Toxic Assets - Huge risks for vulture investors.

This is part of a story I picked up via my RSS feed.

Toxic Assets - Who will pay? On February 10th, 2009 The Huffington Post published an article accompanied by a photo of a flock of buzzards. The article spoke about the current economic crisis and the problem of Toxic debt our nation faces. Government is spending trillions of tax payers dollars to bail out the big banks. Everybody is well aware of that potential fiasco. But President Obama don't want the government forced into footing all of the bill. According to the Huffington Post article, Obama wants investors with deep pockets to buy as much of the toxic debt as possible at huge discounts. It doesn't take much thinking to start understanding the process and how that is likely to work out. Let's say that a large potential investor buys $25 Billion worth of toxic debt. What is the investor going to do with it? Certainly they won't just sit on it and hope the out of work or down on their luck consumers will be nice to them and voluntarily pony up their unemployment, welfare or retirement checks because of the sheer weight of the moral burden they shoulder to pay their just debts.
Investors would only be interested in spending huge amounts of cash buying up toxic debts if they were certain that they could at least double their investment and maybe much more. Where is that profit going to come from and how will it be collected? That is the question that consumers nationwide will soon enough have to consider. Of course, there can only be one logical answer which is that he who created the debt will have to do the paying in the end.
Those investors will be coming after the debtors like that flock of vultures depicted by the Huffington Post. All that will happen is that the debtors might have the benefit of a temporary rest period and have to pay a much higher burden of taxation for the short breather they got. But no bailout for them, only for the big boys who already had more money than they knew what to do with in the first place. For the courts, the lawyers and the consumer it will be business as usual probably multiplied by billions of times. Consumers will still be losing their homes if they managed to retain them by that time. Consumers will be losing their cars and trucks if they have any left by the time the economy turns around. Consumers will be getting their bank accounts frozen and their paychecks garnished. First their shoes and then their socks and then their shorts. All gone to satisfy the wealthy investors. There is no other conceivable outcome. The toxic debts will suddenly become toxic assets for the vultures unless somebody can come up with a bailout for the consumers because the government obviously has no plan to bail out the little guy as usual. Of course, government is talking about some miracle plans that will help taxpayers but those programs will come with so many restrictions and qualifications that few will be able to qualify for them. Even so, the amount of help they end up getting will be minuscule to say the least. No real help at all. Millions will be convinced that their benevolent
government is doing all it can to help the taxpayer but will the majority will not realize that the consumer's bailout is nothing but a poor bandaid for a deep and hurtful wound.

 

So long as courts have a plaintiff who is willing to stand before the court and claim ownership of the note or claim that they somehow have the right to foreclose on the note and mortgage or that they somehow have the right to stand in the shoes of the lender they have no problem with the court system. Not even if there is not one shred of truth to their claims. Often not even if the consumer has never actually defaulted on their payments and may actually be a payment or two ahead of schedule. Many homeowners have been foreclosed on even though they were not in default but the lenders had messed up their bookkeeping in order to show that the homeowner was in default. Often they simply failed to credit the appropriate account, maybe putting the payment in an escrow account of some kind. Sometimes the bank has failed to properly apportion the payments so that an escrow account went unpaid while some other account was overpaid. Good mortgage fraud investigators such as Norm Bradford can uncover such discrepancies and their findings can be used to defeat foreclosure attempts.
But that is not the point of the article. The point is that debtors need to learn how to protect assets from garnishments. Protect vehicles and their wages so that they can never be garnished or siezed by creditors. The procedures being discussed are real and they are impregnable because the corporate veil cannot be pierced.
Shell corporations have been used for a very long time in vain attempt to hide assets from creditors but those are easily discovered and pierced by the courts. People have paid huge sums of money to set up shell corporations in Panama and other countries only to find out that no protection is to be had by that means. They have fallen for another scam.
My own corporation holds big liens on my vehicles (I have 3) and the ability to make monthly credit reports showing that I am making timely payments on those loans thereby enhancing my credit scores. It shows that I have paid the notes in full every couple of years or so and that helps my credit scores too. So the idea that a corporation properly set up and operated can hide assets is workable. I deliberately set it up so the corporation shows to have made a very small profit every year and I pay the taxes on that profit. That usually costs me less than $200 a year in taxes.

I don't expect to ever be sued for any debts because I don't have any that I can't keep up with but that could change at any time and it is becoming more and more likely with each passing day just as it is for everybody else. I fully expect that it may not be long before I could be out of a job. Here is why. The DOW closed in the low 7,000 area this week. The lowest close since October 2002. That is going to continue because investors know that government cannot survive if it continues to follow the current policies. Each time the Obama administration announces some new plan to save the economy the investors worldwide react by selling off more stock. The DOW can and very well close in the low 4,000 area sometime next month. If it dips solidly below the 4,000 mark there is no predictable bottom. It could just as well end up at the 100 mark or maybe even below that. There is no way to know where the actual bottom is. Companies will be dying off like flies after the first hard freeze. If something so dire as that happens I will be out of work just like most other folks. I'll be among those who will end up getting sued.
If such events should come to pass pensioners will be the most affluent people in our society. They will be the new wealthy class.
Whatever the final economic bottom turns out to be, when it does turn around and people start going back to work again those who have defaulted on mortgages or credit cards will be the targets of massive waves of lawsuits as the vultures start feeding on the rebounding economy. That is going to happen whether the economy tanks or not.
Those who are thinking about the future and what it is likely to bring no matter what happens will start to protect their assets now before it is too late.