JPMorgan Chase Too Big Not To Fail
We got trouble right here in River City, with a capital T that rhymes with C and that stands for CHASE
America Under Water
Cases & Pleadings
Soros Dumps JPM
Hide the Ball
Secrets & Lies
Kill the Lawyers
Out of Whack
FHFA v Chase
Wall St. Journal
The Big Boom
Beat Goes On
Feeling the Heat
How the feds failed
What's on Second
Bill Black 2
Dust to Dust
Bill Black 1
- King Solomon's
- Cut to the Chase
- Modern World
- Stress Of It All
Mortgage Defense and the Law of Restitution
by Richard F. Kessler, esq.
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Will Wall Street Ever Face Justice?
by Phil Angelides
New York Times 3/1/2012
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The Ibanez Time Bomb
by Elizabeth Renuart
Albany Law School
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by Ellen Brown
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Underwater and Not Walking Away: Shame, Fear, and Social Management of a Housing Crisis
by Brent T. White
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Where's The Note, Who's The Holder by Hon. Samuel L. Bufford, Glen Ayer
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The Great Collapse
by Kurt Eggert Connecticut Law Review
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by James R. Barth, Tong Li, et al., Milken Institute
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HAMP=Foreclosure so HAMP is a fraud
by Patrick Pulatie
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The Dream Deferred
by Thomas Brom, California Lawyer
Send us an email
Fasten your Seatbelts, Bankabillies
George Soros Dumps All Shares of Chase, BofA and Citibank
George Soros sold his stakes in banks and went for tech and gold mines in the first quarter of 2014, according to a filing with the Securities and Exchange Commission. Soros sold his holdings in Citigroup, Chase, and Bank of America in 2014. Soros said at a Columbia University conference in 2009 that the world financial system had effectively disintegrated, and that there was no prospect of a near-term resolution to the crisis. “We witnessed the collapse of the financial system. It was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom.” (Reuters Feb. 21, 2009)
Are Foreclosure Cases Rigged?
Many judges do not disclose financial ties to banks
The East Bay Express reported on May 13, 2014, that Justice Elizabeth Grimes, Second Appellate District Court of Appeal (Los Angeles), has voted in favor of Bank of America against homeowners in foreclosures cases even though she owns between $100,000 and $1 million worth of stock in Bank of America, according to public records maintained by the state Fair Political Practices Commission.
The Cal. Code of Judicial Ethics Canon 3E(3)(b) requires that judges disqualify themselves from any case in which they own stock or bonds issued by a party with a fair market value exceeding $1,500 if the outcome of the proceeding could substantially affect the value of the judge’s bond. Grimes also owns between $100,000 and $1 million of stock in Wells Fargo and US Bank, and between $10,000 and $100,000 in Citibank, giving her potentially a multimillion-dollar stake in the profitability of the mortgage lending industry.
In 2012, the Second Appellate District (Ventura) ruled in favor of Bank of America in a wrongful foreclosure case brought by Daniel and Yvette Shuster. One of the justices in that the case, Presiding Justice Arthur Gilbert, held stock in four different financial companies that originate or service home mortgage loans, including shares worth as much as $10,000 in Bank of America and shares between $10,000 and $100,000 in JPMorgan Chase. Gilbert ruled in favor of Chase in a foreclosure case filed by Susan Lange that was argued in December 2012, and wrote an unpublished opinion in favor of Chase in another foreclosure matter decided in April 2011.
Forty-two of California's 105 appellate court justices (40%) own significant amounts of stock in at least one financial company. Attorney Patricia Rodriguez said the fact that so many judges have significant financial investments in the banking and mortgage industry means that they're inclined to rule against homeowners because a string of decisions against the banks could reduce the profitability of the entire sector. "They don't want to be the judge that allows forty million mortgages to go back to the borrowers," Rodriguez continued. "They don't want to possibly set a precedent." A series of cases decided in favor of homeowners against the banks could establish a precedent that would make it easier for borrowers to win lawsuits against their banks. Banks losing more often in court could have sweeping impacts on their profitability in California. (East Bay Express).
Chase settles with U.S. for $13 Billion
$4 billion goes to homeowners
Los Angeles Times - Nov. 20, 2013
JPMorgan Chase agreed to a $13-billion settlement with the government over selling shoddy mortgage investments, ending a legal battle that signals a tougher stance against Wall Street wrongdoing. The nation's largest bank admitted to knowingly peddling the toxic securities that helped lead to the housing bubble and the worst financial meltdown since the Great Depression.
California, slammed by 1 million foreclosures during the mortgage meltdown, will be a major beneficiary of the deal. The agreement includes $4 billion to help homeowners across the nation who were foreclosed on or who are struggling with their loans.
Sen. Bernie Sanders (I-Vt.) said he was pleased officials were taking action.
"What the American people understand is that we continue to be in the midst of a terrible, terrible economic downturn because of the greed and recklessness and illegal behavior of Wall Street,” Sanders said. “And I think people want justice to be done."
It was unclear Tuesday how the $4-billion relief program would be apportioned to struggling homeowners. Chase said it would distribute the assistance over the next four years. Half of the program will go toward writing down the balance of mortgages and waiving certain payments on home loans. Most of that would be achieved through outright forgiveness of first-mortgage debt.
Investors in Chase appeared to be relieved the bank was able to arrive at the the largest settlement made by any single American company in history. The bank's shares rose 41 cents, or 0.7%, to $56.15 on Tuesday, while major U.S. stock indexes edged lower. So apparently Wall St. thinks the Biggest Bank got off light.
Fabrice Tourre Takes the Fall
Little guys bounce higher than CEOs
New York Times - Aug 2, 2013
A federal jury found the trader, Fabrice Tourre, liable on six counts of civil securities fraud after a three-week trial in Lower Manhattan. Five years after Wall Street risk-taking nearly toppled the economy, the S.E.C. has taken only a handful of employees to court in connection with the crisis; most cases have been settled. The agency has not leveled fraud charges against one top executive at a big bank.
Some critics have questioned why the agency chose to make Mr. Tourre — a midlevel employee who was stationed in the bowels of Goldman’s mortgage machine — the face of the crisis. Rather than aim at a high-flying executive, the agency pursued someone barely known on Wall Street.
On September 30, his lawyers filed a motion for a new trial in federal court. Meanwhile, Fab is studying for a doctorate in economics at the University of Chicago, where Barack Obama was a law professor for 12 years.
A Broken System
The law of contract was thrown out the window when Wall Street turned title to real property into confetti.
Jamie Dimon Meets With Obama Today
You Won't Find it in The Wall Street Journal
April 11, 2013
If President Obama is trying to make it clear that he reports to the 1 percent, not the average Americans who elected him, he’s earning an A+ on his report card.
At 6:46 p.m. last evening, the White House sent out the President’s schedule for today. One item on the agenda reads as follows: “Later in the morning, the President will meet with members of the Financial Services Forum as part of the organization’s daylong Spring Meeting. This meeting in the Roosevelt Room is closed press.” There is no mention in this press announcement that the President will be meeting with the CEOs of the too-big-to-fail banks – certainly a detail worthy of the public’s attention.
Early this morning, the Wall Street Journal’s link on the front page of its web site to its story on the President’s meet-up with members of the Financial Services Forum tells us the following: “PAGE UNAVAILABLE — The document you requested either no longer exists or is not currently available.” Fortunately, Google has cached the article and from it we learn that Jamie Dimon, Chairman and CEO of JPMorgan Chase (whose firm is under an FBI investigation for losing $6.2 billion of depositors’ money in a derivatives trading scheme) is expected to meet with the President at the White House today as part of the Financial Services Forum. Also expected to attend is Brian Moynihan, CEO of Bank of America...
by Pam Martens, Wall Street on Parade
The Corruption of Capitalism in America"
by David Stockman, New York Times, March 30, 2013
Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later - within a few years, I predict - this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.
So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.
David A. Stockman is a former Republican congressman from Michigan, President Ronald Reagan’s budget director from 1981 to 1985 and the author, most recently, of "The Great Deformation: The Corruption of Capitalism in America."
Secrets and Lies of the Bailout
by Matt Taibbi
Rolling Stone, January 17, 2013
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you'd think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we've been told, but the money has all been paid back, and the government even made a profit. No harm, no foul - right?
It was all a lie - one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in - only temporarily, mind you - to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
How Wall Street Killed Financial Reform
But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn't the only thing the government gave Wall Street - it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. "It is," says former bailout Inspector General Neil Barofsky, "the ultimate bait-and-switch."
The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven't run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it.
Read more: http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104#ixzz2JyBGoqwY
"The First Thing We Do,
Let's Kill All the Lawyers"
Henry VI by William Shakespeare
You may have heard that not one single banker has been charged with a crime for their rampage against the global economy during the past several years, but the California Bar Association has a different perspective on the problem. Not enough lawyers have been disbarred for trying to represent homeowners in foreclosure.
"Rage Among The Ruins" is a feature story by Eric Berkowitz in the February 2013 issue of California Lawyer, a free monthly magazine sent to 170,000 California lawyers.
California State Bar CEO Joe Dunn calls foreclosure relief "the No. 1 disciplinary challenge" his organization faces. From February 2009 to December 2012, the State Bar processed roughly 12,000 complaints against lawyers who allegedly sold clients worthless foreclosure relief services of one sort or another. Of those, 396 cases resulted in disbarments, and at this writing another 284 matters were under active investigation. "Most of our cases come from angry clients," says investigator Tom Layton, who worked on the State Bar's Mortgage Fraud Task Force. "We weren't ready for this kind of volume."
To protect unsuspecting homeowners, the State Bar, the state Attorney General's office, the Department of Real Estate, various district attorneys and U.S. Attorneys' offices, and now the new federal Consumer Financial Protection Bureau have been stepping up enforcement efforts against foreclosure relief scams. Setting up task forces, issuing consumer warnings, and filing lawsuits, these various agencies have brought down operations across California. But as long as troubled homeowners have hopes of keeping a roof over their heads, unscrupulous people will try to profit from their distress.
"Lawyers are involved at some level in most of the scams," says the State Bar's Dunn.
So next time you find a lawyer who is willing to invest 500 hours to help you to fight the banks and save your home from foreclosure, take the advice of William Shakespeare and the California Lawyer. Just shoot him.
Foreclosures Haunting Obama
by Ginyamin Appelbaum
New York Times, August 19, 2012
WASHINGTON - After inheriting the worst economic downturn since the Great Depression, President Obama poured vast amounts of money into efforts to stabilize the financial system, rescue the auto industry and revive the economy.
But he tried to finesse the cleanup of the housing crash, rejecting unpopular proposals for a broad bailout of homeowners facing foreclosure in favor of a limited aid program - and a bet that a recovering economy would take care of the rest.
During his first two years in office, Mr. Obama and his advisers repeatedly affirmed this carefully calibrated strategy, leaving unspent hundreds of billions of dollars that Congress had allocated to buy mortgage loans, even as millions of people lost their homes and the economic recovery stalled somewhere between crisis and prosperity.
The nation's painfully slow pace of growth is now the primary threat to Mr. Obama's bid for a second term, and some economists and political allies say the cautious response to the housing crisis was the administration's most significant mistake. The bailouts of banks and automakers are now widely regarded as crucial steps in arresting the recession, while the depressed housing market remains a millstone.
"They were not aggressive in taking the steps that could have been taken," said Representative Zoe Lofgren, chairwoman of the California Democratic caucus. "And as a consequence they did not interrupt the catastrophic spiral downward in our economy."
Mr. Obama insisted the government should help only "responsible borrowers," and his administration offered aid to fewer than half of those facing foreclosure, excluding landlords, owners of big-ticket homes and those judged to have excessive debts.
He decided to rely on mortgage companies to modify unaffordable loans rather than have the government take control by purchasing the loans, the approach advocated by his chief political rivals in the 2008 presidential race, Hillary Rodham Clinton and John McCain.
The Unrepentant and Unreformed Bankers
by Phil Angelides
San Francisco Cronicle August 18, 2012
That too much of Wall Street remains unchanged is not surprising. Simply stated, the banks and their leaders have paid no real economic, legal or political price for their wrongdoing and thus have not felt compelled to change.
On the economic front, the financial sector has rebounded nicely from its brush with death, thanks to an enormous taxpayer bailout. By 2010, compensation at publicly traded Wall Street firms had hit a record $135 billion.
Last year, the profits of the nation's five biggest banks exceeded $51 billion, with their chief executives all enjoying pay increases. By 2011, the 10 biggest U.S. banks held 77 percent of the nation's banking assets.
On the legal front, enforcement has been woefully inadequate. Federal criminal financial fraud prosecutions have fallen to a two-decade low. Violations are settled for pennies on the dollar - the mere cost of doing business, with no admission of wrongdoing and with the bill invariably picked up by insurers or shareholders. (When it's shareholders, that's not someone else far away, that's your 401(k), pension fund or mutual fund.)
May God Help Us All
by Mark Stopa, Florida attorney
Wanna Buy a Government-Foreclosed Home? OK. Just Bring $10,000,000.00
Posted on June 29th, 2012 by Mark Stopa
I've often expressed my disgust at how Fannie Mae and Freddie Mac frequently pay banks 100% of their judgment amounts in foreclosure cases. It's an appalling dynamic in foreclosure-world, one where banks often have no incentive to modify mortgages because "our" government will pay the banks in full once the foreclosure is over (and all the banks have to do is convey title to Fannie and Freddie). Incredibly, just when I thought I couldn't be any more appalled, somehow, my disgust with "our" government reached a new level today.
I have it on good information (directly from someone personally involved) that Fannie and Freddie are selling foreclosed homes in bulk to third-party investors. Not one at a time, not several - dozens - at heavily discounted rates. In other words, many of the homes in Florida and elsewhere that have been foreclosed, with lower and middle-class homeowners thrown onto the streets and title transferred to Fannie or Freddie, are being sold to third-party investors in bulk.
If you think that sounds like an interesting investment opportunity, a chance to purchase a new home after you were foreclosed, let me stop you. Fannie and Freddie aren't making these investments available to just anyone. To qualify, to even get inside the door to the auction room, you must have at least $10,000,000.00 in assets, and you must be able to prove the existence of those assets via bank statements and the like.
Ten million bucks, just to get in the door.
Is this what America has become? Throwing Americans onto the streets so "our" government pays the banks to foreclose and "our" government sells those houses in bulk at discounted rates to third-party investors with an eight-figure net worth?
You know what's arguably even worse? Nobody is even talking about this. No news stories. No media coverage. Nothing. Would you have known about this if Mark Stopa - basically a nobody in the scope of national news and politics - hadn't blogged about it?
Why such secrecy? Where is the media coverage? Where's the outrage? Who is running our government, exactly? This is as big an issue as Obamacare - thousands of homeowners getting foreclosed and their homes being sold in bulk to the mega-wealthy. Why is nobody even talking about it? Is America really a land where our government takes houses from the poor and middle class and sells them in bulk at discounted rates to the mega-wealthy - and it does so completely in secret? Does anyone care?
This is why I consider this the biggest post I've ever written. This is what is driving the whole foreclosure crisis, and nobody knows about it. Nobody's even talking about it. Change is not possible without awareness, and right now, all Americans are totally in the dark about this dynamic. Well, all Americans except those who have $10,000,000.00.
May God help us all.
Geithner against reducing mortgage principal
Obama pledged to use $50 billion from the $700 billion bank bailout approved by Congress in 2008 to help homeowners. Only about $3.7 billion of that has been spent.
Uncle Sam's Underwater Foreclosure Policy
"Sink, Baby, Sink!"
April 11, 2012. Massachusetts Attorney General Martha Coakley led a coalition of eleven states urging Fannie Mae and Freddie Mac to reverse its position and implement principle reduction in its loan modification program. Her letter to the FHFA on April 11 was joined by Attorneys General from California, Delaware, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, Oregon, and Vermont. AG Coakley said, "We will soon see the results of the country's largest banks implementing principal loan reduction as required under the recent Multistate Servicing Settlement. It is now time for the FHFA to accept the fact that principal forgiveness programs help borrowers, help communities and can improve the creditors' bottom line."
April 18, 2012. One week later, the New York Daily News urged NY Attorney General Eric Schneiderman to quit President Obama's mortgage unit. "The promises of the President have led to little or no concrete action," wrote Mike Gecan and Arnie Graf of the Metro Industrial Areas Foundation in an opinion piece for the Daily News. New York State Attorney General Eric Schneiderman should "distance himself from this cynical arrangement," they said.
The Residential Mortgage-Backed Securities Working Group was prominently featured in the State of the Union speech 85 days ago. It has accomplished nothing, according to the Daily News. Schneiderman has no office, no phones, no staff, and no executive director.
The Daily News article continues:
The settlement and working group - taken together - were a coup: a public relations coup for the White House and the banks. The media hailed the resolution for a few days and then turned their attention to other topics and controversies. But for 12 million American homeowners, collectively $700 billion under water, this was just another in a long series of sham transactions.
In fact, the new Residential Mortgage-Backed Securities Working Group was the sixth such entity formed since the start of the financial crisis in 2009. The grand total of staff working for all of the previous five groups was one, according to a surprised Schneiderman. In Washington, where staffs grow like cherry blossoms, this is a remarkable occurrence.
The Huffington Post reported on April 19, "In law enforcement time, three months isn't very long - investigations typically take months or even years. But the skepticism is hardly surprising, given the Obama administration's scattershot and largely underwhelming law enforcement response to the financial crisis. It's been five years since the subprime market crashed, and federal authorities mostly haven't prosecuted the individuals and institutions that created, marketed and rated the financial products that nearly brought down the American economy."
A recent New York Times/CBS poll found that 36 percent of respondents approve of the president's handling of the mortgage crisis, while 49 percent disapprove.
USA Today reports that almost 1 in 5 children in Nevada lived or live in owner-occupied homes that were lost to foreclosure or are at risk of being lost. The percentages are 15% in Florida, 14% for Arizona, and 12% for California. That's about one in eight children in California. Five years into the foreclosure crisis, an estimated 2.3 million children have lived in homes lost to foreclosure.
Chase is Bigger than Wells Fargo, BoA, Citi...
Too Big to Miss
Chasing Chase is getting easier. JPMorgan is now the country's biggest commercial bank by assets, with $2.416 trillion in assets, a number that has increased by half a trillion dollars since 2007, $757 billion worth of loans, $1.4 trillion in deposits, 260,000 employees all over the world. It is the biggest investment bank in the world, Reuters reported April 13, 2012, citing a report by a research group called Coalition. And it keeps getting bigger.
Second on the list? Goldman "We-Break-Our-Clients-for-Entertainment" Sachs. Huffington Post
One Hundred Years of Title Turmoil
MERS Madness will poison the U.S. well for a century
"When you get your pocket picked by a real pro, sometimes all you can do is appreciate the artistry. Such, apparently, is the case with MERS, a national electronic database of home mortgages that effectively swiped millions of dollars from local governments just when they could have used the revenue most." Thomas Brom, "In MERS We Trust", California Lawyer (March 2013). "Whether MERS Inc. can sustain a private, members-only registry of home mortgages remains to be seen."
"There can be no national solution - each state governs its own recording system," maintains David E. Woolley, principal of Harbinger Analytics Group in Tustin and a licensed land surveyor. Woolley predicted that a wave of boundary suits would eventually hit title insurers. "[T]ens of thousands of titles have been lost or diluted in a sea of MERS transactions, and may take a hundred years to fix," he and Manhattan Beach lawyer Lisa D. Herzog wrote in 8 HASTINGS BUS. L.J. 365, 367 (2012).
In 2010 Rep. Marcy Kaptur (D-Ohio) introduced a bill to prohibit Fannie Mae, Freddie Mac, and Ginnie Mae from owning or guaranteeing any mortgage assigned to MERS or for which MERS is the mortgagee of record. It died in committee in 2011 and again last year; in January 2013, Kaptur reintroduced the bill as H.R. 189. As of July 4, 2013, http://www.govtrack.us gives the bill a 3% chance of getting past committee and 1% chance of being enacted.
Land is America's most valuable asset. MERS may have put our national security at risk as property values crumble and insolvency is the enduring result of MERS mythology. Happy Fourth of July, MERS maniacs.
Rachael Maddow reports on the Meltdown
Interview with Jeff Thigpen, County Recorder
Rachael Maddow describes how the banks destroyed property values in the Unites States by trading title to property like casino chips. She reports that Occupy Greensboro in North Carolina trains volunteers to review documents in new foreclosures to find evidence of fraud, including robosigning. She interviews Jeff Thigpen, Register of Deeds for Guilford County NC, who says he can no longer tell who owns what.
Thigpen's staff conducted a study of 6,100 mortgage documents and discovered that 74 percent, about 4,500 transactions, had problems involving forged signatures and fraudulent documents. His research into robo-signing has been cited in a number of pending court cases as well as in the Associated Press, Business Week, and other national publications.
In March 2012, Thigpen's office took more than two dozen big banks and mortgage companies to court, including JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and MERSCorp., and charged them with wrecking 250 years of fair dealing in his county.
The lawsuit begins, "This lawsuit seeks to have defendants clean up the mess they created." Until the banks do that, he said, the people in his county cannot buy and sell property with any real confidence about who owns it.
MERS Foreclosure Fraud
Wisconsin State Journal
Friday, March 5, 2012
by Dee J. Hall
It used to be that if you wanted to find out who owned your mortgage, you could go to the office of your local register of deeds, the final authority on questions of property ownership.
But when banks set up their own private registration system to help them bundle and resell mortgages in a whirlwind of securities exchanges, the land offices of record had no hope of keeping up.
And when some banks later foreclosed on many of those properties, often cutting corners or worse - creating phony documents - it left register of deeds offices across Wisconsin awash in forged and fraudulent documents.
That's a "serious problem" for registrars charged with maintaining property records, said Brown County Register of Deeds Cathy Williquette Lindsay, who heads a committee studying foreclosure fraud on behalf of the Wisconsin Register of Deeds Association.
"It's troubling to know that in each of our offices, are thousands - and I mean thousands - of fraudulent documents," Williquette Lindsay said.
Registrars' offices across Wisconsin are littered with paperwork signed and sworn to by fictitious people, including "Linda Green," a handle commonly used by "robo-signers" - workers who signed off on foreclosure documents without verifying them.
"Not only did 'Linda Green' not sign it," Williquette Lindsay said, "but somebody fraudulently notorized it."
Across the country, officials tasked with keeping track of property ownership are increasingly alarmed about the prevalence of forged signatures and fraudulent affidavits among their records.
Last month, five major banks agreed to pay $25 billion to compensate homeowners and states for the fraudulent activity and to halt abusive practices, although they have admitted no wrongdoing.
In separate legal actions, several local governments and three states - Massachusetts, New York and Delaware - have sued the major banks and the private record-keeping service they employ, the Mortgage Electronic Registration System (MERS), alleging they have flooded the courts and registrars' offices with inaccurate, fraudulent and forged documents.
John O'Brien, head of the Southern Essex District Registry of Deeds in Massachusetts, was among the first to raise the alarm about potential foreclosure fraud in November 2010. Last year, O'Brien's office commissioned a study of 473 mortgages issued to and from JP Morgan Chase Bank, Wells Fargo Bank and Bank of America during 2010.
The review found just 16 percent of the records in the Essex County office assigning ownership of the mortgages were valid. The rest had been back-dated, robo-signed or had other problems, including broken chains of title.
Kevin Harvey, the county's first assistant register, said O'Brien's office has asked 80 financial institutions to file affidavits verifying that the records they have previously submitted were legitimate.
"Guess how many banks have signed the affidavit?" Harvey asked. "None."
At the heart of the controversy is MERS, founded about 15 years ago by the large banks and now used by roughly 3,000 mortgage-related entities. MERS was to be a central storehouse that streamlined the process of registering and transferring loans secured by property, which previously had been the exclusive purview of county registrars' offices.
But the private registration system has also created chaos, uncertainty and injected fraud into the nation's property records, New York Attorney General Eric Schneiderman charged in a lawsuit against MERS on Feb. 3.
The lawsuit alleges the system effectively eliminated the public's ability to track property transactions by registering properties in the name of MERS rather than the bank that owns the mortgage. That allows member institutions to move loans quickly and multiple times without having to record each move with the local registrar's office.
The lawsuit claims the MERS system has led to a loss of $2 billion in fees nationally from local registrars' offices. And some of the information MERS does have, the lawsuit alleges, is "unreliable and inaccurate."
The Reston, Va.-based company said it is following the law and has become an important part of the mortgage industry.
"MERS does not hide ownership or undermine the integrity of land records," the company said in response to Schneiderman's suit. "Any mortgage holder registered in the MERS System can easily access information related to their mortgage on our website or through a toll-free number."
The company added that federal law already requires that consumers be notified when the owner or servicer of their loan changes.
"County land records were not intended to identify the servicer of a mortgage or the current note holder," the company said, "they are intended to provide notice to purchasers of property that there is a lien on the property and when that lien was perfected."
But Williquette Lindsay said very little information is made available to homeowners by MERS. Property owners visiting their local register of deeds offices to find out who owns their mortgage to prepare for a bankruptcy or defend against foreclosure often leave empty-handed, she said.
"They want to know who is their lender of record, and we can't tell them," Williquette Lindsay said.
When Nevada began requiring transfers of mortgage ownership be recorded in the local recorder's office in October, foreclosures in that state dropped sharply.
'Bizarre' and 'complex'
Schneiderman's suit described MERS as a "bizarre" and "complex" entity that has few employees but which has designated at least 20,000 people working for its member institutions to sign documents on its behalf.
In some cases, MERS-designated officials sign documents "assigning" mortgages from MERS - which actually is only a registration system and owns no mortgages at all - to their own companies or clients to prove ownership in foreclosure actions, Schneiderman said.
Madison attorney Briane Pagel said he has been unable to get any information out of MERS to help his clients fighting foreclosure.
"We have a property recording system that dates back to the Middle Ages," he said, "and MERS has just about destroyed it."
Capitalism is "Out of Whack"
The President Sends Bank Lawyers after the Banks
U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department's criminal division, were partners for years at a Washington law firm that represented a Who's Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters investigation shows. While Holder and Breuer were partners at Covington, the firm's clients included the four largest U.S. banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo. The traffic between the Justice Department and Covington & Burling has been non-stop. In 2010, Holder's deputy chief of staff, John Garland, returned to Covington. So did Steven Fagell, who was Breuer's deputy chief of staff in the criminal division. The revolving door between the Obama administration and Big Banks never stops turning.
President Obama announced in his State of the Union address on January 24, 2012, that he was creating a special unit within the Financial Fraud Enforcement Taskforce to deal with mortgage origination and securitization abuses:
And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.
The members of the new Mortgage Securitization Abuses Unit were identified as New York Attorney General Eric Schneiderman; Assistant U.S. Attorney General Lanny Breuer; Robert Khuzami, Director of Enforcement at the SEC; John Walsh, U.S. Attorney, District of Colorado; and Tony West, Assistant Attorney General, Civil Division, Department of Justice. AG Eric Holder, sitting near the podium, was blinking so fast as Obama said he would rein in the banks that I could only assume he was on LSD - but the kinder interpretation would be that people often blink more rapidly when they are feeling distressed or uncomfortable.
New York Attorney General Schneiderman and Delaware Attorney General Beau Biden have been among the most outspoken regarding the prosecution of crimes relating to mortgage securitization. Schneiderman released a statement after the President's address: "In coordination with our federal partners, our office will continue its steadfast commitment to holding those responsible for the economic crisis accountable, providing meaningful relief for homeowners commensurate with the scale of the misconduct, and getting our economy moving again. The American people deserve a robust and comprehensive investigation into the global financial meltdown to ensure nothing like it ever happens again, and today's announcement is a major step in the right direction."
Abigail Caplovitz Field wrote in Reality Check on January 24, 2012, "Schneiderman isn't chairing anything. He's Co-Chairing. That's a huge difference. If he's Chair he's in charge. If he's Co-Chair he needs consensus. And who is he Co-Chairing with? Four people, starting with Lanny Breuer. That's unacceptable...Why has Breuer failed to go after the people who committed 'misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis'? Is it because he's an ex- (and likely future) Covington & Burling partner? Doesn't matter. His track record speaks for itself. There is only one reason to have him co-chair with Schneiderman, and that's to rein Schneiderman in."
On January 31, Bill Black wrote, "The federal government does not intend to prosecute criminally the large financial firms and their senior officers who committed hundreds of billions of dollars in fraudulent mortgage originations. That figure only counts the fraudulent liar's loans the five large banks made. The total amount of mortgage origination fraud through liar's loans exceeds $1 trillion. The five banks' civil liability for mortgage origination fraud is vastly larger than their civil liability for their endemic foreclosure fraud."
"Capitalism is out of whack," said Klaus Schwab, founder and president of the World Economic Forum. "We have sinned," he said, adding that this year's forum in Davos, Switzerland, will place particular emphasis on ethics and resetting the moral compass of the world's business and political community. New Zealand Herald 1/26/2012.
The Amazing Disappearing Bank
Chase Halts Lawsuits to Collect Credit Card Debt
American Banker Jan. 13, 2012
JPMorgan Chase & Co. has quietly ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments.
Jerry Salzberg, a lawyer who represents debt collectors and banks in the Chicago area, was familiar with Chase's dismissed Illinois collections attorneys, whom he describes as experienced, productive and profitable.
"Someone from New York brought in the three lawyers, kicked them out with no warning and dismissed all their cases," Salzberg says. "These were people who were by the book. ...If they weren't the most profitable [of Chase's regional collection teams], they sure as hell were making a lot of money for the bank. ...Obviously something happened."
Chase collections cases have dropped off sharply in Illinois in recent months, in addition to disappearing in five other states, an American Banker review indicates. The review focused on California, Florida Maryland, New York and Washington, where local court records are electronically searchable.
After recouping $405 million in the first quarter of 2011, Chase's recoveries fell to $321 million in the second quarter and $266 million in the third quarter.
It is not clear why Chase is walking away from billions of dollars of claims, but the number is likely to climb as word gets out that Chase is climbing out of the ring.
Here We Go Again
2012 was another stunning year
The system continues to crumble. "House prices have fallen an average of 33 percent from their 2006 peak, resulting in about $7 trillion in household wealth losses and an associated ratcheting down of aggregate consumption," according to a Federal Reserve White Paper that Fed Chairman Ben Bernanke provided to the chairmen and ranking members of the House and Senate banking committees on January 4, 2012. It states:
"...the large inventory of foreclosed or surrendered properties is contributing to excess supply in the for-sale market, placing downward pressure on house prices and exacerbating the loss in aggregate housing wealth. At the same time, rental markets are strengthening in some areas of the country, reflecting in part a decline in the homeownership rate. Reducing some of the barriers to converting foreclosed properties to rental units will help redeploy the existing stock of houses in a more efficient way. Such conversions might also increase lenders' eventual recoveries on foreclosed and surrendered properties."
Thank you, Chairman Bernanke, for those snappy remarks. Deploy means to move troops into position for action. Maybe your troops can establish base camps filled with barracks to deploy the millions of families who were marched out of the "existing stock of houses."
Bank of America's CEO Brian Moynihan earned $2.26 million in 2011, while his bank's market value dropped 60%. Chase CEO Jamie Dimon took home $41.9 million the most among bank CEOs for steering a bank that lost 23% of its stock value in 2011. Goldman's Lloyd Blankfein pocketed nearly $22 million, while his investment bank lost more than 46% of its market value. You gotta pay top dollare to lose money at that rate.
Compensation pools at seven of the biggest U.S. banks totalled about $156 billion (including salaries, benefits and bonuses) in 2011, which is 3.7% higher than the record breaking number set in 2010. Truthout January 2, 2012.
Bankruptcy attorney Max Gardner's prediction for 2012:
The number of homes in foreclosure will double or triple from 2011 levels and home values will drop by another 15% to 20% by the end of year. I do not expect to see any real recovery in the housing market until at least 2022. A massive number of bank-owned homes (Real Estate Owned or REO property) will be turned into rental properties by the banks and/or mortgage servicers and many more foreclosed on homes will be sold in bulk sales to investors for the same purpose.
Bank of America will be forced into liquidation under the too big to fail provisions of the Dodd Frank Act. The FHFA as conservator of BoA may impose the Chapter 13 principal reduction program for all loans owned and serviced by the Bank.
On November 26, 2012, Foreclosure Radar recorded its millionth California foreclosure sale since January 2007. On average, more than 500 California families have lost their homes every day since 4Q 2007. California foreclosure activity remains elevated, with more than 30,000 completed foreclosures each quarter, compared to less than 3,500 foreclosures in 3Q 2006. Cumulative Foreclosure Totals Have Devastated California Communities: Since 4Q 2007 - the unofficial beginning of the economic crisis - through 4Q 2011, more than 1.5 million Californians received notices of default on their homes. More than 785,000 California families actually lost their homes to foreclosure during the same period. Ten of the top 20 metro foreclosure areas nationwide for 2011 were in California. For mortgages originated between 2004 and 2008, Latino and African-American homeowners in California experienced foreclosure rates 2.1 and 1.7 times that of non-Hispanic White homeowners through February 2011. Latinos accounted for 22 percent of all loans made between 2004 and 2008, but 37% of California foreclosures for the same time period. In 2011 Santa Barbarians received 2307 notices of trustee sales and 1799 notices in 2012. Currently, one in three California owners with a mortgage is underwater.
Santa Barbara has not escaped the housing collapse. Consider the Old Masini Adobe in Montecito. Almost 200 years old, this vintage piece of history is considered to be the oldest 2-story adobe. Built in 1820, this Monterey Colonial is a historical landmark situated on 3/4 acre on 129 Sheffield Drive. Originally listed at $3 million, then reduced to $2.5 million, it sold at the end of 2011 for $791,000.
Notices of Trustee's Sale recorded in Santa Barbara County:
Foreclosures in Santa Barbara increased 12-fold in the most recent five years compared to the previous five years.
Killinger/Rotella Settle for $64 Million
Insurance will pay most of the FDIC's latest joke
New York Times Dec. 14, 2011
The Federal Deposit Insurance Corp. has settled their $900 million lawsuit against three former top executives of Washington Mutual for $64 million (7 cents on the dollar). The FDIC in March 2011 sued WaMu CEO Kerry Killinger, COO Steven Rotella, and home-loans President David Schneider, accusing them of "gross mismanagement" of WaMu's mortgage business that ultimately led to the lender's failure in September 2008. The FDIC accused the executives of pushing Washington Mutual to the brink by making risky bets to reap short-term profits for themselves.
Most of the settlement will be paid by WaMu's directors' and officers' (D&O) insurance. Only $400,000 in total will be paid by the executives. Killinger's $133,000 share of the settlement will be a tiny drop in the bucket he collected $103 million between 2003 and 2008 as his compensation for steering WaMu into the ground.
"The system's broken"
-Rich Sharga, Sr. Vice President, RealtyTrac
With the nation's foreclosure system all but paralyzed after an avalanche of loan failures and "robo-signing" scandals, many delinquent homeowners are defying lenders and staying put. Instead of packing up and slinking away, they're living for free, sometimes for years. They're hiring lawyers to challenge their cases, and many are winning reprieves or causing the process to stall even further.
"They go into a perpetual state of limbo where nothing happens or the case goes very slowly," says attorney, Mark Stopa.
The extraordinary delays are hampering hope of a housing market recovery and pushing this year's troubles into next year, says Rich Sharga, senior vice president at RealtyTrac, which tracks foreclosure data. The logjam also has kept thousands of new cases from being filed. "The system's broken," he says.
The AARP article continues, "Often, banks are not pushing to go to foreclosure. They seem to be in no hurry to add to their swollen inventory of repossessed homes, which now stands at a near record 862,000 nationwide.
"Also contributing to the gridlock is intense scrutiny by regulators stemming from the scandals in which banks cut corners and falsified documents to rush homeowners to foreclosure. Until their cases are resolved, owners can legally remain in homes they would've lost long ago in normal times.
"The banks' paperwork was so messed up in so many cases that it's mind-boggling," says Florida lawyer Peter Ticktin. "The delay is huge."
Realty Trac's Top 10 College Towns for Buying Foreclosures
It's the time of year when proud parents are sending their kids off to college while booster clubs are revving up for the impending college football season. What better time to consider the best college towns in the nation for investing in foreclosures? Read about the Top 10 college towns for smart investors.
FHFA sues Chase for $33 billion
17 banks sued for $196 billion on September 2, 2011
The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac, filed lawsuits against 17 financial institutions, certain of their officers and various lead underwriters. The suits allege violations of federal securities laws in the sale of residential private-label mortgage-backed securities to Fannie Mae and Freddie Mac.
Complaints have been filed against the following lead defendants:
- JPMorgan Chase & Co. - $33 billion
- The Royal Bank of Scotland Group PLC - $30.4 billion
- Countrywide Financial Corporation - $26.6 billion
- Merrill Lynch & Co. - $24.8 billion
- Deutsche Bank AG - $14.2 billion
- Credit Suisse Holdings (USA), Inc. - $14.1 billion
- Goldman Sachs & Co. - $11.1 billion
- Morgan Stanley - $10.6 billion
- HSBC North America Holdings, Inc. - $6.2 billion
- Ally Financial Inc. f/k/a GMAC, LLC - $6 billion
- Bank of America Corporation - $6 billion
- Barclays Bank PLC - $4.9 billion
- Citigroup, Inc. - $3.5 billion
- Nomura Holding America Inc. - $2 billion
- Societe Generale - $1.3 billion
- First Horizon National Corporation - $883 million
- General Electric Company - $549 million
The complaints are available on the FHFA website.
The SEC Systematically Destroyed Evidence
Crooks in all the wrong places - the heat rises...
From Matt Taibbi's article in Rolling Stone August 17, 2011
Much has been made in recent months of the government's glaring failure to police Wall Street; to date, federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis. Indeed, Flynn's accusations dovetail with a recent series of damaging critiques of the SEC made by reporters, watchdog groups and members of Congress, all of which seem to indicate that top federal regulators spend more time lunching, schmoozing and job-interviewing with Wall Street crooks than they do catching them. As one former SEC staffer describes it, the agency is now filled with so many Wall Street hotshots from oft-investigated banks that it has been "infected with the Goldman mindset from within."
The destruction of records by the SEC, as outlined by Flynn, is something far more than an administrative accident or bureaucratic fuck-up. It's a symptom of the agency's terminal brain damage. Somewhere along the line, those at the SEC responsible for policing America's banks fell and hit their head on a big pile of Wall Street's money - a blow from which the agency has never recovered. "From what I've seen, it looks as if the SEC might have sanctioned some level of case-related document destruction," says Sen. Chuck Grassley, the ranking Republican on the Senate Judiciary Committee, whose staff has interviewed Flynn. "It doesn't make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame and to what extent its actions were consistent with the law."
The system is broken.
"It's Been an Unmitigated Disaster"
- Jamie Dimon, July 14, 2011
BLOOMBERG - JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said clashes over faulty mortgages may drag on as investors and regulators demand compensation for soured loans issued at the peak of the housing market.
"There have been so many flaws in mortgages that it's been an unmitigated disaster," Dimon said during a conference call on July 14. "We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it's going to go on for a long time."
How can anybody not like Jamie Dimon? He shows the resilience and common sense of a captain who can weather the storm. JPMorgan disclosed about $2.5 billion in second-quarter costs tied to faulty mortgages and foreclosures. The bank added $1.27 billion to litigation reserves, mostly for mortgage matters, and incurred $1 billion of expenses tied to foreclosures. While millions of families are being thrown out on the streets, lawyers working for the banks are making billions! Maybe all that money will trickle down as the lawyers buy cocktails, and golf clubs, and thousand-dollar suits.
Banks Can't Prove They Own The Loan
The Wall Street Journal Picks Up the Scent
An article by Nick Timiraos appeared in The Wall Street Journal on June 1, 2011 - "Banks Hit Hurdle to Foreclosures."
"Banks trying to foreclose on homeowners are hitting another roadblock," Timiraos writes, "as some delinquent borrowers are successfully arguing that their mortgage companies can't prove they own the loans and therefore don't have the right to foreclose."
If you (or I) try to boot a homeowner into the street without any proof that we're entitled to the property, the cops will lock us up. Stealing is stealing, whether it is somebody's wallet or their 3-bedroom 2-bath in the suburbs with two dogs and a kid. When a bank tries to steal the bungalow without proof that they have a right to foreclose, it's a "hurdle" or "another roadblock."
Semantics aside, this is good news for all people holding grant deeds. This year, the Journal reports, cases in California, North Carolina, Alabama, Florida, Maine, New York, New Jersey, Texas, Massachusetts and other states have raised questions about whether banks properly demonstrated ownership.
In some cases, borrowers are showing courts that banks failed to properly assign ownership of mortgages after they were pooled into mortgage-backed securities. In other cases, borrowers say that lenders backdated or fabricated documents to fix those errors.
"Flawed mortgage-banking processes have potentially infected millions of foreclosures, and the damages against these operations could be significant and take years to materialize," said Sheila Bair, chairman of the Federal Deposit Insurance Corp., in testimony to a Senate committee last month.
In March, an Alabama court said J.P. Morgan Chase & Co. couldn't foreclose on Phyllis Horace, a delinquent homeowner in Phenix City, Ala., because her loan hadn't been properly assigned to its owners - a trust that represents investors - when it was securitized by Bear Stearns Cos. The mortgage assignment showed that the loan hadn't been transferred to the trust from the subprime lender that originated it.
This WSJ story represents a seismic shift in the foreclosure meltdown. Judges read The Wall Street Journal. So does Jamie Dimon. These hurdles, these roadblocks, are early warning signs that the bridges are washed outproceed with caution.
The People vs. Goldman Sachs
Sen. Carl Levin's Report Indicts the Goldman Crown
On April 13, 2011, the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma, released a 650-page bipartisan report, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse.
"Goldman seemed to count on the unwillingness or inability of federal regulators to stop them - and when called to Washington last year to explain their behavior, Goldman executives brazenly misled Congress, apparently confident that their perjury would carry no serious consequences. Thus, while much of the Levin report describes past history, the Goldman section describes an ongoing crime - a powerful, well-connected firm, with the ear of the president and the Treasury, that appears to have conquered the entire regulatory structure and stands now on the precipice of officially getting away with one of the biggest financial crimes in history.
"Goldman was like a car dealership that realized it had a whole lot full of cars with faulty brakes. Instead of announcing a recall, it surged ahead with a two-fold plan to make a fortune: first, by dumping the dangerous products on other people, and second, by taking out life insurance against the fools who bought the deadly cars."
Goldman Sachs was President Obama's number-one private campaign contributor. Hank Paulson, U.S. Treasury Secretary (2006-2009) was CEO of Goldman Sachs and was worth $700 million when George W. Bush appointed him to his Cabinet. Paulson then put Edward M. Liddy, a Goldman Sachs director, in charge of AIG and gave AIG $85 billion. For more names of Goldman troopers in the Executive Branch, see "The Guys from Government Sachs" NY Times, Oct. 17, 2008.
In January 2011, Obama named William Daley, vice chairman at JPMorgan Chase, to be his new chief of staff the man who controls who sees the President. An SEC filing shows that Daley owns $7.7 million worth of stock (175,678 shares) in Chase, a $2.1 trillion behemoth and the nation's second-largest bank. Daley headed Chase's Corporate Responsibility division, which included oversight of the firm's lobbyists and relations with government officials. With Wall Street lobbyists patrolling the Oval Office, we rest assured that the President is in good company.
Obama photo: Douglas Gillies
The 639-page Subcommittee report devoted 183 pages to WaMu, which was acquired by Chase in Sept. 2008:
Internal emails at Moody's and Standard & Poor demonstrate that senior management and ratings personnel were aware of the deteriorating mortgage market and increasing credit risk. In June 2005, for example, an outside mortgage broker who had seen the head of S&P's RMBS Group, Susan Barnes, on a television program sent her an email warning about the "seeds of destruction" in the financial markets. He noted that no one at the time seemed interested in fixing the looming problems.
"I have contacted the OTS, FDIC and others and my concerns are not addressed. I have been a mortgage broker for the past 13 years and I have never seen such a lack of attention to loan risk. I am confident our present housing bubble is not from supply and demand of housing, but from money supply. In my professional opinion the biggest perpetrator is Washington Mutual. 1) No income documentation loans. 2) Option ARMS (negative amortization)...5) 100% financing loans. I have seen instances where WAMU approved buyers for purchase loans where the fully indexed interest only payments represented 100% of borrower's gross monthly income. We need to stop this madness!!!" (Levin Report p. 269)
At the same time that WaMu was implementing its high risk lending strategy, WaMu and Long Beach engaged in a host of shoddy lending practices that produced billions of dollars in high risk, poor quality mortgages and mortgage backed securities. Those practices included qualifying high risk borrowers for larger loans than they could afford; steering borrowers from conventional mortgages to higher risk loan products; accepting loan applications without verifying the borrower's income; using loans with low, short term "teaser" rates that could lead to payment shock when higher interest rates took effect later on; promoting negatively amortizing loans in which many borrowers increased rather than paid down their debt; and authorizing loans with multiple layers of risk. (Levin Report p. 2)
Federal Reserve Consent Orders
Big Banks Promise to be Better Bandits
The Wall Street Journal reported that U.S. regulators hit the nation's largest banks with sweeping penalties for improper home-foreclosure practices, issuing detailed orders to revamp the way they deal with troubled borrowers.
The orders issued on Wednesday, April 13, 2011, to 14 financial institutions didn't include fines. Officials said they are coming. The orders were issued by the Federal Reserve, the Office of Thrift Supervision (OTS), and the Comptroller of the Currency.
Update: On February 9, 2012, the OCC announced the fines, totalling $394 million, including:
This announcement came on the same day that the U.S. government announced a $25 billion settlement with five of the nation's largest banks over charges of systemic and widespread mortgage fraud. Thursday, February 9, 2012, may one day be memorialized as the day everything changed, as with the Magna Charta and the Declaration of Independence. Let the festivities begin.
- $164 million for Bank of America
- $34 million for Citibank
- $113 million for JPMorgan Chase
- $83 million for Wells Fargo
Under the orders, banks have 60 days to establish plans to clean up their mortgage-servicing processes to prevent documentation errors. The orders also direct banks to take steps to ensure they have enough staff to handle the flood of foreclosures, that foreclosures don't happen when a borrower is receiving a loan modification, and that borrowers have a single point of contact throughout the loan-modification and foreclosure process.
Banks must hire an independent consultant to conduct a "look back" of all foreclosure proceedings from 2009 and 2010 to evaluate whether they improperly foreclosed on any homeowners and require each company to establish its own process to consider whether to compensate borrowers who have been harmed.
The OCC, which has been the target of most criticism, defended the enforcement orders. Acting Comptroller of the Currency John Walsh said, "The banks are going to have to do substantial work, bear substantial expense to fix the problems that we identified" as well as to identify and compensate homeowners that suffered financial harm.
It is the latest effort to cobble together a broken system with duct tape. President Obama launched HAMP in March 2009 and offered loan mods as a solution to the foreclosure meltdown. Fewer than 2 million trial modifications were started in the first two years of the program, and fewer than 800,000 converted to permanent modifications.
Here are links to the Consent Orders signed by the Federal Reserve on April 13, 2011. You be the judge whether they will stop the abuse. Better yet, ask your trial judge to take judicial notice of the consent order.
In order of assets (total = $9,512,340,569):
- Bank of America $2,340,667,014
- JPMorgan Chase $2,135,796,000
- CitiBank $2,002,213,000
- Wells Fargo $1,223,630,000
- Metlife $565,566,452
- HSBC $345,382,871
- U.S. Bancorp $282,428,000
- PNC $265,432,977
- Ally $179,428,000
- Suntrust $171,796,255
- plus LPS and MERS
Meanwhile, the soaring U.S. National Debt (below) is now half a trillion dollars greater than the combined assets of the nation's thirty largest banks (based on figures provided by InfoPlease.com). How much of that debt was assumed to bail out the banks?
The U.S. National Debt
Government Gone Wild
The U.S. government debt on May 15, 2012 was $15.7 trillion $50,152 for every man, woman, and child residing in the U.S. (the current total is 312,820,593). The interest on the national debt in 2011 was $454 billionmore than the combined budgets of the Departments of Justice, Homeland Security, Energy, Transportation, Health & Human Services, Agriculture, Treasury, Labor, Commerce, plus HUD and the Small Business Administration. So Americans pay more to the bankers than to all of those departments combined. Since 1988, the U.S. has paid $8 trillion in interest. The
New York Times reported on Aug. 16, 2010, that the United States economy was valued at $4 trillion. China was number two at $1.33 trillion. Forecasts predict that China will surpass the United States as the world's biggest economy in twenty years - and America's interest payments to China will put China on top.
If the United States were to make daily payments of $100 million, it would take 422 years to pay off the national debt. Just nine months ago, it was going to take 389 years, so the U.S. has gone into debt for another 33 years - if it makes payments of $100 million per day for 422 years without missing a payment. We're only 235 years old as a country. We may be a deadbeat nation, but since the U.S. spends half of its budget on "defense" (stuff that kills people), what are they going to do about it? They can't touch US with a ten-foot pole.
Chase's profits jump 67% in Q1 2011
"There is a lot of money washing around the world
and obviously we are the beneficiary of that"
- Jamie Dimon, CEO, JPMorgan Chase, April 13, 2011
April 14, 2011
Senator Carl Levin, chair of the Senate's Permanent Subcommittee on Investigations, releasing the findings of a two-year inquiry yesterday, said he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought collateralized debt obligations without knowing the firm would benefit if they fell in value.
The Michigan Democrat also said federal prosecutors should review whether to bring perjury charges against Goldman Sachs Chief Executive Officer Lloyd Blankfein and other current and former employees who testified in Congress last year. Levin said they denied under oath that Goldman Sachs took a financial position against the mortgage market solely for its own profit, statements the senator said were untrue.
"In my judgment, Goldman clearly misled their clients and they misled the Congress," Levin said at a press briefing yesterday where he and Senator Tom Coburn, an Oklahoma Republican, discussed the 640-page report from the Permanent Subcommittee on Investigations.
"Blame for this mess lies everywhere - from federal regulators who cast a blind eye, Wall Street bankers who let greed run wild, and members of Congress who failed to provide oversight," said Republican Senator Tom Coburn, the subcommittee's top Republican.
Washington Mutual - which became the largest failed bank in U.S. history in 2008 - embraced a high-risk home loan strategy in 2005 while its own top executives were warning of a bubble that "will come back to haunt us."
The report said a runaway mortgage securitization machine churned out abusive loans, toxic securities, and big fees for lenders and Wall Street.
It cited internal emails by Wall Street executives that described mortgage-backed securities underlying many collateralized debt obligations, or CDOs, as "crap" and "pigs."
It said Washington Mutual - which became the largest failed bank in U.S. history in 2008 - embraced a high-risk home loan strategy in 2005 while its own top executives were warning of a bubble that "will come back to haunt us."
Investment banks, it said, charged $1 million to $8 million in fees to construct, underwrite and sell a mortgage-backed security in the bubble, and $5 million to $10 million per CDO.
In the case of one CDO, Hudson Mezzanine Funding 2006-1, Goldman Sachs told investors its interests were "aligned" with theirs while the firm held 100 percent of the short side, according to the report.
Meanwhile, JPMorgan Chase & Co. posted a 67% jump in first-quarter profit thanks to an improving U.S. economy. "There is a lot of money washing around the world, and obviously we are the beneficiary of that," Jamie Dimon, JPMorgan's chief executive, said during a call with analysts after releasing the earnings Wednesday.
JPMorgan earned $5.6 billion, or $1.28 a share, in the first three months of 2011, up from $3.3 billion, or 74 cents, in the first quarter of 2010. The Baltimore Sun ran a mug shot of JPMorgan Chase:
Lawless Lawyers Lead to Outlaw Banks
1.New York Attorney General Issues Subpoenas
The New York Times reported on April 8, 2011, that the New York attorney general has issued subpoenas against the state's largest foreclosure law firm. Representing JPMorgan Chase, Wells Fargo, and other large banks, the Steven Baum law firm has handled an estimated 40 percent of foreclosure cases in the state. Since the end of 2007, Baum has filed more than 50,000 foreclosure cases in New York, according to data compiled by the New York State Unified Court System. The firm employs approximately 70 lawyers.
Judges in courts across New York state have rejected scores of cases filed by the Baum firm, saying it has failed to provide the documentation necessary to commence foreclosure. The firm might do better in California, where judges routinely dismiss lawsuits filed by homeowners without requiring that the foreclosing banks produce anything but a Trustee's Deed Upon Sale. In California, as in many states, "non judicial" means "no judge."
2. Judges crack down on Florida lawyers
Fifty thousand families on the street is by no means a record for bare-fisted law firms. Florida attorney David J. Stern prosecuted 70,400 foreclosures in 2009 with a staff of 1,200. Stern purchased a 130-foot yacht, The Misunderstood, as his fortunes rose. He bought the house adjacent to his $15 million mansion in The Harborage, Fort Lauderdale, and tore it down to build a waterfront tennis court. The Palm Beach Post reported that Stern laid off 70 percent of his staff one day last November. The Misunderstood was offered for sale for $18 million at the Miami Yacht Show last month. Stern is selling his $7 million cabin near Vail and two ocean-front properties in Hillsboro Beach, Florida, with a combined value of $17 million. Stern is now under investigation by the Florida Attorney General, and he stopped repossessing houses in March.
Stern sent letters to the chief judges of Florida's 20 circuit courts announcing that he intended to violate court rules and dump 100,000 foreclosure cases without a judge's order.
"We no longer have the financial or personnel resources to continue to file Motions to Withdraw in tens of thousands of cases that we still remain as counsel of record," Stern wrote, suggesting that the judges treat the pending cases "as you deem appropriate."
The Sun-Sentinel reported on April 4, 2011, that judges throughout Florida are increasingly dismissing cases and accusing lawyers of "fraud upon the court."
A Palm Beach Post review of cases in state and appellate courts found judges are routinely dismissing cases for questionable paperwork. Although in most cases the bank is allowed to refile the case with the appropriate documents, in a growing number of cases judges are awarding homeowners their homes free and clear after finding fraud upon the court.
In February, Miami-Dade County Circuit Judge Maxine Cohen Lando took one of the largest foreclosure law firms in the state to task. She called Marc A. Ben-Ezra, founding partner of Ben-Ezra & Katz P.A., before her to explain discrepancies in a case handled by an attorney in his Fort Lauderdale-based firm.
"This case should have never been filed," said Lando, who referred to the firm's work on the case as "shoddy" and "grossly incompetent." She called Ben-Ezra a "robot" who filed whatever the banks sent him, and held him in contempt of court. She then gave the homeowner the home - free and clear - and barred the lender from refiling the foreclosure.
Fannie Mae fired the Ben-Ezra law firm in February and then sued the firm on February 11 to recover 15,000 foreclosure case files, according to Courthouse News.
JPMorgan Chase fired the Ben-Ezra law firm on March 8, 2011, and then sued them to recover thousands of foreclosure case files, promissory notes, and mortgages that Chase alleges are being held hostage by its former foreclosure attorneys to collect outstanding legal bills. The case was filed in federal district court (SDFL) on March 25, 2011, Case No. 11-60655. Chase alleges that the files are worth $400 million.
3. Follow the Heat to Beat the Bank
Much of the fraudulent paperwork was manufactured by the banks. So the banks are providing paperwork to their lawyers and then suing the lawyers to get their felonious files back while the lawyers take the fall for the banks. The cases are being reported by the press in stories that fail to mention the names of the banks.
The judges shoot the messengers, putting law firms out of business, and tap the banksters on the wrist. Wading through a tsunami of foreclosures, how well does it punish the bank to lose one house in foreclosure when banks are foreclosing on 12 million homes?
Could all of this be happening because bankers broke the system when they went off the deep end and caused the mortgage meltdown? When will judges look for the cause of the calamity? How many illegal foreclosures put families in the streets because judges were too busy managing their caseload to read the files.
Gaddafi's Bank Received $28 Billion Bail-out
Your Tax Dollars at Work
After he ordered that hundreds of Scud missles be launched into Libya, Barack Obama issued an executive order freezing Libyan assets and barring Americans from having business dealings with Libyan banks. A week later, Timothy Geithner, Secretary of the U.S. Treasury Department, issued an order exempting Libyan-owned banks so that they could continue operating without sanction.
Matt Taibbi reports that he is working on a story for the April 15 issue of Rolling Stone that will describe how the United States extended billions of dollars in aid to Muammar Gaddafi and the Central Bank of Libya through Arab Banking Corporation (ABC), a Libyan-owned subsidiary bank operating out of Bahrain.
Senator Bernie Sanders of Vermont sponsored an amendment to the Dodd-Frank bill forcing the Federal Reserve to open its books for the first time and make public the names of individuals and corporations who received emergency loans and bailout monies during the two year period between the crash of 2008 and the passage of the Dodd-Frank bill. In his upcoming Rolling Stone article, Taibbi describes how the Federal Reserve gave $26 billion to Gaddafi's ABC Bank in near-zero interest loans.
"The ABC loans are just one example of the Fed's bailout madness," Taibbi writes. "There are 21,000 transactions on the Fed's list of released names."
"Every one of these is outrageous," according to one of Sanders aides.
Killinger and Rotella Sued by FDIC
Government asks for $900 million
How does it feel to be sued by the U.S. government for almost a billion dollars? Ask Kerry Killinger, former CEO of Washington Mutual, or Stephen Rotella, former WaMu COO.
The FDIC filed a 63-page complaint in Federal District Court on March 17 against Killinger, Rotella and their wives. It also names David Schneider, former head of WaMu's home loans division, who is now working for JPMorgan Chase.
The complaint alleges that Killinger, Rotella, and Schneider caused WaMu "to take extreme and historically unprecedented risks with WaMu's home loans portfolio. They focused on short term gains to increase their own compensation, with reckless disregard for WaMu's longer term safety and soundness."
Linda Killinger and Esther Rotella were accused of receiving millions of dollars of property from their husbands with intent to defraud creditors while the largest bank failure in history was underway and lawsuits were piling up.
On the day the lawsuit was filed, Killinger released a prepared statement describing the lawsuit as "baseless and unworthy of the government. The factual allegations are fiction. The legal conclusions are political theater. Trial in a courtroom that honors the rule of law - and not the will of Washington, D.C. - will confirm that Kerry Killinger's management, diligence and commitment to Washington Mutual responsibly and consistently served the interests of its depositors, customers and shareholders.
"The presence and prominence of the federal bank regulators at Washington Mutual cannot be overstated. First, they had offices on premises "24/7". Second, they had unfettered access to the books, records, accounts, committee minutes, and personnel of the Bank. They roamed freely and paid particular attention to the quality of the assets - i.e., the mortgages - and the liquidity of the Bank...
"The September 25, 2008 seizure and sale of Washington Mutual was demonstrably premature
and unjustified. Had the benefits extended to Wall Street institutions within weeks of the seizure - e.g., increases in insurance limits, guarantees of bank debt, TARP purchases and capital injections, and added liquidity by the Federal Reserve - been extended to Washington Mutual, it too would have weathered the global financial crisis."
Stephen Rotella added, "I am angered at this abuse of power by the FDIC. More than anything, I am angered that my wife and children may be subjected to the public attention this lawsuit may generate, even if it is for a short period of time. And, of course, I am angered that my good name, built over a career of three decades, is at risk as a result of this callous action.
"It is almost beyond belief that the FDIC would take action against an effective, hard working bank manager who performed well under extraordinary conditions in an effort to save an important financial institution."
So, it was the government's fault that WaMu failed because:
(1) They didn't tell us to stop;
(2) They could have bailed us out; and,
(3) We were effective, hard working, diligent, and committed.
This wasn't something that came out unexpectedly when the Summons and Complaint were served. The FDIC gave Killinger and Rotella a heads up three weeks earlier that the lawsuit was in the pipelined. Their prepared statements were the result of strategy sessions with Killinger's lawyers - Wilson Sonsini Goodrich & Rosati in Seattle and Williams & Connolly in Washington D.C. Having collected hundreds of millions in salary and bonuses, the defendants have worked out a strategy - it wasn't our fault.
New Proposed Legislation in California
California takes a Trillon-Dollar Hit
While Wall Street bankers snorted cocaine and frolicked with hookers (see the Academy Award winning documentary, "Inside Job") California was hit with an economic tsunami of one trillion dollars, according to "Home Wreckers," a report released on March 16, 2011.
New state legislation is pending in Sacramento, including:
The Homeowner Protection Act (SB 729): requires lenders to finish attempting a loan modification with each borrower before continuing with the foreclosure process.
- The Title Transparency bill (AB 1321): requires that all deeds and transfers of mortgage loans be recorded with the County, so that borrowers can confirm in public records who actually holds their mortgage.
- The Foreclosure Fee bill (AB 935): encourages loan modifications by adding a disincentive to foreclosing - a $20,000 fee. This fee begins to allow California cities and state to recoup some of the fiscal costs that result from each foreclosure.
Judges in California still insist that banks can foreclose on homes without producing any papers to show they own the mortgage. The courts may still be operating in the Dark Ages, but not for long.
10,000 Lawsuits Against Chase
10K Filing Discloses 10K Lawsuits
Chase is defending more than 10,000 legal proceedings, the bank revealed in its 10-K filing with the Securities and Exchange Commission on February 28, 2011. It may be $4.5 billion short in reserves to cover the costs in a worst-case scenario, the bank said.
The lawsuits range from individual actions against JPMorgan Chase to class actions with "potentially millions" of litigants to regulatory/gov't investigations. The suits include common law tort and contract claims, statutory antitrust claims, securities claims and consumer protection claims, the bank reported.
If Houdini could conjure one lawyer to represent all the plaintiffs in each case and persuade all the lawyers to attend one humongous settlement conference, here's how the line would look on the courthouse lawn:
"In view of the inherent difficulty of predicting the outcome of legal proceedings, particularly where the claimants seek very large or indeterminate damages, or where the matters present novel legal theories, involve a large number of parties or are in early stages of discovery, the Firm cannot state with confidence what the eventual outcome of the currently pending matters will be, what the timing of the ultimate resolution of these pending matters will be or what the eventual loss, fines, penalties or impact related to each pending matter may be."
FDIC may sue Killinger and Rotella
Monday, February 21, 2011.
The FDIC sent letters to several former executives of Washington Mutual warning that it was considering taking legal action tied to their role in the collapse of WaMu.
News of the letters was reported Monday by the online edition of The Wall Street Journal. Former president and chief operating officer Steve Rotella and David Schneider, former president of the failed bank's home-loan division, also received the letters.
FDIC officials have discussed seeking damages of up to $1 billion. The FDIC has filed civil lawsuits against former directors and officers at hundreds of banks that were closed during the financial crisis.
Deleware Bankruptcy Judge Mary Walrath refused to confirm WaMu's reorganization plan in January, finding that the protections from future legal liabilities the plan granted to the company's directors, officers and professionals were either unwarranted or too broad.
Why Isn't Wall Street in Jail?
Matt Taibi writes in Rolling Stone March 3, 2011
Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom - an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities - has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft.
"You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."
The shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.
The systematic lack of regulation has left even the country's top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. "I think you've got a wrong assumption - that we even have a law-enforcement agency when it comes to Wall Street," he says.
Over and over, even the most obvious cases of fraud and insider dealing got gummed up in the works, and high-ranking executives were almost never prosecuted for their crimes. In 2003, Freddie Mac coughed up $125 million after it was caught misreporting its earnings by $5 billion; nobody went to jail. In 2006, Fannie Mae was fined $400 million, but executives who had overseen phony accounting techniques to jack up their bonuses faced no criminal charges. That same year, AIG paid $1.6 billion after it was caught in a major accounting scandal that would indirectly lead to its collapse two years later, but no executives at the insurance giant were prosecuted.
...it wasn't just the executives of Lehman and AIGFP who got passes. Virtually every one of the major players on Wall Street was similarly embroiled in scandal, yet their executives skated off into the sunset, uncharged and unfined. Goldman Sachs paid $550 million last year when it was caught defrauding investors with crappy mortgages, but no executive has been fined or jailed - not even Fabrice "Fabulous Fab" Tourre, Goldman's outrageous Euro-douche who gleefully e-mailed a pal about the "surreal" transactions in the middle of a meeting with the firm's victims. In a similar case, a sales executive at the German powerhouse Deutsche Bank got off on charges of insider trading; its general counsel at the time of the questionable deals, Robert Khuzami, now serves as director of enforcement for the SEC.
As for President Obama, what is there to be said? Goldman Sachs was his number-one private campaign contributor. He put a Citigroup executive in charge of his economic transition team, and he just named an executive of JP Morgan Chase, the proud owner of $7.7 million in Chase stock, his new chief of staff.
The mental stumbling block, for most Americans, is that financial crimes don't feel real; you don't see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property - which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional - when the state simply gives up on the notion of justice - this whole American Dream thing recedes even further from reality.
...and the beat goes on.
Foreclosure Fraud in Florida
Law Offices of David Stern Collapse
Some employees of Florida's largest "foreclosure mill" were given jewelry, cars and houses in exchange for altering and forging key documents used to obtain foreclosures, according to a statement released in October 2010 by the Florida Attorney General's Office and reported in the Tampa Tribune.
The office released transcripts of interviews it conducted for its investigation into the law offices of David J. Stern. They painted a picture of a secret system designed to speed up the foreclosure process. Attorneys and staff members forged signatures, changed dates, passed around notary stamps.The office would move forward with cases even if they knew the homeowner had not been properly notified of the lawsuit.
Two former Sterns employees described long tables where employees would sign as a witness and notarize documents without actually witnessing the signing. Twice a day, the company's chief operating officer, Cheryl Samons, would go into the office and sign 500 documents at a time - without reading them.
As a perk of Samons' job, Stern's office would routinely pay her personal mortgage, a car payment, her electric bills and her cell phone bill, according to Samons' legal assistant, who told investigators Stern also bought Samons a new BMW sport utility vehicle every year and gave her and other employees jewelry. Additionally, Stern purchased employee David Vargas a house, a car and a cell phone.
After the economy crashed in the fall of 2008, Florida, along with Nevada, Arizona and California, became foreclosure central. Stern's caseload rose from 15,000 foreclosures in 2006 to 70,400 in 2009. His staff tripled to more than 1,200. To keep up with demand, Stern set up offices in the Philippines. When the U.S. staff responsible for entering bank data in the foreclosure files logged off, the offshore workers logged on.
Revenue swelled from $41 million in 2006 to $260 million in 2009, according to an SEC filing. The firm moved into a plush, marble-floored headquarters near Miami that was all glass and fountains. Stern was driving a Bugatti and had bought at least $60 million in property, including a 16,000-square-foot island compound that sits behind two security gates.
In October, the megabanks started to withdraw their cases from Stern's firm. Fannie fired Stern on Oct. 22. Stern's staff of 1,200 has dwindled to 200. His company's stock, worth as much as $13 last April, now trades for pennies.
The firm's fall has spawned more chaos in Florida's circus-like foreclosure courts. Recently, even the most infamous "rocket docket," in Lee County, where judges were reported to have signed off on a foreclosure every 30 seconds, ground to a virtual standstill as the Stern firm withdrew from case after case. Some of Stern's remaining lawyers show up court with greasy hair, fleece jackets and food-stained clothing. As for Stern, if federal and state prosecutors file criminal charges, he could end up in prison.
Meanwhile, Stern's payment on his $12 million line of credit with Bank of America is late. So is the rent on his headquarters. He's now in default.
Banks "have essentially sidestepped 400 years of property law in the United States," said Rebel A. Cole, a professor of finance and real estate at DePaul University. "There are so many questionable aspects to this thing it's scary...This is ultimately going to have to be resolved by the 50 state supreme courts who have jurisdiction for property law."
The Big Boom in Foreclosures
Bank of America Halts Foreclosures - Just Kidding
The explosion is almost deafening. Bank of America, the nation's largest bank, put foreclosures in 23 states on hold in order to review whether "certain affidavits have followed the correct procedures," the company said. The bank was the third major lender to freeze foreclosures in those states due to flawed paperwork. J.P. Morgan and Ally Financial had announced similar measures.
A Bank of America official acknowledged in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn't read them. The Bank of America executive said in a February deposition in a Massachusetts bankruptcy case that she signed 7,000 to 8,000 foreclosure documents a month. "I typically don't read them because of the volume that we sign," the executive said.
The official admitted to these acts of perjury in testimony under oath in February. Chase admitted the same thing in May. GMAC confessed in June. Why did the big banks wait until October to take action? What high level executives were aware of the perjury and conspired to keep it under wraps? Millions of felonies committed by banks went unreported for five to ten months.
Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that "until further notice" it would not insure title to properties foreclosed upon by GMAC Mortgage, the country's fourth-largest home lender and one of the two big lenders at the center of the current controversy. The federal government has been the majority owner of GMAC since supplying $17 billion to prevent the lender's failure during the financial crisis.
Other lenders said Thursday, September 30, that their foreclosure filings, including the crucial affidavits, had been properly done. A Citigroup spokesman said the lender required "annual training for our foreclosure employees on the proper execution of affidavits, including having personal knowledge of the information in the affidavit."
A Wells Fargo spokeswoman said "the affidavits we sign are accurate." A spokesman for Bank of America, Rick Simon, said to the New York Times, "We do not have anything to tell you at this time."
But the fuse was already lit.
"The way the banks' lawyers have handled this has corrupted our legal system," said Thomas Cox, a Maine lawyer whose deposition of a GMAC executive in June helped prompt the current disclosures. "They tried to manufacture foreclosures the way you'd manufacture cars, on an assembly line. It can't be done that way."
Mr. Cox is representing pro bono a rural woman who is in foreclosure on a $82,000 mortgage. The plaintiff in the case is Fannie Mae, the mortgage holding company that failed during the financial crisis and is now under government conservatorship. GMAC serviced the loan for Fannie Mae.
The judge in the case set aside his summary judgment in favor of Fannie when he read Mr. Cox's deposition of a GMAC executive, Jeffrey Stephan, who said he never reviewed the file he had signed. The case will go to trial.
Rep Alan Grayson (D-FL) explains the foreclosure crisis in a coherent summary on YouTube
Law enforcement officials in several states, including Texas, Maryland and Connecticut, are demanding a suspension of foreclosures until lenders can prove they are using legal methods.
While homeowners in those states and elsewhere must usually show damages to win a lawsuit, "attorneys general can just sue over deceptive sales practices and get penalties," said Christopher Peterson, a University of Utah law professor who specializes in commercial and contract law, reported by Bloomberg.
Massachusetts Attorney General Martha Coakley asked GMAC, JPMorgan, Bank of America and Wells Fargo to suspend foreclosures and evictions in that state. North Carolina Attorney General Roy Cooper said today he was expanding his investigation into questionable foreclosure tactics to include 14 more lenders. Cooper, who announced earlier he was looking into allegations about GMAC, also asked lenders to stop foreclosures in his state until they can confirm they are complying with laws.
In addition to the investigation of Ally which began last month, Texas Attorney General Greg Abbott on Oct. 4 asked 30 loan servicers operating in his state, including Bank of America and JPMorgan Chase, to stop foreclosures pending a review of business practices. Abbott also asked lenders and servicers to halt "all sales of properties previously foreclosed upon" and stop all evictions.
Lenders took possession of a record 95,364 U.S. homes in August and issued foreclosure filings to 338,836 homeowners, or one of every 381 U.S. households, according to RealtyTrac Inc., an Irvine, California-based data seller.
Lenders, loan servicers and even title insurance companies are facing litigation on multiple fronts, said Peter Henning, a law professor at Wayne State University in Detroit and a former federal prosecutor who worked on cases involving bank fraud.
"This is going to become a hydra," he said in an interview. "You've got so many potential avenues of liability. You don't even know the parameters of this yet."
Reviews of affidavits and other loan documents that may have been signed without personal examination by the signers should be completed in a few weeks, JPMorgan and Bank of America said last week.
"We believe the accuracy of the factual loan information contained in the affidavits was not affected by whether or not the signer had personal knowledge of the precise details," JPMorgan said in its statement. "The affidavits were prepared by appropriate personnel with knowledge of the relevant facts."
Uh huh. So perjury is okay so long as the facts turn out to be true. That's a new twist to an old legal concept.
Homeowners in multiple lawsuits claim lenders have been using falsified documents to foreclose on homes, at times when they don't even hold titles to the properties. Individuals who signed false affidavits or falsely claimed clear titles to properties can be subject to criminal prosecution, including perjury charges, Peterson said.
"Did they know about gaps in the system and lie about it?" Henning said, referring to companies. "This is certainly a concern for MERS but it could be, too, for the banks. Any action of any employee can be looked at, but what they're looking at is the volume of transactions and the involvement of senior level management." More civil litigation is a certainty, Henning said.
The Center for Responsible Lending reports that California and the United States are in the midst of the worst foreclosure crisis since the Great Depression. Across the country, foreclosures have hit an all-time high, with nearly one in ten homes with a mortgage currently in some stage of foreclosure. In California, nearly one in eightor approximately 702,000 homesis currently in foreclosure, the economy is in ruins and unemployment remains at 12 percent. The Center posted a report in August 2010, "Dreams Deferred," that paints a picture of the foreclosure crisis in California, examines the who, the where and the why of foreclosures in the Golden State and discusses what we should do to prevent as many avoidable foreclosures as possible.
Over half (50.3 percent) of foreclosures resulted from refinance loans, challenging the notion that foreclosures are simply the result of people purchasing properties they could
not afford. The median size of a foreclosed home in California is 1,494 square feet, with two-thirds (67 percent) of these homes having three or fewer bedrooms.
The Center proposes the following steps be taken to prevent foreclosures:
Require servicers to complete the review of any loan modification application before
beginning the foreclosure process or referring the loan file to a foreclosure attorney.
- Incorporate principal reduction into loan modification programs, especially where housing prices have contributed to lack of affordability.
- Lift the ban on the modification of principal residence mortgages by bankruptcy judges.
- Expand funding and capacity of housing counseling agencies and legal aid providers.
On September 30, California Attorney Jerry Brown sent a letter demanding that JP Morgan Chase halt foreclosures in California. Then two advocacy groups - the Los Angeles-based Alliance of Californians for Community Empowerment and the Greenlining Institute of Berkeley - called for a foreclosure moratorium. The L.A. group said it was forming a separate organization, the Home Defenders League, to help homeowners fight foreclosures. Both groups called on Brown to support a moratorium. Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, on Thursday, October 7, called on lenders to voluntarily suspend foreclosures until they complete internal investigations.
On Friday, October 8, Bank of America announced that it was placing a moratorium on all foreclosures across the U.S. Too good to be true? A week later, on the Santa Barbara Courthouse steps, Bank of America was especially active in foreclosure sales.
Meanwhile, Jerry Brown joined a coalition of state attorneys general from all 50 states and dozens of state banking regulators in a multi-state effort to demand that lenders find solutions to serious and potentially widespread problems in the foreclosure process across the country. In a unprecedented show of force, the states moved in to fill a void caused by years of inaction at the federal level. The bottom-up response to an economic crisis caused by federally regulated banks doesn't seem to embarrass the Obama administration as it continues to urge banks to foreclose as quickly as possible.
The Federal Housing Finance Agency stressed that foreclosures on delinquent homeowners "should proceed without delay. Delays in foreclosures add cost and other burdens for communities, investors and taxpayers," said the agency, which regulates seized mortgage financing giants Fannie Mae and Freddie Mac. The Los Angeles Times reported on October 14, "As all 50 states escalate efforts to quell a rising tide of foreclosures, one prominent figure is resisting calls for the federal government to do more: President Obama. Banks seized 102,134 homes in September, a record for any month, RealtyTrac reported Wednesday. California led the nation with 17,756, the Irvine company said. Even so, top White House officials worry that imposing a national moratorium on foreclosures would backfire by driving down prices even more."
Chase Halts Foreclosures
Chase joins GMAC/Ally in the fraudulent document scandal
The unraveling of the foreclosure spectacle continued as JPMorgan Chase announced on September 29 that it was halting 56,000 foreclosures. Following the footsteps of Ally Financial (aka GMAC), Chase acknowledged that employees had signed foreclosure documents without reviewing them and without personal knowledge that the facts recited were true. The New York Times reported the story.
In May, a Chase employee testified in a deposition that her team had signed affidavits in 18,000 foreclosures a month without checking to see if the facts they swore to under oath were true. Now that the all-time record for perjury has been reported in Bloomberg, after Chase kept it under wraps for four months, Beth Ann Cottrell has taken the place of Jeffrey Stephan, a document processor for Ally Financial, as the worst bankster in the world. Stephan made headlines last week when it was reported that he had signed off on 10,000 foreclosures per month without reading them. He was known by consumer advocates as the "super robot signer."
The Washington Post reported on October 1 that a top federal bank regulator has directed seven of the nation's largest lenders to review their foreclosure processes after learning about the widespread mishandling of homeowner evictions by the industry. The banks contacted by regulators include J.P. Morgan Chase, Bank of America, Citibank, HSBC, PNC Bank, U.S. Bank, and Wells Fargo.
John Walsh, acting director of the Office of the Comptroller of the Currency, told lawmakers during a hearing on Thursday, September 30, 2010, "We both want to see that they fix the processing problems but also to look to see whether there is specific harm in individual cases." Walsh made the remarks in response to questions from Christopher J. Dodd (D-Conn.), chairman of the Senate banking committee, about the spreading problem with foreclosure processing.
OCC spokesman Kevin Murki said that in J.P. Morgan's case, the bank "determined that its affidavit procedures were non-compliant with foreclosure processing requirements in some states." He added that the "negative impact or harm to customers has not been determined at this point." Mukri would not comment about other banks but said that the OCC has teams permanently stationed at each one and that those teams have been in close contact with senior management at the banks to ensure the reviews are completed in a timely manner.
Referring to a front-page article in the Washington Post, Dodd called the news about lenders initiating improper foreclosures "very troubling." He asked senior bank regulators at Thursday's hearing - including Federal Deposit Insurance Corp. Chairman Sheila C. Bair and Federal Reserve Chairman Ben S. Bernanke - to comment on the matter.
Bair, whose agency insures deposits at thousands of U.S. banks, called the issue of document processing errors "troubling" and said "it's just a further indication of how wrong we went with the mortgage origination process and securitization process."
Bernanke said, "it's been a managerial challenge to the banks to deal with these foreclosure modifications and they haven't always met that challenge."
Review your foreclosure papers carefully if the bank is trying to steal your home. How many "troubling" affidavits or declarations did that company representative sign without personal knowledge? The purpose of such documents is to commit the signator to swear under penalty of perjury that the facts recited are true. We've all heard about perjury. It's how they impeached Bill Clinton. It's how they locked up Alger Hiss. "Scooter" Libby took the fall for Dick Cheney when he was convicted of two counts of perjury in the Valerie Plame scandal, and Mark Fuhrman pled guilty to perjury for his testimony in the OJ Simpson trial.
We got trouble.
In nonjudicial states like California, judges tend to look the other way. They're much too busy playing golf or granting probation to snorting movie stars to concern themselves with people losing their homes. So on September 24, 2010, California Attorney General Jerry Brown ordered that Ally Financial halt all foreclosure activity in California. Brown's letter to Ally and press release left no doubt that California statutes cannot be trampled by hyperactive banks frothing at the mouth with unbridled greed.
Chase will be next on Brown's list. The tide is turning. A Florida lawyer, Matthew Weidner, said, "The GMAC announcement was the mushroom cloud. The fallout will burn through the entire mortgage servicing industry."
It Was A Ponzi Scheme on Steroids
and they laughed all the way to the bank
Driving up the 880 through Oakland in 1999, I was listening to "The Mortgage Crisis," a seminar presented at the California State Bar Convention. The speakers were experts in mortgage and foreclosure law. They went on and on about how bad it was, and the only solution was loan modifications, but they weren't working, and lawyers could be disbarred for taking a retainer to assist in a loan mod, according to Senate Bill 94a measure that was endorsed by the California Bar Association. The speakers were not offering strategies or solutions. They didn't even sound like lawyers. They were whining.
Then it hit me. The banks must have broken the system! All that talk in the financial news about securitization, referring to mortgages as "collateralized debt obligations," bundling them into bonds, getting fake AAA ratings from Moody's, selling them to pension funds through offshore tax shelters, then taking out credit default swaps so the banks could recover the unpaid balance on each loan when the borrower inevitably defaultedthat was the creaking sound of the Common Law losing its structural integrity as centuries of real estate principles were tossed out the window and the whole system came crashing down. The speakers sounded like shell-shocked casualties wandering through the smoldering ruins of the World Banking System searching for clues.
This is a collection of stories and news reports about how the biggest banks committed systemic fraud on the American people, robbed them of their savings, and collected a trillion dollars from the U.S. Treasury under the disguise of insurance payments. Fifteen million American families face losing their homes to banks while the banksters pay themselves billions in bonuses and post record profits. Dick Fuld took home over half a billion dollars while he steered Lehman Bros. into the ground. Kerry Killinger walked out of the smoldering ruins of Washington Mutual with over a hundred million. Will they retreat behind their walls to tally their latest plunder, or will they trade their mansions and hideaways for a different set of walls, giving new meaning to Wall Street? Why did President Obama invite Chase CEO Jamie Dimon over for dinner on the eve of the President's speech introducing his financial reform package? Why have none of the finance czars been fired or imprisoned for demolishing the global economy?
In Santa Barbara County, 12,745 Notices of Trustee's Sale were recorded from January 1, 2007 to December 31, 2012. By contrast, in the previous 6-year period, from January 1, 2001 to December 31, 2006, there were 1,081 Notices of Trustee's Sale. So Santa Barbara has suffered a twelve-fold increase in trustee's sales. Meanwhile, California has 30,000 homes in foreclosure.
Fifty thousand people have lost their homes in Santa Barbara in the past six years. Why isn't any local newspaper reporting this story? Not one story in the News-Press, the Independent, Santa Maria Times, KEYT, KSBY, KCOY, or any of the local radio stations has described this tragedy, while the illusion of prosperity persists. "Lookin' good, Santa Barbara, lookin' good!" Nationally, RealtyTrac reports 1,509,669 foreclosure listings in December 2012. That's over 6 million people who expect to be escorted from their homes by armed people in uniforms. The only thing that's missing from this picture is the goose-step.
How to Say No to Bank Fraud
Homeowner Responds Boldly to Foreclosure
Banks shouldn't mess with Margaret Carswell. She borrowed money from WaMu, made all her payments on time. Then Chase started sending her letters that said, "Give me the money. WaMu is becoming Chase." Margaret said, "Show me the papers." Chase said, "Give me your money."
Margaret Carswell sent Chase a Qualified Written Request. Chase said, "Give me all your money." She filed a lawsuit in federal court. Chase said, "Give me your house."
Does Chase have a single document to show who owns the loan, who is entitled to the money, or even who holds the promissory note? Apparently not. To be continued...
Meanwhile, the Washington Post reported on 9/21/2010 that GMAC, now Ally Financial, had one man signing all of their foreclosure documents, except for bankruptcies, to initiate foreclosures by a rather impressive roster of banks, including Fannie and Freddie. Jeffrey Stephan, a 41-year-old team leader of the execution unithonest to God, that was his titlepersonally signed 10,000 foreclosure documents per month for five years. Then they were bundled and sent somewhere else to be notarized. We're talking jail time, and a lot of people can look forward to big damages in addition to getting their homes back.
Here is a copy of the article by Ariana Eunjung Cha: Ally Financial Legal Issue With Foreclosures...
"...and the beat goes on"
News from the battlefield
September 5, 2010. Florida's Streamlined Foreclosure Process
Today's NY Times reports on Florida's new judicial bullet train that speeds up the foreclosure process by establishing a special court system staffed by retired judges. Twenty percent of Florida's mortgages are delinquent or in foreclosure.
"Now you show up and you get whatever judge is on the schedule and they have not looked at the file - they don't even look at the motion," says April Charney, a lawyer who represents imperiled borrowers at Jacksonville Area Legal Aid. "You get a five-minute hearing. It's a factory."
The article features the elusive David Stern, whose law firm in Plantation, Florida, employs more than 900 people. The firm filed 70,382 foreclosure cases last year. Mr. Stern recently sold the foreclosure support division of his foreclosure mill to China Acquisition Corporation for $146 million.
September 4, 2010. Oakland Reports Health Effects of Foreclosure
The Alameda County Public Health Department has posted a new report, "Rebuilding Neighborhoods, Restoring Health." Here is a link to the Executive Summary.
Last summer, representatives from Causa Justa/Just Cause interviewed 388 residents in East and West Oakland, two of the harder-hit neighborhoods, to investigate the impact of the foreclosures on health. Here are some of the findings:
Residents going through foreclosure or those who had recently lost their homes were twice as likely as others to say their mental and physical health had become worse over the past two years.
More than 3 in 10 foreclosed residents reported forgoing medical care due to money concerns.
31 percent of tenants in foreclosed buildings said they were living with mold, rodents, cockroaches or other unhealthy conditions.
Homeowners in Real Estate Limbo
by Sue McALlister and Eve Mitchell
San Jose Mercury News, 07/25/2010
An estimated 40,283 homeowners across a seven-county region spanning the South Bay, East Bay and the San Francisco metro area were at least three months behind on their mortgages but not yet in foreclosure as of April 2010, according to CoreLogic, which tracks mortgage performance data. That's about 4.5 percent of total mortgages in those areas, an 18-fold increase from January 2007, when the rate was 0.25 percent.
Nationwide, "roughly 3.5 milloin loans are in this limbo land, and are not proceeding through very quickly. It could take years," said Sam Khater, an economist with CoreLogic, which tracks mortgage performance.
Kenneth Rosen, chair of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said banks and the government "are being quite rational" in stretching out the foreclosure process to avoid displacing homeowners and depressing prices. He estimated that fewer than 15 percent of Bay Area mortgage-holders who are 90 days overdue will get foreclosed on.
Foreclosure is certainly taking longer than it used to. According to figures from ForeclosureRadar, for the California homes that were foreclosed on in June, it took an average of 234 days from the notice of default to the time the property was foreclosed. That's nearly eight months on average - meaning some homeowners stay in their homes much longer. In January 2007, the average time to foreclose was a little more than four months.
New research from consulting firm Oliver Wyman found that among borrowers nationwide who defaulted in the first half of 2009 and remained in default through the end of the year, 19% could have afforded to keep paying. In June, mortgage financing company Fannie Mae said, "But we will punish those strategic defaulters by prohibiting them from getting a Fannie-backed loan for seven years after their foreclosure, instead of the typical five."
A mortgage is a non-recourse loan, Fannie, you floozy. The borrower has a contractual right to walk away under the written agreement with the lender. So where does Fannie Mae, a private corporation, find the audacity to threaten homeowners who choose to exercise their contractual rights?
"Are ye Gods?" Parsifal might ask them on his quest for the Grail, if he were to stumble upon Fannie Mae's palatial headquarters in Washington, D.C.
"Nay, lad, they're just bankers." And if they carry out their threat and punish millions of families for letting their houses go back to the bank when they're six feet under water, that royal Fannie will be burn red hot when the lawyers are done with them.
It behooves each of us, as we wander through the wasteland of a broken system, to set our sights on the abolition of tyranny and the restoration of honor in America. In fact, why not call Fannie right now at (202) 752-2078 and give 'em a holler and a royal hoot in the but!
Even Ben Bernanke Feels the Heat
Too Many Problems; Too Little Time
The Center for Responsible Lending reports that 6.6 million foreclosures have been initiated since 2007. They project up to 12 million additional foreclosures in the next five yearsa total of 18.6 million families kicked out of their homes. Federal and state judges keep shoveling homeowners into the streets. Have they volunteered as firemen on the runaway trains that are hurtling the United States towards an abyss? The engineers are the bankers who report record profits while the nation sinks. Wells Fargo's second quarter profit was $3.1 billion. The nation's largest home lender, it reported loans on its books of $766 billion at the end of June 2010. Morgan Stanley profited $1.58 billion during the quarter.
The LA Times reported on July 22 that banks stepped up their repossession of California homes in the second quarter. The number of trustee's deeds - the last stage of foreclosure - increased 4.4% over the previous year. A total of 47,669 California houses were sold on the courthouse steps April - June, and almost all those sales were to the banks. "Now that prices have bottomed, banks apparently feel comfortable putting more inventory on the market," according to LA Times. Isn't that cozycomfortable banks are kicking more people out of their homes.
Federal Reserve Chariman Ben Bernanke said the economic outlook was "unusually uncertain...This is the worst labor market since the Great Depression." He told the Senate Banking Committee on Wednesday that it would take "a significant amount of time" to reclaim the 8.5 million jobs lost during 2008 and 2009.
Nearly 2.4 million homeowners purchased affordable homes at standard mortgage rates, but are now finding themselves unable to keep up with falling home values and factors such as unemployment, according to the Christian Science Monitor. They find themselves in a catch-22they are unable to maintain payments due to prolonged unemployment but can't sell their house because they owe more than it's worth.
"In the next 12 months it's going to be tragicmost people are just starting to fall behind now," Boston attorney Avi Liss told the Monitor.
Record profits for banks. Record foreclosures and unemployment. Things are heating up in the American Dream.
Send us an email.
Morgan Stanley To Pay Mass. $100M
California's AG Jerry Brown misses the boat
Worcester Business Journal Staff Writer Brandon Butler reported on June 25 that Morgan Stanley will pay Massachusetts and its residents more than $100 million as part of a settlement negotiated by Attorney General Martha Coakley related to financing for subprime mortgages.
As part of the agreement, the bank will pay $58 million to 1,000 Massachusetts homeowners who were impacted by the securitization of subprime loans. Morgan Stanley will also pay $23 million to the state's pension fund to cover losses and will give $19.5 million to the state's general fund.
The suit Coakley brought against Morgan Stanley alleges that the company provided money for retail loan outlets to target low-income borrowers and lure them into accepting loans they could not afford. "Morgan Stanley backed loans for homeowners they knew or should have known were destined to fail," Coakley said on June 24.
The Massachusetts attorney general reached a $60 million settlement last year with Goldman Sachs. However, Goldman Sachs collected $12.9 billion from U.S. taxpayers after AIG's $182.3 billion bailout by the federal government.
The bundling of the riskiest type of mortgages into securities turned the U.S. housing slump into a global recession as foreclosures deflated bond values and toppled Wall Street firms such as Lehman Brothers, Bloomberg reported on June 25.
The Ohio attorney general said July 16 that AIG agreed to a $725 million settlement to resolve claims of wide-ranging fraud laid out in a class-action suit led by three Ohio pension funds.
The S.E.C. reached a settlement with Goldman Sachs on July 15 to pay $550 million to settle civil fraud charges. The New York Times reported, "the Goldman settlement - both its size and its legal implications - brought a palpable sense of relief on Wall Street. After two months of strident claims and equally strident denials, the matter was finally settled, and for a price Goldman could easily afford. The penalty amounted to about 15 days of profits."
To put that in perspective, if we assume the median household income in the United States is $50,000, a penalty of 15 days' income would be $2,054.00. You might feel the pinch, but it wouldn't slow you down. But wait - the Goldman will pay the U.S. $550 million and it paid Massachusettes $60 million, but it collected $12.9 billion from U.S. taxpayers in the AIG bailout. So it is still $12.3 billion ahead. Back to our average Joe, if he pays a fine of $2,054 after cashing a government bailout check for $43,437, he has been taught to go right out and do it again. He can't afford to go straight.
California Attorney General Edmund G. Brown, issued a press release cautioning homeowners to avoid forensic loan audits, branding them phony foreclosure-relief. "Don't ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house."
Maybe Jerry Brown could take a hint from Robert Lewis, AIG's chief risk officer, who said in prepared remarks submitted to the Financial Crisis Inquiry Commission (FCIC), "We were wrong about how bad things could get. What ended up happening was so extreme that it was beyond anything we had planned for."
"When clarity mattered most, Wall Street and Washington were flying blind," FCIC Chairman Phil Angelides said. "In the case of derivatives, my fellow commissioners and I are seeing something we've seen many times in our investigation: enormous risk, reckless leverage, and early warning signs being ignored."
Angelides, former California treasurer, said to Goldman President Gary Cohn on July 1, "It's pretty clear that you helped build the bomb."
What do you think?
Dylan Ratigan Challenges Banks on MSNBC
Vampire Banksters Control our Government
The New York Times reported on June 27, 2010, that Dylan Ratigan, a financial news reporter, had transformed himself into an outspoken opponent of too-big-to-fail banks and the politicians whom he calls their servants. In the recent fight over financial reform, he lent a megaphone to people who wanted an end to "too big to fail," and he called on viewers to lobby the Senators in his imaginary Bankster Party.
All this from a man who, until recently, hosted a stock-picking show on CNBC, the cable personification of Wall Street. Now Mr. Ratigan, who labels himself a taxpayer advocate, rails against the "vampire" banks who "have assumed control of our government."
"It's like being the guy who was running the casino, and then having an awakening and realizing that the casino is what's killing the country," Mr. Ratigan said in an interview last week. The American people are being held hostage by a banking system that acts like a government subsidized casino.
There are early signs that viewers are responding favorably to Mr. Ratigan. His show, which is on MSNBC at 4 p.m. Eastern on weekdays, had an average of 330,000 viewers each afternoon in May, an increase of 20% over the news program that aired in that slot a year ago.
Wall St. Crashed America's Reputation
The U.S. is losing face around the world
The Sidney Morning Herald reported on June 11, 2010, that Australian hedge fund Basis Capital has filed a $1 billion lawsuit against Goldman Sachs and its Australian offshoot, claiming one if its funds was misled into buying a toxic security packed full of US subprime mortgages that eventually contributed to its collapse.
Basis Capital paints a picture of a deliberate scheme by Goldman Sachs since early 2007 to offload toxic securities linked to US subprime mortgages. It also alleges moves by the investment bank to make large bets against the securities at the same time it was reassuring clients the securities were sound.
The same week Basis and Goldman were closing a deal to buy two slices of the billion dollar security called Timberwolf, a senior sales executive at the Goldman sent an email to a colleague describing the instrument as "one shitty deal". Senator Carl Levin quoted the email repeatedly in the Senate Investigations Subcommittee's hearing on April 27.
Timberwolf was a collateralised debt obligation holding pieces of other CDOs that were ultimately backed by US subprime mortgage bonds. Within five months of its debut, Timberwolf had lost 80 per cent of its value and was liquidated in 2008. Within 2 1/2 weeks of its investment in the Timberwolf CDO, Goldman Sachs began "to make significant margin calls" on Basis and forced the firm into insolvency, Basis said. Their lawsuit was filed on June 8 in Manhattan federal court.
Meanwhile, the London Times reported on June 11 that John Napier, the chairman of the British insurer RSA, formerly Royal and Sun Alliance, was circulating a letter to President Obama. "Your comments towards BP and its CEO as reported here are coming across as somewhat prejudicial and personal...There is a sense here that these attacks are being made because BP is British. If you compare the damage inflicted on the economies of the Western world by polluted securities from the irresponsible, unchecked greed and avarice of leading USA international banks, there has not been the same personalised response in or from countries beyond the US. Perhaps a case of double standards?"
Napier was referring to a remark the President made after an interviewer asked him whether this wasn't a time to "kick some butt" rather than be calm and collected. Obama replied:
"I was down there a month ago, before most of these talking heads were even paying attention to the Gulf. A month ago, I was meeting with fishermen down there, standing in the rain talking about what a potential crisis this could be. And I don't sit around just talking to experts because this is a college seminar. We talk to these folks because they potentially had the best answers, so I know whose ass to kick. Right? So, you know, this is not theater."
Obama's remarks were not prejudicial or personal. Great Britain and Australia are two of America's closest allies. With friends like that, who needs enemies? All the credit goes to Wall Street for sending America limping into the dog houseJamie Dimon, Stephen Rotella, Lloyd Blankfein, Gary Cohn, Ken Lewis, Kerry Killinger, Richard Fuld, and all the other banksters who took home 9-figure paychecks while they crashed the global economy.
Obama said he would have fired BP Chief Executive Tony Hayward if Hayward worked for him, but he has not suggested that any of the CEOs on Wall Street step down. His administration remains populated by Wall Street insiders.
"If we leave the crooks in charge, they're not going to tell us what they know - who committed the frauds, whose bonuses should be recovered, how much the assets are worth. We need to know the facts to solve a problem, and they're deliberately leaving in place the people who caused the problem."
Speak of the devil, Goldman Sachs CEO Lloyd Blankfein, and JP Morgan Chase CEO James Dimon, center, leave the White House on March 28, 2009 (photo: Getty Images):
Bill Black, litigation director for Federal Home Loan Board during the savings and loan crisis in the 1980's.
How to Beat the Banks
Class Actions are Not Likely to Succeed
We hear about companies that promise to bring class action lawsuits against the banks. "Just pay us $4,295 today, and in 90 days we will start filing class action lawsuits against the banks. Once they're in a class action, the banks cannot foreclose against you." It sounds like a good deal if it will set you free and clear of your mortgage.
I wouldn't place too much faith in class action lawsuits against banks. The courts have been throwing out class actions in this arena. See page 27 of the California Court of Appeals decision in Mabry v. Aurora published June 2, 2010. It would be rare for a court to stop multiple foreclosures based on a class action complaint, and the order would probably be reversed within days, if not hours.
If an advocacy group hired one of the top 100 law firms in the country and it was prepared to assign several dozen lawyers to the case, then you might take it seriously. Otherwise, it would be a futile effort. Almost thirty years ago, seventy insurance companies were sued by Johns Manville in The Coordinated Asbestos Litigation. Early in the case, JM announced that it was producing 10 million relevant documents at a warehouse in Colorado. There were 72 corporations in that case, and each of them produced a mountain of documents in the same month. Depositions were conducted for the next 15 monthseight simultaneous depositions five days a week all over the country, some lasting a few hours, others a few weeks. A lawyer couldn't just throw up his hands and say, "No way, Dude!"
That was the good old days. Congress created the Financial Crisis Inquiry Commission in 2009 and gave it the mission to examine the causes of the financial meltdown. The Commission sent many requests for documents to Goldman Sachs, and complained when The Goldman delayed providing documents. On May 18, it produced five terabytes of records - which the commission estimates to be the equivalent of about three billion pages. What would a couple of lawyers in a small firm do with three billion documents in a class action lawsuit? Goldman is just one bank.
A grassroots approach with many simultaneous lawsuits stands a better chance of changing the corrupt practices that broke the financial system in the past decade. The banks can't be in ten thousand courtrooms at once. We hope you find the information on ChaseChase to be helpful.
A Tale of Two Cities
Foreclosures is Santa Barbara and Montecito
The above house in Montecito was scheduled to be sold on the Santa Barbara courthouse steps on June 3, 2010, according to a Notice of Trustee's Sale published by California Reconveyance Co. on behalf of Washington Mutual Bank and JPMorgan Chase, because the owner owed $349,782.00 on a promissory note. What are the chances that Chase could actually prove that it has any legitimate right to sell the property?
This house in Santa Barbara was scheduled to be sold on the Santa Barbara courthouse steps on June 3, 2010, according to a Notice of Trustee's Sale published by California Reconveyance Co. on behalf of Washington Mutual Bank and JPMorgan Chase, because the owner owed the amount of $858,881.00 on a promissory note. What are the odds that WaMu followed any conventional underwriting practices when it made the loan?
An estimated total of 15,000,000 houses will have been sold in foreclosure sales in the United States by the end of 2012 as the result of the insatiable greed that infected Wall Street during the past decade. It is up to the people to stop the domicide.
What do you think?
The Great Collapse
Securitization received a significant stress test, and not only failed
miserably, but also helped drag down much of the world's economy with
its failure. The current recession is, to a surprising extent, caused by the
effects of securitization itself. While other factors also played a role in the
meltdown, subprime securitization may represent one of the greatest
structurally-caused financial implosions of the modern world. In essence,
subprime securitization acted like a virus that infected the entire American financial industry and affected much of the world.
- Kurt Eggert, Law Professor, Chapman University School of Law
"The Great Collapse: How Securitization Caused the Subprime Meltdown"
Connecticut Law Review (May 2009)
Government Fell Asleep in Bed
DOT Report How Feds Failed to Stop the Crash
DOT Office of Inspector General released its Evaluation of Federal Regulatory Ovesight of Washington Mutual Bank on April 16. This is more ammunition for trial judges to take judicial notice of the fact that WaMu went crazy and broke the bank. When WaMu made a mortgage loan, they didn't expect that the borrower would be able to pay it back. They didn't care. They expected to make money even when the borrowers defaultedtons of money. Kerry Killinger (right) stuffed $103 million into his piggy bank between 2003 and 2008 while he played captain on a sinking shipthe biggest bank failure in historyand ran out the door with $21 million in 2008, the year he was fired and WaMu went down to a watery grave .
Here is one section of the DOT (Department of Treasury) Report:
Systemic Underwriting Weaknesses at WaMu
WaMu underwriting policies and practices made what were already
inherently high-risk products even riskier. For example, WaMu
originated a significant number of loans as "stated income" loans.
Stated income loans, sometimes referred to as "low-doc" loans, allow
borrowers to simply write in their income on the loan application
without providing any supporting documentation. Approximately 90
percent of all of WaMu's home equity loans, 73 percent of Option
ARMs, and 50 percent of subprime loans were "stated income" loans.
WaMu also originated loans with high loan-to-value ratios.
Specifically, WaMu held a significant percentage of loans where the
loan amount exceeded 80 percent of the underlying property. For
example, WaMu's 2007 financial statements showed that 44 percent
of subprime loans, 35 percent of home equity loans, and 6 percent of
Option ARMs were originated for total loan amounts in excess of 80
percent of the value of the underlying property. Further, WaMu did not
require borrowers to purchase private mortgage insurance (PMI). PMI
protects lenders against the loss on default when the loan amount
exceeds 80 percent of the home's value.
WaMu's review of appraisals establishing the value of single family
homes did not always follow standard residential appraisal methods
because WaMu allowed a homeowner's estimate of the value of the
home to be included on the form sent from WaMu to third-party
appraisers, thereby biasing the appraiser's evaluation.
Finally, WaMu did not provide adequate oversight of third-party
brokers who were compensated for originating most of WaMu's
mortgages but were not WaMu employees. In 2007, WaMu had only
14 WaMu employees overseeing more than 34,000 third-party
brokers. Although WaMu used scorecards to evaluate its third-party
brokers, the scorecards did not measure the rate of significant
underwriting and documentation deficiencies attributable to individual
brokers. In 2007, WaMu identified fraud losses attributable to third party
brokers of $51 million for subprime loans and $27 million for
prime loans. These matters are under further review by law
So WaMu dispensed with underwriting, discarded traditional principles of debt to equity ratios, and disposed of any oversight function to keep track of its 34,000 independent loan brokers. The Office of Thrift Supervision looked the other way. And now our leaders in Washington and on Wall Street are coaxing trial judges across the country to pass the buck to the 15 million households who are being thrown out into the street. Who do we have to killingerno, that's not the right verbwho do we have to communicate with so that our society can begin to deal with such stunning institutional anarchy and overwhelming cynical greed.
What do you think?
Before someone calls the cops, I know what this crazy show needshow about a Broadway tune from "The Producers," performed for "This American Life". Take them away, those $100,000,000 boys (cue play button)
|15,000,000 U.S. homes
Who's on first and What's on second
Why the holder of the second is just waiting
I had lunch with Scott the other day. Scott is a broker who helped me buy my house 18 years ago. He told me that homes are selling for 2/3 of what they were going for three years ago in Santa Barbara, 2/3 as many houses are selling, and people expect realtors to work for 4% commission instead of 6%2/3 of what they made 3 years ago. 2/3 x 2/3 x 2/3 = 8/27. Local realtors make 30% to 40% of what they earned in 2007. We're all feeling the pinch.
Scott suggested why so few homeowners in default are hearing from the junior lien holders. Let's say you took out an equity line of credit secured by a second mortgage or deed of trust, and it was not purchase money to buy the home. If the first forecloses and pays the second nothing, or only a fraction of what is owed, the second can collect the unpaid balance from the borrower.
Let's say they have four years to sue under state law. If the second puts pressure on the debtor Who's falling behind on the first, the debtor is more likely to file for bankruptcy to discharge What's on second, but if the second bides their time while the debtor works things out with Who's on first and resumes making payments, there may be a knock at the door as the four-year limit approaches. A debtor who is getting back on their feet will be less likely to file for bankruptcy and tarnish their credit, and most homeowners expect that things will get better in four years. Few have any idea Why they haven't been pestered with calls from What's on second.
Scott said that it may be better to file for bankruptcy and get a fresh startsooner rather than laterinstead of hoping the bank has forgotten the six-figure debtunless What's on second is the result of bank fraud, or the bank no longer owns the loan or holds the promissory note because it sold it to investors, or for any other reason they cannot prove that they are entitled to your money.
What do you think?
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- Margaret Carswell
There, but for the grace of . . .
Waterproof mantra for a rainy day
If the bank is trying to take your house, the bills are piling up, your friends are shaking their heads, and the neighbors never invite you over for drinks anymore, just remember, it could be a lot worse. You could be Yitzchak Tessler. Bloomberg reported on April 29, 2010, that Lehman Brothers sued the Israeli developer to foreclose on his vacant 17-story building at Broadway and 5th Avenue in New York City. The bill comes to $137 million in principal, $17 million in interest, $10.6 million in default charges, and $14 million in fees$180 million and he's being sued by a ghost. Lehman Brothers went bankrupt in September 2008. Somebody must have forgotten to tell the lawyers.
Indeed, NY Times reported on May 3 that fees for lawyers, accountants, and restructuring experts in Lehman's bankruptcy have exceeded $730 million and are heading to the billion-dollar frontier. The turnaround company hired to curate the remains has billed Lehman's ghost $262 million. Alvarez & Marsal's website boasts that a "reputation for providing leadership, problem solving and value creation to both underperforming and robust companies across the industry spectrum leads clients to look to us to find the right answers and deliver solutions in a variety of service areas." Like how to remove all the remaining flesh from the bones.
So when you're feeling a little down, just repeat after me: It could be worse I could be Yitzchak!
Or Lloyd Blankfein
Blankfein Testifies at Senate Hearing
A swing and a miss for Goldman Sach's CEO
Lloyd Blankfein, CEO of Goldman Sachs, testified on April 27, 2010, before the Senate Governmental Affairs Subcommittee on Investigations. It was the fourth hearing chaired by Sen. Carl Levin into the financial crisis, and the role of investment banks was the focus.
The committee focused on a deal that sounded like a Wall St. version of a Daniel Boone episode. In 2007, Goldman sold $300 million of securities in a deal called Timberwolf to a Bear Stearns offshore hedge fund. Within five months, the CDO lost 80 percent of its value, the Bear Stearns hedge fund collapsed, and the AAA-rated securities were downgraded to junk status. A Goldman trader who managed the deal accurately predicted that the day Timberwolf was issued would be "a day that will live in infamy." A senior Goldman executive wrote: "Boy that timeberwof [sic] was one shitty deal." His supervisor, Daniel Sparks, head of Goldman's Mortgage Department, was confronted by Sen. Levin immediately preceeding Blankfein's testimony.
Blankfein answered questions for three hours. Sen. John McCain (R Ariz) said to Blankfein, "I don't know if Goldman Sachs has done anything illegal. From the reading of these emails...there's no doubt their behavior was unethical, and the American people will render a judgment as well as the courts.".
Although a tone of indignation filled the room, this hearing was not good news for homeowners in distress. Other than fleeting references to the plight of people losing their homes, little was said about the wholesale fraud perpetrated on the American people, who were tricked into signing over their homes in exchange for "liar's loans" and "crap loans" which were bundled into "junk," toxic synthetic collateralized debt obligations (CDOs) sold to investment funds in "shitty deals" in which Goldman Sachs and other Wall Street syndicates bet against their clients - the quotes are all from emails in Goldman files.
You don't kick 15 million families out on the street and fix it with a little twist here and a little turn there in the regulations for bankers while they pay themselves billions of dollars in bonuses as a reward for their crime orgy at the same time they accept billions in taxpayer bailouts. That's too many people on the street. That's too much money lining the pockets of the crooks. Kerry Killinger bailed out of WaMu with $25 million in 2008 just 18 days before the bank crashed into the groundthe biggest bank failure in history. His total take was $103 million. Banks are stealing millions of homes after risking no money of their own. Maybe the walls on Wall Street need to come tumbling down so that crooked politicians who are bankrolled by the bankers can finally see that they must answer to the people, not to America's Most Wanted:
Jamie Dimon, CEO of JPMorgan Chase (paid $100 million)
Lloyd Blankfein, CEO of Goldman Sachs
Gary Cohn, President of Goldman Sachs
Richard Parsons, Chairman of Citigroup
Vikram Pandit, CEO of Citigroup
Hank Paulson, former Chairman of Goldman Sachs and U.S. Treasury Secretary
Kerry Killinger, CEO of WaMu (paid $103 million)
Angelo R. Mozilo, CEO of Countrywide
Richard Fuld, CEO of Lehman Brothers
Stanley O'Neal, CEO of Merrill Lynch
Edward M. Liddy, Goldman Sachs director put in charge of AIG by Paulson
Stephen Rotella, CEO Chase '01-'05, President of WaMu '05 - '08, President Chase Mortgage '08 -
After scolding Blankfein, Levin read his closing statement haltingly, promising amendments to Senator Dodd's financial reform bill that would limit two bank practices: betting against their investment fund clients and buying off the rating agencies to get triple-A ratings. Levin has said the panel will decide after the hearings whether to make a formal referral to the Justice Department for possible criminal prosecution. No help for homeowners was explored at the hearing, and it seemed that nothing was learned. Levin's closing statement had been written before the hearing began. It was political theater, a moment in the pillory for banksters who wreaked havoc and still hold their jobs. Even Sen. Levin sounded disappointed with his encore.
Pressure is mounting. Systems resist change - that's their job - but they also respond to external forces. The people are already influencing this Wall Street/Washington system after years of corruption, lax regulation, and secrecy. To bring the walls down, people will sue the basterds with thousands of lawsuits, stand in front of the banksters' limousines to serve summons, TROs, subpoenas, and indictments, post maps to their exclusive clubs and hideouts, visit their tropical islands on rubber rafts and dugout canoes. The pressure is rapidly mounting from outside the beltway, and Washington will change. That's how systems work.
One day after the Senate Investigations Committee hearing, the New York Times reported:
With political pressure mounting, Senate Republicans relented on Wednesday and agreed to let Democrats open debate on legislation that would impose the most far-reaching overhaul of the nation's financial regulatory system since the aftermath of the Depression.
F.D.R. was a leader. If Washington continues with business as usual, Obama will have Jamie Dimon over for dinner at the White House while homeowners grapple with predatory loan modification programs, waiving their rights to prosecute the fraud perpetrated against them when NINJA loans were consumated. Only the people have the power to pry apart those strange, quarreling bedfellowsbanksters and bank-owned politicians.
What do you think?
Dick Fuld Mocks Henry Waxman's Committee
Fuld's $212,000,000 act of perjury not punished
On Oct. 6, 2008, three weeks after Lehman Brothers filed the largest bankruptcy in U.S. history, Lehman's former CEO found himself before Representative Henry A. Waxman, the California Democrat who chaired the House Committee on Oversight and Government Reform.
"Mr. Fuld will do fine," Waxman said. "He can walk away from Lehman a wealthy man who earned over $500 million. But taxpayers are left with a $700 billion bill to rescue Wall Street and an economy in crisis."
Dick Fuld replied that his total compensation from 2000 through 2007 was less than $310 million, not the $485 million that appeared on Waxman's chart. He said 85% of his pay was in Lehman stock that had become worthless. "I never sold my shares," Fuld said at one point, Business Week reported on 4/29/2010. At another, he said he had not sold the "vast majority" of them. Fuld said he was a victim, not an architect, of the collapse, blaming a "crisis of confidence" in the markets for dooming his firm. Reckless management had nothing to do with it. "Lehman Brothers was a casualty," he said.
However, a Harvard University study published in July 2010 reported after careful analysis that Fuld took home $522.7 million from 2000 to 2007. In other words, Fuld harvested over half a billion dollars while he destroyed Lehman Bros., then he lied to Congress under oath. The Yale Journal on Regulation Vol. 27, pp. 257-282, published "The Wages of Failure: Executive Compensation at Bear Stearns and Lehman, 2000-2008." Harvard Law professor Lucian Bebchuk, Alma Cohen, a visiting professor from Tel Aviv University, and Holger Spamann, a Harvard Law lecturer, reported, "Overall, we estimate that the top executive teams of Bear Stearns and Lehman Brothers derived cash flows of about $1.4 billion and $1 billion respectively from cash bonuses and equity sales during 2000-2008." The study found that Fuld made $522.7 million, and $461.2 million of that total was from the sale of 12.4 million shares of Lehman stock.
How does Dick Fuld lie to Congress under oath to the tune of $212 million and avoid prosecution? Why have there been no convictions since this collapse began three years ago? "Inside Job," a feature-length documentary, concludes, "We have a Wall Street White House." If they're right, we're in big trouble and Mr. Obama might well be remembered for making Herbert Hoover look good.
Bill Black Calls the Kettle Black
Lehman Brothers Committed Fraud
Bill Black, former litigation director of the Federal Home Loan Board, testified on April 20 before the House Financial Services Committee on the 2008 failure of Lehman Brothers. Dick Fuld, former CEO of Lehman (right) sat at the table with Black during his testimony before the committee. Lehman was the leading purveyer of liars loans in the world throughout the decade, Black said. The incidence of fraud was 90%. "Financial institution leaders are not engaged in risk when they engage in liar's loans. Liars loans will cause a failure. They lose money. The only way to make money is to deceive others by selling bad paper, and that will eventually lead to liability and failure as well."
"When people cheat, you cannot continue business as usual," Black continued. SEC decided to have only 24 people in their comprehensive program when it should have assigned hundreds. Secretary Geithner testified that Lehman's insolvency pushed the financial system to brink of collapse, but Chairman Bernanke said he only dispatched two people to Lehman Brothers. The Fed has had authority since 1994 to regulate all mortgage lenders under HOEPA. "We have known for a decade that these are frauds. We have known for a decade how to stop them. All of the major regulatory agencies were complicit. We have a self-fulfilling policy of regulatory failure because of the leadership in this era."
Bill Moyers interviewed Black three days later on April 23, 2010. In addition to Lehman Brothers, they discussed the civil lawsuit filed in April against Goldman Sachs.
BILL MOYERS: The complaint names only one person, Fabrice Tourre, who was 27 at the time. Would he have been acting without supervision on a deal of that enormity?
WILLIAM K. BLACK: Not even close. And this was part of a package of about 18 deals as well. So as big as this package was, and it was huge, the overall package was absolutely the type of thing that received personal attention of the leaders, the absolute top leaders at Goldman Sachs. So it's very curious to me that the SEC has failed to name the higher-ups.
MOYERS: Why did it take so long for the Securities and Exchange Commission, the SEC, to kick into gear on this? I mean, have they kicked into gear?
BLACK: Well, they haven't kicked into gear fully, or they'd be naming Blankfein and other senior leaders of Goldman. And they've, as you just mentioned, they've only gone after a junior person. And there would be, if they were really in gear, there would be criminal charges here. And if they were really in gear, there'd be a broad investigation, not just of Goldman, but of all of these major entities.
In the last three weeks, we have finally done a half-baked investigation, mind you. Nothing like we did in the Savings & Loan days - of Washington Mutual (WaMu), Citicorp, Lehman, and Goldman. And we have found strong evidence of fraud at all four places. And we have looked previously at Fannie and Freddie and found the same thing. So the only six places we've looked, at really elite institutions, we've found strong evidence of fraud. So where are the other investigations? Why are there no arrests? Why are there no convictions?
MOYERS: Well, Bill, where are the other investigations? Why have there been no arrests? Why have there been no convictions?
BLACK: Because we have still Bush's wrecking crew in charge of the key regulatory agencies. Why are they still in place? They have abysmal records as major causes of this crisis.
MOYERS: You talk about the Bush appointees still being there, but Goldman's former lobbyist, his treasury secretary, Timothy Geithner's chief of staff, the head of the Commodity Futures Trading Commission, Gary Gensler, who may soon have new power over derivatives, worked for Goldman.
So did the deputy director of the White House National Economic Council, the under Secretary of State is a former Goldman employee. Goldman's hired Barack Obama's recent chief counsel from the White House on his defense team. I mean
BLACK: Don't forget Rubin.
MOYERS: Robert Rubin, whose influence is all over the place, who used to be--
BLACK: It's his proteges that are in charge of economic policy, under Obama.
MOYERS: So is this administration, which still has some Bush holdovers in it, and now has a lot of Goldman people in it, is this administration going to be able to pass judgment on Goldman Sachs?
BLACK: Well, so far, they haven't been able to do it. They can't even get themselves to use the word fraud.
- - -
Ten days later, Bill Black appeared in a Huffington Post video interview, 'The Perfect Crime.' He said, "The current crisis is a story of accounting control fraud." During the Savings & Loan scandal in the 80's, a thousand indictments were handed down. This time, there have been no indictments.
"If you look at this crisis, crime pays," Black concluded. "Right now, accounting control fraud by these elites is a perfect and successful crime. They got away with it and they made more money than anybody in history."
Gun was Smokin' on Clinton's Watch
Feds Warned Banks of Illegal Loans in 2000
Here is an excerpt from OCC Advisory Letter AL 2000-7 issued ten years ago by the Comptroller of the U.S. Currency, not long after Congress repealed the Glass-Steagall Act and demolished the wall erected in 1933 between Wall Street brothels and Main Street banks:
TO: Chief Executive Officers and Compliance Officers of All National Banks
This advisory is to alert you to abusive lending practices that may involve violations of fair lending and other consumer protection laws and regulations.
Objective, fairly-applied subprime and risk-based lending have been important tools in expanding access to credit. However, certain lending practices -- largely engaged in by non-bank entities -- have come under intense scrutiny recently. Most of these practices involve the setting of prices, fees, and other terms and conditions in a manner that drastically departs from those used by more traditional and responsible prime and subprime lenders.
These practices may involve violations of fair lending statutes and other consumer protection provisions. They may also lead to increased credit, legal, and reputation risk. For this reason, national banks and their direct subsidiaries should review their direct and indirect lending practices to determine whether they are involved in activities that may be considered abusive or predatory, and should take corrective action where needed.
This advisory does not attempt to define what constitutes abusive or predatory lending, and many of the indicators of such lending may not be readily available to examiners. However, examiners should be alert for the following indications that an institution may be engaging in abusive lending practices:
- Collateral or Equity "Stripping" - loans made in reliance on the liquidation value of the borrower's home or other collateral, rather than the borrower's independent ability to repay, with the possible or even intended result of foreclosure or the need to refinance under duress;
- Pricing and terms, whether interest rates or fees, that far exceed the true risk and cost of making the loan;
- Targeting persons, such as the elderly, women, minorities, and persons living in low- or moderate-income areas, who are perceived to be less financially sophisticated or otherwise vulnerable to abusive loan practices;
- Inadequate disclosure of the true costs and risks of loan transactions;
- Lending practices that are fraudulent, coercive, unfair, deceptive or otherwise illegal;
- and the list goes on...
When examiners identify circumstances that may lead to a conclusion that a bank is engaged in predatory lending, they should inform both the supervisory office deputy comptroller and the deputy comptroller for Compliance Operations, who will determine the appropriate course of action.
John D. Hawke, Jr.
Comptroller of the Currency (1998-2004)
Hawke testified before the Financial Crisis Inquiry Commission on April 8, 2010. "We did not predict that securitizations would drive lending, rather than vice versa, as investment bankers demanded more and more "product" to securitize. I believe that this "top down" demanddriven not only by securitization fees, but also by a demand in the market for higher yield investments at a time of low market ratesencouraged an erosion of underwriting standards.
"Mortgage brokers, who received commissions for originating loans, had little incentive to be rigorous in underwriting borrowers; banks, who were acting as conduits, and who did not retain loans in their own portfolios, had a diminished incentive to be rigorous; the investment bankers, who were taking in big fees for selling the bonds issued by securitization pools, had no particular expertise in loan underwriting, and, in any event, were slicing up the risks in the pools in such a manner as to obscure the risks that really existed."
When banks stopped underwriting, the system stopped working. They didn't look to see if the borrower could pay back the loan because they didn't care. Default would be somebody else's problem, because the bank was not putting up its own money and did not ever intend to own the loan. So there was no expectation that the borrower would perform. So there was no contract. The promissory note is unenforceable. Foreclosure is not lawful. The bank expected nothing from the homeowner, so now the bank gets nothing. The grantee on the grant deed keeps the home.
What do you think?
A Crash That Keeps On Banking
Banks are swallowing millions of homes
RealtyTrac said on April 15, 2010, that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. More than a quarter of a million houses, places that people used to call home, were consumed by the same banks that caused the financial meltdown.
Foreclosure filings - default notices, scheduled auctions and bank repossessions - were reported on 932,234 properties in the first quarter, a 16 percent increase from the first quarter of 2009. One in every 138 U.S. housing units received a foreclosure filing during the quarter.
California alone accounted for 23 percent of the nation's total foreclosure activity in the first quarter with 216,263 properties receiving a foreclosure notice. Florida's total was second highest, with 153,540 properties receiving a foreclosure filing during the quarter, and Arizona's total was third with 55,686 properties.
Banks are scooping up homes at a rate unprecedented in human history. Not even Genghis Khan or Adolf Hitler succeeded in driving people out of their homes at the rate of a million households per year, dislocating millions of people. The 21st century wars are economic.
Lloyd Blankfein, Goldman Sachs CEO and Gary Cohn, president, wait for Obama's speech on Wall Street
Consider these remarks from our leaders in Washington this week:
"Investment banks such as Goldman Sachs were not simply market-makers, they were self interested promoters of risky and complicated financial schemes that helped trigger the crisis," said Sen. Carl Levin, Chairman of the Senate Subcommittee on Investigations in a press release on April 24, 2010.
In one day Goldman netted over $50 million by taking short positions that increased in value as the mortgage market collapsed. They profited $1,000 million in 2007, the year the bubble burst, which Blankfein dismissed as chump change ("close to home") in his testimony on Capital Hill.
"Goldman made a lot of money by betting against the mortgage market," Sen. Levin said.
"They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients."
President Obama said in his weekly radio address on Saturday, April 24, "In the absence of common sense rules, Wall Street firms took enormous, irresponsible risks that imperiled our financial system and hurt just about every sector of our economy."
I still remember when banks were considered a safe place to keep your money. The safe was a prominent feature in every bank, and the bank manager was a human being you could trust. The only place you could trust Blankfein, Cohn, Dimon, Rotella, Fuld, Mozilo, Parsons, Killinger, Jester, or Pandit these are all real names of multi-millionaires who headed the biggest banks while they broke the system is behind bars. How else can society reward any individual who becomes so smitten with greed that they cast millions of families into the streets while they hoard a $103 million salary (Killinger), or $245 million (Mozillo), or $246 million (Fuld). See Public Citizen's report "Rewarding Failure" to see how far the banks leaped off the deep end, taking every one of us with them but keeping the money for themselves.
Joseph Cassano, head of AIG Financial Products division, was paid $280 million for creating credit default swaps during the eight years between Y2K and the day he was fired. AIG has since received $134 billion in taxpayer infusions. The average annual CEO compensation during the period 2000-2007 for Countrywide was $51.4 million; for Lehman Brothers it was $69.2 million. These immense salaries rewarded men whose claim to fame is that they literally broke the bank.
The crash has laid bare many unpleasant truths about the United States. One of the most alarming is that the finance industry has effectively captured our governmenta state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF's staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we're running out of time.
- Simon Johnson, professor of Entrepreneurship at the Sloan School of Management, M.I.T., and former Chief Economist of the International Monetary Fund 3/2007 - 8/2008
Underwater and Not Walking Away
The Psychology of Drowning
The University of Arizona College of Law reports in a discussion paper * that a recent qualitative sociological study of the internal costs of foreclosure found that feelings of personal failure, shame, and embarrassment dominated the accounts of individuals who had lost their homes to foreclosure.
* "Underwater and Not Walking Away: Shame, Fear and Social Management of the Housing Crisis," by Brent T. White, The University of Arizona, James E. Rogers College of Law
Moreover, such feelings predominated even when individuals were not at fault for their predicament, but were victims of the declining economy and/or unethical practices by mortgage brokers.
And, as further evidence of the shame and guilt felt by those who experience foreclosure, large damage awards for humiliation are common features of successful suits against lenders for wrongful foreclosure.
David Stevens, HUD Assistant Secretary for Housing, parrots the government line, drawn by President Obama, that anyone who can afford to keep making the payments should stay in their house, even if they will remain underwater for the next 15 years. The policy of the Administration is to shift the burden of the housing meltdown from the banks to the homeowners by shaming them into clinging to a sinking ship. It is a corrupt line that has not basis in law. The mortgage contract is based on the premise that the buyer can walk away and hand the keys to the bank.
The term commonly used to describe foreclosure by those who face it is "terrifying." People not only fear losing their homes, but fear having ruined credit for life, not be able to find a decent place to live, to buy a car, to get a credit card, to get insurance, to ever buy a house, or even get a job. Foreclosure is seen as the end of life as one knows it: financial suicide to be avoided at all costs. In short, fear - like shame and guilt - is a powerful motivator in homeowner decisions not to default.
Federal policy proclaims that homeowners are - for the most part - not "ruthless" and won't walk away from their mortgages simply because they have negative equity. Most homeowners walk only when they can no longer afford to stay. As evidence of this fact, only 45% of homeowners would walk even if they had $300,000 in negative equity. This percentage drops to 38% among the subset of individuals who believe it is immoral to strategically default on one's mortgage (a subset to which 87% of homeowners belong).
Federal policy can only proceed on the premise that affordability is the prime consideration as long as the moral and social constraints on foreclosure remain strong. The government thus has an incentive, along with certain other economic and social institutions interested in limiting the number of foreclosures, in cultivating guilt and shame in those who would contemplate walking away. Similarly, knowing that guilt and shame alone are not enough to prevent many individuals from defaulting once negative equity is extreme, these same institutions have an interest in increasing the perceived cost of foreclosure by cultivating fear of financial disaster for those who contemplate it.
A homeowner contemplating a strategic default would be hard pressed to avoid the message that doing so would place them among the most despicable members of society. It is thus not surprising that a large number of media stories about individuals who walk on their mortgages indicate that these individuals ask that their "last name not be used" to protect their privacy.
Gail Cunningham of the National Foundation for Credit Counseling declared in an interview on NPR: "Walking away from one's home should be the absolute last resort. However desperate a situation might become for a homeowner, that does not relieve us of our responsibilities." Well, Gail, if the "responsibilities" you invoke with absolute moral certainty do not appear in the written contracts between the desperate homeowners and desperado banks, when exactly would it be appropriate for the owner to stop pouring money into a sinkhole?
Many homes will not recover equity for more than a dozen years. When can the owner say that enough is enough? A non-recourse loan is a contract with a provision that allows the owner to walk away. That is not a breach of contract. Business owners do it all the time. Why should homeowners bear the burden of the real estate collapse while big banks enjoy taxpayer bailouts and record profits?
But in one sense, I'm with you, Gail. Don't walk away when the bank adjusts your interest rate through the roof and you can no longer afford to pay. Stay and fight for your home. Don't give it to the bank that made a fraudulant loan, knowing full well that you could never pay it back.
If you were the owner of this three-story building that disappeared down a sinkhole in Guatamala City on June 1, 2010, would you keep paying the mortgage for the next 30 years?
WaMu Former CEO Killinger Testifies
Senator Carl Levin turns up the heat
Kerry Killinger (left) and President Stephen Rotella testified before Senator Carl Levin's Senate Subcommittee on Investigations for two hours on April 13, 2010. Shameless passing of the buck climaxed with an 8-minute exchange between Mr. Levin and former CEO Killinger on C-Span that left Mr. Killinger speechless.
Don't get me wrong, I'm not passing judgment on Mr. K's sheepish grin. I've worn that expression when I got caught with my hand in the cookie jar and asserted my inalienable right to remain silent. I just never got caught with 300 billion broken cookies on the floor. Nor did it ever occur to me to grab $25 million in severance pay (for a total of $103 million in compensation) as I ran out the door shouting, "It's not fair! They didn't give me a bailout."
The Stress of It All
by Barbara Caldwell
Shelter is one of the essential elements in life, in addition to food, water, and human contact. What is shelter? It is our homes. And because our homes are essential, the banks are able to mess with those of us in loan modification hell to the point that we become physically ill. I have read about it, and I have experienced it.
The gut-wrenching fear is present almost constantly some days. Most of the people I know who are in loan modification hell are on anti-stress meds. We are smart people, loving people, compassionate people, and the banks are brutally assaulting our very souls.
I know that's strong, but its how I feel and what I know. I know people in this nightmare who throw up many mornings because of the stress. I know people whose chronic illnesses have increased, and who are often too tired to drag themselves out of bed. I know that couples fight, that marriages are threatened, and that people are just overcome with disbelief. And yet it continues.
I worry about the people who are at their wits end. How in the world are they ever going to fight the banks if they are so scared - so almost paralyzed with fear that they will lose? Most people have no ONE person at the bank they can talk to. It's the luck of the draw who you will get on the other end of that line when you call that bank, and I know first hand that no matter how prepared you think you are, that person can reduce you to a puddle with their cruelty.
I often fantasize about a class action lawsuit against Wall Street. Not about the loan mods (although that is a fantasy at other times), but one that is due to the personal damages and stress and health care costs that we have all incurred because of this nightmare. Ah, that is something that might happen in another dimension, unfortunately. The America I now know now does not care about much about anything more than money and power. It is sad, isn't it?
The Pillory or the Sack?
How do we reward avarice and greed?
The New York Times reported on tax day, April 15, 2010, that the number of homeowners who defaulted on their mortgages after getting loan modifications doubled in March to 2,879 from 1,499 in February. HUD's loan modification program started last fall. The defaults are only 1% of the 228,000 active permanent modifications in March, which represent only 3% of the seven million households that are behind in their mortgage payments.
Sixty percent of modifications undertaken by banks in late 2008 were in default a year later, according to the latest Mortgage Metrics Report compiled by the Office of Thrift Supervision and the comptroller of the currency.
Many of these private plans either kept the payments the same or increased them. Inevitably, those mortgages suffered the highest failure rate: about two-thirds of the borrowers defaulted again.
Loans for which the payments were decreased by at least 20 percent failed at a slower but still significant rate of about 40 percent.
The Treasury said on Wednesday that new elements of the program focus on allowing distressed homeowners to sell their properties for less than they owe and on shaving the principal owed by borrowers.
The notion of cutting principal, however, has already run into some resistance from the big banks, which do not want borrowers to get the idea that their mortgage can be chopped on a whim.
"Chopped on a whim." Hmmm. These big banks are the same pranksters who made loans to homeowners who could not possibly pay them back, sold the "toxic assets" to unsuspecting pension funds as bundled securities, then took out insurance in the form of credit default swaps so that they, the banks, would be paid the amount of the loan in full (which they no longer owned) from insurance companies such as AIG when the borrowers defaulted. Taxpayers bailed out AIG because Wall Street told our President that it was too big to fail. Then the banks seized the homes. To say that banks don't want borrowers to think their mortgages can be chopped on a whim is not simply "the pot calling the kettle black." It's the rapist calling the victim a tramp.
How does a bank sell off a toxic loan, pocket the balance of the loan when the homeowner defaults, then seize the home, evict the residents, and sell the house? It's called fraud, malice, stealing, unjust enrichment. Society's civilized remedy for such conduct is restitution, punitive damages, ostracism, and jail. Oh yes, and we replace the guarded mansion behind the wall with a guarded cell. Many years ago it was tar-and-feathers, lynching, the pillory, or burned at the stake. In the time of Jesus, they got sacked. The thieving money-changer would be tied up, stuffed in a leather sack with a live monkey, a rooster, or a dog, and tossed in the river. The Sack was considered a preferable method to crucifixion because the unfortunate soul would be dead before he drowned.
We've come a long way since Good Friday, but so have the banks.
Rep. Marcy Kaptur Grills Tim Geithner
Goldman Sachs gets to keep U.S. $14 billion
Congressman Marcy Kaptur (Ohio-D) grilled Tim Geithner, Obama's Treasury Secretary, about his Goldman Sachs colleagues, who drained the US Treasury of $14 billion in AIG bailout funds in 2009 while two million American families lost their homes and Wall Street rewarded its unblushing champions-of-the-universe with $20 billion in bonuses. Goldman Sachs was the largest recipient of federal funds that were dumped on Wall Street to bail out AIG so that it could honor the banks in full for their credit default swaps (bets that homeowners would default on mortgages written by the banks). It was the biggest heist of all time. Goldman Sachs has given new meaning to the term bank robber.
Kaptur elicits admissions from Geithner that he was elected to his previous job as President of the New York Federal Reserve Bank during the George W. Bush's presidency (2003-09) by a handful of private banks. Geithner held that powerful position at the pleasure of the Wall Street banks while they wreaked havoc on the global economy. For example, Jamie Dimon, C.E.O. of JPMorgan Chase, sat on the Board of the New York Federal Reserve Bank in 2008 when it decided to loan $55 billion to Chase to bail out Bear Stearns. That's about how much Bush said the invasion of Iraq would cost American taxpayers.
No other U.S. president but Obama has picked a New York Fed President to be his Treasury Secretary. Bush's Treasury Secretary was Hank Paulson, who headed Goldman Sachs before taking over the Treasury. Geithner's gatekeeper, Mark Patterson, Treasury Secretary chief of staff, worked for Goldman Sachs before he joined the Obama administration. Geithner bristles as Kaptur grills him. "You in effect nationalized AIG and let the bankers off the hook" while President of the New York Fed, she said. She points out that during the critical period when the AIG bailout occured, Geither made 225 calls to Treasury Secretary Paulson, about a hundred calls to Fed Chair Ben Bernanke, and 103 calls to Dan Jester at Goldman Sachs. Goldman received more AIG bailout funds than any other US corporation. It's probably not a coincidence that Paulson put Edward M. Liddy, a Goldman director, in charge of A.I.G. in the fall of 2008 as he directed the bailout.
Wall Street tanks the Euro
In 1929, "The St. Valentine's Day Massacre" was the beginning of the end for the mafia. It was probably just a coincidence that the New York Times ran a headline on Feb. 14, 2010, "Wall St. Helped to Mask Debt Fueling Europe's Crisis." Could this story signal the beginning of the end for the characters who steered the US economy to the brink of collapse? Is the boss of Goldman Sachs, Gary Cohn (on your right) going the way of Al Capone? Will he share a jail cell with Jamie Dimon (dukes on your left) Chairman, President, and CEO of JPMorgan Chase? Will they get along okay in an 8x10' cell? Sweet dreams.
The Times is in hot pursuit:
Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermined the euro by enabling European governments to hide their mounting debts.
As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
Financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away rights to airport fees and lottery proceeds for years to come.
Wall Street put Greece underwater while knawing at the fragile bonds that hold together the European Union. This is not your typical subdivision in the suburbs. Hey Gary, Jamie, listen up. It ain't wise to mess with Zorba. Greece is the cradle of democracyan idea introduced by Theseus 2,500 years ago.
Will this meltdown turn into a grand duel between the Rockefellers and the Rothchilds? Will they settle the score in an epic battle over the Atlantic with supersonic drones, or will they face off like gentlemen over a civilized game of cribbage? We can only wonder how the modern lords of finance will duel. Perhaps there is a new legend in the making. What diety will Chief Ex Dimon (on your left) play?
What do you think?
How to Interview a Lawyer
from www.LivingLies - Neil Garfield
If you can see the writing on the wall, you house is underwater, or your mortgage is going to adjust through the roof, or you just can't keep paying the bank and still feed the kids on the same reduced paycheck, and you suspect that the lender knew or should have known that you wouldn't be able to keep up with the payments, maybe it's time to start interviewing lawyers. Most law firms will meet with you without charge, even if only for 15 minutes, to explore whether or not you will hire them to represent you. You can learn a lot in a quarter of an hour if you're prepared.
Here is a link to a list of questions posted by Neil Garfield, a Florida lawyer and outspoken advocate for beseiged homeowners. To Neil's list, I would add the following three questions:
If the bank knew, or should have known, that you couldn't pay back the loan when you signed the promissory note, then how could there have been a meeting of the minds?
- If there was no meeting of the minds, how could there be an enforceable contract?
- If there was no contract, how can any bank lawfully foreclose under a Deed of Trust?
How Banks Can Bankrupt a Nation
The fall of an empire is not a pretty picture
One in every 365 housing units in the United States was branded with a foreclosure notice recorded in December 2009, according to RealtyTrac.com. That means 850,000 Americans got a big lump of coal in their stocking from Uncle Scrooge. It's hard to think of a more unpleasant holiday greeting than a Sheriff knocking on your door with an eviction notice when the kids are expecting Santa Claus, but banks will be banks. The number is February 2010 was one in every 418 housing units.
According to author Michael Lewis, appearing on "60 Minutes" on March 14, 2010, the financial hoard on Wall Street paid themselves $20 billion in bonuses in 2009. The all-time bonus record was $30 billion in 2007, when they crashed the global economy. Will any of those courtesans survive the roar of the crowd as more and more people wake up to the fact that their bonuses came out of the pockets of taxpayers in the form of government bailouts? Look up their names. Publish their addresses. Post their phone numbers on bulletin boards and restroom doors. Cherry bombs on slingshots at 3:00 AM. Dog poop catapults targeting the fine wedding on the lawnNo! Don't do it. An evil force must be taking over my mind. Be nice to these insatiable, greedy people, for they know not what they do (or maybe they just don't care).
Over 2,076,764 American homes are now in foreclosure. The number of persons per household in 2000 was 2.6 according to the US Census, so 5.4 million people are now feeling like deer in the headlights. How many human beings is that? They would fill 68 Sun Life Stadiums, where Super Bowl XLIV was played, if they could afford the tickets$226,000 for one seat facing the end zone in Section 238A offered on the official NFL website on February 4, three days before the game. What a country! As for trends, the number of foreclosures rose 41,409 in the past two months for an increase of 106,663 casualties in the first two months of 2010. It hurts to get kicked out of your home.
One in every 165 housing units in California (more that twice the national average) received a foreclosure notice in December, for a total of 80,488 properties. In Nevada, the figure was one in every 93 houses getting Santa's boot.
In Santa Barbara County, 965 properties are currently in default, according to RealtyTrac. A search of public records in the SB Recorder's Office shows that notices of trustee sale increased from 116 in 2005 to 2460 in 2009a 2,100% increase in five years. The ratio of NODs to NOTSs jumped from 30% to 75%. Three out of ten defaults resulted in a foreclosure sale in 2005; four years later, three out of four defaults ended with a foreclosure sale on the courthouse steps. In the first 6 months of 2010, the number of NOTS climbed another 8% over the same period in 20091,273 Notices of Trustee's Sale filed between New Year's Day and June 30, 2010. At 2.8 persons per household (U.S. Census 2000) that adds up7,128 people in Santa Barbara County notified that they will lose ownership of their home in 2010. They would fill the Arlington Theater four times. Sales of houses on the South Coast (Goleta to Carpinteria) are 30-40% short sales or foreclosures, and 10-20,000 homes are underwater (no equity). There's trouble in paradise, but not a word is said in the local media. Shame is a major component of South Coast culture. Wear a happy face until the Sheriff is about to come knocking, then slip away silently into the night as "friends" and neighbors look the other way shaking their heads.
This may shed some light on the debate at the SB Board of Supervisors reported by Noozhawk.com about the growing homeless population in Santa Barbara. If every homeless shelter bed was used, it would still leave 300 to 400 people on the street with nowhere to go, according to John Buttny, director of Bringing our Community Home. The Red Cross has declined to help recently because it doesn't have the staff equipped to deal with people with mental illness, said Michelle Mickiewicz, deputy director at the County Public Health department. "They are saying, 'We'd love to help with this, but we are not fit for this.'" The Red Cross can deal with Haiti, but not State Street.
Is it possible that homelessness is related to the 4,927 Notices of Trustee's Sale recorded in Santa Barbara during the past two years? Homelessness is not only a mental health issue involving winos and drifters, as often portrayed in the press. We are facing systemic failure compounded by issues of institutional cardiac arrest.
Noozhawk reports that the coroner's office has seen a disturbing trend with an increase in suicides, which were up to 60 deaths in 2009 from the previous year's 34. The total number of deaths also was up, hovering near a 20 percent increase. Do people without a roof over their heads die in the winter? Maybe we should all try sleeping outside under a blanketif we can find onewhen it's raining.
Great work!!! You've done a wasterful job here.
Thanks Jack. I'll keep wasting away here. I welcome everyone's comments.
The Upbeat and the Downbeaten
Are we recovering from a Great Recession, or are we sinking into a Great Depression? Here are two sides of the story from the New York Times. The first appeared on January 7, 2010:
Despite extensive government intervention in the housing market, some policy makers at the Federal Reserve are worried that even more might need to be done...Unease is growing that a tentative comeback in the housing market could fall apart as a tax credit for home buyers expires and the Fed's program to hold down mortgage rates comes to a close.
Other signs of stress in real estate have become apparent in the last few weeks, although most economists say any downturn will be relatively mild.
The Fed has been buying $1.25 trillion of mortgage-backed assets to ease lending markets and keep longer-term rates lowa program that is winding down and scheduled to end by March 31.
So the government is doing a lot, we are told, but there is growing unease whether the comeback we are enjoying will persist, but any downturn will be relatively mild. Relative is relative. If you're a Rockefeller, life is good.
The Times benignly referred to purchase of $1,125 billion of "mortgage-backed assets" by the Fed. I have trouble grasping the concept of a trillion dollars. A thousand million is a billion; a thousand billion is a trillion. What am I supposed to do with twelve 0's? I can still remember when a billion seemed like a lot of money. Those "assets" are the securitized mortgages we're reading about, and didn't the 150-billion-dollar-bonus recipients on Wall Street refer to them as "toxic waste" while they were marketing them as Triple-A bonds to teacher's retirement funds?
There was another story told in the New York Times a week earlier on December 30 that is not rippled with unease that the downturn might turn out to be slightly more vexing than "mild." In New York City, 20,000 homeowners faced foreclosure in 2009. With an average household size of 2.6 persons, this is a story about 52,000 people who grappled with some combination of terror, anger, shame, and grief as they faced the imminent prospect of being herded out of their homes by officers in uniformrain or shine.
Lenders offered new or trial mortgages to just 3 percent of New York homeowners who sought help. Nationwide, lenders have cut three-month trial deals with 759,000 homeowners, but they have converted just 31,000 of those to permanent new mortgagesthat's 4 percent. So if you're facing foreclosure in the Big Apple, you have 3 chances in 100 of being offered a trial mortgage, and 4 chances in 100 of converting it to a permanent new mortgage. That adds up to 12 chances in 10,000.
New York state law requires lenders to negotiate with troubled borrowers in court.
Leonard N. Florio, a court-appointed referee, oversees such sessions in a dusty room in Queens. "I have yet to see an attorney for a servicer cut a deal," he told the Times.
In California, only 7.8% of the mortgages modified through Obama's Making Home Affordable program were permanent through December 31. "Foreclosures will mount as borrowers are not able to make it from trial modification to a permanent modification," said Celia Chen, senior director of Moody's www.Economy.com. This will cause home prices to start falling again."
So take your pickare we experiencing a "mild downturn" or has the bottom fallen out? Stephen Choiniere sends these fascinating articles for your consideration:
Here's an article by Chris Hedges (Pulitzer Prize winner 2002) that might interest you:
"Wall Street Will Be Back For More."
As for cap and trade, Matt Tabbi wrote a scathing article in Rolling Stone about the next surprise from Goldman Sachs: "The Great American Bubble Machine."
- Stephan Choiniere
Thank you, Stephan. I hope all the lawyers who work for the banks will read Chris Hedges' article, as well as their investigators, paralegals, secretaries, and especially their clients. Here is an excerpt:
Jan 11, 2010.
Corporations, which control the levers of power in government and finance, promote and empower the psychologically maimed. Those who lack the capacity for empathy and who embrace the goals of the corporationpersonal power and wealthas the highest good succeed. Those who possess moral autonomy and individuality do not. And these corporate heads, isolated from the mass of Americans by insular corporate structures and vast personal fortunes, are no more attuned to the misery, rage and pain they cause than were the courtiers and perfumed fops who populated Versailles on the eve of the French Revolution. They play their games of high finance as if the rest of us do not exist. And it is a game that will kill us.
These companies exist in a pathological world where identity and personal worth are determined solely by the perverted code of the corporation. The corporation decides who has value and who does not, who advances and who is left behind. It rewards the most compliant, craven and manipulative, and discards the losers who can't play the game, those who do not accumulate wealth or status fast enough, or who fail to fully subsume their individuality into the corporate collective.
These deeply stunted and maladjusted individuals, from Treasury Secretary Timothy Geithner to Robert Rubin to Lawrence Summers to the heads of Goldman Sachs, Morgan Stanley, J.P. Morgan Chase and Bank of America, hold the fate of the nation in their hands. They have access to trillions of taxpayer dollars and are looting the U.S. Treasury to sustain reckless speculation.
Chris Hedges, a former Middle East bureau chief of The New York Times, shared the 2002 Pulitzer Prize for Explanatory Journalism. He has written nine books, including "Empire of Illusion: The End of Literacy and the Triumph of Spectacle" (2009).
A video of a lecture by Chris Hedges in Seattle on tour with his latest book, Empire of Illusion, also helps to place our current crisis in an historical perspective as it describes the unconscious forces that cause many Americans to keep trudging on the treadmill in our consumer culture.
The bubbles manufactured by Wall Street banks like Goldman and Chase don't just take away people's houses. The food bubble of 2005 - 2008 added another 250 million people to the ranks of the food insecure and starving. Banks starved a quarter of a billion people in order to make a buck. That's four times the number of people who died in World War II.
Hard Times in River City
Here is one of those things that circulates by email. If you know who wrote it, drop me a note.
The economy is so bad that:
- I got a pre-declined credit card in the mail.
- I ordered a burger at McDonald's and the kid behind the counter asked, "Can you afford fries with that?"
- CEO's are now playing miniature golf.
- If the bank returns your check marked "Insufficient Funds," you call them and ask if they meant you or them.
- Hot Wheels and Matchbox stocks are trading higher than GM.
- McDonald's is selling the 1/4 ouncer.
- Parents in Beverly Hills fired their nannies and learned their children's names.
- A truckload of Americans was caught sneaking into Mexico .
- Dick Cheney took his stockbroker hunting.
- Motel Six won't leave the light on anymore.
- The Mafia is laying off judges.
- Exxon-Mobil laid off 25 Congressmen.
- Congress says they are looking into this Bernard Madoff scandal.
Oh Great!! The guy who made $50 billion disappear is being investigated by the people who made $1.5 brillion disappear.
- I was so depressed last night thinking about the economy, wars, jobs, my savings, Social Security, retirement funds, etc., I called the Suicide Lifeline. I got a call center in Pakistan, and when I told them I was suicidal, they got all excited and asked if I could drive a truck.
Auctioning Off the American Dream
Houses are going like hotcakes at 1 pm on the Santa Barbara Courthouse steps. Here are dates of the public auctions listed in the "legal" newspapers on January 6, 2010:
4, 5, 6, 7, 8
11, 12, 13, 14
18, 19, 20
25, 26, 27
The auctions listed that day announced 43 foreclosure sales about one fifth of the total for the month. Listings appear in the classified ads 7 days a week. There are eight legal newspapers in Santa Barbara County that can publish Notices of Trustee's Sale:
Carpinteria/Summerland Coastal View
Pacific Coast Business Times
Santa Barbara Daily Sound
Santa Ynez Valley News
Santa Maria Times
Have you ever attended a public auction on the courthouse steps, where your neighbors' houses are being transferred to the banks almost daily in foreclosure sales? Here is a photo taken January 5, 2010, of Ryan, Santa Barbara County's leading public auctioneer at work, a handsome fellow with a trim goatee dressed in T-shirt, levis, and sunglasses facing the steps of the courthouse as he reads a script:
"Okay, I do have clearance. It is a total debt bid, address purported to be 1310 State Street in Santa Barbara. If you want to bid you must have cashier's checks acceptable to the trustee for any bid that you make before you make that bid. Any bid that you make is irrevocable. It cannot be withdrawn. Your bid will only be cancelled by a higher bid, postponement or cancellation of the sale. The first bid must be higher than the opening bid. I will sell the property to the last and highest bidder. I will not pronounce the property sold until I have endorsed checks for the full amount in my hand. Bidders are advised that all sales are being perfected on an as-is where-is basis. No representations or warranties are made by the trustee or beneficiary regarding the title or condition of the property or its habitability. Does anybody care to qualify for the sale? On behalf of the beneficiary, I am authorized to and I do bid the sum of 53,553 dollars even. Do I have any higher bids?"
"I'll bid a dollar," says a woman who is sitting on the steps.
"A dollar over - 53,554 dollars even. Do I have any higher bids? 53,554 dollars going once, twice, third and last call. Taking no more bids."
And then the property changes hands. If nobody bids, the bank takes it for the amount it claims it is owned. The bank doesn't pay one additional penny for the house, even if
- the bank doesn't own the loan
- the bank can't produce the promissory note that is the only evidence of the loan
- the bank never entered the loan on its balance sheet
- the bank can't tell the homeowner who put up the money for the loan
- the bank doesn't know whether the lender still has any interest in the loan
- the bank has no idea whether the middlemen who securitized the loan have been paid the entire balance of the loan many times over because they placed a series of bets that the homeowner wouldn't be able to keep up with the payments on the loan.
How do the banks get away with it? Because so many homeowners walk away from their homes without asking questions, without demanding to be shown documents that would prove whether the bank has any legal right to the property.
There are 3,140 counties in the United States, where foreclosure filings were reported on 2,824,674 properties in 2009. That is 54,320 families per week or 7,739 families per day. Another army of refugees is forced out of their homes by the banks every day in the world's richest country.
The number of homes receiving a foreclosure notice increased 120% from 2007. A Realty Trac report released Jan. 14, 2010, shows that 2.2% of all U.S. housing units (one in 45) received at least one foreclosure filing in 2009. Foreclosure filings were reported on 349,519 U.S. properties in December, a 14% jump from the previous month.
"As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans," said James J. Saccacio, chief executive officer of RealtyTrac. "After peaking in July with over 361,000 homes receiving a foreclosure notice, we saw four straight monthly decreases driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process, and an overwhelming volume of inventory clogging the foreclosure pipeline. Despite all the delays, a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in foreclosure as lenders gradually work their way through the backlog."
More than 10% of Nevada housing units received at least one foreclosure filing in 2009, giving it the nation's highest state foreclosure rate for the third consecutive year. Four states accounted for more than 50% of the nation's totalCalifornia, Florida, Arizona and Illinois. A total of 632,573 California properties received a foreclosure filing in 2009, the nation's largest state foreclosure activity total and an increase of nearly 21% from 2008.
The next wave of foreclosures is starting to hit. In a "60 Minutes" segment on December 16, 2009, investment fund manager Whitney Tilson told Scott Pelley that we are about halfway through the bursting of the real estate bubble. Defaults in subprimes mortgages approached $1 trillion. Now the Option ARMs and Alt-A loans are about to adjust, leading to additional damages of $1.6 trillion. Tilson predicts that 70% will default.
California will be especially hard hit. It had more than its share of Option ARMs and Alt-As because the real estate prices were so high. Every homeowner felt like a millionairejust like in the movies. We were feasting like pigs in a culture of celebrity and now we are told that we must pay the piperJPMorgan Chase, BofA, Wells Fargo, and Goldman Sachs.
What do you think?
If you have nightmares about some big bank rumbling down the street and aiming its cannon at your home, and that causes you to wake up before the sun rises and wander through the house fending off images of packing, you might reconsider your attitude. Craig Cunningham has attitude. The Dallas Observer reports that he has been suing debt collectors and beating them at their own game. How about this for a battle cry: "Su-eeeeeeeee!"
Information is easy to find on the web. The FTC publishes a Guide for Consumers describing the Fair Debt Collection Practices Act. Here is one example:
What practices are off limits for debt collectors?
Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, they may not repeatedly use the phone to annoy someone.
You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, the judge can require the collector to pay you for any damages you can prove you suffered because of the illegal collection practices, like lost wages and medical bills. The judge can require the debt collector to pay you up to $1,000, even if you can't prove that you suffered actual damages. You also can be reimbursed for your attorney's fees and court costs.
The FCC publishes a Consumer Fact Sheet that describes your rights under the Telephone Consumer Protection Act (TCPA). This statute established the national Do-No-Call list. Once you register your phone numbers, callers are prohibited from making telephone solicitations to those numbers. There is no need to re-register your number(s) as time passes. Even if you haven't registered, autodialers and artificial or prerecorded voice messages may not be used to contact cell phones or any other service for which the person being called would be charged for the call.
Debtorboard is a message board founded in 2005 by Steven Katz, author of an e-book, Debtmanship (January 2010). Debtorboards.com describes the TCPA, the FDCPA, and various other tools used more and more frequently to fight collection agencies. The site reports that debtorboard members have collected $355,551.12 from creditors. Watch that number climb into the millions as a growing army of people who are fed up with greedy banks fight back.
Chase Bags WaMu for $1.9 Billion
A grandstand deal or a brazen steal?
This is from Bill Moyers on December 18, 2009:
Only around 31,000 homeowners have received permanent loan modifications under the Obama administration's $75 billion plan. Lenders claim that the low success rate is due to the failure of borrowers to send in the necessary paperwork.
Wall Street's earnings surged to $50 billion in the first 3 quarters of 2009. Wall Street bonuses for employees in the New York City may be as much as 40% higher than in 2008. According to the non-profit Americans for Financial Reform, Wall Street is paying itself $150 billion in bonuseswhich would be enough money to prevent all foreclosures for four years.
JP Morgan Chase is paying its executives $29 billion in bonuses for 2009, the highest ever paid by the bank and an increase of 28% from the previous year, when 1,626 JP Morgan bankers took home bonuses of more than $1 million each. The bank received $25 billion from the US Treasury's Troubled Assets Relief Programme (TARP).
The website of Americans for Financial Reform reports, "Countrywide CEO Angelo R. Mozilo was paid $244.8 million in the two years leading up to his firm's demise; former Lehman Brothers CEO Richard Fuld received $246.3 million in the three years preceding his firm's bankruptcy; and former Merrill Lynch CEO Stanley O'Neal received a $161.5 million golden parachute when he was removed in 2007. The next year, Merrill Lynch was sold for a fire sale price.
The UK Telegraph reported on Dec. 16 that receivers in the WaMu bankruptcy case (which was filed one day after the FDIC transferred WaMu's assets to Chase on Sept. 25, 2008 for $1.9 billion) have now alleged that Chase launched a public relations campaign to drive down WaMu's value before they took over WaMu - the world's largest saving & loan.
In filings in US bankruptcy court, WaMu's receivers allege that JP Morgan disclosed confidential information "to government regulators, ratings agencies, media and investors in an effort to harm WaMu by driving down WaMu's credit rating and share price."
JP Morgan expressed an interest in rescuing WaMu in early September but the courtship came to nothing. However, they apparently took the confidential information and used it against WaMu. Following a series of damaging downgrades from credit ratings agencies, the smaller bank's shares plummeted, leading to its eventual collapse.
The bank was seized by the Federal Deposit Insurance Corporation (FDIC) on September 25, 2008, and JPMorganChase the same day acquired its assets in a government-brokered fire-sale for $1.9 billion. WaMu's shareholders were stuck with the dirt while Chase walked away with the gold.
Chase picked up WaMu's 2,200-branch network - much of which was on the West Coast where his Chase retail format was under-represented - as well as its $310 billion of deposits and $176 billion of mortgage book.
I asked a banker what the WaMu-now-Chase properties are worth on State Street at Victoria St. and at Hope St. in Santa Barbara. He said, "Four million, maybe five million each." Multiply that by 2,200 branches, add $486 billion in deposits and secured loans, and you have a very good deal for slightly under $2 billion brokered by the FDIC - which was hailed at the time as a necessary move to save the free world from financial freefall.
The FDIC didn't have a license to steal WaMu's assets from its shareholders and give them to Chase for less than half a cent on the dollar, so here's what the FDIC might have been telling us:
(1) The 2,200 branches were valued at less than $1 million each;
(2) Overnight instant access to the entire West Coast was a freebie;
(3) The deposits belonged to the depositers, not WaMu; and
(4) There were not many mortgages on the books.
Why would there be so few mortgages on the books? This was reported on April 14, 2008, in the Seattle Times:
WaMu made billions of dollars' worth of loans with only "limited documentation" of the borrowers' income, net worth or credit history. Such loans - often called "liar loans" or "NINJA loans," for "no income, no job or assets" - make up three-quarters of its $58.9 billion option-ARM portfolio."The option-ARM product," Killinger said on the conference call, "is a key flagship product for our company."
Unfortunately for WaMu, its flagship was precisely the kind of loan most prone to sour once the housing boom ended, mortgage rates started going up, and borrowers couldn't make their payments, refinance their loans, or sell their houses.
And despite selling off hundreds of billions of dollars' worth of option ARMs to outside investors (who now are watching them blow up at alarmingly high rates), WaMu still has $58.9 billion of them on its books.
So WaMu securitized the vast majority of their option-ARMs, and 3/4 of them were "liar loans." The question remains, did WaMu invest in credit default swaps and bet against their own borrowers?
And how did Washington Mutual CEO Kerry K. Killinger manage to take home $14,364,883 in 2007 while his bank was crashing into the ground? And that was only 14% of his total estimated compensation of $103 million since 1990 as WaMu CEO.
Wall St. Turned Mortgages into Dust
When securitization took over the mortgage market, many big banks stopped owning the mortgages they wrote. They passed them off to Wall Street as quickly as they wrote them, taking a commission on each deal but keeping the promissory notes and deeds of trust off their balance sheets. In other words, they acted like a Fuller Brush salesman who works on commission but doesn't own the brushes. How could that bank foreclose on a family's residence if they never owned the promissory note? Good question. Keep asking good questions, and don't give up your home without a fight.
If the banks knew the borrower would not be able to repay the loan, then how could there be a meeting of the minds, one of the necessary elements of an enforceable contract? Every lawyer learns that in law school.
United States Rep. Marcy Kaptur (D-Ohio) said to Amy Goodman in 2009 on Democracy Now, "I'm saying that possession is nine-tenths of the law; therefore, stay in your property. Get proper legal representation. If you believe that Wall St. has been deceptive, could have been fraudulent or tried to dupe the publicand with these subprime loans and with the kind of circuitous financing that's been done, Wall Street cannot produce the deed nor the mortgage audit trailyou need a lawyer. And you should stay in your home. It is your castle. It's more than a piece of property. It's your home."
U.S. Treasury is a Branch of Wall St.
Treasury Secretary Timothy Geithner spends more time on the phone with Wall Street than Capital Hill. In the first seven months of Geithner's tenure, his calendars reflect at least 80 contacts with Lloyd Blankfein, CEO of Goldman Sachs, Jamie Dimon, CEO of JPMorgan Chase, and Citigroup Chairman Richard Parsons or Citigroup CEO Vikram Pandit.
Geithner had more contacts with Citigroup than he did with Rep. Barney Frank, D-Mass., the lawmaker leading the effort to approve Geithner's overhaul of the financial system. Geithner's contacts with Blankfein outnumber his contacts with Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee. Geithner's previous job was CEO of the Federal Reserve Bank of New York.
On January 26, 2010, economist Mark Schneipp, Ph.D. said, "Policy mistakes in September and October 2008 pushed the economy into the Great Recession...Capitalism is self correcting. It doesn't need a stimulus from government."
So when US Treasury secretary Hank Paulson presented the Bush administration with a choice between a $750 billion bailout of Wall Street and a Depression, he tanked the economy. The Bush administration and Congress discussed the possibility of a breakdown in law and order and the logistics of feeding US citizens if commerce and banking collapsed as a result of financial panic.
Making his first appearance on Capitol Hill since leaving office, Paulson testified to a House Oversight Committee on July 16, 2009, "When a financial system fails, a whole country's economic system can fail. I believe we could have gone back to the sorts of situations we saw in the Depression." Time named Paulson as a runner-up for its Person of the Year 2008, saying, "If there is a face to this financial debacle, it is now his." Paulson was Chair and CEO of Goldman Sachs before serving as United States Treasury secretary under President George W. Bush.
Schneipp predicted that the $862 billion spent on the American Recovery and Reinvestment Act, a.k.a. the stimulus bill, will eventually have an impact on the economy, but he concluded that it would have been cheaper to send everyone in the United States a prepaid credit card with equal shares of the stimulus packageabout $2,800 per person.
Bank Fraud Caused Mortgage Crisis
Bill Black Blows the Whistle on Bill Moyers
Bill Moyers interviewed William K. Black on PBS in the Spring of 2009. If you are fighting to save your home from foreclosure, you may be able to prove that a bank committed fraud when it loaned you the money. This could lead a judge to stop the foreclosure. Find out how the banks turned into robbers, and how they are now fanning out across America seizing title to millions of homes.
Bill Black was the litigation director for the Federal Home Loan Board during the savings and loan crisis in the 1980's, when Charles Keating wrote a memo, "Get Black. Kill him dead." Black is currently a professor of law and economics at the University of Missouri, Kansas City.
Black says that this economic meltdown has been driven by fraud. "Fraud is deceit, and the essence of fraud is, I create trust in you, and then I betray that trust and get you to give me something of value." Calculated dishonesty by people in charge is at the heart of most large corporate scandals. They made really bad loans because they paid better. Heads of large banks deliberately set out to make bad loans so they would increase their personal income.
Alt-As are called liars loans, which means, we don't check. They knew that they were frauds. You tell us what your income is, you tell us what your job is, you tell us what your assets are, and we agree to believe you. These were also called NINJA loans - no income verification, no job verification, no asset verification. In 2006, Indy Mac sold $60 billion in liar's loans to other companies. They even gutted the verification process for prime loans. We know that that will produce fraud through economic theory and 2,000 years of life experience.
Then you take something so toxic that it has crushing risk and you rate it triple-A so that it has zero risk. The ratings agencies never looked at a single loan file. When they finally looked, there was evidence of fraud in almost every file they checked. The lenders, rating agencies, and investment banks all committed fraud, and the result was they sold investments with AAA ratings that experienced 60-80% losses. Our financial system became a ponzi scheme. The FBI publicly warned in 2004 that there was an epidemic of mortgage fraud that would produce a crisis at least as large as the savings and loan crisis, but there are not even one fifth as many agents working on this crisis as the S&L crisis, even though this is at least a hundred times worse.
The taxpayers played the fool under both Secretary Paulson and Secretary Geithner when they bailed out AIG. We paid $5 billion to UBS, a huge Swiss bank, even as we charged it with defrauding the taxpayers of America and fined it $780 million, so U.S. taxpayers paid the fine. Geithner was in charge as president of the Federal Reserve Bank of New York while the entire scandal unfolded and he took no action. The policies of the Obama administration in response to this crisis completely lack integrity and violate the rule of law. Geithner is hiding the truth about the big banks.
AIG was used to bail out favored banks like UBS and Goldman Sachs, Secretary Paulson's firm, which got $12.9 billion. Either we've lost our sense of outrage, or people lack the facts. If we leave the crooks in charge, they're not going to tell us what they know - who committed the frauds, whose bonuses should be recovered, how much the assets are worth. We need to know the facts to solve a problem, and they're deliberately leaving in place the people who caused the problem. What sets this crisis apart from the savings and loan crisis is that this time, the most powerful financial institutions in America engaged in, or facilitated, fraud.
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