The Wall Street Model Backfires, Deutsche Bank and the US Mortgage Scam

Published on Global Research.ca, by F. William Engdahl, November 5, 2010.

The earlier filing of fraud charges against Wall Street banking titan Goldman Sachs by the US Government Securities and Exchange Commission (SEC) was only the tip of a huge fraud iceberg. Now a US mortgage insurer has charged one of the most aggressive banks involved in the US subprime mortgage scam of fraud. The bank is none other than Deutsche Bank. This case is also likely to be just the “tip of a very big iceberg.”

Since he left his post as president of the Swiss-US Credit Suisse bank to go to Deutsche Bank, Swiss banker Josef Ackermann has focused on making the premier German bank into an imitation of the major Wall Street banks. It seems he has succeeded only too well. 

Assured Guaranty Ltd., owner of Assured Guaranty Mortgage Insurance Company of New York has sued affiliates of Deutsche Bank AG for over $312 million of mortgage-backed securities (MBS), the controversial bonds that the bond insurer guaranteed and says were “plagued by rampant fraud and misrepresentations.” Assured Guaranty is asking a judge to force Deutsche Bank to repurchase the loans, on which the insurer has already paid almost $60 million in loss claims with potential for tens of millions of dollars more. The suit was filed in New York State Supreme Court against DB Structured Products Inc. and ACE Securities Corp. The bond insurer, backed by billionaire Wilbur Ross, is also seeking reimbursement for the claims paid and for future losses. This is major.

When asked by the press, a spokesman for Deutsche Bank in New York declined to comment.

“The entire pools of loans that Deutsche Bank securitized and to a large degree originated in the transactions are plagued by rampant fraud and misrepresentations and an abdication of sound origination and underwriting practices,” Assured stated in its New York court filing. They declared, “more than 83 percent of 1,306 defaulted loans examined in one of the transactions…breached Deutsche Bank’s representations and warranties.” In other plain language, they claim Deutsche Bank lied. In the second deal, Home Equity Loan Trust, 86 percent of the 1,774 loans breached the agreements, Assured said.[1]

The Wall Street model backfires:

According to members of the Frankfurt financial community, Joe Ackermann came to Deutsche Bank with the clear goal of making the traditional German bank a competitor to the most successful Wall Street investment banks.

The only problem, as began to emerge with the explosion of the US Financial Tsunami in 2007 around Wall Street’s securitization of bundles of thousands of individual low quality, high-risk home mortgages, dubbed “sub-prime” as in below best quality, is that the success “model” of Wall Street was based on fraud to begin with. That’s the model for mega-profits and giga-bonuses that Ackermann’s Deutsche Bank is apparently building its business on.

In recent weeks it has emerged that perhaps millions of US homeowners had been fraudulently tricked into signing mortgages in which their true costs were hidden only to explode some years after they signed the loan agreement with the lender, forcing them to default and the banks to repossess the homes, so-called bank foreclosure. Now legal action is also hitting Germany’s esteemed Deutsche Bank.

‘Stupid Germans: … (full text).

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