Turn On The Lights, Watch The Roaches Scatter, Part 50

A dubious milestone as the Roaches series on Foreclosuregate hits the big five oh.  Today's news: the SEC is officially issuing subpoenas to the big banks to see if they tried to have their cake and eat it too on mortgage notes.  Reuters:

The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks like Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc and Wells Fargo & Co, the sources said.

The subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.

The sources said the SEC is asking for information about the role of so-called "master servicers" -- specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.

In many cases, Wall Street banks that underwrite mortgage-backed securities either own their own master servicing firms or are closely aligned with one.

In the fall, the SEC began looking into the banks' foreclosure practices following allegations that mortgage servicers like Bank of America were using shoddy paperwork to evict delinquent borrowers from their homes.

The Justice Department, banking regulators and the attorneys general in all 50 U.S. states are also probing potential wrongdoing.

One of the sources said the SEC is seeking information about the role banks had in mortgage securitization. The regulator is also looking at the role trustees for the trusts that issued the mortgage-backed securities had in monitoring the performance of the underlying loans.

The SEC is looking at whether loans were properly transferred to the trusts that issued the securities, the source said.

It's that last sentence that should be giving the banksters serious agita.  There's plenty of evidence that the banks have not done this, possibly for thousands, if not hundreds of thousands of mortgages.  When they turned these mortgages into securities products, they were supposed to sign the notes over to these trust companies.  It's looking like the banks never actually did this.

They kept the note and turned around and foreclosed on the owners even though they don't technically own the property anymore.  The problem is because all these notes supposedly got bundled up into securities and sold to investors, nobody knows who actually owns the notes.  If the banks don't own them, they can't count them as assets on the books.

And from there, it goes straight into another financial crisis as the Mother Of All Bank Runs shapes up.

If the SEC is now looking into the issuing trusts, the banks are in deep, deep doodoo (and they know it).  How long do you suppose it will take for the new Congress in January to come up with legislation that absolves the banks of this, get it through the Senate, and onto the President's desk?

There's several trillion reasons why I think that will happen, and soon.  The jig is almost up.