JPMorgan, RBS Sued by Federal Agency Over Mortgage Bonds

[boutons_deux]

Unregulated (and unpunished), self-regulated (just trust us!) capitalism is a beauty to behold.

[boutons_deux]

More Proof of DoJ Lack of Interest in Enforcing the Law: The Case of the Kickback-Demanding Banks

So why is the Department of Justice’s excuse for sitting on its hands? The excuse made is that it lacks the needed accounting skills. If you believe that, I have a bridge I’d like to sell you. Actions speak louder than words, and the evidence is overwhelming that the DoJ has no interest in inconveniencing anyone influential, particularly banks.

http://www.nakedcapitalism.com/2011/...+capitalism%29

===========

The finance sector OWNS the federal govt, all 3 branches.

[Wild Cobra]

A previously undisclosed HUD investigation reveals that banks took at least $6B in reinsurance kickbacks:

http://www.americanbanker.com/issues...1041928-1.html

Looks like there should be prosecutions coming. Make an example of people who hold a government role so it doesn't happen so frequently. If this doesn't happen, say no to more government bailout intervention.

[boutons_deux]

the govt didn't cause or commit the kickbacks.

the problem is govt NOT policing/intervening to enforce the law, just as Wall St pays the govt to STFU and GFTO so Wall st can commit crimes unimpeded.

[boutons_deux]

Florida Appellate Decision May Be a Major Obstacle to Foreclosure

A ruling issued today, Glarum v. LaSalle Bank, by the court of appeals for Florida’s fourth district, may have thrown a really big wrench in the foreclosure machinery state-wide. I say “may” because this ruling has such big implications that the bank has good reason to appeal to try to get the decision reversed or narrowed.

The ruling itself is remarkably straightforward and damning. The trial court had issued a summary judgment for foreclosure. The appeals court reversed it because the evidence submitted by LaSalle Bank to establish the amount due and owing was inadequate under Florida’s rules of civil procedure.

http://www.nakedcapitalism.com/2011/...+capitalism%29

[Winehole23]

Compare and contrast with Frank-Dodd:

http://bankingcommission.independent.gov.uk/

[boutons_deux]

Regulators Weaken Dodd-Frank Draft Regs, Allow More Risk

Here’s the Wall Street Journal:

[The language] opens the door for banks to make all manner of bets on the market, observers said, because a bank might define the risk to its portfolio broadly, such as the risk of a U.S. recession.

If the language is confirmed in the final rule, expected by late October, it would be a victory for Wall Street firms that have lobbied to relax the ban on proprietary trading.

Reuters reports:

The CFTC's final rule maintains that the Dodd-Frank Wall Street overhaul law requires position limits -- caps on the total number of commodity-linked contracts that any one trader can hold -- to prevent excessive speculation in oil, grain, silver and other commodity markets.

… But in the details of the plan, the CFTC modified key areas that were a major concern for big Wall Street banks like Morgan Stanley and oil companies such as S .

In an earlier draft of the rule, the agency had essentially proposed that all the trading positions of a company be added up and that the total be subjected to the position limits, thereby limiting a company’s overall bet on a commodity.

But the latest version, according to Reuters, allows the limits to be applied to individual trading desks within large companies, provided they trade independently. This could allow banks and other companies to ac ulate far larger totals of commodity-linked contracts.

http://www.propublica.org/blog/item/...dd-frank-rules

===============

the finance sector OWNS the govt, esp the Repugs, who killed Warren and killed recess appts.

[boutons_deux]

Game Over: California Attorney General Breaks From “50 State” Mortgage Settlement

We’ve been saying for months that the 50 state attorney general settlement was not going to happen. Despite the vigorous efforts by people on the side of the Federal regulators involved in the negotiations and Tom Miller’s (the AG leading the negotiations’) office to make it seem as if the deal was moving forward, the content of the reports showed otherwise. There was a huge gap between the positions of the banks and even the bank friendly position of the state AGs at the table and the banking regulators.

Now that Kamala Harris, the California state attorney general, has officially abandoned the talks, they don’t mean much, at least from the state side. The departure of such a big state, in population, foreclosure exposure, and Electoral college terms, along with other states (New York, Delaware, Nevada, Massachusetts, Kentucky, Minnesota, likely Arizona) means any settlement has limited practical meaning from the state side and even less credibility. It also considerably raises the odds of other states bolting. And needless to say, this is a major repudiation of the Obama Adminstration “let’s sweep foreclosure fraud under the rug” strategy.

The Wall Street Journal points out that the issue that led Harris to leave the talks was the one that we highlighted, that the Federal/state effort had offered an unduly broad release of claims (draft language would, among other things, waive the Federal and State regulatory ability to prosecute chain of le abuses)

Congratulations to the state attorneys general who were courageous enough to stand up to this whitewash early, particularly Eric Schneiderman, Beau Biden, and Martha Coakley.

http://www.nakedcapitalism.com/2011/...+capitalism%29

[boutons_deux]

Attorneys General Settlement: The Next Big Bank Bailout?

In fact, any federal foreclosure settlement along the lines of what’s been proposed will amount to a last round of post-2008-crisis bailouts. I talked to one foreclosure activist over the weekend who put it this way: “[The AG settlement] will be a bigger bailout than TARP.”

How? The math actually makes a of a lot of sense, when you look at it closely.

Any foreclosure settlement will allow the banks to pay one relatively small bill to cover all of their legal liabilities stemming from the monstrous frauds they all practiced in the years leading up to the 2008 crash (and even afterward), when they all schemed to create great masses of dicey/junk subprime loans and then disguise them as AAA-rated paper for sale to big private investors and ins utions like state pension funds and union funds.

To recap the crime: the banks lent money to firms like Countrywide, who in turn created billions in dicey loans, who then sold them back to the banks, who chopped them up and sold them to, among other things, your state’s worker retirement funds.

So this is bankers from Deutsche and Goldman and Bank of America essentially stealing the retirement nest eggs of firemen, teachers, cops, and other actors, as well as the investment monies of foreigners and hedge fund managers. To repeat: this was Wall Street hotshots stealing money from old ladies.

Along the road to this systematic thievery, a great many other, sometimes smaller offenses were committed. One involved the use of the MERS electronic registration system. By law, banks were supposed to register with county-level offices in each state every time they sold or resold a mortgage, and pay fees each time.

But they didn’t, instead registering with the private deed-transfer agency MERS, allowing them to systematically, and illegally, bypass local taxes.

So any “AG settlement” might allow the banks to avoid legal damages being sought from three different set of enraged creditors: the public ins utions who invested in these sham securities, the private investors who did the same, and the localities who were cheated out of their taxes.

http://www.rollingstone.com/politics...ilout-20111005

[Winehole23]

Nov. 22 (Bloomberg) -- JPMorgan Chase & Co., the biggest U.S. bank by assets, was sued for fraud by German lender Bayerische Landesbank over losses on about $2.1 billion in mortgage-backed securities.


JPMorgan units concealed the truth about the poor quality of the loans underlying the securities and knew that credit ratings misrepresented their risk, BayernLB said in a lawsuit filed yesterday in New York State Supreme Court.


“This misconduct has resulted in astounding rates of default on the loans,” BayernLB said. Most of the securities have been downgraded to junk, it said.

http://www.businessweek.com/news/201...ecurities.html

[Winehole23]

Paying fines and walking away from liability, though, isn’t the only break that the accused have been catching. It has become routine that, on the heels of a settlement with the SEC, big banks and other defendants request and receive waivers from punishments designed to kick in as a result of their settlement orders. My personal favorites are the series of agreements between the SEC and the investment firms it accused of rigging prices of municipal bonds. Five firms have agreed to pay $743 million in bid-rigging cases since December 2010 -- all reaping the benefits of those “neither admit nor deny” clauses along the way, of course.
Start Believing

If we are to believe the SEC, some of those firms that didn’t have to say they did anything wrong really did break laws and hurt the public. Read this quote from a May 4 SEC press release: “Our complaint against UBS reads like a ‘how-to’ primer for bid-rigging and securities fraud,” said Elaine C. Greenberg, chief of the SEC’s Municipal Securities and Public Pensions Unit. “They used secret arrangements and multiple roles to win business and defraud municipalities through the repeated use of illegal courtesy bids, last looks for favored bidders, and money to bidding agents disguised as swap payments.”



I don’t know about you, but that sounds pretty bad to me. Fraud. Secret arrangements. Disguises.



Bad, perhaps, but not bad enough to stop UBS AG’s lawyers at Debevoise & Plimpton LLP from writing to the SEC five days later on May 9 to ask a favor. Through its lawyers, UBS asked the SEC not to enforce a rule that would have disqualified it from participating in securities offerings that are exempt from registration requirements. To help make the case for UBS, the letter cited nine examples of times the SEC had granted waivers for “similar reasons” since 2002, including another action against UBS. On the very same day, the SEC wrote back to say the waiver was granted.



In case you are having trouble keeping track, what we’re talking about here is an exemption from a ban from an exemption. Regulators do have the ability to bring administrative proceedings if a firm abuses the privileges it gets from a waiver. But if we need to go to this much trouble to undo the rules when somebody gets caught -- but doesn’t admit it anyway - - why have rules at all? UBS didn’t respond to a request for comment.



While all the settling and waiving and exempting is going on, the banks paying the most for legal juice benefit from remarkable access. Thanks to research by the Project on Government Oversight, the public got hard data back in May showing just how easy it was for SEC professionals to leave their posts for the private sector and, on behalf of their new financial-industry clients, to get rapid entree to sitting securities regulators.

http://www.bloomberg.com/news/2012-0...n-antilla.html

[Winehole23]

wrong thread

[boutons_deux]

Under Foreclosure Fraud Settlement Proposal, Investors – Not Banks – On the Hook for Penalties

Investors in US home mortgage bonds may have to swallow losses as part of a wide-ranging settlement being discussed between leading banks and the Obama administration to resolve allegations of foreclosure misdeeds [...]

According to the terms of the settlement currently under discussion, each of the banks involved will have to meet a certain dollar target to fulfil their end of the deal. Each dollar of reduced payments or overall loan balances would be treated like a credit. A dollar of principal reduction on loans held on the banks’ own books would get a higher credit – for example, 100 cents on the dollar – than reducing a dollar of loan principal on mortgages owned by bond investors.

The servicers would have to determine that a mortgage restructuring would be more beneficial to the investor than a foreclosure, and the contracts governing the mortgage securities would have to allow for loan modifications. Investors probably would have no say in the decision, according to people familiar with the matter [...]

Officials have discussed giving the banks credit to the tune of roughly 50 cents on the dollar for cutting the principal on mortgages owned by bond investors.

Because the banks would get less credit for reducing the principal on bond investors’ mortgage holdings, some officials expect that the banks would mostly cut principal balances on their own mortgages.

In fact, I can tell you exactly what will happen: all the mortgage mod money will come out of investors, and it will come out of the very biggest loans, since the bigger the loan, the fewer the number of mods the bank has to make (the cost of making a mod is not related to the size of the loan). So that means that this approach assures that the mods will go to comparatively few people in big ticket homes and will do nada to help middle and lower middle class people.

http://news.firedoglake.com/2012/01/...for-penalties/

[Winehole23]

The SEC is about to get tougher on Wall Street crime. A little bit.

The Securities and Exchange Commission said Friday that in certain cases, it will no longer allow defendantsto settle complaints without admitting or denying the allegations against them.

The catch is that the change to this controversial policy applies only to cases in which defendants have been convicted of the same conduct in criminal proceedings, or in which they've admitted to the conduct as part of an agreement with law enforcement officials to avoid or delay criminal prosecution.

The SEC does not have the power to bring criminal complaints.

Defendants will still be able to reach SEC settlements without admitting or denying the allegations against them when there are no concurrent criminal convictions or admissions of criminal violations for the same conduct.

http://money.cnn.com/2012/01/06/news....htm?iid=HP_LN

[boutons_deux]

"SEC does not have the power to bring criminal complaints."

hmm, that was a fortuitous oversight in creating the SEC. I wonder where that idea came from?

[Winehole23]

Joe Kennedy?

[boutons_deux]

Fraud and Folly: The Untold Story of General Electric's Subprime Debacle

For General Electric Co., hawking subprime mortgages was a long way from making light bulbs and jet engines.

That didn't stop the industrial giant from jumping into the subprime business in 2004, lending blue-chip respectability to the market for risky home loans by paying roughly half a billion dollars to buy California-based WMC Mortgage Corp.

What GE got in the bargain, former WMC employees say, was a place where erstwhile shoe salesmen, ex-strippers and even a former porn actress could sign on as sales reps and make big money pushing home loans. WMC's top salespeople earned a million dollars a year or more and lived fast, swigging $1,000 bottles of Cristal and wheeling around in $100,000 Ferraris and Bentleys.

In pursuit of these riches and perks, several ex-employees claim, many WMC sales staffers embraced fraud as a tool for pushing through loans that borrowers couldn’t afford.

Dave Riedel, a former compliance manager at WMC, says sales reps intent on putting up big numbers used falsified paperwork, bogus income do entation and other tricks to get loans approved and sold off to Wall Street investors.

One WMC official, Riedel claims, went so far as to declare: “Fraud pays.”

How well did GE address WMC’s fraud problems?

GE says it did plenty to deal with the issue. Some ex-employees counter that GE officials didn’t do enough to rein in illicit practices, despite warnings from Riedel and other whistleblowers inside the lender. GE dispatched emissaries to look into the problem, the ex-employees say, but their efforts were too little, too late.

“They sent in people we thought were going to bring us back in the right direction,” Victor Argueta, a former risk analyst at WMC, says. “But it just never happened.”

By 2007, WMC was bleeding bad loans and red ink. General Electric shut the lender and reported related losses totaling more than $1 billion.

http://www.alternet.org/module/printversion/153679

[boutons_deux]

The Obama Administration's 'New' Bank Fraud Deal: Still Unfair, Still Unjust, Still Unbalanced

proposed settlement, whose stated purpose is to punish banks and reduce the amount of money owed by underwater homeowners. But it's increasingly clear that the deal wouldn't help homeowners very much and wouldn't punish bankers at all.

Banks could lower those loan balances by reducing the amount owed on mortgages owned by investors and not by the bank itself.

Many of the investors are from the 99 percent, not the one percent. As the head of the Association of Mortgage Investors told the Financial Times, "It would be a pyrrhic victory to settle the mortgage crisis with the money of public ins utions, pension funds and seniors."

The proposed deal would force banks to meet a certain dollar limit for reducing mortgage principal. But it's designed to let them use other people's money - mortgage investors' money - to reach that limit.

What if you were given a choice between spending a thousand dollars of your own money to pay a fine - or two thousand dollars of someone else's? (And remember: You're a banker, so don't let conscience influence your decision.) What would you do?

The entire amount of the deal is $25 billion, and we now know that even some of that will be payable out of other people's funds. Let's put that figure in perspective:

American homes have lost more than ten trillion dollars in value as a result of the bank-fueled bubble and crash. $25 billion is one-fourth of one percent of the lost value.

Americans owed $750 billion in principal for non-existent real estate that evaporated after the crash, as of the last study. That's money borrowed against values that were artificially inflated by the banks, which made bankers rich and left homeowners holding the bag. That figure has risen since then.

But even if we don't adjust for additional losses, $25 billion is a little more than 3 percent of the amount that's owed for nothing - that is, for bank-inflated and now nonexistent home value.

The "good news" for 2011 was that US homes only lost an estimated $681 billion in value. That's down from the $1.1 trillion lost in 2010. But even at last year's slower rate of loss, know how long it would take for US homes to lose the entire $25 billion amount of this settlement in value?

Less than two weeks.

http://www.huffingtonpost.com/rj-esk...comm_ref=false

[Winehole23]

By 2007, WMC was bleeding bad loans and red ink. General Electric shut the lender and reported related losses totaling more than $1 billion.

judge lets lawsuit against GE for misleading investors stand: http://www.chicagotribune.com/busine...,2805331.story

[clambake]

judge lets lawsuit against GE for misleading investors stand: http://www.chicagotribune.com/busine...,2805331.story

thanks. i was about to pull the trigger on stock.

[Winehole23]

You're welcome!


(WH23 is not a financial adviser and does not give advice about investments in these pages.)

[clambake]

it was at 18 on the 11th.

think i'll go with mins. its at 98.

[Winehole23]

Citigroup Inc (C.N) was sued for fraud by Loreley Financing over nearly $1 billion worth of collateralized debt obligations purchased in 2006 and 2007.

Citigroup is accused of defrauding Loreley into purchasing "fraudulent investments that are now worthless," Loreley said in a complaint filed Tuesday in New York State Supreme Court in Manhattan.

Citi used the CDOs to offload the risks of toxic mortgage-backed securities on its books and to help preferred clients "short" the housing market, the lawsuit claims.

http://uk.reuters.com/article/2012/0...pe=companyNews

[Winehole23]

Michael Lewis is terrific both at picking topics and in his exposition. What I thought was most interesting about this book was that there is, to this day, a view about the whole pathology of collateralised debt obligations (CDOs) – these highly complex, packaged mortgage securities – as well as the credit default swaps – the insurance contracts written on those securities – that Wall Street created them and they simply got out of hand. They didn’t anticipate it would be hard to value them, how they would be misused, and so forth. What Michael Lewis points out very forcefully is that they were deliberately created by Wall Street banks in order to produce non-transparent securities that could not be adequately evaluated by the rating agencies, which then could be sold to less sophisticated investors, who would buy the idea that this junk debt actually had triple A ratings. So what this book does quite brilliantly is show that there was actually a high degree of intentionality in creating the crisis. The worst of all these securities are the so-called synthetic CDOs. A CDO is a bond that represents maybe a couple of thousand mortgages; a synthetic CDO is a group of hundreds of CDOs, all packaged into a single security. When you get to that level of complexity, no one can evaluate what this thing is worth. You can come up with sophisticated rationales for why this might actually follow some kind of market logic, but I think Lewis shows that the reason this happened is that they didn’t want anyone to be able to rate it.

http://thebrowser.com/interviews/fra...nancial-crisis

[Winehole23]

I’ve never been a fan of Wall Street, which I covered as a financial journalist and found considerably more secretive than the Chinese companies I followed as a reporter in Shanghai. In the case of Goldman Sachs, I remember even having a hard time finding out who their head of international equity was, as if this was some sort of big secret. However, I also know quite a few people who have worked there, and I find the idea of systematic fraud hard to buy.

It depends what you mean by systematic. Lloyd Blankfein doesn’t get up in the morning and say, “OK. How are we going to defraud people today?” but I do think the relationship of these banks to social rules is fairly dodgy. Rules are viewed as potential obstacles that you try to get around if that maximises your profit. This is a deeper social issue that I think has to do with the economisation of a lot of thinking. Economists have this model of rational utility maximisation – that social benefit comes out of everybody pursuing their private rational self-interest. This has shaded over – imperceptibly over the past couple of generations – to a downplaying of social norms as constraints on behaviour. You see this in a number of places. In business schools, for example. Back in the 1960s and 70s, business schools regarded themselves as professional schools along the lines of law schools or architecture schools. They were meant to inculcate a certain sense of professional responsibility, that you have obligations to society at large. But as a result of the economisation of a lot of what was taught in these schools, individual profit maximisation began to displace this normative sense, and this spilled over into the behaviour of the people who went on from these programmes into the financial sector. In their minds, they weren’t deliberately trying to defraud people, but if they saw an opportunity to take advantage of less sophisticated buyers of subprime mortgages, they would go ahead and do it.

same