrower. Meanwhile, an industry association that oversees derivatives trading has been drawn into the middle of the matter.

 The False Claims Act and Wall Street: How a qui tam case reformed the municipal bond market

In December 1993, Michael R. Lissack was on vacation in Florida and read a brief article in the financial press that aggravated him. The article reported that documents produced by a public agency in California had failed to turn up evidence that Merrill Lynch and Lazard Freres & Co. were engaging in illegal fee- and market-splitting arrangements. At that time, both banks were under active investigation for violations of securities laws in public finance transactions undertaken in Massachusetts and the District of Columbia.[1]

Lissack, an investment banker, knew that federal investigators were missing a much larger scandal by focusing on the fee-splitting allegations. He went to a pay phone near the beach and made an anonymous call to the U.S. Attorney’s office mentioned in the article to let the government in on Wall Street’s dirty — but very profitable — little secret. 

For several years, he told them, investment banks had engaged in systematic, industry-wide overpricing of securities sold in connection with certain municipal bond transactions. Hundreds of millions of dollars in illegal profits had been pocketed by Wall Street. Lissack stressed that these overpricing practices — known as “yield burning” — were the true scandal on Wall Street, for they infected thousands of transactions across the country and touched nearly every public issuer of municipal debt.

Yield burning was hurting the Treasury, the bond markets and the taxpayers far more than any market-splitting arrangement.