The 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.
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.
Hey y’all, it is Friday!
This one up top I found on Facebook (h/t dakinikat)…it sets the tone perfectly.
There are a bunch of cartoons with puffed up elephants this week:
This next one doesn’t have an elephant, but it is from an artist down under…funny what even other countries see in Romney:
From Florida: Cagle Post » LOCAL FL Merit Retention Vote
From my man Luckovich:
And now two from Pat Bagley:
This next one is fabulous:
I love the belly on that one.
Sending thoughts out to both Boston Boomer and Wonk the Vote, both have come down with colds…get better!
This is an open thread.
Wikileaks has been the source of a lot of important whistle blower information which is why there seems to be a crusade against the organization’s most visible representative, Julian Assange. Wikileaks was founded in 2006 as a place where–among others–Chinese dissidents would be allowed to get important information to the public. Wikileaks’ stated purpose is to give assistance to all peoples that seek to “reveal unethical behaviour in their governments and corporations”.
Its first released documents dealt with government plots to assassinate people. It also has exposed bizarre documents from the Church of Scientology. During the financial crisis, Wikileaks released a report about a serious nuclear accident in Iran, problems at banks like the Kaupthing Bank of Iceland and Barclay’s, and a toxic dumping incident in the Ivory Coast. They have dumped data on corrupt governments and corrupt corporations so there is absolutely no shock that the powers that be all over the world are trying anything they can to discredit Wikileaks and every one associated with it. Wikileaks is bigger than one man and his foibles.
I’ve been finding more and more horrible things about Big Pharma and their experimentation on poor and helpless people in developing nations. This cover up trail–as with some others associated with horrible drug testing practices–leads to Wikileaks. Wikileaks has acted as our pharma watch dogs and released documents that provide more information on an ongoing story that exposed fatal drug tests on Nigerian children. Here is a summary of the situation from Democracy Now. You can watch Amy Goodman’s story in video at the same link. WAPO actually did a lot of the original investigative journalism back at the time this came to light in the late 1990s.
Diplomatic cables released by WikiLeaks show the pharmaceutical giant Pfizer hired investigators to find evidence of corruption against the Nigerian attorney general to pressure him to drop a $6 billion lawsuit over fraudulent drug tests on Nigerian children. Researchers did not obtain signed consent forms, and medical personnel said Pfizer did not tell parents their children were getting the experimental drug. Eleven children died, and others suffered disabling injuries including deafness, muteness, paralysis, brain damage, loss of sight, slurred speech. We speak to Washington Post reporter Joe Stephens, who helped break the story in 2000, and Musikilu Mojeed, a Nigerian journalist who has worked on this story for the NEXT newspaper in Lagos.
The story is 14 years old, but the Wikileaks information is new. In 1995, Pfzier was trying to get a new antibiotic–Trovan— to market. You may know this drug as Zithromax. It was supposed to be a big drug breakthrough and they wanted to test the drug on children. This is a complex and difficult undertaking in the US so they headed to Nigeria for their Clinical Trials. This is Amy Goodman’s explanation from a transcript of the show.
AMY GOODMAN: In 1996, Pfizer’s researchers selected 200 children at an epidemic hospital in Nigeria for an experimental drug trial. About a hundred of the kids were given an untested oral version of the antibiotic Trovan. Researchers did not obtain signed consent forms, and medical personnel said Pfizer did not tell their parents their children were getting the experimental drug. Eleven children died. Others suffered disabling injuries including deafness, muteness, paralysis, brain damage, loss of sight, slurred speech.
The details of the case were first exposed in 2000 in an investigative series in the Washington Post. In 2007, Nigerian officials brought criminal and civil charges against Pfizer in a multi-billion-dollar lawsuit.
Wikileaks has exposed an important link between Pfizer and the Nigerian law suit.
JUAN GONZALEZ: A State Department cable from 2009 details a meeting between Pfizer’s country manager, Enrico Liggeri, and U.S. officials in Abuja. The cable reads, “According to Liggeri, Pfizer had hired investigators to uncover corruption links to Federal Attorney General Michael Aondoakaa to expose him and put pressure on him to drop the federal cases.” A few months later, Nigeria settled with Pfizer for just $75 million.
Nigerian journalists consider Assange and Wikileaks to be heroes for exposing this connection. Here’s something just written by PMNews Nigeria outlining the importance of this information. You see an article there written by a Nigerian lawyer that explains the importance of the Wikileaks. The author has disabled the option to quote his work so I’ll respect this and just give you the link.
Additional information on Pfizer has come to light through the documents released by WikiLeaks. A lot of this information is being reported by Democracy Now–an advertising free media outlet–that has followed this story extensively. Pfizer extensively lobbied against a New Zealand Free trade agreement because New Zealand has drug buying rules similar to Canada. Big Pharma just hates it when countries negotiate prices.
In other WikiLeaks news, newly released cables have shed more light on the pharmaceutical giant Pfizer. Last week on Democracy Now! we reported how Pfizer hired investigators to find evidence of corruption against the Nigerian attorney general to pressure him to drop legal action over fatal drug tests on Nigerian children. Now Pfizer’s actions in New Zealand have been exposed by WikiLeaks. Newly released cables show the pharmaceutical company lobbied against New Zealand getting a free trade agreement with the United States because it objected to New Zealand’s restrictive drug buying rules. In addition, cables show drug companies tried to get rid of New Zealand’s former health minister.
Democracy NOW also reports that the Big Pharma has become the biggest defrauder of the Federal Government. They are bigger than even the military industrial complex with its giants like GE.
A new study by the watchdog group Public Citizen has found that the pharmaceutical drug industry has become the biggest defrauder of the federal government, surpassing the defense industry. Public Citizen found that the drug industry paid out nearly $20 billion in penalties over the past two decades for violations of the False Claim Act. More than half of the industry’s fines were paid by just four companies: GlaxoSmithKline, Pfizer, Eli Lilly and Schering-Plough.
If you read the show’s transcript, you’ll see further evidence and concerns about clinical trials happening on poor people in poor countries. The person I will quote is guest “Dr. Sidney Wolfe, the Director of Public Citizen’s Health Research Group and co-author of the new report, Rapidly Increasing Criminal and Civil Monetary Penalties Against the Pharmaceutical Industry: 1991 to 2010.”
I’d just like to add something to what James Steele said, which is, we call this industry the human experimentation corporations. The biggest human experimentation corporation is right here in the United States. It’s called Quintiles. They do experiments for drug companies as quickly as they possibly can all over the world. We found an ad from Quintiles that sells to the drug industry: “We help you recruit drug-naive subjects in many developing countries.” So this industry, in terms of exporting human experiments—and it really is a business—in terms of criminal violations—off-label marketing, illegal—in terms of False Claims Act, is really at the forefront. They parade themselves—and they do some good things; they do develop some good drugs. Is it really necessary for them to engage in criminal behavior, in civil violations and in very unethical human experimentations around the world? We think the answer is no.
A top lawyer at the FDA has recently said, “The only way we’re going to stop this industry from violating these laws, endangering people, is to start putting people in jail.” No one has ever gone to jail from one of these drug companies for these criminal violations. The size of the penalties is miniscule compared with the profits. Two companies, as mentioned—Glaxo and Pfizer alone—have paid $7 billion or $8 billion in the last 20 years. In one year, those two companies make about $15 billion or $16 billion in profits. So, until they are adequately assessed penalties that compare with the amount of money they’ve made off of these various drugs, until people are put in jail, if appropriate, this industry is going to keep running away.
And one other thing that was alluded to by James Steele is, this industry directly finances the FDA through cash payments. This year, between $700 million and $800 million in cash goes directly from the drug industry to the FDA. It pays for about two-thirds of all the review of drugs. So, in addition to the lobbying, the $200 million that James Steele talked about, there are direct cash payments, under a 1992 law that the Congress unwisely passed. So we have lots of problems with this industry. It does a lot of good things, but it is increasingly a menace in this country and abroad. As part of globalization, we’ve globalized human experimentation, and it’s a pretty nasty business.
There are several things that are becoming abundantly clear to me as I continue my search for Big Pharma’s role in the deathes of many people–babies and children included–through reckless experimentation and profit-seeking. The first is the importance of Wikileaks and the realization that the sideshow going on right now over Assange’s behavior in Sweden detracts from the essential role that Wikleaks plays in releasing important information. The second is how the majority of real data that I find comes from either sources not aligned with advertising interests or over seas media.
Democracy NOW and public interest groups like WikiLeaks rely on small donations and are not held hostage by government bullies and corporate revenues. Without media and free press outlets like Wikileaks and Democracy NOW and these investigative reports done by Public Interest Groups, we would NEVER get this information. We should be actively funding their ventures and supporting their right to expose the corruption and immoral behaviors of all governments and huge corporations.
The rich and powerful are banding together to prevent this information from coming to the surface. JUST a few minutes ago, this came to my attention: Apple Explains Why They Banned The Wikileaks App. MasterCard, Bank of America, and Pay Pal have moved to stop the flow of money to Wikileaks. BOA is said to be one of the next data drops from Wikileaks so I hardly find that move surprising. As corporate and western European/American government interests move to strangle this outlet of free speech, we’re beginning to see more people–people with questionable intellect and morals–distracted by the Assange Rape Accusation Side Show. Isn’t a little bit odd that all this is taking place in light of more and more whistle blowing documents showing up in places where there is only accountability to free speech and not to the profit motive and geopolitical power?
Against this backdrop, Julian Assange, the 39-year-old globetrotting Australian who is the driving force behind WikiLeaks, is battling extradition from England to Sweden for questioning about rape allegations. He was released on bail in London on Thursday.
Speaking Saturday outside a supporter’s mansion in eastern England, Assange called the case in Sweden a “travesty.” He also claimed he and others working for WikiLeaks face significant risks.
“There is a threat to my life. There is a threat to my staff. There are significant risks facing us,” he said, without offering details of the purported threats.
In an interview with CNBC on Friday, Assange said his organization plans to soon release information about banks, and he told Forbes magazine last month that the data would show “unethical practices.”
Assange told Computerworld magazine in 2009 that his organization had a trove of files on Bank of America. “At the moment, for example, we are sitting on 5GB from Bank of America, one of the executive’s hard drives. Now how do we present that? It’s a difficult problem,” he was quoted as telling the magazine.
Stay tuned. There will be more. The more you dig into stuff, the more twisted it gets. My guess is that Karl Rove is over on a mission there in Sweden to stop something that must either endanger Cheney, Bush, or himself. Why is Karl Rove helping to persecute Julian Assange? But, my friends, that is another story.