October 3, 2007 (LPAC) -- The practice of packaging mortgages and other loans for resale to other banks or investment funds conflicts with the constitutional property and personal rights of the citizen, lawyers representing investors have argued before a German government committee.
The legal challenges, made in recent hearings before the German Bundestag Finance Committee, resonate with a September 28th call by Helga Zepp-LaRouche, urging German government officials to abide by their constitutional duty to uphold the general welfare.
The mortgage repackaging practice was denounced by various experts testifying at the September 18-19 Bundestag hearings on mortgage securitization. The hearings were prompted by a wave of foreclosures provoked when some German banks sold non-performing real estate loans to third parties (hedge funds).
According to financial policy newsletters describing the hearing, law firms representing investors and Mittelstand firms (small and medium-sized producers) argued that the resale of loans violates the confidentiality guaranteed to both sides in a contract, which includes confidentiality respecting banking. The practice of reselling original loans other assets to other investors, has violated this right in multiple ways:
(1) The original borrower is turned into a debtor to some other agency without his consent, and often without any knowledge about it, which creates a financial slave trade of a special kind;
(2) new investors who are lured into purchasing leveraged loans in this Ponzi scheme, are defrauded, because they are not told that the loans or assets they are buying are non-performing -- hot air, that is;
(3) whereas in Germany, usury is banned, banks have found ways to circumvent that ban, by selling the loans covertly to foreign funds, and then bringing them back into Germany under a new title.
Experts testifying against such practices included Reinhard Kudiss from the German Industrial Association (BDI), Prof. Udo Reifner from the Hamburg Institute for Financial Services (IFF), and Ingo Schulz-Hennig, a lawyer in Munich probably representing homeowners.
A deeper challenge to the constitutionality of the hedge fund practices was issued by Helga Zepp-LaRouche, chairwoman of the Civil Rights Movement Solidarity, in a September 28th call to German federal government officials to uphold Article 56 of the Basic Law (Germany's constitution). Under this article, elected officials swear to defend the well-being and advance the general welfare of the German people. As Mrs. Zepp-LaRouche notes in her call: "Particularly in periods of extraordinary crises, the sovereign nation-state is the only institution, which can protect the General Welfare of the population."
