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Bankster sues Bankster – AGAIN

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Bankster sues Bankster – AGAIN
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One of the easiest predictions I've made about the ongoing collapse of the U.S. economy was made in the early stages of this economic meltdown. I stated that even if the U.S. government could pump enough trillions of newly-printed money into the financial system to save the bankster-oligarchs from the consequences of their own reckless greed that they would ultimately be finished off by U.S. lawyers.

Sadly, this is a very slow process. As a ball-park number, I've suggested it will take roughly a decade for most of this litigation to move through the U.S.'s clogged legal system. However, now that we are seeing the beginning of this process, it's time to devote an entire commentary to this subject.

The first observation to make is that the U.S. is the litigation capital of the world. It's “Wild West” procedural rules on litigation don't simply encourage legitimate legal actions, but strongly encourage frivolous law suits – because the U.S. has the only Western legal system where plaintiffs are not required to pay the legal costs of defendants when they lose.

Jurisdictions which have this rule have much, much lower litigation rates than the U.S., because for both lawyer and client alike, being forced to cover the costs of the other side should your action fail is a significant deterrent. Lacking such a rule, the U.S. has become The Land of Lawyers.

It has far more lawyers per capita than any other nation on Earth. Indeed, if I can recall a few numbers correctly, the U.S. has a thousand times as many lawyers as Japan. Naturally, this plethora of litigation lawyers means a plethora of law suits. Again, relying upon memory, there are so many legal actions commenced in the U.S. that it totals out to every person in the U.S. being sued (on average) once every five years.

Granted, many of those actions are truly frivolous – and get dismissed at very early stages, but it serves to illustrate the message. Anyone in the U.S. who causes harm to others can expect to get sued. In the case of entities who cause harm to vast numbers of people, such parties can either expect to get sued multiple times, or face the dreaded “class-action” law suit.

Given that no one (on Earth) has caused harm to as many people as Wall Street's banskter-oligarchs, the deluge of litigation on the way can be expected to have the same impact on Wall Street as Hurricane Katrina had on New Orleans.

On Thursday, a judge ruled that Bank of America can proceed with an action alleging fraud on the part of the now-deceased Bear Stearns. However, given that JP Morgan devoured that carcass more than a year ago, this legal action becomes Bank of America vs. JP Morgan.

It was less than a week ago that I wrote about another bankster-versus-bankster law suit, this one involving Citigroup suing Morgan Stanley – alleging non-payment, for a derivatives bet that blew up in Morgan Stanley's face. For a mere $750,000 “insurance premium”, Morgan Stanley is required to pay out over $200 million (more than a 300:1 loss) – not including the “collateral” which Morgan Stanley has already liquidated to cover additional monies owed (see “Morgan Stanley sued over bad derivatives bet”).

What makes these two law suits such important symbols is that they perfectly represent the two main categories of litigation which we will see over and over again in the future: fraud based on the misrepresentation of assets, and huge losses (most likely from the derivatives market) where the party on the payment end simply refuses to pay.

As I pointed out in the suit against Morgan Stanley, many of these contracts between the banksters were fraudulent conveyances – where neither party ever dreamed they would be forced to rely upon the terms of the deal. This principally refers to the fraudulent “insurance” known as “credit default swaps”. This was a massive extension of the existing form of insurance fraud where a party needing to enhance its appearance of creditworthiness enters into an “insurance contract” to bolster the asset(s) in question – while secretly, a “side letter” is issued where both parties acknowledge the contract is a sham.

This scam was simply institutionalized in the derivatives market, through the invention of the phony “insurance” of the CDS's. The purpose of the fraud scheme was two-fold. First, it created a pretext for the fraudulent ratings agencies to slap their triple-A “rubber stamp” on Wall Street's financial feces. Secondly, by (supposedly) insuring all these assets, it allowed Wall Street to increase its balance sheet leverage from a reckless 10:1 to an utterly insane 30:1 (averaged across all of Wall Street).

However, now that Wall Street's colossal Ponzi-scheme is in the early stages of unraveling, pay-outs are now required on an increasing number of these phony insurance contracts. Obviously, the party which is obliged to pay cannot simply waltz into a courtroom and hand a judge the secret “side letter” - acknowledging that both parties willing participated in this fraud – especially when such secret deals have been entered into countless thousands of times.

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