After years of negative judicial decisions about the use of a straw-man on mortgages, MERS was about to lose its existence as well as its credibility. But now all of that is set to change as Wall Street money is pouring into the coffers of those who are receptive (i.e., almost everyone in Congress). The legislation is already being drafted under the interstate commerce clause to ratify MERS and everything it did retroactively. It appears that the Obama administration is ready to pardon all the securitization deviants by signing this bill into law. This information is corroborated by several people who are in sensitive positions — persons who would be the first to know such proposals. Fortunately, there are some people in Washington who have a conscience and do not want to see this happen.It is my understanding that Garfield is something of an expert on the fraudclosure mess, as he has been fighting in the trenches against the banksters, and he has been interviewed by national television media on the topic.
Besides the obvious seediness of this maneuver, it runs roughshod over state property laws, and the rights of investors, homeowners and borrowers. It amounts to a permanent installation of a Federal system that supersedes the county records for recording property rights. Off-record comments I’ve heard from people in power are outraged at this assault on states’ rights. But these people are not legislators, who are getting promises larger than anything in your imagination, if they will support such a bill. It might be couched as a uniform law to be adopted by the states to get around the states rights issues, but it will permanently remove some of the power over property that lies solely within the jurisdiction of the states and place it preemptively within federal jurisdiction.
All of this is scheduled to happen during the lame duck session of congress between now and the end of the this year, 2010. That means in a manner of days, some bill that may look like it has nothing to do with property, mortgages or foreclosures is going to have attached to it a provision whose effect will go even further than the notarization bill that went through Congress like S–t through a goose and almost got signed by the President. We caught that one AFTER it was passed by Congress unanimously but before Obama signed it.
I'm going to accept the premise that the lame duck Congress is going to pass a bill, most likely sponsored by an outgoing member (like Chris Dodd or even perennial "good guy" Russ Feingold), that will, as a practical matter, achieve the goals Garfield ascribes to the Obama administration.
I have a hard time accepting that the bill will look anything like the ex post facto law Garfield describes above. Why? Because something like that is likely to wake up a lot of economic elites (i.e., people in the top 5% of household wealth and income) to the fact that something has gone horribly wrong, and they can force real change.
For this reason, I think Garfield's sources are purposefully misleading him. They're creating a false "anchor" from which Garfield and others will adjust incrementally around while the real action will happen elsewhere and may even seem benign. At this point, Garfield has too much credibility, and the powers that be need him to squander a bit of it by making breathless claims that don't pan out.
So, here's my prediction on how the Washington elite are going to try to pull this off for Wall Street:
- There won't be one piece of legislation but two.
- The first piece of legislation will create federal subject matter jurisdiction over foreclosures involving mortgages that have been securitized (these are the foreclosures that are the real threat to the financial system). This legislation will definitely be passed during the lame duck session of Congress and will most likely be offered as an amendment to either the Securities Act of 1933, the Securities Exchange Act of 1934, the Federal Trade Commission Act of 1914, or some other existing act that ostensibly passed to protect consumers.
- The form that the second piece of "legislation" takes depends on whether federal subject matter jurisdiction will be assigned to federal district courts or an administrative agency. Going the administrative agency route is the most attractive to people seeking to avoid transparency and accountability, but the level of scrutiny on the fraudclosure mess and the fact that foreclosures are truly a local problem makes it far more likely that foreclosures for securitized mortgages will land in federal district courts.
- Regardless, the second piece will take the form of either a bill or a regulation that officially touches on "procedure." This piece does not have to be passed during the lame duck session, and may not be. My bet is that it will, though, and it may actually precede the first piece.
- If federal district courts see their jurisdiction expanded, we will see a second bill, it will be to amend the Rules Enabling Act. Under the Eerie Doctrine, federal courts dealing with state law claims must follow the "substantive" laws of the states in which they sit, but they must apply the "procedural" laws of the federal courts. If Congress identifies something as "procedural law" for federal courts, they must accept that designation. And what do you think Congress will identify as "procedural," if they want to sweep substantive state law claims under the rug without invoking the spectre of an ex post facto law? Something like the sufficiency of evidence to establish the chain of title, perhaps?
- If an adminisatrative agency has its jurisdiction expanded (or a new agency is created), we won't see much of anything. They'll just issue a regulation at whim (which makes going the administrative route so attractive to those seeking to avoid transparency and accountability).