October 26, 2010

The Corporatism of MERS

Filed under: Corporatism, Land Reform — Tags: — Russ @ 3:54 am


Taken in itself, MERS is just a lesser moving part of the big mechanism of the Foreclosuregate Land Scandal. It’s a malfunctioning gear, not the ghost in the machine. The most important features are the break in the chain of ownership, leaving the liens homeless and vagrant, and the vagrancy of the securities in the MBS trusts. In both cases we seem to be left with nothing but unsecured paper. The MBS themselves are worthless, and neither kind of paper directly touches the house. All of this has been propped up in the eyes of the law by massive, systematic forgery and perjury. The culpable conspiracy to commit fraud must encompass all officers of every entity involved, right up to the CEOs of BofA, Wells, Citi, and JPM. (Goldman Sachs and Morgan Stanley as well, since they knew how the MBS scam worked.)
MERS is just an electronic registry set up to secretively toss around “ownership” in the form of virtual ones and zeroes but not in the form of the physical paper required for it to have any force of law. This was intended to render the conveyor belt from originator to trust and servicer to investor more “efficient”, meaning cheaper in labor and tax evasion. It was also helpful in tranche fraud, since rather than the mortgages actually being sliced and diced ahead of time, the computer waited until one went bad and then assigned it to the proper tranche so the favored gamblers wouldn’t take the hit. The system was like a million Schrodinger’s cat boxes where people bet on how many cats were dead, except that the connected players were tipped off whenever a cat died and always got to avoid those boxes.
Nearly a year ago I wrote about this, and I think my description and assessment hold up pretty well:

But at the very center of the financial system, out of its own logic and procedure, it has grown a tumor. This is the system’s failure to maintain its own registry, its own paper trail, its own legal basis. It’s as if they already burned many of the deeds for us.

The people are already outraged at the crimes of the banks. We can join to this moral and political outrage an understanding of the structural anarchy and illegality of the system in itself. According to its own premise it has no legal basis, even a phony one, because the land ownership premise is that whoever holds the note has the right, so if there’s no note, there’s no right.

This philosophical and moral combination could provide the basis for a real reform movement. The goal is not just to take back the country from the banksters, but to restore the rule of law and order itself.

So let’s be clear: To be a revolutionary today is to be the advocate of law, while to defend the status quo is to be a lawless rioter.

Property ownership, duly recorded and registered, is the foundation of this legal system. Anarchy at this point equals anarchy throughout. You sell a property, you transfer the written deed. The legal owner, the piece of paper in hand. This has allowed for the orderly ranking and disposal of any claims on the property. Adjudication is not supposed to get hopelessly entangled right at the outset, in even figuring out who holds the note.

But the housing bubble’s fuel was a vast supply of mortgage loans passed along a conveyor belt of entities – lender, sponsor, depositor, trust – while being sliced and diced into tranche layers to then be securitized. Apparently the paperwork and fees and taxes payable at each transfer were too much for the banks to deal with so they simply set up their own extralegal system where any of the shell firms along the way could at any time be what the bank’s computer would call the “owner” (meanwhile the piece of paper often simply disappeared).

The banks (Citi, BofA, JPM, Wells), the Mortgage Bankers Association (MBA), Fannie and Freddie, the street-level sleazy lenders and servicers and others set up the Mortgage Electronic Registration System (MERS) as a front to carry out foreclosures and serve as the respondent in any court case. MERS simply claims to own the mortgage if anyone asks. It doesn’t really even “exist” in the sense of having many employees, etc. Where action is necessary an employee of the underlying bank, servicer or whatnot doubles as the MERS cadre.

For convenience sake, and to cheat on fees and taxes, they simply blew off centuries of property law, the rule of law as such. The result of all this is a system of accounting fraud and avoidance of legal responsibility in general. Anyone who has to deal with them, especially who tries to fight back, has to play Whack-A-Mole with this crazy bureaucracy where no one in particular has any responsibility, authority, or ability to do anything. It takes faceless, bloodless limited liability, the zero responsibility-total rights ideology, to the extreme.

Most ridiculous, the note itself often disappears. Demands to produce it lead to MERS or some similar shell simply vouching for itself, “I own it”, with zero proof.

While MERS is not the essence but a tool, it is symbolic of the corporate phenomenon – the disembodied claim to total rights, the relinquishing of all responsibility, shifting of all costs, the assumption of all prerogative, the essence of might makes right.
In a sense MERS is a totem of corporatism, and a taboo for humanity. Even for ardent propertarians like Hernando de Soto, MERS is a monster to be feared and loathed. MERS flouts, assaults, or subverts several of the criteria de Soto listed for stability of property rights – that registries be accessible to the public, that they take all externalities into account, that deals be “firmly tethered to the real value of the asset from which it originated” (MERS systematically orphaned the lien), and that opacity and obfuscation be purged from the system.
The anti-MERS ruling of the Kansas supreme court made a joke about it:

“The relationship that MERS has to Sovereign [Bank] is more akin to that of a straw man than to a party possessing all the rights given a buyer… What meaning is this court to attach to MERS’s designation as nominee for Millennia [Mortgage Corp.]? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage ‘in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.’ ” (Landmark National Bank v. Boyd A. Kesler)

It was oddly appropriate that in 1997 the MERS CEO proclaimed, “Yes, there is life on MERS.” This was false, but it does capture the sense of the MERS corporation itself as a sterile rock floating through a dead void.
There’s something horrible about this:

On April 7, 2010, in the Superior Court of New Jersey, MERS Treasurer and Secretary William C. Hultman gave an oral sworn video/telephone deposition in the case of Bank Of New York v. Ukpe.:

Q Do the assistant secretaries — first off, are
you a salaried employee of MERS?
A No.

Q Are you a salaried employee of MERS Corp,
A Yes.

Q Are any of the employees of MERS, Inc.
salaried employees?
A I don’t understand your question.

Q Does anyone get a paycheck, if they are an
employee of MERS, Inc., do they get a paycheck from
Mercer, Inc.?
A There is no MERS, Inc.

Q I thought, sir, there’s a company that was
formed January 1, 1999, Mortgage Electronic Registration
Systems, Inc. Does it have paid employees?
A No, it does not.

Q Does it have employees?
A No.

Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.

Q Does MERS have any employees currently?
A No.

Q In the last five years has MERS had any
A No.

Q How many assistant secretaries have you
appointed pursuant to the April 9, 1998 resolution; how
many assistant secretaries of MERS have you appointed?
A I don’t know that number.

Q Approximately?
A I wouldn’t even begin to be able to tell you
right now.

Q Is it in the thousands?
A Yes.

Q Have you been doing this all around the
country in every state in the country?
A Yes.

Q And all these officers I understand are unpaid
officers of MERS?
A Yes.

Q And there’s no live person who is an employee
of MERS that they report to, is that correct, who is an employee?
A There are no employees of MERS.

It’s not just run-of-the-mill crookedness (let alone “sloppiness”.) There’s something horrible about how they strive to make this corporation a truly humanless entity. Their concept was that whenever they wanted, MERS was to have “standing” in court, stand as “owner” of the land. Yet not only is it a “corporate person”, but it claims to have no human persons as employees. Whenever they needed an actual person to stand in for the corporate entity they’d deputize someone from one of the other entities such as the servicer.
This is the trend of all corporations. Wherever possible, as per the Rule of Rackets (the capitalist-to-oligopolist imperative and prerogative), the goal is to become a “brand” and delegate all the actual work, if any, to subcontractors. This is also intended to “legally” put buffers between the corporation and its responsibility for anything at all, for example using something close to slave labor. (See Naomi Klein, No Logo.) Or, as in our mortgage conveyor belt example, to buffer the originator, i.e. a big bank or subsidiary thereof, from legal liability for the bogus quality of its mortgage loans when that same bank later stands as trustee for the MBS derived from them. The bank’s liability is supposed to have been laundered in both directions through the conveyor process. MERS facilitated this.
MERS is also used to illegally assign mortgages after an originator had gone bankrupt, when only the bankruptcy trustee could have such authority. But this crime would regularly be committed, whenever the trust belatedly needed such an assignment. The system’s opacity was intended to cover this up. 
It would stand to “own” the land wherever a foreclosure was to take place. This is the logic of separating useful work on the land (the original kernel of the ultimately fraudulent labor theory of property itself) from legal ownership. Todau we reach the point where temporarily unwanted land can be consigned to humanless corporate “ownership”. This is the better to relinquish responsibility for maintaining the foreclosed land and paying property taxes on it until the next buyer is found. Beleaguered towns and cities, facing fiscal disaster and whole neighborhoods falling into neglected semi-vacancy and the squalor that follows, have had great trouble trying to find out who really “owns” these vacant, unmaintained houses. (The same trouble the individual foreclosee often has.)
These phenomena describe the full logic of corporate personhood. The goal is for none of us human beings to have any legal rights vs. the corporation, but for it to have total rights vs. us. The goal is for none of us to be “employees” of the corporate entity, but just deputized laborers. Have you seen the impoverished day laborers who stand in a parking lot waiting for some guy to come around in a pickup truck? The goal is for all workplaces to become like that in essence, just piling into the pickup truck. (That is, for the diminishing number of us who’ll have a job at all.) You’ll get your meager pay, but beyond that you won’t exist, in the eyes of either the corporation or the law, as a human being. You’ll be a deputized cog at work, and outside work you simply won’t exist at all, other than as a criminal.
It’s chillingly redolent of the phenomenon described in Arendt’s Origins of Totalitarianism, where the stateless person had no legal existence unless he committed a crime. The only difference is that in the mass refugee situations Arendt was describing she claimed that the stateless unperson could actually improve his condition by committing a crime and in that way becoming a legal person. I doubt that’s likely to be true under corporatism where the system aggressively criminalizes poverty itself.
Today the whole mortgage conveyor system totters, calling into profound question both the legal and market validity of securitization as well as the legal disposition of the residential land itself. The system will try to retroactively legalize the mess, but the hurdles it faces are daunting. If it’s possible to hold the line vs. MERS and this system of fraud, could the rest be rolled back from there? Many commenters are saying this threatens to bring us back to September 2008. We should be saying, is that a threat or a promise? Could this actually give us a second chance to do what we should have done two years ago? Could this derail the Bailout and bring about the destruction of Wall Street itself?
And from there, could we find ways to invigorate other battlefronts with the same primal sense of outrage people are now feeling where it comes to their very own homes? In this case, as I said in my Jubilation post, “the political street entered the house”. But how do we find other such avenues, to the point that we can get Americans out of the houses and into the streets?


  1. “So let’s be clear: To be a revolutionary today is to be the advocate of law, while to defend the status quo is to be a lawless rioter.”

    That was deftly phrased. Well done. Wish I’d read it when you first posted it.

    The MERS thing is kind of interesting. You’re right that they’ve created this shell to launder liability. And it is pretty clear that the company is as thinly capitalized as possible to make it judgment proof (I don’t think MERS even hires contractors, they just delegate corporate authority to customer banks and servicers). The problem MERS has is that it is such an obvious sham that you might be able to pierce the corporate veil and go after the owners. Everything about MERS and the big banks that own it just screams for a RICO action.

    Comment by Tao Jonesing — October 26, 2010 @ 11:47 am

    • If RICO wasn’t made for this and lots of other bank patterns of fraud, then it’s a joke.

      “The mafia”? Crips and Bloods? Gimmie a break.

      I remember writing that line recently, but I forget where it was. I’m glad you liked it.

      Shells indeed. I was reading an old printout earlier, and somebody on it talked about the University of Virginia. Evidently the place really squeezes the blood out of its employees. Every few years the students rouse themselves for protests and the place promises to change and makes a few concessions, until the heat dies down. Then it finds new modes of exploitation.

      What made me think of them is this combo of shell and hiring contractors. Apparently now what UVA does is force people to work longer than 40 hours but evades paying them overtime by having them be “employees of the university” for just part of the day, while for the rest of the day they’re technically employees of a contractor.

      But as you point out, MERS has refined things even beyond that.

      It’s really sickening what’s happened to this country and this world. We’ve hit rock bottom, a psychopathic free-fire zone where almost no one thinks in any terms other than how to squeeze the person below one, while enduring the squeeze from above.


      That’s another discussion in Origins; how the Nazis set up their repression system with a gradation of the conquered peoples, so that everyone had someone he knew was below him, who the Nazis encouraged him to squeeze and abuse. It was an effective divide and conquer strategy, which of course dovetailed perfectly with their race ideology.

      Somehow we have to redeem our humanity, but it won’t be possible until we break the swine at the top of this tower of exploitation and abuse.

      So have you finished your project, or just taking a break?

      Comment by Russ — October 26, 2010 @ 3:46 pm

  2. Couple of comments:

    1) We’re seeing every day the most blatant evidence of a two-tiered legal system which produces justice for the banks and injustice for the citizens. And this injustice cuts to the heart of civilized society, to the ownership of land and the rights of homeowners. In a commonplace, everyday scenario recurring thousands of times a week in every state in the country, a bank forecloses on a homeowner without any evidence of its legal right to do so. And when John and Jane Doe dare appear before a judge to contest the foreclosure of their home, the judge yawns over whatever argument they make and rules automatically for the bank. The bank doesn’t need to prove it has the right to foreclose because it is a bank. If the situation were reversed and the Does were the party trying to foreclose, the judge would never rule in their favor. The judge would require the note. So it’s obvious there are two kinds of justice meted out in court: justice for the banks and injustice for citizens. Rather, we shouldn’t dignify the deference shown the banks with the word “justice” because it’s so obviously corrupt. The banks, a fiction of corporate personhood, have become super-people much like the nobility of old. The system is favoritism by fiat for the banks and injustice for actual people.

    2) Stateless people: It seems more and more common to deny people justice by creating legal definitions that leave their status in ambiguity. In Afghanistan we have unlawful combatants who do not qualify for human rights, which I suppose means they are not human. As unlawful combatants they’re denied the Geneva Conventions for POWs as well as whatever justice might be obtained through the criminal justice system. Similarly for Muslim terrorists arrested inside the United States. Days of legal wrangling are required before a suspect can even be Mirandized. Right-wing fascists erupt in outrage whenever the craven administration decides to give a suspect a trial.

    Similarly, as you point out, for contractors and other non-employee employees. When hired they’re not actually hired; they don’t receive health care benefits or other necessities. When fired they’re not actually fired. They don’t receive unemployment or count in government statistics as unemployed. Yet more non-person persons.

    3) Why don’t Americans leave their homes to protest? It’s a little hard to understand why this poses such a mystery for so many people in the blogosphere. Americans don’t protest because they can’t. Do you remember the pro-immigration rallies in 2006? There was massive, almost unbelievable turnout: 400,000 people or more at each one for weeks in a row. Do you remember what caused those rallies to stop? Employers.

    American employment is “at will” which means American workers can be fired at any time for any reason. The immigration rallies stopped as soon as employers threatened to fire people who left work to participate. The same would hold true for any other kind of mass public demonstration. Citizens don’t have to worry about being deported, but they do have to worry about the complete lack of a safety net in the US. Everyone’s on a treadmill of debt payments. Health insurance is a necessity of life. The French can protest — great for them — but they have far less to risk.

    If this argument is correct it means the unemployed have the most potential power in America today. They don’t have anything to lose by not taking the streets, except I suppose in damaging themselves in the eyes of future employers. To an unemployed college grad, or an unemployed 55-year old unlikely to ever work a decent job again, that may prove little enough to fear. History as ever has its way of making rhymes.

    Comment by reslez — October 26, 2010 @ 8:42 pm

    • The systematic defining of human beings out of juridical existence, except insofar as they’re defined as debtors or criminals, is far advanced over Arendt’s time, but her book gives a detailed account of how “innovative” the Nazis were in this respect.

      I say the system is now more advanced only in that the capitalist pseudo-democracies were perplexed back then by the epidemic of statelessness. Today, under their refined neoliberal master plan, creeping statelessness for everyone outside the elites is a calculated part of the plan.

      I’m not well-versed in stuff like making charts or graphics, but I have the idea for a post where I’d chart the inverse trends of juridically expanded corporate “rights” and juridically constricted citizen rights for actual human beings.

      I’ll write the post one of these days, but I’d love to include some kind of graphic depiction of this two-pronged assault, juxtaposing the crushing of rights and bloating of “rights”.

      Comment by Russ — October 27, 2010 @ 5:37 am

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