Are Victims of Mortgage Lender Fraud about to get their Justice?
Posted: October 24, 2012 Filed under: Bailout Blues, Banksters, investment banking | Tags: BOA, DOJ, FHA, FNMA, hustle loans, Subprime mortgages 23 CommentsThe DOJ has filed a lawsuit against BOA on so-called “hustle mortgages” that accuses the lender of selling bad mortgages to Fannie and Freddie. I’m going to follow this, believe me, because it represents a ‘big deal’ for any one that does research in banking, lending, or moral hazard. I’m not a lawyer–nor do I play one on TV–so the finer parts of the law are not in my knowledge ballpark. I do have some knowledge of home value through the apprenticeship I did with a home appraisal service. However, I expect this to influence both lending behavior and the willingness of larger banks to merge with banks in bad shape. The latter is a trick used by regulators to deal with a problem bank. Bank of America is basically being sued over mortgages originated through a Countrywide program called the “hustle mortgage”. It supposedly continued the program after its merger to Countrywide.
This is the first civil fraud suit brought by the Department of Justice concerning mortgage loans sold to Fannie Mae or Freddie Mac.
Manhattan U.S. Attorney Preet Bharara said: “For the sixth time in less than 18 months, this Office has been compelled to sue a major U.S. bank for reckless mortgage practices in the lead-up to the financial crisis. The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope. As alleged, through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill. As described, Countrywide and Bank of America systematically removed every check in favor of its own balance – they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects. These toxic products were then sold to the government sponsored enterprises as good loans. This lawsuit should send another clear message that reckless lending practices will not be tolerated.”
FHFA Inspector General Steve A. Linick said: “To prevent fraud, conducting quality reviews and complying with underwriting standards are critical. Countrywide and Bank of America allegedly engaged in fraudulent behavior that contributed to the financial crisis, which ultimately falls on the shoulders of taxpayers. This type of conduct is reprehensible and we are proud to work with our law enforcement partners to hold all parties accountable.”
SIGTARP Special Inspector General Christy Romero said: “The complaint filed today alleges serious and significant misrepresentations that Bank of America made before and during the time taxpayers invested $45 billion in TARP funds in the bank. SIGTARP and its law enforcement partners will investigate allegations of wrongdoing by TARP recipients, particularly conduct that results in substantial losses to the government and taxpayers.”
Are we beginning to see the DOJ move on the banksters? Has this got anything to do with the stampeded to Romney by all things Wall Street?
The Bank of America lawsuit is the sixth brought against a major U.S. bank by the Justice Department in less than 18 months over what Bharara called “reckless mortgage practices in the lead-up to the financial crisis.”
This month, the government sued Wells Fargo & Co. (WFC), one of the biggest mortgage lenders and service, over claims the San Francisco-based bank made reckless loans that caused losses for a federal insurance program when they defaulted. The complaint alleges misconduct over more than a decade related to the bank’s participation in a Federal Housing Administration program and follows similar cases against other lenders including Citigroup Inc. (C) and Deutsche Bank AG. (DB)
A state and federal task force is investigating misconduct in the bundling of mortgage loans into securities before the housing bust. The group’s first legal action was this month, when New York Attorney General Eric Schneiderman sued JPMorgan Chase & Co. (JPM), the biggest U.S. lender, over defective mortgage loans underlying securities, a suit he said would act as a template for other such cases. The bank has denied wrongdoing.
Fannie Mae and Freddie Mac losses totaled more than $1 billion, Bharara said. The Justice Department’s complaint was brought under the federal False Claims Act, which allows for triple damages.
Fannie Mae and Freddie Mac have operated under U.S. conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency.
“Bank of America has stepped up and acted responsibly to resolve legacy mortgage matters,” Larry DiRita, a spokesman for the Charlotte, North Carolina-based company, said in an e-mailed statement. “The claim that we have failed to repurchase loans from Fannie Mae is simply false. At some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”
The government said in the complaint that Bank of America “systematically removed every check” in the issuance of mortgages and then sold the “flawed” mortgages to Fannie Mae and Freddie Mac. Both relied on Bank of America’s assurances that the mortgages they purchased complied with their standards, the U.S. said.
According to the complaint, Countrywide initiated “the Hustle” in 2007 just as mortgage loan defaults were increasing nationally and Fannie Mae and Freddie Mac were tightening their loan purchasing standards to reduce risk. The Countrywide program did just the opposite, the U.S. said.
This suit is based on information from a whistle blower and has been in the works since February.
According to court records, Wednesday’s case was originally filed under seal in February by Edward O’Donnell, a Pennsylvania resident and former executive vice president at Countrywide Home Loans who had worked there between 2003 and 2009.
In that complaint, O’Donnell said Countrywide and later Bank of America dismissed his “numerous” objections to the Hustle, and that he became “one of the lone voices” in his division pointing to escalating loan quality issues and defaults.
O’Donnell could not immediately be reached for comment, and his lawyer did not immediately respond to requests for comment.
Grab your bowl of popcorn. This should be interesting.
Friday Reads
Posted: March 9, 2012 Filed under: Economy, Global Financial Crisis, House of Representatives, investment banking, Mitt Romney, morning reads, Regulation, religious extremists, Rush Limbaugh | Tags: Dennis Kucinich, Dump Rush, FED, SEC 36 Comments
Good Morning!
Well, we’ve always known Pat Robertson was a little off. Reconcile all his throw back ideas about women and the GLBT community with his views on decriminalizing marijuana, I dare you!!
“I really believe we should treat marijuana the way we treat beverage alcohol,” Mr. Robertson said in an interview on Wednesday. “I’ve never used marijuana and I don’t intend to, but it’s just one of those things that I think: this war on drugs just hasn’t succeeded.”
Mr. Robertson’s remarks echoed statements he made last week on “The 700 Club,” the signature program of his Christian Broadcasting Network, and other comments he made in 2010. While those earlier remarks were largely dismissed by his followers, Mr. Robertson has now apparently fully embraced the idea of legalizing marijuana, arguing that it is a way to bring down soaring rates of incarceration and reduce the social and financial costs.
“I believe in working with the hearts of people, and not locking them up,” he said.
Rush has lost at least 50 advertisers after his horrendous, personal attacks on a university student exercising her first amendment rights. Just what kind of advertisers does the big blowhard have left? Well, he’s picked up an online dating service for married people interested in extramarital relations. There’s your family values for you!!!
Advertisers learned something about Rush Limbaugh’s demographic this week.
“Here we thought lots of pleasant, upstanding people were listening to and enjoying the rational things Rush had to say,” dozens of companies said. “Apparently not.”
It turns out that people who really, truly still enjoy Rush Limbaugh’s show are — how do I put this? — jerks.
At least that’s what the new advertisements moving into the vast empty lot of Rush Limbaugh, Inc., implies. “Ah,” you say, as a rat runs over your foot and several people offer payday loans and try to sell you watches from their trench coats. “This place seems to have gone downhill somewhat.”
So far, he’s picked up AshleyMadison.com, the site where you go to cheat on your wife, and another Web site that is explicitly for sugar-daddy matchmaking.
Republicans in the House have basically gone after finance regulators in a way that would basically change one of the major mandates of the Fed’s economic stabilization mandate and the SEC’s ability to police the markets for fraud. The FED suggestions are outrageous. They would completely stop the FED’s ability to stimulate the economy and would change the composition of the FED board from economists to the Bank’s District Presidents who are answerable to their member banks.
The bill, which will be formally introduced later this week by Congressman Brady, would eliminate the employment leg of the dual mandate, requiring the Federal Reserve to focus only on price stability.
The legislation would also restructure the Federal Open Market Committee (FOMC). The bill would give permanent seats on the committee to the twelve regional Federal Reserve bank presidents, who are chosen by regional Federal Reserve Bank directors. Those boards are composed of private citizens.
Yesterday, SEC chairman Mary Schapiro begged Congress to increase the agency’s funding, arguing that “the rapidly expanding size and complexity of the markets presents enormous oversight challenges.” Representative Barney Frank, ranking member of the House Financial Services Committee, offered a bill to provide that funding—and Republicans voted lockstep to trash it.
Republicans on the committee offered the perverse argument that since the SEC has repeatedly suffered oversight breakdowns in the past, it’s not entitled to additional funding. Representative Jo Ann Emerson, a Missouri Republican and member of the House Appropriations Committee, echoed this argument in the hearing with Schapiro yesterday:
“I think this body is reticent to throw more money at the SEC until ya’ll have proven that you have addressed the structural problems from within…in a comprehensive way,” [Emerson said]. “Since 2001, SEC’s budget has increased over 200 percent. Despite this tremendous growth in resources over the past decade, the SEC failed to detect Ponzi schemes such as Madoff and Stanford, the U.S. financial system nearly collapsed, and judges continue to question SEC settlements and regulations.”
Further starving a regulatory agency that’s already clearly unable to handle its massive mission is not a terribly convincing argument—one would have to truly believe the SEC is completely capable of policing Wall Street but simply suffering from “structural problems,” as Emerson asserts. (To give a sense of the very real funding problems, JPMorgan Chase—only one of the 35,000 entities the SEC is tasked with regulating—spends four times the entire SEC budget on information technology alone). But it’s the only argument Republicans have—the SEC is funded entirely by fees from the financial industry, so Republicans can’t carp about the deficit.
None of these folks seem to have any idea about what caused the financial crisis nor how much the underfunding and disabling of regulators and regulators have played into all these problems It’s really disheartening.
Meanwhile, Romney has told a university student that students going to cheap schools they could afford would be better than government student loans. BTW, where are there cheap schools now?
Mr. Romney was perfectly polite to the student. He didn’t talk about the dangers of liberal indoctrination on college campuses, as Rick Santorum might have. But his warning was clear: shop around and get a good price, because you’re on your own.
“It would be popular for me to stand up and say I’m going to give you government money to pay for your college, but I’m not going to promise that,” he said, to sustained applause from the crowd at a high-tech metals assembly factory here. “Don’t just go to one that has the highest price. Go to one that has a little lower price where you can get a good education. And hopefully you’ll find that. And don’t expect the government to forgive the debt that you take on.”
There wasn’t a word about the variety of government loan programs, which have made it possible for millions of students to get college degrees. There wasn’t a word urging colleges to hold down tuition increases, as President Obama has been doing, or a suggestion that the student consider a work-study program.
And there wasn’t a word about Pell Grants, in case the student’s family had a low enough income to qualify. That may be because Mr. Romney supports the House Republican budget, which would cut Pell Grants by 25 percent or more at a time when they are needed more than ever.
Instead, the advice was pretty brutal: if you can’t afford college, look around for a scholarship (good luck with that), try to graduate in less than four years, or join the military if you want a free education.
Robert Scheer writes about Dennis Kucinich who will leave Congress after his term finishes. His district was merged with Marcy Kaptur’s and she won on Tuesday. It’s an interest profile for a quirky politician.
Kucinich never competed in that way. He has been a national symbol of resistance to excessive government power and waste. He also has been a champion of social justice. His has been a rare voice, and one way or another it must continue to be heard. Simply put, when it came to the struggle for peace over war, Dennis was the conscience of the Congress. And he was always at the forefront in defending the rights of unionized workers who once formed the backbone of a solid middle class and who are now threatened with extinction.
Kucinich will surely be back for another turn in public life. As he put it in our Playboy interview:
“I appreciate Woody Allen’s humor because one of my safety valves is an appreciation for life’s absurdities. His message is that life isn’t a funeral march to the grave. It’s a polka.”
What’s on your reading and blogging list today?
Greedy Bastards
Posted: January 26, 2012 Filed under: Banksters, commercial banking, Corporate Crime, corruption, financial institutions, Global Financial Crisis, investment banking, lobbyists, U.S. Economy, U.S. Politics | Tags: Dylan Ratigan, extractionism vs capitalism, Greedy Bastards 15 CommentsNo, I am not making an editorial comment.
But after nonstop blathering served up by the GOP, only to be followed by President Obama’s Teddy Roosevelt impersonation [although I have to admit—the State of the Union was a surprisingly good speech], I thought a moment of palate cleansing might be in order. In this case Dylan Ratigan offers up the sorbet.
Ratigan is someone willing to call out the shysters, the casino players and shakedown artists, including their political handmaidens for what they truly are, and ‘Greedy Bastards’ is the title of his newly released book. The author’s name may ring a bell because Dylan Ratigan has a public platform on MSNBC, an hour-long show Monday through Friday. The program airs at 4:00 pm, EST, in my neck of the woods.
Ratigan’s slant focuses on the collision of worlds, that of finance and politics, how the incestuous relationship is literally squeezing the life out of the United States. His take is not an indictment of capitalism. Rather it is an indictment of what is posing as capitalism, a system he refers to as ‘extractionism.’
Ratigan is not a newcomer or a pundit simply reading a script. He worked the financial beat with Bloomberg News, serving as Global Managing Editor to Corporate Finance until 2003. He’s also the former anchor and co-creator of CNBC’s Fast Money. He has launched and anchored a number of financially-related broadcasts over the years but decided to leave Fast Money after the 2008 financial meltdown. Ratigan has publicly stated that he was personally disgusted by the Wall Street banking sector’s shakedown of the American public. The Dylan Ratigan Show was launched to provide discussion and analysis of the financial/government intersection, a system that has acquiesced to the wanton theft of the Nation’s wealth and resources by . . . Greedy Bastards, of course.
Though the show has been on air for three years, Ratigan has admitted that his voice was finally heard after an infamous meltdown last August. It was an on-air rant that would have made Patty Chayefesky proud, a Howard Beale moment.
That woke people up! It also led to Ratigan’s Get the Money Out [of politics] Movement, working towards a Constitutional Amendment to remove the corrosive element of money in the political sphere. And then, there’s the book.
One thing I liked about Ratigan’s approach is that instead of pointing out one segment of the population for public pillorying, his title basically refers to a state of mind and the all too frequent way of doing business and politics in the 21st century.
For instance, in the case of capitalism, Ratigan uses the example of venture capital, a subject that has come up in reference to Romney’s connection to Bain & Company, specifically Bain Capital. From Chapter 1:
If I start a venture capital firm that lends out money to drug researchers trying to find new cures for disease, and I get rich doing it, then I made my money by investing in the productive future of the country. I used my money in a way that facilitated scientific innovation and a cure. I’m what the director of the Havas Media Lab Umair Haque a ‘capitalist who makes.’ But instead, if I take the same money and use it to lobby for changes in government regulation—changes that help me trick a union into investing its retirement savings in flawed investments so that I can collect the commissions—then I may move as many dollars into my bank account as someone who funded cures for diseases, but I haven’t made anything. I’m a ‘capitalist who takes,’ exploiting my power to influence the government for my own private gain, no matter the harm to anyone else. I’m a greedy bastard.
The latter example, taking money from others without providing anything of value is, according to Ratigan, the opposite of capitalism. An extractionist system loses increasing value over time until there’s nothing left. Call it the vampire or vulture model. A system based on the extractionist principle, provides no incentive for people to make good deals, where both sides benefit. Instead, it rewards those who take and give nothing in return.
Sound familiar?
Ratigan covers the areas that have pushed the extractionist model to the max: banking, education, healthcare, energy, trade negotiations and the unholy alliance of government and big money fueling the feeding frenzy of the Nation’s resources and our future. But unlike many gloom and doom tomes, Ratigan offers solutions and brings an optimism to the subject, namely that we have the ideas, the people and yes, even the money to solve what at times seems insolvable. He concludes in a rather convincing way that what is needed is a realignment between investment and the needs of capable, innovative people. If loans and investments offered the highest returns when they provided the highest value as opposed to simply taking the highest risk, then prevailing attitudes and business practices would shift and win/win deals would be created.
Sound like pie in the sky? I don’t think so. Yes, it’s a matter of will, public pressure to exact the necessary changes but this realignment idea is possible by citing the goals first, and then targeting the resources to get there. Ratigan refers to this as hotspotting—zeroing in on the problem, determining what methodology provides the best results, and then aiming resources to match those needs.
Though some critics have dismissed this idea, it is very attuned to what Bill Clinton recently suggested in his Esquire interview about highlighting the successes and needs across the country, and then linking them, matching them up. Just another turn on the realignment idea:
. . . the two best things you could do are the infrastructure bank and a simple SBA-like loan guarantee for all building retrofits, where the contractor or the energy-service company guarantees the savings. So that allows the bank to loan money to let a school or a college or a hospital or a museum or a commercial building or factories for lease unencumbered by debt to loan it on terms that are longer, so you can pay it back only from your utility savings. You could create a million jobs doing that because of the home models that are out there now.
There are these two guys on Long Island who started a little home-repair deal. They got thirty-five employees now, and they’re — they can go in, tell you how much they’ll save you. There’s an operation in Nebraska that’s in and out in a day, and they’re averaging more than 20 percent savings, and conservative Republican Nebraska is the only state in the country that has 100 percent publicly owned power.
And,
You’ve got Orlando with those one hundred computer-simulation companies. They got into computer simulation because you have the Disney and Universal theme parks, and Electronic Arts’ video-games division. And the Pentagon and NASA desperately need simulation, for different reasons. So there you’ve got the University of Central Florida, the biggest unknown university in America, fifty-six thousand students, changing curriculum, at least once a year, if not more often, to make sure they’re meeting whatever their needs are, and they’re recruiting more and more professors to do this kind of research that will lead to technology transfers to the companies. You’ve got Pittsburgh actually becoming a real hotbed of nanotechnology research. You’ve got San Diego, where there are more Nobel-prize-winning scientists living than any other city in America. You’ve got the University of California San Diego and other schools there training people to do genomic work. Qualcomm is headquartered there, and there are now seven hundred other telecom companies there, and you’ve got a big private foundation investing in this as well as the government, and nobody knows who’s a Republican or who’s a Democrat, they’re just building this networking.
We have fabulously innovative, creative people working on all kinds of things. Our true wealth is in our people; our true value is . . . us.
Ratigan is now on a 30-million jobs tour showcasing business enterprises that are, in fact, answering a need, offering value to their communities, providing jobs and in the best capitalist tradition—making a profit.
The endnote is that the country hasn’t lost its edge. We’ve lost the path that works, the one that values quality and integrity. Greedy Bastards will always exist, those hoping to make a quick buck [or trillions of bucks] off the backs of others. They have no shame. The goal is to make them and their thievery the exception, not the rule.
Btw, Ratigan’s book is highly readable, written for the layperson. No economic degrees required. If you’ve been following the financial blowout and/or Ratigan’s show, this will be a fast review. If you’re just starting to pay attention, consider the book a primer—what the country underwent and where we need to go. The sooner, the better. Ratigan encourages us to reclaim our voice, demanding that our people and country come first.
It’s a worthy message. Read the book. Get the word out.
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