The Foreclosure Meltdown was Planned - A Whistle blower Speaks Out

by Melinda Pillsbury-Foster

“The trade in derivatives, using home notes, was designed as a Ponzi scheme. Excel knew it. Cadwalader, Wickersham & Taft (CWT), knew it. My fellow junior associates laughed at me, senior associates got mad at me, and the senior partners ultimately asked me to resign or be fired when I wrote repeated lengthy memoranda explaining this out to them.” – Robert X PH.D., Harvard, J.D., University of Chicago, School of Law

Who is Robert X?

In October, 1993, a young attorney, who will prefers to be known as Robert X, began work as an associate at Cadwalader, Wickersham & Taft (CWT). He had just completed a judicial clerkship for Kenneth L. Ryskamp, U. S. District Judge, Southern District of Florida. During his clerkship with Judge Ryskamp, Linc had planned, coordinated, and framed the jury questions for a very large securities fraud trial in Palm Beach against Alan B. Levan’s Florida-based BankAtlantic Bancorp and Subsidiary Bank Atlantic Financial Company (BAFCO), which were heavily involved in Florida Real Estate from 1952-2011.

What he was about to learn, and challenge, would change the course of his life, from one of privilege to destitution.

In many ways, Robert X might have appeared exactly the kind of associate who could be expected to make partner rapidly. Ambitious, bright, and energetic, CWT hired him because he received top law school grades in Securities, Antitrust, and Banking Law, as well as for his clerkship experience in Securities & Banking cases in the post-S & L Collapse period in Florida. He had also been President of the Environmental Law Society at University of Chicago, School of Law.

In law school, he had become intrigued by the role of securities in establishing, maintaining, and shaping the global-elites of the 20thcentury. The complexities of hierarchical and socio-political structures had been his greatest interest in Anthropology & History at Harvard.

In his first month at CWT he turned in 393 billable hours wildly exceeding any expectations. First year associates are expected to bill at least 2000 hours per year, Linc managed to do this in less than six months. At Cadwalader, Linc aspired to a professional specialization in securities litigation, fraud, shareholder’s and directors’ relations, rights and obligations, general agency and relationships of fiduciary duty.

X had taken up law as a second career after a decade as a working archeologist in Mexico & Central America, during which time he wrote a doctoral dissertation “Ethnicity & Social Organization at Chichen Itza, Yucatan” at Harvard’s Peabody Museum. His dissertation resulted from a project he directed in his 20s, funded by the National Geographic Society, Harvard’s Peabody Museum of Archaeology & Ethnology, and private donors such as Doris Zemurray Stone and novelist James A. Michener.

As an archaeologist, X had become frustrated, acutely aware of problems mounting in the world, which originated in finance. Determined to use law creatively as a force for positive change, he enrolled at the University of Chicago, School of Law. At the school, he served as President of the Environmental Law Society (ELS), presiding on a year-long symposium at the Law School in 1990-1991, concerning oil spills in the immediate wake of the Exxon Valdez disaster of March 24, 1989.

Raised as the grandson, and effectively adopted son, of a wealthy petro-chemical engineer & military supplier in Highland Park, Dallas, Texas, X was not a stranger to the better addresses in New York. The welcome dinner held at the Waldorf Astoria for the twenty associates hired at the same time, of which he was one, did not impress him. Cadwalader, Wickersham, & Taft, though claiming to be the oldest, founded in 1792, the same year as the New York Stock Exchange, was by no means the largest.

X knew Cadwalader’s history and greatest claim to fame and power. This is its status as primary law firm to the Bank of New York (BNY), now BNY-Mellon, founded in 1784 by Alexander Hamilton, 8 years before Cadwalader opened its doors under a different name.

The long relationship between the oldest bank and the oldest Wall Street Law Firm include Cadwalader’s role in setting up BNY to be the very first law firm to be traded on the NYSE. Cadwalader’s historical policies have consistently, matched and supported those of the BNY and the thinking of Alexander Hamilton.

Cadwalader’s flagship office was then at 100 Maiden Lane, in New York 10038, close to the heart of the financial district in New York.

Having been hired on for Cadwalader’s litigation department, X encountered a department which was essentially inactive in 1993. The only the only active cases involved municipal defense to voting rights act cases in California.

Even the litigators, in 1993, were all working on one project, one particular project which was shrouded in great mystery and secrecy.

The Excel Mortgage Project

Instead of litigation, X along with all other first year associates, were temporarily to work with the “Structured Finance Department” on preparing the registration statement of Excel Mortgage. Linc’s role was to review and assess a series of some 1500 Arizona residential properties in relationship to state and federal environmental law and geographic issues, such as cultural resource management, and other points relating to the entire history and possible condition and liabilities of these properties.

The 1500 or so properties, subject of his study, were earmarked as assets being “deposited” into the Excel Mortgage Bond Fund, along with promissory notes originated by a number of creditors on homes conforming to a certain size and value profile, but having no other relationship. These were not part of the same communities, not part of a single development project, not built by a common builder, or anything else. This struck X as strange. Why “pool” all these unrelated properties together? And would be in the completed “pool?” Why was the Bank of New York underwriting this project?

Enter the Securitized Derivative

Excel Mortgage, a highly valued client of CWT was about to become part of history, doing something that had never been done before: registering a bond for sale to the public, which bond was based on pooled notes, a hybrid of debt and equity interests in and contingent claims to realty. This type of financial instrument had never before been sold to the public, though it had existed for about 25 years in the “private placement” market.

X was unwittingly participating in the first initial public offering (IPO) of a bond, a debt instrument, derived in part from promissory notes, ‘debts,’ and in part from contingent pledges of title, ‘secured equity,’ in residential real estate.

Securitized derivatives were being born at 100 Maiden Lane.

Bernard Madoff, who founded the NASDAQ when he was 33, was a prominent client of CWT, walking the floors of Cadwalader late at night.

The entire staff of CWT, underwritten by the Bank of New York, supporting Excel, were charged getting these new-fangled “derivative” instruments past examination by the Securities & Exchange Commission (SEC).

This was an arduous, and expensive task, necessitating a “lint-picking” review, before these ‘derivative instruments’ could be packaged under the name of Excel Mortgage and offered both on the NYSE and NASDAQ. An SEC Registration Statement is an application for Federal Blessings affirming investing in a certain stock, bond, or “other instrument or obligation” is a reasonable investment for an average investor to make.

Supposedly “sophisticated investors” can do whatever they want to do, so long as it’s not expressly fraudulent or otherwise illegal. But the average grandmother investing for her grandkids’ college needs Federal Protection. Like “Social Security”, the concept of “Security” in the “Securities and Exchange Commission” is essentially a matter of “Trust us, We’re the Government.”

SEC Registration Statements require, prior to sale of any debt or equity instrument to the public, disclosure of all a companies’ assets and liabilities along with the qualifications of its officers and directors, and more.

Nobody outside of the law firms who prepare such things and SEC staff, would ever read this, but preparing the registration would bring CWT millions of dollars.

Excel Mortgage, however, was not selling stock in itself as an enterprise or an entity: it was selling a pooled collection of utterly unrelated and unconnected and barely similar promissory notes with contingent interests in, and access to, equity ownership of real property owned by 1500 different people and subject to 1500 separate notes and mortgages.

1993 – Anomalies, and Questions, Emerge

Who was to supervise its operation after “Registration”? What coherence did this “enterprise” have ASIDE FROM the Registration Statement? Would anyone ever recognize it as a “business?” If so, how and why? X was puzzled and perplexed, and not satisfied with any of the answers he was getting.

The SEC did not appear to inquire into post-issuance management or maintenance of the pool of assets. Once “securitized” the notes would still be handled by individual originators or assigned to servicers. Linc asked “what was there left to be assigned or handled once the notes and mortgages were pooled?”

The SEC is charged with protecting small individuals and the corporate investor.

The SEC is expected to be involved in examining and making inquiries about a company’s claims for potential and predictions of earnings or profitability.

On what opinion or data would these be based for the Excel Mortgage Pool, since there weren’t any?

The opinions used were based on the “normal statistical performance of similarly credit rated and similarly valued mortgages in similar markets from studies of a group at MIT Sloan School of Management headed by a then no-name professor Frank J. Fabozzi. Fabozzi, with close ties to the Bank of New York, was also among the occasional Night walkers at Cadwalader.

The process of preparing an SEC registration statement is a gold-mine for lawyers inclined to highly detailed work. Such a process for registration can normally require X said, over a thousand individual revisions. The Excel Mortgage registration would be subject to over 2,000 revisions, but in all this there was still no attention given to claims of ownership, transfer of title, the laws of agency and fiduciary duty of managers, any of the concerns which normally plague the corporate world and frame the concern of SEC examiners and securities lawyers.

What’s In It for CWT?

The careers of young associates, and even older partners, at firms such as Cadwalader, Wickersham, & Taft, Chadbourne & Park, Sullivan & Cromwell, or Skadden, Arps, depend upon work measured in billable hours. Cadwalader had a “billing goal” of multiple millions of dollars for the Excel Mortgage registration project.

X recalls three relevant details:

First, the firm was never able to reach it’s own goal of billable hours by the time the project was complete.

Second, the firm sent constant “internal memoranda” by e-mail to all employees, down to the lowliest legal secretaries and paralegals, to work harder and BILL MORE HOURS. It was simply inconceivable that Cadwalader might have to refund any part of enormous retainer paid for the Excel Mortgage, SEC Registration Statement project. The money for this had all been advanced by BNY, who counted on Cadwalader to do the job which needed to be done.

Third, the practical purpose of any billable hours stood quite above and beyond any possibility of doubt or question. In fact, any and all billings, however described, so long as they were assigned to the Excel Mortgage Registration Statement Account, were welcomed.

X was therefore able to unleash his curiosity, delving late at night after hours into issues which ranged far, far afield from the environmental history, condition, and culturally or historically significant use or contents of the subject properties.

Despite some losses during the 2007-2008, CWT was in 1993-1994, and remains today, the top firm representing the creators and implementing the designs of “structure finance and derivative securitization” world-wide. X wanted to understand what he was doing, and what he was involved in creating. The more he found out, the more troubled he became.

As an entry-level associate at Cadwalader X received his own office and secretary and paralegal. Little time was spent interacting with others in the office. A quick question might be asked but friends did not come quickly. Each associate knew what mattered was the hours billed, and friendly socialization was hard to itemize even on the Cadwalader charts. Hanging over the heads of all new associates was the goal of “making partner.”

X saw immediately the subculture of the law firm had its own standards, values, and mandates. The firm had high standards for dress which included ties which remained in place all day, regulations for tie clips or tie pins and cufflinks and belts and, of course, shoes, whether white or “normal.”

Standards for women included skirts below the knee and mandated the length for sleeves and the height of necklines and collars. Even the length of hair, for women, was described and outlined in the firm guide, although one paralegal from the litigation department was granted a special exemption, for cause. Known to and noted by everyone in the firm, for his ponytail and paisley shirts, the associate was hired from SDS in California as “our eyes and ears to the lower classes,” as the senior partners consistently and uniformly described him.

X, as an undergraduate, had twice been voted, “best dressed man on campus”, but the whole Cadwalader atmospheric ethos of bloodless conformity, as noted above, was for him one of stifling suffocation.

The anomalies which began to intrude on X’s consciousness during his late hours trying to understand the “entity” being sold almost as if it were a company or entity, without actually being one, became an obsession. At first, this lead only to more billable hours, but the trip down the rabbit hole became increasingly disconcerting.

All questions of real value or reasonable expectations, lead the inquirer to the Bank of New York’s Heart, ending any questions.

The Disconnect between Law and Derivatives

X’s law school classes, under the University of Chicago’s Andrew M. Rosenfield, William Landes, Geoffrey Parsons Miller, and Richard A. Posner, and from his further and ongoing research as a Law Clerk with Ryskamp and now at Cadwalader, had considered the question of real value and reasonable expectations.

Issuing and selling securities, debt or equity, takes place when a company, or group of people who have control over assets they planned to use to make money, or with which they were already doing something generally profitable, or wanted to raise new capital and/or liquidate their ownership and interests in an ongoing and successful venture.

This did not come close to describing what Bank of New York had underwritten for Cadwalader to prepare for Excel Mortgage.

This SEC Registration Statement gave birth to new type of “debt-equity-derivative debt instrument” which had none of the elements or characteristics of a traditional enterprise at all. It was PAPER MADE FROM PAPER, SECURED BY PAPER.

Indeed, the Excel Mortgage Bond, which was soon to be popped onto the market with an SEC certification of Federal conformity was a creation of the lawyers, by the lawyers, for the lawyers.

As one of the most senior associates, now firm Chairman, Christopher White explained to X when he asked him, “Who will own the interests in these notes once they are securitized?” He grinned boyishly from ear-to-ear and said, “we will, because everyone will have to pay us to tell them.”

Without any unifying manager or common owner for these properties, the pool of notes struck X as like nothing so much as “res nullius” in Ancient Roman Law—the legal category of “property belonging to no one”, e.g. virgin forests, wild beasts and undomesticated fur and game animals of every kind, the un-owned and un-ownable creatures of the deep.

Excel Mortgage was going to pool all these “derivative” real estate mortgage interests, whose only commonalities marking them as similar were the price, promissory note, range, size and “single-family home-residential” nature of the properties, and the credit or FICO scores of the owners.

Having “pooled” these “cherry picked” assets, Excel was going to create a strange creature without an owner until either default or foreclosure moved someone to homestead these unownable notes back to control and “ownership” again.

In essence, the concept was, “everything belongs to everyone in common” and “debt is not individual but collective.”  ”No one owes his or her debt to any person, but everyone owes it to everyone to pay. This concept seemed, even to X in 1994, strangely reminiscent of Aldous Huxley’s “Brave New World.”

The Excel Mortgage Bond to be securitized reflected an artificial “derivative” interests in a non-coherent, uncontrolled mass of wealth, which could and would have to be tamed individually, just like hunting the wild game of the woods.

There would be only a pretense of relationship between the notes originated and the notes collected upon.

There was no one to oversee the transfers, no one to audit the exchanges of values; there were quite simply no responsible parties anymore than anyone can take charge of wheat chaff thrown into the wind or the by-products of a paper mill dumped into a river, yet these “derivative by-products” were being STRUCTURED into something said to have value.

Around 1500 or 2000 properties had been collected together and placed in a basket or pool. But no single plan of real estate development or construction or sales was involved, nor was any contemplated. Nothing joined these properties as a class. Most were not new, but merely resales.

Raising the Issues

X dug in further, producing and circulating to all his fellow associates and the senior partners at Cadwalader his own memoranda: lengthy studies and analysis on issues such as the fiduciary obligations in the Law of Agency.

Fiduciary responsibility of issuers of securities to purchasers, holder in due course doctrine, implied covenants of good faith and fair dealing between parties to a contract, privity of contract itself, and commercial paper doctrines such as endorsement and ownership as holder, and the comparative rights and priorities of “naked” holders vs. “perfected” holders.

As X’s months stretched out among the whirring circular brushes which polished the green and white marble floors of CWT, he spent more-and-more time with the partners of real estate department, which seemed to understand his worries and concerns better than others, certainly better than the Fourth or Fifth year associate in charge of coordinating the Excel Mortgage Project who kept explaining “this is my road to partner; if I can finish this and make it happen, I won’t have to worry about how to live on these lousy six figure salaries anymore, I’ll finally be making millions, and that’s why we all came here, isn’t it?”

Questions Find Answers

Since it was not why X had arrived at 100 Maiden Lane this presented a dead end for him.

The real estate connection, and an aborted plan to open a CWT office in California, permitted him to compare the Excel Mortgage project with another, more traditional real estate development Sacramento, California.

An extremely prominent CWT client based in Los Angeles was complaining and encountering major problems because of a parallel but separate and distinct set of misapplications of the law of agency, fiduciary duty, and obligation, also originating from the same historical “Cadwalader Memorandum” on transfer of interests which had triggered the explosion of derivative innovations in the securities realm.

With CWT acting as counsel for an old and distinguished California family and collection of enterprises, the Ahmansons, tracts totaling several dozen suburban “townships” in El Dorado, Placer, Sacramento, Sutter, Yolo, and Yuba Counties had sold by the Ahmanson family to a Japanese firm and retained an “Ahmanson Construction Group.”

The intention was to build a resort in the area for the benefit of the Japanese owners acting as “construction agents.”

Normally construction is performed pursuant to agreements with “independent contractors” who make estimates but are not obligated to continue working if their estimated budgets prove insufficient to complete a project. The Japanese investors were seeking to securitize all the sales in this immense, almost unimaginable project.

Involved, were the Bank of New York, with Cadwalader’s long-time California based H.F. Ahmanson holding Company, parent company both to Ahmanson Construction and the since failed Home Savings of America Bank.

The “construction agency relationship” which Cadwalader had created imposed devastating duties and obligations on Ahmanson. As agents, Ahmanson Construction was obligated to use its own money to achieve the ends of the principal, in this case the Japanese company which had purchased the real estate but woefully underfunded the construction of the vast tracts of homes. Ahmanson could not make a profit or even break even. In effect, they had become slaves to the Japanese and might never be compensated.

X, having reviewed the facts, pointed out to Stephen Meyer, Richard C. Field, and John McDermott, the partners most closely associated with Ahmanson, that by not only failing to protect Ahmanson, but in fact, selling them into quasi-slavery as agents under a contract without guarantees of adequate funding to execute agency obligations, the firm had made a ghastly mistake amounting to nothing less than legal malpractice. This was a breach of fiduciary duty in and of itself.

X was told, “This firm has a policy of doing no wrong. Therefore, you are wrong. The firm is never wrong. You should reevaluate your conclusions.”

This happened in 1994, only two and a half years after the sensational October 1991 confirmation hearings for Justice Clarence Thomas. The Paula Jones allegations against the new President Clinton, were beginning. “Sexual harassment” became a great boogie-man haunting law firms all over America.

Consequences are Clarified

After reading his memorandum on the Ahmanson project, these senior partners asked Linc to leave the room.

When they called X back in, they told him, very solemnly, “you know you need to keep your nose clean around here. We have all received reports that you have taken your secretary Alex to lunch more than once and what’s more you gave Holly, the Senior Secretary in recruitment & personnel, flowers for her birthday and Valentine’s Day. So just remember: never ever do anything, anything at all, that you would not want to see published on the front page of the New York Times. Anything here can be, you know, and anything will be, at the drop of a pin, because everyone is very sensitive to questions of decorum these days, and, after all, you are a married man.”

X reports he did not even bother to ask how they happened to think of this only after a three-hour meeting concerning the Ahmanson contract of construction agency, when he had never heard about any concerns of this nature before.

At work, X continued to pile up daunting billable hours doing research on a growing list of issues, each going back to the dissection of the elements of value, which were being “deposited” into the derivative pool. He was determined to understand what was really happening. Why were they doing this?

Confirming what Christopher White had told him before, a Properties Department attorney named Stephen Meyer, advised X to keep his mouth shut, this happening shortly before X was asked to resign. Both men had made it clear, in nearly the same words, that X should be careful about questioning or criticizing firm’s plan for transforming the economy of the Western World, “this is how things are being done these days. We do because we get to charge everybody. This is how the whole world will be managed by 2020, we have a plan.”

As X was to discover, there was a plan. A book called “Cadwalader 2020” contained a comprehensive manifesto of how the world would be changed by the year 2020. Unsecuritized individual debt would no longer exist.

During X’s entire time at CWT, the firm maintained a high level of security over the Excel Mortgage work, work which finally involved everyone at the firm. All who worked at the firm had to submit to a frisk on leaving work. No papers or laptop computers or diskettes, this still the era of 3.5-inch diskettes, were to be taken home or removed from the premises, and no external e-mail was allowed connecting to firm e-mail. All firm e-mail was in fact carefully monitored.

To entirely use up the retainer on the Excel work, X and all the other first and second year associates found themselves in a large conference room supervised by some of the partners pasting labels on files.

The partners had to review the signature pages before officers of Excel would sign the documents, and the associates were there to prepare and affix signature tabs, saying “sign here, Mr. So-and-So, on to the final pages of Statement before final submission.

X said it seemed odd to use attorney billable time to prepare, double-check, and verify signature tabs, even on a super important document until you considered the driving desire of CWT to maximize their billable hours.

Billing rates were $150.00 an hour for new associates, $60 – 80 an hour for paralegals, and $40 – 50 an hour for secretaries. On being told that he had failed to bill his secretary’s and paralegals’ time for bringing him after hours meals and snacks, X asked the senior associate in charge of organizing the Excel Mortgage Project how much the firm billed out for the hourly operators of the automated circular marble floor polishers which whirred seemingly ceaselessly day and night throughout the offices. Epstein just glared at X silently. Those hours were not billable.

CWT was determined to drain every possible penny from the work done for Excel Mortgage, and did. This appeared to be consistent with the Bank of New York’s plan in financing the project in the first place.

As X’s research continued, the business plan being followed by Excel Mortgage also emerged, in all of its complexity and disturbing detail. The company had seen the potential to redefine a debt, recreating it as equity, and equity can be used as collateral for originating and extending more debt, which can be hybridized with contingent interests in an ever expanding pyramid of debt, doubled into equity, doubled into debt…. And again, this was the CWT-BNY plan for perpetual inflation.

There was quite simply no plan other than to pool and securitize the notes to issue X millions of dollars in bonds. These would be sold on the major stock exchanges, generating equity. The equity would be used to extend or originate more money to the borrowing public who then “sell” or give their new notes. This then generates more equity through debt, a constantly pooling and production of derivatives then sell to continue the cycle.

Ponzi Scheme Emerges

After his first month of painful research, it took C. an additional 6 weeks to figure out and map the nature of the pyramid, another 6 weeks to check his work and accept the results, and then he started writing memoranda, one after the other, each one critiqued by other associates or the senior partners and getting longer and longer.

His first memorandum was entitled “The Law of Fiduciary Duty in Agency.”

His second was “Transfer and acceptance of instruments by endorsement and receipt: who is responsible?”

There were at least four others, the longest of which was over 500 pages.

X’s conclusion was breathtakingly simple: “merger of identities destroys the identities merged, there is no individual liability for debt in the absence of privity of contract, and no privity of contract without individual identity of contracting parties.”

It was clear from the elated attitude of the Senior Partners that designing and implementing the Excel Registration Statement, as the first IPO of its kind, stood in their minds as their most important contribution to western civilization, as envisioned through the world of “Cadwalader 2020”.

Finally, X was asked to resign, about six weeks shy of his first anniversary. His questions and concerns had not ended and the Partners were becoming hostile.

Leaving with a not quite “Golden Parachute” consisting of a $50,000 severance payment, he had vocally identified a series of challenges which the management of Cadwalader had no intention of addressing. It was now clear to Linc these were not any kind of mistake or oversight.

X’s final memorandum at Cadwalader opined, perhaps overestimating general knowledge of the law, “no mortgage note included in the Excel mortgage pool will ever be lawfully collected in the event of borrower/credit-debtor default, because the pooling of identities obliterates individual obligations and rights, and discrete transactions lie at the foundation of our system of contract and debt.”

At the meeting where he finally resigned, the Senior partners, perhaps understanding the American public better than X, said to him,

“Who is ever going to notice lack of privity of contract besides you? They teach you all those archaic “Elements of Law” at the University of Chicago, we know all about it, but nobody does business that way anymore. The economy of the future is now, nobody cares about endorsements and signatures anymore, it’s all going to be electronic, anyhow.”

X responded, “well, then, you’re going to have to change the law.” And the masters of the CWT universe said, “Don’t let the door hit you on your way out, we write the law, we interpret the law, we tell everyone in America what the law means, that’s what we do.”

The Price Paid

The next nineteen years of X’s life have been filled with constant attacks from the legal establishment from directions and in ways which exacted a hideous toll on him and those he loves. He has repeatedly learned what it is to be hated, rejected, despised, a man of sorrows and acquainted with grief. In those two decades he lost his wife, his birth family, and his son, all his inherited property, including several homes and a gigantic private library and personal collections of fossils, numismatic, painted, and sculptural art, his law licenses in three states and even his own not-at-all-insubstantial investments.

X notes that, after what can only be called a blessed beginning in life with his loving grandparents supporting him, an exceptional education, and basically a privileged and charmed first three decades of life, his consistent pattern of loss only began when he was 33-34 years with his entry into private law practice at Cadwalader, in what, quite simply should have been “the best of all possible worlds.”

Left with nothing, he refused to quit.

All of these events began after those critical months, less than a year, that he had spent at Cadwalader, Wickersham, & Taft.

As historical events unfolded, parallel to his own life, his worst projections regarding the impact of the new market in mortgage derivatives proved to be frighteningly accurate. X began to research how the runaway Ponzi Scheme could be halted, and reversed.

A Solution

According to X, for the past ten years, his life has been entirely shaped by the mortgage crisis and its origin in securitization. The question which, he says, drove him is how private property and integrity of contract could restored in the face of the “New World Order” Plan. This is the plan X first became aware from the internal firm booklet “Cadwalader 2020,” while he was working at CWT in 1993-1994.

X believes such restoration is possible. The systemic fraud has not gone unnoticed, as CWT and BNY clearly thought would be the case. Their concern is registering through the rising wave of settlements which are now extinguishing the cases they deem most threatening. These cases are now settling on the courthouse steps for significant amounts and return of the real estate, free and clear of mortgage related liens.

Banks understand the ominous possibilities they face if juries realize what really happened. And today, it is not just Cadwalader. Nearly every major financial law firm in the United States who is involved, directly or indirectly, in the implementation, defense, or coverup of securitization is potentially liable.

This potential for liability makes the settlements paid out by cigarette companies seem like chump change.

As long as such settlements are few and remain outside the view of the courts, the banks are safe. But the moment juries hear the facts, and see the reality, the banks are toast, and they know it.

And here, X said, is the leverage point from which change can be enacted. More cases must be litigated using the facts so cases won in the light of day can become case law and precedent. The war can be won, but will be costly. This challenge requires, along with several lines of attack, the means for funding litigation.

One possible solution is to solicit private direct investment in litigation for individual cases in exchange for a share of the awards by the jury. Another is to design an “anti-derivative derivative” plan which bundles and pools both investments and potential awards, allowing Americans at all income levels to invest in the effort.

For this derivative, investors would understand both the risk and the benefits of investing.

X’s team, they know, cannot fund its efforts as the banks do, by an out of control pyramid scheme piling debt on equity to create more debt, but X sees a certain symmetry achieved by using the weapons created by the originators of the problem against them.

Either solution, X says, lies directly in the hands of Americans. If the money is available, litigation can go forward. 

If houses now held by banks go on the market, or are returned to their owners, the heavily inflated prices of homes will drop to its natural market level based on supply and demand. Communities will stabilize, as will the lives of Americans.

The America which emerges from this crisis can be very different. No stability will ever result from the current expectations of perpetual economic growth relying on perpetual inflation and perpetual motion in the market place, and the resultant social instability.

The 99% need to bring the 1% home to live with the rest of us in peace.

Given the propensity of the legal establishment to go after activist attorneys, X admits this will not be without risk, but he believes young, committed attorneys will step forward to meet the challenge.  Public involvement can help here, too. They did so in 1775 and in other times of crisis in America.

Failing to act, he said, means abandoning Americans to the cartels and monopolies who are responsible for what has happened to our country.  Along with many other members of the legal profession and finance, we believe strongly most attorneys and judges, when asked to make a choice in the light of day, will do the right thing.

Now, we are looking for more attorneys who love and respect the law, and investors who know what matters most and want to make a difference. Our website is, homeownersjustice.com.